Bill Overview
Title: To amend the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986 to limit fiduciary consideration of non-pecuniary factors in investment decision-making.
Description: This bill generally requires fiduciaries of employer-sponsored retirement plans to make investment decisions based only on pecuniary factors (i.e., factors that a fiduciary prudently determines are expected to have a material effect on the risk and return of an investment based on appropriate investment horizons consistent with the plan's policies and objectives). The bill allows nonpecuniary factors to be considered when selecting investment options for certain participant-directed retirement plans if specified requirements are met (e.g., the investment option is not a default investment). Further, if a plan includes investment options based on nonpecuniary factors, it also must include investment options that are not based on any such factors.
Sponsors: Rep. Murphy, Gregory [R-NC-3]
Target Audience
Population: Individuals enrolled in employer-sponsored retirement plans
Estimated Size: 60000000
- Fiduciaries of employer-sponsored retirement plans will need to adjust their investment strategies to comply with the requirement to prioritize pecuniary factors.
- Employers and plan sponsors will likely need to review and potentially revise their retirement plan options and documentation.
- Employees enrolled in employer-sponsored retirement plans may see changes in their investment options, particularly those who are currently invested in funds that consider non-pecuniary factors.
- The legislation could impact individuals interested in socially responsible or ESG (Environmental, Social, and Governance) investing, as fiduciaries may prioritize traditional financial metrics over non-pecuniary factors.
- The bill impacts the U.S. primarily, but multinational companies with employees in the U.S. may also need to adjust their global policies.
Reasoning
- The policy change affects a substantial number of people enrolled in employer-sponsored retirement plans, particularly those focused on non-pecuniary investment options.
- Budget constraints mean that not all participants will experience a significant change in wellbeing, particularly those whose investments aren't strongly influenced by non-pecuniary factors.
- Individuals who prefer socially responsible or ESG fund options might feel impacted both positively and negatively, depending on their values versus financial returns.
- People employed by multinational companies might see a double layer of changes if their employers adjust not just U.S.-based plans but international ones as well.
- Changes may not be felt equally; those with higher financial literacy or interest in their investments may be more aware of and affected by the policy changes.
Simulated Interviews
Software Engineer (San Francisco, CA)
Age: 45 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 20.0 years
Commonness: 10/20
Statement of Opinion:
- I prioritize investments that align with my values, such as sustainability and social impact.
- This policy seems to limit my choices, which is frustrating.
- I understand the importance of financial returns, but I don't want to compromise on my principles.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 7 |
| Year 2 | 6 | 7 |
| Year 3 | 6 | 7 |
| Year 5 | 6 | 7 |
| Year 10 | 6 | 7 |
| Year 20 | 5 | 7 |
Financial Advisor (Austin, TX)
Age: 35 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 10.0 years
Commonness: 14/20
Statement of Opinion:
- This policy change is beneficial as it ensures that financial returns are prioritized, which is in the client's best interest.
- I believe in a more traditional approach to investing, focusing on what brings the best returns.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 7 | 8 |
Retired Teacher (New York, NY)
Age: 62 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 8.0 years
Commonness: 12/20
Statement of Opinion:
- As someone nearing retirement, stability and growth are my priorities.
- I'm open to changes as long as they improve my financial security.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 7 | 6 |
Non-profit Worker (Seattle, WA)
Age: 29 | Gender: other
Wellbeing Before Policy: 5
Duration of Impact: 15.0 years
Commonness: 8/20
Statement of Opinion:
- It seems like my choices in ethical investments will be limited.
- I hope more people advocate for keeping some non-pecuniary options open.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 4 | 5 |
| Year 2 | 4 | 5 |
| Year 3 | 4 | 5 |
| Year 5 | 4 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 5 |
Corporate Executive (Miami, FL)
Age: 50 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 7/20
Statement of Opinion:
- It's important to adhere to regulations while providing diverse investment options.
- Balancing compliance with varied employee preferences will be challenging.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Small Business Owner (Denver, CO)
Age: 40 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 15/20
Statement of Opinion:
- I generally support regulations that ensure financial prudence.
- As a small business owner, I appreciate clear guidelines to follow.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 6 | 6 |
Union Representative (Chicago, IL)
Age: 55 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 12.0 years
Commonness: 9/20
Statement of Opinion:
- Balancing financial returns with social responsibility is key.
- I'll be working to ensure our members' voices are heard in these decisions.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 7 |
| Year 2 | 6 | 7 |
| Year 3 | 6 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 6 | 7 |
Environmental Scientist (Portland, OR)
Age: 30 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 20.0 years
Commonness: 11/20
Statement of Opinion:
- I chose my investments based on their environmental impact.
- This new policy might steer me away from my goals.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 6 |
| Year 2 | 5 | 6 |
| Year 3 | 5 | 6 |
| Year 5 | 5 | 6 |
| Year 10 | 5 | 6 |
| Year 20 | 4 | 6 |
Part-time Consultant (Atlanta, GA)
Age: 63 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 5.0 years
Commonness: 5/20
Statement of Opinion:
- It's critical to maintain options that maximize returns as I manage my own retirement.
- I would like a balance between traditional and alternative investments.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 7 | 8 |
| Year 20 | 7 | 8 |
HR Manager (Boston, MA)
Age: 47 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 15.0 years
Commonness: 13/20
Statement of Opinion:
- Ensuring our plan offerings are compliant and appealing is a priority.
- We aim to continue offering diverse investment options within the new framework.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Cost Estimates
Year 1: $500000000 (Low: $400000000, High: $600000000)
Year 2: $150000000 (Low: $100000000, High: $200000000)
Year 3: $125000000 (Low: $100000000, High: $150000000)
Year 5: $100000000 (Low: $80000000, High: $120000000)
Year 10: $50000000 (Low: $40000000, High: $60000000)
Year 100: $5000000 (Low: $4000000, High: $6000000)
Key Considerations
- The transition may create temporary disruptions in retirement plan management and administration.
- Companies may face legal challenges during the transition phase, impacting costs and operations.
- Technology and data management systems might need updating to comply with new fiduciary standards.