I
106TH CONGRESS
1ST SESSION
H. R. 871
To provide for investment in private sector securities markets of amounts
held in the Federal Old-Age and Survivors Insurance Trust Fund for
payment of benefits under title II of the Social Security Act.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 25, 1999
Mr. MARKEY (for himself, Mr. BARTLETT of Maryland, and Mr. POMEROY)
introduced the following bill; which was referred to the Committee on
Ways and Means
A BILL
To provide for investment in private sector securities markets
of amounts held in the Federal Old-Age and Survivors
Insurance Trust Fund for payment of benefits under
title II of the Social Security Act.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Social Security Invest-
ment Fund Act of 1999’’.
SEC. 2. ESTABLISHMENT OF THE SOCIAL SECURITY IN-
VESTMENT BOARD AND EXECUTIVE DIREC-
TOR.
(a) IN GENERAL.—Title VII of the Social Security
Act is amended by adding after section 712 (42 U.S.C.
913) the following new section:
‘‘SOCIAL SECURITY INVESTMENT BOARD; EXECUTIVE
DIRECTOR
‘‘Social Security Investment Board
‘‘SEC. 713. (a)(1) There is established in the execu-
tive branch of the Government an independent agency to
be known as the Social Security Investment Board.
‘‘(2) The Board shall be composed of—
‘‘(A) 3 members appointed by the President, of
whom 1 shall be designated by the President as
Chairman; and
‘‘(B) 2 members appointed by the President, of
whom—
‘‘(i) 1 shall be appointed by the President
after taking into consideration the recommenda-
tion made by the Speaker of the House of Rep-
resentatives in consultation with the minority
leader of the House of Representatives; and
‘‘(ii) 1 shall be appointed by the President
after taking into consideration the recommenda-
tion made by the majority leader of the Senate
in consultation with the minority leader of the
Senate.
‘‘(3) Appointments under paragraph (2) shall be
made by and with the advice and consent of the Senate.
‘‘(4) Members of the Board shall have substantial ex-
perience, training, and expertise in the management of fi-
nancial investments and the exercise of fiduciary duties.
‘‘(5)(A) A member of the Board shall be appointed
for a term of 10 years, subject only to removal by the
President for cause, except that of the members first
appointed—
‘‘(i) the Chairman shall be appointed for a term
of 4 years;
‘‘(ii) one of the members appointed under para-
graph (2)(B) shall be appointed for a term of 2
years;
‘‘(iii) the remaining member appointed under
paragraph (2)(B) shall be appointed for a term of
6 years;
‘‘(iv) one of the members appointed under para-
graph (2)(A) shall be appointed for a term of 8
years; and
‘‘(v) the remaining member appointed under
paragraph (2)(A) shall be appointed for a term of
10 years.
‘‘(B)(i) A vacancy on the Board shall be filled in the
manner in which the original appointment was made and
shall be subject to any conditions which applied with re-
spect to the original appointment.
‘‘(ii) An individual chosen to fill a vacancy shall be
appointed for the unexpired term of the member replaced.
‘‘(iii) The term of any member shall not expire before
the date on which the member’s successor takes office.
‘‘(6) The Board shall—
‘‘(A) establish policies for investments under
part B of title II of amounts in the Social Security
Investment Fund in the Common Stock Index Fund
established pursuant to section 252 and policies for
the selection and retention of investment managers
to manage such investments;
‘‘(B) review the performance of investments of
amounts in the Social Security Investment Fund;
and
‘‘(C) review and approve the budget of the
Board.
‘‘(7) The Board shall develop investment policies
under paragraph (6)(A) which provide for—
‘‘(A) prudent investments suitable for accumu-
lating funds for payment of benefits under title II;
and
‘‘(B) low administrative costs.
‘‘(8)(A) The Board may—
‘‘(i) adopt, alter, and use a seal;
‘‘(ii) except as provided in subparagraph (B),
establish policies with which the Executive Director
is required to comply under section 252; and
‘‘(iii) take such other actions as may be nec-
essary to carry out the functions of the Board.
