What This Bill Does
This bill stops the Secretary of Labor from limiting what types of investments people can choose when they control their own individual retirement account money. The bill says that if a retirement plan lets someone pick their own investments, the plan does not have to favor one type of investment over another based on anything other than risk and return characteristics.
Who It Affects
People who have individual retirement accounts and can control their own investments. Fiduciaries (people legally required to manage retirement accounts responsibly) who offer these accounts. The Secretary of Labor.
Key Provisions
- The Secretary of Labor cannot issue rules or guidance that limit or ban the types of investments available through a self-directed brokerage window (an account option that lets people trade various investments) (Sec. 2)
- Fiduciaries do not have to pick or avoid any particular investment type except based on how risky the investment is and what return it offers (Sec. 2)
- When someone picks a self-directed brokerage window option, choosing that option does not violate the requirement that retirement accounts be diversified (spread across different investments) or the requirement that fiduciaries act prudently (carefully and responsibly) (Sec. 2)
- Fiduciaries must give participants and beneficiaries a chance to choose from a broad range of investment options, according to Secretary of Labor regulations (Sec. 2)
What Changes
If this becomes law, the Secretary of Labor loses the power to restrict what investments can be offered through self-directed brokerage windows in retirement plans.
Important Definitions
None defined in this bill.
II
118TH CONGRESS
1ST SESSION
S. 427
To prohibit the Secretary of Labor from constraining the range or type
of investments that may be offered to participants and beneficiaries
of individual retirement accounts who exercise control over the assets
in such accounts.
IN THE SENATE OF THE UNITED STATES
FEBRUARY 15, 2023
Mr. TUBERVILLE (for himself, Ms. LUMMIS, Mr. BRAUN, Mr. SCOTT of Flor-
ida, and Mrs. BRITT) introduced the following bill; which was read twice
and referred to the Committee on Health, Education, Labor, and Pen-
sions
A BILL
To prohibit the Secretary of Labor from constraining the
range or type of investments that may be offered to
participants and beneficiaries of individual retirement ac-
counts who exercise control over the assets in such ac-
counts.
Be it enacted by the Senate and House of Representa-
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tives of the United States of America in Congress assembled,
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SECTION 1. SHORT TITLE.
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This Act may be cited as the ‘‘Financial Freedom Act
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of 2023’’.
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•S 427 IS
SEC. 2. FIDUCIARY DUTIES WITH RESPECT TO PENSION
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PLAN INVESTMENTS.
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Section 404(a) of the Employee Retirement Income
3
Security Act of 1974 (29 U.S.C. 1104(a)) is amended by
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adding at the end the following:
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‘‘(3)(A) In the case of a pension plan that provides
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for individual accounts and permits a participant or bene-
7
ficiary to exercise control over the assets in the partici-
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pant’s or beneficiary’s account, nothing in paragraph
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(1)—
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‘‘(i) requires a fiduciary to select, or prohibits
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a fiduciary from selecting, any particular type of in-
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vestment alternative, provided that a fiduciary pro-
13
vides the participant or beneficiary an opportunity to
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choose, from a broad range of investment alter-
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natives, the manner in which some or all of the as-
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sets of the participant’s or beneficiary’s account are
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invested, according to regulations prescribed by the
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Secretary; or
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‘‘(ii) requires that any particular type of invest-
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ment be either favored or disfavored, other than on
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the basis of the investment’s risk-return characteris-
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tics, in the context of the plan fiduciary’s objective
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of providing investment alternatives suitable for pro-
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viding benefits for participants and beneficiaries.
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•S 427 IS
‘‘(B) In the event that a fiduciary selects a self-di-
1
rected brokerage window as an investment alternative for
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a plan described in subparagraph (A)—
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‘‘(i) the Secretary shall not issue any regula-
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tions or subregulatory guidance constraining or pro-
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hibiting the range or type of investments that may
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be offered through such brokerage window;
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‘‘(ii) subsection (c) shall apply to such self-di-
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rected brokerage window; and
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‘‘(iii) the diversification requirement of para-
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graph (1)(C) and the prudence requirement of para-
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graph (1)(B) are not violated by the fiduciary’s se-
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lection of a self-directed brokerage window as an in-
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vestment alternative or as a result of the exercise of
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a participant or beneficiary’s control over the assets
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in such self-directed brokerage window.’’.
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Æ
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