text: 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 control respecting 
  management or disposition of its assets, has an occasion to choose 
  between any two alternative investments 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 considered 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 advantageous 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 economic 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 discharge 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 investment 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 established or 
          maintained, by means of subsidy or otherwise, any list of 
          investments or classes of investments 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 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 
          paragraph (1) or section 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 
          instrumentality of the United States, or
              ``(ii) by any other institution or entity established, 
          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 investment or class of investments.
      ``(5) Nothing in this title shall be construed to permit any matter 
  unrelated to the economic interests of participants 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 amended by inserting after paragraph (31) the 
  following new paragraph:
              ``(32) Additional rules relating to exclusive 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 management or disposition of its assets, has 
                  an occasion to choose between any two alternative 
                  investments 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 economically 
                          equally advantageous to the employees 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 benefits.--
                              ``(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 permissible.--The 
                          requirements of paragraph (2) shall not be 
                          treated as not satisfied solely because such 
                          investment yields external benefits.
                              ``(iii) External benefit.--For purposes of 
                          this subparagraph, the term `external 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 Secretary nor any other 
                          agency or instrumentality 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 
                                  investments purporting to satisfy the 
                                  requirements of subparagraph (A), or
                                      ``(II) in any manner pledge, 
                                  guarantee, ensure, or otherwise 
                                  represent 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 subsidies.--None 
                          of the funds authorized or appropriated to 
                          carry out this title or any other provision of 
                          law may be used--
                                      ``(I) by the Secretary or any other 
                                  agency or instrumentality of the United 
                                  States, or
                                      ``(II) by any other institution or 
                                  entity established, 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 subparagraph (A) to be met 
                          with respect to such investment or class of 
                          investments.
                      ``(D) Irrelevance of matters other than economic 
                  interests of employees and their beneficiaries.--
                  Nothing in this paragraph or paragraph (2) shall be 
                  construed to permit any matter unrelated to the 
                  economic interests of the employees and their 
                  beneficiaries to be taken into account in determining 
                  whether the requirements of paragraph (2) have been 
                  satisfied.''.
  
  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.
target: Employee Benefit Plan Security and Protection Act of 1994 - Amends the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code to revise provisions regarding employee benefit plan fiduciary duties in relation to external benefits, social investing, and economically targeted investments.
feat_title: Employee Benefit Plan Security and Protection Act of 1994