WASHINGTON – This week, Congresswoman Erin Houchin (R-Ind.-09), a member of the House Education and Workforce Committee and House Financial Services Committee, introduced the Retirement Proxy Protection Act. This bill would prevent the politicization of individuals’ retirement plans by clarifying guidance around shareholder proposals and codifying key provisions of the Trump Administration’s proxy regulations.
“I’m proud to lead new legislation to protect Hoosiers’ hard-earned money from woke policies. This bill would get politics out of Americans’ retirement accounts and ensure that the financial interests of individuals in certain investment plans are not pushed aside in favor of unrelated far-left ESG priorities,” said Congresswoman Houchin.
In particular, this bill would amend the Employee Retirement Income Security Act of 1974 (ERISA) to state that fiduciaries are not required to vote on every proxy or exercise every shareholder right if such actions do not promote the financial interests or goals of the plan’s participants. It would also require that fiduciaries maintain records and prudently monitor proxy voting activities for compliance with ERISA should they choose to delegate the authority to exercise shareholder rights to a third party.
Background:
Under the Employee Retirement Income Security Act of 1974 (ERISA), a trustee or an investment fiduciary is required to act solely in the financial interest of participants and beneficiaries for the exclusive purpose of providing benefits to these individuals and defraying reasonable expenses of administering the plan. Despite this, historical regulatory guidance from the Department of Labor has been interpreted as a regulatory mandate to vote all proxies, even when the proposal being voted upon has focused on issues unrelated to the function of the business or would have a negligible impact on the financial interests of participants. As a result, fiduciaries who oversee ERISA plans have often turned to proxy advisory firms to vote proxies for these investment holdings. Under the current system, proxy advisory firms hold enormous influence over a variety of matters facing public companies, including board composition and corporate policies.
This bill would codify several elements from the Trump administration’s final rule regarding proxy voting, including provisions that would:
- Clarify that ERISA does not require the voting of every proxy or the exercise of every shareholder right;
- Ensure that fiduciaries or other delegated third parties act solely in the interest of plan participants and beneficiaries when deciding to exercise shareholder rights; and
- Require that fiduciaries maintain a record of proxy votes, proxy voting activities, and any other exercise of shareholder rights.
For the full bill text, click here.
