SB 520-FN - AS INTRODUCED
2024 SESSION
24-2868
10/05
SENATE BILL 520-FN
AN ACT relative to the fiduciary duty and proxy voting activities of public retirement systems.
SPONSORS: Sen. Gannon, Dist 23; Sen. Murphy, Dist 16; Sen. Avard, Dist 12; Sen. Carson, Dist 14; Sen. Pearl, Dist 17; Rep. Bernardy, Rock. 36
COMMITTEE: Executive Departments and Administration
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ANALYSIS
This bill requires state and local public retirement systems to discharge its duties solely in the financial interest of the participants and beneficiaries.
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Explanation: Matter added to current law appears in bold italics.
Matter removed from current law appears [in brackets and struckthrough.]
Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
24-2868
10/05
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Twenty Four
AN ACT relative to the fiduciary duty and proxy voting activities of public retirement systems.
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 New Chapter; Public Retirement System Fiduciary Duty Act. Amend RSA by inserting after chapter 5-C the following new chapter:
CHAPTER 5-D
PUBLIC RETIREMENT SYSTEM FIDUCIARY DUTY ACT
5-D:1 Definitions. In this chapter:
I. “Fiduciary” includes any person acting on behalf of the state or local retirement system board as an investment manager or proxy advisor.
II. “Fiduciary commitment” means any evidence of a fiduciary’s purpose in managing assets as a fiduciary, including, but not limited to, any of the following in a fiduciary’s capacity as a fiduciary:
(a) Advertising, statements, explanations, reports, letters to clients, communications with portfolio companies, statements of principles, or commitments; or
(b) Participation in, affiliation with, or status as a signatory to, any coalition, initiative, joint statement of principles, or agreement.
III. “Financial” means having been prudently determined by a fiduciary to have a material effect on the financial risk or the financial return of an investment.
(a) “Financial” does not include any action taken, or factor considered, by a fiduciary with any purpose whatsoever to further social, political, or ideological interests.
(b) A fiduciary may reasonably be determined to have taken an action, or considered a factor, with a purpose to further social, political, or ideological interests based upon evidence indicating such a purpose, including, but not limited to, any fiduciary commitment to further, through portfolio company engagement, board or shareholder votes, or otherwise as a fiduciary, any of the following beyond what controlling federal or state law requires:
(1) Eliminating, reducing, offsetting, or disclosing greenhouse gas emissions;
(2) Instituting or assessing corporate board, or employment, composition, compensation, or disclosure criteria that incorporates characteristics protected in this state under RSA 354-B;
(3) Divesting from, limiting investment in, or limiting the activities or investments of, any company, for failing, or not committing, to meet environmental standards or disclosures;
(4) Access to abortion, sex or gender change or transgender surgery; or
(5) Divesting from, limiting investment in, or limiting the activities or investments of, any company that engages in, facilitates, or supports the manufacture, import, distribution, marketing or advertising, sale, or lawful use of firearms, ammunition or components parts and accessories of firearms or ammunition.
IV. “Public retirement system” means any retirement or pension system or plan maintained, provided or offered by:
(a) The state or any political subdivision of the state; or
(b) Any school, college, university, authority, or other enterprise operated by the state or any political subdivision.
5-D:2 Fiduciary Duty.
I. In making and supervising investments of the reserve fund of a public retirement system, an investment manager, fiduciary, or board of trustees shall discharge its duties solely in the financial interest of the participants and beneficiaries for the exclusive purposes of:
(a) Providing financial benefits to participants and their beneficiaries; and
(b) Defraying reasonable expenses of administering the system.
II. A fiduciary shall take into account only financial factors when discharging its duties with respect to public retirement system.
III. All shares held directly or indirectly by or on behalf of a public retirement system and/or the participants and their beneficiaries shall be voted solely in the financial interest of participants and their beneficiaries.
IV. Unless no economically practicable alternative is available, a public retirement system may not grant proxy voting authority to any person who is not a member, unless that person has a practice of, and in writing commits to, follow guidelines that match the board of trustees' obligation to act solely upon financial factors.
V. Unless no economically practicable alternative is available, public retirement system assets shall not be entrusted to a fiduciary, unless that fiduciary has a practice of, and in writing commits to, follow guidelines, when engaging with portfolio companies and voting shares or proxies, that match the board of trustees' obligation to act solely upon financial factors.
