II

106TH CONGRESS

1ST SESSION S. 263

To amend the Social Security Act to establish the Personal Retirement

Accounts Program.

IN THE SENATE OF THE UNITED STATES

JANUARY 20, 1999

Mr. ROTH introduced the following bill; which was read twice and referred to

the Committee on Finance

A BILL

To amend the Social Security Act to establish the Personal

Retirement Accounts Program.

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; TABLE OF CONTENTS.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Personal Retirement Accounts Act of 1999’’.

6 (b) TABLE OF CONTENTS.—The table of contents of

7 this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Findings.

Sec. 3. Save Social Security First Trust Fund.

Sec. 4. Establishment of Personal Retirement Accounts Program.

‘‘TITLE I—PERSONAL RETIREMENT ACCOUNTS PROGRAM
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‘‘Subtitle A—Management of the Personal Retirement Accounts Program

‘‘Sec. 101. Personal Retirement Accounts Board.

‘‘Sec. 102. Executive director.

‘‘Subtitle B—Establishment of Personal Retirement Savings Fund; Personal

Retirement Accounts

‘‘Sec. 111. Appropriations; annual transfers to the Personal Retirement

Savings Fund.

‘‘Sec. 112. Personal Retirement Savings Fund.

‘‘Sec. 113. Personal retirement accounts.

‘‘Subtitle C—Investment and Administration of Personal Retirement Accounts

‘‘Sec. 121. Investment of personal retirement accounts.

‘‘Sec. 122. Accounting and information.

‘‘Sec. 123. Distribution of benefits.

‘‘Sec. 124. Annuities: methods of payment; election; purchase.

‘‘Sec. 125. Protections for spouses and former spouses.

‘‘Sec. 126. Designation of beneficiary; order of precedence.

‘‘Sec. 127. Tax treatment of the Personal Retirement Savings Fund.

‘‘Sec. 128. Administrative provisions.

‘‘Subtitle D—Beneficiary Protections

‘‘Sec. 131. Fiduciary responsibilities; liability and penalties.

‘‘Sec. 132. Bonding.

‘‘Sec. 133. Investigative authority.

‘‘Sec. 134. Exculpatory provisions; insurance.’’.

Sec. 5. Report and recommendations regarding investment options.

1 SEC. 2. FINDINGS.

2 Congress makes the following findings:

3 (1) The social security program is the founda4 tion of retirement income for most Americans, and

5 solving the financial problems of the social security

6 program is a vital national priority and essential for

7 the retirement security of today’s working Ameri8 cans and their families.

9 (2) There is a growing bipartisan consensus

10 that personal retirement accounts should be an im11 portant feature of social security reform.
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1 (3) Personal retirement accounts can provide a

2 substantial retirement nest egg and real personal

3 wealth. For an individual 28 years old on the date

4 of enactment of this Act, earning an average wage,

5 and retiring at age 65 in 2035, just 1 percent of

6 that individual’s wages deposited each year in a per7 sonal retirement account and invested in securities

8 consisting of the Standard & Poors 500 would grow

9 to $132,000, and be worth approximately 20 percent

10 of the benefits that would be provided to the individ11 ual under the current provisions of the social secu12 rity program.

13 (4) Personal retirement accounts would give the

14 majority of Americans who do not own any invest15 ment assets a new stake in the economic growth of

16 America.

17 (5) Personal retirement accounts would dem18 onstrate the value of savings and the magic of com19 pound interest to all Americans. Today, Americans

20 save less than people in almost every other country.

21 (6) Personal retirement accounts would help

22 Americans to better prepare for retirement gen23 erally. According to the Congressional Research

24 Service, 60 percent of Americans are not actively

25 participating in a retirement plan other than social
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1 security, although social security was never intended

2 to be the sole source of retirement income.

3 (7) The Federal budget will register a surplus

4 of $657,000,000,000 over fiscal years 1999 through

5 2004, offering a unique opportunity to begin a per6 manent solution to social security’s financing.

7 (8) Using the Federal budget surplus to fund

8 personal retirement accounts would be an important

9 first step in comprehensive social security reform

10 and ensuring the delivery of promised retirement

11 benefits.

12 SEC. 3. SAVE SOCIAL SECURITY FIRST TRUST FUND.

13 (a) ESTABLISHMENT OF TRUST FUND.—There is es14 tablished in the Treasury of the United States a trust fund

15 to be known as the ‘‘Save Social Security First Trust

16 Fund’’ (in this section referred to as the ‘‘Trust Fund’’),

17 consisting of such amounts as are appropriated or credited

18 to the Trust Fund as provided in this section.

19 (b) APPROPRIATION TO TRUST FUND.—There is ap20 propriated to the Trust Fund, out of any sums in the

21 Treasury not otherwise appropriated, an amount equal to

22 $31,500,000,000 for fiscal year 1999 and

23 $39,500,000,000 for fiscal year 2000. The Secretary of

24 the Treasury shall transfer such amounts to the Trust

25 Fund not later than—
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1 (1) September 30, 1999, in the case of the

2 amount appropriated for fiscal year 1999; and

3 (2) September 30, 2000, in the case of the

4 amount appropriated for fiscal year 2000.

5 (c) INVESTMENT OF TRUST FUND.—The Secretary

6 of the Treasury shall invest the Trust Fund in public debt

7 securities with suitable maturities and bearing interest at

8 rates determined by the Secretary, taking into consider9 ation current market yields on outstanding marketable ob10 ligations of the United States of comparable maturities.

11 The income on such investments shall be credited to and

12 form a part of the Trust Fund.

13 (d) LIMITATION ON USE OF TRUST FUND.—

14 Amounts in the Trust Fund shall not be appropriated or

15 used for any purpose other than to be transferred to the

16 Personal Retirement Savings Fund established under sec17 tion 112 of the Social Security Act in accordance with sec18 tion 111(b)(1) of such Act.

19 (e) DISSOLUTION OF TRUST FUND.—On the date of

20 the transfer of all amounts in the Trust Fund to the Per21 sonal Retirement Savings Fund in accordance with section

22 111(b)(1) of the Social Security Act, the Trust Fund es23 tablished under this section shall be dissolved.
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1 SEC. 4. ESTABLISHMENT OF PERSONAL RETIREMENT AC2 COUNTS PROGRAM.

3 The Social Security Act (42 U.S.C. 301 et seq.) is

4 amended—

5 (1) by redesignating title I as title VI; and

6 (2) by inserting before title II the following:

7 ‘‘TITLE I—PERSONAL RETIRE8 MENT ACCOUNTS PROGRAM

9 ‘‘Subtitle A—Management of the

10 Personal Retirement Accounts

11 Program

12 ‘‘SEC. 101. PERSONAL RETIREMENT ACCOUNTS BOARD.

13 ‘‘(a) ESTABLISHMENT.—There is established in the

14 Executive Branch of the Government a Personal Retire15 ment Accounts Board (in this title referred to as the

16 ‘Board’).

17 ‘‘(b) COMPOSITION.—The Board shall be composed

18 of—

19 ‘‘(1) 3 members appointed by the President, of

20 whom 1 shall be designated by the President as

21 Chairman; and

22 ‘‘(2) 2 members appointed by the President, of

23 whom—

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

25 after taking into consideration the recommenda26 tion made by the Speaker of the House of Rep-
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1 resentatives in consultation with the Minority

2 Leader of the House of Representatives; and

3 ‘‘(B) 1 shall be appointed by the President

4 after taking into consideration the recommenda5 tion made by the Majority Leader of the Senate

6 in consultation with the Minority Leader of the

7 Senate.

8 ‘‘(c) ADVICE AND CONSENT.—Appointments under

9 subsection (b) shall be made by and with the advice and

10 consent of the Senate.

11 ‘‘(d) MEMBERSHIP REQUIREMENTS.—Members of

12 the Board shall have substantial experience, training, and

13 expertise in the management of financial investments and

14 pension benefit plans.

15 ‘‘(e) LENGTH OF APPOINTMENTS.—

16 ‘‘(1) TERMS.—A member of the Board shall be

17 appointed for a term of 4 years, except that of the

18 members first appointed under subsection (b)—

19 ‘‘(A) the Chairman shall be appointed for

20 a term of 4 years;

21 ‘‘(B) the members appointed under sub22 section (b)(2) shall be appointed for terms of 3

23 years; and

24 ‘‘(C) the remaining members shall be ap25 pointed for terms of 2 years.
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1 ‘‘(2) VACANCIES.—

2 ‘‘(A) IN GENERAL.—A vacancy on the

3 Board shall be filled in the manner in which the

4 original appointment was made and shall be

5 subject to any conditions that applied with re6 spect to the original appointment.

7 ‘‘(B) COMPLETION OF TERM.—An individ8 ual chosen to fill a vacancy shall be appointed

9 for the unexpired term of the member replaced.

10 ‘‘(3) EXPIRATION.—The term of any member

11 shall not expire before the date on which the mem12 ber’s successor takes office.

13 ‘‘(f) DUTIES.—The Board shall—

14 ‘‘(1) administer the program established under

15 this title;

16 ‘‘(2) establish policies for the investment and

17 management of the Personal Retirement Savings

18 Fund, including policies applicable to the outside en19 tities and qualified professional asset managers with

20 responsibility for managing the investment options

21 described in section 121(b), that shall provide for—

22 ‘‘(A) prudent investments suitable for ac23 cumulating funds for payment of retirement in24 come; and

25 ‘‘(B) low administrative costs.
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1 ‘‘(3) review the performance of investments

2 made for the Personal Retirement Savings Fund;

3 ‘‘(4) review and approve the budget of the

4 Board; and

5 ‘‘(5) comply with the provisions of subtitle D.

6 ‘‘(g) ADMINISTRATIVE PROVISIONS.—

7 ‘‘(1) IN GENERAL.—The Board may—

8 ‘‘(A) adopt, alter, and use a seal;

9 ‘‘(B) except as provided in paragraph (2),

10 direct the Executive Director to take such ac11 tion as the Board considers appropriate to

12 carry out the provisions of this title and the

13 policies of the Board;

14 ‘‘(C) upon the concurring votes of 4 mem15 bers, remove the Executive Director from office

16 for good cause shown; and

17 ‘‘(D) take such other actions as may be

18 necessary to carry out the functions of the

19 Board.

20 ‘‘(2) MEETINGS.—The Board shall meet—

21 ‘‘(A) not less than once during each

22 month; and

23 ‘‘(B) at additional times at the call of the

24 Chairman.

25 ‘‘(3) EXERCISE OF POWERS.—
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1 ‘‘(A) IN GENERAL.—Except as provided in

2 paragraph (1)(C) and section 102(a)(1), the

3 Board shall perform the functions and exercise

4 the powers of the Board on a majority vote of

5 a quorum of the Board. Three members of the

6 Board shall constitute a quorum for the trans7 action of business.

8 ‘‘(B) VACANCIES.—A vacancy on the

9 Board shall not impair the authority of a

10 quorum of the Board to perform the functions

11 and exercise the powers of the Board.

