[House Report 118-225]
[From the U.S. Government Publishing Office]


 118th Congress    }                                     {    Report
                         HOUSE OF REPRESENTATIVES
  1st Session      }                                     {    118-225

======================================================================



 
           ROLL BACK ESG TO INCREASE RETIREMENT EARNINGS ACT

                                _______
                                

 September 26, 2023.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

Ms. Foxx, from the Committee on Education and the Workforce, submitted 
                             the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 5339]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Education and the Workforce, to whom was 
referred the bill (H.R. 5339) to amend the Employee Retirement 
Income Security Act of 1974 to specify requirements concerning 
the consideration of pecuniary and non-pecuniary factors, and 
for other purposes, having considered the same, reports 
favorably thereon with an amendment and recommends that the 
bill as amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Roll back ESG To Increase Retirement 
Earnings Act'' or the ``RETIRE Act''.

SEC. 2. EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 AMENDMENT.

  (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) Interest based on pecuniary factors.--
                  ``(A) In general.--For purposes of paragraph (1), a 
                fiduciary shall be considered to act solely in the 
                interest of the participants and beneficiaries of the 
                plan with respect to an investment or investment course 
                of action only if the fiduciary's action with respect 
                to such investment or investment course of action is 
                based only on pecuniary factors (except as provided in 
                subparagraph (B)). 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 shall 
                reflect a prudent assessment of the impact of such 
                factor on risk and return.
                  ``(B) Use of non-pecuniary factors for investment 
                alternatives.--Notwithstanding paragraph (A), 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 
                may use non-pecuniary factors as the deciding factor if 
                the fiduciary documents--
                          ``(i) why pecuniary factors were not 
                        sufficient to select a plan 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 and 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 non-pecuniary factor 
                        or factors are consistent with the interests of 
                        the participants and beneficiaries in their 
                        retirement income or financial benefits under 
                        the plan.
                  ``(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 is not 
                prohibited from considering, selecting, or retaining an 
                investment option on the basis that such investment 
                option promotes, seeks, or supports one or more non-
                pecuniary benefits or goals, 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 under subsection (c)(5) (or 
                        any other default investment alternative) if 
                        its investment objectives or goals or its 
                        principal investment strategies include, 
                        consider, or indicate the use of one or more 
                        non-pecuniary factors.
                  ``(D) Definitions.--For the purposes of this 
                paragraph:
                          ``(i) 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).
                          ``(ii) 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 an individual 
                        account plan, a designated investment 
                        alternative under the plan.''.
  (b) Effective Date.--The amendments made by this section shall apply 
to actions taken by a fiduciary on or after the date that is 12 months 
after the date of enactment of this Act.

                                Purpose

    Employee benefit plans have one purpose: to provide 
employee benefits. Employee benefit plan assets have one 
purpose: to fund those benefits. The Employee Retirement Income 
Security Act of 1975 (ERISA) was designed to ensure that the 
financial interests of participants and beneficiaries in their 
benefits do not take a back seat to a fiduciary's 
environmental, social, and governance (ESG) preferences. The 
Biden administration's interpretation of ERISA reverses a 
fiduciary's duty of loyalty by declaring that an investment 
fiduciary may consider his or her political and social 
preferences when investing ERISA plan assets. H.R. 5339 makes 
clear that the financial interests of participants and 
beneficiaries in their benefits come first.

                            Committee Action


                             117TH CONGRESS

Second Session--Hearings

    On February 26, 2022, the Committee on Education and Labor, 
Subcommittee on Health, Employment, Labor, and Pensions, held a 
hearing titled ``Improving Retirement Security and Access to 
Mental Health Benefits.'' The hearing discussed the Biden 
administration's attempt to put its radical environmental and 
social agendas above the financial interests of retirees by 
prioritizing ESG factors when investing retirement plan assets. 
Testifying before the Subcommittee were Dr. Andrew Biggs, 
Resident Scholar, American Enterprise Institute, Washington, 
D.C.; Karen Handorf, Senior Counsel, Berger Montague, 
Washington, D.C.; Amy Matsui, Director of Income Security and 
Senior Counsel, National Women's Law Center, Washington, D.C.; 
and Aron Szapiro, Head of Retirement Studies and Public Policy, 
Morningstar Investment Management, Washington, D.C.
    On June 14, 2022, the Committee on Education and Labor held 
a hearing titled ``Examining the Policies and Priorities of the 
U.S. Department of Labor.'' The purpose of the hearing was to 
review the Fiscal Year 2023 budget priorities of the U.S. 
Department of Labor (DOL). Testifying before the Committee was 
the Honorable Martin J. Walsh, Secretary, DOL, Washington D.C. 
At this hearing, concerns were discussed regarding DOL's 
proposed rule titled ``Prudence and Loyalty in Selecting Plan 
Investments and Exercising Shareholder Rights,'' including the 
Biden administration's efforts to undermine an investment 
fiduciary's duties of prudence and loyalty when selecting and 
monitoring investments for ERISA plans, and the 
administration's view on incorporating ESG into the 
administration of ERISA plans.

Second Session--Legislative Action

    On March 18, 2022, Rep. Andy Barr (R-KY) introduced the 
Ensuring Sound Guidance Act (H.R. 7151) with Rep. Rick Allen 
(R-GA) as an original co-sponsor. The bill was referred to the 
Committee on Education and Labor and the Committee on Financial 
Services.

                             118TH CONGRESS

First Session--Hearings

    On June 7, 2023, the Committee on Education and the 
Workforce held a hearing on ``Examining the Policies and 
Priorities of the U.S. Department of Labor.'' The purpose of 
the hearing was to review the Fiscal Year 2023 budget 
priorities of DOL. Testifying before the Committee was the 
Honorable Julie Su, Acting Secretary, DOL, Washington, D.C. At 
this hearing, DOL's December 1, 2022, rule titled ``Prudence 
and Loyalty in Selecting Plan Investments and Exercising 
Shareholder Rights'' was discussed, including concerns 
regarding the Biden administration's efforts to undermine an 
investment fiduciary's duties of prudence and loyalty when 
selecting and monitoring investments for ERISA plans and the 
administration's support for incorporating ESG into the 
administration of ERISA plans.

First Session--Legislative Action

    On February 7, 2023, Rep. Barr introduced a joint 
resolution of disapproval (H.J. Res. 30) under the 
Congressional Review Act (CRA) to nullify the Biden 
administration's DOL rule titled ``Prudence and Loyalty in 
Selecting Plan Investments and Exercising Shareholder Rights.'' 
The resolution rescinds the rule and would have the effect of 
reinstating the Trump administration's November 13, 2020, rule 
on ESG investing for ERISA plans titled ``Financial Factors in 
Selecting Plan Investments.'' On February 28, 2023, the House 
of Representatives passed H.J. Res. 30 by a vote of 219-210, 
with Senate passage on March 1 by a vote of 50-46. On March 20, 
the President vetoed the measure. On March 23, the House failed 
to override the veto by a vote of 219-200.
    On June 21, 2023, Rep. Barr introduced the Ensuring Sound 
Guidance Act (H.R. 4237) with Reps. Allen and Bill Huizenga (R-
MI) as original co-sponsors.
    On September 5, 2023, Rep. Allen introduced the Roll Back 
ESG to Increase Retirement Earnings Act or the RETIRE Act (H.R. 
5339). The bill was referred to the Committee on Education and 
the Workforce. On September 14, 2023, the Committee considered 
H.R. 5339 in legislative session and reported it favorably, as 
amended, to the House of Representatives by a recorded vote of 
23 to 19. The Committee adopted an Amendment in the Nature of a 
Substitute (ANS) offered by Rep. Allen that made minor 
technical changes. Ranking Member Robert C. ``Bobby'' Scott (D-
VA) offered a substitute amendment codifying the 2022 Biden 
administration ESG investing rule. The amendment failed by a 
recorded vote of 19-23.

