I

106TH CONGRESS

1ST SESSION H. R. 871

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

FEBRUARY 25, 1999

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

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 BALANCE WITH FEDERAL

2 OLD-AGE AND SURVIVORS INSURANCE TRUST FUND.—

3 ‘‘(1) IN GENERAL.—The Managing Trustee of

4 the Federal Old-Age and Survivors Insurance Trust

5 Fund shall make determinations during each fiscal

6 year of amounts necessary to be transferred between

7 the Social Security Investment Fund and the Fed8 eral Old-Age and Survivors Insurance Trust Fund

9 so as to ensure that, to the maximum extent prac10 ticable, the amount transferred is equal to the pre11 scribed amount for such fiscal year.

12 ‘‘(2) MAINTENANCE OF BENEFIT CUSHION.—In

13 determining the extent to which any amount is to be

14 transferred from the Federal Old-Age and Survivors

15 Insurance Trust Fund pursuant to paragraph (1)

16 during any fiscal year, the Managing Trustee of the

17 Trust Fund shall first, not later than the beginning

18 of such fiscal year, determine the amount which is

19 necessary for the fiscal year to meet current with20 drawals from the Trust Fund under part A. Solely

21 for purposes of making determinations under para22 graph (1), the balance in the Trust Fund shall be

23 deemed during such fiscal year not to include such

24 amount. Any transfer pursuant to this subsection

25 shall not include such amount, and such amount
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1 shall be invested or applied to current withdrawals

2 as described in section 201(d).

3 ‘‘(3) PRESCRIBED AMOUNT.—For purposes of

4 paragraph (1), the ‘prescribed amount’ for a fiscal

5 year shall be:

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

2001 ............................................... $81.5 billion.

2002 ............................................... $67.5 billion.

2003 ............................................... $88.5 billion.

2004 ............................................... $87.4 billion.

2005 ............................................... $106.0 billion.

2006 ............................................... $117.7 billion.

2007 ............................................... $148.9 billion.

2008 ............................................... $175.1 billion.

2009 ............................................... $203.4 billion.

2010 ............................................... $232.6 billion.

2011 ............................................... $256.5 billion.

2012 ............................................... $280.1 billion.

2013 ............................................... $299.9 billion.

2014 ............................................... $316.5 billion.

2015 or thereafter ......................... $324.5 billion.

6 ‘‘(4) TRANSFERS BETWEEN FUNDS TO MAIN7 TAIN PRESCRIBED AMOUNT.—

8 ‘‘(A) TRANSFERS TO THE SOCIAL SECU9 RITY INVESTMENT FUND.—Upon any deter10 mination under paragraph (1) made by the

11 Managing Trustee that a transfer of any

12 amount from the Federal Old-Age and Sur13 vivors Insurance Trust Fund to the Social Se14 curity Investment Fund is necessary, the Man15 aging Trustee shall transfer such amount from

16 the Trust Fund to the Social Security Invest17 ment Fund.
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1 ‘‘(B) TRANSFERS FROM THE SOCIAL SECU2 RITY INVESTMENT FUND.—Upon any deter3 mination under paragraph (1) made by the

4 Managing Trustee that a transfer of any

5 amount from the Social Security Investment

6 Fund to the Federal Old-Age and Survivors In7 surance Trust Fund is necessary, the Managing

8 Trustee shall certify such determination to the

9 Executive Director and, upon receipt of such

10 certification, the Executive Director shall trans11 fer such amount from the Social Security In12 vestment Fund to the Trust Fund.