12 ‘‘(4) LIMITATION ON INVESTMENTS.—Except in

13 the case of investments required by section 121 to

14 be invested in securities of the Government, the

15 Board may not direct the Executive Director to in16 vest or to cause to be invested any sums in the Per17 sonal Retirement Savings Fund in a specific asset or

18 to dispose of or cause to be disposed of any specific

19 asset of such Fund.

20 ‘‘(h) COMPENSATION.—

21 ‘‘(1) IN GENERAL.—Each member of the Board

22 who is not an officer or employee of the Federal

23 Government shall be compensated at the daily rate

24 of basic pay for level IV of the Executive Schedule
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1 for each day during which such member is engaged

2 in performing a function of the Board.

3 ‘‘(2) EXPENSES.—A member of the Board shall

4 be paid travel, per diem, and other necessary ex5 penses under subchapter I of chapter 57 of title 5,

6 United States Code, while traveling away from such

7 member’s home or regular place of business in the

8 performance of the duties of the Board.

9 ‘‘(3) SOURCE OF FUNDS.—Payments authorized

10 under this subsection shall be paid from the Per11 sonal Retirement Savings Fund.

12 ‘‘(i) DISCHARGE OF RESPONSIBILITIES.—The mem13 bers of the Board shall discharge their responsibilities

14 solely in the interest of account holders and beneficiaries

15 under this title.

16 ‘‘(j) ANNUAL INDEPENDENT AUDIT.—The Board

17 shall annually engage an independent qualified public ac18 countant to audit the activities of the Board.

19 ‘‘(k) SUBMISSION OF BUDGET TO CONGRESS.—The

20 Board shall prepare and submit to the President, and, at

21 the same time, to the appropriate committees of Congress,

22 an annual budget of the expenses and other items relating

23 to the Board which shall be included as a separate item

24 in the budget required to be transmitted to Congress

25 under section 1105 of title 31, United States Code.
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1 ‘‘(l) SUBMISSION OF LEGISLATIVE RECOMMENDA2 TIONS.—The Board may submit to the President, and, at

3 the same time, shall submit to each House of Congress,

4 any legislative recommendations of the Board relating to

5 any of its functions under this title or any other provision

6 of law.

7 ‘‘SEC. 102. EXECUTIVE DIRECTOR.

8 ‘‘(a) APPOINTMENT OF EXECUTIVE DIRECTOR.—

9 ‘‘(1) IN GENERAL.—The Board shall appoint,

10 without regard to the provisions of law governing

11 appointments in the competitive service, an Execu12 tive Director by action agreed to by a majority of

13 the members of the Board.

14 ‘‘(2) REQUIREMENTS.—The Executive Director

15 shall have substantial experience, training, and ex16 pertise in the management of financial investments

17 and pension benefit plans.

18 ‘‘(b) DUTIES.—The Executive Director shall—

19 ‘‘(1) carry out the policies established by the

20 Board;

21 ‘‘(2) invest and manage the Personal Retire22 ment Savings Fund in accordance with the invest23 ment policies and other policies established by the

24 Board;
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1 ‘‘(3) purchase annuity contracts and provide for

2 the payment of benefits under this title;

3 ‘‘(4) administer the provisions of this title; and

4 ‘‘(5) prescribe such regulations (other than reg5 ulations relating to fiduciary responsibilities) as may

6 be necessary for the administration of this title.

7 ‘‘(c) ADMINISTRATIVE AUTHORITY.—The Executive

8 Director may—

9 ‘‘(1) prescribe such regulations as may be nec10 essary to carry out the responsibilities of the Execu11 tive Director under this section, other than regula12 tions relating to fiduciary responsibilities;

13 ‘‘(2) appoint such personnel as may be nec14 essary to carry out the provisions of this title;

15 ‘‘(3) subject to approval by the Board, procure

16 the services of experts and consultants under section

17 3109 of title 5, United States Code;

18 ‘‘(4) secure directly from an Executive agency,

19 the United States Postal Service, or the Postal Rate

20 Commission any information necessary to carry out

21 the provisions of this title and the policies of the

22 Board;

23 ‘‘(5) make such payments out of sums in the

24 Personal Retirement Savings Fund as the Executive
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1 Director determines are necessary to carry out the

2 provisions of this title and the policies of the Board;

3 ‘‘(6) pay the compensation, per diem, and travel

4 expenses of individuals appointed under paragraphs

5 (2), (3), and (7) from the Personal Retirement Sav6 ings Fund;

7 ‘‘(7) accept and use the services of individuals

8 employed intermittently in the Government service

9 and reimburse such individuals for travel expenses,

10 as authorized by section 5703 of title 5, United

11 States Code, including per diem as authorized by

12 section 5702 of such title;

13 ‘‘(8) except as otherwise expressly prohibited by

14 law or the policies of the Board, delegate any of the

15 Executive Director’s functions to such employees

16 under the Board as the Executive Director may des17 ignate and authorize such successive redelegations of

18 such functions to such employees under the Board

19 as the Executive Director may consider to be nec20 essary or appropriate; and

21 ‘‘(9) take such other actions as are appropriate

22 to carry out the functions of the Executive Director.
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1 ‘‘Subtitle B—Establishment of Per2 sonal Retirement Savings Fund;

3 Personal Retirement Accounts

4 ‘‘SEC. 111. APPROPRIATIONS; ANNUAL TRANSFERS TO THE

5 PERSONAL RETIREMENT SAVINGS FUND.

6 ‘‘(a) APPROPRIATIONS.—Out of any money in the

7 Treasury of the United States not otherwise appropriated,

8 there are appropriated for the purpose of making the

9 transfers required under subsection (b)—

10 ‘‘(1) for fiscal year 2001, $43,000,000,000;

11 ‘‘(2) for fiscal year 2002, $69,500,000,000;

12 ‘‘(3) for fiscal year 2003, $68,000,000,000; and

13 ‘‘(4) for fiscal year 2004, $77,000,000,000.

14 ‘‘(b) TRANSFERS TO THE PERSONAL RETIREMENT

15 SAVINGS FUND.—

16 ‘‘(1) TRANSFER OF AMOUNTS IN THE SAVE SO17 CIAL SECURITY FIRST TRUST FUND.—Not later than

18 October 1, 2000, the Secretary of the Treasury shall

19 transfer the obligations held by the Secretary for the

20 Save Social Security First Trust Fund established

21 under section 3 of the Personal Retirement Accounts

22 Act of 1999, and the amount standing to the credit

23 of such Trust Fund on the books of the Treasury on

24 such date to the Personal Retirement Savings Fund

25 established under section 112.
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1 ‘‘(2) TRANSFER OF APPROPRIATED

2 AMOUNTS.—With respect to a fiscal year for which

3 an amount is appropriated under subsection (a), the

4 Secretary of the Treasury shall transfer to the Per5 sonal Retirement Savings Fund established under

6 section 112 the amount appropriated under sub7 section (a) for that fiscal year not later than—

8 ‘‘(A) September 30, 2001, in the case of

9 the amount appropriated under such subsection

10 for fiscal year 2001;

11 ‘‘(B) September 30, 2002, in the case of

12 the amount appropriated under such subsection

13 for fiscal year 2002;

14 ‘‘(C) September 30, 2003, in the case of

15 the amount appropriated under such subsection

16 for fiscal year 2003; and

17 ‘‘(D) September 30, 2004, in the case of

18 the amount appropriated under such subsection

19 for fiscal year 2004.

20 ‘‘SEC. 112. PERSONAL RETIREMENT SAVINGS FUND.

21 ‘‘(a) ESTABLISHMENT OF TRUST FUND.—There is

22 established in the Treasury of the United States a Per23 sonal Retirement Savings Fund, consisting of all amounts

24 deposited by the Secretary of the Treasury in accordance

25 with section 111(b), increased by the total net earnings
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1 from investments of sums in the Personal Retirement Sav2 ings Fund or reduced by the total net losses from invest3 ments of the Fund, and reduced by the total amount of

4 payments made from the Fund (including payments for

5 administrative expenses).

6 ‘‘(b) AVAILABILITY.—The sums in the Personal Re7 tirement Savings Fund are appropriated and shall remain

8 available without fiscal year limitation—

9 ‘‘(1) to invest under section 121;

10 ‘‘(2) to pay benefits or purchase annuity con11 tracts under this title;

12 ‘‘(3) to pay the administrative expenses of the

13 Board;

14 ‘‘(4) to make distributions in accordance with

15 sections 123 and 124; and

16 ‘‘(5) to purchase insurance as provided in sec17 tion 134(b)(2).

18 ‘‘(c) LIMITATIONS ON USE OF FUNDS.—

19 ‘‘(1) IN GENERAL.—Sums in the Personal Re20 tirement Savings Fund credited to the account of an

21 individual may not be used for, or diverted to, pur22 poses other than for the exclusive benefit of the ac23 count holder or the account holder’s beneficiaries

24 under this title.
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1 ‘‘(2) ASSIGNMENTS.—Except as provided in

2 paragraph (3), sums in the Personal Retirement

3 Savings Fund may not be assigned or alienated and

4 are not subject to execution, levy, attachment, gar5 nishment, or other legal process.

6 ‘‘(3) SUPPORT OBLIGATIONS.—Moneys due or

7 payable from the Personal Retirement Savings Fund

8 to any account holder shall be subject to legal proc9 ess for the enforcement of the account holder’s legal

10 obligations to provide child support or make alimony

11 payments as provided in section 459 or for the en12 forcement of a court order or other similar process

13 in the nature of a garnishment for the enforcement

14 of a judgment rendered against the account holder

15 for physically, sexually, or emotionally abusing a

16 child.

17 ‘‘(d) PAYMENT OF ADMINISTRATIVE EXPENSES.—

18 Administrative expenses incurred to carry out this title

19 shall be paid out of net earnings in the Personal Retire20 ment Savings Fund in conjunction with the allocation of

21 investment earnings and losses under section 122(a)(2).

