article: 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.
summary: Employee Benefit Plan Security and Protection Act of 1994 - Amends the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code to revise provisions regarding employee benefit plan fiduciary duties in relation to external benefits, social investing, and economically targeted investments.