What This Bill Does
This bill restricts the Secretary of Labor from limiting what types of investments people can choose for their individual retirement accounts (retirement savings accounts where a person controls their own money). The bill changes federal retirement law to allow broader investment choices for retirement account holders.
Who It Affects
Participants and beneficiaries of individual retirement accounts who control their own account assets.
The Secretary of Labor.
Plan fiduciaries (people or companies responsible for managing retirement plan investments).
Key Provisions
A fiduciary does not have to select or avoid any particular type of investment, as long as participants get to choose from a broad range of investment options according to regulations set by the Secretary. (Sec. 2)
Investments cannot be favored or rejected based on anything other than risk-return characteristics (how risky the investment is compared to potential earnings), which help provide suitable benefits to participants. (Sec. 2)
The Secretary cannot issue rules or guidance that limit or prohibit the types of investments offered through a self-directed brokerage window (an account feature that lets people choose individual investments). (Sec. 2)
A fiduciary's choice to offer a self-directed brokerage window does not violate diversification or prudence requirements, and participants' investment choices through such a window do not violate those requirements. (Sec. 2)
What Changes
The federal law governing retirement plans no longer allows the Secretary of Labor to constrain what investments can be offered through self-directed brokerage windows in retirement accounts where people control their own assets.
Important Definitions
Self-directed brokerage window: An investment option within a retirement plan that allows participants to choose individual investments.
Fiduciary: A person or organization responsible for managing retirement plan investments according to the law.
I
118TH CONGRESS
1ST SESSION H. R. 1177
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 HOUSE OF REPRESENTATIVES
FEBRUARY 24, 2023
Mr. DONALDS (for himself, Mr. DAVIDSON, Mr. CLOUD, Mr. SCHWEIKERT,
Mr. EMMER, and Mrs. KIM of California) introduced the following bill;
which was referred to the Committee on Education and the Workforce
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-
1
tives of the United States of America in Congress assembled,
2
SECTION 1. SHORT TITLE.
3
This Act may be cited as the ‘‘Financial Freedom Act
4
of 2023’’.
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•HR 1177 IH
SEC. 2. FIDUCIARY DUTIES WITH RESPECT TO PENSION
1
PLAN INVESTMENTS.
2
Section 404(a) of the Employee Retirement Income
3
Security Act of 1974 (29 U.S.C. 1104(a)) is amended by
4
adding at the end the following:
5
‘‘(3)(A) In the case of a pension plan that pro-
6
vides for individual accounts and permits a partici-
7
pant or beneficiary to exercise control over the as-
8
sets in the participant’s or beneficiary’s account,
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nothing in paragraph (1)—
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‘‘(i) requires a fiduciary to select, or pro-
11
hibits a fiduciary from selecting, any particular
12
type of investment alternative, provided that a
13
fiduciary provides the participant or beneficiary
14
an opportunity to choose, from a broad range of
15
investment alternatives, the manner in which
16
some or all of the assets of the participant’s or
17
beneficiary’s account are invested, according to
18
regulations prescribed by the Secretary; or
19
‘‘(ii) requires that any particular type of
20
investment be either favored or disfavored,
21
other than on the basis of the investment’s risk-
22
return characteristics, in the context of the plan
23
fiduciary’s objective of providing investment al-
24
ternatives suitable for providing benefits for
25
participants and beneficiaries.
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•HR 1177 IH
‘‘(B) In the event that a fiduciary selects a self-
1
directed brokerage window as an investment alter-
2
native for a plan described in subparagraph (A)—
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‘‘(i) the Secretary shall not issue any regu-
4
lations or subregulatory guidance constraining
5
or prohibiting the range or type of investments
6
that may be offered through such brokerage
7
window;
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‘‘(ii) subsection (c) shall apply to such self-
9
directed brokerage window; and
10
‘‘(iii) the diversification requirement of
11
paragraph (1)(C) and the prudence requirement
12
of paragraph (1)(B) are not violated by the fi-
13
duciary’s selection of a self-directed brokerage
14
window as an investment alternative or as a re-
15
sult of the exercise of a participant or bene-
16
ficiary’s control over the assets in such self-di-
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rected brokerage window.’’.
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Æ
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