I

105TH CONGRESS

1ST SESSION H. R. 510

To establish a Federal cause of action for failure of State and local public

employee pension plans to meet the terms of such plans, subject to

differing burdens of proof depending on whether changes in the plan

relating to employer contributions are subject, under the law of the

principal State involved, to qualified review boards.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 4, 1997

Mr. ANDREWS introduced the following bill; which was referred to the Committee on the Judiciary, 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 establish a Federal cause of action for failure of State

and local public employee pension plans to meet the

terms of such plans, subject to differing burdens of proof

depending on whether changes in the plan relating to

employer contributions are subject, under the law of the

principal State involved, to qualified review boards.

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 ‘‘Public Employee Pen3 sion Plan Liability Act of 1997’’.

4 SEC. 2. CIVIL ENFORCEMENT OF PUBLIC EMPLOYEE PEN5 SION PLAN TERMS.

6 (a) IN GENERAL.—A civil action may be brought, by

7 a participant or beneficiary under a public employee pen8 sion plan, against the plan—

9 (1) to recover benefits due to him or her under

10 the terms of the plan, to enforce his or her rights

11 under the terms of the plan, or to clarify his or her

12 rights to future benefits under the terms of the plan;

13 (2) to enjoin any act or practice which violates

14 the terms of the plan, or

15 (3) to obtain other appropriate equitable relief

16 (A) to redress violations of the terms of the plan or

17 (B) to enforce the terms of the plan.

18 (b) BURDEN OF PROOF.—

19 (1) IN GENERAL.—Except as provided in para20 graph (2), in any action brought under this section,

21 the plaintiff may prevail if the plaintiff proves his or

22 her case by a preponderance of the evidence.

23 (2) SPECIAL RULE FOR PLANS SUBJECT TO RE24 VIEW BY QUALIFIED REVIEW BOARDS.—In the case

25 of a public employee pension plan which meets the

26 requirements of section 3, in any action brought
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1 under this section, the plaintiff may prevail only if

2 the plaintiff proves his or her case by clear and con3 vincing evidence.

4 (c) PLANS TREATED AS PERSONS.—A public em5 ployee pension plan may sue or be sued under this Act

6 as a person. Service of summons, subpoena, or other legal

7 process of a court upon a trustee or an administrator of

8 a public employee pension plan in the trustee’s or adminis9 trator’s capacity as such shall constitute service upon the

10 plan.

11 (d) JURISDICTION AND VENUE.—

12 (1) IN GENERAL.—State courts of competent

13 jurisdiction and district court of the United States

14 shall have concurrent jurisdiction of actions brought

15 under this section. The district courts of the United

16 States shall have jurisdiction without regard to the

17 amount in controversy or the citizenship of the par18 ties, to grant the relief provided for in subsection

19 (a).

20 (2) VENUE.—Notwithstanding section 94 of the

21 National Banking Act (12 U.S.C. 94), in any case

22 in which an action under this Act is brought in a

23 district court of the United States, it may be

24 brought in any district of the State where the plan

25 is administered, where the breach took place, or
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1 where a defendant resides or may be found, and

2 process may be served in any other district where a

3 defendant resides or may be found.

4 (e) ATTORNEY’S FEES.—In any action brought under

5 this section, the court may in its discretion award a rea6 sonable attorney’s fee and costs of action to any party who

7 prevails or substantially prevails in such action.

8 SEC. 3. REVIEW BY QUALIFIED REVIEW BOARDS OF

9 CHANGES IN EMPLOYER CONTRIBUTIONS.

10 (a) IN GENERAL.—A public employee pension plan

11 meets the requirements of this section if, under the plan,

12 changes in employer contributions are subject to review

13 by a qualified review board established for the plan as pro14 vided in this section. For purposes of this section, the term

15 ‘‘qualified review board’’ means a board—

16 (1) whose membership is determined under the

17 law of the principal State in accordance with sub18 section (b), and

19 (2) whose powers are determined under the law

20 of the principal State in accordance with subsection

21 (c).

22 (b) MEMBERSHIP.—

23 (1) IN GENERAL.—The membership of a quali24 fied review board established for a plan shall consist

25 of 3 members selected from among individuals who,
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1 by means of their education and experience, have

2 demonstrated expertise in the area of pension fund

3 management, as follows:

4 (A) one member is appointed by the Gov5 ernor of the State,

6 (B) one member is selected by the partici7 pants in the plan, by means of an election held

8 in such form and manner as shall be prescribed

9 in regulations of the Secretary of Labor, and

10 (C) one member is selected jointly by the

11 Governor and by a representative of partici12 pants in the plan (from a certified list of pen13 sion experts established in accordance with

14 paragraph (2)).

15 Each member of the board shall have 1 vote. Mem16 bers of the board shall serve for such equivalent

17 terms as shall be prescribed under the law of the

18 principal State.

