I

106TH CONGRESS

1ST SESSION H. R. 990

To provide for investment in private sector securities markets of amounts

held in the Federal Old-Age and Survivors Insurance Trust Fund for

payment of benefits under title II of the Social Security Act.

IN THE HOUSE OF REPRESENTATIVES

MARCH 4, 1999

Mr. BARTLETT of Maryland (for himself, Mr. MARKEY, Mr. POMEROY, Mr.

DUNCAN, and Mr. MATSUI) introduced the following bill; which was referred to the Committee on Ways and Means

A BILL

To provide for investment in private sector securities markets

of amounts held in the Federal Old-Age and Survivors

Insurance Trust Fund for payment of benefits under

title II of the Social Security Act.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Social Security Invest5 ment Fund Act of 1999’’.
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1 SEC. 2. ESTABLISHMENT OF THE SOCIAL SECURITY IN2 VESTMENT BOARD AND EXECUTIVE DIREC3 TOR.

4 (a) IN GENERAL.—Title VII of the Social Security

5 Act is amended by adding after section 712 (42 U.S.C.

6 913) the following new section:

7 ‘‘SOCIAL SECURITY INVESTMENT BOARD; EXECUTIVE

8 DIRECTOR

9 ‘‘Social Security Investment Board

10 ‘‘SEC. 713. (a)(1) There is established in the execu11 tive branch of the Government an independent agency to

12 be known as the Social Security Investment Board.

13 ‘‘(2) The Board shall be composed of—

14 ‘‘(A) 3 members appointed by the President, of

15 whom 1 shall be designated by the President as

16 Chairman; and

17 ‘‘(B) 2 members appointed by the President, of

18 whom—

19 ‘‘(i) 1 shall be appointed by the President

20 after taking into consideration the recommenda21 tion made by the Speaker of the House of Rep22 resentatives in consultation with the minority

23 leader of the House of Representatives; and

24 ‘‘(ii) 1 shall be appointed by the President

25 after taking into consideration the recommenda26 tion made by the majority leader of the Senate
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1 in consultation with the minority leader of the

2 Senate.

3 ‘‘(3) Appointments under paragraph (2) shall be

4 made by and with the advice and consent of the Senate.

5 ‘‘(4) Members of the Board shall have substantial ex6 perience, training, and expertise in the management of fi7 nancial investments and the exercise of fiduciary duties.

8 ‘‘(5)(A) A member of the Board shall be appointed

9 for a term of 10 years, subject only to removal by the

10 President for cause, except that of the members first

11 appointed—

12 ‘‘(i) the Chairman shall be appointed for a term

13 of 4 years;

14 ‘‘(ii) one of the members appointed under para15 graph (2)(B) shall be appointed for a term of 2

16 years;

17 ‘‘(iii) the remaining member appointed under

18 paragraph (2)(B) shall be appointed for a term of

19 6 years;

20 ‘‘(iv) one of the members appointed under para21 graph (2)(A) shall be appointed for a term of 8

22 years; and

23 ‘‘(v) the remaining member appointed under

24 paragraph (2)(A) shall be appointed for a term of

25 10 years.
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1 ‘‘(B)(i) A vacancy on the Board shall be filled in the

2 manner in which the original appointment was made and

3 shall be subject to any conditions which applied with re4 spect to the original appointment.

5 ‘‘(ii) An individual chosen to fill a vacancy shall be

6 appointed for the unexpired term of the member replaced.

7 ‘‘(iii) The term of any member shall not expire before

8 the date on which the member’s successor takes office.

9 ‘‘(6) The Board shall—

10 ‘‘(A) establish policies for investments under

11 part B of title II of amounts in the Social Security

12 Investment Fund in the Common Stock Index Fund

13 established pursuant to section 252 and policies for

14 the selection and retention of investment managers

15 to manage such investments;

16 ‘‘(B) review the performance of investments of

17 amounts in the Social Security Investment Fund;

18 and

19 ‘‘(C) review and approve the budget of the

20 Board.

21 ‘‘(7) The Board shall develop investment policies

22 under paragraph (6)(A) which provide for—

23 ‘‘(A) prudent investments suitable for accumu24 lating funds for payment of benefits under title II;

25 and
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1 ‘‘(B) low administrative costs.