13 ‘‘(c) TERMINATION OF TRANSFERS UPON DEPLE14 TION OF FEDERAL OLD-AGE AND SURVIVORS INSURANCE

15 TRUST FUND.—

16 ‘‘(1) ISSUANCE OF CERTIFICATION UPON DE17 TERMINATION OF IMPENDING DEPLETION OF TRUST

18 FUND.—Not later than July 1 of each fiscal year,

19 the Managing Trustee of the Federal Old-Age and

20 Survivors Insurance Trust Fund shall determine,

21 using reasonable assumptions, whether, by reason of

22 transfers from the Trust Fund to the Social Secu23 rity Investment Fund necessary to provide for pay24 ment form the Social Security Investment Fund dur25 ing the following fiscal year of administrative ex-
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1 penses of the Social Security Investment Board and

2 the Executive Director of the Board, the balance in

3 the Trust Fund would, but for the provisions of this

4 subsection, be reduced under this section during

5 such following fiscal year to the amount to be deter6 mined for such following fiscal year under subsection

7 (b)(2). Upon so determining that such balance would

8 be reduced to such an amount during such following

9 fiscal year, the Managing Trustee shall certify such

10 determination to the Social Security Investment

11 Board, the Comptroller General of the United

12 States, and each House of the Congress.

13 ‘‘(2) TERMINATION OF TRANSFERS UPON CER14 TIFICATION.—In any case in which the Managing

15 Trustee issues a certification under paragraph (1),

16 effective October 1 of the following fiscal year, sub17 section (b) shall cease to be effective.

18 ‘‘(3) AUTHORIZATION OF APPROPRIATIONS FOR

19 ADMINISTRATIVE EXPENSES UPON TERMINATION OF

20 TRANSFERS.—There is authorized to be appro21 priated, for the fiscal year referred to in paragraph

22 (2) and subsequent fiscal years, from amounts in the

23 general fund of the Treasury which are not other24 wise appropriated, such sums as are necessary to

25 pay the administrative expenses of the Social Secu-
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1 rity Investment Board and the Executive Director of

2 the Board.

3 ‘‘INVESTMENT OF SOCIAL SECURITY INVESTMENT FUND

4 IN COMMON STOCK

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

6 Investment Board shall establish for the Social Security

7 Investment Fund a Common Stock Index Fund under

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

9 Any interest or dividends earned on such investments, and

10 the proceeds from any liquidation of such investments, in11 cluding capital gain derived from such liquidation, shall

12 be credited to and form a part of the Social Security In13 vestment Fund.

14 ‘‘(b) COMMON STOCK INDEX FUND.—

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

16 Fund shall consist of amounts invested in common

17 stock which is selected by qualified professional asset

18 managers as provided in this subsection.

19 ‘‘(2) SELECTION OF INDEX AND PORTFOLIO

20 DESIGN.—

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

22 Security Investment Board shall select for pur23 poses of this subsection one or more indices

24 each of which is comprised of common stock the

25 aggregate market value of which is a reasonably

26 complete representation of all publicly held
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1 companies whose shares are traded on the

2 United States equity markets.

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

4 in the Common Stock Index Fund shall be in5 vested in portfolios designed to replicate the

6 performance of the indices selected under sub7 paragraph (A). Each portfolio shall consist sole8 ly of stock purchased in a registered public of9 fering or in a secondary market transaction and

10 shall be designed such that, to the extent prac11 ticable and consistent with the effective man12 agement of such Fund, the percentage of the

13 amount of such Fund in each portfolio that is

14 invested in each stock is the same as the per15 centage determined by dividing the aggregate

16 market value of all shares of that stock by the

17 aggregate market value of all shares of all

18 stocks included in the corresponding index. The

19 shares of any company shall not be included or

20 excluded from investments under this sub21 section because of political, social, or religious

22 considerations.

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

24 Social Security Investment Board and the Executive

25 Director may not—
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1 ‘‘(A) exercise voting rights associated with

2 the ownership of securities by the Social Secu3 rity Investment Fund, or

4 ‘‘(B) direct the manner in which any vot5 ing rights are exercised on behalf of the Social

6 Security Investment Fund by any qualified pro7 fessional asset manager pursuant to this sec8 tion.

9 ‘‘(c) QUALIFIED PROFESSIONAL ASSET MAN10 AGERS.—

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

12 professional asset managers shall be procured by the

13 Executive Director for purposes of this section in a

14 competitive bidding process which shall be estab15 lished in regulations which shall be prescribed by the