22 ‘‘(e) LIMITATION.—The sums in the Personal Retire23 ment Savings Fund shall not be appropriated for any pur24 pose other than the purposes specified in this section and

25 may not be used for any other purpose.
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1 ‘‘(f) FUNDS HELD IN TRUST.—All sums transferred

2 to the Personal Retirement Savings Fund for the benefit

3 of individuals eligible for personal retirement accounts,

4 and all net earnings in such Fund attributable to invest5 ment of such sums, are held in such Fund in trust for

6 such individuals.

7 ‘‘SEC. 113. PERSONAL RETIREMENT ACCOUNTS.

8 ‘‘(a) ESTABLISHMENT OF INDIVIDUAL ACCOUNTS.—

9 ‘‘(1) FISCAL YEAR 2001.—Not later than Octo10 ber 1, 2000, the Executive Director shall establish

11 and maintain a personal retirement savings account

12 for any individual who has worked 4 qualifying quar13 ters of coverage, as determined under title II, in cal14 endar year 1999.

15 ‘‘(2) SUBSEQUENT FISCAL YEARS.—Not later

16 than October 1 of each fiscal year beginning after

17 fiscal year 2001, the Executive Director shall estab18 lish and maintain a personal retirement savings ac19 count for any individual who has worked 4 qualify20 ing quarters of coverage, as determined under title

21 II, in the calendar year ending on December 31 of

22 the preceding fiscal year and for whom the Execu23 tive Director has not previously established an ac24 count.
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1 ‘‘(b) ALLOCATION OF FUNDS TO ACCOUNTS.—Begin2 ning on October 1, 2000, and annually thereafter, the Ex3 ecutive Director shall allocate to each personal retirement

4 savings account maintained on such date for the benefit

5 of an individual who has worked 4 qualifying quarters of

6 coverage, as determined under title II, in the calendar year

7 ending on December 31 of the preceding fiscal year the

8 amount determined under subsection (c).

9 ‘‘(c) AMOUNT DETERMINED.—

10 ‘‘(1) IN GENERAL.—For any fiscal year, the

11 amount determined under this subsection is equal to

12 the sum of—

13 ‘‘(A) $250, plus

14 ‘‘(B) the amount determined under para15 graph (2) (if any).

16 ‘‘(2) PRO RATA SHARE OF REMAINDER.—For

17 any fiscal year, the amount determined under this

18 paragraph with respect to the account of each indi19 vidual maintained on October 1 of such fiscal year

20 is equal to the product of—

21 ‘‘(A) the remainder of the Fund Balance

22 for such fiscal year, determined after the appli23 cation of paragraph (1)(A); and

24 ‘‘(B) the ratio determined under paragraph

25 (3).
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1 ‘‘(3) RATIO DETERMINED.—The ratio deter2 mined under this paragraph is the ratio, expressed

3 as a percentage, of—

4 ‘‘(A) the excess of—

5 ‘‘(i) the sum of—

6 ‘‘(I) the total tax imposed on the

7 individual’s wages under section

8 3101(a) of the Internal Revenue Code

9 of 1986 (relating to taxes on employ10 ees) for the taxable year ending in the

11 preceding fiscal year, plus

12 ‘‘(II) 50 percent of the total tax

13 imposed on the individual’s self-em14 ployment income under section

15 1401(a) of such Code (relating to tax

16 on self-employment income) for such

17 taxable year, over

18 ‘‘(ii) $250; to

19 ‘‘(B) the total amount of such excess for

20 all such individuals for such fiscal year.

21 ‘‘(4) DEFINITION OF FUND BALANCE.—In this

22 subsection, the term ‘Fund balance’ means the net

23 earnings and net losses from the investment of the

24 sums transferred to the Personal Retirement Sav25 ings Fund in accordance with section 111(b), re-
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1 duced by the appropriate share of the administrative

2 expenses paid out of the net earnings under section

3 112(d), as determined by the Executive Director.

4 ‘‘Subtitle C—Investment and Ad5 ministration of Personal Retire6 ment Accounts

7 ‘‘SEC. 121. INVESTMENT OF PERSONAL RETIREMENT AC8 COUNTS.

9 ‘‘(a) DEFINITIONS.—In this section—

10 ‘‘(1) the term ‘Common Stock Index Investment

11 Fund’ means the Common Stock Index Investment

12 Fund established under subsection (b)(1)(C);

13 ‘‘(2) the term ‘equity capital’ means common

14 and preferred stock, surplus, undivided profits, con15 tingency reserves, and other capital reserves;

16 ‘‘(3) the term ‘Fixed Income Investment Fund’

17 means the Fixed Income Investment Fund estab18 lished under subsection (b)(1)(B);

19 ‘‘(4) the term ‘Government Securities Invest20 ment Fund’ means the Government Securities In21 vestment Fund established under subsection

22 (b)(1)(A);

23 ‘‘(5) the term ‘net worth’ means capital, paid24 in and contributed surplus, unassigned surplus, con-
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1 tingency reserves, group contingency reserves, and

2 special reserves;

3 ‘‘(6) the term ‘plan’ means an employee benefit

4 plan, as defined in section 3(3) of the Employee Re5 tirement Income Security Act of 1974 (29 U.S.C.

6 1002(3));

7 ‘‘(7) the term ‘qualified professional asset man8 ager’ means—

9 ‘‘(A) a bank, as defined in section

10 202(a)(2) of the Investment Advisers Act of

11 1940 (15 U.S.C. 80b–2(a)(2)) which—

12 ‘‘(i) has the power to manage, ac13 quire, or dispose of assets of a plan; and

14 ‘‘(ii) has, as of the last day of its lat15 est fiscal year ending before the date of a

16 determination for the purpose of this

17 clause, equity capital in excess of

18 $1,000,000;

19 ‘‘(B) a savings and loan association, the

20 accounts of which are insured by the Federal

21 Deposit Insurance Corporation, which—

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

23 trust powers to manage, acquire, or dis24 pose of assets of a plan by a State or Gov-
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1 ernment authority having supervision over

2 savings and loan associations; and

3 ‘‘(ii) has, as of the last day of its lat4 est fiscal year ending before the date of a

5 determination for the purpose of this

6 clause, equity capital or net worth in ex7 cess of $1,000,000;

8 ‘‘(C) an insurance company which—

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

10 more than 1 State to manage, acquire, or

11 dispose of any assets of a plan;

12 ‘‘(ii) has, as of the last day of its lat13 est fiscal year ending before the date of a

14 determination for the purpose of this

15 clause, net worth in excess of $1,000,000;

16 and

17 ‘‘(iii) is subject to supervision and ex18 amination by a State authority having su19 pervision over insurance companies; or

20 ‘‘(D) an investment adviser registered

21 under section 203 of the Investment Advisers

22 Act of 1940 (15 U.S.C. 80b–3) if the invest23 ment adviser has, on the last day of its latest

24 fiscal year ending before the date of a deter25 mination for the purpose of this subparagraph,
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1 total client assets under its management and

2 control in excess of $50,000,000, and—

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

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

5 in excess of $750,000; or

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

7 adviser’s liabilities, including any liabilities

8 which may arise by reason of a breach or

9 violation of a duty described in section

10 131, is unconditionally guaranteed by—

11 ‘‘(I) a person (as defined in para12 graph (9)) who directly or indirectly,

13 through 1 or more intermediaries,

14 controls, is controlled by, or is under

15 common control with the investment

16 adviser and who has, on the last day

17 of the person’s latest fiscal year end18 ing before the date of a determination

19 for the purpose of this clause, share20 holder’s or partner’s equity in an

21 amount which, when added to the

22 amount of the shareholder’s or part23 ner’s equity of the investment adviser

24 on such day, exceeds $750,000;
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1 ‘‘(II) a qualified professional

2 asset manager described in subpara3 graph (A), (B), or (C); or

4 ‘‘(III) a broker or dealer reg5 istered under section 15 of the Securi6 ties Exchange Act of 1934 (15 U.S.C.

7 78o) that has, on the last day of the

8 broker’s or dealer’s latest fiscal year

9 ending before the date of a determina10 tion for the purpose of this clause, net

11 worth in excess of $750,000;

12 ‘‘(8) the term ‘shareholder’s or partner’s eq13 uity’, as used in paragraph (7)(D) with respect to an

14 investment adviser or a person (as defined in para15 graph (9)) who is affiliated with the investment ad16 viser in a manner described in clause (ii)(I) of such

17 paragraph, means the equity shown in the most re18 cent balance sheet prepared for such investment ad19 viser or affiliated person, in accordance with gen20 erally accepted accounting principles, within 2 years

21 before the date on which the investment adviser’s

22 status as a qualified professional asset manager is

23 determined for the purposes of this section; and

24 ‘‘(9) the term ‘person’ means an individual,

25 partnership, joint venture, corporation, mutual com-
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1 pany, joint-stock company, trust, estate, unincor2 porated organization, association, or labor organiza3 tion.

4 ‘‘(b) ESTABLISHMENT OF INVESTMENT OPTIONS.—

5 ‘‘(1) INITIAL FUNDS.—The Board shall

6 establish—

7 ‘‘(A) a Government Securities Investment

8 Fund under which sums in the Personal Retire9 ment Savings Fund are invested in securities of

10 the United States Government issued as pro11 vided in subsection (e);

12 ‘‘(B) a Fixed Income Investment Fund

13 under which sums in the Personal Retirement

14 Savings Fund are invested in—

15 ‘‘(i) insurance contracts;

16 ‘‘(ii) certificates of deposits; or

17 ‘‘(iii) other instruments or obligations

18 selected by qualified professional asset

19 managers,

20 that return the amount invested and pay inter21 est, at a specified rate or rates, on that amount

22 during a specified period of time;

23 ‘‘(C) a Common Stock Index Investment

24 Fund as provided in paragraph (3).
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1 ‘‘(2) ADDITIONAL FUNDS.—The Board may ap2 prove diversified, indexed funds that are not de3 scribed in paragraph (1) and that meet such other

4 criteria as the Board may establish for inclusion

5 among the investment choices offered to account

6 holders under this title.

7 ‘‘(3) COMMON STOCK FUND REQUIREMENTS.—

8 ‘‘(A) SELECTION OF INDEX.—The Board

9 shall select an index which is a commonly rec10 ognized index comprised of common stock the

11 aggregate market value of which is a reasonably

12 complete representation of the United States

13 equity markets.

