Stricken language would be deleted from and underlined language would be added to present law.
Act 498 of the Regular Session
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State of Arkansas As Engrossed: H3/28/23 1
94th General Assembly A Bill 2
Regular Session, 2023 HOUSE BILL 1253 3
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By: Representatives McAlindon, Gonzales 5
By: Senator J. Bryant 6
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For An Act To Be Entitled 8
AN ACT TO CREATE THE STATE GOVERNMENT EMP LOYEE 9
RETIREMENT PROTECTIO N ACT; AND FOR OTHER PURPOSES. 10
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Subtitle 13
TO CREATE THE STATE GOVERNMENT EMPLOYEE 14
RETIREMENT PROTECTION ACT. 15
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BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS: 18
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SECTION 1. Arkansas Code Title 24, Chapter 2, is amended to add an 20
additional subchapter to read as follows: 21
Subchapter 8 — State Government Employee Retirement Protection Act 22
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24-2-801. Title. 24
This subchapter shall be known and may be cited as the "State 25
Government Employee Retirement Protection Act". 26
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24-2-802. Definitions. 28
As used in this subchapter: 29
(1) "Fiduciary" means a person who, with respect to a pension 30
benefit plan: 31
(A) Exercises any discretionary authority or discretionary 32
control regarding the management of the pension benefit plan or exercises an 33
authority or control regarding the management or disposition of the pension 34
benefit plan's assets; 35
(B) Has any discretionary autho rity or discretionary 36 As Engrossed: H3/28/23 HB1253
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responsibility in the administration of the pension benefit plan, including 1
making recommendations or voting on or for a plan's shares or proxies; 2
(2)(A) "Material", when used to qualify a financial risk or 3
financial return, means a financial risk or financial return in which there 4
is a substantial likelihood that a reasonable investor would attach 5
importance when: 6
(i) Evaluating the potential financial risks or 7
returns of an existing or prospective investment; or 8
(ii) Exercising, or declining to exercise, any 9
rights appurtenant to securities. 10
(B) "Material", when used to qualify a financial risk or 11
financial return, does not include: 12
(i) Furthering nonpecuniary, environmental, social, 13
political, ideological, or ot her goals or objectives; or 14
(ii) Any portion of a financial risk or financial 15
return that primarily relates to events that: 16
(a) Involve a high degree of uncertainty 17
regarding what may occur in the long -term future; and 18
(b) Are systemic, ge neral, or not investment -19
specific in nature; 20
(3) "Pension benefit plan" means any plan, fund, or program, 21
other than an individually directed defined contribution plan, that is 22
established, maintained, or offered by the State of Arkansas or any 23
subdivision, county, municipality, agency, or instrumentality of the State of 24
Arkansas, or any school, college, university, administration, authority, or 25
other enterprise operated by the State of Arkansas to the extent that, by its 26
terms or as a result of prevaili ng circumstances, the plan, fund, or program: 27
(A) Provides retirement income or other retirement 28
benefits to employees or former employees; or 29
(B) Results in a deferral of income by employees for a 30
period of time extending to or beyond the termination of the covered 31
employment; 32
(4)(A) "Pecuniary factor" means a factor that has a material 33
effect on the financial risk or financial return, or bo th, of an investment 34
based on appropriate investment horizons consistent with the pension benefit 35
plan's investment objectives and the funding policy. 36 As Engrossed: H3/28/23 HB1253
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(B) "Pecuniary factor" does not include a nonpecuniary 1
factor; and 2
(5) "Nonpecuniary" means any ac tion taken or factor considered 3
by a fiduciary with any purpose to further environmental, social, political, 4
or ideological goals. 5
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24-2-803. Standard of care — Sole interest and prudent person. 7
(a) A fiduciary shall discharge his or her duties with re spect to a 8
pension benefit plan: 9
(1) Solely in the pecuniary interest of the participants and 10
beneficiaries and for the exclusive purpose of: 11
(A) Providing pecuniary benefits to participants and their 12
beneficiaries; and 13
(B) Defraying reasonable expenses of administering the 14
plan; 15
(2) With the care, skill, prudence, and diligence under the 16
prevailing circumstances that a prudent person acting in a similar capacity 17
and familiar with such matters would use in the conduct of an enterprise of a 18
similar character and with similar aims; 19
(3) By diversifying the investments of the pension benefit plan 20
so as to minimize the risk of large losses, unless under the circumstances it 21
is clearly prudent not to do so; and 22
(4) In accordance with the docume nts and instruments governing 23