19 (2) CERTIFIED LIST OF EXPERTS.—The Gov20 ernor of the State shall, for purposes of paragraph

21 (1)(C), establish and maintain with respect to each

22 public employee pension plan (for which such State

23 is the principal State) a certified list of pension ex24 perts meeting the requirements for membership on
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1 the qualified review board. Individuals may be in2 cluded on such list only by agreement between the

3 Governor of the State and a representative elected

4 by participants in the plan, entered into by means

5 of collective bargaining in such form and manner as

6 shall be prescribed in regulations of the Secretary of

7 Labor.

8 (c) POWERS.—The board shall be treated as a quali9 fied review board for purposes of this section with respect

10 to any public employee pension plan (for which such State

11 is the principal State) only if the powers of such board

12 under the law of the principal State include review by the

13 board, for approval or disapproval by the board, of any

14 change in the terms of such plan, as a necessary pre15 requisite for such change to take effect, if—

16 (1) such change would have the effect of chang17 ing levels of employer contributions to the plan, and

18 (2) such review is requested, in such form and

19 manner as shall be prescribed in regulations of the

20 Secretary of Labor, by—

21 (A) at least one-third of the total number

22 of trustees of any trust fund forming a part of

23 the plan, or
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1 (B) the head of any employee organization

2 representing at least 20 percent of the total

3 number of active participants in the plan.

4 The board may be treated as a qualified review board for

5 purposes of this section only if, under the law of the prin6 cipal State, any such change submitted to such review by

7 the board may take effect only upon approval of the

8 change by the board.

9 SEC. 4. EFFECT ON OTHER LAWS.

10 (a) IN GENERAL.—Nothing in this Act shall be con11 strued to alter, amend, modify, invalidate, impair, or su12 persede any law of a State or any rule or regulation issued

13 under any such law, except to the extent that such law—

14 (1) may now or hereafter relate to the subject

15 matter of the provisions of this Act as they apply to

16 any public employee pension plan described in sec17 tion 4(b)(1) and not exempt under section 4(b)(2),

18 and

19 (2) prevents the application of such provisions.

20 (b) STATE CAUSES OF ACTION PRESERVED.—Noth21 ing in this Act shall be construed to apply with respect

22 to State causes of action available in State courts.

23 SEC. 5. DEFINITIONS AND COVERAGE.

24 (a) DEFINITIONS.—For purposes of this Act—
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1 (1) ADMINISTRATOR.—The term ‘‘adminis2 trator’’ means—

3 (A) the board of trustees, retirement

4 board, or similar person with administrative re5 sponsibilities in connection with a plan, or any

6 other person specifically so designated in con7 nection with any requirement of this Act by the

8 terms of the instrument or instruments under

9 which the plan is operated, including but not

10 limited to the law of any State or of any politi11 cal subdivision of any State, or

12 (B) in any case in which there is no person

13 described in subparagraph (A) in connection

14 with the plan, the plan sponsor.

15 (2) BENEFICIARY.—The term ‘‘beneficiary’’

16 means a person designated by a participant, or by

17 the terms of a public employee pension plan, who is

18 or may become entitled to a benefit thereunder.

19 (3) EMPLOYEE.—The term ‘‘employee’’ means

20 any individual employed by an employer, employer

21 representative, or other person required to make em22 ployer contributions under the plan.

23 (4) EMPLOYEE ORGANIZATION.—The term

24 ‘‘employee organization’’ means any labor union or
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1 any organization of any kind, or any agency or em2 ployee representation committee, association, group,

3 or plan, in which employees participate and which

4 exists for the purpose, in whole or in part, of dealing

5 with employers or employer representatives concern6 ing a public employee pension plan or other matters

7 incidental to employment relationships; or any em8 ployees’ beneficiary association organized for the

9 purpose, in whole or in part, of establishing such a

10 plan.

11 (5) EMPLOYER.—The term ‘‘employer’’

12 means—

13 (A) the government of any State or of any

14 political subdivision of a State,

15 (B) any agency or instrumentality of a

16 government referred to in subparagraph (A), or

17 (C) any agency or instrumentality of two

18 or more governments referred to in subpara19 graph (A).

20 (6) EMPLOYER CONTRIBUTION.—The term

21 ‘‘employer contribution’’ means any contribution to

22 a public employee pension plan other than a con23 tribution made by a participant in the plan.

24 (7) EMPLOYER REPRESENTATIVE.—The term

25 ‘‘employer representative’’ means—
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1 (A) any group or association consisting, in

2 whole or in part, of employers acting, in connec3 tion with a public employee pension plan, for an

4 employer, or

5 (B) any person acting, in connection with

6 a public employee pension plan, indirectly in the

7 interest of an employer or of a group or asso8 ciation described in subparagraph (A).

