[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5135 Introduced in House (IH)]

103d CONGRESS
  2d Session
                                H. R. 5135

To amend title I of the Employee Retirement Income Security Act of 1974 
 and the Internal Revenue Code of 1986 to clarify provisions governing 
 fiduciary duties in relation to external benefits, social investing, 
                 and economically targeted investments.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           September 29, 1994

Mr. Saxton introduced the following bill; which was referred jointly to 
        the Committees on Education and Labor and Ways and Means

_______________________________________________________________________

                                 A BILL


 
To amend title I of the Employee Retirement Income Security Act of 1974 
 and the Internal Revenue Code of 1986 to clarify provisions governing 
 fiduciary duties in relation to external benefits, social investing, 
                 and economically targeted investments.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Employee Benefit Plan Security and 
Protection Act of 1994''.

SEC. 2. CLARIFICATION OF SCOPE OF FIDUCIARY DUTIES UNDER ERISA.

    (a) In General.--Section 404(a) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1104(a)) is amended by adding at the 
end the following new paragraphs:
    ``(3)(A) In any case in which a fiduciary, in the course of 
managing a plan or exercising authority or control respecting 
management or disposition of its assets, has an occasion to choose 
between any two alternative investments of plan assets, if the 
fiduciary in making such choice takes into account other factors in 
addition to the rate of return, the riskiness of the investment, and 
other direct economic factors, the fiduciary shall not be considered to 
be discharging the fiduciary's duties with respect to the plan in 
accordance with paragraph (1) and section 403(c)(1) unless--
            ``(i) the fiduciary has determined in advance that both 
        alternatives are economically equally advantageous to the 
        participants and beneficiaries under the plan, and
            ``(ii) such other factors are taken into account solely to 
        the extent that they would be in the economic interest of 
        participants and beneficiaries of the plan.
    ``(B)(i) A fiduciary with respect to a plan shall not be considered 
to be discharging the fiduciary's duties with respect to the plan in 
accordance with paragraph (1) and section 403(c)(1) if the fiduciary, 
in making investment decisions with respect to plan assets, takes into 
account external benefits.
    ``(ii) A fiduciary shall not be treated as failing to discharge the 
fiduciary's duties with respect to the plan in accordance with 
paragraph (1) or section 403(c)(1) solely because such investment 
yields external benefits.
    ``(iii) For purposes of this subparagraph, the term `external 
benefit' means, in connection with any investment of plan assets, a 
benefit to individuals other than participants or beneficiaries under 
the plan.
    ``(4)(A) Neither the Secretary nor any other agency or 
instrumentality of the Government of the United States may--
            ``(i) establish or maintain, or cause to be established or 
        maintained, by means of subsidy or otherwise, any list of 
        investments or classes of investments purporting to satisfy the 
        requirements of paragraph (1) or section 403(c)(1), or
            ``(ii) in any manner pledge, guarantee, ensure, or 
        otherwise represent that any particular investment or class of 
        investments will yield a sufficiently high rate of return at a 
        sufficiently low level of risk to satisfy the requirements of 
        paragraph (1) or section 403(c)(1).
    ``(B) None of the funds authorized or appropriated to carry out 
this Act or any other provision of law may be used--
            ``(i) by the Secretary or any other agency or 
        instrumentality of the United States, or
            ``(ii) by any other institution or entity established, 
        chartered, or subsidized by the United States,
to subsidize, or to otherwise increase the rate of return on, any 
particular investment or class of investments for the purpose of 
causing the requirements of paragraph (1) or section 403(c)(1) to be 
met with respect to such investment or class of investments.
    ``(5) Nothing in this title shall be construed to permit any matter 
unrelated to the economic interests of participants and beneficiaries 
under employee benefit plans to be taken into account in determining 
whether a fiduciary has discharged such fiduciary's duties with respect 
to a plan in accordance with paragraph (1) and section 403(c)(1).''.

