[House Report 118-226]
[From the U.S. Government Publishing Office]


 118th Congress    }                                     {    Report
                         HOUSE OF REPRESENTATIVES
  1st Session      }                                     {    118-226

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



 
                  NO DISCRIMINATION IN MY BENEFITS 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. 5338]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Education and the Workforce, to whom was 
referred the bill (H.R. 5338) to amend the Employee Retirement 
Income Security Act of 1974 to establish that fiduciaries must 
act with prudence and loyalty when selecting service providers 
for pension plans, 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 ``No Discrimination in My Benefits 
Act''.

SEC. 2. SERVICE PROVIDER SELECTION.

  Section 404(a)(1) of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1104(a)(1)) is amended--
          (1) in subparagraph (C), by striking ``and'';
          (2) in subparagraph (D), by striking the period at the end 
        and inserting ``; and''; and
          (3) by adding at the end the following new subparagraph:
          ``(E) by selecting, monitoring, and retaining any fiduciary, 
        counsel, employee, or service provider of the plan--
                  ``(i) in accordance with subparagraphs (A) and (B); 
                and
                  ``(ii) without regard to race, color, religion, sex, 
                or national origin.''.

                                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 1974 (ERISA) was designed to ensure that the 
financial interests of participants and beneficiaries in their 
benefits do not take a back seat to advancing political and 
social interests. H.R. 5338 reiterates a fundamental principle 
already existing under ERISA: selecting a service provider for 
an ERISA plan is a fiduciary act subject to ERISA's fiduciary 
obligations of prudence and loyalty. H.R. 5338 also provides 
that such selections must not be discriminatory and therefore 
must be made without regard to race, color, religion, sex, or 
national origin.

                            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 included discussion of 
the Biden administration's attempt to put its radical 
environmental and social agendas above the financial interests 
of retirees by prioritizing environmental, social, and 
governance (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'' 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 raised 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 for ERISA plans, as well as the 
administration's view on incorporating ESG into the 
implementation 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'' 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 for ERISA plans and the administration's support for 
incorporating ESG into the implementation 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 September 5, 2023, Rep. Bob Good (R-VA) introduced the 
No Discrimination in My Benefits Act (H.R. 5338). The bill was 
referred to the Committee on Education and the Workforce. On 
September 14, 2023, the Committee considered H.R. 5338 in 
legislative session and reported it favorably, as amended, to 
the House of Representatives by a recorded vote of 23-19. The 
Committee adopted an Amendment in the Nature of a Substitute 
(ANS) offered by Rep. Good that made minor technical changes.

                            Committee Views


                              INTRODUCTION

    H.R. 5338, the No Discrimination in My Benefits Act, 
reiterates a fundamental principle already existing under 
ERISA: selecting a service provider for an ERISA plan is a 
fiduciary act subject to ERISA's fiduciary obligations of 
prudence and loyalty. H.R. 5338 also amends ERISA to codify a 
prohibition against discrimination in selecting service 
providers on the basis of race, color, religion, sex, or 
national origin.

