US Laws, Codes, Statutes & Cases

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[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
  January 24, 2002 and December 19, 2002]
[CITE: 5USC8477]

 
             TITLE 5--GOVERNMENT ORGANIZATION AND EMPLOYEES
 
                           PART III--EMPLOYEES
 
                   Subpart G--Insurance and Annuities
 
            CHAPTER 84--FEDERAL EMPLOYEES' RETIREMENT SYSTEM
 
 SUBCHAPTER VII--FEDERAL RETIREMENT THRIFT INVESTMENT MANAGEMENT SYSTEM
 
Sec. 8477. Fiduciary responsibilities; liability and penalties

    (a) For the purposes of this section--
        (1) the term ``account'' is not limited by the definition 
    provided in section 8401(1);
        (2) the term ``adequate consideration'' means--
            (A) in the case of a security for which there is a generally 
        recognized market--
                (i) the price of the security prevailing on a national 
            securities exchange which is registered under section 6 of 
            the Securities Exchange Act of 1934; or
                (ii) if the security is not traded on such a national 
            securities exchange, a price not less favorable to the 
            Thrift Savings Fund than the offering price for the security 
            as established by the current bid and asked prices quoted by 
            persons independent of the issuer and of any party in 
            interest; and

            (B) in the case of an asset other than a security for which 
        there is a generally recognized market, the fair market value of 
        the asset as determined in good faith by a fiduciary or 
        fiduciaries in accordance with regulations prescribed by the 
        Secretary of Labor;

        (3) the term ``fiduciary'' means--
            (A) a member of the Board;
            (B) the Executive Director;
            (C) any person who has or exercises discretionary authority 
        or discretionary control over the management or disposition of 
        the assets of the Thrift Savings Fund; and
            (D) any person who, with respect to the Thrift Savings Fund, 
        is described in section 3(21)(A) of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1002(21)(A)); and

        (4) the term ``party in interest'' includes--
            (A) any fiduciary;
            (B) any counsel to a person who is a fiduciary, with respect 
        to the actions of such person as a fiduciary;
            (C) any participant;
            (D) any person providing services to the Board and, with 
        respect to the actions of the Executive Director as a fiduciary 
        any person providing services to the Executive Director;
            (E) a labor organization, the members of which are 
        participants;
            (F) a spouse, sibling, ancestor, lineal descendant, or 
        spouse of a lineal descendant of a person described in 
        subparagraph (A), (B), or (D);
            (G) a corporation, partnership, or trust or estate of which, 
        or in which, at least 50 percent of--
                (i) the combined voting power of all classes of stock 
            entitled to vote or the total value of shares of all classes 
            of stock of such corporation;
                (ii) the capital interest or profits interest of such 
            partnership; or
                (iii) the beneficial interest of such trust or estate,

        is owned directly or indirectly, or held by a person described 
        in subparagraph (A), (B), (D), or (E);
            (H) an official (including a director) of, or an individual 
        employed by, a person described in subparagraph (A), (B), (D), 
        (E), or (G), or an individual having powers or responsibilities 
        similar to those of such an official;
            (I) a holder (directly or indirectly) of at least 10 percent 
        of the shares in a person described in any subparagraph referred 
        to in subparagraph (H); and
            (J) a person who, directly or indirectly, is at least a 10 
        percent partner or joint venturer (measured in capital or 
        profits) in a person described in any subparagraph referred to 
        in subparagraph (H).

    (b)(1) To the extent not inconsistent with the provisions of this 
chapter and the policies prescribed by the Board, a fiduciary shall 
discharge his responsibilities with respect to the Thrift Savings Fund 
or applicable portion thereof solely in the interest of the participants 
and beneficiaries and--
        (A) for the exclusive purpose of--
            (i) providing benefits to participants and their 
        beneficiaries; and
            (ii) defraying reasonable expenses of administering the 
        Thrift Savings Fund or applicable portions thereof;

        (B) with the care, skill, prudence, and diligence under the 
    circumstances then prevailing that a prudent individual acting in a 
    like capacity and familiar with such matters would use in the 
    conduct of an enterprise of a like character and with like 
    objectives; and
        (C) to the extent permitted by section 8438 of this title, by 
    diversifying the investments of the Thrift Savings Fund or 
    applicable portions thereof so as to minimize the risk of large 
    losses, unless under the circumstances it is clearly prudent not to 
    do so.