16 Social Security Investment Board.

17 ‘‘(2) DEFINITION.—For purposes of this sec18 tion, the term ‘qualified professional asset manager’

19 means—

20 ‘‘(A) a bank, as defined in section

21 202(a)(2) of the Investment Advisers Act of

22 1940 (15 U.S.C. 80b–2(a)(2)) which—

23 ‘‘(i) has the power to manage, ac24 quire, or dispose of assets of a plan;
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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 in excess of

5 $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 ‘‘(B) a savings association, the accounts of

13 which are insured by the Federal Deposit In14 surance Corporation, which—

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

16 trust powers to manage, acquire, or dis17 pose of assets of a plan by a State or Gov18 ernment authority having supervision over

19 savings associations;

20 ‘‘(ii) has, as of the last day of its lat21 est fiscal year ending before the date of a

22 determination for the purpose of this sub23 paragraph, equity capital or net worth in

24 excess of $10,000,000; and
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1 ‘‘(iii) has, on the last day of its latest

2 fiscal year ending before the date of a de3 termination for the purpose of this sub4 paragraph, total client assets under its dis5 cretionary management and control for in6 vestment in excess of $100,000,000;

7 ‘‘(C) an insurance company which—

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

9 more than one State to manage, acquire,

10 or dispose of any assets of a plan;

11 ‘‘(ii) has, as of the last day of its lat12 est fiscal year ending before the date of a

13 determination for the purpose of this sub14 paragraph, net worth in excess of

15 $10,000,000;

16 ‘‘(iii) is subject to supervision and

17 examination by a State authority having

18 supervision over insurance companies; and

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

20 fiscal year ending before the date of a de21 termination for the purpose of this sub22 paragraph, total client assets under its dis23 cretionary management and control for in24 vestment in excess of $100,000,000; or
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1 ‘‘(D) an investment adviser registered

2 under section 203 of the Investment Advisers

3 Act of 1940 (15 U.S.C. 80b–3) if the invest4 ment adviser has, on the last day of its latest

5 fiscal year ending before the date of a deter6 mination for the purpose of this subparagraph,

7 total client assets under its discretionary man8 agement and control for investment in excess of

9 $100,000,000, and—

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

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

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

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

14 adviser’s liabilities, including any liabilities

15 which may arise by reason of a breach or

16 violation of a duty described in section

17 254, is unconditionally guaranteed by—

18 ‘‘(I) a person who directly or in19 directly, through one or more inter20 mediaries, controls, is controlled by,

21 or is under common control with the

22 investment adviser and who has, on

23 the last day of the person’s latest fis24 cal year ending before the date of a

25 determination for the purpose of this
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1 subparagraph, shareholder’s or part2 ner’s equity in an amount which,

3 when added to the amount of the

4 shareholder’s or partner’s equity of

5 the investment adviser on such day,

6 exceeds $10,000,000;

7 ‘‘(II) a qualified professional

8 asset manager described in paragraph

9 (1), (2), or (3); or

10 ‘‘(III) a broker or dealer reg11 istered under section 15 of the Securi12 ties Exchange Act of 1934 (15 U.S.C.

13 78o) that has, on the last day of the

14 broker’s or dealer’s latest fiscal year

15 ending before the date of a determina16 tion for the purpose of this subpara17 graph, ønet worth¿ in excess of

18 $10,000,000.

19 For purposes of subparagraph (D), the term ‘share20 holder’s or partner’s equity’, when used with respect

21 to an investment adviser, or a person who is affili22 ated with the investment adviser in a manner de23 scribed in clause (ii)(I) of subparagraph (D), means

24 the equity shown in the most recent balance sheet

25 prepared for such investment adviser or affiliated
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1 person, in accordance with generally accepted ac2 counting principles, within 2 years before the date

3 on which the investment adviser’s status as a quali4 fied professional asset manager is determined for the

5 purposes of this section.