2 ‘‘(8)(A) The Board may—

3 ‘‘(i) adopt, alter, and use a seal;

4 ‘‘(ii) except as provided in subparagraph (B),

5 establish policies with which the Executive Director

6 is required to comply under section 252; and

7 ‘‘(iii) take such other actions as may be nec8 essary to carry out the functions of the Board.

9 ‘‘(B) The policies of the Board may not require the

10 Executive Director to invest or to cause to be invested any

11 sums in the Social Security Investment Fund in a specific

12 asset or to dispose of or cause to be disposed of any spe13 cific asset of the Fund.

14 ‘‘(9)(A) The Board shall meet—

15 ‘‘(i) not less than once during each month; and

16 ‘‘(ii) at additional times at the call of the Chair17 man.

18 ‘‘(B)(i) The Board shall perform the functions and

19 exercise the powers of the Board on a majority vote of

20 a quorum of the Board.

21 ‘‘(ii) A vacancy on the Board shall not impair the

22 authority of a quorum of the Board to perform the func23 tions and exercise the powers of the Board.

24 ‘‘(C) Three members of the Board shall constitute a

25 quorum for the transaction of business.
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1 ‘‘(D)(i) Each member of the Board who is not an offi2 cer or employee of the Federal Government shall be com3 pensated at the daily rate of basic pay for level IV of the

4 Executive Schedule for each day during which such mem5 ber is engaged in performing a function of the Board.

6 ‘‘(ii) A member of the Board shall be paid travel, per

7 diem, and other necessary expenses under subchapter I of

8 chapter 57 of title 5, United States Code, while traveling

9 away from such member’s home or regular place of busi10 ness in the performance of the duties of the Board.

11 ‘‘(iii) Payments authorized under this paragraph

12 shall be paid from the Social Security Investment Fund.

13 ‘‘(E) The accrued annual leave of any officer or em14 ployee of the Federal Government who is a member of the

15 Board shall not be charged for any time used in perform16 ing services for the Board.

17 ‘‘(10) The members of the Board shall discharge

18 their responsibilities solely in the interest of the Social Se19 curity Investment Fund.

20 ‘‘(11) The Board shall prepare and submit to the

21 President, and, at the same time, to the appropriate com22 mittees of Congress, an annual budget of the expenses and

23 other items relating to the Board which shall be included

24 as a separate item in the budget required to be transmit-
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1 ted to the Congress under section 1105 of title 31, United

2 States Code.

3 ‘‘(12) The Board shall submit an annual report to

4 the President and to each House of the Congress regard5 ing the financial and operating condition of the Social Se6 curity Investment Fund. Such report may include legisla7 tive recommendations of the Board relating to any of its

8 functions under this section, part B of title II, or any

9 other provision of law.

10 ‘‘Executive Director

11 ‘‘(b)(1) The Board shall appoint, without regard to

12 the provisions of law governing appointments in the com13 petitive service, an Executive Director of the Social Secu14 rity Investment Board, by action agreed to by a majority

15 of the members of the Board.

16 ‘‘(2) The Executive Director shall have substantial

17 experience, training, and expertise in the management of

18 financial investments and the exercise of fiduciary duties.

19 ‘‘(3) The Executive Director shall—

20 ‘‘(A) carry out the policies established by the

21 Board;

22 ‘‘(B) carry out the provisions of section 252, re23 lating to investment of the Social Security Invest24 ment Fund in common stock;
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1 ‘‘(C) administer the provisions of part B of title

2 II;

3 ‘‘(D) prescribe such regulations (other than

4 regulations relating to fiduciary responsibilities) as

5 may be necessary for the administration of part B

6 of title II; and

7 ‘‘(E) meet from time to time with, and provide

8 information to, the Board of Trustees of the Federal

9 Old-Age and Survivors Insurance Trust Fund upon

10 request of the Board of Trustees regarding matters

11 relating to the Social Security Investment Fund.