    (2) No fiduciary may maintain the indicia of ownership of any assets 
of the Thrift Savings Fund outside the jurisdiction of the district 
courts of the United States.
    (c)(1) A fiduciary shall not permit the Thrift Savings Fund to 
engage in any of the following transactions, except in exchange for 
adequate consideration:
        (A) A transfer of any assets of the Thrift Savings Fund to any 
    person the fiduciary knows or should know to be a party in interest 
    or the use of such assets by any such person.
        (B) An acquisition of any property from or sale of any property 
    to the Thrift Savings Fund by any person the fiduciary knows or 
    should know to be a party in interest.
        (C) A transfer or exchange of services between the Thrift 
    Savings Fund and any person the fiduciary knows or should know to be 
    a party in interest.

    (2) Notwithstanding paragraph (1), a fiduciary with respect to the 
Thrift Savings Fund shall not--
        (A) deal with any assets of the Thrift Savings Fund in his own 
    interest or for his own account;
        (B) act, in an individual capacity or any other capacity, in any 
    transaction involving the Thrift Savings Fund on behalf of a party, 
    or representing a party, whose interests are adverse to the 
    interests of the Thrift Savings Fund or the interests of its 
    participants or beneficiaries; or
        (C) receive any consideration for his own personal account from 
    any party dealing with sums credited to the Thrift Savings Fund in 
    connection with a transaction involving assets of the Thrift Savings 
    Fund.

    (3)(A) The Secretary of Labor may, in accordance with procedures 
which the Secretary shall by regulation prescribe, grant a conditional 
or unconditional exemption of any fiduciary or transaction, or class of 
fiduciaries or transactions, from all or part of the restrictions 
imposed by paragraph (2).
    (B) An exemption granted under this paragraph shall not relieve a 
fiduciary from any other applicable provision of this chapter.
    (C) The Secretary of Labor may not grant an exemption under this 
paragraph unless he finds that such exemption is--
        (i) administratively feasible;
        (ii) in the interests of the Thrift Savings Fund and of its 
    participants and beneficiaries; and
        (iii) protective of the rights of participants and beneficiaries 
    of such Fund.

    (D) An exemption under this paragraph may not be granted unless--
        (i) notice of the proposed exemption is published in the Federal 
    Register;
        (ii) interested persons are given an opportunity to present 
    views; and
        (iii) the Secretary of Labor affords an opportunity for a 
    hearing and makes a determination on the record with respect to the 
    respective requirements of clauses (i), (ii), and (iii) of 
    subparagraph (C).

    (E) Notwithstanding subparagraph (D), the Secretary of Labor may 
determine that an exemption granted for any class of fiduciaries or 
transactions under section 408(a) of the Employee Retirement Income 
Security Act of 1974 shall, upon publication of notice in the Federal 
Register under this subparagraph, constitute an exemption for purposes 
of the provisions of paragraph (2).
    (d) This section does not prohibit any fiduciary from--
        (1) receiving any benefit which the fiduciary is entitled to 
    receive under this subchapter or subchapter III of this chapter as a 
    participant or beneficiary;
        (2) receiving any reasonable compensation authorized by this 
    subchapter for services rendered, or for reimbursement of expenses 
    properly and actually incurred, in the performance of the 
    fiduciary's duties under this chapter; or
        (3) serving as a fiduciary in addition to being an officer, 
    employee, agent, or other representative of a party in interest.

