I 

113TH CONGRESS 

2D SESSION H. R. 5877 

To amend the Employee Retirement Income Security Act of 1974 and title 

5, United States Code, to require plans to establish policies addressing 

firm-specific risks in asset management services, greater diversification 

in investment strategies, and the inclusion of diverse asset managers 

and minority brokerage firms, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

DECEMBER 11, 2014 

Mr. MEEKS (for himself and Ms. WATERS) introduced the following bill; which 

was referred to the Committee on Oversight and Government Reform, 

and in addition to the Committee on Education and the Workforce, 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 amend the Employee Retirement Income Security Act 

of 1974 and title 5, United States Code, to require 

plans to establish policies addressing firm-specific risks 

in asset management services, greater diversification in 

investment strategies, and the inclusion of diverse asset 

managers and minority brokerage firms, and for other 

purposes. 

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


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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘American Pension In3 vestments Modernization Act of 2014’’. 

4 SEC. 2. CONSIDERATION OF FIRM-SPECIFIC RISKS AND IN5 CLUSION OF DIVERSE ASSET MANAGERS IN 

6 ERISA PLANS. 

7 (a) IN GENERAL.—Section 404(a) of the Employee 

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

9 1104(a)) is amended— 

10 (1) in paragraph (1)— 

11 (A) in subparagraph (C), by striking 

12 ‘‘and’’ at the end; 

13 (B) by designating subparagraph (D) as 

14 subparagraph (E); and 

15 (C) by inserting after subparagraph (C) 

16 the following: 

17 ‘‘(D) in any case in which the fiduciary ap18 points an investment manager or managers to man19 age any assets of a plan under section 402(c)(3), or 

20 business enterprise or enterprises for brokerage and 

21 investment banking services, by establishing policies 

22 under which the fiduciary will consider— 

23 ‘‘(i) the concentration level of the plan’s 

24 exposure to firm-specific risks, including oper25 ational, compliance, and fraud risks; 


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1 ‘‘(ii) the inclusion, to the greatest extent 

2 feasible, of minority business enterprises for 

3 brokerage and investment banking services; and 

4 ‘‘(iii) the utilization of diverse asset man5 agers, taking into consideration the investment 

6 opportunities they offer in sectors, strategies, 

7 geographies, and demographics not meaning8 fully available to the plans.’’; and 

9 (2) by inserting at the end the following: 

10 ‘‘(3)(A) For purposes of this subsection, the term 

11 ‘minority business enterprise’ means any business entity— 

12 ‘‘(i) not less than 51 percent of which is owned 

13 by one or more individuals described in subpara14 graph (C) or, in the case of any publicly owned busi15 ness, not less than 51 percent of the stock of which 

16 is owned by such individuals; or 

17 ‘‘(ii)(I) not less than 35 percent of which is 

18 owned by one or more individuals described in sub19 paragraph (C) or, in the case of any publicly owned 

20 business, not less than 35 percent of the stock of 

21 which is owned by such individuals; and 

22 ‘‘(II) the management and daily business oper23 ations of which are controlled by one or more indi24 viduals described in subparagraph (C). 


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1 ‘‘(B) For purposes of this subsection, the term ‘di2 verse asset manager’ means a minority business enterprise 

3 that manages an investment portfolio of at least 

4 $100,000,000 and not more than $25,000,000,000. 

5 ‘‘(C) An individual described in this subparagraph 

6 is— 

7 ‘‘(i) an African-American, Hispanic-American, 

8 Asian Pacific American, Subcontinent Asian Amer9 ican, or Native American; 

10 ‘‘(ii) a woman; or 

11 ‘‘(iii) a veteran (as defined in section 101(2) of 

12 title 38, United States Code).’’. 

13 (b) ISSUANCE OF GUIDANCE BY SECRETARY OF

14 LABOR.—Not later than 1 year after the date of the enact15 ment of this Act, the Secretary of Labor shall issue guid16 ance relating to the requirement imposed by section 

17 404(a)(1)(D) of such Act (as amended by subsection (a)). 

18 In issuing guidance under this subsection, the Secretary 

19 of Labor shall consider successful practices from State, 

20 local, and private-sector retirement systems’ utilization of 

21 diverse and emerging asset managers and of minority 

22 business enterprises for brokerage and investment banking 

23 services, including established efforts, programs, plans, 

24 and goals designed to increase their participation in finan25 cial services, and providing pension plans with greater acVerDate Sep 11 2014 07:28 Dec 20, 2014 Jkt 049200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H5877.IH H5877

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1 cess to investment opportunities that may otherwise be 

2 overlooked. 

