119-s3086

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 3086 Introduced in Senate

    (IS) ]

<DOC>

119th CONGRESS
 1st Session
 S. 3086

To amend the Employee Retirement Income Security Act of 1974 to clarify 
 the criteria by which a fiduciary may evaluate and select investments 
 based on nonpecuniary factors, and to clarify the application of 
 prudence and exclusive purpose duties to the exercise of shareholder 
 rights.

_______________________________________________________________________

 IN THE SENATE OF THE UNITED STATES

 October 30, 2025

Mr. Cassidy (for himself and Mr. Banks) introduced the following bill; 
 which was read twice and referred to the Committee on Health, 
 Education, Labor, and Pensions

_______________________________________________________________________

 A BILL

To amend the Employee Retirement Income Security Act of 1974 to clarify 
 the criteria by which a fiduciary may evaluate and select investments 
 based on nonpecuniary factors, and to clarify the application of 
 prudence and exclusive purpose duties to the exercise of shareholder 
 rights.

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

SECTION 1. SHORT TITLE.

 This Act may be cited as the ``Restoring Integrity in Fiduciary 
Duty Act''.

SEC. 2. EXERCISE OF FIDUCIARY DUTY IN EVALUATING AND SELECTING 
 INVESTMENTS.

    (a) In General.--

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:
 ``

    (3) Investments based on pecuniary factors.--
 ``
        (A) In general.--For the purposes of paragraph

    (1) , a fiduciary--
 ``
            (i) may evaluate an investment or 
 investment course of action based only on 
 pecuniary factors, except as provided in 
 subparagraph
        (B) ;
 ``
            (ii) may not subordinate the interests of 
 the participants and beneficiaries in their 
 retirement income or financial benefits under 
 the plan to other objectives;
 ``
            (iii) may not sacrifice investment return 
 or take on additional investment risk to 
 promote nonpecuniary benefits or goals; and
 ``
            (iv) shall weight each pecuniary factor 
 in a manner that appropriately reflects a 
 prudent assessment of the impact of the factor 
 on risk and return.
 ``
        (B) Use of nonpecuniary factors for investment 
 alternatives.--Notwithstanding subparagraph
        (A) , when 
 choosing between or among investment alternatives, if a 
 fiduciary is unable to distinguish between or among 
 investment alternatives or investment courses of action 
 on the basis of pecuniary factors alone, the fiduciary 
 shall use the capita aut navia standard as the deciding 
 factor in the investment decision, provided that--
 ``
            (i) the fiduciary documents detail--
 ``
            (I) why pecuniary factors were 
 not sufficient to select the investment 
 or investment course of action;
 ``
            (II) how the selected investment 
 compares to the alternative investments 
 with regard to the composition of the 
 portfolio with regard to 
 diversification, the liquidity, current 
 return of the portfolio relative to the 
 anticipated cash flow requirements of 
 the plan, and the projected return of 
 the portfolio relative to the funding 
 objectives of the plan; and
 ``
            (III) how the selected investment 
 is consistent with the interests of the 
 participants and beneficiaries in their 
 retirement income or financial benefits 
 under the plan; and
 ``
            (ii) the fiduciary demonstrates that it 
 did not expend any resources during the 
 investment course of action on nonpecuniary 
 factors that place weight between or among 
 investment alternatives for the purpose of the 
 investment decision.
 ``
            (C) Investment alternatives for participant-
 directed individual account plans.--In selecting or 
 retaining investment options for a pension plan 
 described in subsection
            (c) (1)
        (A) , a fiduciary may 
 consider, select, or retain an investment option on the 
 basis that such investment option promotes, seeks, or 
 supports 1 or more nonpecuniary benefits or goals, only 
 if--
 ``
            (i) the fiduciary satisfies the 
 requirements of paragraph

    (1) and subparagraphs
        (A) and
        (B) of this paragraph in selecting or 
 retaining any such investment option; and
 ``
            (ii) such investment option is not added 
 or retained as, or included as a component of, 
 a default investment described in subsection
            (c) (5) (or any other default investment 
 alternative).
 ``
            (D) === Definitions. ===
-For the purposes of this 
 paragraph:
 ``
            (i) Capita aut navia.--The term `capita 
 aut navia' means a standard by which a 
 fiduciary chooses at random between or among 
 investment alternatives where pecuniary factors 
 are equal and does not give added weight to 1 
 investment or another, provided that the 
 investment alternatives have identical risk and 
 return attributes and choosing among the 
 investment alternatives would have 
 comparatively negligible impact, not 
 considering liquidity constraints or 
 transaction costs.
 ``
            (ii) Investment course of action.--The 
 term `investment course of action' means any 
 series or program of investments or actions 
 related to a fiduciary's performance of the 
 fiduciary's investment duties, and includes the 
 selection of an investment fund as a plan 
 investment, or in the case of a plan described 
 in subsection
            (c) (1)
        (A) , a designated 
 investment alternative under the plan.
 ``
            (iii) Material.--The term `material,' 
 when used to qualify a financial risk or 
 financial return--
 ``
            (I) means a financial risk or 
 financial return in which there is a 
 substantial likelihood that a 
 reasonable investor would attach 
 importance when--
 ``

    (aa) evaluating the 
 potential financial risks or 
 returns of an existing or 
 prospective investment; or
 ``

    (bb) exercising, or 
 declining to exercise, any 
 rights with respect to 
 securities; and
 ``
            (II) does not include furthering 
 nonpecuniary, environmental, social, 
 political, ideological, or other goals 
 or objectives.
 ``
            (iv) Pecuniary factor.--The term 
 `pecuniary factor' means a factor that a 
 fiduciary prudently determines is expected to 
 have a material effect on the risk or 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) .''.

