Federal

Freedom to Invest in a Sustainable Future Act

Source: Congress.gov · 476 words in original text

What This Bill Does

This bill changes retirement plan investment rules under a law called the Employee Retirement Income Security Act of 1974. It allows the people managing retirement plans to consider environmental, social and governance factors (like a company's impact on the environment or how it treats workers) when making investment decisions.

Who It Affects

People managing retirement plans and pension funds. Retirement plan sponsors and fiduciaries (people legally responsible for managing retirement money). Workers whose retirement savings are invested through these plans.

Key Provisions

• Fiduciaries may consider environmental, social, governance or similar factors when making investment decisions, as long as they follow all other required duties (Sec. 2) • Fiduciaries may use environmental, social, governance or similar factors as tie-breakers when two competing investments are expected to perform equally well financially (Sec. 2) • Fiduciaries do not need to create extra documentation or justification for considering these factors beyond what is normally required (Sec. 2) • Investments selected using these factors can be treated as default investments (investments automatically chosen if you don't pick one yourself) if they otherwise qualify (Sec. 2)

What Changes

Current law limits what retirement plan managers can consider. This bill explicitly permits them to factor in environmental, social and governance considerations alongside financial performance.

Important Definitions

Environmental, social, governance or similar factors: Not specified in bill text

Effective Date

Not specified in bill text

I 118TH CONGRESS 1ST SESSION H. R. 1119 To amend the Employee Retirement Income Security Act of 1974 to permit retirement plans to consider certain factors in investment decisions. IN THE HOUSE OF REPRESENTATIVES FEBRUARY 21, 2023 Ms. DELBENE (for herself, Mr. CASTEN, Mr. VARGAS, and Mr. PHILLIPS) in- troduced the following bill; which was referred to the Committee on Edu- cation and the Workforce A BILL To amend the Employee Retirement Income Security Act of 1974 to permit retirement plans to consider certain factors in investment decisions. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Freedom to Invest in 4 a Sustainable Future Act’’. 5 SEC. 2. ERISA AMENDMENTS. 6 Subsection (a) of section 404 of the Employee Retire- 7 ment Income Security Act of 1974 (29 U.S.C. 1104) is 8 VerDate Sep 11 2014 01:13 Mar 11, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H1119.IH H1119 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 1119 IH amended by adding at the end the following new para- 1 graph: 2 ‘‘(3)(A) Provided that a fiduciary discharges the fidu- 3 ciary’s duties with respect to a plan in a manner otherwise 4 consistent with this subsection, a fiduciary may— 5 ‘‘(i) consider environmental, social, governance, 6 or similar factors, in connection with carrying out an 7 investment decision, strategy, or objective, or other 8 fiduciary act; and 9 ‘‘(ii) consider collateral environmental, social, 10 governance, or similar factors as tie-breakers when 11 competing investments can reasonably be expected to 12 serve the plan’s economic interests equally well with 13 respect to expected return and risk over the appro- 14 priate time horizon. 15 ‘‘(B) In a case described in clause (i) or (ii) of sub- 16 paragraph (A), a fiduciary shall not be required to main- 17 tain any greater documentation, substantiation, or other 18 justification of the fiduciary’s actions relating to such fi- 19 duciary act than is otherwise required under this part. 20 ‘‘(C) Nothing in this part shall preclude an invest- 21 ment selected in accordance with clause (i) or (ii) of sub- 22 paragraph (A) from being treated as a default investment 23 or a component of such a default investment (as described 24 in regulations issued by the Secretary under subsection 25 VerDate Sep 11 2014 01:13 Mar 11, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H1119.IH H1119 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 1119 IH (c)(5)(A)), if such investment would otherwise qualify for 1 such treatment under such regulations.’’. 2 Æ VerDate Sep 11 2014 01:13 Mar 11, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6301 E:\BILLS\H1119.IH H1119 kjohnson on DSK79L0C42PROD with BILLS

Important: This plain English summary was generated by AI and is provided for informational purposes only. It is not legal advice. Always consult the official bill text on Congress.gov or a qualified attorney for legal matters.