    (e)(1)(A) Any fiduciary that breaches the responsibilities, duties, 
and obligations set out in subsection (b) or violates subsection (c) 
shall be personally liable to the Thrift Savings Fund for any losses to 
such Fund resulting from each such breach or violation and to restore to 
such Fund any profits made by the fiduciary through use of assets of 
such Fund by the fiduciary, and shall be subject to such other equitable 
or remedial relief as a court considers appropriate, except as provided 
in paragraphs (3) and (4) of this subsection. A fiduciary may be removed 
for a breach referred to in the preceding sentence.
    (B) The Secretary of Labor may assess a civil penalty against a 
party in interest with respect to each transaction which is engaged in 
by the party in interest and is prohibited by subsection (c). The amount 
of such penalty shall be equal to 5 percent of the amount involved in 
each such transaction (as defined in section 4975(f)(4) of the Internal 
Revenue Code of 1986) for each year or part thereof during which the 
prohibited transaction continues, except that, if the transaction is not 
corrected (in such manner as the Secretary of Labor shall prescribe by 
regulation consistent with section 4975(f)(5) of such Code) within 90 
days after the date the Secretary of Labor transmits notice to the party 
in interest (or such longer period as the Secretary of Labor may 
permit), such penalty may be in an amount not more than 100 percent of 
the amount involved.
    (C) A fiduciary shall not be liable under subparagraph (A) with 
respect to a breach of fiduciary duty under subsection (b) committed 
before becoming a fiduciary or after ceasing to be a fiduciary.
    (D) A fiduciary shall be jointly and severally liable under 
subparagraph (A) for a breach of fiduciary duty under subsection (b) by 
another fiduciary only if--
        (i) the fiduciary participates knowingly in, or knowingly 
    undertakes to conceal, an act or omission of such other fiduciary, 
    knowing such act or omission is such a breach;
        (ii) by the fiduciary's failure to comply with subsection (b) in 
    the administration of the fiduciary's specific responsibilities 
    which give rise to the fiduciary status, the fiduciary has enabled 
    such other fiduciary to commit such a breach; or
        (iii) the fiduciary has knowledge of a breach by such other 
    fiduciary, unless the fiduciary makes reasonable efforts under the 
    circumstances to remedy the breach.

    (E) The Secretary of Labor shall prescribe, in regulations, 
procedures for allocating fiduciary responsibilities among fiduciaries, 
including investment managers. Any fiduciary who, pursuant to such 
procedures, allocates to a person or persons any fiduciary 
responsibility shall not be liable for an act or omission of such person 
or persons unless--
        (i) such fiduciary violated subsection (b) with respect to the 
    allocation, with respect to the implementation of the procedures 
    prescribed by the Secretary of Labor (or the Board under section 114 
    of the Federal Employees' Retirement System Technical Corrections 
    Act of 1986), or in continuing such allocation; or
        (ii) such fiduciary would otherwise be liable in accordance with 
    subparagraph (D).

    (2) No civil action may be maintained against any fiduciary with 
respect to the responsibilities, liabilities, and penalties authorized 
or provided for in this section except in accordance with paragraphs (3) 
and (4).
    (3) A civil action may be brought in the district courts of the 
United States--
        (A) by the Secretary of Labor against any fiduciary other than a 
    Member of the Board or the Executive Director of the Board--
            (i) to determine and enforce a liability under paragraph 
        (1)(A);
            (ii) to collect any civil penalty under paragraph (1)(B);
            (iii) to enjoin any act or practice which violates any 
        provision of subsection (b) or (c);
            (iv) to obtain any other appropriate equitable relief to 
        redress a violation of any such provision; or
            (v) to enjoin any act or practice which violates subsection 
        (g)(2) or (h) of section 8472 of this title;

        (B) by any participant, beneficiary, or fiduciary against any 
    fiduciary--
            (i) to enjoin any act or practice which violates any 
        provision of subsection (b) or (c);
            (ii) to obtain any other appropriate equitable relief to 
        redress a violation of any such provision;
            (iii) to enjoin any act or practice which violates 
        subsection (g)(2) or (h) of section 8472 of this title; or

        (C) by any participant or beneficiary--
            (i) to recover benefits of such participant or beneficiary 
        under the provisions of subchapter III of this chapter, to 
        enforce any right of such participant or beneficiary under such 
        provisions, or to clarify any such right to future benefits 
        under such provisions; or
            (ii) to enforce any claim otherwise cognizable under 
        sections 1346(b) and 2671 through 2680 of title 28, provided 
        that the remedy against the United States provided by sections 
        1346(b) and 2672 of title 28 for damages for injury or loss of 
        property caused by the negligent or wrongful act or omission of 
        any fiduciary while acting within the scope of his duties or 
        employment shall be exclusive of any other civil action or 
        proceeding by the participant or beneficiary for recovery of 
        money by reason of the same subject matter against the fiduciary 
        (or the estate of such fiduciary) whose act or omission gave 
        rise to such action or proceeding, whether or not such action or 
        proceeding is based on an alleged violation of subsection (b) or 
        (c).

