New Retirement Bill Bans Investments in Foreign Adversaries, Piling Compliance Work on Fiduciaries

The Protecting Americans Retirement Savings Act (PARSA) is here to change how your 401(k) money can be invested, specifically targeting foreign entities deemed adversarial or sanctioned by the U.S. government. Starting soon, the folks managing your retirement plan (the fiduciaries) will be legally barred from doing business with or even transferring data to these "covered entities." This isn't just about direct stock purchases; Section 2 says plans can’t buy anything that creates an interest, lend money, provide services, or transfer plan assets or participant data to these blacklisted groups. The goal is clear: stop U.S. retirement dollars from flowing to entities the government considers a national security risk.

The New Rules for Your Retirement Manager

Think of this as a massive new compliance checklist for anyone managing retirement funds. If you’re a fiduciary, you now have a legal duty to make sure your plan has zero new connections to any entity on a long list of government watchlists—everything from the Treasury Department’s sanctioned lists to the Commerce Department’s Entity List (SEC. 3). The law defines a "Foreign Adversary Entity" broadly, capturing everything from government bodies to companies organized under the laws of a defined foreign adversary nation (SEC. 3). The definition of an “Interest” is also massive, covering indirect holdings and financial instruments designed to mimic the return of owning the entity. This means fiduciaries can’t just check their direct holdings; they have to trace exposure through complex investment funds, which is a huge administrative lift.

Grandfathered Assets and the Reporting Nightmare

What about investments already sitting in the fund? PARSA allows plans to keep investments they already owned in these restricted entities before the law was enacted. However, this is where the complexity explodes. To keep those grandfathered assets, fiduciaries must comply with specific, complex reporting requirements detailed in external sections of ERISA (SEC. 2). For the average person, this means your plan administrator is now wading through a bureaucratic swamp just to hold onto an investment that might otherwise be perfectly sound. If the compliance burden gets too high, the easiest path for many fiduciaries—especially those managing smaller plans—will be to simply sell the asset, potentially forcing a loss or premature exit just to avoid the paperwork and legal liability.

Transparency vs. Overload: The Annual Report Changes

Section 3 mandates extensive new disclosures in the annual report every retirement fund files. Administrators must now report the total value of assets tied to sanctioned entities, list the specific entities, and cite the official government list they came from. For foreign adversary entities, they need to detail the value, the investment vehicle used, and even provide a summary of why the fiduciary decided to keep that investment. While increased transparency sounds good, this level of detail requires constant monitoring of multiple, ever-changing government blacklists. For the folks running your company’s 401(k), this means a massive increase in tracking and legal exposure, which could translate into higher administrative fees passed on to participants like you. The Secretary has 180 days to draft the regulations, and those rules must take effect within one year, meaning this massive shift is coming fast.