                            Committee Views


                              INTRODUCTION

    H.R. 5339, the Roll back ESG To Increase Retirement 
Earnings Act, clarifies what ERISA and the U.S. Supreme Court 
already require: that fiduciaries manage plan assets for the 
exclusive purpose of a participant's or beneficiary's financial 
interest in his or her benefits under the plan. This 
legislation is needed because the Biden administration has 
ignored ERISA's foundational principles in order to allow 
activists to use ERISA plan assets to advance ESG goals at the 
expense of the financial interests of ERISA plans. H.R. 5339 
protects the retirement savings of the U.S. workforce, which is 
the purpose of ERISA.

          THE DUTY OF PRUDENCE AND LOYALTY UNDER EXISTING LAW

    Under ERISA, an investment fiduciary must act solely in the 
interest of participants and beneficiates and for the exclusive 
purpose of providing benefits to participants and their 
beneficiaries and defraying reasonable expenses of 
administering the plan (the ``exclusive purpose rule'').\1\ 
Courts have stated that ERISA's exclusive purpose rule requires 
fiduciaries to act with ``complete and undivided loyalty to the 
beneficiaries''\2\ and to make decisions ``with an eye single 
to the interests of participants and beneficiaries.''\3\
---------------------------------------------------------------------------
    \1\ERISA Sec. Sec. 403(c), 404(a); 29 U.S.C. Sec. Sec. 1103(c), 
1104(a). Hereinafter, this fiduciary duty is referred to as the 
``exclusive purpose rule.''
    \2\Donavan v. Mazzola, 716 F.2d 1226, 1238 (9th Cir. 1983) 
(citation omitted).
    \3\Donavan v. Bierwirth, 680 F.2d 263, 271 (2nd Cir. 1982).
---------------------------------------------------------------------------
    In 2014, the U.S. Supreme Court unanimously rejected non-
pecuniary public policy goals as a basis for relaxing ERISA's 
fiduciary standards.\4\ The Court held that ERISA's duty of 
prudence does not vary depending on a non-pecuniary goal, even 
if that goal is set out in the plan document.\5\ The Court 
stated:
---------------------------------------------------------------------------
    \4\Fifth Third Bancorp v. Dudenhoeffer, 573 U.S. 409 (2014) 
(rejecting a ``presumption of prudence'' for acquisition and holding of 
employer stock based on the non-pecuniary benefit of employee stock 
ownership).
    \5\Id. at 420 (``We cannot accept the claim . . . that the content 
of ERISA's duty of prudence varies depending on the specific 
nonpecuniary goal set our in an ERISA plan.'')

          Read in the context of ERISA as a whole, the term 
        `benefits' . . . must be understood to refer to the 
        sort of financial benefits (such as retirement income) 
        that trustees who manage investments typically seek to 
        secure for the trust's beneficiaries. . . . The term 
        does not cover nonpecuniary benefits like those 
        supposed to arise from employee ownership of employer 
        stock.\6\
---------------------------------------------------------------------------
    \6\Id. at 421.

The Court's holding applies to all non-pecuniary benefits. 
Thus, under ERISA, there is no room for advancing collateral 
goals such as ESG, even in a tiebreaker situation in which 
there are two economically equal investments.
    ERISA also requires a fiduciary to act ``with the care, 
skill, prudence, and diligence under the circumstances then 
prevailing that a prudent man acting in a like capacity and 
familiar with such matters would use in the conduct of an 
enterprise of like character.''\7\ Thus, fiduciaries are held 
to an expert prudence standard. Courts have held that the duty 
of prudence requires an ERISA fiduciary to monitor the 
appropriateness of investments continually.\8\ However, for the 
last 30 years, there have been attempts to erode ERISA's 
principles of prudence and loyalty in order to promote benefits 
other than the financial interest of participants and 
beneficiaries (i.e., ``collateral benefits'').
---------------------------------------------------------------------------
    \7\ERISA Sec. 404(a)(1)(B), 29 U.S.C. Sec. 1104(a)(1)(B).
    \8\Tibble v. Edison Int'l, 135 S. Ct. 1823, 1828-29 (2015) 
(confirming ERISA fiduciary duty to monitor and remove imprudent trust 
investments).
---------------------------------------------------------------------------
    In 1994, DOL first articulated a ``tiebreaker rule'' in 
broadly applicable guidance allowing an ERISA fiduciary to 
consider ESG benefits (``collateral benefits'') when choosing 
between two economically equal investments.\9\ From the 
beginning, the tiebreaker rule was inherently inconsistent with 
ERISA's exclusive purpose rule.\10\ Over the next two decades, 
DOL addressed the tiebreaker rule through sub-regulatory 
guidance, with Democrat administrations promoting the 
tiebreaker rule to use ERISA plan assets for collateral 
benefits and Republican administrations attempting to limit 
collateral benefit investing by reinforcing ERISA's exclusive 
purpose rule.\11\
---------------------------------------------------------------------------
    \9\59 Fed. Reg. 32,606 (June 23, 1994) (incorporated in the Code of 
Federal Regulations as 29 C.F.R. Sec. 2509.94-1) (Interpretive Bulletin 
(IB) 94-1)). The term used in IB 94-1 is ``economically targeted 
investments.'' Prior to issuing 1B 94-1, DOL issued letters concerning 
a fiduciary's ability to consider the non-pecuniary effects of an 
investment and granted a variety of prohibited transaction exemptions 
to both individual plans and pooled investment vehicles involving 
investments that produce non-pecuniary benefits. See Financial Factors 
in Selecting Plan Investments, 85 Fed. Reg. 72,856, 72,856 n.6 (Nov. 
13, 2020).
    \10\See Max M. Schanzebach & Robert H. Sitkoff, Reconciling 
Fiduciary Duty and Social Conscience: The Law and Economics of ESG 
Investing by a Trustee, 72 Stanford L. Rev. 381, 390, 408 (2020) 
(stating that DOL's tiebreaker rule is ``dubious as a matter or 
textbook financial economics and . . . contrary to the controlling 
statute and U.S. Supreme Court precedent.); see also Edward Zelinsky, 
ETI, Phone the Department of Labor: Economically Targeted Investments, 
IB 94-1 and the Reincarnation of Industrial Policy, 16 Berkeley J. Emp. 
Lab. L. 333 (1995) (criticizing DOL's first sub-regulatory guidance on 
investing for collateral benefits using the tie breaker rule as 
``unsound as a matter of logic and policy and . . . incompatible with 
the statutory standards governing the investment decisions of pension 
fiduciaries.'').
    \11\Edward Zelinsky, Interpretive Bulletin 08-01 and Economically 
Targeted Investing: A Missed Opportunity, 82 S. Cal. L. Rev. Postscript 
11, 12 (criticizing subsequent Republican subregulatory guidance as an 
attempt to limit collateral investing rather than to repudiate it as 
incoherent and incompatible with ERISA's duty of loyalty).
---------------------------------------------------------------------------
    Two distinguished professors wrote in the Stanford Law 
Review in 2020 on ERISA's fiduciary duty and ESG investing: 
``With respect to law, the tiebreaker is irreconcilable with 
the strict `sole interest' or `exclusive benefit' rule [of 
ERISA].''\12\ The article is skeptical that true economic ties 
exist in the investment world, but if they do, then the 
appropriate solution is to invest in both instruments for 
purposes of diversification.
---------------------------------------------------------------------------
    \12\Max Schanzenbach & Robert Sitkoff, Reconciling Fiduciary Duty 
and Social Conscience: The Law and Economics of ESG Investing by a 
Trustee, 72 Stan. L. Rev. 408 (2020).
---------------------------------------------------------------------------

