EMPOWERS Act

II 117TH CONGRESS 1ST SESSION S. 1677 To establish a process by which participants of employee welfare plans select guidelines to be used by the plan fiduciary for voting proxies on securities held in investment portfolios under the plan, and for other purposes. IN THE SENATE OF THE UNITED STATES MAY 18, 2021 Ms. BALDWIN (for herself, Mr. SANDERS, Ms. WARREN, Mr. MERKLEY, Mr. MARKEY, Mr. BOOKER, and Mr. BLUMENTHAL) introduced the following bill; which was read twice and referred to the Committee on Health, Edu- cation, Labor, and Pensions A BILL To establish a process by which participants of employee welfare plans select guidelines to be used by the plan fiduciary for voting proxies on securities held in invest- ment portfolios under the plan, and for other purposes. 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 ‘‘Encouraging More 4 Proxy voting by Organized Workers, Employees, and Re- 5 tirement Savers Act’’ or the ‘‘EMPOWERS Act’’. 6 VerDate Sep 11 2014 01:49 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1677.IS S1677 pbinns on DSKJLVW7X2PROD with BILLS 2 •S 1677 IS SEC. 2. TRUSTEESHIP OF SINGLE-EMPLOYER PLANS. 1 Section 403(a) of the Employee Retirement Income 2 Security Act of 1974 (29 U.S.C. 1103(a)) is amended— 3 (1) by redesignating paragraphs (1) and (2) as 4 subparagraphs (A) and (B), respectively; 5 (2) by striking ‘‘Except as’’ and inserting ‘‘(1) 6 Except as’’; and 7 (3) by adding at the end the following: 8 ‘‘(2)(A) The assets of a single-employer plan shall be 9 held in trust by a joint board of trustees, which shall con- 10 sist of 2 or more trustees representing on an equal basis 11 the interests of the employer or employers maintaining the 12 plan and the interests of the participants and their bene- 13 ficiaries. 14 ‘‘(B)(i) Except as provided in clause (ii), in any case 15 in which the plan is maintained pursuant to one or more 16 collective bargaining agreements between one or more em- 17 ployee organizations and one or more employers, the trust- 18 ees representing the interests of the participants and their 19 beneficiaries shall be designated by such employee organi- 20 zations. 21 ‘‘(ii) In any case in which clause (i) does not apply 22 with respect to a single-employer plan because the plan 23 is not described in clause (i), the trustee or trustees rep- 24 resenting the interests of the participants and their bene- 25 ficiaries shall consist of 1 or more participants under the 26 VerDate Sep 11 2014 01:49 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1677.IS S1677 pbinns on DSKJLVW7X2PROD with BILLS 3 •S 1677 IS plan elected to serve as such in accordance with this 1 clause. 2 ‘‘(C) Not later than one year after the date of enact- 3 ment of the Encouraging More Proxy voting by Organized 4 Workers, Employees, and Retirement Savers Act, the Sec- 5 retary shall issue rules with respect to the election of 6 trustees and certification of the results of such elections 7 under subparagraph (B)(ii). Such rules shall ensure 8 that— 9 ‘‘(i) employee trustee elections are— 10 ‘‘(I) fair and democratic and free from in- 11 terference by the employer, the employer’s fidu- 12 ciaries, and the investment managers; 13 ‘‘(II) designed to maximize participation by 14 plan participants and their beneficiaries and to 15 be convenient for participants, and their bene- 16 ficiaries when appropriate, to vote; 17 ‘‘(III) use the latest technologies to meet 18 the objectives described in subclause (II); 19 ‘‘(IV) provide for a secret ballot to be used 20 by the participants of the plan (or, in the case 21 of a deceased participant, by the beneficiary of 22 such participant); and 23 ‘‘(V) provide one vote per participant, 24 which, in the event a participant is deceased, 25 VerDate Sep 11 2014 01:49 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1677.IS S1677 pbinns on DSKJLVW7X2PROD with BILLS 4 •S 1677 IS may be cast by the deceased participant’s bene- 1 ficiary; and 2 ‘‘(ii) trustee vacancies are filled— 3 ‘‘(I) by the election process, and not by ap- 4 pointment; and 5 ‘‘(II) not later than one month after the 6 trustee position is vacant.’’. 7 SEC. 3. PROXY VOTING GUIDELINES FOR SINGLE EM- 8 PLOYER PLANS. 9 (a) ESTABLISHMENT OF PLAN.—Section 402 of the 10 Employee Retirement Income Security Act of 1974 (29 11 U.S.C. 1102) is amended by adding at the end the fol- 12 lowing: 13 ‘‘(d) PROXY VOTING GUIDELINES FOR SINGLE EM- 14 PLOYER PLANS.— 15 ‘‘(1) IN GENERAL.—The trustees of a plan shall 16 establish a set of proxy voting guidelines to direct 17 the voting of the plan’s shares of corporate stock by 18 plan fiduciaries, except in the case of an employee 19 stock ownership plan as defined in section 20 407(d)(6). 21 ‘‘(2) TRUSTEES.— 22 ‘‘(A) TRAINING.—Each plan trustee de- 23 scribed in paragraph (1) shall undergo training, 24 which shall— 25 VerDate Sep 11 2014 01:49 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1677.IS S1677 pbinns on DSKJLVW7X2PROD with BILLS 5 •S 1677 IS ‘‘(i) include education on proxy voting 1 issues, fund and executive compensation 2 practices, procedural prudence, and appro- 3 priate long-term investing for retirement 4 savers; and 5 ‘‘(ii) be administered by a third party 6 nonprofit organization with significant ex- 7 perience in educating trustees for service 8 as employee representatives on employee 9 benefit boards. 