12 ‘‘(4) The Executive Director may—

13 ‘‘(A) prescribe such regulations as may be nec14 essary to carry out the responsibilities of the Execu15 tive Director under this subsection, other than regu16 lations relating to fiduciary responsibilities;

17 ‘‘(B) appoint such personnel as may be nec18 essary to carry out the provisions of part B of title

19 II;

20 ‘‘(C) in accordance with the policies of the

21 Board, procure the services of experts and consult22 ants under section 3109 of title 5, United States

23 Code;

24 ‘‘(D) secure directly from any agency or instru25 mentality of the Federal Government any informa-
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1 tion necessary to carry out the provisions of part B

2 of title II and policies of the Board;

3 ‘‘(E) make such payments out of sums in the

4 Social Security Investment Fund as the Executive

5 Director determines are necessary to carry out the

6 provisions of part B of title II and the policies of the

7 Board;

8 ‘‘(F) pay the compensation, per diem, and trav9 el expenses of individuals appointed under subpara10 graphs (B), (C), and (G) of this paragraph from

11 amounts otherwise available in the Social Security

12 Investment Fund;

13 ‘‘(G) accept and use the services of individuals

14 employed intermittently in the Government service

15 and reimburse such individuals for travel expenses,

16 as authorized by section 5703 of title 5, United

17 States Code, including per diem as authorized by

18 section 5702 of such title; and

19 ‘‘(H) take such other actions as are appropriate

20 to carry out the functions of the Executive Director

21 under part B of title II.

22 ‘‘(5) The Executive Director shall discharge his or

23 her responsibilities solely in the interest of the Social Se24 curity Investment Fund.
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1 ‘‘Inspector General

2 ‘‘(c) There shall be in the Office of the Board an In3 spector General appointed by the President, by and with

4 the advice and consent of the Senate, in accordance with

5 section 3(a) of the Inspector General Act of 1978.’’.

6 (b) CONFORMING AMENDMENTS.—Section 11 of the

7 Inspector General Act of 1978 (5 U.S.C. App.) is

8 amended—

9 (1) in paragraph (1), by striking the second of

10 the two semicolons following ‘‘Community Service’’,

11 by striking ‘‘and’’ before ‘‘the chief executive’’, by

12 striking ‘‘and’’ before ‘‘the Chairperson’’, by striking

13 ‘‘or’’ before ‘‘the Commissioner’’, and by inserting

14 ‘‘or the Chairman of the Social Security Investment

15 Board;’’ before ‘‘as the case may be’’; and

16 (2) in paragraph (2), by striking ‘‘or’’ before

17 ‘‘the Veterans’ Administration’’, by striking ‘‘or’’ be18 fore ‘‘the Social Security Administration’’, and by

19 inserting ‘‘, or the Social Security Investment

20 Board’’ after ‘‘the Social Security Administration’’.

21 SEC. 3. SOCIAL SECURITY INVESTMENT PROGRAM.

22 (a) IN GENERAL.—Title II of the Social Security Act

23 is amended—

24 (1) by inserting before section 201 (42 U.S.C.

25 401) the following:
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1 ‘‘PART A—OLD-AGE, SURVIVORS, AND DISABILITY

2 INSURANCE BENEFITS’’;

3 and

4 (2) by adding after section 233 (42 U.S.C. 433)

5 the following new part:

6 ‘‘PART B—SOCIAL SECURITY INVESTMENT PROGRAM

7 ‘‘SOCIAL SECURITY INVESTMENT FUND

8 ‘‘SEC. 251. (a) IN GENERAL.—There is hereby cre9 ated on the books of the Treasury of the United States

10 a trust fund to be known as the ‘Social Security Invest11 ment Fund’. The Social Security Investment Fund shall

12 consist of such amounts as may be appropriated to, or

13 deposited in, the Social Security Investment Fund as pro14 vided in this part. Such Fund shall be available—