    (4)(A) In all civil actions under paragraph (3)(A), attorneys 
appointed by the Secretary may represent the Secretary (except as 
provided in section 518(a) of title 28), however all such litigation 
shall be subject to the direction and control of the Attorney General.
    (B) The Attorney General shall defend any civil action or proceeding 
brought in any court against any fiduciary referred to in paragraph 
(3)(C)(ii) (or the estate of such fiduciary) for any such injury. Any 
fiduciary against whom such a civil action or proceeding is brought 
shall deliver, within such time after date of service or knowledge of 
service as determined by the Attorney General, all process served upon 
such fiduciary (or an attested copy thereof) to the Executive Director 
of the Board, who shall promptly furnish copies of the pleading and 
process to the Attorney General and the United States Attorney for the 
district wherein the action or proceeding is brought.
    (C) Upon certification by the Attorney General that a fiduciary 
described in paragraph (3)(C)(ii) was acting in the scope of such 
fiduciary's duties or employment as a fiduciary at the time of the 
occurrence or omission out of which the action arose, any such civil 
action or proceeding commenced in a State court shall be--
        (i) removed without bond at any time before trial by the 
    Attorney General to the district court of the United States for the 
    district and division in which it is pending; and
        (ii) deemed a tort action brought against the United States 
    under the provisions of title 28 and all references thereto.

    (D) The Attorney General may compromise or settle any claim asserted 
in such civil action or proceeding in the manner provided in section 
2677 of title 28, and with the same effect. To the extent section 2672 
of title 28 provides that persons other than the Attorney General or his 
designee may compromise and settle claims, and that payment of such 
claims may be made from agency appropriations, such provisions shall not 
apply to claims based upon an alleged violation of subsection (b) or 
(c).
    (E) For the purposes of paragraph (3)(C)(ii) the provisions of 
sections 2680(h) of title 28 shall not apply to any claim based upon an 
alleged violation of subsection (b) or (c).
    (F) Notwithstanding sections 1346(b) and 2671 through 2680 of title 
28, whenever an award, compromise, or settlement is made under such 
sections upon any claim based upon an alleged violation of subsection 
(b) or (c), payment of such award, compromise, or settlement shall be 
made to the appropriate account within the Thrift Savings Fund, or where 
there is no such appropriate account, to the participant or beneficiary 
bringing the claim.
    (G) For purposes of paragraph (3)(C)(ii), fiduciary includes only 
the Members of the Board and the Board's Executive Director.
    (5) Any relief awarded against a Member of the Board or the 
Executive Director of the Board in a civil action authorized by 
paragraph (3) may not include any monetary damages or any other recovery 
of money.
    (6) An action may not be commenced under paragraph (3)(A) or (B) 
with respect to a fiduciary's breach of any responsibility, duty, or 
obligation under subsection (b) or a violation of subsection (c) after 
the earlier of--
        (A) 6 years after (i) the date of the last action which 
    constituted a part of the breach or violation, or (ii) in the case 
    of an omission, the latest date on which the fiduciary could have 
    cured the breach or violation; or
        (B) 3 years after the earliest date on which the plaintiff had 
    actual knowledge of the breach or violation, except that, in the 
    case of fraud or concealment, such action may be commenced not later 
    than 6 years after the date of discovery of such breach or 
    violation.