the pension benefit plan insofar as the documents and instruments are 24
consistent with the provisions of this subchapter. 25
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24-2-804. Consideration of nonpecuniary factors prohibited. 27
(a) A fiduciary's evaluation of an inves tment, or evaluation or 28
exercise of any right appurtenant to an investment, shall take into account 29
only pecuniary factors. 30
(b) A fiduciary shall not promote a nonpecuniary benefit or any other 31
nonpecuniary goals. 32
(c)(1) An environmental, social, corpo rate governance, or other 33
similarly oriented consideration is a pecuniary factor only if it presents an 34
economic risk or opportunity that a qualified investment professional would 35
treat as a material economic consideration under generally accepted 36 As Engrossed: H3/28/23 HB1253
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investment theories. 1
(2) The weight given to any factor listed in subdivision (c)(1) 2
of this section should reflect solely a prudent assessment of its impact on 3
financial risk and financial return. 4
(3) A fiduciary considering an environmental, social, corpor ate 5
governance, or other similarly oriented factor as a pecuniary factor is also 6
required to examine the level of diversification, degree of liquidity, and 7
the potential financial risk and financial return in comparison with other 8
available alternative inv estments that would play a similar role in the 9
pension benefit plan portfolio. 10
(4) Any pecuniary consideration of an environmental, social, or 11
governance factor must include an evaluation of whether a greater return can 12
be achieved through investments t hat rank poorly on that factor. 13
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24-2-805. Voting ownership interests. 15
(a)(1) All shares held directly or indirectly by or on behalf of a 16
pension benefit plan or its beneficiaries, or both, shall be voted upon 17
solely in the pecuniary interest of the pe nsion benefit plan participants. 18
(2) Voting to further a nonpecuniary, environmental, social, 19
political, ideological, or other benefit or goal is prohibited. 20
(b) Unless no economically practicable alternative is available: 21
(1) A fiduciary shall not adopt a practice of following the 22
recommendations of a proxy advisory firm or other service provider unless the 23
firm or service provider has a practice of following proxy voting guidelines 24
that are consistent with the fiduciary's obligation to act based o nly upon 25
pecuniary factors and makes a written commitment to do so; and 26
(2) Plan assets shall not be entrusted to a fiduciary unless 27
that fiduciary has a practice of following guidelines when engaging with 28
portfolio companies and voting shares or proxies that match the obligation of 29
the pension benefit plan to act based only upon pecuniary factors and makes a 30
written commitment to do so. 31
(c) Authority to vote upon shares as discussed in this section shall 32
be in the hands of the existing state off icial or board who is politically 33
accountable to the people of the State of Arkansas for each pension benefit 34
plan. 35
(d) All voting authority shall reside with the appropriate state 36 As Engrossed: H3/28/23 HB1253
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official or board, except that the state official or board may delegate t hat 1
authority to a person who has a practice of following guidelines that match 2
the governmental entity's obligation to act based only on pecuniary factors 3
and makes a written commitment to do so. 4
(e)(1) All proxy votes shall be tabulated and reported an nually to the 5
each pension benefit plan's board of trustees. 6
(2)(A) For each vote, the report shall contain a vote caption, 7
the plan's vote, the recommendation of company management and, if applicable, 8
the proxy advisor's recommendation. 9
(B) These reports shall be posted on a publicly available 10
webpage on each applicable board of trustees' website. 11
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24-2-806. Enforcement. 13
(a) This subchapter may be enforced by the Attorney General. 14
(b) If the Attorney General has reasonable cause to believe tha t a 15
person has engaged in or is engaging in a violation of this subchapter, the 16
Attorney General may: 17
(1) Require the person to file on forms the Attorney General 18
prescribes a statement or report in writing, under oath, as to all the facts 19
and circumstances concerning the violation, as well as other data and 20
information the Attorney General deems necessary; 21
(2) Examine under oath any person in connection with the 22
violation; 23
(3) Examine any record, book, document, account, or paper the 24
Attorney General deems necessary; and 25
(4) Pursuant to an order of a circuit court with jurisdiction, 26
impound any record, book, document, account, paper, sample, or material 27
relating to the practice and retain the same in the Attorney General's 28
possession until the c ompletion of all proceedings undertaken under this 29
subchapter or in the court. 30
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/s/McAlindon 32
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APPROVED: 4/10/23 35
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