15 ‘‘(1) for investment in accordance with this

16 part,

17 ‘‘(2) to be transferred to the Managing Trustee

18 of the Federal Old-Age and Survivors Insurance

19 Trust Fund in accordance with this part, and

20 ‘‘(3) subject to subsection (c), to pay the ad21 ministrative expenses of the Social Security Invest22 ment Board and the Executive Director of the

23 Board (including compensation for the officers and

24 employees of the Board).
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1 ‘‘(b) MAINTENANCE OF PRESCRIBED BALANCE IN

2 SOCIAL SECURITY INVESTMENT FUND.—

3 ‘‘(1) IN GENERAL.—Except as otherwise pro4 vided in this section, the Managing Trustee of the

5 Federal Old-Age and Survivors Insurance Trust

6 Fund shall transfer from the Trust Fund to the So7 cial Security Investment Fund during each of the

8 fiscal years 2001 through 2015 amounts equivalent

9 to 100 percent of the prescribed transfer for such

10 fiscal year specified in paragraph (2). The amounts

11 shall be transferred from time to time from the

12 Trust Fund to the Social Security Investment Fund,

13 such amounts to be determined on the basis of esti14 mates by the Managing Trustee; and proper adjust15 ments shall be made in amounts subsequently trans16 ferred to the extent prior estimates were in excess

17 of or were less than actual amounts.

18 ‘‘(2) PRESCRIBED TRANSFER.—For purposes of

19 paragraph (1), the ‘prescribed transfer’ for a fiscal

20 year shall be the amount specified for the fiscal year

21 in the following table:

‘‘For the fiscal year— The prescribed transfer is—

2001 ............................................... $34.2 billion.

2002 ............................................... $28.4 billion.

2003 ............................................... $37.2 billion.

2004 ............................................... $36.7 billion.

2005 ............................................... $44.5 billion.

2006 ............................................... $49.4 billion.

2007 ............................................... $62.5 billion.

2008 ............................................... $73.5 billion.
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‘‘For the fiscal year— The prescribed transfer is—

2009 ............................................... $85.4 billion.

2010 ............................................... $97.7 billion.

2011 ............................................... $107.7 billion.

2012 ............................................... $117.6 billion.

2013 ............................................... $126.0 billion.

2014 ............................................... $133.0 billion.

2015 ............................................... $136.3 billion.

1 ‘‘(3) MAINTENANCE OF BALANCE OF SOCIAL

2 SECURITY INVESTMENT FUND AT LEVEL NECESSARY

3 TO ENSURE 6-YEAR INCREASE IN TRUST FUND SOL4 VENCY.—

5 ‘‘(A) ANNUAL DETERMINATIONS BY MAN6 AGING TRUSTEE.—The Managing Trustee of

7 the Federal Old-Age and Survivors Insurance

8 Trust Fund shall determine at the beginning of

9 each of the fiscal years beginning with or after

10 fiscal year 2002 whether the then current bal11 ance in the Social Security Investment Fund

12 has resulted in an increase of—

13 ‘‘(i) at least 6 years in the number of

14 years for which (under the actuarial as15 sumptions used in the most recent annual

16 report of the Board of Trustees of the

17 Trust Fund, and taking into account

18 amounts in the Social Security Investment

19 Fund made available under this subsection

20 to the Trust Fund) the Trust Fund is in

21 close actuarial balance, over
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1 ‘‘(ii) the number of years for which

2 (under such assumptions) the Trust Fund

3 would have been in close actuarial balance

4 if amounts previously transferred to the

5 Social Security Investment Fund had not

6 been transferred but had been retained in

7 the Trust Fund and invested as provided

8 in section 201(d).

