Federal Legislation
Congress Revises ERISA Fiduciary Duties
December 30, 2025
Congress has enacted H.R. 2988, the Protecting Prudent Investment of Retirement Savings Act, which amends the Employee Retirement Income Security Act (ERISA) to reinforce fiduciary duties for retirement plan investment decisions. This legislation mandates that fiduciaries prioritize the financial interests of plan participants over non-pecuniary factors such as environmental, social, and governance (ESG) considerations. It restricts the use of non-pecuniary factors in investment selections, prohibits discrimination in choosing service providers, regulates proxy voting to focus strictly on economic interests, and requires enhanced disclosures for participants utilizing brokerage windows.
- Why this matters: Federal agencies and contractors involved in retirement plan management and investment advisory services must align their practices with the updated fiduciary standards emphasizing financial prudence and participant interests.
- The legislation impacts proxy advisory firms and service providers by limiting the scope of proxy voting recommendations to economic factors, potentially altering engagement strategies.
- Procurement professionals should anticipate revised contract requirements and compliance obligations related to fiduciary duties and disclosures under ERISA.
- Organizations offering retirement plan services should evaluate their investment policies and proxy voting guidelines to ensure conformity with the new statutory mandates.
The fiduciary may not subordinate the interests of the participants and beneficiaries in their retirement income or financial benefits under the plan to other objectives and may not sacrifice investment return or take on additional investment risk to promote non-pecuniary benefits or goals.
— H.R. 2988 legislative text
ERISA's fiduciary guardrails have been tested by the advent of so-called ESG investing . . . Providing collateral social benefits to third parties is not consistent with the duty of loyalty under ERISA, and avoiding financially sound investments is not consistent with the duty of prudence.
— Professor Max Schanzenbach
Agencies
Department of Labor, Committee on Education and Workforce, Subcommittee on Health, Employment, Labor, and Pensions, Pension Benefit Guaranty Corporation
Vendors
Institutional Shareholder Services, Inc. (ISS), Glass, Lewis & Co., LLC (Glass Lewis)
Locations
Sources
- H. Rept. 119-421 - PROTECTING PRUDENT INVESTMENT OF RETIREMENT SAVINGS ACT · congress · Dec 30