                     TRUMP ADMINISTRATION ESG RULE

    In November 2020, DOL issued a final rule on ESG investing 
based on skepticism that a true tie can exist between two 
investments. Under this rule, a fiduciary can consider 
collateral benefits only if choosing between or among 
``investment alternatives that the plan fiduciary is unable to 
distinguish on the basis of pecuniary factors alone.''\13\ The 
Trump rule requires a plan fiduciary to document (and, in 
essence, prove) that two investments are indistinguishable 
based on pecuniary factors before invoking the tiebreaker rule. 
If a fiduciary invokes the tiebreaker rule, then the fiduciary 
is required to document how any tiebreaking factor is 
consistent with the interests of the participants and 
beneficiaries in their financial benefits under the plan. This 
provision is intended to prevent abuse of the tiebreaker. The 
rule also prohibits fiduciaries from choosing default 
investments that have objectives or principal strategies that 
are non-pecuniary.
---------------------------------------------------------------------------
    \13\Financial Factors in Selecting Plan Investments, 85 Fed. Reg. 
72,846, 72,884 (Nov. 13, 2020).
---------------------------------------------------------------------------

                     BIDEN ADMINISTRATION ESG RULE

    In December 2022, DOL issued a final rule rescinding the 
Trump rule\14\ and allowing a fiduciary to consider collateral 
benefits when choosing among or between investment alternatives 
that ``equally serve the financial interests of the plan over 
the appropriate time horizon.''\15\ As such, the fiduciary may 
select an investment based on collateral benefits other than 
investment returns. This tiebreaker rule is vague enough to 
create a giant loophole, increasing ESG investing and 
completely eroding ERISA's exclusive purpose rule.
---------------------------------------------------------------------------
    \14\Prudence and Loyalty in Selecting Plan Investments and 
Exercising Shareholder Rights, 87 Fed. Reg. 73,822 (Dec. 1, 2022).
    \15\29 C.F.R. Sec. 2550.404a-1(c)(2).
---------------------------------------------------------------------------

         IMPACT ON THE RETIREMENT SAVINGS OF AMERICA'S WORKERS

    DOL's subterfuge on this issue is not harmless. Promoting 
the use of ERISA plan assets for collateral benefits undermines 
a central cornerstone of ERISA. Further, such actions may lead 
to increased risk and lower returns for retirement savings. The 
cumulative harm, over the lifetime of retirement savings, could 
have a substantial adverse impact on a participant's lifestyle 
and welfare during his or her retirement years.

    H.R. 5339, ROLL BACK OF ESG TO INCREASE RETIREMENT EARNINGS ACT

    H.R. 5339 protects the retirement savings and other ERISA-
covered benefits of the U.S. workforce and reinforces what the 
Supreme Court has already stated: The exclusive purpose rule of 
ERISA precludes the consideration of nonpecuniary benefits.\16\ 
ERISA's duty of loyalty does not provide any opportunity for an 
investment fiduciary to choose an economically inferior 
investment because it provides nonpecuniary benefits. H.R. 5339 
also tightens the tiebreaker rule to require a fiduciary to 
prove, by way of documentation, that a tie exists because the 
plan fiduciary is ``unable to distinguish on the basis of 
pecuniary factors alone.''\17\
---------------------------------------------------------------------------
    \16\Fifth Third Bancorp, 573 U.S. at 421 (the ``benefits'' to be 
pursued by ERISA fiduciaries as their ``exclusive purpose'' does not 
include ``nonpecuniary benefits'') (emphasis in original).
    \17\Financial Factors in Selecting Plan Investments, 85 Fed. Reg. 
at 72,884.
---------------------------------------------------------------------------

                               CONCLUSION

    To protect the financial interests of participants and 
beneficiaries in their benefits and to reinforce ERISA's 
existing duties of prudence and loyalty, H.R. 5339 ensures that 
ERISA's duties of prudence and loyalty will be honored. The 
intent of ERISA's exclusive purpose rule, as enacted by 
Congress and as interpreted by the U.S. Supreme Court, remains 
as clear now as when it was first signed into law. However, the 
Biden administration's regulations and activist agendas are 
undermining ERISA's protections. H.R. 5339 is essential for 
restoring and upholding the intent of ERISA. The U.S. workforce 
deserves nothing less.

                                Summary


                  H.R. 5339 SECTION-BY-SECTION SUMMARY

Section 1. Short title

           Names the bill as the ``Roll back ESG To 
        Increase Retirement Earnings Act'' or the ``RETIRE 
        Act''

Section 2. Employee Retirement Income Security Act of 1974 Amendment

           Section 2(a) amends ERISA Section 404(a) 
        with the following provisions:
                   Clarifies that for purposes of 
                ERISA section 404(a)(1), a fiduciary shall be 
                considered to act solely in the interest of the 
                participants and beneficiaries of the plan with 
                respect to an investment or investment course 
                of action only if the fiduciary's action with 
                respect to such investment or investment course 
                of action is based only on pecuniary factors 
                (except as provided in subparagraph (B)).
                   Expressly states that a 
                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.
                   Provides that the weight given 
                to any pecuniary factor by a fiduciary shall 
                reflect a prudent assessment of the impact of 
                such factor on risk and return.
                   Adds a tiebreaker rule that 
                narrowly defines a tie and narrowly constrains 
                the factors used to consider in breaking a tie. 
                To have a tie, the fiduciary must be unable to 
                distinguish between or among investment 
                alternatives or alternative courses of action 
                on the basis of pecuniary factors alone.
                   Requires fiduciaries to 
                document, and in essence to prove, why 
                pecuniary factors were not sufficient to select 
                a plan investment or investment course of 
                action.
                   Requires other documentation to 
                ensure that the investment fiduciary does not 
                make decisions based on non-pecuniary factors. 
                Specifically, requires the fiduciary to 
                document how the selected investment compares 
                to the alternative investments considered with 
                regard to the composition of the portfolio with 
                regard to diversification, the liquidity, and 
                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.
                   For fiduciaries who ``declare a 
                tie'' in order to consider non-pecuniary 
                factors, requires documentation of how the 
                selected non-pecuniary factor or factors are 
                consistent with the interests of the 
                participants and beneficiaries in their 
                retirement income or financial benefits under 
                the plan.
                   Addresses a fiduciary's 
                selection of investment alternatives for 
                participant-directed individual account plans 
                intended to qualify for relief under existing 
                ERISA section 404(c)(1)(A) by stating a 
                fiduciary's actions must comply with H.R. 4339 
                in selecting or retaining the investment 
                option. Further, any such investment option may 
                not be added or retained as or included as a 
                component of a default investment under 
                existing section 404(c)(5) of ERISA, or any 
                other type of default investment, if its 
                investment objectives or goals or its principal 
                investment strategies include, consider, or 
                indicate the use of one or more non-pecuniary 
                factors.
                   Defines ``pecuniary factor'' as 
                ``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 [existing ERISA] section 
                402(b)(1).''
                   Defines ``investment course of 
                action'' as ``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 an individual account plan, a 
                designated investment alternative under the 
                plan.''
           Section 2(b) provides that the amendments 
        made by the bill apply to actions taken by a fiduciary 
        on or after the date that is 12 months after the date 
        of enactment.

                       Explanation of Amendments

    The amendments, including the amendment in the nature of a 
substitute, are explained in the body of this report.

              Application of Law to the Legislative Branch

    Section 102(b)3 of Public Law 104-1 requires a description 
of the application of this bill to the legislative branch. H.R. 
5339 takes important steps to protect the interests of the 
workforce in their benefits provided under ERISA plans. H.R. 
5339 is applicable only to investments subject to ERISA and 
therefore does not affect the legislative branch.

