To amend the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986 to limit fiduciary consideration of non-pecuniary factors in investment decision-making.
Bill: H.R.9198 | Sponsor: Rep. Murphy, Gregory (R-NC)
Policy area: Labor and Employment

Summary:
This bill generally requires fiduciaries of employer-sponsored retirement plans to make investment decisions based only on pecuniary factors (i.e., factors that a fiduciary prudently determines are expected to have a material effect on the risk and return of an investment based on appropriate investment horizons consistent with the plan's policies and objectives).
The bill allows nonpecuniary factors to be considered when selecting investment options for certain participant-directed retirement plans if specified requirements are met (e.g., the investment option is not a default investment).
Further, if a plan includes investment options based on nonpecuniary factors, it also must include investment options that are not based on any such factors.

To amend the Employee Retirement Income Security Act of 1974 and the 
 Internal Revenue Code of 1986 to limit fiduciary consideration of non-
            pecuniary factors in investment decision-making.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. FIDUCIARY RESPONSIBILITIES RELATING TO CERTAIN NON-PECUNIARY 
              OBJECTIVES.

    Section 404(a) of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1104(a)) is amended by adding at the end the following 
new paragraph:
    ``(3) Interest Based on Non-Pecuniary Factors.--
            ``(A) In general.--For purposes of paragraph (1), a 
        fiduciary of a plan shall be considered to act solely in the 
        interest of the participants and beneficiaries of the plan with 
        respect to a plan investment or investment course of action 
        only if the fiduciary's action with respect to such investment 
        is based only on pecuniary factors. The fiduciary may not 
        subordinate the interests of the participants and beneficiaries 
        in their retirement income or financial benefits under the plan 
        to other objectives and may not sacrifice investment return or 
        take on additional investment risk to promote non-pecuniary 
        benefits or goals. The weight given to any pecuniary factor by 
        a fiduciary should appropriately reflect a prudent assessment 
        of the impact of such factor on risk-return.
            ``(B) Investment alternatives for participant-directed 
        individual account plans.--In selecting investment options for 
        a pension plan described in subsection (c)(1)(A), a fiduciary 
        is not prohibited from considering or including an investment 
        option on the basis that such investment option promotes non-
        pecuniary benefits or goals, provided that the fiduciary--
                    ``(i) satisfies the requirements of paragraph (1) 
                and subparagraph (A) in considering or including any 
                such investment option; and
                    ``(ii) does not consider or include such investment 
                option as a default investment (as defined in the 
                regulations issued by the Secretary under subsection 
                (c)(5)(A)), or a component thereof.
            ``(C) Pecuniary factor defined.--For the purposes of this 
        paragraph, the term `pecuniary factor' means a factor that a 
        fiduciary prudently determines is expected to have a material 
        effect on the risk and return of an investment based on 
        appropriate investment horizons consistent with the plan's 
        investment objectives and the funding policy established 
        pursuant to section 402(b)(1).''.

SEC. 2. REQUIREMENT THAT RETIREMENT PLANS CONTINUE TO OFFER INVESTMENTS 
              BASED SOLELY ON PECUNIARY FACTORS.

    (a) In General.--Section 401(a) of the Internal Revenue Code of 
1986 is amended by adding at the end the following new paragraph:
            ``(39) Defined contribution plan investment option 
        requirements.--In the case of a trust forming part of a defined 
        contribution plan which includes investment options based on 
        non-pecuniary factors (within the meaning of section 404(a)(3) 
        of the Employee Retirement Income Security Act of 1974), such 
        trust shall not constitute a qualified trust unless the plan 
        includes investment options not based on any such factors.''.
    (b) 403(b) Plans.--Section 403(b)(7) of such Code is amended by 
adding at the end the following new subparagraph:
                    ``(D) Investment option requirements.--Subparagraph 
                (A) shall not apply to an amount unless under the 
                custodial account meets investment option requirements 
                similar to the requirements of section 401(a)(39).''.
    (c) 457(b) Plans.--Section 457(e) of such Code is amended by adding 
at the end the following new paragraph:
            ``(19) Investment option requirements.--In the case of an 
        employer described in subsection (e)(1)(A), a plan shall not be 
        treated as meeting the requirements of this section unless such 
        plan meets investment option requirements similar to the 
        requirements of section 401(a)(39).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after the date of the enactment of this 
Act.
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