S. 3086 — Restoring Integrity in Fiduciary Duty Act

This section amends the Employee Retirement Income Security Act of 1974 (ERISA) prudent man standard of care (29 U.S.C. 1104(a)) by adding requirements for fiduciaries to base investment evaluations and courses of action solely on pecuniary factors (i.e., factors expected to materially affect risk-adjusted returns). Specifically, it (1) prohibits subordinating plan participants' and beneficiaries' interests to nonpecuniary objectives or sacrificing returns/taking extra risk to promote nonpecuniary goals; (2) permits nonpecuniary factors as a tiebreaker only via random "capita aut navia" selection (i.e., no added weight) among otherwise identical alternatives, with strict documentation of pecuniary indistinguishability, portfolio impacts, and consistency with participant interests—and without expending resources on nonpecuniary analysis; (3) for participant-directed individual account plans (e.g., 401(k)s), allows nonpecuniary considerations only if the above requirements are met and the option is not a default investment; and (4) defines key terms including "pecuniary factor," "material" (financial risks/returns only, excluding nonpecuniary goals), and "investment course of action" (e.g., selecting plan funds). (As background, ERISA fiduciary duties govern investments in employer-sponsored retirement plans covering over 150 million participants, and these changes limit consideration of environmental, social, or governance (ESG) factors.) The amendments apply to fiduciary actions taken one year after enactment.

This section establishes fiduciary duties under ERISA for managing shareholder rights (e.g., proxy voting) appurtenant to plan assets that are shares of stock, applicable to exercises occurring on or after January 1, 2026. (ERISA's section 404 sets the prudent man standard of care for fiduciaries of private-sector retirement and health plans to act solely in the interests of participants and beneficiaries.) The duties require fiduciaries to act prudently and solely to further the economic interests of the plan—considering costs, material facts, and recordkeeping—without subordinating participants' financial benefits to nonpecuniary objectives; the duties do not require exercising every shareholder right and include safe harbor policies for refraining from votes on proposals unrelated to issuer business activities or expected to lack material effect on plan value, or when plan assets in the issuer are below 5% of total plan assets. Fiduciaries must prudently select and monitor persons delegated to assist with shareholder rights (e.g., investment managers, proxy advisory firms) and periodically review any adopted proxy voting policies; the provision does not apply to pass-through voting rights in individual account plans (e.g., 401(k)s).