3 SEC. 3. CONSIDERATION OF FIRM-SPECIFIC RISKS AND IN4 CLUSION OF DIVERSE ASSET MANAGERS IN 

5 THE THRIFT SAVINGS PLAN. 

6 (a) IN GENERAL.—Section 8472 of title 5, United 

7 States Code, is amended by adding at the end the fol8 lowing: 

9 ‘‘(k) In establishing policies under subsection 

10 (f)(1)(A), the Board shall take into account the guidance 

11 issued by the Secretary of Labor pursuant to section 

12 404(a)(1)(D) of the Employee Retirement Income Secu13 rity Act of 1974 (29 U.S.C. 1104(a)).’’. 

14 (b) CONFORMING AMENDMENT.—Section 

15 8477(b)(1)(C) of such title is amended by inserting after 

16 ‘‘of this title,’’ the following: ‘‘and consistent with the poli17 cies developed under section 8472(k),’’. 

18 SEC. 4. ACTIVE MANAGEMENT OPTION UNDER THE THRIFT 

19 SAVINGS PLAN. 

20 (a) IN GENERAL.—Subchapter III of chapter 84 of 

21 title 5, United States Code, is amended by inserting at 

22 the end the following: 

23 ‘‘§ 8440g. Active management option 

24 ‘‘(a) The Board shall provide employees and Members 

25 and former employees or Members the option to particiVerDate Sep 11 2014 07:28 Dec 20, 2014 Jkt 049200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H5877.IH H5877

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1 pate in actively managed funds within such employee or 

2 Member’s Thrift Savings Fund account. Such option or 

3 options shall allow not more than 20 percent of an em4 ployee or Member’s (or former employee or Member’s) 

5 funds to be actively managed. 

6 ‘‘(b) Notwithstanding the requirement of subsection 

7 (a), the Board may not subject more than 20 percent of 

8 the total assets under management of the Thrift Savings 

9 Fund to active management. 

10 ‘‘(c) The Board shall promulgate guidelines regarding 

11 the active management of funds under this section. In pro12 mulgating such guidelines, the Board shall consider mod13 ern and successful practices from State, local, and private14 sector retirement systems’ utilization of active manage15 ment strategies in order to— 

16 ‘‘(1) reduce market downside risks to the best 

17 extent possible, including dramatic swings in major 

18 market indexes; 

19 ‘‘(2) take advantage of research and investment 

20 opportunities offered by small-, minority-, women21 and veteran-owned firms that specialize in less tradi22 tional asset classes, or less efficient market segments 

23 with high-growth potentials, including investments in 

24 sectors, strategies, geographies and demographics 


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1 that are not meaningfully available to large passively 

2 invested funds; and 

3 ‘‘(3) take advantage of more effective portfolio 

4 designs that diversify across active and passive in5 vestment strategies and managers.’’. 

6 (b) CLERICAL AMENDMENT.—The table of sections 

7 for such subchapter is amended by adding after the item 

8 relating to section 8440f the following new item: 

‘‘8440g. Active management option.’’. 

9 SEC. 5. REPORTS. 

10 Not later than 1 year after the issuance of guidance 

11 under section 2(b) and annually thereafter, the Secretary 

12 of Labor and the Chairman of the Federal Retirement 

13 Thrift Investment Board shall submit a report to Congress 

14 on the progress achieved and efforts being made to imple15 ment the amendments made by sections 2 and 3, respec16 tively. Such report shall include such recommendations as 

17 the Secretary and the Chairman, respectively, deem nec18 essary or appropriate. In addition, each report shall in19 clude— 

20 (1) an assessment of the extent to which com21 pliance with the requirements contained in such 

22 amendments is being achieved; 

23 (2) a summary of the enforcement actions 

24 taken by each of the agencies assigned administraVerDate Sep 11 2014 07:28 Dec 20, 2014 Jkt 049200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H5877.IH H5877

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1 tive enforcement responsibilities for such require2 ments; 

3 (3) to the extent feasible, with respect to the 

4 Thrift Savings Plan and terminated plans within the 

5 meaning of title IV of the Employee Retirement In6 come Security Act of 1974— 

7 (A) a list of all asset management firms 

8 (minority-owned and others) to which plan 

9 funds were allocated, and the amount allocated 

10 to each asset management firm; 

11 (B) the fees charged by each asset man12 agement firm, including proceeds from security 

13 lending, if any; 

14 (C) the list of all firms (minority-owned 

15 and others) used for brokerage and investment 

16 banking services, and the amount of trans17 actions executed; and 

18 (D) the fees charged by each firm used for 

19 brokerage and investment banking services. 

20 SEC. 6. EFFECTIVE DATE. 

21 The amendments made by sections 2 and 3 shall 

22 apply with respect to plan years beginning at least 9 

23 months after the issuance of guidance under section 2(b). 

Æ 


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