10 ‘‘(B) TRAINING CURRICULUM.—The train- 11 ing described in subparagraph (A) shall follow 12 a curriculum established by an entity selected 13 by the Secretary. 14 ‘‘(C) FIDUCIARY DUTY TO UNDERGO 15 TRAINING.—A failure to undergo training and 16 fulfill the obligation to develop guidelines in ac- 17 cordance with paragraph (1) shall be deemed to 18 be a violation of fiduciary duties under section 19 404. 20 ‘‘(3) VOTING GUIDELINES WITH RESPECT TO 21 DIFFERENT INVESTMENT OPTIONS.—A plan may es- 22 tablish multiple voting guidelines, with each set of 23 voting guidelines applicable to specific fiduciaries 24 VerDate Sep 11 2014 01:49 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1677.IS S1677 pbinns on DSKJLVW7X2PROD with BILLS 6 •S 1677 IS and investment options available to the plan partici- 1 pants. 2 ‘‘(4) AVAILABILITY OF VOTING GUIDELINES.— 3 The voting guidelines established pursuant to this 4 subsection with respect to a plan shall be made 5 available to all plan participants and beneficiaries. 6 ‘‘(5) INVESTMENT COMPANIES AND POOLED IN- 7 VESTMENT VEHICLES.— 8 ‘‘(A) PROVISION OF VOTING GUIDE- 9 LINES.—If an employee benefit plan is invested 10 in securities issued by an investment company 11 registered under the Investment Company Act 12 of 1940 (15 U.S.C. 80a–1), or any other pooled 13 investment vehicle, the trustees described in 14 paragraph (1) shall provide to the company the 15 voting guidelines established under paragraph 16 (1). 17 ‘‘(B) PROXY VOTING.—An investment com- 18 pany or pooled investment vehicle described in 19 subparagraph (A) shall vote in accordance with 20 the guidelines provided under that subpara- 21 graph with respect to the percentage of proxies 22 that is equivalent to the percentage of owner- 23 ship of the employee benefit plan in the invest- 24 ment company. 25 VerDate Sep 11 2014 01:49 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1677.IS S1677 pbinns on DSKJLVW7X2PROD with BILLS 7 •S 1677 IS ‘‘(C) PROXY VOTING RECORD REPORT.— 1 An investment company described in subpara- 2 graph (A) shall annually provide to the partici- 3 pant representation board a report on all the 4 votes the investment company cast on behalf of 5 the plan in the last year. Each such report shall 6 provide the relevant provision of the plan’s 7 guidelines illustrating how the investment com- 8 pany made its determination. 9 ‘‘(D) RULE OF CONSTRUCTION.—Nothing 10 in this paragraph may be construed to deem se- 11 curities issued by investment companies to em- 12 ployee benefit plans to be senior securities, as 13 defined in section 18(g) of the Investment Com- 14 pany Act of 1940 (15 U.S.C. 80–18(g)). 15 ‘‘(6) EXEMPTION FOR SMALL PLANS.—The Sec- 16 retary may exempt from the requirements of this 17 subsection any plan with fewer than 100 partici- 18 pants, subject to the same requirements with respect 19 to an exemption to reporting requirements under 20 section 2520.104–46 of title 29, Code of Federal 21 Regulations (or any successor regulations). 22 ‘‘(7) CONFORMING WITH SECURE ACT.—Not 23 later than one year after the enactment of this sub- 24 section, the Secretary shall promulgate rules to en- 25 VerDate Sep 11 2014 01:49 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1677.IS S1677 pbinns on DSKJLVW7X2PROD with BILLS 8 •S 1677 IS sure that the requirements of this subsection apply 1 to multiple employer plans with pooled providers 2 plans as described in section 413(e) of the Internal 3 Revenue Code of 1986. 4 ‘‘(8) INVESTMENT MANAGER PROXY VOTING 5 POLICIES.—No investment manager shall require 6 participating investors to accept the investment 7 manager’s own proxy voting policy as a condition of 8 investment’’. 9 (b) PRUDENCE REQUIREMENT.—Section 404(a)(1) 10 of the Employee Retirement Income Security Act of 1974 11 (29 U.S.C. 1104(a)(1)) is amended— 12 (1) in subparagraph (C), by striking ‘‘and’’ at 13 the end; 14 (2) in subparagraph (D), by striking the period 15 and inserting ‘‘; and’’; and 16 (3) by adding at the end the following: 17 ‘‘(E) in exercising a plan’s proxy voting rights 18 with respect to plan assets— 19 ‘‘(i) may vote proxies in accordance with 20 the plan’s proxy voting guidelines as established 21 by the plan’s trustees, unless the fiduciary de- 22 termines that the casting of any proxy vote 23 would be inconsistent with subparagraphs (A) 24 and (B); and 25 VerDate Sep 11 2014 01:49 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1677.IS S1677 pbinns on DSKJLVW7X2PROD with BILLS 9 •S 1677 IS ‘‘(ii) may consider— 1 ‘‘(I) the distinct and specific invest- 2 ment objectives and horizons of the partici- 3 pants and beneficiaries, especially in con- 4 trast with other market actors engaged in 5 proxy voting; and 6 ‘‘(II) the diversified nature of the 7 plan’s investments and the effect of any 8 negative externalities generated by port- 9 folio companies on the plan’s ability to pro- 10 vide benefits to participants and bene- 11 ficiaries by reducing the returns from 12 other plan assets.’’. 13 Æ VerDate Sep 11 2014 01:49 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6301 E:\BILLS\S1677.IS S1677 pbinns on DSKJLVW7X2PROD with BILLS