14 ‘‘(B) INVESTMENT IN PORTFOLIO.—The

15 Common Stock Index Investment Fund shall be

16 invested in a portfolio designed to replicate the

17 performance of the index selected under sub18 paragraph (A). The portfolio shall be designed

19 such that, to the extent practicable, the per20 centage of the Common Stock Index Investment

21 Fund that is invested in each stock is the same

22 as the percentage determined by dividing the

23 aggregate market value of all shares of that

24 stock by the aggregate market value of all

25 shares of all stocks included in such index.
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•S 263 IS

1 ‘‘(c) INVESTMENT OF FUND.—

2 ‘‘(1) IN GENERAL.—The Executive Director

3 shall invest the sums available in the Personal Re4 tirement Savings Fund for investment as provided in

5 elections made under subsection (d).

6 ‘‘(2) INVESTMENT IF NO ELECTION.—If an

7 election has not been made with respect to any sums

8 in the Personal Retirement Savings Fund available

9 for investment, the Executive Director shall invest

10 such sums in the Government Securities Investment

11 Fund.

12 ‘‘(d) ELECTION OF INVESTMENTS.—

13 ‘‘(1) TWICE YEARLY.—At least twice each year,

14 an account holder may elect the investment funds

15 referred to in subsection (b) into which the sums in

16 the Personal Retirement Savings Fund credited to

17 such individual’s account are to be invested or rein18 vested.

19 ‘‘(2) REGULATIONS.—An election may be made

20 under paragraph (1) only in accordance with regula21 tions prescribed by the Executive Director and with22 in such period as the Executive Director shall pro23 vide in such regulations.

24 ‘‘(e) GOVERNMENT SECURITIES INVESTMENT

25 FUND.—
30

•S 263 IS

1 ‘‘(1) AUTHORIZATION TO ISSUE CERTAIN OBLI2 GATIONS.—The Secretary of the Treasury is author3 ized to issue special interest-bearing obligations of

4 the United States for purchase by the Personal Re5 tirement Savings Fund for the Government Securi6 ties Investment Fund.

7 ‘‘(2) REQUIREMENTS.—

8 ‘‘(A) IN GENERAL.—Obligations issued for

9 the purpose of this subsection shall have matu10 rities fixed with due regard to the needs of such

11 Fund as determined by the Executive Director,

12 and shall bear interest at a rate equal to the av13 erage market yield (computed by the Secretary

14 of the Treasury on the basis of market

15 quotations as of the end of the calendar month

16 next preceding the date of issue of such obliga17 tions) on all marketable interest-bearing obliga18 tions of the United States then forming a part

19 of the public debt which are not due or callable

20 earlier than 4 years after the end of such cal21 endar month.

22 ‘‘(B) ROUNDING.—Any average market

23 yield computed under subparagraph (A) which

is not a multiple of 1 24 ⁄8 of 1 percent, shall be
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rounded to the nearest multiple of 1 1 ⁄8 of 1 per2 cent.

3 ‘‘(f) LIMITATION ON VOTING RIGHTS.—The Board,

4 other Government agencies, the Executive Director, and

5 an account holder may not exercise voting rights associ6 ated with the ownership of securities by the Personal Re7 tirement Savings Fund.

8 ‘‘SEC. 122. ACCOUNTING AND INFORMATION.

9 ‘‘(a) BALANCE OF PERSONAL RETIREMENT AC10 COUNTS.—

11 ‘‘(1) IN GENERAL.—The balance in an individ12 ual’s account established under section 113 at any

13 time is the excess of—

14 ‘‘(A) the sum of—

15 ‘‘(i) all allocations made to the ac16 count under section 113(b); and

17 ‘‘(ii) the total amount of the alloca18 tions made to and reductions made in the

19 account pursuant to paragraph (2), over

20 ‘‘(B) the amounts paid out of the Personal

21 Retirement Savings Fund with respect to such

22 individual.

23 ‘‘(2) ALLOCATION OF INVESTMENT EARNINGS

24 AND LOSSES.—Pursuant to regulations prescribed by

25 the Executive Director, the Executive Director shall
32

•S 263 IS

1 allocate to each account an amount equal to a pro

2 rata share of the net earnings and net losses from

3 each investment of sums in the Personal Retirement

4 Savings Fund attributable to sums credited to such

5 account, reduced by an appropriate share of the ad6 ministrative expenses paid out of the net earnings

7 under section 112(d), as determined by the Execu8 tive Director.

9 ‘‘(b) ANNUAL, INDEPENDENT AUDITS.—

10 ‘‘(1) DEFINITION.—In this subsection, the term

11 ‘qualified public accountant’ shall have the same

12 meaning as provided in section 103(a)(3)(D) of the

13 Employee Retirement Income Security Act of 1974

14 (29 U.S.C. 1023(a)(3)(D)).

15 ‘‘(2) INDEPENDENT ACCOUNTANT.—The Exec16 utive Director shall annually engage, on behalf of all

17 account holders under this title, an independent

18 qualified public accountant, who shall conduct an ex19 amination of all accounts and other books and

20 records maintained in the administration of this title

21 as the public accountant considers necessary to en22 able the public accountant to make the determina23 tion required by paragraph (3). The examination

24 shall be conducted in accordance with generally ac25 cepted auditing standards and shall involve such
33

•S 263 IS

1 tests of the accounts, books, and records as the pub2 lic accountant considers necessary.

3 ‘‘(3) DETERMINATION REQUIRED.—The public

4 accountant conducting an examination under para5 graph (2) shall determine whether the accounts,

6 books, and records referred to in such paragraph

7 have been maintained in conformity with generally

8 accepted accounting principles applied on a basis

9 consistent with the manner in which such principles

10 were applied during the examination conducted

11 under such paragraph during the preceding year.

12 The public accountant shall transmit to the Board

13 a report on his examination, including his deter14 mination under this paragraph.

15 ‘‘(4) RELIANCE ON ACTUARIAL MATTER.—In

16 making a determination under paragraph (3), a pub17 lic accountant may rely on the correctness of any ac18 tuarial matter certified by an enrolled actuary if the

19 public accountant states his reliance in the report

20 transmitted to the Board under such paragraph.

21 ‘‘(c) STATEMENTS.—

22 ‘‘(1) IN GENERAL.—The Board shall prescribe

23 regulations under which each account holder under

24 this title shall be furnished with—
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1 ‘‘(A) a periodic statement relating to the

2 individual’s account; and

3 ‘‘(B) a summary description of the invest4 ment options under section 121 covering, and

5 an evaluation of, each such option the 5-year

6 period preceding the date as of which such eval7 uation is made.

8 ‘‘(2) TIMING.—Information under this sub9 section shall be provided at least 30 calendar days

10 before the beginning of each election period under

11 section 121(d), and in a manner designed to facili12 tate informed decisionmaking with respect to elec13 tions under section 121.

14 ‘‘(d) ACKNOWLEDGEMENT.—Each account holder

15 who elects to invest in the Common Stock Index Invest16 ment Fund, the Fixed Income Investment Fund, or any

17 other Fund designated by the Board shall sign an ac18 knowledgement prescribed by the Executive Director

19 which states that the account holder understands that an

20 investment in such Fund is made at the account holder’s

21 risk, that the account holder is not protected by the Gov22 ernment against any loss on such investment, and that

23 a return on such investment is not guaranteed by the Gov24 ernment.
35

•S 263 IS

1 ‘‘SEC. 123. DISTRIBUTION OF BENEFITS.

2 ‘‘(a) TIMING OF DISTRIBUTIONS.—Notwithstanding

3 any other provision of law, distributions may only be made

4 from a personal retirement savings account of an individ5 ual on or after the earlier of the date on which the individ6 ual begins receiving old-age benefits under title II or the

7 date of the individual’s death.

8 ‘‘(b) FORM OF DISTRIBUTION.—

9 ‘‘(1) IN GENERAL.—Subject to section 125, an

10 individual is entitled and may elect to withdraw from

11 the Personal Retirement Savings Fund the balance

12 of the individual’s personal retirement savings ac13 count as—

14 ‘‘(A) an annuity; or

15 ‘‘(B) substantially equal payments to be

16 made over a period not greater than the life ex17 pectancy of the individual or the joint life

18 expectancies of the individual and the individ19 ual’s designated beneficiary.

20 ‘‘(2) LUMP-SUM REQUIRED FOR MINIMUM

21 AMOUNTS.—Notwithstanding paragraph (1), if the

22 balance in an individual’s personal retirement sav23 ings account is below such minimum amount as the

24 Board, by regulation, shall establish, the account

25 shall be distributed in a single lump-sum payment.

26 ‘‘(c) CHANGE OF ELECTION OF DISTRIBUTION.—
36

•S 263 IS

1 ‘‘(1) IN GENERAL.—Subject to paragraph (2)

2 and subsections (a) and (c) of section 125, an ac3 count holder may change an election previously

4 made under this section.

5 ‘‘(2) LIMITATION.—An account holder may not

6 change an election under this section on or after the

7 date on which a payment is made in accordance with

8 such election or, in the case of an election to receive

9 an annuity, the date on which an annuity contract

10 is purchased to provide for the annuity elected by

11 the account holder.

12 ‘‘(d) RULES IF NO ELECTION.—If an account holder

13 dies without having made an election under this section

14 or after having elected an annuity under this section but

15 before making an election under section 124, an amount

16 equal to the value of that individual’s account (as of

17 death) shall, subject to any decree, order, or agreement

18 referred to in section 125(c)(2), be paid in a manner con19 sistent with section 126(b).

20 ‘‘SEC. 124. ANNUITIES: METHODS OF PAYMENT; ELECTION;

21 PURCHASE.

22 ‘‘(a) METHODS OF PAYMENT.—

23 ‘‘(1) IN GENERAL.—The Board shall prescribe

24 methods of payment of annuities under this title.
37

•S 263 IS

1 ‘‘(2) REQUIREMENTS.—The methods of pay2 ment prescribed under paragraph (1) shall include—

3 ‘‘(A) a method that provides for the pay4 ment of a monthly annuity only to an annuitant

5 during the life of the annuitant;

6 ‘‘(B) a method that provides for the pay7 ment of a monthly annuity to an annuitant for

8 the joint lives of the annuitant and the spouse

9 of the annuitant and an appropriate monthly

10 annuity to the one of them who survives the

11 other of them for the life of the survivor;

12 ‘‘(C) a method described in subparagraph

13 (A) that provides for automatic adjustments in

14 the amount of the annuity payable so long as

15 the amount of the annuity payable in any 1

16 year shall not be less than the amount payable

17 in the previous year;

18 ‘‘(D) a method described in subparagraph

19 (B) that provides for automatic adjustments in

20 the amount of the annuity payable so long as

21 the amount of the annuity payable in any 1

22 year shall not be less than the amount payable

23 in the previous year; and

24 ‘‘(E) a method which provides for the pay25 ment of a monthly annuity—
38

•S 263 IS

1 ‘‘(i) to the annuitant for the joint lives

2 of the annuitant and an individual who is

3 designated by the annuitant under regula4 tions prescribed by the Executive Director

5 and—

6 ‘‘(I) is a former spouse of the an7 nuitant; or

8 ‘‘(II) has an insurable interest in

9 the annuitant; and

10 ‘‘(ii) to the one of them who survives

11 the other of them for the life of the sur12 vivor.

