I
103D CONGRESS
2D SESSION
H. R. 5135
To amend title I of the Employee Retirement Income Security Act of 1974
and the Internal Revenue Code of 1986 to clarify provisions governing
fiduciary duties in relation to external benefits, social investing, and
economically targeted investments.
IN THE HOUSE OF REPRESENTATIVES
SEPTEMBER 29, 1994
Mr. SAXTON introduced the following bill; which was referred jointly to the
Committees on Education and Labor and Ways and Means
A BILL
To amend title I of the Employee Retirement Income Secu-
rity Act of 1974 and the Internal Revenue Code of
1986 to clarify provisions governing fiduciary duties in
relation to external benefits, social investing, and eco-
nomically targeted investments.
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 ‘‘Employee Benefit Plan
Security and Protection Act of 1994’’.
SEC. 2. CLARIFICATION OF SCOPE OF FIDUCIARY DUTIES
UNDER ERISA.
(a) IN GENERAL.—Section 404(a) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1104(a)) is amended by adding at the end the following
new paragraphs:
‘‘(3)(A) In any case in which a fiduciary, in the
course of managing a plan or exercising authority or con-
trol respecting management or disposition of its assets,
has an occasion to choose between any two alternative in-
vestments of plan assets, if the fiduciary in making such
choice takes into account other factors in addition to the
rate of return, the riskiness of the investment, and other
direct economic factors, the fiduciary shall not be consid-
ered to be discharging the fiduciary’s duties with respect
to the plan in accordance with paragraph (1) and section
403(c)(1) unless—
‘‘(i) the fiduciary has determined in advance
that both alternatives are economically equally ad-
vantageous to the participants and beneficiaries
under the plan, and
‘‘(ii) such other factors are taken into account
solely to the extent that they would be in the eco-
nomic interest of participants and beneficiaries of
the plan.
‘‘(B)(i) A fiduciary with respect to a plan shall not
be considered to be discharging the fiduciary’s duties with
respect to the plan in accordance with paragraph (1) and
section 403(c)(1) if the fiduciary, in making investment
decisions with respect to plan assets, takes into account
external benefits.
‘‘(ii) A fiduciary shall not be treated as failing to dis-
charge the fiduciary’s duties with respect to the plan in
accordance with paragraph (1) or section 403(c)(1) solely
because such investment yields external benefits.
‘‘(iii) For purposes of this subparagraph, the term
‘external benefit’ means, in connection with any invest-
ment of plan assets, a benefit to individuals other than
participants or beneficiaries under the plan.
‘‘(4)(A) Neither the Secretary nor any other agency
or instrumentality of the Government of the United States
may—
‘‘(i) establish or maintain, or cause to be estab-
lished or maintained, by means of subsidy or other-
wise, any list of investments or classes of invest-
ments purporting to satisfy the requirements of
paragraph (1) or section 403(c)(1), or
‘‘(ii) in any manner pledge, guarantee, ensure,
or otherwise represent that any particular invest-
ment or class of investments will yield a sufficiently
high rate of return at a sufficiently low level of risk
to satisfy the requirements of paragraph (1) or sec-
tion 403(c)(1).
‘‘(B) None of the funds authorized or appropriated
to carry out this Act or any other provision of law may
be used—
‘‘(i) by the Secretary or any other agency or in-
strumentality of the United States, or
‘‘(ii) by any other institution or entity estab-
lished, chartered, or subsidized by the United States,
to subsidize, or to otherwise increase the rate of return
on, any particular investment or class of investments for
the purpose of causing the requirements of paragraph (1)
or section 403(c)(1) to be met with respect to such invest-
ment or class of investments.
‘‘(5) Nothing in this title shall be construed to permit
any matter unrelated to the economic interests of partici-
pants and beneficiaries under employee benefit plans to
be taken into account in determining whether a fiduciary
has discharged such fiduciary’s duties with respect to a
plan in accordance with paragraph (1) and section
403(c)(1).’’.
SEC. 3. CLARIFICATION OF SCOPE OF EXCLUSIVE BENEFIT
RULE 
UNDER 
THE 
INTERNAL 
REVENUE
CODE.
(a) IN GENERAL.—Section 401(a) of the Internal
Revenue Code of 1986 (requirements for qualification of
pension, profit-sharing, and stock bonus plans) is amend-
ed by inserting after paragraph (31) the following new
paragraph:
‘‘(32) ADDITIONAL
RULES
RELATING
TO
EX-
CLUSIVE BENEFIT RULE.—
‘‘(A) IN GENERAL.—The requirements of
paragraph (2) shall not be treated as satisfied
with respect to a plan, in any case in which a
fiduciary, in the course of managing a plan or
exercising authority or control respecting man-
agement or disposition of its assets, has an oc-
casion to choose between any two alternative in-
vestments of plan assets, if the fiduciary in
making such choice takes into account other
factors in addition to the rate of return, the
riskiness of the investment, and other direct
economic factors, unless—
‘‘(i) the fiduciary has determined in
advance that both alternatives are eco-
nomically equally advantageous to the em-
ployees and their beneficiaries under the
plan, and
‘‘(ii) such other factors are taken into
account solely to the extent that they
would be in the economic interest of the
employees and their beneficiaries of the
plan.
‘‘(B) DISREGARD
OF
EXTERNAL
BENE-
FITS.—
‘‘(i) IN GENERAL.—The requirements
of paragraph (2) shall not be treated as
satisfied with respect to a plan in any case
in which a fiduciary with respect to the
plan, in making investment decisions with
respect to plan assets, takes into account
external benefits.
‘‘(ii) EXTERNAL
BENEFITS
PERMIS-
SIBLE.—The requirements of paragraph
(2) shall not be treated as not satisfied
solely because such investment yields exter-
nal benefits.
‘‘(iii) EXTERNAL BENEFIT.—For pur-
poses of this subparagraph, the term ‘ex-
ternal benefit’ means, in connection with
any investment of plan assets, a benefit to
individuals other than the employees or
their beneficiaries under the plan.
‘‘(C) NONINTERFERENCE WITH FIDUCIARY
RESPONSIBILITIES.—
‘‘(i) PROHIBITION AGAINST LISTS AND
OTHER
REFERRALS.—Neither the Sec-
retary nor any other agency or instrumen-
tality of the Government of the United
States may—
‘‘(I) establish or maintain, or
cause to be established or maintained,
by means of subsidy or otherwise, any
list of investments or classes of invest-
ments purporting to satisfy the re-
quirements of subparagraph (A), or
‘‘(II) in any manner pledge,
guarantee, ensure, or otherwise rep-
resent that any particular investment
or class of investments will yield a
sufficiently high rate of return at a
sufficiently low level of risk to satisfy
the requirements of subparagraph
(A).
‘‘(ii) 
PROHIBITION
AGAINST
SUB-
SIDIES.—None of the funds authorized or
SEC. 4. EFFECTIVE DATE.
The amendments made by this Act shall apply with
respect to acts or failures to act occurring on or after the
date of the enactment of this Act.
Æ