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106TH CONGRESS

1ST SESSION H. R. 633

To provide for investment in broad-based private equities indices of amounts

held in trust for payment of benefits from the Federal Old-Age and

Survivors Insurance Trust Fund, the Federal Disability Insurance Trust

Fund, the Federal Hospital Insurance Trust Fund, the Department

of Defense Military Retirement Fund, the Civil Service Retirement and

Disability Fund, and the Railroad Retirement Account, and for other

purposes.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 9, 1999

Mr. BARTLETT of Maryland introduced the following bill; which was referred

to the Committee on Ways and Means, and in addition to the Committees

on Armed Services, Government Reform, the Budget, Transportation and

Infrastructure, and Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions

as fall within the jurisdiction of the committee concerned

A BILL

To provide for investment in broad-based private equities

indices of amounts held in trust for payment of benefits

from the Federal Old-Age and Survivors Insurance Trust

Fund, the Federal Disability Insurance Trust Fund, the

Federal Hospital Insurance Trust Fund, the Department

of Defense Military Retirement Fund, the Civil Service

Retirement and Disability Fund, and the Railroad Retirement Account, and for other purposes.
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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 ‘‘Retirement Trust

5 Fund Integrity Act of 1999’’.

6 SEC. 2. INVESTMENT OF SURPLUS IN RETIREMENT TRUST

7 FUNDS

8 Notwithstanding any other provision of law, it shall

9 be the duty of the managing trustee of each participating

10 trust fund to transfer, from time to time, to the Retire11 ment Trust Fund Investment Board such portion of each

12 of the trust funds as is not, in his judgment, required to

13 meet current withdrawals.

14 SEC. 3. RETIREMENT TRUST FUNDS INVESTMENT PRO15 GRAM.

16 (a) IN GENERAL.—There is created in the Treasury

17 of the United States a trust fund to be known as the ‘‘Re18 tirement Investment Fund’’. The Retirement Investment

19 Fund shall consist of such amounts as may be appro20 priated to, or deposited in, such fund as provided in this

21 Act. Such Fund shall be available—

22 (1) for investment in accordance with this Act,

23 (2) to be transferred to the managing trustees

24 of the participating trust funds, and
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1 (3) to pay the operational and administrative

2 expenses of the Board.

3 (b) TRANSFERS FROM THE RETIREMENT INVEST4 MENT FUND.—Upon receipt by the Executive Director of

5 a written request from the managing trustee of any par6 ticipating trust fund that a transfer of a designated

7 amount of funds from the Retirement Investment Fund

8 to that fund is necessary to meet current withdrawals, the

9 Executive Director shall transfer such amount to the such

10 managing trustee, who shall deposit that amount in such

11 trust fund. In no event may the amount so transferred

12 to a participating trust fund exceed the current market

13 value of shares in the Common Stock Index Investment

14 Fund purchased with funds transferred to the Fund by

15 the managing trustee of that participating trust fund.

16 SEC. 4. INVESTMENT OF TRUST FUNDS IN COMMON STOCK.

17 (a) IN GENERAL.—(1) The Retirement Trust Fund

18 Investment Board shall establish for the Retirement In19 vestment Fund a Common Stock Index Investment Fund

20 under which sums shall be invested as provided in sub21 section (b).

22 (2) It shall be the duty of the Executive Director to

23 enter into such investments and to liquidate such invest24 ments in accordance with the investment policies which

25 shall be prescribed by the Board. Any interest earned on
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1 such investments, and the proceeds from any liquidation

2 of such investments, including any income derived from

3 such liquidation, shall be credited to and form a part of

4 the Retirement Investment Fund.

5 (b) COMMON STOCK INVESTMENT FUND.—

6 (1) IN GENERAL.—The Common Stock Index

7 Investment Fund shall consist of amounts held in

8 the Retirement Investment Fund invested as pro9 vided in this subsection.

10 (2) SELECTION OF INDEX AND PORTFOLIO DE11 SIGN.—

12 (A) SELECTION OF INDEX.—The Board

13 shall select for purposes of this subsection an

14 index which is a commonly recognized index

15 comprised of common stock the aggregate mar16 ket value of which is a reasonably complete rep17 resentation of the United States equity mar18 kets. Common stock of companies may not be

19 included or excluded because of political, social,

20 or religious considerations.