‘‘(B) The policies of the Board may not require the
Executive Director to invest or to cause to be invested any
sums in the Social Security Investment Fund in a specific
asset or to dispose of or cause to be disposed of any spe-
cific asset of the Fund.
‘‘(9)(A) The Board shall meet—
‘‘(i) not less than once during each month; and
‘‘(ii) at additional times at the call of the Chair-
man.
‘‘(B)(i) The Board shall perform the functions and
exercise the powers of the Board on a majority vote of
a quorum of the Board.
‘‘(ii) A vacancy on the Board shall not impair the
authority of a quorum of the Board to perform the func-
tions and exercise the powers of the Board.
‘‘(C) Three members of the Board shall constitute a
quorum for the transaction of business.
‘‘(C) administer the provisions of part B of title
II;
‘‘(D) prescribe such regulations (other than
regulations relating to fiduciary responsibilities) as
may be necessary for the administration of part B
of title II; and
‘‘(E) meet from time to time with, and provide
information to, the Board of Trustees of the Federal
Old-Age and Survivors Insurance Trust Fund upon
request of the Board of Trustees regarding matters
relating to the Social Security Investment Fund.
‘‘(4) The Executive Director may—
‘‘(A) prescribe such regulations as may be nec-
essary to carry out the responsibilities of the Execu-
tive Director under this subsection, other than regu-
lations relating to fiduciary responsibilities;
‘‘(B) appoint such personnel as may be nec-
essary to carry out the provisions of part B of title
II;
‘‘(C) in accordance with the policies of the
Board, procure the services of experts and consult-
ants under section 3109 of title 5, United States
Code;
‘‘(D) secure directly from any agency or instru-
mentality of the Federal Government any informa-
‘‘Inspector General
‘‘(c) There shall be in the Office of the Board an In-
spector General appointed by the President, by and with
the advice and consent of the Senate, in accordance with
section 3(a) of the Inspector General Act of 1978.’’.
(b) CONFORMING AMENDMENTS.—Section 11 of the
Inspector General Act of 1978 (5 U.S.C. App.) is
amended—
(1) in paragraph (1), by striking the second of
the two semicolons following ‘‘Community Service’’,
by striking ‘‘and’’ before ‘‘the chief executive’’, by
striking ‘‘and’’ before ‘‘the Chairperson’’, by striking
‘‘or’’ before ‘‘the Commissioner’’, and by inserting
‘‘or the Chairman of the Social Security Investment
Board;’’ before ‘‘as the case may be’’; and
(2) in paragraph (2), by striking ‘‘or’’ before
‘‘the Veterans’ Administration’’, by striking ‘‘or’’ be-
fore ‘‘the Social Security Administration’’, and by
inserting ‘‘, or the Social Security Investment
Board’’ after ‘‘the Social Security Administration’’.
SEC. 3. SOCIAL SECURITY INVESTMENT PROGRAM.
(a) IN GENERAL.—Title II of the Social Security Act
is amended—
(1) by inserting before section 201 (42 U.S.C.
401) the following:
‘‘PART A—OLD-AGE, SURVIVORS, AND DISABILITY
INSURANCE BENEFITS’’;
and
(2) by adding after section 233 (42 U.S.C. 433)
the following new part:
‘‘PART B—SOCIAL SECURITY INVESTMENT PROGRAM
‘‘SOCIAL SECURITY INVESTMENT FUND
‘‘SEC. 251. (a) IN GENERAL.—There is hereby cre-
ated on the books of the Treasury of the United States
a trust fund to be known as the ‘Social Security Invest-
ment Fund’. The Social Security Investment Fund shall
consist of such amounts as may be appropriated to, or
deposited in, the Social Security Investment Fund as pro-
vided in this part. Such Fund shall be available—
‘‘(1) for investment in accordance with this
part,
‘‘(2) to be transferred to the Managing Trustee
of the Federal Old-Age and Survivors Insurance
Trust Fund in accordance with this part, and
‘‘(3) subject to subsection (c), to pay the ad-
ministrative expenses of the Social Security Invest-
ment Board and the Executive Director of the
Board (including compensation for the officers and
employees of the Board).
