American Pension Investments Modernization Act of 2014

Summary: American Pension Investments Modernization Act of 2014 - Amends the Employee Retirement Income Security Act of 1974 (ERISA) to require the fiduciary of an employee benefit plan to establish policies for appointment of an investment manager or managers to manage any plan assets or business enterprise or enterprises for brokerage and investment banking services. Requires the fiduciary, under these policies, to consider:  the concentration level of the plan's exposure to firm-specific risks, including operational, compliance, and fraud risks; the inclusion, to the greatest extent feasible, of minority business enterprises for brokerage and investment banking services (including enterprises owned or controlled by specified percentages of African-Americans, Hispanic-Americans, Asian Pacific Americans, Subcontinent Asian Americans, Native Americans, women, or veterans); and the utilization of diverse asset managers, taking into consideration the investment opportunities they offer in sectors, strategies, geographies, and demographics not meaningfully available to the plans.  Defines &quot;diverse asset manager&quot; as a minority business enterprise that manages an investment portfolio of between $100 million and $25 billion. Directs the Secretary of Labor to issue related guidance and requires the Federal Retirement Thrift Investment Board (FRTIB) under the Federal Employees Retirement System (FERS) to take this guidance into account. Directs the FRTIB to give current and former federal employees and Members of Congress in FERS the option to participate in actively managed funds within the employee's or Member's Thrift Savings Fund account (but no more than 20% of a current or former employee's or Member's funds). Prohibits the FRTIB from subjecting more than 20% of the total assets under management of the Thrift Savings Fund to active management.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``American Pension Investments 
Modernization Act of 2014''.

SEC. 2. CONSIDERATION OF FIRM-SPECIFIC RISKS AND INCLUSION OF DIVERSE 
              ASSET MANAGERS IN ERISA PLANS.

    (a) In General.--Section 404(a) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1104(a)) is amended--
            (1) in paragraph (1)--
                    (A) in subparagraph (C), by striking ``and'' at the 
                end;
                    (B) by designating subparagraph (D) as subparagraph 
                (E); and
                    (C) by inserting after subparagraph (C) the 
                following:
            ``(D) in any case in which the fiduciary appoints an 
        investment manager or managers to manage any assets of a plan 
        under section 402(c)(3), or business enterprise or enterprises 
        for brokerage and investment banking services, by establishing 
        policies under which the fiduciary will consider--
                    ``(i) the concentration level of the plan's 
                exposure to firm-specific risks, including operational, 
                compliance, and fraud risks;
                    ``(ii) the inclusion, to the greatest extent 
                feasible, of minority business enterprises for 
                brokerage and investment banking services; and
                    ``(iii) the utilization of diverse asset managers, 
                taking into consideration the investment opportunities 
                they offer in sectors, strategies, geographies, and 
                demographics not meaningfully available to the 
                plans.''; and
            (2) by inserting at the end the following:
    ``(3)(A) For purposes of this subsection, the term `minority 
business enterprise' means any business entity--
            ``(i) not less than 51 percent of which is owned by one or 
        more individuals described in subparagraph (C) or, in the case 
        of any publicly owned business, not less than 51 percent of the 
        stock of which is owned by such individuals; or
            ``(ii)(I) not less than 35 percent of which is owned by one 
        or more individuals described in subparagraph (C) or, in the 
        case of any publicly owned business, not less than 35 percent 
        of the stock of which is owned by such individuals; and
            ``(II) the management and daily business operations of 
        which are controlled by one or more individuals described in 
        subparagraph (C).
    ``(B) For purposes of this subsection, the term `diverse asset 
manager' means a minority business enterprise that manages an 
investment portfolio of at least $100,000,000 and not more than 
$25,000,000,000.
    ``(C) An individual described in this subparagraph is--
            ``(i) an African-American, Hispanic-American, Asian Pacific 
        American, Subcontinent Asian American, or Native American;
            ``(ii) a woman; or
            ``(iii) a veteran (as defined in section 101(2) of title 
        38, United States Code).''.
    (b) Issuance of Guidance by Secretary of Labor.--Not later than 1 
year after the date of the enactment of this Act, the Secretary of 
Labor shall issue guidance relating to the requirement imposed by 
section 404(a)(1)(D) of such Act (as amended by subsection (a)). In 
issuing guidance under this subsection, the Secretary of Labor shall 
consider successful practices from State, local, and private-sector 
retirement systems' utilization of diverse and emerging asset managers 
and of minority business enterprises for brokerage and investment 
banking services, including established efforts, programs, plans, and 
goals designed to increase their participation in financial services, 
and providing pension plans with greater access to investment 
opportunities that may otherwise be overlooked.