                       Unfunded Mandate Statement

    Pursuant to Section 423 of the Congressional Budget and 
Impoundment Control Act of 1974, Pub. L. No. 93-344 (as amended 
by Section 101(a)(2) of the Unfunded Mandates Reform Act of 
1995, Pub. L. No. 104-4), the Committee adopts as its own the 
cost estimate prepared by the Director of the Congressional 
Budget Office (CBO) pursuant to section 402 of the 
Congressional Budget and Impoundment Control Act of 1974.

                           Earmark Statement

    H.R. 5339 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI of the Rules of the House of 
Representatives.

                            Roll Call Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee Report to include for 
each record vote on a motion to report the measure or matter 
and on any amendments offered to the measure or matter the 
total number of votes for and against and the names of the 
Members voting for and against.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

         Statement of General Performance Goals and Objectives

    In accordance with clause (3)(c) of House rule XIII, the 
goal of H.R. 5339 is to protect the interests of the workforce 
in their benefits provided under ERISA plans.

                    Duplication of Federal Programs

    No provision of H.R. 5339 establishes or reauthorizes a 
program of the Federal Government known to be duplicative of 
another Federal program, a program that was included in any 
report from the Government Accountability Office to Congress 
pursuant to section 21 of Public Law 111-139, or a program 
related to a program identified in the most recent Catalog of 
Federal Domestic Assistance.

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
the committee's oversight findings and recommendations are 
reflected in the body of this report.

            Required Committee Hearing and Related Hearings

    In compliance with clause 3(c)(6) of rule XIII of the Rules 
of the House of Representatives, the following hearing held 
during the 118th Congress was used to develop or consider H.R. 
5339: ``Examining the Policies and Priorities of the U.S. 
Department of Labor''.

               New Budget Authority and CBO Cost Estimate

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the Rules of the House of Representatives and section 
308(a) of the Congressional Budget Act of 1974 and with respect 
to requirements of clause 3(c)(3) of rule XIII of the Rules of 
the House of Representatives and section 402 of the 
Congressional Budget Act of 1974, the Committee has received 
the following estimate for H.R. 5339 from the Director of the 
Congressional Budget Office:

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Bill summaries: On September 14, 2023, the Committee on 
Education and the Workforce ordered to be reported four bills 
related to the investments of retirement plans. This document 
provides estimates for each piece of legislation.
    Generally, the bills would:
           Change the standards that the fiduciaries of 
        private pension plans must use when making investment 
        decisions, including decisions on whether and how to 
        vote proxies and decisions about selecting plan 
        employees.
           Require plans to provide information to 
        participants investing in brokerage windows, which 
        allow participants to select from a broad variety of 
        investments.
    Background: Under the Employee Retirement Income Security 
Act of 1974 (ERISA), fiduciaries of private pension plans must 
act in the interest of plan participants, including when making 
investment decisions. The rule ``Financial Factors in Selecting 
Plan Investments,'' issued on November 13, 2020, required 
fiduciaries to make investment decisions based solely on 
``pecuniary factors.'' That rule included a ``tiebreaker'' 
standard, under which fiduciaries could consider other benefits 
when ``alternative investment options are economically 
indistinguishable.'' A related rule, ``Fiduciary Duties 
Regarding Proxy Voting and Shareholder Rights,'' issued on 
December 16, 2020, guided whether and how fiduciaries were to 
exercise proxy votes. That rule stated that fiduciaries must 
make such decisions ``for the exclusive purpose of providing 
benefits to participants.''
    On December 1, 2022, the Department of Labor (DOL) issued a 
new rule, ``Prudence and Loyalty in Selecting Plan Investments 
and Exercising Shareholder Rights,'' which clarified how plan 
fiduciaries may consider climate change and other 
environmental, social, or governance (commonly referred to as 
ESG) factors when making investment decisions. Under the new 
regulation, fiduciaries may consider ``the economic effects of 
climate change and other environmental, social, or governance 
factors,'' but investment decisions ``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.''
    For additional background, see CBO's estimate of H.J. Res. 
30, which disapproved the 2022 rule. The resolution was 
approved by the Congress but vetoed by the President, so that 
rule remains in effect.
    Estimated Federal cost: The costs of the legislation fall 
within budget function 600 (income security).
    Basis of estimate: CBO and the staff of the Joint Committee 
on Taxation (JCT) estimate that none of the bills would affect 
expected revenues or net direct spending. CBO estimates that 
implementing each of the bills would affect spending subject to 
appropriation. This cost estimate does not include any effects 
of interaction among the bills. If all four bills were combined 
and enacted as a single piece of legislation, CBO expects that 
the net difference in estimated costs would be insignificant.
    H.R. 5337, the Retirement Proxy Protection Act, would 
specify plans' obligations relating to proxy voting. It would 
reinstate many of the provisions included in the December 2020 
rule ``Fiduciary Duties Regarding Proxy Voting and Shareholder 
Rights.''
    H.R. 5338, the No Discrimination in My Benefits Act, would 
require that any selection of plan employees or service 
providers be made ``without regard to race, color, religion, 
sex, or national origin.''
    H.R. 5339, the RETIRE Act, would reinstate many of the 
provisions in the November 2020 rule ``Financial Factors in 
Selecting Plan Investments.''
    H.R. 5340, the Providing Complete Information to Retirement 
Investors Act, would require the provision of additional 
information to plan participants before they select nonstandard 
investments. In self-directed pension plans, such as 401(k)s, 
participants generally select from a menu of designated 
investment alternatives offered by the plan. Some plans also 
offer ``brokerage windows,'' which allow participants access to 
a broad variety of investments.
    Direct spending and revenues: Enacting H.R. 5337, H.R. 
5338, or H.R. 5339 could affect federal revenues if the amount 
that individuals or employers contribute to tax-preferred plans 
changed. Additionally, premiums (which are recorded as 
offsetting receipts and reduce direct spending) received by the 
Pension Benefit Guaranty Corporation could be affected because 
those premiums are based in part on the amount of plan assets.
    However, because fiduciaries must maximize investment 
performance, CBO and JCT do not expect H.R. 5337, H.R. 5338, or 
H.R. 5339 to substantially affect investment outcomes. 
Projections of investment returns are inherently uncertain, but 
we expect an equally likely chance of small increases or small 
decreases in federal revenues and outlays stemming from this 
resolution. The new rule may induce individual employers and 
workers to raise or lower their pension contributions, but CBO 
and JCT project that total contributions will not change and 
thus there would be no effect on expected revenues and net 
direct spending.
    Under H.R. 5340, plans would be required to warn 
participants in brokerage windows about the extra potential 
risk associated with those investments. CBO and JCT do not 
expect H.R. 5340 to significantly change participants' 
investment choices, and to the extent that they do change, we 
expect an equally likely chance of small increases or small 
decreases in federal revenues and outlays.
    Spending subject to appropriation: CBO estimates that each 
of the bills would increase spending subject to appropriation 
by insignificant amounts, less than $500,000 over the 2023-2028 
period. The administrative burden on DOL to issue the 
regulations associated with the legislation would be minimal. 
Based on experience with similar changes, CBO estimates that 
administrative costs would be insignificant. Any such spending 
would be subject to the availability of appropriated funds.
    Pay-as-you-go considerations: None.
    Increase in long-term net direct spending and deficits: 
None.
    Mandates: H.R. 5337 would impose a private-sector mandate 
as defined in the Unfunded Mandates Reform Act (UMRA) by 
prohibiting ERISA plan fiduciaries from prioritizing a non-
pecuniary objective when exercising shareholder rights. CBO 
estimates that the cost of the mandate would not exceed the 
private-sector threshold established in UMRA ($198 million in 
2023, adjusted annually for inflation). The bill would not 
impose any intergovernmental mandates.
    CBO has not reviewed H.R. 5338 for intergovernmental or 
private-sector mandates. Section 4 of UMRA excludes from the 
application of that act any legislative provisions that would 
establish or enforce statutory rights prohibiting 
discrimination. CBO has determined that this legislation falls 
within that exclusion because it would prohibit discrimination 
in hiring or retaining personnel based on race, color, 
religion, sex, or national origin.
    H.R. 5339 would not impose any private-sector or 
intergovernmental mandates as defined in UMRA.
    H.R. 5340 would impose a private-sector mandate as defined 
in UMRA by requiring pension plans that offer brokerage windows 
to warn participants of potential risk associated with 
alternative investments. Because of the small burden associated 
with providing an additional warning, CBO estimates that the 
cost of the mandate would not exceed the private-sector 
threshold established in UMRA ($198 million in 2023, adjusted 
annually for inflation). The bill would not impose any 
intergovernmental mandates.
    Estimate prepared by: Federal costs: Noah Meyerson, Federal 
revenues: Staff of the Joint Committee on Taxation; Mandates: 
Staff of the Joint Committee on Taxation and Andrew Laughlin.
    Estimate reviewed by: Justin Humphrey, Chief, Finance, 
Housing, and Education Cost Estimates Unit; Kathleen 
FitzGerald, Chief, Public and Private Mandates Unit; H. Samuel 
Papenfuss, Deputy Director of Budget Analysis.
    Estimate approved by: Phillip L. Swagel, Director, 
Congressional Budget Office.