‘‘(b) MAINTENANCE OF BALANCE WITH FEDERAL
OLD-AGE AND SURVIVORS INSURANCE TRUST FUND.—
‘‘(1) IN GENERAL.—The Managing Trustee of
the Federal Old-Age and Survivors Insurance Trust
Fund shall make determinations during each fiscal
year of amounts necessary to be transferred between
the Social Security Investment Fund and the Fed-
eral Old-Age and Survivors Insurance Trust Fund
so as to ensure that, to the maximum extent prac-
ticable, the amount transferred is equal to the pre-
scribed amount for such fiscal year.
‘‘(2) MAINTENANCE OF BENEFIT CUSHION.—In
determining the extent to which any amount is to be
transferred from the Federal Old-Age and Survivors
Insurance Trust Fund pursuant to paragraph (1)
during any fiscal year, the Managing Trustee of the
Trust Fund shall first, not later than the beginning
of such fiscal year, determine the amount which is
necessary for the fiscal year to meet current with-
drawals from the Trust Fund under part A. Solely
for purposes of making determinations under para-
graph (1), the balance in the Trust Fund shall be
deemed during such fiscal year not to include such
amount. Any transfer pursuant to this subsection
shall not include such amount, and such amount
shall be invested or applied to current withdrawals
as described in section 201(d).
‘‘(3) PRESCRIBED AMOUNT.—For purposes of
paragraph (1), the ‘prescribed amount’ for a fiscal
year shall be:
‘‘For the fiscal year—
The prescribed amount is—
2001 ...............................................
$81.5 billion.
2002 ...............................................
$67.5 billion.
2003 ...............................................
$88.5 billion.
2004 ...............................................
$87.4 billion.
2005 ...............................................
$106.0 billion.
2006 ...............................................
$117.7 billion.
2007 ...............................................
$148.9 billion.
2008 ...............................................
$175.1 billion.
2009 ...............................................
$203.4 billion.
2010 ...............................................
$232.6 billion.
2011 ...............................................
$256.5 billion.
2012 ...............................................
$280.1 billion.
2013 ...............................................
$299.9 billion.
2014 ...............................................
$316.5 billion.
2015 or thereafter .........................
$324.5 billion.
‘‘(4) TRANSFERS BETWEEN FUNDS TO MAIN-
TAIN PRESCRIBED AMOUNT.—
‘‘(A) TRANSFERS TO THE SOCIAL SECU-
RITY
INVESTMENT
FUND.—Upon any deter-
mination under paragraph (1) made by the
Managing Trustee that a transfer of any
amount from the Federal Old-Age and Sur-
vivors Insurance Trust Fund to the Social Se-
curity Investment Fund is necessary, the Man-
aging Trustee shall transfer such amount from
the Trust Fund to the Social Security Invest-
ment Fund.
‘‘(B) TRANSFERS FROM THE SOCIAL SECU-
RITY
INVESTMENT
FUND.—Upon any deter-
mination under paragraph (1) made by the
Managing Trustee that a transfer of any
amount from the Social Security Investment
Fund to the Federal Old-Age and Survivors In-
surance Trust Fund is necessary, the Managing
Trustee shall certify such determination to the
Executive Director and, upon receipt of such
certification, the Executive Director shall trans-
fer such amount from the Social Security In-
vestment Fund to the Trust Fund.
‘‘(c) TERMINATION OF TRANSFERS UPON DEPLE-
TION OF FEDERAL OLD-AGE AND SURVIVORS INSURANCE
TRUST FUND.—
‘‘(1) ISSUANCE OF CERTIFICATION UPON DE-
TERMINATION OF IMPENDING DEPLETION OF TRUST
FUND.—Not later than July 1 of each fiscal year,
the Managing Trustee of the Federal Old-Age and
Survivors Insurance Trust Fund shall determine,
using reasonable assumptions, whether, by reason of
transfers from the Trust Fund to the Social Secu-
rity Investment Fund necessary to provide for pay-
ment form the Social Security Investment Fund dur-
ing the following fiscal year of administrative ex-
penses of the Social Security Investment Board and
the Executive Director of the Board, the balance in
the Trust Fund would, but for the provisions of this
subsection, be reduced under this section during
such following fiscal year to the amount to be deter-
mined for such following fiscal year under subsection
(b)(2). Upon so determining that such balance would
be reduced to such an amount during such following
fiscal year, the Managing Trustee shall certify such
determination to the Social Security Investment
Board, the Comptroller General of the United
States, and each House of the Congress.