13 ‘‘(b) TIMING.—Subject to section 125(b), under such

14 regulations as the Executive Director shall prescribe, an

15 account holder who elects under section 123 to receive an

16 annuity under this title shall elect, on or before the date

17 on which an annuity contract is purchased to provide for

18 that annuity, one of the methods of payment prescribed

19 under subsection (a).

20 ‘‘(c) ELIMINATION OF METHODS.—Notwithstanding

21 the elimination of a method of payment by the Board, an

22 account holder may elect the eliminated method if the

23 elimination of such method becomes effective less than 5

24 years before the date on which that account holder’s annu25 ity commences.
39

•S 263 IS

1 ‘‘(d) PURCHASE REQUIREMENTS.—

2 ‘‘(1) TIMING.—Not earlier than 90 days (or

3 such shorter period as the Executive Director may

4 by regulation prescribe) before an annuity is to com5 mence under this title, the Executive Director shall

6 expend the balance in the annuitant’s account to

7 purchase an annuity contract from any entity which,

8 in the normal course of its business, sells and pro9 vides annuities.

10 ‘‘(2) COMPLIANCE WITH PROGRAM REQUIRE11 MENTS.—The Executive Director shall ensure, by

12 contract entered into with each entity from which an

13 annuity contract is purchased under paragraph (1),

14 that the annuity shall be provided in accordance

15 with the provisions of this title.

16 ‘‘(3) ADDITIONAL TERMS AND CONDITIONS.—

17 An annuity contract purchased under paragraph (1)

18 shall include such terms and conditions as the Exec19 utive Director requires for the protection of the an20 nuitant.

21 ‘‘(4) BONDING REQUIREMENTS.—The Executive

22 Director shall require, from each entity from which

23 an annuity contract is purchased under paragraph

24 (1), a bond or proof of financial responsibility suffi25 cient to protect the annuitant.
40

•S 263 IS

1 ‘‘(e) NONAPPLICATION OF STATE TAX.—

2 ‘‘(1) IN GENERAL.—No tax, fee, or other mone3 tary payment may be imposed or collected by any

4 State, the District of Columbia, or the Common5 wealth of Puerto Rico, or by any political subdivision

6 or other governmental authority thereof, on, or with

7 respect to, any amount paid to purchase an annuity

8 contract under this section.

9 ‘‘(2) RULE OF CONSTRUCTION.—Paragraph (1)

10 shall not be construed to exempt any company or

11 other entity issuing an annuity contract under this

12 section from the imposition, payment, or collection

13 of a tax, fee, or other monetary payment on the net

14 income or profit accruing to or realized by that en15 tity from the sale of an annuity contract under this

16 section if that tax, fee, or payment is applicable to

17 a broad range of business activity.

18 ‘‘SEC. 125. PROTECTIONS FOR SPOUSES AND FORMER

19 SPOUSES.

20 ‘‘(a) LIMITATION ON WITHDRAWALS.—

21 ‘‘(1) APPLICATION OF REQUIREMENTS.—

22 ‘‘(A) IN GENERAL.—A married account

23 holder may withdraw all or part of a personal

24 retirement savings account under section 123 or

25 change a withdrawal election only if the account
41

•S 263 IS

1 holder satisfies the requirements of subpara2 graph (B).

3 ‘‘(B) JOINT WRITTEN WAIVER.—An ac4 count holder may make an election or change

5 referred to in subparagraph (A) if the account

6 holder and the account holder’s spouse jointly

7 waive, by written election, any right that the

8 spouse may have to a survivor annuity with re9 spect to such account holder under section 124

10 or subsection (b).

11 ‘‘(2) EXCEPTION.—Paragraph (1) shall not

12 apply to an election or change of election by an ac13 count holder who establishes to the satisfaction of

14 the Executive Director (at the time of the election

15 or change and in accordance with regulations pre16 scribed by the Executive Director)—

17 ‘‘(A) that the spouse’s whereabouts cannot

18 be determined; or

19 ‘‘(B) that, due to exceptional cir20 cumstances, requiring the spouse’s waiver would

21 otherwise be inappropriate.

22 ‘‘(b) METHOD OF ANNUITY.—

23 ‘‘(1) SURVIVOR ANNUITIES.—Notwithstanding

24 any election under section 124(b), the method de25 scribed in section 124(a)(2)(B) (or, if more than one
42

•S 263 IS

1 form of such method is available, the form that the

2 Board determines to be the one that for a surviving

3 spouse a survivor annuity most closely approximat4 ing the annuity of a surviving spouse under section

5 8442 of title 5, United States Code) shall be deemed

6 the applicable method under section 124(b) in the

7 case of an account holder who is married on the date

8 on which an annuity contract is purchased to pro9 vide for the account holder’s annuity under this title.

10 ‘‘(2) EXCEPTIONS.—Paragraph (1) shall not

11 apply if—

12 ‘‘(A) a joint waiver of such method is

13 made, in writing, by the account holder and the

14 spouse; or

15 ‘‘(B) the account holder waives such meth16 od, in writing, after establishing to the satisfac17 tion of the Executive Director that cir18 cumstances described under subparagraph (A)

19 or (B) of subsection (a)(2) make the require20 ment of a joint waiver inappropriate.

21 ‘‘(c) NONAPPLICATION OF ELECTION.—

22 ‘‘(1) IN GENERAL.—An election or change of

23 election shall not be effective under this title to the

24 extent that the election, change, or transfer conflicts
43

•S 263 IS

1 with any court decree, order, or agreement described

2 in paragraph (2).

3 ‘‘(2) COURT DECREE, ORDER, OR AGREEMENT

4 DESCRIBED.—A court decree, order, or agreement

5 described in this paragraph is, with respect to an ac6 count holder, a court decree of divorce, annulment,

7 or legal separation issued in the case of such ac8 count holder and any former spouse of the account

9 holder or any court order or court-approved property

10 settlement agreement incident to such decree if—

11 ‘‘(A) the decree, order, or agreement ex12 pressly relates to any portion of the balance in

13 the individual’s personal retirement savings ac14 count; and

15 ‘‘(B) notice of the decree, order, or agree16 ment was received by the Executive Director

17 before—

18 ‘‘(i) the date on which payment is

19 made, or

20 ‘‘(ii) in the case of an annuity, the

21 date on which an annuity contract is pur22 chased to provide for the annuity,

23 in accordance with the election, change, or con24 tribution referred to in paragraph (1).
44

•S 263 IS

1 ‘‘(3) 2 OR MORE CASES.—The Executive Direc2 tor shall prescribe regulations under which this sub3 section shall be applied in any case in which the Ex4 ecutive Director receives 2 or more decrees, orders,

5 or agreements referred to in paragraph (1).

6 ‘‘(d) PROCEDURES FOR WAIVERS.—Waivers and no7 tifications required by this section and waivers of the re8 quirements for such waivers and notifications (as author9 ized by this section) may be made only in accordance with

10 procedures prescribed by the Executive Director.

11 ‘‘(e) NONAPPLICATION.—None of the provisions of

12 this section requiring notification to, or the consent or

13 waiver of, a spouse or former spouse of an account holder

14 shall apply in any case in which the account balance of

15 the individual is equal to or less than such amount as the

16 Board, by regulation, shall prescribe.

17 ‘‘SEC. 126. DESIGNATION OF BENEFICIARY; ORDER OF

18 PRECEDENCE.

19 ‘‘(a) DESIGNATION OF BENEFICIARIES.—Under reg20 ulations prescribed by the Board, an account holder may

21 designate 1 or more beneficiaries under this section.

22 ‘‘(b) PAYMENTS.—

23 ‘‘(1) IN GENERAL.—Benefits authorized to be

24 paid to an account holder to individuals surviving
45

•S 263 IS

1 the account holder and alive at the time of distribu2 tion shall be made according to the following:

3 ‘‘(A) First, to the beneficiary or bene4 ficiaries designated by the account holder in a

5 signed and witnessed writing received by the

6 Executive Director before the death of such ac7 count holder. For this purpose, a designation,

8 change, or cancellation of beneficiary in a will

9 or other document not so executed and filed has

10 no force or effect.

11 ‘‘(B) Second, if there is no designated ben12 eficiary, to the widow or widower of the account

13 holder.

14 ‘‘(C) Third, if none of the above, to the

15 child or children of the account holder and de16 scendants of deceased children by representa17 tion.

18 ‘‘(D) Fourth, if none of the above, to the

19 parents of the account holder or the survivor of

20 them.

21 ‘‘(E) Fifth, if none of the above, to the

22 duly appointed executor or administrator of the

23 estate of the account holder.

24 ‘‘(F) Sixth, if none of the above, to such

25 other next of kin of the account holder as the
46

•S 263 IS

1 Board determines to be entitled under the laws

2 of the domicile of the account holder at the date

3 of death of the account holder.

4 ‘‘(2) BAR ON OTHER RECOVERIES.—A payment

5 made in accordance with paragraph (1) shall bar

6 any other recovery by—

7 ‘‘(A) the individual receiving the payment;

8 and

9 ‘‘(B) any other individual.

10 ‘‘(3) DEFINITION OF CHILD.—In this section,

11 the term ‘child’ includes a natural child and an

12 adopted child, but does not include a stepchild.

13 ‘‘(c) TERMINATION OF AN ANNUITY.—Any annuity

14 accrued and unpaid on the termination, except by death,

15 of the annuity of an annuitant or survivor shall be paid

16 to that individual. Annuity accrued and unpaid on the

17 death of a survivor shall be paid in the following order

18 of precedence, and the payment bars recovery by any other

19 person:

20 ‘‘(1) First, to the duly appointed executor or

21 administrator of the estate of the survivor.