    (b) Effective Date.--The amendments made by this section shall 
apply to actions taken by a fiduciary on or after the date that is 1 
year after the date of enactment of this Act.

SEC. 3. EXERCISE OF SHAREHOLDER RIGHTS.

    (a) In General.--

Section 404 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1104) is amended by adding at the end 
the following new subsection:
 ``

    (f) Exercise of Shareholder Rights.--
 ``

    (1) Authority to exercise shareholder rights.--
 ``
        (A) In general.--The fiduciary duty to manage 
 plan assets that are shares of stock includes the 
 management of shareholder rights appurtenant to those 
 shares, including the right to vote proxies. When 
 deciding whether to exercise a shareholder right and in 
 exercising such right, including the voting of proxies, 
 a fiduciary shall act prudently and solely in the 
 interests of participants and beneficiaries and for the 
 exclusive purpose of providing benefits to participants 
 and beneficiaries and defraying the reasonable expenses 
 of administering the plan. The fiduciary duty to manage 
 shareholder rights appurtenant to shares of stock does 
 not require the voting of every proxy or the exercise 
 of every shareholder right.
 ``
        (B) Exception.--This subsection shall not apply 
 to voting, tender, and similar rights with respect to 
 securities that are passed through pursuant to the 
 terms of an individual account plan to participants and 
 beneficiaries with accounts holding such securities.
 ``

    (2) Requirements for exercise of shareholder rights.--A 
 fiduciary, when deciding whether to exercise a shareholder 
 right and when exercising a shareholder right--
 ``
        (A) shall--
 ``
            (i) act solely in accordance with the 
 economic interest of the plan and its 
 participants and beneficiaries;
 ``
            (ii) consider any costs involved;
 ``
            (iii) evaluate material facts that form 
 the basis for any particular proxy vote or 
 exercise of shareholder rights; and
 ``
            (iv) maintain a record of any proxy vote, 
 proxy voting activity, or other exercise of a 
 shareholder right, including any attempt to 
 influence management; and
 ``
        (B) shall not subordinate the interests of 
 participants and beneficiaries in their retirement 
 income or financial benefits under the plan to any 
 nonpecuniary objective, or promote nonpecuniary 
 benefits or goals unrelated to those financial 
 interests of the plan's participants and beneficiaries.
 ``

    (3) Monitoring.--A fiduciary shall exercise prudence and 
 diligence in the selection and monitoring of a person, if any, 
 selected to advise or otherwise assist with the exercise of 
 shareholder rights, including by providing research and 
 analysis, recommendations on exercise of proxy voting or other 
 shareholder rights, administrative services with respect to 
 voting proxies, and recordkeeping and reporting services.
 ``

    (4) Investment managers and proxy advisory firms.--Where 
 the authority to vote proxies or exercise other shareholder 
 rights has been delegated to an investment manager pursuant to 
 

section 403

    (a) , or a proxy voting advisory firm or other person 
 who performs advisory services as to the voting of proxies or 
 the exercise of other shareholder rights, a responsible plan 
 fiduciary shall prudently monitor the proxy voting activities 
 of such investment manager or advisory firm and determine 
 whether such activities are in compliance with paragraphs

    (1) and

    (2) .
 ``

    (5) Voting policies.--
 ``
        (A) In general.--In deciding whether to vote a 
 proxy pursuant to this subsection, the plan fiduciary 
 may adopt a proxy voting policy, including a safe 
 harbor proxy voting policy described in subparagraph
        (B) , providing that the authority to vote a proxy shall 
 be exercised pursuant to specific parameters designed 
 to serve the economic interest of the plan.
 ``
        (B) Safe harbor voting 

=== policy ===
-With respect to a 
 decision not to vote a proxy, a fiduciary shall satisfy 
 the fiduciary responsibilities under this subsection if 
 such fiduciary adopts and is following a safe harbor 
 proxy voting policy that--
 ``
            (i) limits voting resources to particular 
 types of proposals that the fiduciary has 
 prudently determined are substantially related 
 to the business activities of the issuer or are 
 expected to have a material effect on the value 
 of the plan investment; or
 ``
            (ii) establishes that the fiduciary will 
 refrain from voting on proposals or particular 
 types of proposals when the assets of a plan 
 invested in the issuer relative to the total 
 assets of such plan are below 5 percent (or, in 
 the event such assets are under management, 
 when the assets under management invested in 
 the issuer are below 5 percent of the total 
 assets under management).
 ``
            (C) Exception.--No proxy voting policy adopted 
 pursuant to this paragraph shall preclude a fiduciary 
 from submitting a proxy vote when the fiduciary 
 determines that the matter being voted on is expected 
 to have a material economic effect on the investment 
 performance of a plan's portfolio (or the investment 
 performance of assets under management in the case of 
 an investment manager); provided, however, that in all 
 cases compliance with a safe harbor voting policy shall 
 be presumed to satisfy fiduciary responsibilities with 
 respect to decisions not to vote.
 ``

    (6) Review.--A fiduciary shall periodically review any 
 policy adopted under this subsection.''.

    (b) Effective Date.--The amendments made by subsection

    (a) shall 
apply to an exercise of shareholder rights occurring on or after 
January 1, 2026.
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