Who is affected and how:

• Plan participants and beneficiaries: Participants will see limits on plan‑sponsored investment options that pursue non‑pecuniary goals; participant‑directed brokerage windows must display new disclosures (including projected balance scenarios) and require acknowledgement before use. Default fund menus cannot be replaced with non‑pecuniary options, which could reduce the availability of ESG‑themed default funds in some plans.

• Plan fiduciaries, sponsors, and trustees: Fiduciaries must revise investment‑selection, proxy‑voting, and service‑provider selection processes to focus on pecuniary factors, produce contemporaneous written justifications when non‑pecuniary factors are used, maintain records, and monitor delegates/advisors. They will need updated policies, training, and compliance procedures; failure to comply could raise litigation and enforcement risk under ERISA.

• Plan recordkeepers, administrators, and brokerage‑window providers: Must implement new disclosure flows, produce the standardized projected‑balance chart, collect participant acknowledgements, and maintain records. Operational changes and system upgrades will be required ahead of the 2027 effective date for brokerage‑window disclosures.

• Investment managers, delegated managers, and proxy/advisory firms: Must operate under tighter monitoring and potential restrictions on proxy voting advice if fiduciaries adopt safe‑harbors or stricter voting policies. Managers may face more frequent oversight and documentation requests from plan fiduciaries.

• Employers offering retirement plans: Sponsors (especially large employers with multiple plans) will incur compliance costs to update plan documents, vendor contracts, and procurement/talent practices. The ban on considering protected characteristics when selecting service providers may affect diversity, equity, and inclusion (DEI) contracting efforts—raising operational and legal questions about how to reconcile supplier‑diversity programs with the new language.

Overall effects and tradeoffs:

• Expect increased compliance, legal, and operational costs for fiduciaries, recordkeepers, and employers to meet new documentation, monitoring, and disclosure duties.
• The limits on non‑pecuniary considerations and proxy‑voting controls may reduce the use of ESG or social objectives in plan investing and shareholder engagement unless fiduciaries can document financial equivalence or benefit.
• The anti‑discrimination clause in selecting service providers could prompt challenges or require restructured vendor‑selection processes and may reduce explicit use of race/sex/nationality‑conscious vendor‑diversity criteria for ERISA plan‑level procurement.
• Participants gain clearer disclosures for brokerage‑window use, which may improve informed decision making but might also discourage use of self‑directed options due to required warnings and formal acknowledgements.