21 (B) PORTFOLIO DESIGN.—Amounts held

22 in the Common Stock Index Investment Fund

23 shall be invested in a portfolio designed to rep24 licate the performance of the index selected

25 under subparagraph (A). The portfolio shall be
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1 designed such that, to the extent practicable,

2 the percentage of the Common Stock Index In3 vestment Fund that is invested in each stock is

4 the same as the percentage determined by di5 viding the aggregate market value of all shares

6 of that stock by the aggregate market value of

7 all shares of all stocks included in such index.

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

9 Board and the Executive Director may not exercise

10 voting rights associated with the ownership of secu11 rities by Retirement Investment Fund.

12 SEC. 5. ENGAGEMENT OF QUALIFIED PUBLIC ACCOUNT13 ANT.

14 (a) IN GENERAL.—The Board shall annually engage

15 an independent qualified public accountant who shall con16 duct an examination of all accounts and other books and

17 records maintained in the administration of this section

18 as the public accountant considers necessary to enable the

19 public accountant to make the determination required by

20 subsection (b). The examination shall be conducted in ac21 cordance with generally accepted auditing standards and

22 shall involve such tests of the accounts, books, and records

23 as the public accountant considers necessary.

24 (b) EXAMINATION AND REPORT.—The public ac25 countant conducting an examination under subsection (a)
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1 shall determine whether the accounts, books, and records

2 referred to in such subsection have been maintained in

3 conformity with generally accepted accounting principles

4 applied on a basis consistent with the manner in which

5 such principles were applied during the examination con6 ducted under such paragraph during the preceding year.

7 The public accountant shall transmit to the Board and

8 the Comptroller General of the United States a report on

9 his examination, including his determination under this

10 subsection.

11 (c) RELIANCE ON ACTUARY’S CERTIFICATIONS.—In

12 making a determination under subsection (b), a public ac13 countant may rely on the correctness of any actuarial mat14 ter certified by an actuary enrolled under subtitle C of

15 title III of the Employee Retirement Income Security Act

16 of 1974 (29 U.S.C. 1241 et seq.), if the public accountant

17 states his reliance in the report transmitted to the Board

18 under such paragraph.

19 (d) DEFINITION.—As used in this section, the term

20 ‘qualified public accountant’ shall have the same meaning

21 as is provided in section 103(a)(3)(D) of the Employee

22 Retirement Income Security Act of 1974 (29 U.S.C.

23 1023(a)(3)(D)).
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1 SEC. 6. FIDUCIARY RESPONSIBILITIES.

2 (a) IN GENERAL.—Under regulations of the Sec3 retary of Labor, sections 8477 and 8478 of title 5, United

4 States Code, shall apply in connection with the amounts

5 maintained in the Common Stock Investment Fund of the

6 Retirement Investment Fund in the same manner and to

7 the same extent as such provisions apply in connection

8 with the Thrift Savings Fund.

9 (b) INVESTIGATIVE AUTHORITY.—Any authority

10 available to the Secretary of Labor under section 504 of

11 the Employee Retirement Income Security Act of 1974 is

12 hereby made available to the Secretary of Labor, and any

13 officer designated by the Secretary of Labor, to determine

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

15 any provision applicable under subsection (a).

16 (c) EXCULPATORY PROVISIONS; INSURANCE.—

17 (1) IN GENERAL.—Any provision in an agree18 ment or instrument which purports to relieve a fidu19 ciary from responsibility or liability for any respon20 sibility, obligation, or duty under this part shall be

21 void.

22 (2) INSURANCE.—Amounts in the Retirement

23 Investment Fund available for administrative ex24 penses shall be available and may be used at the dis25 cretion of the Board to purchase insurance to cover

26 potential liability of persons who serve in a fiduciary
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1 capacity with respect to amounts maintained in the

2 Common Stock Investment Fund of Retirement In3 vestment Fund, without regard to whether a policy

4 of insurance permits recourse by the insurer against

5 the fiduciary in the case of a breach of a fiduciary

6 obligation.

