Statement of Administration Policy: H.R. 1594 — Restrictions on Federal Activities Regarding Economically Targeted Investments

(House)
(Saxton (R) NJ and 105 cosponsors)

The Administration strongly opposes H.R. 1594. The bill would rescind a Department of Labor Interpretive Bulletin clarifying the ability of employee benefit plans to make economically targeted investments (ETIs) that comply with the fiduciary standards of the Employee Retirement Income Security Act of 1974 (ERISA). In addition, H.R. 1594 would prevent the Department of Labor from promoting ETIs or even providing pension plans with information about such investment alternatives. Both of these provisions would place an unwarranted restriction on the Department's responsibility to interpret and enforce pension law.

H.R. 1594 would throw into doubt a longstanding legal position on the extent to which pension plan fiduciaries may consider benefits to the local or national economy in selecting plan investments. Since the Reagan Administration, the Department of Labor has consistently maintained that fiduciaries may consider such collateral benefits when choosing among investment opportunities that are equally attractive in terms of their risks and the direct financial benefit they would bring to the plan. By casting doubt on this well-settled understanding, H.R. 1594 could discourage investments by pension plans in such areas as small business development, infrastructure, and affordable housing.

H.R. 1594 would also increase the risk of litigation to fiduciaries, even when they are choosing financial opportunities in which they now commonly invest — such as real estate and mortgage loans. As a result, H.R. 1594 is likely to interfere with the ability of plan fiduciaries to make investment decisions in the best interest of plan participants and free of unnecessary government interference.

H.R. 1594 could have a significant adverse effect on America's private sector pension funds. It would unnecessarily jeopardize the existing, well-established understanding of the ERISA fiduciary requirements that govern the investment of over $3 trillion — investments critical to the retirement income security of workers, retirees, and their beneficiaries.