I

103D CONGRESS

1ST SESSION H. R. 367

To amend title II of the Social Security Act to provide for the investment

of the Trust Fund in the same investments permitted by pension funds

guaranteed by the Employee Retirement Income Security Act and to

require the Trustees to meet the same prudent person standards required

under that Act.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 5, 1993

Mr. SMITH of Iowa introduced the following bill; which was referred to the

Committee on Ways and Means

A BILL

To amend title II of the Social Security Act to provide

for the investment of the Trust Fund in the same investments permitted by pension funds guaranteed by the

Employee Retirement Income Security Act and to require

the Trustees to meet the same prudent person standards

required under that 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 Trust

5 Fund Amendments of 1993’’.
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1 SEC. 2. Title II, section 201 of the Social Security

2 Act (42 U.S.C. 401) is amended by deleting subsections

3 (c) and (d) and inserting in lieu thereof the following:

4 ‘‘(c) BOARD OF TRUSTEES: DUTIES; REPORTS TO

5 CONGRESS.—With respect to the Federal Old-Age and

6 Survivors Insurance Trust Fund and the Federal Disabil7 ity Insurance Trust Fund (hereinafter in this subchapter

8 called the ‘‘Trust Funds’’) there is hereby created a body

9 to be known as the Board of Trustees of the Trust Funds

10 (hereinafter in this subchapter called the ‘‘Board of Trust11 ees’’) which Board of Trustees shall be composed of the

12 Secretary of the Treasury, the Secretary of Labor, and

13 the Secretary of Health and Human Services, all ex

14 officio, and of eight members of the public (not more than

15 four of whom may be from the same political party), who

16 shall be nominated by the President for a term of four

17 years and subject to confirmation by the Senate. The

18 terms of two of the members of the public shall expire

19 each year. A member of the Board of Trustees serving

20 as a member of the public and nominated and confirmed

21 to fill a vacancy occurring during a term shall be nomi22 nated and confirmed only for the remainder of such term.

23 An individual nominated and confirmed as a member of

24 the public may serve in such position after the expiration

25 of such member’s term until the earlier of the time at
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1 which the member’s successor takes office or the time at

2 which a report of the Board is first issued under para3 graph (2) after the expiration of the member’s term. The

4 Secretary of the Treasury shall be the Managing Trustee

5 of the Board of Trustees (hereinafter in this subchapter

6 called the ‘‘Managing Trustee’’). The Commissioner of So7 cial Security shall serve as Secretary of the Board of

8 Trustees. The Board of Trustees shall meet not less fre9 quently than ten times each calendar year. It shall be the

10 duty of the Board of Trustees to—

11 ‘‘(1) hold the Trust Funds;

12 ‘‘(2) report to the Congress not later than the

13 first day of April of each year on the operation and

14 status of the Trust Funds during the preceding fis15 cal year and on their expected operation and status

16 during the next ensuing five fiscal years;

17 ‘‘(3) report immediately to the Congress when18 ever the Board of Trustees is of the opinion that the

19 amount of either of the Trust Funds is unduly

20 small;

21 ‘‘(4) recommend improvements in administra22 tive procedures and policies designed to effectuate

23 the proper coordination of the old-age and survivors

24 insurance and Federal-State unemployment com25 pensation program;
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1 ‘‘(5) review the general policies followed in

2 managing the Trust Funds, and recommend changes

3 in such policies, including necessary changes in the

4 provisions of the law which govern the way in which

5 the Trust Funds are to be managed; and

6 ‘‘(6) approve the investment of funds and dis7 charge their duties in a manner which is solely in

8 the interest of the beneficiaries of the funds; and

9 ‘‘(A) for the exclusive purpose of—

10 ‘‘(i) providing benefits for the bene11 ficiaries; and

12 ‘‘(ii) defraying reasonable expenses of

13 administering the fund;

14 ‘‘(B) with the care, skill, prudence, and

15 diligence under the circumstances then prevail16 ing that a prudent person acting in a like ca17 pacity and familiar with such matters would use

18 in the conduct of an enterprise of a like char19 acter and with like aims;

20 ‘‘(C) by diversifying the investments of the

21 plan so as to minimize the risk of large losses,

22 unless under the circumstances it is clearly pru23 dent not to do so; and

24 ‘‘(D) in accordance with the provisions of

25 subsection (d) below.
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1 ‘‘(d) INVESTMENTS.—It shall be the duty of the Man2 aging Trustee to invest such portion of the Trust Funds

3 as is not, in his judgment, required to meet current with4 drawals. Not more than one-fourth of such investments

5 (based upon the cost at the time of investment) may be

6 held in interest-bearing obligations of the United States.

7 For such purpose such obligations may be acquired (1)

8 on original issue at the issue price, or (2) by purchase

9 of outstanding obligations at the market price. The pur10 poses for which obligations of the United States may be

11 issued under chapter 31 of title 31 are hereby extended

12 to authorize the issuance at par of public-debt obligations

13 for purchase by the Trust Funds. Such obligations issued

14 for purchase by the Trust Funds shall have maturities

15 fixed with due regard for the needs of the Trust Funds

16 and shall bear interest at a rate equal to the average mar17 ket yield (computed by the Managing Trustee on the basis

18 of market quotations as of the end of the calendar month

19 next preceding the date of such issue) on all marketable

20 interest-bearing obligations of the United States then

21 forming a part of the public debt which are not due or

22 callable until after the expiration of four years from the

23 end of such calendar month; except that where such aver24 age market yield is not a multiple of one-eighth of 1 per

25 centum, the rate of interest of such obligations shall be
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1 the multiple of one-eighth of 1 per centum nearest such

2 market yield. The Managing Trustee, with the approval

3 of a majority of the Board of Trustees, shall invest the

4 funds not required to meet current withdrawals and not

5 invested in interest-bearing obligations of the United

6 States described above, in other interest-bearing obliga7 tions of the United States or obligations guaranteed as

8 to both principal and interest by the United States, on

9 original issue or at the market price, and in bonds, deben10 tures, and securities in accordance with the provisions of

11 section (c).’’.

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