                        Committee Cost Estimate

    Clause 3(d)(1) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison of the 
costs that would be incurred in carrying out H.R. 5339. 
However, clause 3(d)(2)(B) of that rule provides that this 
requirement does not apply when, as with the present report, 
the committee adopts as its own the cost estimate of the bill 
prepared by the Director of the Congressional Budget Office 
under section 402 of the Congressional Budget Act.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italics and existing law in which no change is 
proposed is shown in roman):

            EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974




           *       *       *       *       *       *       *
TITLE I--PROTECTION OF EMPLOYEE BENEFIT RIGHTS

           *       *       *       *       *       *       *



Subtitle B--Regulatory Provisions

           *       *       *       *       *       *       *



Part 4--Fiduciary Responsibility

           *       *       *       *       *       *       *



                            FIDUCIARY DUTIES

  Sec. 404. (a)(1) Subject to sections 403(c) and (d), 4042, 
and 4044, a fiduciary shall discharge his duties with respect 
to a plan solely in the interest of the participants and 
beneficiaries and--
          (A) for the exclusive purpose of:
                  (i) providing benefits to participants and 
                their beneficiaries; and
                  (ii) defraying reasonable expenses of 
                administering the plan;
          (B) with the care, skill, prudence, and diligence 
        under the circumstances then prevailing that a prudent 
        man acting in a like capacity and familiar with such 
        matters would use in the conduct of an enterprise of a 
        like character and with like aims;
          (C) by diversifying the investments of the plan so as 
        to minimize the risk of large losses, unless under the 
        circumstances it is clearly prudent not to do so; and
          (D) in accordance with the documents and instruments 
        governing the plan insofar as such documents and 
        instruments are consistent with the provisions of this 
        title and title IV.
  (2) In the case of an eligible individual account plan (as 
defined in section 407(d)(3)), the diversification requirement 
of paragraph (1)(C) and the prudence requirement (only to the 
extent that it requires diversification) of paragraph (1)(B) is 
not violated by acquisition or holding of qualifying employer 
real property or qualifying employer securities (as defined in 
section 407(d)(4) and (5)).
          (3) Interest based on pecuniary factors.--
                  (A) In general.--For purposes of paragraph 
                (1), a fiduciary shall be considered to act 
                solely in the interest of the participants and 
                beneficiaries of the plan with respect to an 
                investment or investment course of action only 
                if the fiduciary's action with respect to such 
                investment or investment course of action is 
                based only on pecuniary factors (except as 
                provided in subparagraph (B)). 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 shall 
                reflect a prudent assessment of the impact of 
                such factor on risk and return.
                  (B) Use of non-pecuniary factors for 
                investment alternatives.--Notwithstanding 
                paragraph (A), 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 may use non-pecuniary factors as the 
                deciding factor if the fiduciary documents--
                          (i) why pecuniary factors were not 
                        sufficient to select a plan 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 and 
                        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 non-pecuniary 
                        factor or factors are consistent with 
                        the interests of the participants and 
                        beneficiaries in their retirement 
                        income or financial benefits under the 
                        plan.
                  (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 is not prohibited from considering, 
                selecting, or retaining an investment option on 
                the basis that such investment option promotes, 
                seeks, or supports one or more non-pecuniary 
                benefits or goals, 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 
                        under subsection (c)(5) (or any other 
                        default investment alternative) if its 
                        investment objectives or goals or its 
                        principal investment strategies 
                        include, consider, or indicate the use 
                        of one or more non-pecuniary factors.
                  (D) Definitions.--For the purposes of this 
                paragraph:
                          (i) 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).
                          (ii) 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 an individual account plan, a 
                        designated investment alternative under 
                        the plan.
  (b) Except as authorized by the Secretary by regulation, no 
fiduciary may maintain the indicia of ownership of any assets 
of a plan outside the jurisdiction of the district courts of 
the United States.
  (c)(1)(A) In the case of a pension plan which provides for 
individual accounts and permits a participant or beneficiary to 
exercise control over assets in his account, if a participant 
or beneficiary exercises control over the assets in his account 
(as determined under regulations of the Secretary)--
          (i) such participant or beneficiary shall not be 
        deemed to be a fiduciary by reason of such exercise, 
        and
          (ii) no person who is otherwise a fiduciary shall be 
        liable under this part for any loss, or by reason of 
        any breach, which results from such participant's or 
        beneficiary's exercise of control, except that this 
        clause shall not apply in connection with such 
        participant or beneficiary for any blackout period 
        during which the ability of such participant or 
        beneficiary to direct the investment of the assets in 
        his or her account is suspended by a plan sponsor or 
        fiduciary.
  (B) If a person referred to in subparagraph (A)(ii) meets the 
requirements of this title in connection with authorizing and 
implementing the blackout period, any person who is otherwise a 
fiduciary shall not be liable under this title for any loss 
occurring during such period.
  (C) For purposes of this paragraph, the term ``blackout 
period'' has the meaning given such term by section 101(i)(7).
          (2) In the case of a simple retirement account 
        established pursuant to a qualified salary reduction 
        arrangement under section 408(p) of the Internal 
        Revenue Code of 1986, a participant or beneficiary 
        shall, for purposes of paragraph (1), be treated as 
        exercising control over the assets in the account upon 
        the earliest of--
                  (A) an affirmative election among investment 
                options with respect to the initial investment 
                of any contribution,
                  (B) a rollover to any other simple retirement 
                account or individual retirement plan, or
                  (C) one year after the simple retirement 
                account is established.
        No reports, other than those required under section 
        101(g), shall be required with respect to a simple 
        retirement account established pursuant to such a 
        qualified salary reduction arrangement.
          (3) In the case of a pension plan which makes a 
        transfer to an individual retirement account or annuity 
        of a designated trustee or issuer under section 
        401(a)(31)(B) of the Internal Revenue Code of 1986, the 
        participant or beneficiary shall, for purposes of 
        paragraph (1), be treated as exercising control over 
        the assets in the account or annuity upon--
                  (A) the earlier of--
                          (i) a rollover of all or a portion of 
                        the amount to another individual 
                        retirement account or annuity; or
                          (ii) one year after the transfer is 
                        made; or
                  (B) a transfer that is made in a manner 
                consistent with guidance provided by the 
                Secretary.
          (4)(A) In any case in which a qualified change in 
        investment options occurs in connection with an 
        individual account plan, a participant or beneficiary 
        shall not be treated for purposes of paragraph (1) as 
        not exercising control over the assets in his account 
        in connection with such change if the requirements of 
        subparagraph (C) are met in connection with such 
        change.
          (B) For purposes of subparagraph (A), the term 
        ``qualified change in investment options'' means, in 
        connection with an individual account plan, a change in 
        the investment options offered to the participant or 
        beneficiary under the terms of the plan, under which--
                  (i) the account of the participant or 
                beneficiary is reallocated among one or more 
                remaining or new investment options which are 
                offered in lieu of one or more investment 
                options offered immediately prior to the 
                effective date of the change, and
                  (ii) the stated characteristics of the 
                remaining or new investment options provided 
                under clause (i), including characteristics 
                relating to risk and rate of return, are, as of 
                immediately after the change, reasonably 
                similar to those of the existing investment 
                options as of immediately before the change.
          (C) The requirements of this subparagraph are met in 
        connection with a qualified change in investment 
        options if--
                  (i) at least 30 days and no more than 60 days 
                prior to the effective date of the change, the 
                plan administrator furnishes written notice of 
                the change to the participants and 
                beneficiaries, including information comparing 
                the existing and new investment options and an 
                explanation that, in the absence of affirmative 
                investment instructions from the participant or 
                beneficiary to the contrary, the account of the 
                participant or beneficiary will be invested in 
                the manner described in subparagraph (B),
                  (ii) the participant or beneficiary has not 
                provided to the plan administrator, in advance 
                of the effective date of the change, 
                affirmative investment instructions contrary to 
                the change, and
                  (iii) the investments under the plan of the 
                participant or beneficiary as in effect 
                immediately prior to the effective date of the 
                change were the product of the exercise by such 
                participant or beneficiary of control over the 
                assets of the account within the meaning of 
                paragraph (1).
          (5) Default investment arrangements.--
                  (A) In general.--For purposes of paragraph 
                (1), a participant or beneficiary in an 
                individual account plan meeting the notice 
                requirements of subparagraph (B) shall be 
                treated as exercising control over the assets 
                in the account with respect to the amount of 
                contributions and earnings which, in the 
                absence of an investment election by the 
                participant or beneficiary, are invested by the 
                plan in accordance with regulations prescribed 
                by the Secretary. The regulations under this 
                subparagraph shall provide guidance on the 
                appropriateness of designating default 
                investments that include a mix of asset classes 
                consistent with capital preservation or long-
                term capital appreciation, or a blend of both.