22 ‘‘(2) Second, if there is no executor or adminis23 trator, payment may be made, after 30 days from

24 the date of death of the survivor, to such next of kin

25 of the survivor as the Board determines to be enti-
47

•S 263 IS

1 tled under the laws of the domicile of the survivor

2 at the date of death.

3 ‘‘SEC. 127. TAX TREATMENT OF THE PERSONAL RETIRE4 MENT SAVINGS FUND.

5 ‘‘For purposes of the Internal Revenue Code of

6 1986—

7 ‘‘(1) the Personal Retirement Savings Fund

8 shall be treated as a trust described in section

9 401(a) of such Code that is exempt from taxation

10 under section 501(a) of such Code;

11 ‘‘(2) any contribution to, or distribution from,

12 such Fund shall be treated in the same manner as

13 contributions to or distributions from such a trust;

14 and

15 ‘‘(3) allocations made to an account holder’s

16 personal retirement savings account shall not be

17 treated as distributed or made available to the ac18 count holder.

19 ‘‘SEC. 128. ADMINISTRATIVE PROVISIONS.

20 ‘‘(a) DUTY OF EXECUTIVE DIRECTOR.—The Execu21 tive Director shall make or provide for payments and

22 transfers in accordance with an election of an account

23 holder under section 123 or 124(b) or, if applicable, in

24 accordance with section 125.
48

•S 263 IS

1 ‘‘(b) WRITTEN REQUIREMENTS.—Any election,

2 change of election, or modification of a deferred annuity

3 commencement date made under this title shall be in writ4 ing and shall be filed with the Executive Director in ac5 cordance with regulations prescribed by the Executive Di6 rector.

7 ‘‘Subtitle D—Beneficiary

8 Protections

9 ‘‘SEC. 131. FIDUCIARY RESPONSIBILITIES; LIABILITY AND

10 PENALTIES.

11 ‘‘(a) DEFINITIONS.—For the purposes of this

12 section—

13 ‘‘(1) the term ‘account’ is not limited to the

14 personal retirement savings account established for

15 an individual under section 113;

16 ‘‘(2) the term ‘adequate consideration’ means—

17 ‘‘(A) in the case of a security for which

18 there is a generally recognized market—

19 ‘‘(i) the price of the security prevail20 ing on a national securities exchange that

21 is registered under section 6 of the Securi22 ties Exchange Act of 1934 (15 U.S.C.

23 78f); or

24 ‘‘(ii) if the security is not traded on

25 such a national securities exchange, a price
49

•S 263 IS

1 not less favorable to the Personal Retire2 ment Savings Fund than the offering price

3 for the security as established by the cur4 rent bid and asked prices quoted by per5 sons independent of the issuer and of any

6 party in interest; and

7 ‘‘(B) in the case of an asset other than a

8 security for which there is a generally recog9 nized market, the fair market value of the asset

10 as determined in good faith by a fiduciary or fi11 duciaries in accordance with regulations pre12 scribed by the Secretary of Labor;

13 ‘‘(3) the term ‘fiduciary’ means—

14 ‘‘(A) a member of the Board;

15 ‘‘(B) the Executive Director;

16 ‘‘(C) any person who has or exercises dis17 cretionary authority or discretionary control

18 over the management or disposition of the as19 sets of the Personal Retirement Savings Fund;

20 and

21 ‘‘(D) any person who, with respect to the

22 Personal Retirement Savings Fund, is described

23 in section 3(21)(A) of the Employee Retirement

24 Income Security Act of 1974 (29 U.S.C.

25 1002(21)(A)); and
50

•S 263 IS

1 ‘‘(4) the term ‘party in interest’ includes—

2 ‘‘(A) any fiduciary;

3 ‘‘(B) any counsel to a person who is a fi4 duciary, with respect to the actions of such per5 son as a fiduciary;

6 ‘‘(C) any individual for which a personal

7 retirement account is established under section

8 113;

9 ‘‘(D) any person providing services to the

10 Board and, with respect to the actions of the

11 Executive Director as a fiduciary, any person

12 providing services to the Executive Director;

13 ‘‘(E) a spouse, sibling, ancestor, lineal de14 scendant, or spouse of a lineal descendant of a

15 person described in subparagraph (A), (B), or

16 (D);

17 ‘‘(F) a corporation, partnership, or trust or

18 estate of which, or in which, at least 50 percent

19 of—

20 ‘‘(i) the combined voting power of all

21 classes of stock entitled to vote or the total

22 value of shares of all classes of stock of

23 such corporation;

24 ‘‘(ii) the capital interest or profits in25 terest of such partnership; or
51

•S 263 IS

1 ‘‘(iii) the beneficial interest of such

2 trust or estate;

3 is owned directly or indirectly, or held by a per4 son described in subparagraph (A), (B), or (D);

5 ‘‘(G) an official (including a director) of,

6 or an individual employed by, a person de7 scribed in subparagraph (A), (B), (D), or (F),

8 or an individual having powers or responsibil9 ities similar to those of such an official;

10 ‘‘(H) a holder (directly or indirectly) of at

11 least 10 percent of the shares in a person de12 scribed in any subparagraph referred to in sub13 paragraph (G); and

14 ‘‘(I) a person who, directly or indirectly, is

15 at least a 10 percent partner or joint venturer

16 (measured in capital or profits) in a person de17 scribed in any subparagraph referred to in sub18 paragraph (G).

19 ‘‘(b) DISCHARGE OF RESPONSIBILITIES.—

20 ‘‘(1) IN GENERAL.—To the extent not inconsist21 ent with the provisions of this title and the policies

22 prescribed by the Board, a fiduciary shall discharge

23 his or her responsibilities with respect to the Per24 sonal Retirement Savings Fund or any applicable
52

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1 portion thereof solely in the interest of the account

2 holders and beneficiaries of such Fund and—

3 ‘‘(A) for the exclusive purpose of—

4 ‘‘(i) providing benefits to such account

5 holders and beneficiaries; and

6 ‘‘(ii) defraying reasonable expenses of

7 administering the Personal Retirement

8 Savings Fund or applicable portions there9 of;

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

11 diligence under the circumstances then prevail12 ing that a prudent individual acting in a like

13 capacity and familiar with such matters would

14 use in the conduct of an enterprise of a like

15 character and with like objectives; and

16 ‘‘(C) to the extent permitted by section

17 121, by diversifying the investments of the Per18 sonal Retirement Savings Fund or applicable

19 portions thereof so as to minimize the risk of

20 large losses, unless under the circumstances it

21 is clearly prudent not to do so.

22 ‘‘(2) LIMITATION ON OWNERSHIP.—No fidu23 ciary may maintain the indicia of ownership of any

24 assets of the Personal Retirement Savings Fund out-
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1 side the jurisdiction of the district courts of the

2 United States.

3 ‘‘(c) LIMITATIONS ON TRANSACTIONS.—

4 ‘‘(1) PROHIBITED TRANSACTIONS.—A fiduciary

5 shall not permit the Personal Retirement Savings

6 Fund to engage in any of the following transactions,

7 except in exchange for adequate consideration:

8 ‘‘(A) A transfer of any assets of the Per9 sonal Retirement Savings Fund to any person

10 the fiduciary knows or should know to be a

11 party in interest or the use of such assets by

12 any such person.

13 ‘‘(B) An acquisition of any property from

14 or sale of any property to the Personal Retire15 ment Savings Fund by any person the fiduciary

16 knows or should know to be a party in interest.

17 ‘‘(C) A transfer or exchange of services be18 tween the Personal Retirement Savings Fund

19 and any person the fiduciary knows or should

20 know to be a party in interest.

21 ‘‘(2) OTHER PROHIBITIONS.—Notwithstanding

22 paragraph (1), a fiduciary with respect to the Per23 sonal Retirement Savings Fund shall not—
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1 ‘‘(A) deal with any assets of the Personal

2 Retirement Savings Fund in his or her own in3 terest or for his or her own account;

4 ‘‘(B) act, in an individual capacity or any

5 other capacity, in any transaction involving the

6 Personal Retirement Savings Fund on behalf of

7 a party, or representing a party, whose inter8 ests are adverse to the interests of the Personal

9 Retirement Savings Fund or the interests of the

10 account holders and beneficiaries of such Fund;

11 or

12 ‘‘(C) receive any consideration for his or

13 her own personal account from any party deal14 ing with sums credited to the Personal Retire15 ment Savings Fund in connection with a trans16 action involving assets of the Personal Retire17 ment Savings Fund.

18 ‘‘(3) EXEMPTION BY THE SECRETARY OF

19 LABOR.—

20 ‘‘(A) IN GENERAL.—The Secretary of

21 Labor may, in accordance with procedures

22 which the Secretary shall by regulation pre23 scribe, grant a conditional or unconditional ex24 emption of any fiduciary or transaction, or class
55

•S 263 IS

1 of fiduciaries or transactions, from all or part

2 of the restrictions imposed by paragraph (2).

3 ‘‘(B) NONAPPLICATION TO OTHER APPLI4 CABLE PROVISIONS.—An exemption granted

5 under this paragraph shall not relieve a fidu6 ciary from any other applicable provision of this

7 title.

8 ‘‘(C) REQUIREMENTS.—The Secretary of

9 Labor may not grant an exemption under this

10 paragraph unless the Secretary finds that such

11 exemption is—

12 ‘‘(i) administratively feasible;

13 ‘‘(ii) in the interests of the Personal

14 Retirement Savings Fund and of the ac15 count holders and beneficiaries of such

16 Fund; and

17 ‘‘(iii) protective of the rights of such

18 account holders and beneficiaries.

19 ‘‘(D) NOTICE.—An exemption under this

20 paragraph may not be granted unless—

21 ‘‘(i) notice of the proposed exemption

22 is published in the Federal Register;

23 ‘‘(ii) interested persons are given an

24 opportunity to present views; and
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•S 263 IS

1 ‘‘(iii) the Secretary of Labor affords

2 an opportunity for a hearing and makes a

3 determination on the record with respect to

4 the respective requirements of clauses (i),

5 (ii), and (iii) of subparagraph (C).

6 ‘‘(E) ERISA EXEMPTIONS.—Notwith7 standing subparagraph (D), the Secretary of

8 Labor may determine that an exemption grant9 ed for any class of fiduciaries or transactions

10 under section 408(a) of the Employee Retire11 ment Income Security Act of 1974 (29 U.S.C.

12 1108(a)) shall, upon publication of notice in the

13 Federal Register under this subparagraph, con14 stitute an exemption for purposes of the provi15 sions of paragraph (2).

