[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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