9 Upon determining at the beginning of any such

10 fiscal year that the then current balance in the

11 Social Security Investment Fund has resulted

12 in the 6-year increase described in clause (i),

13 the Managing Trustee shall certify such deter14 mination to the Social Security Investment

15 Board, the Comptroller General of the United

16 States, and each House of the Congress.

17 ‘‘(B) TRANSFERS BETWEEN FUNDS TO

18 MAINTAIN 6 ADDITIONAL YEARS OF SOL19 VENCY.—

20 ‘‘(i) IN GENERAL.—In any case in

21 which the Managing Trustee determines

22 under subparagraph (A) at the beginning

23 of any fiscal year that the then current

24 balance in the Social Security Investment

25 Fund has resulted in the 6-year increase
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1 described in subparagraph (A)(ii), effective

2 for such fiscal year and subsequent fiscal

3 years—

4 ‘‘(I) paragraph (1) shall not

5 apply, and

6 ‘‘(II) amounts shall be trans7 ferred between the Social Security In8 vestment Fund and the Federal Old9 Age and Survivors Insurance Trust

10 Fund only in accordance with this

11 paragraph, and only to the extent nec12 essary to ensure, to the maximum ex13 tent practicable, that the balance in

14 the Social Security Investment Fund

15 does not exceed the minimum level

16 necessary for such 6-year increase to

17 be maintained.

18 ‘‘(ii) TRANSFERS FROM THE SOCIAL

19 SECURITY INVESTMENT FUND.—Upon any

20 determination made by the Managing

21 Trustee that a transfer of any amount

22 from the Social Security Investment Fund

23 to the Federal Old-Age and Survivors In24 surance Trust Fund is necessary in order

25 to comply with clause (i), the Managing
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1 Trustee shall certify such determination to

2 the Executive Director and, upon receipt of

3 such certification, the Executive Director

4 shall transfer such amount from the Social

5 Security Investment Fund to the Trust

6 Fund.

7 ‘‘(d) SPECIAL RULES EFFECTIVE UPON DEPLETION

8 OF FEDERAL OLD-AGE AND SURVIVORS INSURANCE

9 TRUST FUND.—

10 ‘‘(1) IN GENERAL.—At the beginning of fiscal

11 year 2002 and each subsequent fiscal year, the Man12 aging Trustee of the Federal Old-Age and Survivors

13 Insurance Trust Fund shall determine whether,

14 under reasonable assumptions, the balance in the

15 Trust Fund would, but for the provisions of this

16 subsection, be reduced during such fiscal year to the

17 amount which is necessary for such fiscal year to

18 meet current withdrawals from the Trust Fund

19 under part A. Upon so determining that such bal20 ance would be reduced to such an amount during

21 such fiscal year, the Managing Trustee shall certify

22 such determination to the Social Security Invest23 ment Board, the Comptroller General of the United

24 States, and each House of the Congress.
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1 ‘‘(2) TRANSFERS UPON CERTIFICATION.—In

2 any case in which the Managing Trustee issues a

3 certification under paragraph (1) at the beginning of

4 any fiscal year—

5 ‘‘(A) subsection (b) shall cease to be effec6 tive with respect to any transfers thereunder for

7 such fiscal year and subsequent fiscal years,

8 and

9 ‘‘(B) effective for such fiscal year and sub10 sequent fiscal years, upon any determination

11 made by the Managing Trustee that a transfer

12 of any amount from the Social Security Invest13 ment Fund to the Federal Old-Age and Sur14 vivors Insurance Trust Fund is necessary to en15 sure that amounts are available for current

16 withdrawals from the Trust Fund, the Manag17 ing Trustee shall certify such determination to

18 the Executive Director and, upon receipt of

19 such certification, the Executive Director shall

20 transfer such amount from the Social Security

21 Investment Fund to the Trust Fund.

22 ‘‘(3) AUTHORIZATION OF APPROPRIATIONS FOR

23 ADMINISTRATIVE EXPENSES UPON TERMINATION OF

24 TRANSFERS.—There is authorized to be appro25 priated, for the fiscal year referred to in paragraph
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1 (2) and subsequent fiscal years, from amounts in the

2 general fund of the Treasury which are not other3 wise appropriated, such sums as are necessary to

4 pay the administrative expenses of the Social Secu5 rity Investment Board and the Executive Director

6 of the Board.