    (7)(A) The district courts of the United States shall have exclusive 
jurisdiction of civil actions under this subsection.
    (B) An action under this subsection may be brought in the District 
Court of the United States for the District of Columbia or a district 
court of the United States in the district where the breach alleged in 
the complaint or petition filed in the action took place or in the 
district where a defendant resides or may be found. Process may be 
served in any other district where a defendant resides or may be found.
    (8)(A) A copy of the complaint or petition filed in any action 
brought under this subsection (other than by the Secretary of Labor) 
shall be served on the Executive Director, the Secretary of Labor, and 
the Secretary of the Treasury by certified mail.
    (B) Any officer referred to in subparagraph (A) of this paragraph 
shall have the right in his discretion to intervene in any action. If 
the Secretary of Labor brings an action under paragraph (2) of this 
subsection on behalf of a participant or beneficiary, he shall notify 
the Executive Director and the Secretary of the Treasury.
    (f) The Secretary of Labor may prescribe regulations to carry out 
this section.
    (g)(1) The Secretary of Labor shall establish a program to carry out 
audits to determine the level of compliance with the requirements of 
this section relating to fiduciary responsibilities and prohibited 
activities of fiduciaries.
    (2) An audit under this subsection may be conducted by the Secretary 
of Labor, by contract with a qualified non-governmental organization, or 
in cooperation with the Comptroller General of the United States, as the 
Secretary considers appropriate.

(Added Pub. L. 99-335, title I, Sec. 101(a), June 6, 1986, 100 Stat. 
582; amended Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095; Pub. 
L. 99-556, title I, Secs. 112, 114(b), Oct. 27, 1986, 100 Stat. 3133; 
Pub. L. 100-238, title I, Sec. 133(a), (c), Jan. 8, 1988, 101 Stat. 
1760, 1762; Pub. L. 100-366, Sec. 3(a), July 13, 1988, 102 Stat. 826; 
Pub. L. 101-335, Sec. 8, July 17, 1990, 104 Stat. 325.)

                       References in Text

    Section 6 of the Securities Exchange Act of 1934, referred to in 
subsec. (a)(2)(A)(i), is classified to section 78f of Title 15, Commerce 
and Trade.
    Section 408(a) of the Employee Retirement Income Security Act of 
1974, referred to in subsec. (c)(3)(E), is classified to section 1108(a) 
of Title 29, Labor.
    Section 4975(f)(4) and (5) of the Internal Revenue Code of 1986, 
referred to in subsec. (e)(1)(B), is classified to section 4975(f)(4) 
and (5) of Title 26, Internal Revenue Code.
    Section 114 of the Federal Employees' Retirement System Technical 
Corrections Act of 1986, referred to in subsec. (e)(1)(E)(i), is section 
114 of Pub. L. 99-556 which amended this section and enacted provisions 
set out as a note under this section.


                               Amendments

    1990--Pub. L. 101-335 repealed section 133(c) of Pub. L. 100-238. 
See Effective Date of 1988 Amendment note below.
    1988--Subsec. (e)(1)(A). Pub. L. 100-238, Sec. 133(a)(1), inserted 
``, except as provided in paragraphs (3) and (4) of this subsection''.
    Subsec. (e)(1)(B). Pub. L. 100-238, Sec. 133(a)(2), substituted 
``Internal Revenue Code of 1986'' for ``Internal Revenue Code of 1954''.
    Subsec. (e)(1)(D). Pub. L. 100-238, Sec. 133(a)(3), inserted 
``only'' in introductory provisions.
    Subsec. (e)(2), (3). Pub. L. 100-238, Sec. 133(a)(5), added pars. 
(2) and (3) and struck out former pars. (2) and (3) which read as 
follows:
    ``(2) A civil action may be brought in the district courts of the 
United States--
        ``(A) by the Secretary of Labor--
            ``(i) to determine and enforce a liability under paragraph 
        (1)(A);
            ``(ii) to collect any civil penalty under paragraph (1)(B); 
        or
            ``(iii) to enjoin any act or practice which violates 
        subsection (g)(2) or (h) of section 8472 of this title;
        ``(B) by the Secretary of Labor, any participant, beneficiary, 
    or fiduciary--
            ``(i) to enjoin any act or practice which violates any 
        provision of subsection (b) or (c); or
            ``(ii) to obtain any other appropriate equitable relief to 
        redress a violation of any such provision; or
        ``(C) by any participant or beneficiary to recover benefits due 
    to him or her under the provisions of subchapter III of this 
    chapter, to enforce his or her rights under such provisions, or to 
    clarify his or her rights to future benefits under such provisions.
    ``(3) An action may not be commenced under paragraph (2) with 
respect to a fiduciary's breach of any responsibility, duty, or 
obligation under subsection (b) or a violation of subsection (c) after 
the earlier of--
        ``(A) 6 years after (i) the date of the last action which 
    constituted a part of the breach or violation, or (ii) in the case 
    of an omission, the latest date on which the fiduciary could have 
    cured the breach or violation; or
        ``(B) 3 years after the earliest date on which the plaintiff had 
    actual knowledge of the breach or violation, except that, in the 
    case of fraud or concealment, such action may be commenced not later 
    than 6 years after the date of discovery of such breach or 
    violation.''
    Subsec. (e)(3)(C)(ii). Pub. L. 100-366, Sec. 3(a)(1), substituted 
``28, provided that'' for ``28, if'' and ``shall be exclusive of'' for 
``is exclusive of''.
    Subsec. (e)(4) to (8). Pub. L. 100-238, Sec. 133(a)(4), (5), added 
pars. (4) to (6) and redesignated former pars. (4) and (5) as (7) and 
(8), respectively.
    Subsec. (e)(5). Pub. L. 100-366, Sec. 3(a)(2), substituted 
``paragraph (3)'' for ``paragraphs (3) and (4)''.
    1986--Subsec. (c)(3)(E). Pub. L. 99-556, Sec. 112, added subpar. 
(E).
    Subsec. (e)(1)(B). Pub. L. 99-514 substituted ``Internal Revenue 
Code of 1986'' for ``Internal Revenue Code of 1954''.
    Subsec. (e)(1)(E)(i). Pub. L. 99-556, Sec. 114(b), substituted 
``Secretary of Labor (or the Board under section 114 of the Federal 
Employees' Retirement System Technical Corrections Act of 1986)'' for 
``Board''.