SEC. 3. CONSIDERATION OF FIRM-SPECIFIC RISKS AND INCLUSION OF DIVERSE 
              ASSET MANAGERS IN THE THRIFT SAVINGS PLAN.

    (a) In General.--Section 8472 of title 5, United States Code, is 
amended by adding at the end the following:
    ``(k) In establishing policies under subsection (f)(1)(A), the 
Board shall take into account the guidance issued by the Secretary of 
Labor pursuant to section 404(a)(1)(D) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1104(a)).''.
    (b) Conforming Amendment.--Section 8477(b)(1)(C) of such title is 
amended by inserting after ``of this title,'' the following: ``and 
consistent with the policies developed under section 8472(k),''.

SEC. 4. ACTIVE MANAGEMENT OPTION UNDER THE THRIFT SAVINGS PLAN.

    (a) In General.--Subchapter III of chapter 84 of title 5, United 
States Code, is amended by inserting at the end the following:
``Sec. 8440g. Active management option
    ``(a) The Board shall provide employees and Members and former 
employees or Members the option to participate in actively managed 
funds within such employee or Member's Thrift Savings Fund account. 
Such option or options shall allow not more than 20 percent of an 
employee or Member's (or former employee or Member's) funds to be 
actively managed.
    ``(b) Notwithstanding the requirement of subsection (a), the Board 
may not subject more than 20 percent of the total assets under 
management of the Thrift Savings Fund to active management.
    ``(c) The Board shall promulgate guidelines regarding the active 
management of funds under this section. In promulgating such 
guidelines, the Board shall consider modern and successful practices 
from State, local, and private-sector retirement systems' utilization 
of active management strategies in order to--
            ``(1) reduce market downside risks to the best extent 
        possible, including dramatic swings in major market indexes;
            ``(2) take advantage of research and investment 
        opportunities offered by small-, minority-, women- and veteran-
        owned firms that specialize in less traditional asset classes, 
        or less efficient market segments with high-growth potentials, 
        including investments in sectors, strategies, geographies and 
        demographics that are not meaningfully available to large 
        passively invested funds; and
            ``(3) take advantage of more effective portfolio designs 
        that diversify across active and passive investment strategies 
        and managers.''.
    (b) Clerical Amendment.--The table of sections for such subchapter 
is amended by adding after the item relating to section 8440f the 
following new item:

``8440g. Active management option.''.

SEC. 5. REPORTS.

    Not later than 1 year after the issuance of guidance under section 
2(b) and annually thereafter, the Secretary of Labor and the Chairman 
of the Federal Retirement Thrift Investment Board shall submit a report 
to Congress on the progress achieved and efforts being made to 
implement the amendments made by sections 2 and 3, respectively. Such 
report shall include such recommendations as the Secretary and the 
Chairman, respectively, deem necessary or appropriate. In addition, 
each report shall include--
            (1) an assessment of the extent to which compliance with 
        the requirements contained in such amendments is being 
        achieved;
            (2) a summary of the enforcement actions taken by each of 
        the agencies assigned administrative enforcement 
        responsibilities for such requirements;
            (3) to the extent feasible, with respect to the Thrift 
        Savings Plan and terminated plans within the meaning of title 
        IV of the Employee Retirement Income Security Act of 1974--
                    (A) a list of all asset management firms (minority-
                owned and others) to which plan funds were allocated, 
                and the amount allocated to each asset management firm;
                    (B) the fees charged by each asset management firm, 
                including proceeds from security lending, if any;
                    (C) the list of all firms (minority-owned and 
                others) used for brokerage and investment banking 
                services, and the amount of transactions executed; and
                    (D) the fees charged by each firm used for 
                brokerage and investment banking services.

SEC. 6. EFFECTIVE DATE.

    The amendments made by sections 2 and 3 shall apply with respect to 
plan years beginning at least 9 months after the issuance of guidance 
under section 2(b).