7 SEC. 7. ESTABLISHMENT OF THE RETIREMENT TRUST

8 FUND INVESTMENT BOARD AND EXECUTIVE

9 DIRECTOR.

10 (a) RETIREMENT TRUST FUND INVESTMENT

11 BOARD.—(1) There is established in the executive branch

12 of the Government an independent agency to be known

13 as the Retirement Trust Fund Investment Board.

14 (2) The Board shall be composed of—

15 (A) 3 members appointed by the President, of

16 whom 1 shall be designated by the President as

17 Chairman; and

18 (B) 2 members appointed by the President, of

19 whom—

20 (i) 1 shall be appointed by the President

21 after taking into consideration the recommenda22 tion made by the Speaker of the House of Rep23 resentatives in consultation with the minority

24 leader of the House of Representatives; and
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1 (ii) 1 shall be appointed by the President

2 after taking into consideration the recommenda3 tion made by the majority leader of the Senate

4 in consultation with the minority leader of the

5 Senate.

6 (3) Appointments under paragraph (2) shall be made

7 by and with the advice and consent of the Senate.

8 (4) Members of the Board shall have substantial ex9 perience, training, and expertise in the management of fi10 nancial investments and the exercise of fiduciary duties.

11 (5)(A) A member of the Board shall be appointed for

12 a term of 5 years, except that of the members first

13 appointed—

14 (i) the Chairman shall be appointed for a term

15 of 5 years;

16 (ii) the members appointed under paragraph

17 (2)(B) shall be appointed for a term of 4 years; and

18 (iii) the remaining members shall be appointed

19 for a term of 3 years.

20 (B)(i) A vacancy on the Board shall be filled in the

21 manner in which the original appointment was made and

22 shall be subject to any conditions which applied with re23 spect to the original appointment.

24 (ii) An individual chosen to fill a vacancy shall be ap25 pointed for the unexpired term of the member replaced.
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1 (iii) The term of any member shall not expire before

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

3 (6) The Board shall—

4 (A) establish policies for the investment and

5 management of the Retirement Investment Fund;

6 (B) review the performance of investments

7 made for such fund; and

8 (C) review and approve the budget of the

9 Board.

10 (7)(A) The Board may—

11 (i) adopt, alter, and use a seal;

12 (ii) except as provided in subparagraph (B), es13 tablish policies with which the Executive Director is

14 required to comply; and

15 (iii) take such other actions as may be nec16 essary to carry out the functions of the Board.

17 (B) The policies of the Board may not require the

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

19 sums in the Trust Funds in a specific asset or to dispose

20 of or cause to be disposed of any specific asset of the Trust

21 Funds.

22 (8)(A) The Board shall meet—

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

24 (ii) at additional times at the call of the Chair25 man.
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1 (B)(i) The Board shall perform the functions and ex2 ercise the powers of the Board on a majority vote of a

3 quorum of the Board.

4 (ii) A vacancy on the Board shall not impair the au5 thority of a quorum of the Board to perform the functions

6 and exercise the powers of the Board.

7 (C) Three members of the Board shall constitute a

8 quorum for the transaction of business.

9 (D)(i) Each member of the Board who is not an offi10 cer or employee of the Federal Government shall be com11 pensated at the daily rate of basic pay for level IV of the

12 Executive Schedule for each day during which such mem13 ber is engaged in performing a function of the Board.

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

15 diem, and other necessary expenses under subchapter I of

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

17 away from such member’s home or regular place of busi18 ness in the performance of the duties of the Board.

19 (iii) Payments authorized under this paragraph shall

20 be paid from the Retirement Investment Fund.

21 (E) The accrued annual leave of any officer or em22 ployee of the Federal Government who is a member of the

23 Board shall not be charged for any time used in perform24 ing services for the Board.
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1 (10) The members of the Board shall discharge their

2 responsibilities solely in the interest of the Retirement In3 vestment Fund.

4 (11) The Board shall prepare and submit to the

5 President, and, at the same time, to the appropriate com6 mittees of Congress, an annual budget of the expenses and

7 other items relating to the Board which shall be included

8 as a separate item in the budget required to be transmit9 ted to the Congress under section 1105 of title 31, United

10 States Code.

11 (12) The Board may submit to the President, and,

12 at the same time, shall submit to each House of Congress,

13 any legislative recommendations of the Board relating to

14 any of its functions under this Act.