                  (B) Notice requirements.--
                          (i) In general.--The requirements of 
                        this subparagraph are met if each 
                        participant or beneficiary--
                                  (I) receives, within a 
                                reasonable period of time 
                                before each plan year, a notice 
                                explaining the employee's right 
                                under the plan to designate how 
                                contributions and earnings will 
                                be invested and explaining how, 
                                in the absence of any 
                                investment election by the 
                                participant or beneficiary, 
                                such contributions and earnings 
                                will be invested, and
                                  (II) has a reasonable period 
                                of time after receipt of such 
                                notice and before the beginning 
                                of the plan year to make such 
                                designation.
                          (ii) Form of notice.--The 
                        requirements of clauses (i) and (ii) of 
                        section 401(k)(12)(D) of the Internal 
                        Revenue Code of 1986 shall apply with 
                        respect to the notices described in 
                        this subparagraph.
          (6) Default investment arrangements for a pension-
        linked emergency savings account.--For purposes of 
        paragraph (1), a participant in a pension-linked 
        emergency savings account shall be treated as 
        exercising control over the assets in the account with 
        respect to the amount of contributions and earnings 
        which are invested in accordance with section 
        801(c)(1)(A)(iii).
  (d)(1) If, in connection with the termination of a pension 
plan which is a single-employer plan, there is an election to 
establish or maintain a qualified replacement plan, or to 
increase benefits, as provided under section 4980(d) of the 
Internal Revenue Code of 1986, a fiduciary shall discharge the 
fiduciary's duties under this title and title IV in accordance 
with the following requirements:
          (A) In the case of a fiduciary of the terminated 
        plan, any requirement--
                  (i) under section 4980(d)(2)(B) of such Code 
                with respect to the transfer of assets from the 
                terminated plan to a qualified replacement 
                plan, and
                  (ii) under section 4980(d)(2)(B)(ii) or 
                4980(d)(3) of such Code with respect to any 
                increase in benefits under the terminated plan.
          (B) In the case of a fiduciary of a qualified 
        replacement plan, any requirement--
                  (i) under section 4980(d)(2)(A) of such Code 
                with respect to participation in the qualified 
                replacement plan of active participants in the 
                terminated plan,
                  (ii) under section 4980(d)(2)(B) of such Code 
                with respect to the receipt of assets from the 
                terminated plan, and
                  (iii) under section 4980(d)(2)(C) of such 
                Code with respect to the allocation of assets 
                to participants of the qualified replacement 
                plan.
  (2) For purposes of this subsection--
          (A) any term used in this subsection which is also 
        used in section 4980(d) of the Internal Revenue Code of 
        1986 shall have the same meaning as when used in such 
        section, and
          (B) any reference in this subsection to the Internal 
        Revenue Code of 1986 shall be a reference to such Code 
        as in effect immediately after the enactment of the 
        Omnibus Budget Reconciliation Act of 1990.
  (e) Safe Harbor for Annuity Selection.--
          (1) In general.--With respect to the selection of an 
        insurer for a guaranteed retirement income contract, 
        the requirements of subsection (a)(1)(B) will be deemed 
        to be satisfied if a fiduciary--
                  (A) engages in an objective, thorough, and 
                analytical search for the purpose of 
                identifying insurers from which to purchase 
                such contracts;
                  (B) with respect to each insurer identified 
                under subparagraph (A)--
                          (i) considers the financial 
                        capability of such insurer to satisfy 
                        its obligations under the guaranteed 
                        retirement income contract; and
                          (ii) considers the cost (including 
                        fees and commissions) of the guaranteed 
                        retirement income contract offered by 
                        the insurer in relation to the benefits 
                        and product features of the contract 
                        and administrative services to be 
                        provided under such contract; and
                  (C) on the basis of such consideration, 
                concludes that--
                          (i) at the time of the selection, the 
                        insurer is financially capable of 
                        satisfying its obligations under the 
                        guaranteed retirement income contract; 
                        and
                          (ii) the relative cost of the 
                        selected guaranteed retirement income 
                        contract as described in subparagraph 
                        (B)(ii) is reasonable.
          (2) Financial capability of the insurer.--A fiduciary 
        will be deemed to satisfy the requirements of 
        paragraphs (1)(B)(i) and (1)(C)(i) if--
                  (A) the fiduciary obtains written 
                representations from the insurer that--
                          (i) the insurer is licensed to offer 
                        guaranteed retirement income contracts;
                          (ii) the insurer, at the time of 
                        selection and for each of the 
                        immediately preceding 7 plan years--
                                  (I) operates under a 
                                certificate of authority from 
                                the insurance commissioner of 
                                its domiciliary State which has 
                                not been revoked or suspended;
                                  (II) has filed audited 
                                financial statements in 
                                accordance with the laws of its 
                                domiciliary State under 
                                applicable statutory accounting 
                                principles;
                                  (III) maintains (and has 
                                maintained) reserves which 
                                satisfies all the statutory 
                                requirements of all States 
                                where the insurer does 
                                business; and
                                  (IV) is not operating under 
                                an order of supervision, 
                                rehabilitation, or liquidation;
                          (iii) the insurer undergoes, at least 
                        every 5 years, a financial examination 
                        (within the meaning of the law of its 
                        domiciliary State) by the insurance 
                        commissioner of the domiciliary State 
                        (or representative, designee, or other 
                        party approved by such commissioner); 
                        and
                          (iv) the insurer will notify the 
                        fiduciary of any change in 
                        circumstances occurring after the 
                        provision of the representations in 
                        clauses (i), (ii), and (iii) which 
                        would preclude the insurer from making 
                        such representations at the time of 
                        issuance of the guaranteed retirement 
                        income contract; and
                  (B) after receiving such representations and 
                as of the time of selection, the fiduciary has 
                not received any notice described in 
                subparagraph (A)(iv) and is in possession of no 
                other information which would cause the 
                fiduciary to question the representations 
                provided.
          (3) No requirement to select lowest cost.--Nothing in 
        this subsection shall be construed to require a 
        fiduciary to select the lowest cost contract. A 
        fiduciary may consider the value of a contract, 
        including features and benefits of the contract and 
        attributes of the insurer (including, without 
        limitation, the insurer's financial strength) in 
        conjunction with the cost of the contract.
          (4) Time of selection.--
                  (A) In general.--For purposes of this 
                subsection, the time of selection is--
                          (i) the time that the insurer and the 
                        contract are selected for distribution 
                        of benefits to a specific participant 
                        or beneficiary; or
                          (ii) if the fiduciary periodically 
                        reviews the continuing appropriateness 
                        of the conclusion described in 
                        paragraph (1)(C) with respect to a 
                        selected insurer, taking into account 
                        the considerations described in such 
                        paragraph, the time that the insurer 
                        and the contract are selected to 
                        provide benefits at future dates to 
                        participants or beneficiaries under the 
                        plan.
                Nothing in the preceding sentence shall be 
                construed to require the fiduciary to review 
                the appropriateness of a selection after the 
                purchase of a contract for a participant or 
                beneficiary.
                  (B) Periodic review.--A fiduciary will be 
                deemed to have conducted the periodic review 
                described in subparagraph (A)(ii) if the 
                fiduciary obtains the written representations 
                described in clauses (i), (ii), and (iii) of 
                paragraph (2)(A) from the insurer on an annual 
                basis, unless the fiduciary receives any notice 
                described in paragraph (2)(A)(iv) or otherwise 
                becomes aware of facts that would cause the 
                fiduciary to question such representations.
          (5) Limited liability.--A fiduciary which satisfies 
        the requirements of this subsection shall not be liable 
        following the distribution of any benefit, or the 
        investment by or on behalf of a participant or 
        beneficiary pursuant to the selected guaranteed 
        retirement income contract, for any losses that may 
        result to the participant or beneficiary due to an 
        insurer's inability to satisfy its financial 
        obligations under the terms of such contract.
          (6) Definitions.--For purposes of this subsection--
                  (A) Insurer.--The term ``insurer'' means an 
                insurance company, insurance service, or 
                insurance organization, including affiliates of 
                such companies.
                  (B) Guaranteed retirement income contract.--
                The term ``guaranteed retirement income 
                contract'' means an annuity contract for a 
                fixed term or a contract (or provision or 
                feature thereof) which provides guaranteed 
                benefits annually (or more frequently) for at 
                least the remainder of the life of the 
                participant or the joint lives of the 
                participant and the participant's designated 
                beneficiary as part of an individual account 
                plan.

