PARSA Bill Restricts Retirement Plan Investments in Sanctioned & Foreign Adversary Entities, Mandates New Disclosures

There's a new piece of legislation on the table called the 'Protecting Americans Retirement Savings Act'—or PARSA. At its core, this bill amends the rules governing many retirement plans (specifically, those under the Employee Retirement Income Security Act, or ERISA) to block them from investing in certain foreign entities. It also ramps up disclosure requirements, aiming for more transparency about where retirement dollars are parked.

Your Retirement Plan's New Guardrails

So, what's actually changing? Section 2 of PARSA prohibits plan fiduciaries—the people managing the retirement fund—from knowingly letting the plan engage in transactions with what the bill calls a "covered entity." This means no buying an interest in, lending money to, providing services to, or even transferring plan data (like yours) to these specific entities.

Who counts as a "covered entity"? It's a two-part definition:

1. Foreign adversary entities: This includes governments, military forces, ruling parties of designated "foreign adversaries" (think countries on the official 'covered nation' list), entities based in those countries, or companies controlled by them.
2. Sanctioned entities: This covers a specific roster of companies found on various U.S. government lists, such as Treasury's Non-SDN Chinese Military-Industrial Complex list, Commerce's Entity List and Denied Persons List, the FCC's Covered List, and others related to forced labor or military end-use.

Now, what if your plan already holds investments in one of these entities? PARSA includes provisions allowing plans to keep existing investments or honor pre-existing binding contracts, but only if the fiduciary follows specific compliance steps detailed in the bill. This isn't a free pass; it's a structured process for handling legacy assets and agreements.

Shining a Light on Investments

Beyond blocking new investments, PARSA wants to make existing ones clearer. Section 3 mandates additional disclosures in retirement fund reports. Plan administrators will need to:

• List all plan assets invested in sanctioned entities, including their total value, the identity of each entity, and which sanction list(s) they appear on.
• Detail assets invested in foreign adversary entities, including the total value, the specific investment type, the investment vehicle used (like a mutual fund), who made the decision, and a brief explanation of why the investment is being maintained.
• Describe any ongoing agreements with covered entities that fall under the exception clause mentioned earlier.

The goal here is transparency, giving plan participants a clearer view of potential exposures to these specific types of foreign entities. The bill gives the Secretary of Labor 180 days after enactment to draft regulations, with these new rules taking effect no later than one year after the bill becomes law. This means plan managers will have some time to adapt to the new requirements, which will likely involve updating reporting systems and potentially reviewing investment strategies.