          THE DUTY OF PRUDENCE AND LOYALTY UNDER EXISTING LAW

    The selection of a service provider for an ERISA plan is a 
fiduciary act.\1\ Under ERISA, a fiduciary must act solely in 
the interest of participants and beneficiaries hand for the 
exclusive purpose of providing benefits to participants and 
their beneficiaries and of defraying reasonable expenses of 
administering the plan (the ``exclusive purpose rule'').\2\ 
Courts have held that ERISA's exclusive purpose rule requires 
fiduciaries to act with ``complete and undivided loyalty to the 
beneficiaries''\3\ and to make decisions ``with an eye single 
to the interests of participants and beneficiaries.''\4\
---------------------------------------------------------------------------
    \1\DOL, Field Assistance Bulletin No. 2002-02 (``In selecting a 
service provider, plan fiduciaries must, consistent with the 
requirements of [ERISA] section 404(a), act prudently and solely in the 
interest of plan participants and beneficiaries and for the exclusive 
purpose of providing benefits and defraying reasonable expenses of 
administering the plan.''); see also Liss v. Smith, 991 F. Supp. 278, 
300 (S.D.N.Y. 1998).
    \2\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.''
    \3\Donavan v. Mazzola, 716 F.2d 1226, 1238 (9th Cir. 1983) 
(citation omitted).
    \4\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.\5\ 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.\6\ The Court 
stated,
---------------------------------------------------------------------------
    \5\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).
    \6\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.\7\
---------------------------------------------------------------------------
    \7\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. 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.''\8\ Thus, 
fiduciaries are held to an expert prudence standard when 
selecting service providers.
---------------------------------------------------------------------------
    \8\ERISA Sec. 404(a)(1)(B), 29 U.S.C. Sec. 1104(a)(1)(B).
---------------------------------------------------------------------------

            DEMOCRATS' ATTACK ON ERISA'S FIDUCIARY STANDARD

    In June 2022, Sens. Robert Menendez (D-NJ), Elizabeth 
Warren (D-MA), Alex Padilla (D-CA), Tim Kaine (D-VA), and John 
Hickenlooper (D-CO) sent letters (the ``Menendez letters'') to 
25 large companies requesting information about the gender and 
race of the asset managers of their pension plans. The letters 
stated, ``Across the industry, the senior leadership level is 
overwhelmingly white and male. . . . This is a serious problem. 
. . .'' The letters' questions included ``What commitments has 
your corporate pension fund made to increase opportunities for 
women and minority owned asset management firms?'' and ``Does 
your corporate pension fund have established priorities and 
expectations for investment staff to seek diverse asset 
managers?''\9\
---------------------------------------------------------------------------
    \9\Press Release, Sen. Bob Menendez Newsroom, Menendez Leads Push 
for Big Corporations to Improve Diversity Among Corporate Pension Fund 
Managers (June 3, 2022).
---------------------------------------------------------------------------
    In June 2023, the Supreme Court ruled in Students for Fair 
Admission v. Harvard that basing college admissions decisions 
on race violates the 14th Amendment to the United States 
Constitution and Title VI of the Civil Rights Act.\10\ This 
decision has encouraged skepticism and challenges regarding 
corporate DEI (diversity, equity, inclusion) policies. 
Moreover, the U.S. Supreme Court has unanimously rejected non-
pecuniary public policy goals as a basis for relaxing ERISA's 
fiduciary standards.\11\ Therefore, the type of discrimination 
encouraged by the Menendez letters is impermissible under ERISA 
and inconsistent with Students for Fair Admission v. Harvard.
---------------------------------------------------------------------------
    \10\143 S. Ct. 2141 (2023).
    \11\Dudenhoeffer, 573 U.S. 409.
---------------------------------------------------------------------------

            H.R. 5338, NO DISCRIMINATION IN MY BENEFITS ACT

    H.R. 5338 protects the retirement savings and other ERISA-
covered benefits of the U.S. workforce. The bill reiterates a 
fundamental principle already existing under ERISA: selecting a 
service provider for an ERISA plan is a fiduciary act subject 
to ERISA's fiduciary obligations of prudence and loyalty. The 
bill also amends ERISA to codify a prohibition against 
discrimination in selecting service providers on the basis of 
race, color, religion, sex, or national origin.

                               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. 5338 ensures that 
fiduciaries are informed that service provider selection is a 
fiduciary act subject to ERISA's fiduciary obligations of 
prudence and loyalty. H.R. 5338 also amends ERISA to codify a 
prohibition against discrimination in selecting service 
providers on the basis of race, color, religion, sex, or 
national origin.

