Qualifies the following as such fiduciary advisers if they satisfy applicable laws: (1) registered investment advisers; (2) banks; (3) insurance companies; (4) registered broker-dealers; (5) affiliates of such entities; or (6) employees, agents, or registered representatives of such entities. Requires fiduciary advisers to keep for six years records necessary to determine whether the conditions of the exemption have been met.
Requires such a fiduciary adviser to disclose: (1) fees or other compensation it receives relating to the provision of investment advice or a resulting sale or acquisition of securities or other property, including from third parties; (2) any interest it has and its affiliates have in any security or other property recommended, purchased, or sold; (3) any limitation placed on its ability to provide advice; (4) the advisory services offered; (5) that it is acting as a fiduciary of the plan in connection with the provision of such advice; and (6) any information required to be disclosed under applicable securities laws. Requires such disclosure to be: (1) written to be understandable by the average plan participant; and (2) maintained in currently accurate form.
Allows any such investment advice provided to participants or beneficiaries to be implemented only at their direction. Requires the terms of the transaction to be at least as favorable to the plan as an arm's length transaction would be. Requires to be reasonable any compensation received by the fiduciary adviser and its affiliates in connection with any transaction.
Requires such a fiduciary adviser to provide the plan sponsor a written acknowledgment that it is acting as a fiduciary of the plan. Exempts from the duty to monitor the specific investment advice given by the fiduciary adviser a plan sponsor or other fiduciary that arranges for a fiduciary adviser to provide investment advice to participants and beneficiaries, if certain conditions are met under this Act. Declares that the plan sponsor or other fiduciary retains the duty of prudent selection and periodic review of the fiduciary adviser. Allows plan assets to be used to pay for the expenses of providing investment advice to participants and beneficiaries.
[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 1978 Introduced in Senate (IS)]
107th CONGRESS
2d Session
S. 1978
To amend title I of the Employee Retirement Income Security Act of 1974
and the Internal Revenue Code of 1986 to promote the provision of
retirement investment advice to workers managing their retirement
income assets.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
March 1, 2002
Mr. Hutchinson introduced the following bill; which was read twice and
referred to the Committee on Health, Education, Labor, and Pensions
_______________________________________________________________________
A BILL
To amend title I of the Employee Retirement Income Security Act of 1974
and the Internal Revenue Code of 1986 to promote the provision of
retirement investment advice to workers managing their retirement
income assets.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Retirement Security Advice Act of
2002''.
SEC. 2. PROHIBITED TRANSACTION EXEMPTION FOR THE PROVISION OF
INVESTMENT ADVICE.
(a) Amendments to the Employee Retirement Income Security Act of
1974.--
(1) Exemption from prohibited transactions.--Section 408(b)
of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1108(b)) is amended by adding at the end the following
new paragraph:
``(14)(A) Any transaction described in subparagraph (B) in
connection with the provision of investment advice described in
section 3(21)(A)(ii), in any case in which--
``(i) the investment of assets of the plan is
subject to the direction of plan participants or
beneficiaries,
``(ii) the advice is provided to the plan or a
participant or beneficiary of the plan by a fiduciary
adviser in connection with any sale, acquisition, or
holding of a security or other property for purposes of
investment of plan assets, and
``(iii) the requirements of subsection (g) are met
in connection with the provision of the advice.
``(B) The transactions described in this subparagraph are
the following:
``(i) the provision of the advice to the plan,
participant, or beneficiary;
``(ii) the sale, acquisition, or holding of a
security or other property (including any lending of
money or other extension of credit associated with the
sale, acquisition, or holding of a security or other
property) pursuant to the advice; and
``(iii) the direct or indirect receipt of fees or
other compensation by the fiduciary adviser or an
affiliate thereof (or any employee, agent, or
registered representative of the fiduciary adviser or
affiliate) in connection with the provision of the
advice or in connection with a sale, acquisition, or
holding of a security or other property pursuant to the
advice.''.
(2) Requirements.--Section 408 of such Act is amended by
adding at the end the following new subsection:
``(g) Requirements Relating to Provision of Investment Advice by
Fiduciary Advisers.--
``(1) In general.--The requirements of this subsection are
met in connection with the provision of investment advice
referred to in section 3(21)(A)(ii), provided to an employee
benefit plan or a participant or beneficiary of an employee
benefit plan by a fiduciary adviser with respect to the plan in
connection with any sale, acquisition, or holding of a security
or other property for purposes of investment of amounts held by
the plan, if--
``(A) in the case of the initial provision of the
advice with regard to the security or other property by
the fiduciary adviser to the plan, participant, or
beneficiary, the fiduciary adviser provides to the
recipient of the advice, at a time reasonably
contemporaneous with the initial provision of the
advice, a written notification (which may consist of
notification by means of electronic communication)--
``(i) of all fees or other compensation
relating to the advice that the fiduciary
adviser or any affiliate thereof is to receive
(including compensation provided by any third
party) in connection with the provision of the
advice or in connection with the sale,
acquisition, or holding of the security or
other property,
``(ii) of any material affiliation or
contractual relationship of the fiduciary
adviser or affiliates thereof in the security
or other property,
``(iii) of any limitation placed on the
scope of the investment advice to be provided
by the fiduciary adviser with respect to any
such sale, acquisition, or holding of a
security or other property,
``(iv) of the types of services provided by
the fiduciary adviser in connection with the
provision of investment advice by the fiduciary
adviser, and
``(v) that the adviser is acting as a
fiduciary of the plan in connection with the
provision of the advice,
``(B) the fiduciary adviser provides appropriate
disclosure, in connection with the sale, acquisition,
or holding of the security or other property, in
accordance with all applicable securities laws,
``(C) the sale, acquisition, or holding occurs
solely at the direction of the recipient of the advice,
``(D) the compensation received by the fiduciary
adviser and affiliates thereof in connection with the
sale, acquisition, or holding of the security or other
property is reasonable, and
``(E) the terms of the sale, acquisition, or
holding of the security or other property are at least
as favorable to the plan as an arm's length transaction
would be.