           *       *       *       *       *       *       *


                             MINORITY VIEWS

                              INTRODUCTION

    H.R. 5339, the Roll back ESG To Increase Retirement 
Earnings (RETIRE) Act, amends the Employee Retirement Income 
Security Act of 1974 (ERISA)\1\ to codify a Trump 
Administration regulation regarding environmental, social, 
governance (ESG) investing. The Trump-era rule sought to impose 
needless barriers and first-of-its kind paperwork requirements 
related to ESG investing in defined contribution plans, such as 
401k plans. H.R. 5339 is opposed by organizations such as the 
AFL-CIO, Americans for Financial Reform, and US SIF: The Forum 
for Sustainable and Responsible Investment (US SIF).
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    \1\29 U.S.C. Sec. 1104(a).
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    CONTEXT FOR H.R. 5339: ESG INVESTING AND THE LABOR DEPARTMENT'S 
            POSITION ON IT PRIOR TO THE TRUMP ADMINISTRATION

    ESG factors are categories of statistical data about 
companies that inform investors, including retirement plans, of 
potential risks and opportunities when evaluating a company for 
inclusion in an investment portfolio. Workers across the 
country are interested in ESG data, as it allows them to 
evaluate whether an investment reflects their values on issues 
such as combating climate change or promoting health and labor 
standards, without sacrificing returns. Additionally, ESG-data 
usage can be viewed as part of a risk mitigation strategy in 
investment. Private sector retirement plans should be able to 
consider investments that account for companies' negative 
externalities, such as high liability risks, fossil fuel 
dependent business practices, and poor treatment of workers. 
These are among the factors that could cause a stock to suffer 
over the decades, the type of long-term time horizon pivotal to 
strong retirement investing.
    The Government Accountability Office (GAO) made a similar 
point in its review of the use of ESG factors and retirement 
plans, noting such ``plans have investment timelines spanning 
decades and must manage investment risks to provide benefits 
for workers for many years to come . . . The use of 
environmental, social, and governance (ESG) factors has emerged 
as a way for investors, such as retirement plans, to capture 
information on climate change and other potential risks and 
opportunities . . .''\2\ According to GAO, ``[w]hether or not 
retirement plans consider the projected impacts from climate 
change and other ESG risk factors could affect investment 
returns and, in turn, the financial health of retirees.''\3\ 
This is an essential point about ESG investing: ESG factors can 
impact a retirement saver's 401(k) plan whether plan 
fiduciaries consider them or not. Committee Democrats believe 
it is common sense for plan fiduciaries to be permitted to 
consider ESG factors, and federal law should not discourage 
them from doing so.
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    \2\U.S. Govt. Accountability Off., GAO-18-398, Retirement Plan 
Investing: Clearer Information on Consideration of Environmental, 
Social, and Governance Factors Would be Helpful 7 (2018), https://
www.gao.gov/assets/700/691930.pdf.
    \3\Id. at 1.
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    Prior to the Trump Administration, the Department of Labor 
(DOL) periodically issued guidance regarding ESG factors and 
consistently ensured that retirement plan fiduciaries 
exclusively focus on financial returns. However, in instances 
when competing investments served the plan's economic interests 
equally well, plan fiduciaries typically could use collateral 
considerations--such as ESG risk factors--as ``tie breakers'' 
for an investment choice.\4\
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    \4\See Interpretive Bulletin 94-1, 59 Fed. Reg. 32606 (June 23, 
1994), https://www.govinfo.gov/content/pkg/FR-1994-06-23/html/94-
15162.htm.
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    THE TRUMP ADMINISTRATION'S UNSUBSTANTIATED CONCERN TOWARD PLAN 
                     FIDUCIARIES AND ESG INVESTING