‘‘(2) TERMINATION OF TRANSFERS UPON CER-
TIFICATION.—In any case in which the Managing
Trustee issues a certification under paragraph (1),
effective October 1 of the following fiscal year, sub-
section (b) shall cease to be effective.
‘‘(3) AUTHORIZATION OF APPROPRIATIONS FOR
ADMINISTRATIVE EXPENSES UPON TERMINATION OF
TRANSFERS.—There is authorized to be appro-
priated, for the fiscal year referred to in paragraph
(2) and subsequent fiscal years, from amounts in the
general fund of the Treasury which are not other-
wise appropriated, such sums as are necessary to
pay the administrative expenses of the Social Secu-
rity Investment Board and the Executive Director of
the Board.
‘‘INVESTMENT OF SOCIAL SECURITY INVESTMENT FUND
IN COMMON STOCK
‘‘SEC. 252. (a) IN GENERAL.—The Social Security
Investment Board shall establish for the Social Security
Investment Fund a Common Stock Index Fund under
which sums shall be invested as provided in subsection (b).
Any interest or dividends earned on such investments, and
the proceeds from any liquidation of such investments, in-
cluding capital gain derived from such liquidation, shall
be credited to and form a part of the Social Security In-
vestment Fund.
‘‘(b) COMMON STOCK INDEX FUND.—
‘‘(1) IN GENERAL.—The Common Stock Index
Fund shall consist of amounts invested in common
stock which is selected by qualified professional asset
managers as provided in this subsection.
‘‘(2) SELECTION
OF
INDEX
AND
PORTFOLIO
DESIGN.—
‘‘(A) SELECTION OF INDEX.—The Social
Security Investment Board shall select for pur-
poses of this subsection one or more indices
each of which is comprised of common stock the
aggregate market value of which is a reasonably
complete representation of all publicly held
companies whose shares are traded on the
United States equity markets.
‘‘(B) PORTFOLIO DESIGN.—Amounts held
in the Common Stock Index Fund shall be in-
vested in portfolios designed to replicate the
performance of the indices selected under sub-
paragraph (A). Each portfolio shall consist sole-
ly of stock purchased in a registered public of-
fering or in a secondary market transaction and
shall be designed such that, to the extent prac-
ticable and consistent with the effective man-
agement of such Fund, the percentage of the
amount of such Fund in each portfolio that is
invested in each stock is the same as the per-
centage determined by dividing the aggregate
market value of all shares of that stock by the
aggregate market value of all shares of all
stocks included in the corresponding index. The
shares of any company shall not be included or
excluded from investments under this sub-
section because of political, social, or religious
considerations.
‘‘(3) NO VOTING RIGHTS IN SECURITIES.—The
Social Security Investment Board and the Executive
Director may not—
‘‘(A) exercise voting rights associated with
the ownership of securities by the Social Secu-
rity Investment Fund, or
‘‘(B) direct the manner in which any vot-
ing rights are exercised on behalf of the Social
Security Investment Fund by any qualified pro-
fessional asset manager pursuant to this sec-
tion.
‘‘(c) 
QUALIFIED
PROFESSIONAL
ASSET
MAN-
AGERS.—
‘‘(1) SELECTION.—The services of qualified
professional asset managers shall be procured by the
Executive Director for purposes of this section in a
competitive bidding process which shall be estab-
lished in regulations which shall be prescribed by the
Social Security Investment Board.
