This bill mandates that retirement plan fiduciaries evaluate investments based *only* on financial factors unless those factors are equal, and strictly limits the consideration of non-financial objectives in both investment selection and the exercise of shareholder rights.
Bill Cassidy
Senator
LA
The Restoring Integrity in Fiduciary Duty Act mandates that retirement plan fiduciaries must evaluate investments based *only* on pecuniary factors that materially affect risk and return, prohibiting the subordination of financial interests to non-financial goals. If financial factors are equal, fiduciaries must use a specific tie-breaking standard (*capita aut navia*) and document their reasoning. Furthermore, the bill clarifies that exercising shareholder rights, such as proxy voting, must be done solely in the economic interest of participants and beneficiaries.
Retirement Bill Mandates 'Pecuniary Factors Only' Investing, Restricting ESG Consideration for 401(k) Fiduciaries.
If you’ve got a 401(k) or a pension plan, listen up. The Restoring Integrity in Fiduciary Duty Act is trying to fundamentally change how the money managers—the fiduciaries—handle your retirement savings. This bill is a laser-focused attempt to mandate that every single investment decision must be based only on purely financial factors, often called “pecuniary factors.”
It amends the bedrock law governing retirement plans, ERISA, to make it crystal clear: fiduciaries cannot “subordinate the financial interests of plan participants and beneficiaries to any other objectives.” Translation? No sacrificing potential returns or taking on extra risk to promote non-financial goals. The changes apply to actions taken one year after the bill is enacted, so we’re talking about a significant shift in investment strategy starting potentially in 2025 or 2026.
The Strict New Rules for Your Retirement Dollars
Under current law, many fiduciaries consider factors like environmental, social, and governance (ESG) criteria because they often believe these factors materially affect a company's long-term financial risk and return. This bill shuts that door. It defines a “pecuniary factor” as one expected to “materially affect the risk or return of an investment.” Crucially, the definition of “Material” explicitly excludes “nonpecuniary, environmental, social, political, ideological, or other goals.”
What this means for you, the plan participant, is that your plan’s fiduciary is legally barred from considering things like a company’s climate risk or labor practices unless they can prove those factors immediately and materially affect the financial return in a traditional sense. For busy professionals or tradespeople saving for retirement, this could mean that long-term risks—like a utility company heavily exposed to climate change—might be ignored if the immediate financial return looks good.
The ‘Heads or Tails’ Tie-Breaker
Perhaps the strangest addition is the new tie-breaker rule. If a fiduciary has two investment choices that are indistinguishable based on pecuniary factors alone, they must use the bizarrely named capita aut navia standard. This Latin phrase literally means “heads or tails” or “by head or ship.” The bill defines it as a standard where the fiduciary must choose randomly between the alternatives.
Think about that: after all the due diligence and analysis, if the numbers look identical, the fiduciary is required to flip a coin. They also have to document why the pecuniary factors weren't enough. For the average person, this seems like an administrative nightmare that adds complexity without adding value, forcing investment professionals to rely on chance rather than subtle, non-financial judgment calls when faced with identical risk/return profiles.
Muting the Shareholder Voice
Beyond investment selection, the bill dramatically changes how fiduciaries exercise shareholder rights, like voting proxies on corporate issues. Under Section 3, the fiduciary must act “solely according to the economic interest of the plan” when deciding whether to vote. This is a huge shift.
It provides a “safe harbor” policy that allows fiduciaries to essentially ignore voting on proposals unless they are “substantially related to the issuer's business activities” or are expected to “materially affect the plan investment's value.” Alternatively, they can skip voting if the plan’s investment in that company is less than 5% of the total plan assets.
For you, the investor, this means that your retirement plan’s manager is strongly incentivized to stop engaging with companies on non-financial issues—like demanding better corporate governance or transparency on political spending—even if those issues could affect the company’s long-term stability. If you work for a company whose stock is held by your plan, your voice as a shareholder, represented by your fiduciary, just got a lot quieter on everything but the bottom line. The exercise of these rights is set to change on January 1, 2026.