                                Summary


                  H.R. 5338 SECTION-BY-SECTION SUMMARY

Section 1. Short title

     Names the bill as the ``No Discrimination in My 
Benefits Act''

Section 2. Selection of service providers

    Section 2(a) amends ERISA Section 404(a) by stating that 
when selecting, monitoring, and retaining any fiduciary, 
counsel, employee, or service provider of an ERISA plan, 
ERISA's fiduciary duties of prudence and loyalty apply. In 
addition, such actions must be taken without regard to race, 
color, religion, sex, or national origin.

                       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. 
5338 takes important steps to protect the interests of the 
workforce in their benefits provided under ERISA plans with 
respect to selecting, monitoring, and retaining fiduciaries, 
counsels, employees, or service providers of a plan. H.R. 5338 
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. 5338 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. 5338 is to protect the interests of the workforce 
in their benefits provided under ERISA plans with respect to 
proxy voting. The goal of H.R. 5338 is to protect the interests 
of the workforce in their benefits provided under ERISA plans 
with respect to selecting, monitoring, and retaining 
fiduciaries, counsels, employees, or service providers of a 
plan.

                    Duplication of Federal Programs

    No provision of H.R. 5338 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. 
5338: ``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. 5338 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. 5338. 
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 (existing law 
proposed to be omitted is enclosed in black brackets, 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[.]; and
          (E) by selecting, monitoring, and retaining any 
        fiduciary, counsel, employee, or service provider of 
        the plan--
                  (i) in accordance with subparagraphs (A) and 
                (B); and
                  (ii) without regard to race, color, religion, 
                sex, or national origin.
  (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)).
  (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. 5338, the No Discrimination in My Benefits Act, amends 
the Employee Retirement Income Security Act of 1974 (ERISA)\1\ 
to prohibit plan fiduciaries from selecting, monitoring, and 
retaining any fiduciary, counsel, employee, or service provider 
for the plan based on race, color, religion, sex, or national 
origin. The bill undermines efforts to increase diversity in 
the asset management industry that Committee Democrats, among 
others, strongly support. H.R. 5338 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).
---------------------------------------------------------------------------
    \1\29 U.S.C. Sec. 1104.
---------------------------------------------------------------------------

    H.R. 5338 PERPETUATES THE UNACCEPTABLE STATUS QUO IN THE ASSEST 
                          MANAGEMENT INDUSTRY

    Women and people of color are significantly 
underrepresented in the asset management industry. 
Specifically, according to the Government Accountability Office 
(GAO), 1 percent of the $70 trillion in global financial assets 
under management are managed by women or minority-owned 
firms.\2\ There have been efforts to increase diversity among 
asset managers in the private sector and the federal 
government, including the Pension Benefit Guaranty 
Corporation's (PBGC) Smaller Asset Management Program. H.R. 
5338 is viewed as a ``blatant attempt to obstruct efforts to 
address long-standing racial and gender under-representation in 
management.''\3\
---------------------------------------------------------------------------
    \2\U.S. Gov't Accountability Off., GAO-17-726, Investment 
Management: Key Practices Could Provide More Options for Federal 
Entities and Opportunities for Federal Entities and Opportunities for 
Minority- and Women-Owned Asset Managers, (2017), https://www.gao.gov/
products/gao-17-726.
    \3\See letter from AFL-CIO to Chrwmn. Virginia Foxx & Ranking 
Member Bobby Scott, H. Comm. on Educ. & the Workforce, Full Committee 
Markup, (Sept. 14, 2023), https://aflcio.org/about/advocacy/
legislative-alerts/letter-opposing-legislation-would-undermine-
retirement-security.
---------------------------------------------------------------------------