    In 2020, the Trump Administration proposed a rule related 
to ESG investing that significantly departed from the above-
mentioned guidance. The proposed rule's preamble said DOL ``is 
concerned . . . that the growing emphasis on ESG investing may 
be prompting ERISA plan fiduciaries to make investment 
decisions for purposes distinct from providing benefits to 
participants and beneficiaries and defraying reasonable 
expenses of administering the plan.''\5\ However, DOL failed to 
provide any evidence to validate this concern. The proposed 
rule did not cite any litigation from plan participants or 
fiduciary breaches related to ESG investing. Additionally, the 
proposed rule did not cite any agency enforcement actions 
related to ESG; and this issue was not among DOL's enforcement 
priorities in its budget for fiscal year (FY) 2020 when the 
rule was proposed or their three prior budgets.\6\ Curiously, 
the proposed rule even acknowledges that ``most fiduciaries are 
operating in compliance'' with DOL's existing ESG 
guidelines.\7\
---------------------------------------------------------------------------
    \5\Financial Factors in Selecting Plan Investments, 85 Fed. Reg. 
39113 (June 30, 2020) [hereinafter 2020 Proposed Rule], https://
www.govinfo.gov/content/pkg/FR-2020-06-30/pdf/2020-13705.pdf.
    \6\See FY 2021 Budget, U.S. Dep't of Labor, https://www.dol.gov/
general/budget, FY 2020 Budget, U.S. Dep't of Labor, https://
www.dol.gov/general/budget/index-2020, FY 2019 Budget, U.S. Dep't of 
Labor, https://www.dol.gov/general/budget/index-2019, FY 2018 Budget, 
U.S. Dep't of Labor, https://www.dol.gov/general/budget/index-2018.
    \7\2020 Proposed Rule, supra note 5, at 39120.
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    Had Committee Republicans held a legislative hearing on 
H.R. 5339, Committee Members could have heard testimony and 
asked witnesses questions about the unsubstantiated claims 
regarding ESG investing that informed the Trump-era rule and 
H.R. 5339. Unfortunately, Committee Republicans failed to hold 
such a legislative hearing and instead hastily marked up the 
bill shortly after it was introduced.

             H.R. 5339 CODIFIES A FLAWED TRUMP-ERA ESG RULE

    Specifically, the Trump-era's ESG rule required that 
fiduciaries make investment decisions solely based on 
``pecuniary'' factors, defined in the final rule as ``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) of the Employee Retirement Income 
Security Act or ERISA.''\8\ The Trump-era rule permitted 
consideration of non-pecuniary (ESG) factors when a fiduciary 
is unable to distinguish reasonably available alternatives on 
the basis of pecuniary factors alone.\9\ However, in such ``tie 
breaker'' cases, the Trump-era rule imposed a first-of-its-kind 
``documentation requirement'' on a plan fiduciary when 
concluding that a distinguishing factor could not be found and 
why the selected investment was chosen based on the purposes of 
the plan.\10\ This establishes some presumption by the Trump-
era DOL that ESG factors are ``non-pecuniary,'' a presumption 
not supported by evidence. The rule's ``pecuniary'' vs. ``non-
pecuniary'' distinction is arbitrary, flawed, and out of step 
with how ESG factors are considered by retirement asset 
managers, and many other investors. The Trump-era rule also 
prohibited investments with an objective, goal, or principal 
investment strategy that includes the use of one or more non-
pecuniary (ESG) factors from being considered a qualified 
default investment alternative (QDIAs), such as a target date 
fund (TDF).\11\
---------------------------------------------------------------------------
    \8\Financial Factors in Selecting Plan Investments, 85 Fed. Reg. 
72846 (Nov. 13, 2020) [hereinafter 2020 Final Rule], https://
www.govinfo.gov/content/pkg/FR-2020-11-13/pdf/2020-24515.pdf.
    \9\Id. at 72851.
    \10\Id. at 72851.
    \11\Id. at 72851.
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           H.R. 5339 CODIFIES AN UNPOPULAR TRUMP-ERA ESG RULE

    Committee Democrats were not the first voices expressing 
opposition to the Trump-era rule. Such opposition came from all 
corners when the rule was proposed several years ago. According 
to an analysis of the more than 8,700 public comments on the 
proposed rule that was conducted by US SIF and other 
organizations, 96 percent of the comments or petition 
signatures from individuals expressed opposition.\12\ One of 
the key findings of the analysis was that ``[o]pposition was 
especially high among investment-related groups, with asset 
managers, financial advisors, financial service providers, 
asset owners, pension plans, and investment organizations 
either unanimous or all but unanimous opposing the 
proposal.''\13\ Specifically, BlackRock, Fidelity, State Street 
Global Advisors, T. Rowe Price, and Vanguard submitted opposing 
comments to DOL.\14\
---------------------------------------------------------------------------
    \12\Press Release, Ceres, Investor Organizations and Financial 
Industry Firms' Analysis of Public Comments on Department of Labor's 
ESG Proposal Shows Landslide of Opposition (Aug. 20, 2020), https://
www.ceres.org/news-center/press-releases/investor-organizations-and-
financial-industry-firms-analysis-public.
    \13\Id.
    \14\Rachel Koning Beals, Trump's Labor Department's rule 
discouraging ESG investing in retirement plans is finalized over swell 
of objections, Marketwatch, (Oct. 30, 2020), https://
www.marketwatch.com/story/trumps-labor-rule-discouraging-esg-investing-
in-retirement-plans-is-finalized-over-swell-of-objections-11604089492.
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        DEMOCRATIC AMENDMENT OFFERED DURING MARKUP OF H.R. 5339

    Committee Democrats put forward one substitute amendment to 
improve the bill. Offered by Rep. Mark DeSaulnier (D-CA-10), 
this amendment would have codified the Biden Administration's 
ESG rule. The Biden Administration's ESG rule, which was 
finalized in 2022 and replaced the Trump-era rule, retained the 
long-standing duty of a fiduciary to focus on relevant risk-
return factors in selecting investments. The rule specified 
that a fiduciary may not sacrifice investment returns or take 
on additional investment risk for reasons unrelated to plan 
performance. However, the Biden Administration's final rule 
clarified that a fiduciary may reasonably conclude that 
permissible factors relevant to their risk-return analysis 
include the economic effects of climate change and other ESG 
factors on a particular investment. The final rule thus permits 
fiduciaries to consider ESG factors, but only when consistent 
with the requirement that all investments must serve investors' 
economic interests. It does not require consideration of ESG 
factors, and moreover is explicit that ESG considerations alone 
cannot justify lower investment returns or assuming additional 
risk when inconsistent with underlying economic interests.
    US SIF and other organizations conducted further analysis 
of the comments submitted to DOL on the Biden Administration's 
proposed ESG rule and found nearly the opposite results from 
the Trump-era proposed rule. Of the over 22,000 comments 
submitted by individuals, 97.4 percent were in support of the 
proposed rule.\15\ And of the 144 letters submitted by 
institutions--such as corporations, asset managers, financial 
firms, trade groups, and labor organizations--83 percent were 
supportive, with some recommending modifications.\16\
---------------------------------------------------------------------------
    \15\Eric Pitt, Ceres Accelerator for Sustainable Capital Markets, 
Bryan McGannon and Ginny Brooks, US SIF: The Forum for Sustainable and 
Responsible Investment, Garbriel Malek, Stephanie Jones, and Clare 
Staib-Kaufman, Environmental Defense Fund, Public comments 
overwhelmingly support the US Labor Department proposed rule addressing 
the inclusion of ESG criteria and proxy voting in ERISA-governed 
retirement plans, (Jan. 25, 2022), https://www.ussif.org/Files/
Public_Policy/DOL_Comment_Analysis_1.25.22.pdf.
    \16\Id. at 3.

----------------------------------------------------------------------------------------------------------------
              Amendment                       Offered By              Description              Action Taken
----------------------------------------------------------------------------------------------------------------
#2...................................  Mr. DeSaulnier.........  Codifies the Biden       Defeated
                                                                 Administration's final
                                                                 ESG rule.
----------------------------------------------------------------------------------------------------------------

                               CONCLUSION

    H.R. 5339 would codify a deeply problematic and unpopular 
Trump-era ESG rule that would harm retirement savers. For the 
reasons stated above, Committee Democrats opposed H.R. 5339 
when the Committee considered it on September 14, 2023. We urge 
the House of Representatives to do the same.

                                   Robert C. ``Bobby'' Scott,
                                           Ranking Member.
                                   Gregorio Kilili Camacho Sablan.
                                   Mark DeSaulnier.
                                   Jahana Hayes.
                                   Haley M. Stevens.

                                  [all]