7 ‘‘INVESTMENT OF SOCIAL SECURITY INVESTMENT FUND

8 IN COMMON STOCK

9 ‘‘SEC. 252. (a) IN GENERAL.—The Social Security

10 Investment Board shall establish for the Social Security

11 Investment Fund a Common Stock Index Fund under

12 which sums shall be invested as provided in subsection (b).

13 Any interest or dividends earned on such investments, and

14 the proceeds from any liquidation of such investments, in15 cluding capital gain derived from such liquidation, shall

16 be credited to and form a part of the Social Security In17 vestment Fund.

18 ‘‘(b) COMMON STOCK INDEX FUND.—

19 ‘‘(1) IN GENERAL.—The Common Stock Index

20 Fund shall consist of amounts invested in common

21 stock which is selected by qualified professional asset

22 managers as provided in this subsection.

23 ‘‘(2) SELECTION OF INDEX AND PORTFOLIO

24 DESIGN.—

25 ‘‘(A) SELECTION OF INDEX.—The Social

26 Security Investment Board shall select for pur-
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1 poses of this subsection one or more indices

2 each of which is comprised of common stock the

3 aggregate market value of which is a reasonably

4 complete representation of all publicly held

5 companies whose shares are traded on the

6 United States equity markets.

7 ‘‘(B) PORTFOLIO DESIGN.—Amounts held

8 in the Common Stock Index Fund shall be in9 vested in portfolios designed to replicate the

10 performance of the indices selected under sub11 paragraph (A). Each portfolio shall consist sole12 ly of stock purchased in a registered public of13 fering or in a secondary market transaction and

14 shall be designed such that, to the extent prac15 ticable and consistent with the effective man16 agement of such Fund, the percentage of the

17 amount of such Fund in each portfolio that is

18 invested in each stock is the same as the per19 centage determined by dividing the aggregate

20 market value of all shares of that stock by the

21 aggregate market value of all shares of all

22 stocks included in the corresponding index. The

23 shares of any company shall not be included or

24 excluded from investments under this sub-
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1 section because of political, social, or religious

2 considerations.

3 ‘‘(3) NO VOTING RIGHTS IN SECURITIES.—The

4 Social Security Investment Board and the Executive

5 Director may not—

6 ‘‘(A) exercise voting rights associated with

7 the ownership of securities by the Social Secu8 rity Investment Fund, or

9 ‘‘(B) direct the manner in which any vot10 ing rights are exercised on behalf of the Social

11 Security Investment Fund by any qualified pro12 fessional asset manager pursuant to this sec13 tion.

14 ‘‘(c) QUALIFIED PROFESSIONAL ASSET MAN15 AGERS.—

16 ‘‘(1) SELECTION.—The services of qualified

17 professional asset managers shall be procured by the

18 Executive Director for purposes of this section in a

19 competitive bidding process which shall be estab20 lished in regulations which shall be prescribed by the

21 Social Security Investment Board.

22 ‘‘(2) DEFINITION.—For purposes of this sec23 tion, the term ‘qualified professional asset manager’

24 means—
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1 ‘‘(A) a bank, as defined in section

2 202(a)(2) of the Investment Advisers Act of

3 1940 (15 U.S.C. 80b–2(a)(2)) which—

4 ‘‘(i) has the power to manage, ac5 quire, or dispose of assets of a plan;

6 ‘‘(ii) has, as of the last day of its lat7 est fiscal year ending before the date of a

8 determination for the purpose of this sub9 paragraph, equity capital in excess of

10 $10,000,000; and

11 ‘‘(iii) has, on the last day of its latest

12 fiscal year ending before the date of a de13 termination for the purpose of this sub14 paragraph, total client assets under its dis15 cretionary management and control for in16 vestment in excess of $100,000,000;

17 ‘‘(B) a savings association, the accounts of

18 which are insured by the Federal Deposit In19 surance Corporation, which—

20 ‘‘(i) has applied for and been granted

21 trust powers to manage, acquire, or dis22 pose of assets of a plan by a State or Gov23 ernment authority having supervision over

24 savings associations;
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1 ‘‘(ii) has, as of the last day of its lat2 est fiscal year ending before the date of a