           H.R. 5338 APPEARS TO BE PREMISED ON A FALSE CHOICE

    During the Committee markup of H.R. 5338, the bill's author 
noted that Senate Democrats sent letters to companies 
requesting information about the diversity among asset managers 
of their pension plans.\4\ Specifically, the bill's author 
claimed such letters requested answers on the companies' plans 
to diversify their employees based on race and sex rather than 
the skills and expertise that may lead to higher investment 
returns; and the bill's author gave the impression that 
Americans want only the latter.\5\ This is a false choice. 
Retirement savers can have their assets managed by diverse 
firms and expect strong investment returns. In fact, according 
to the non-profit Knight Foundation which has conducted 
research on the diversity of asset managers in the hedge fund, 
mutual fund, private equity, and real estate industries, non-
diverse asset manager firms do not outperform diverse firms 
across all asset classes.\6\ The financial services firm 
Morningstar looked at women-run funds and found that they are 
just as good as men at managing funds and there is ``some 
indication that the industry might be better off with more 
women at the helm of funds.''\7\
---------------------------------------------------------------------------
    \4\H. Comm. on Educ & the Workforce, Full Committee Markup, (Sept. 
14, 2023), https://docs.house.gov/Committee/Calendar/
ByEvent.aspx?EventID=116367.
    \5\Id.
    \6\John Lerneret al., Knight Diversity of Asset Managers Research 
Series: Industry, A Study of Ownership Diversity and Performance in the 
Asset Management Industry, Knight Foundation, (2021), https://
knightfoundation.org/wp-content/uploads/2021/12/KDAM_Industry_2021.pdf.
    \7\Madison Sargis & Kathryn Wing, Female Fund Manager Performance: 
What Does Gender Have to Do With It?, Morningstar, https://
www.morningstar.com/views/blog/fund-managers/female-fund-manager-
performance.
---------------------------------------------------------------------------
    Had Committee Republicans held a legislative hearing on 
H.R. 5338, Committee Members could have heard testimony and 
asked witnesses' questions about the impact of diversity in the 
asset management industry on investment performance. 
Unfortunately, Committee Republicans failed to do hold a 
legislative hearing on H.R. 5338 and instead hastily marked up 
the bill shortly after it was introduced.

    H.R. 5338 IS PART OF COMMITTEE REPUBLICANS' MISGUIDED WAR ON ESG

    H.R. 5338 was among the ``legislative package'' announced 
by Committee Republicans on September 6, 2023 ``to ensure 
financial institutions are focused on maximizing returns in 
retirement plans rather than on woke environmental, social, and 
corporate governance (ESG) factors.''\8\ This is another false 
choice. Maximizing returns is connected to careful 
consideration of ESG factors--and retirement plan fiduciaries 
and major corporations understand this. One such corporation, 
which serves millions of retirement plan participants, noted in 
a comment letter to the Department of Labor that ``[t]he brand 
equity of many publicly traded companies is strongly connected 
to how they handle various ESG matters, and companies can face 
significant reputational risk as a result of their decision-
making on such matters.''\9\ If reputational risk occurs, then 
a company's stock value could suffer and that is directly 
related to retirement savers' 401(k) plans. H.R. 5338 and the 
other anti-ESG bills the Committee considered on September 14, 
2023 illustrate that Committee Republicans are failing to 
understand these same connections. Committee Democrats 
understand ESG's relevance to and impact on workers' retirement 
security. That is why we join those who strongly support 
retirement plan fiduciaries' ability to consider ESG factors 
when making investment decisions.
---------------------------------------------------------------------------
    \8\Press Release, H. Comm. on Educ. & the Workforce, @EdWorkforce 
Republicans Unveil Package to Combat Biden's Harmful ESG Rule, (Sept. 
6, 2023), https://edworkforce.house.gov/news/
documentsingle.aspx?DocumentID=409502.
    \9\Comment No. EBSA-2020-0008-0284, at 8. https://
www.regulations.gov/comment/EBSA-2020-0008-0284.
---------------------------------------------------------------------------

                               CONCLUSION

    As the Committee Ranking Member Bobby Scott (D-VA-3), put 
it during the Committee's consideration of this bill, we should 
be leaning in to increasing diversity in a sector that 
desperately needs it, not layering on more barriers to entry--
which is what H.R. 5338 does. For the reasons stated above, 
Committee Democrats opposed H.R. 5338 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]