16 ‘‘(d) BENEFITS AND COMPENSATION.—This section

17 does not prohibit any fiduciary from—

18 ‘‘(1) receiving any benefit that the fiduciary is

19 entitled to receive under this title as a beneficiary of

20 the Personal Retirement Savings Fund;

21 ‘‘(2) receiving any reasonable compensation au22 thorized by this title for services rendered, or for re23 imbursement of expenses properly and actually in24 curred, in the performance of the fiduciary’s duties

25 under this title; or
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•S 263 IS

1 ‘‘(3) serving as a fiduciary in addition to being

2 an officer, employee, agent, or other representative

3 of a party in interest.

4 ‘‘(e) BREACH OF DUTIES.—

5 ‘‘(1) PERSONAL LIABILITY.—

6 ‘‘(A) IN GENERAL.—Any fiduciary that

7 breaches the responsibilities, duties, and obliga8 tions set out in subsection (b) or violates sub9 section (c) shall be personally liable to the Per10 sonal Retirement Savings Fund for any losses

11 to such Fund resulting from each such breach

12 or violation and to restore to such Fund any

13 profits made by the fiduciary through use of as14 sets of such Fund by the fiduciary, and shall be

15 subject to such other equitable or remedial re16 lief as a court considers appropriate, except as

17 provided in paragraphs (3) and (4). A fiduciary

18 may be removed for a breach referred to in the

19 preceding sentence.

20 ‘‘(B) CIVIL PENALTIES.—The Secretary of

21 Labor may assess a civil penalty against a

22 party in interest with respect to each trans23 action that is engaged in by the party in inter24 est and is prohibited by subsection (c). The

25 amount of such penalty shall be equal to 5 per-
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•S 263 IS

1 cent of the amount involved in each such trans2 action (as defined in section 4975(f)(4) of the

3 Internal Revenue Code of 1986) for each year

4 or part thereof during which the prohibited

5 transaction continues, except that, if the trans6 action is not corrected (in such manner as the

7 Secretary of Labor shall prescribe by regulation

8 consistent with section 4975(f)(5) of such

9 Code) within 90 days after the date the Sec10 retary of Labor transmits notice to the party in

11 interest (or such longer period as the Secretary

12 of Labor may permit), such penalty may be in

13 an amount not more than 100 percent of the

14 amount involved.

15 ‘‘(C) ACTS COMMITTED PRIOR TO OR

16 AFTER SERVICE.—A fiduciary shall not be liable

17 under subparagraph (A) with respect to a

18 breach of fiduciary duty under subsection (b)

19 committed before becoming a fiduciary or after

20 ceasing to be a fiduciary.

21 ‘‘(D) JOINT AND SEVERAL LIABILITY.—A

22 fiduciary shall be jointly and severally liable

23 under subparagraph (A) for a breach of fidu24 ciary duty under subsection (b) by another fidu25 ciary only if—
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1 ‘‘(i) the fiduciary participates know2 ingly in, or knowingly undertakes to con3 ceal, an act or omission of such other fidu4 ciary, knowing such act or omission is such

5 a breach;

6 ‘‘(ii) by the fiduciary’s failure to com7 ply with subsection (b) in the administra8 tion of the fiduciary’s specific responsibil9 ities that give rise to the fiduciary status,

10 the fiduciary has enabled such other fidu11 ciary to commit such a breach; or

12 ‘‘(iii) the fiduciary has knowledge of a

13 breach by such other fiduciary, unless the

14 fiduciary makes reasonable efforts under

15 the circumstances to remedy the breach.

16 ‘‘(E) REGULATIONS.—The Secretary of

17 Labor shall prescribe, in regulations, procedures

18 for allocating fiduciary responsibilities among

19 fiduciaries, including investment managers. Any

20 fiduciary who, pursuant to such procedures, al21 locates to a person or persons any fiduciary re22 sponsibility shall not be liable for an act or

23 omission of such person or persons unless—

24 ‘‘(i) such fiduciary violated subsection

25 (b) with respect to the allocation, with re-
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•S 263 IS

1 spect to the implementation of the proce2 dures prescribed by the Secretary of Labor

3 (or the Board), or in continuing such allo4 cation; or

5 ‘‘(ii) such fiduciary would otherwise

6 be liable in accordance with subparagraph

7 (D).

8 ‘‘(2) REQUIREMENTS FOR CIVIL ACTIONS.—

9 ‘‘(A) IN GENERAL.—No civil action may be

10 maintained against any fiduciary with respect

11 to the responsibilities, liabilities, and penalties

12 authorized or provided for in this section except

13 in accordance with subparagraphs (B) and (C).

14 ‘‘(B) JURISDICTION.—A civil action may

15 be brought in the district courts of the United

16 States—

17 ‘‘(i) by the Secretary of Labor against

18 any fiduciary other than a Member of the

19 Board or the Executive Director of the

20 Board—

21 ‘‘(I) to determine and enforce a

22 liability under paragraph (1)(A);

23 ‘‘(II) to collect any civil penalty

24 under paragraph (1)(B);
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•S 263 IS

1 ‘‘(III) to enjoin any act or prac2 tice that violates any provision of sub3 section (b) or (c);

4 ‘‘(IV) to obtain any other appro5 priate equitable relief to redress a vio6 lation of any such provision; or

7 ‘‘(V) to enjoin any act or practice

8 that violates subsection (g)(3) or (i) of

9 section 101;

10 ‘‘(ii) by any beneficiary or fiduciary

11 against any fiduciary—

12 ‘‘(I) to enjoin any act or practice

13 that violates any provision of sub14 section (b) or (c);

15 ‘‘(II) to obtain any other appro16 priate equitable relief to redress a vio17 lation of any such provision; or

18 ‘‘(III) to enjoin any act or prac19 tice that violates subsection (g)(3) or

20 (i) of section 101; or

21 ‘‘(iii) by any beneficiary or fiduciary—

22 ‘‘(I) to recover benefits of the

23 beneficiary under the provisions of

24 this title, to enforce any right of the

25 beneficiary under such provisions, or
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•S 263 IS

1 to clarify any such right to future

2 benefits under such provisions; or

3 ‘‘(II) to enforce any claim other4 wise cognizable under sections

5 1346(b) and 2671 through 2680 of

6 title 28, United States Code, provided

7 that the remedy against the United

8 States provided by sections 1346(b)

9 and 2672 of such title for damages

10 for injury or loss of property caused

11 by the negligent or wrongful act or

12 omission of any fiduciary while acting

13 within the scope of his duties or em14 ployment shall be exclusive of any

15 other civil action or proceeding by the

16 beneficiary for recovery of money by

17 reason of the same subject matter

18 against the fiduciary (or the estate of

19 such fiduciary) whose act or omission

20 gave rise to such action or proceeding,

21 whether or not such action or proceed22 ing is based on an alleged violation of

23 subsection (b) or (c).

24 ‘‘(C) LEGAL REPRESENTATION.—
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•S 263 IS

1 ‘‘(i) DEPARTMENT OF LABOR.—In all

2 civil actions under subparagraph (B)(i), at3 torneys appointed by the Secretary of

4 Labor may represent the Secretary (except

5 as provided in section 518(a) of title 28,

6 United States Code), however all such liti7 gation shall be subject to the direction and

8 control of the Attorney General.

9 ‘‘(ii) DEPARTMENT OF JUSTICE.—The

10 Attorney General shall defend any civil ac11 tion or proceeding brought in any court

12 against any fiduciary referred to in sub13 paragraph (B)(iii)(II) (or the estate of

14 such fiduciary) for any such injury. Any fi15 duciary against whom such a civil action or

16 proceeding is brought shall deliver, within

17 such time after date of service or knowl18 edge of service as determined by the Attor19 ney General, all process served upon such

20 fiduciary (or an attested copy thereof) to

21 the Executive Director of the Board, who

22 shall promptly furnish copies of the plead23 ing and process to the Attorney General

24 and the United States Attorney for the dis-
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•S 263 IS

1 trict wherein the action or proceeding is

2 brought.

3 ‘‘(iii) REMOVAL.—Upon certification

4 by the Attorney General that a fiduciary

5 described in subparagraph (B)(iii)(II) was

6 acting in the scope of such fiduciary’s du7 ties or employment as a fiduciary at the

8 time of the occurrence or omission out of

9 which the action arose, any such civil ac10 tion or proceeding commenced in a State

11 court shall be—

12 ‘‘(I) removed without bond at

13 any time before trial by the Attorney

14 General to the district court of the

15 United States for the district and di16 vision in which it is pending; and

17 ‘‘(II) deemed a tort action

18 brought against the United States

19 under the provisions of title 28,

20 United States Code, and all references

21 thereto.

22 ‘‘(iv) SETTLEMENT.—The Attorney

23 General may compromise or settle any

24 claim asserted in such civil action or pro25 ceeding in the manner provided in section
65

•S 263 IS

1 2677 of title 28, United States Code, and

2 with the same effect. To the extent section

3 2672 of such title provides that persons

4 other than the Attorney General or his

5 designee may compromise and settle

6 claims, and that payment of such claims

7 may be made from agency appropriations,

8 such provisions shall not apply to claims

9 based upon an alleged violation of sub10 section (b) or (c).

11 ‘‘(v) NONAPPLICATION OF PROVI12 SION.—For the purposes of subparagraph

13 (B)(iii)(II), the provisions of section

14 2680(h) of title 28, United States Code,

15 shall not apply to any claim based upon an

16 alleged violation of subsection (b) or (c).

17 ‘‘(vi) PAYMENT.—Notwithstanding

18 sections 1346(b) and 2671 through 2680

19 of title 28, United States Code, whenever

20 an award, compromise, or settlement is

21 made under such sections upon any claim

22 based upon an alleged violation of sub23 section (b) or (c), payment of such award,

24 compromise, or settlement shall be made to

25 the appropriate account within the Per-
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•S 263 IS

1 sonal Retirement Savings Fund, or where

2 there is no such appropriate account, to

3 the beneficiary bringing the claim.

4 ‘‘(vii) LIMITATION ON DEFINITION OF

5 FIDUCIARY.—For purposes of subpara6 graph (B)(iii)(II), fiduciary includes only

7 the members of the Board and the Board’s

8 Executive Director.

9 ‘‘(D) LIMITATION ON RECOVERY.—Any re10 lief awarded against a member of the Board or

11 the Executive Director of the Board in a civil

12 action authorized by subparagraph (B) may not

13 include any monetary damages or any other re14 covery of money.