15 (b) EXECUTIVE DIRECTOR.—(1) The Board shall ap16 point, without regard to the provisions of law governing

17 appointments in the competitive service, an Executive Di18 rector by action agreed to by a majority of the members

19 of the Board.

20 (2) The Executive Director shall have substantial ex21 perience, training, and expertise in the management of fi22 nancial investments and the exercise of fiduciary duties.

23 (2) The Executive Director shall—

24 (A) carry out the policies established by the

25 Board;
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1 (B) invest and manage the amounts in the Re2 tirement Investment Fund in accordance with the

3 investment policies and other policies established by

4 the Board;

5 (C) prescribe such regulations (other than regu6 lations relating to fiduciary responsibilities) as may

7 be necessary for the administration of this Act; and

8 (D) meet from time to time with the board of

9 trustees of any participating trust funds upon re10 quest of the board of trustees of such fund regard11 ing matters relating to that fund.

12 (3) 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 necessary

18 to carry out this Act;

19 (C) in accordance with the policies of the

20 Board, procure the services of experts and consult21 ants under section 3109 of title 5, United States

22 Code;

23 (D) secure directly from any agency or instru24 mentality of the Federal Government any informa-
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1 tion necessary to carry out this Act and policies of

2 the Board;

3 (E) make such payments out of sums in the Re4 tirement Investment Fund as the Executive Director

5 determines are necessary to carry out this Act and

6 the policies of the Board;

7 (F) pay the compensation, per diem, and travel

8 expenses of individuals appointed under subpara9 graphs (B), (C), and (G) of this paragraph from

10 amounts otherwise available in the Retirement In11 vestment Fund;

12 (G) accept and use the services of individuals

13 employed intermittently in the Government service

14 and reimburse such individuals for travel expenses,

15 as authorized by section 5703 of title 5, United

16 States Code, including per diem as authorized by

17 section 5702 of such title; and

18 (H) take such other actions as are appropriate

19 to carry out the functions of the Executive Director

20 under this Act.

21 (4) The Executive Director shall discharge his or her

22 responsibilities solely in the interest of the Retirement In23 vestment Fund.
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1 SEC. 8. REPORTING REQUIREMENTS.

2 The Executive Director shall transmit a report on the

3 state of the Retirement Investment Fund—

4 (1) to each House of Congress within 20 days

5 after the close of each calendar quarter; and

6 (2) to the Committee on Ways and Means of

7 the House of Representatives and the Committee on

8 Finance of the Senate not later than January 20

9 and July 20 of each calendar year.

10 SEC. 9. DEFINITIONS.

11 As used in this Act:

12 (1) The term ‘‘Board’’ refers to the Retirement

13 Trust Fund Investment Board.

14 (2) The term ‘‘Executive Director’’ refers to the

15 Executive Director of the Retirement Trust Fund

16 Investment Board.

17 (3) The term ‘‘managing trustee’’ refers to the

18 Secretary of Defense in the case of the Department

19 of Defense Military Retirement Fund and the Sec20 retary of the Treasury in the case of all other par21 ticipating trust funds.

22 (4) The term ‘‘participating trust fund’’ refers

23 to each of the following trust funds, as applicable:

24 (A) The Civil Service Retirement and Dis25 ability Fund.
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1 (B) The Department of Defense Military

2 Retirement Fund.

3 (C) The Federal Disability Insurance

4 Trust Fund.

5 (D) The Federal Hospital Insurance Trust

6 Fund.

7 (E) The Federal Old-Age and Survivors

8 Insurance Trust Fund.

9 (F) The Federal Supplementary Medical

10 Insurance Trust Fund.

11 (G) The Railroad Retirement Account.

12 SEC. 10. CONFORMING AMENDMENTS.

13 (a) CIVIL SERVICE RETIREMENT AND DISABILITY

14 FUND.—Section 8348 of title 5 of the United States Code

15 is amended by adding at the end the following new sub16 section:

17 ‘‘(n) For additional provisions relating to the treat18 ment of funds not required to meet current withdrawals,

19 see section 2 of the Retirement Trust Fund Integrity Act

20 of 1999.’’.