3 determination for the purpose of this sub4 paragraph, equity capital or net worth in

5 excess of $10,000,000; and

6 ‘‘(iii) has, on the last day of its latest

7 fiscal year ending before the date of a de8 termination for the purpose of this sub9 paragraph, total client assets under its dis10 cretionary management and control for in11 vestment in excess of $100,000,000;

12 ‘‘(C) an insurance company which—

13 ‘‘(i) is qualified under the laws of

14 more than one State to manage, acquire,

15 or dispose of any assets of a plan;

16 ‘‘(ii) has, as of the last day of its lat17 est fiscal year ending before the date of a

18 determination for the purpose of this sub19 paragraph, net worth in excess of

20 $10,000,000;

21 ‘‘(iii) is subject to supervision and ex22 amination by a State authority having su23 pervision over insurance companies; and

24 ‘‘(iv) has, on the last day of its latest

25 fiscal year ending before the date of a de-
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1 termination for the purpose of this sub2 paragraph, total client assets under its dis3 cretionary management and control for in4 vestment in excess of $100,000,000; or

5 ‘‘(D) an investment adviser registered

6 under section 203 of the Investment Advisers

7 Act of 1940 (15 U.S.C. 80b–3) if the invest8 ment adviser has, on the last day of its latest

9 fiscal year ending before the date of a deter10 mination for the purpose of this subparagraph,

11 total client assets under its discretionary man12 agement and control for investment in excess of

13 $100,000,000, and—

14 ‘‘(i) the investment adviser has, on

15 such day, shareholder’s or partner’s equity

16 in excess of $10,000,000; or

17 ‘‘(ii) payment of all of the investment

18 adviser’s liabilities, including any liabilities

19 which may arise by reason of a breach or

20 violation of a duty described in section

21 254, is unconditionally guaranteed by—

22 ‘‘(I) a person who directly or in23 directly, through one or more inter24 mediaries, controls, is controlled by,

25 or is under common control with the
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1 investment adviser and who has, on

2 the last day of the person’s latest fis3 cal year ending before the date of a

4 determination for the purpose of this

5 subparagraph, shareholder’s or part6 ner’s equity in an amount which,

7 when added to the amount of the

8 shareholder’s or partner’s equity of

9 the investment adviser on such day,

10 exceeds $10,000,000;

11 ‘‘(II) a qualified professional

12 asset manager described in paragraph

13 (1), (2), or (3); or

14 ‘‘(III) a broker or dealer reg15 istered under section 15 of the Securi16 ties Exchange Act of 1934 (15 U.S.C.

17 78o) that has, on the last day of the

18 broker’s or dealer’s latest fiscal year

19 ending before the date of a determina20 tion for the purpose of this subpara21 graph, net worth in excess of

22 $10,000,000.

23 For purposes of subparagraph (D), the term ‘share24 holder’s or partner’s equity’, when used with respect

25 to an investment adviser, or a person who is affili-
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1 ated with the investment adviser in a manner de2 scribed in clause (ii)(I) of subparagraph (D), means

3 the equity shown in the most recent balance sheet

4 prepared for such investment adviser or affiliated

5 person, in accordance with generally accepted ac6 counting principles, within 2 years before the date

7 on which the investment adviser’s status as a quali8 fied professional asset manager is determined for the

9 purposes of this section.

10 ‘‘ENGAGEMENT OF QUALIFIED PUBLIC ACCOUNTANT

11 ‘‘SEC. 253. (a) IN GENERAL.—The Social Security

12 Investment Board shall annually engage, on behalf of the

13 Social Security Investment Fund, an independent quali14 fied public accountant, who shall conduct an examination

15 of all accounts and other books and records maintained

16 in the administration of this part (including all applicable

17 financial statements) as the public accountant considers

18 necessary to enable the public accountant to make the de19 termination required by subsection (b). The examination

20 shall be conducted in accordance with generally accepted

21 auditing standards and shall involve such tests of the ac22 counts, books, and records as the public accountant con23 siders necessary.