‘‘(2) DEFINITION.—For purposes of this sec-
tion, the term ‘qualified professional asset manager’
means—
‘‘(A) a bank, as defined in section
202(a)(2) of the Investment Advisers Act of
1940 (15 U.S.C. 80b–2(a)(2)) which—
‘‘(i) has the power to manage, ac-
quire, or dispose of assets of a plan;
‘‘(ii) has, as of the last day of its lat-
est fiscal year ending before the date of a
determination for the purpose of this sub-
paragraph, equity capital in excess of
$10,000,000; and
‘‘(iii) has, on the last day of its latest
fiscal year ending before the date of a de-
termination for the purpose of this sub-
paragraph, total client assets under its dis-
cretionary management and control for in-
vestment in excess of $100,000,000;
‘‘(B) a savings association, the accounts of
which are insured by the Federal Deposit In-
surance Corporation, which—
‘‘(i) has applied for and been granted
trust powers to manage, acquire, or dis-
pose of assets of a plan by a State or Gov-
ernment authority having supervision over
savings associations;
‘‘(ii) has, as of the last day of its lat-
est fiscal year ending before the date of a
determination for the purpose of this sub-
paragraph, equity capital or net worth in
excess of $10,000,000; and
‘‘(iii) has, on the last day of its latest
fiscal year ending before the date of a de-
termination for the purpose of this sub-
paragraph, total client assets under its dis-
cretionary management and control for in-
vestment in excess of $100,000,000;
‘‘(C) an insurance company which—
‘‘(i) is qualified under the laws of
more than one State to manage, acquire,
or dispose of any assets of a plan;
‘‘(ii) has, as of the last day of its lat-
est fiscal year ending before the date of a
determination for the purpose of this sub-
paragraph, 
net 
worth 
in 
excess 
of
$10,000,000;
‘‘(iii) is subject to supervision and
examination by a State authority having
supervision over insurance companies; and
‘‘(iv) has, on the last day of its latest
fiscal year ending before the date of a de-
termination for the purpose of this sub-
paragraph, total client assets under its dis-
cretionary management and control for in-
vestment in excess of $100,000,000; or
‘‘(D) an investment adviser registered
under section 203 of the Investment Advisers
Act of 1940 (15 U.S.C. 80b–3) if the invest-
ment adviser has, on the last day of its latest
fiscal year ending before the date of a deter-
mination for the purpose of this subparagraph,
total client assets under its discretionary man-
agement and control for investment in excess of
$100,000,000, and—
‘‘(i) the investment adviser has, on
such day, shareholder’s or partner’s equity
in excess of $10,000,000; or
‘‘(ii) payment of all of the investment
adviser’s liabilities, including any liabilities
which may arise by reason of a breach or
violation of a duty described in section
254, is unconditionally guaranteed by—
‘‘(I) a person who directly or in-
directly, through one or more inter-
mediaries, controls, is controlled by,
or is under common control with the
investment adviser and who has, on
the last day of the person’s latest fis-
cal year ending before the date of a
determination for the purpose of this
subparagraph, shareholder’s or part-
ner’s equity in an amount which,
when added to the amount of the
shareholder’s or partner’s equity of
the investment adviser on such day,
exceeds $10,000,000;
‘‘(II) a qualified professional
asset manager described in paragraph
(1), (2), or (3); or
‘‘(III) a broker or dealer reg-
istered under section 15 of the Securi-
ties Exchange Act of 1934 (15 U.S.C.
78o) that has, on the last day of the
broker’s or dealer’s latest fiscal year
ending before the date of a determina-
tion for the purpose of this subpara-
graph, ønet worth¿ in excess of
$10,000,000.
For purposes of subparagraph (D), the term ‘share-
holder’s or partner’s equity’, when used with respect
to an investment adviser, or a person who is affili-
ated with the investment adviser in a manner de-
scribed in clause (ii)(I) of subparagraph (D), means
the equity shown in the most recent balance sheet
prepared for such investment adviser or affiliated
person, in accordance with generally accepted ac-
counting principles, within 2 years before the date
on which the investment adviser’s status as a quali-
fied professional asset manager is determined for the
purposes of this section.