21 (b) DEPARTMENT OF DEFENSE MILITARY RETIRE22 MENT FUND.—Section 1467 of title 10 of the United

23 States Code is amended by inserting ‘‘(a)’’ before ‘‘The

24 Secretary’’ and by adding at the end the following new

25 subsection:
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1 ‘‘(b) For additional provisions relating to the treat2 ment of funds not required to meet current withdrawals,

3 see section 2 of the Retirement Trust Fund Integrity Act

4 of 1999.’’.

5 (c) FEDERAL OLD-AGE AND SURVIVORS INSURANCE

6 TRUST FUND AND FEDERAL DISABILITY INSURANCE

7 TRUST FUND.—Section 201(d) of the Social Security Act

8 is amended by adding at the end the following new sen9 tence: ‘‘For additional provisions relating to the treatment

10 of funds not required to meet current withdrawals, see sec11 tion 2 of the Retirement Trust Fund Integrity Act of

12 1999.’’.

13 (d) FEDERAL HOSPITAL INSURANCE TRUST FUND

14 AND FEDERAL SUPPLEMENTARY MEDICAL INSURANCE

15 TRUST FUND.—Sections 1817(c) and 1842(c) of the So16 cial Security Act (42 U.S.C. 1395i(c), 1395t(c)) are each

17 amended—

18 (1) by striking ‘‘(1)’’ and ‘‘(2)’’ and inserting

19 ‘‘(A)’’ and ‘‘(B)’’, respectively;

20 (2) by inserting ‘‘(1)’’ after ‘‘(c)’’; and

21 (3) by adding at the end the following:

22 ‘‘(2) For additional provisions relating to the treat23 ment of funds not required to meet current withdrawals,

24 see section 2 of the Retirement Trust Fund Integrity Act

25 of 1999.’’.
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1 (e) RAILROAD RETIREMENT ACCOUNT.—Section

2 15(e) of the Railroad Retirement Act (45 U.S.C. 231n(e))

3 is amended by adding at the end the following new sen4 tence: ‘‘For additional provisions relating to the treatment

5 of funds not required to meet current withdrawals, see sec6 tion 2 of the Retirement Trust Fund Integrity Act of

7 1999.’’.

8 SEC. 11. OFF-BUDGET STATUS OF RETIREMENT INVEST9 MENT FUND.

10 Notwithstanding any other provision of law, the re11 ceipts and disbursements of the Retirement Investment

12 Fund shall not be counted as new budget authority, out13 lays, receipts, or deficit or surplus for purposes of—

14 (1) the budget of the United States Govern15 ment as submitted by the President,

16 (2) the congressional budget, or

17 (3) the Balanced Budget and Emergency Defi18 cit Control Act of 1985.

19 SEC. 12. CBO AND OMB REPORTING REQUIREMENTS.

20 (a) CBO.—Section 202 of the Congressional Budget

21 Act of 1974 is amended by adding at the end the following

22 new subsection:

23 ‘‘(h) REPORTING REQUIREMENTS.—(1) Except as

24 provided by paragraph (2), the Director shall not include
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1 the assets of the Retirement Investment Fund in budg2 etary aggregates for the Government.

3 ‘‘(2) Whenever the Director prepares any report of

4 the financial status of the Retirement Investment Fund,

5 if he includes the assets of that fund in budgetary aggre6 gates for the Government, then that report shall also

7 clearly set forth the budgetary aggregates for the Govern8 ment excluding the assets of that fund.’’.

9 (b) OMB.—Section 1105 of title 31, United States

10 Code, is amended by adding at the end the following new

11 subsection:

12 ‘‘(h)(1) Except as provided by paragraph (2), the Di13 rector of the Office of Management and Budget shall not

14 include the assets of the Retirement Investment Fund in

15 budgetary aggregates for the Government.

16 ‘‘(2) Whenever the Director of the Office of Manage17 ment and Budget prepares any report of the financial sta18 tus of the Retirement Investment Fund, if he includes the

19 assets of that fund in budgetary aggregates for the Gov20 ernment, then that report shall also clearly set forth the

21 budgetary aggregates for the Government excluding the

22 assets of that fund.’’.
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1 SEC. 13. EFFECTIVE DATE.

2 This Act and the amendments made by it shall apply

3 with respect to fiscal years beginning on or after October

4 1, 2000.

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