24 ‘‘(b) EXAMINATION AND REPORT.—The public ac25 countant conducting an examination under subsection (a)

26 shall determine whether the accounts, books, and records
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1 referred to in such subsection have been maintained in

2 conformity with generally accepted accounting principles

3 applied on a basis consistent with the manner in which

4 such principles were applied during the examination con5 ducted under such subsection during the preceding year.

6 The public accountant shall transmit to the Board a re7 port on his examination, including his determination

8 under this subsection.

9 ‘‘(c) DEFINITION.—For the purposes of this section,

10 the term ‘qualified public accountant’ shall have the same

11 meaning as is provided in section 103(a)(3)(D) of the Em12 ployee Retirement Income Security Act of 1974 (29

13 U.S.C. 1023(a)(3)(D)).

14 ‘‘FIDUCIARY RESPONSIBILITIES

15 ‘‘SEC. 254. (a) IN GENERAL.—Under regulations of

16 the Secretary of Labor, the provisions of section 8477 of

17 title 5, United States Code (relating to fiduciary respon18 sibilities; liability and penalties) and section 8478 of such

19 title (relating to bonding) shall apply in connection with

20 the amounts maintained in the Common Stock Index

21 Fund of the Social Security Investment Fund in the same

22 manner and to the same extent as such provisions apply

23 in connection with the Thrift Savings Fund.

24 ‘‘(b) INVESTIGATIVE AUTHORITY.—Any authority

25 available to the Secretary of Labor under section 504 of

26 the Employee Retirement Income Security Act of 1974 is
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1 hereby made available to the Secretary of Labor, and any

2 officer designated by the Secretary of Labor, to determine

3 whether any person has violated, or is about to violate,

4 any provision applicable under subsection (a).

5 ‘‘(c) EXCULPATORY PROVISIONS; INSURANCE.—

6 ‘‘(1) IN GENERAL.—Any provision in an agree7 ment or instrument which purports to relieve a fidu8 ciary from responsibility or liability for any respon9 sibility, obligation, or duty under this part shall be

10 void.

11 ‘‘(2) INSURANCE.—Amounts in the Social Secu12 rity Investment Fund available for administrative

13 expenses shall be available and may be used at the

14 discretion of the Social Security Investment Board

15 to purchase insurance to cover potential liability of

16 persons who serve in a fiduciary capacity with re17 spect to amounts maintained in the Common Stock

18 Index Fund of the Social Security Investment Fund,

19 without regard to whether a policy of insurance per20 mits recourse by the insurer against the fiduciary in

21 the case of a breach of a fiduciary obligation.

22 ‘‘DIVERSIFICATION THROUGH INVESTMENT MANAGEMENT

23 ‘‘SEC. 255. The Social Security Investment Board

24 shall prescribe policies governing investment of the Social

25 Security Investment Fund which shall ensure—
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1 ‘‘(1) that the management of investments on

2 behalf of the Fund undertaken in the course of car3 rying out the investment responsibilities of the Exec4 utive Director of the Fund is exercised by qualified

5 professional asset managers pursuant to section 252

6 in such manner as to ensure that not fewer than 3

7 such managers are each engaged in the management

8 of a substantial portion of such investments,

9 ‘‘(2) that investments managed on behalf of the

10 Fund by any such qualified professional asset man11 ager do not represent more than 1 percent of the

12 total equity interest in any person, and

13 ‘‘(3) that each investment manager will vote on

14 any matter the shares of any issuer held by the

15 Fund under the management of such investment

16 manager in conformity with the voting on such mat17 ter of all other shares of such issuer.’’.

18 (b) CONFORMING AMENDMENT.—Section 201(d) of

19 such Act (42 U.S.C. 401(d)) is amended in the first sen20 tence by striking ‘‘withdrawals’’ and inserting ‘‘withdraw21 als, or, in the case of the Federal Old-Age and Survivors

22 Insurance Trust Fund, to meet the transfer requirements

23 under section 251(b)’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply with respect to fiscal years begin3 ning on or after October 1, 2000.

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