‘‘ENGAGEMENT OF QUALIFIED PUBLIC ACCOUNTANT
‘‘SEC. 253. (a) IN GENERAL.—The Social Security
Investment Board shall annually engage, on behalf of the
Social Security Investment Fund, an independent quali-
fied public accountant, who shall conduct an examination
of all accounts and other books and records maintained
in the administration of this part (including all applicable
financial statements) as the public accountant considers
necessary to enable the public accountant to make the de-
termination required by subsection (b). The examination
shall be conducted in accordance with generally accepted
auditing standards and shall involve such tests of the ac-
counts, books, and records as the public accountant con-
siders necessary.
‘‘(b) EXAMINATION AND REPORT.—The public ac-
countant conducting an examination under subsection (a)
shall determine whether the accounts, books, and records
referred to in such subsection have been maintained in
conformity with generally accepted accounting principles
applied on a basis consistent with the manner in which
such principles were applied during the examination con-
ducted under such subsection during the preceding year.
The public accountant shall transmit to the Board a re-
port on his examination, including his determination
under this subsection.
‘‘(c) DEFINITION.—For the purposes of this section,
the term ‘qualified public accountant’ shall have the same
meaning as is provided in section 103(a)(3)(D) of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1023(a)(3)(D)).
‘‘FIDUCIARY RESPONSIBILITIES
‘‘SEC. 254. (a) IN GENERAL.—Under regulations of
the Secretary of Labor, the provisions of section 8477 of
title 5, United States Code (relating to fiduciary respon-
sibilities; liability and penalties) and section 8478 of such
title (relating to bonding) shall apply in connection with
the amounts maintained in the Common Stock Index
Fund of the Social Security Investment Fund in the same
manner and to the same extent as such provisions apply
in connection with the Thrift Savings Fund.
‘‘(b) INVESTIGATIVE AUTHORITY.—Any authority
available to the Secretary of Labor under section 504 of
the Employee Retirement Income Security Act of 1974 is
hereby made available to the Secretary of Labor, and any
officer designated by the Secretary of Labor, to determine
whether any person has violated, or is about to violate,
any provision applicable under subsection (a).
‘‘(c) EXCULPATORY PROVISIONS; INSURANCE.—
‘‘(1) IN GENERAL.—Any provision in an agree-
ment or instrument which purports to relieve a fidu-
ciary from responsibility or liability for any respon-
sibility, obligation, or duty under this part shall be
void.
‘‘(2) INSURANCE.—Amounts in the Social Secu-
rity Investment Fund available for administrative
expenses shall be available and may be used at the
discretion of the Social Security Investment Board
to purchase insurance to cover potential liability of
persons who serve in a fiduciary capacity with re-
spect to amounts maintained in the Common Stock
Index Fund of the Social Security Investment Fund,
without regard to whether a policy of insurance per-
mits recourse by the insurer against the fiduciary in
the case of a breach of a fiduciary obligation.
‘‘DIVERSIFICATION THROUGH INVESTMENT MANAGEMENT
‘‘SEC. 255. The Social Security Investment Board
shall prescribe policies governing investment of the Social
Security Investment Fund which shall ensure—
‘‘(1) that the management of investments on
behalf of the Fund undertaken in the course of car-
rying out the investment responsibilities of the Exec-
utive Director of the Fund is exercised by qualified
professional asset managers pursuant to section 252
in such manner as to ensure that not fewer than 3
such managers are each engaged in the management
of a substantial portion of such investments,
‘‘(2) that investments managed on behalf of the
Fund by any such qualified professional asset man-
ager do not represent more than 1 percent of the
total equity interest in any person, and
‘‘(3) that each investment manager will vote on
any matter the shares of any issuer held by the
Fund under the management of such investment
manager in conformity with the voting on such mat-
ter of all other shares of such issuer.’’.
(b) CONFORMING AMENDMENT.—Section 201(d) of
such Act (42 U.S.C. 401(d)) is amended in the first sen-
tence by striking ‘‘withdrawals’’ and inserting ‘‘withdraw-
als, or, in the case of the Federal Old-Age and Survivors
Insurance Trust Fund, to meet the transfer requirements
under section 251(b)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to fiscal years begin-
ning on or after October 1, 2000.
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