VI. Unless no economically practicable alternative is available, an investment manager, fiduciary, or board of trustees may not adopt a practice of following the recommendations of a proxy advisor or other service provider, unless such advisor or service provider has a practice of, and in writing commits to, follow proxy voting guidelines that match the board of trustees' obligation to act solely upon financial factors.
VII. All proxy votes shall be tabulated and reported annually to the board of trustees. For each vote, the report shall contain a vote caption, the plan’s vote, the recommendation of company management, and, if applicable, the proxy advisor’s recommendation. These reports shall be posted on a publicly available webpage on the public retirement system's website.
5-D:3 Enforcement. This chapter, or any contract subject to this chapter, may be enforced by the attorney general. If the attorney general has reasonable cause to believe that a person has engaged in, is engaging in, or is about to engage in, a violation of this chapter, she or he may:
I. Require such person to file on such forms as the attorney general prescribes a statement or report in writing, under oath, as to all the facts and circumstances concerning the violation, and such other data and information as the attorney general may deem necessary.
II. In addition to any other remedies available at law or equity, a company who serves as a fiduciary and who violates RSA 5-D:2 shall be obligated to pay damages to the state in an amount equal to 3 times all moneys paid to the company by the public retirement system for the company’s services.
2 Effective Date. This act shall take effect January 1, 2025.
24-2868
Revised 12/19/23
SB 520-FN- FISCAL NOTE
AS INTRODUCED
AN ACT relative to the fiduciary duty and proxy voting activities of public retirement systems.
FISCAL IMPACT: [ X ] State [ X ] County [ X ] Local [ ] None
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Estimated State Impact - Increase / (Decrease) | ||||||
| FY 2024 | FY 2025 | FY 2026 | FY 2027 | ||
Revenue | $0 | $0 | $0 | $0 | ||
Revenue Fund(s) | None | |||||
Expenditures | $0 | Indeterminable Increase | Indeterminable Increase | Indeterminable Increase | ||
Funding Source(s) | General Fund and Highway Fund Various Agency Funds | |||||
Appropriations | $0 | $0 | $0 | $0 | ||
Funding Source(s) | None | |||||
• Does this bill provide sufficient funding to cover estimated expenditures? [X] N/A • Does this bill authorize new positions to implement this bill? [X] N/A | ||||||
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Estimated Political Subdivision Impact - Increase / (Decrease) | ||||||
| FY 2024 | FY 2025 | FY 2026 | FY 2027 | ||
Revenue | $0 | $0 | $0 | $0 | ||
Expenditures | $0 | Indeterminable Increase | Indeterminable Increase | Indeterminable Increase | ||
*The New Hampshire Retirement System states it is not able to separate the fiscal impact of this legislation between county and local government, therefore the fiscal impact is shown together as political subdivisions.
METHODOLOGY:
This bill mandates that public retirement systems at the state and local levels, including entities like the New Hampshire Retirement System (NHRS), must prioritize the financial interests of participants and beneficiaries in fulfilling their investment duties. It explicitly prohibits making investment decisions influenced by nonfinancial considerations aimed at advancing social, political, or ideological interests. Additionally, the bill introduces specific regulations regarding the execution and disclosure of proxy voting related to securities held by NHRS.
The New Hampshire Retirement System states this bill could result in uncertain administrative expenses tied to expanded responsibilities in establishing a compliance program to oversee investment choices and proxy voting, along with potential costs associated with portfolio divestment. Additionally, the NHRS has identified implementation issues with the bill including unclear definitions, misaligned authorities, and conflicting laws that would make it difficult to administer and implement.
AGENCIES CONTACTED:
New Hampshire Retirement System
| Date | Body | Type |
|---|---|---|
| Jan. 31, 2024 | Senate | Hearing |
| Feb. 21, 2024 | Senate | Floor Vote |
Feb. 21, 2024: Inexpedient to Legislate, MA, VV === BILL KILLED ===; 02/21/2024; SJ 5
Feb. 15, 2024: Committee Report: Inexpedient to Legislate; Vote 5-0; CC; 02/21/2024; SC 8
Jan. 10, 2024: Hearing: 01/31/2024, Room 103, SH, 09:00 am; SC 3
Dec. 14, 2023: To Be Introduced 01/03/2024 and Referred to Executive Departments and Administration; SJ 1