6 ‘‘ENGAGEMENT OF QUALIFIED PUBLIC ACCOUNTANT

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

8 Investment Board shall annually engage, on behalf of the

9 Social Security Investment Fund, an independent quali10 fied public accountant, who shall conduct an examination

11 of all accounts and other books and records maintained

12 in the administration of this part (including all applicable

13 financial statements) as the public accountant considers

14 necessary to enable the public accountant to make the de15 termination required by subsection (b). The examination

16 shall be conducted in accordance with generally accepted

17 auditing standards and shall involve such tests of the ac18 counts, books, and records as the public accountant con19 siders necessary.

20 ‘‘(b) EXAMINATION AND REPORT.—The public ac21 countant conducting an examination under subsection (a)

22 shall determine whether the accounts, books, and records

23 referred to in such subsection have been maintained in

24 conformity with generally accepted accounting principles

25 applied on a basis consistent with the manner in which

26 such principles were applied during the examination con-
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1 ducted under such subsection during the preceding year.

2 The public accountant shall transmit to the Board a re3 port on his examination, including his determination

4 under this subsection.

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

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

7 meaning as is provided in section 103(a)(3)(D) of the Em8 ployee Retirement Income Security Act of 1974 (29

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

10 ‘‘FIDUCIARY RESPONSIBILITIES

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

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

13 title 5, United States Code (relating to fiduciary respon14 sibilities; liability and penalties) and section 8478 of such

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

16 the amounts maintained in the Common Stock Index

17 Fund of the Social Security Investment Fund in the same

18 manner and to the same extent as such provisions apply

19 in connection with the Thrift Savings Fund.

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

21 available to the Secretary of Labor under section 504 of

22 the Employee Retirement Income Security Act of 1974 is

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

24 officer designated by the Secretary of Labor, to determine

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

26 any provision applicable under subsection (a).
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1 ‘‘(c) EXCULPATORY PROVISIONS; INSURANCE.—

2 ‘‘(1) IN GENERAL.—Any provision in an agree3 ment or instrument which purports to relieve a fidu4 ciary from responsibility or liability for any respon5 sibility, obligation, or duty under this part shall be

6 void.

7 ‘‘(2) INSURANCE.—Amounts in the Social Secu8 rity Investment Fund available for administrative

9 expenses shall be available and may be used at the

10 discretion of the Social Security Investment Board

11 to purchase insurance to cover potential liability of

12 persons who serve in a fiduciary capacity with re13 spect to amounts maintained in the Common Stock

14 Index Fund of the Social Security Investment Fund,

15 without regard to whether a policy of insurance per16 mits recourse by the insurer against the fiduciary in

17 the case of a breach of a fiduciary obligation.

18 ‘‘DIVERSIFICATION THROUGH INVESTMENT MANAGEMENT

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

20 shall prescribe policies governing investment of the Social

21 Security Investment Fund which shall ensure—

22 ‘‘(1) that the management of investments on

23 behalf of the Fund undertaken in the course of car24 rying out the investment responsibilities of the Exec25 utive Director of the Fund is exercised by qualified

26 professional asset managers pursuant to section 252
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1 in such manner as to ensure that not fewer than 3

2 such managers are each engaged in the management

3 of a substantial portion of such investments,

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

5 Fund by any such qualified professional asset man6 ager do not represent more than 1 percent of the

7 total equity interest in any person, and

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

9 any matter the shares of any issuer held by the

10 Fund under the management of such investment

11 manager in conformity with the voting on such mat12 ter of all other shares of such issuer.’’.

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

14 such Act (42 U.S.C. 401(d)) is amended in the first sen15 tence by striking ‘‘withdrawals’’ and inserting ‘‘withdraw16 als, or, in the case of the Federal Old-Age and Survivors

17 Insurance Trust Fund, to meet the transfer requirements

18 under section 251(b)’’.

19 (c) EFFECTIVE DATE.—The amendments made by

20 this section shall apply with respect to fiscal years begin21 ning on or after October 1, 2000.

Æ