SEC. 3. CLARIFICATION OF SCOPE OF EXCLUSIVE BENEFIT RULE UNDER THE 
              INTERNAL REVENUE CODE.

    (a) In General.--Section 401(a) of the Internal Revenue Code of 
1986 (requirements for qualification of pension, profit-sharing, and 
stock bonus plans) is amended by inserting after paragraph (31) the 
following new paragraph:
            ``(32) Additional rules relating to exclusive benefit 
        rule.--
                    ``(A) In general.--The requirements of paragraph 
                (2) shall not be treated as satisfied with respect to a 
                plan, in any case in which a fiduciary, in the course 
                of managing a plan or exercising authority or control 
                respecting management or disposition of its assets, has 
                an occasion to choose between any two alternative 
                investments of plan assets, if the fiduciary in making 
                such choice takes into account other factors in 
                addition to the rate of return, the riskiness of the 
                investment, and other direct economic factors, unless--
                            ``(i) the fiduciary has determined in 
                        advance that both alternatives are economically 
                        equally advantageous to the employees and their 
                        beneficiaries under the plan, and
                            ``(ii) such other factors are taken into 
                        account solely to the extent that they would be 
                        in the economic interest of the employees and 
                        their beneficiaries of the plan.
                    ``(B) Disregard of external benefits.--
                            ``(i) In general.--The requirements of 
                        paragraph (2) shall not be treated as satisfied 
                        with respect to a plan in any case in which a 
                        fiduciary with respect to the plan, in making 
                        investment decisions with respect to plan 
                        assets, takes into account external benefits.
                            ``(ii) External benefits permissible.--The 
                        requirements of paragraph (2) shall not be 
                        treated as not satisfied solely because such 
                        investment yields external benefits.
                            ``(iii) External benefit.--For purposes of 
                        this subparagraph, the term `external benefit' 
                        means, in connection with any investment of 
                        plan assets, a benefit to individuals other 
                        than the employees or their beneficiaries under 
                        the plan.
                    ``(C) Noninterference with fiduciary 
                responsibilities.--
                            ``(i) Prohibition against lists and other 
                        referrals.--Neither the Secretary nor any other 
                        agency or instrumentality of the Government of 
                        the United States may--
                                    ``(I) establish or maintain, or 
                                cause to be established or maintained, 
                                by means of subsidy or otherwise, any 
                                list of investments or classes of 
                                investments purporting to satisfy the 
                                requirements of subparagraph (A), or
                                    ``(II) in any manner pledge, 
                                guarantee, ensure, or otherwise 
                                represent that any particular 
                                investment or class of investments will 
                                yield a sufficiently high rate of 
                                return at a sufficiently low level of 
                                risk to satisfy the requirements of 
                                subparagraph (A).
                            ``(ii) Prohibition against subsidies.--None 
                        of the funds authorized or appropriated to 
                        carry out this title or any other provision of 
                        law may be used--
                                    ``(I) by the Secretary or any other 
                                agency or instrumentality of the United 
                                States, or
                                    ``(II) by any other institution or 
                                entity established, chartered, or 
                                subsidized by the United States,
                        to subsidize, or to otherwise increase the rate 
                        of return on, any particular investment or 
                        class of investments for the purpose of causing 
                        the requirements of subparagraph (A) to be met 
                        with respect to such investment or class of 
                        investments.
                    ``(D) Irrelevance of matters other than economic 
                interests of employees and their beneficiaries.--
                Nothing in this paragraph or paragraph (2) shall be 
                construed to permit any matter unrelated to the 
                economic interests of the employees and their 
                beneficiaries to be taken into account in determining 
                whether the requirements of paragraph (2) have been 
                satisfied.''.

SEC. 4. EFFECTIVE DATE.

    The amendments made by this Act shall apply with respect to acts or 
failures to act occurring on or after the date of the enactment of this 
Act.
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