                    Effective Date of 1988 Amendments

    Section 3(b) of Pub. L. 100-366 provided that: ``Section 8477(e) of 
title 5, United States Code, as amended by subsection (a), shall apply 
to any civil action or proceeding arising from any act or omission 
occurring on or after October 1, 1986.''
    Section 133(b) of Pub. L. 100-238 provided that: ``The provisions of 
section 8477(e)(1), (2), (3), (4), (5), and (6) of title 5, United 
States Code (as amended by subsection (a) of this section), shall apply 
to any civil action or proceeding arising from any act or omission 
occurring on or after October 1, 1986.''
    Section 133(c) of Pub. L. 100-238, which provided that the 
provisions of subsection (a) (and the amendments to section 8477(e) of 
title 5 contained therein) and subsection (b) of this section were to be 
repealed effective on Dec. 31, 1990, and that on and after Dec. 31, 
1990, the provisions of section 8477(e) of title 5 were to be in effect 
as such provisions were in effect on Jan. 7, 1988, was repealed by Pub. 
L. 101-335, Sec. 8, July 17, 1990, 104 Stat. 325.


                      Interim Exemption Procedures

    Section 111 of Pub. L. 99-556 provided that:
    ``(a) In General.--Subject to subsection (b), until such time as 
final regulations under subparagraph (A) of section 8477(c)(3) of title 
5, United States Code, become effective, the Secretary of Labor may, in 
accordance with procedures under section 408(a) of the Employee 
Retirement Income Security Act of 1974 [29 U.S.C. 1108(a)], grant any 
exemption allowable under such section 8477(c)(3).
    ``(b) Termination of Interim Authority.--The authority to grant an 
exemption under section 8477(c)(3) of title 5, United States Code, using 
the procedures under section 408(a) of the Employee Retirement Income 
Security Act of 1974 shall expire not later than December 31, 1988.''


                Allocation of Fiduciary Responsibilities

    Section 114(a) of Pub. L. 99-556 provided that:
    ``(1) Subject to paragraph (2), until such time as final regulations 
under subparagraph (E) of section 8477(e)(1) of title 5, United States 
Code, become effective, a fiduciary (as defined by section 8477(a)(3) of 
title 5, United States Code) may, in accordance with procedures 
established by the Federal Retirement Thrift Investment Board, make any 
allocation of fiduciary responsibilities.
    ``(2) The authority to make any allocation under section 
8477(e)(1)(E) using the procedures referred to in paragraph (1), and any 
allocation so made using such procedures, shall expire not later than 
December 31, 1988.''

                  Section Referred to in Other Sections

    This section is referred to in sections 8401, 8433, 8438, 8478a of 
this title.