15 ‘‘(E) LIMITATION ON COMMENCEMENT OF

16 ACTIONS.—An action may not be commenced

17 under subparagraph (B) with respect to a fidu18 ciary’s breach of any responsibility, duty, or ob19 ligation under subsection (b) or a violation of

20 subsection (c) after the earlier of—

21 ‘‘(i) 6 years after—

22 ‘‘(I) the date of the last action

23 that constituted a part of the breach

24 or violation; or
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•S 263 IS

1 ‘‘(II) in the case of an omission,

2 the latest date on which the fiduciary

3 could have cured the breach or viola4 tion; or

5 ‘‘(ii) 3 years after the earliest date on

6 which the plaintiff had actual knowledge of

7 the breach or violation, except that, in the

8 case of fraud or concealment, such action

9 may be commenced not later than 6 years

10 after the date of discovery of such breach

11 or violation.

12 ‘‘(F) EXCLUSIVE JURISDICTION.—

13 ‘‘(i) IN GENERAL.—The district courts

14 of the United States shall have exclusive

15 jurisdiction of civil actions under this sub16 section.

17 ‘‘(ii) VENUE.—An action under this

18 subsection may be brought in the District

19 Court of the United States for the District

20 of Columbia or a district court of the

21 United States in the district where the

22 breach alleged in the complaint or petition

23 filed in the action took place or in the dis24 trict where a defendant resides or may be

25 found. Process may be served in any other
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•S 263 IS

1 district where a defendant resides or may

2 be found.

3 ‘‘(G) FILING OF COMPLAINT.—

4 ‘‘(i) SERVICE.—A copy of the com5 plaint or petition filed in any action

6 brought under this subsection (other than

7 by the Secretary of Labor) shall be served

8 on the Executive Director, the Secretary of

9 Labor, and the Secretary of the Treasury

10 by certified mail.

11 ‘‘(ii) INTERVENTION.—Any officer re12 ferred to in clause (i) of this subparagraph

13 shall have the right in his or her discretion

14 to intervene in any action. If the Secretary

15 of Labor brings an action under this para16 graph on behalf of a beneficiary, the officer

17 shall notify the Executive Director and the

18 Secretary of the Treasury.

19 ‘‘(f) REGULATIONS.—The Secretary of Labor may

20 prescribe regulations to carry out this section.

21 ‘‘(g) AUDITS.—

22 ‘‘(1) IN GENERAL.—The Secretary of Labor

23 shall establish a program to carry out audits to de24 termine the level of compliance with the require-
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•S 263 IS

1 ments of this section relating to fiduciary respon2 sibilities and prohibited activities of fiduciaries.

3 ‘‘(2) CONDUCT.—An audit under this sub4 section may be conducted by the Secretary of Labor,

5 by contract with a qualified nongovernmental organi6 zation, or in cooperation with the Comptroller Gen7 eral of the United States, as the Secretary considers

8 appropriate.

9 ‘‘SEC. 132. BONDING.

10 ‘‘(a) REQUIREMENT.—

11 ‘‘(1) IN GENERAL.—Except as provided in para12 graph (2), each fiduciary and each person who han13 dles funds or property of the Personal Retirement

14 Savings Fund shall be bonded as provided in this

15 section.

16 ‘‘(2) EXCEPTIONS.—

17 ‘‘(A) IN GENERAL.—Bond shall not be re18 quired of a fiduciary (or of any officer or em19 ployee of such fiduciary) if such fiduciary—

20 ‘‘(i) is a corporation organized and

21 doing business under the laws of the

22 United States or of any State;

23 ‘‘(ii) is authorized under such laws to

24 exercise trust powers or to conduct an in25 surance business;
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•S 263 IS

1 ‘‘(iii) is subject to supervision or ex2 amination by Federal or State authority;

3 and

4 ‘‘(iv) has at all times a combined cap5 ital and surplus in excess of such minimum

6 amount (not less than $1,000,000) as the

7 Secretary of Labor prescribes in regula8 tions.

9 ‘‘(B) BANKS OR OTHER FINANCIAL INSTI10 TUTIONS.—If—

11 ‘‘(i) a bank or other financial institu12 tion would, but for this subparagraph, not

13 be required to be bonded under this section

14 by reason of the application of the excep15 tion provided in subparagraph (A);

16 ‘‘(ii) the bank or financial institution

17 is authorized to exercise trust powers; and

18 ‘‘(iii) the deposits of the bank or fi19 nancial institution are not insured by the

20 Federal Deposit Insurance Corporation,

21 such exception shall apply to such bank or fi22 nancial institution only if the bank or institu23 tion meets bonding requirements under State

24 law which the Secretary of Labor determines
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•S 263 IS

1 are at least equivalent to those imposed on

2 banks by Federal law.

3 ‘‘(b) AMOUNT OF BOND.—

4 ‘‘(1) MINIMUM REQUIREMENTS.—The Secretary

5 of Labor shall prescribe the amount of a bond under

6 this section at the beginning of each fiscal year. Ex7 cept as otherwise provided in this paragraph, such

8 amount shall not be less than 10 percent of the

9 amount of funds handled. In no case shall such bond

10 be less than $1,000 nor more than $500,000, except

11 that the Secretary of Labor, after due notice and op12 portunity for hearing to all interested parties, and

13 other consideration of the record, may prescribe an

14 amount in excess of $500,000.

15 ‘‘(2) DETERMINATION OF AMOUNT OF

16 FUNDS.—For the purpose of prescribing the amount

17 of a bond under paragraph (1), the amount of funds

18 handled shall be determined by reference to the

19 amount of the funds handled by the person, group,

20 or class to be covered by such bond or by their pred21 ecessor or predecessors, if any, during the preceding

22 fiscal year, or to the amount of funds to be handled

23 during the current fiscal year by such person, group,

24 or class, estimated as provided in regulations pre25 scribed by the Secretary of Labor.
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•S 263 IS

1 ‘‘(c) OTHER REQUIREMENTS.—A bond required by

2 subsection (a)—

3 ‘‘(1) shall include such terms and conditions as

4 the Secretary of Labor considers necessary to pro5 tect the Personal Retirement Savings Fund against

6 loss by reason of acts of fraud or dishonesty on the

7 part of the bonded person directly or through con8 nivance with others;

9 ‘‘(2) shall have as surety thereon a corporate

10 surety company that is an acceptable surety on Fed11 eral bonds under authority granted by the Secretary

12 of the Treasury pursuant to sections 9304 through

13 9308 of title 31, United States Code; and

14 ‘‘(3) shall be in a form or of a type approved

15 by the Secretary of Labor, including individual

16 bonds or schedule or blanket forms of bonds that

17 cover a group or class.

18 ‘‘(d) PROHIBITIONS.—

19 ‘‘(1) BOND REQUIRED.—It shall be unlawful for

20 any person to whom subsection (a) applies, to re21 ceive, handle, disburse, or otherwise exercise custody

22 or control of any of the funds or other property of

23 the Personal Retirement Savings Fund without

24 being bonded as required by this section.
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•S 263 IS

1 ‘‘(2) MEET ALL REQUIREMENTS.—It shall be

2 unlawful for any fiduciary, or any other person hav3 ing authority to direct the performance of functions

4 described in paragraph (1), to permit any such func5 tion to be performed by any person to whom sub6 section (a) applies unless such person has met the

7 requirements of such subsection.

8 ‘‘(e) NONAPPLICATION OF OTHER LAWS.—Notwith9 standing any other provision of law, any person who is

10 required to be bonded as provided in subsection (a) shall

11 be exempt from any other provision of law that, but for

12 this subsection, would require such person to be bonded

13 for the handling of the funds or other property of the Per14 sonal Retirement Savings Fund.

15 ‘‘(f) REGULATIONS.—The Secretary of Labor shall

16 prescribe such regulations as may be necessary to carry

17 out the provisions of this section, including exempting a

18 person or class of persons from the requirements of this

19 section.

20 ‘‘SEC. 133. INVESTIGATIVE AUTHORITY.

21 ‘‘Any authority available to the Secretary of Labor

22 under section 504 of the Employee Retirement Income Se23 curity Act of 1974 (29 U.S.C. 1134) is hereby made avail24 able to the Secretary of Labor, and any officer designated

25 by the Secretary of Labor, to determine whether any per-
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•S 263 IS

1 son has violated, or is about to violate, any provision of

2 section 131 or 132.

3 ‘‘SEC. 134. EXCULPATORY PROVISIONS; INSURANCE.

4 ‘‘(a) NONAPPLICATION OF EXCULPATORY PROVI5 SIONS.—Any provision in an agreement or instrument that

6 purports to relieve a fiduciary from responsibility or liabil7 ity for any responsibility, obligation, or duty under this

8 title shall be void.

9 ‘‘(b) LIABILITY INSURANCE.—Sums credited to the

10 Personal Retirement Savings Fund may be used at the

11 discretion of the Executive Director to purchase insurance

12 to cover the potential liability of persons who serve in a

13 fiduciary capacity with respect to the Personal Retirement

14 Savings Fund, without regard to whether a policy of insur15 ance permits recourse by the insurer against the fiduciary

16 in the case of a breach of a fiduciary obligation.’’.

17 SEC. 5. REPORT AND RECOMMENDATIONS REGARDING IN18 VESTMENT OPTIONS.

19 Not later than 36 months after the date of enactment

20 of this Act, the Personal Retirement Accounts Board es21 tablished under section 101 of the Social Security Act (as

22 amended by section 4 of this Act) shall submit to the ap23 propriate committees of Congress a report regarding rec24 ommendations for additional investment options for indi25 viduals with personal retirement accounts established
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1 under title I of the Social Security Act (as so amended).

2 The report shall include recommendations regarding—

3 (1) whether the Board should make available to

4 such account holders investment funds managed by

5 qualified professional asset managers (as defined in

6 section 121(a)(7) of the Social Security Act (as

7 amended by section 4 of this Act));

8 (2) whether such account holders should be per9 mitted to transfer all or a portion of the balance in

10 their personal retirement accounts to a new form of

11 individual retirement account that would be man12 aged by qualified professional asset managers (as so

13 defined);

14 (3) whether the Board should provide an alter15 native for the investment of a personal retirement

16 account for which no investment election is made to

17 investment in the Government Securities Investment

18 Fund provided for under section 121(c)(2) of the

19 Social Security Act (as so amended); and

20 (4) whether the Board should offer diversified

21 investment selections for such account holders that

22 takes into consideration the age of the individual.

Æ