9 (8) PUBLIC EMPLOYEE PENSION PLAN.—The

10 term ‘‘public employee pension plan’’ and ‘‘plan’’

11 mean any plan, fund, or program which was here12 tofore or is hereafter established or maintained, in

13 whole or in part, by an employer, an employer rep14 resentative, or an employee organization, or by a

15 combination thereof, to the extent that by its express

16 terms or as a result of surrounding circumstances

17 such plan, fund, or program—

18 (A) provides retirement income to employ19 ees, or

20 (B) results in a deferral of income by em21 ployees for periods extending to the termination

22 of covered employment or beyond,

23 regardless of the method of calculating the contribu24 tions made to the plan, the method of calculating
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1 the benefits under the plan, or the method of distrib2 uting benefits from the plan.

3 (9) PRINCIPAL STATE.—The term ‘‘principal

4 State’’ means, for any plan year with respect to a

5 public employee pension plan, the State in which, as

6 of the beginning of such plan year, the largest per7 centage of the participants of the plan employed in

8 any single State is employed.

9 (10) GOVERNOR.—The term ‘‘Governor’’

10 means, in connection with a public employee pension

11 plan, the Governor (or equivalent official) of the

12 principal State.

13 (11) PARTICIPANT.—The term ‘‘participant’’

14 means any individual who is or may become eligible

15 to receive a benefit of any type from a public em16 ployee pension plan or whose beneficiaries may be el17 igible to receive any such benefit.

18 (12) PERSON.—The term ‘‘person’’ means a

19 State, a political subdivision of a State, any agency

20 or instrumentality of a State or a political subdivi21 sion of a State, an individual, a partnership, a joint

22 venture, a corporation, a mutual company, a joint23 stock company, a trust, an estate, an unincorporated

24 organization, an association, or an employee organi25 zation.
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1 (13) PLAN SPONSOR.—The term ‘‘plan spon2 sor’’ means—

3 (A) in the case of a plan established or

4 maintained solely for employees of a single em5 ployer, such employer,

6 (B) in the case of a plan established or

7 maintained by an employee organization, the

8 employee organization, or

9 (C) in the case of a plan established or

10 maintained by two or more employers or jointly

11 by one or more employers and one or more em12 ployee organizations, the association, commit13 tee, board of trustees, or other similar group of

14 representatives of the parties who establish or

15 maintain the plan.

16 (14) PLAN YEAR.—The term ‘‘plan year’’

17 means, with respect to a plan, the calendar, policy,

18 or fiscal year on which the records of the plan are

19 kept.

20 (15) STATE.—The term ‘‘State’’ means any

21 State of the United States, the District of Columbia,

22 the Commonwealth of Puerto Rico, the Virgin Is23 lands, American Samoa, and Guam.

24 (b) COVERAGE.—
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1 (1) IN GENERAL.—Except as provided in para2 graph (2), this Act shall apply to any public em3 ployee pension plan.

4 (2) EXCEPTIONS FROM COVERAGE.—The provi5 sions of this Act shall not apply to—

6 (A) any employee benefit plan described in

7 section 4(a) of the Employee Retirement In8 come Security Act of 1974 (29 U.S.C.

9 1003(a)), which is not exempt under section

10 4(b)(1) of such Act (29 U.S.C. 1003(b)(1));

11 (B) any plan which is unfunded and is

12 maintained by an employer or employer rep13 resentative primarily for the purpose of provid14 ing deferred compensation for a select group of

15 management or highly compensated employees;

16 (C) any arrangement which would be a

17 severance pay arrangement, as defined in regu18 lations of the Secretary of Labor under section

19 3(2)(B)(i) of the Employee Retirement Income

20 Security Act of 1974 (29 U.S.C.

21 1002(2)(B)(i)), if the employer were an em22 ployer within the meaning of section 3(5) of

23 such Act (29 U.S.C. 1002(5));

24 (D) any agreement to the extent it is a

25 coverage agreement entered into pursuant to
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1 section 218 of the Social Security Act (42

2 U.S.C. 418);

3 (E) any individual retirement account or

4 any individual retirement annuity within the

5 meaning of section 408 of the Internal Revenue

6 Code of 1986, or a retirement bond within the

7 meaning of section 409 of such Code;

8 (F) any plan described in section 401(d) of

9 such Code;

10 (G) any individual account plan consisting

11 of an annuity contract described in section

12 403(b) of such Code;

13 (H) any eligible State deferred compensa14 tion plan, as defined in section 457(b) of such

15 Code; or

16 (I) any plan maintained solely for the pur17 pose of complying with applicable workers’ com18 pensation laws or disability insurance laws.

19 SEC. 5. EFFECTIVE DATE.

20 The preceding provisions of this Act shall apply with

21 respect to plan years beginning on or after January 1,

22 1998.

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