``(2) Standards for presentation of information.--The
notification required to be provided to participants and
beneficiaries under paragraph (1)(A) shall be written in a
clear and conspicuous manner and in a manner calculated to be
understood by the average plan participant and shall be
sufficiently accurate and comprehensive to reasonably apprise
such participants and beneficiaries of the information required
to be provided in the notification.
``(3) Exemption conditioned on continued availability of
required information on request for 1 year.--The requirements
of paragraph (1)(A) shall be deemed not to have been met in
connection with the initial or any subsequent provision of
advice described in paragraph (1) to the plan, participant, or
beneficiary if, at any time during the provision of advisory
services to the plan, participant, or beneficiary, the
fiduciary adviser fails to maintain the information described
in clauses (i) through (iv) of subparagraph (A) in currently
accurate form and in the manner described in paragraph (2) or
fails--
``(A) to provide, without charge, such currently
accurate information to the recipient of the advice no
less than annually,
``(B) to make such currently accurate information
available, upon request and without charge, to the
recipient of the advice, or
``(C) in the event of a material change to the
information described in clauses (i) through (iv) of
paragraph (1)(A), to provide, without charge, such
currently accurate information to the recipient of the
advice at a time reasonably contemporaneous to the
material change in information.
``(4) Maintenance for 6 years of evidence of compliance.--A
fiduciary adviser referred to in paragraph (1) who has provided
advice referred to in such paragraph shall, for a period of not
less than 6 years after the provision of the advice, maintain
any records necessary for determining whether the requirements
of the preceding provisions of this subsection and of
subsection (b)(14) have been met. A transaction prohibited
under section 406 shall not be considered to have occurred
solely because the records are lost or destroyed prior to the
end of the 6-year period due to circumstances beyond the
control of the fiduciary adviser.
``(5) Exemption for plan sponsor and certain other
fiduciaries.--
``(A) In general.--Subject to subparagraph (B), a
plan sponsor or other person who is a fiduciary (other
than a fiduciary adviser) shall not be treated as
failing to meet the requirements of this part solely by
reason of the provision of investment advice referred
to in section 3(21)(A)(ii) (or solely by reason of
contracting for or otherwise arranging for the
provision of the advice), if--
``(i) the advice is provided by a fiduciary
adviser pursuant to an arrangement between the
plan sponsor or other fiduciary and the
fiduciary adviser for the provision by the
fiduciary adviser of investment advice referred
to in such section,
``(ii) the terms of the arrangement require
compliance by the fiduciary adviser with the
requirements of this subsection, and
``(iii) the terms of the arrangement
include a written acknowledgment by the
fiduciary adviser that the fiduciary adviser is
a fiduciary of the plan with respect to the
provision of the advice.
``(B) Continued duty of prudent selection of
adviser and periodic review.--Nothing in subparagraph
(A) shall be construed to exempt a plan sponsor or
other person who is a fiduciary from any requirement of
this part for the prudent selection and periodic review
of a fiduciary adviser with whom the plan sponsor or
other person enters into an arrangement for the
provision of advice referred to in section
3(21)(A)(ii). The plan sponsor or other person who is a
fiduciary has no duty under this part to monitor the
specific investment advice given by the fiduciary
adviser to any particular recipient of the advice.
``(C) Availability of plan assets for payment for
advice.--Nothing in this part shall be construed to
preclude the use of plan assets to pay for reasonable
expenses in providing investment advice referred to in
section 3(21)(A)(ii).
``(6) Definitions.--For purposes of this subsection and
subsection (b)(14)--
``(A) Fiduciary adviser.--The term `fiduciary
adviser' means, with respect to a plan, a person who is
a fiduciary of the plan by reason of the provision of
investment advice by the person to the plan or to a
participant or beneficiary and who is--
``(i) registered as an investment adviser
under the Investment Advisers Act of 1940 (15
U.S.C. 80b-1 et seq.) or under the laws of the
State in which the fiduciary maintains its
principal office and place of business,
``(ii) a bank or similar financial
institution referred to in section 408(b)(4),
``(iii) an insurance company qualified to
do business under the laws of a State,
``(iv) a person registered as a broker or
dealer under the Securities Exchange Act of
1934 (15 U.S.C. 78a et seq.),
``(v) an affiliate of a person described in
any of clauses (i) through (iv), or
``(vi) an employee, agent, or registered
representative of a person described in any of
clauses (i) through (v) who satisfies the
requirements of applicable insurance, banking,
and securities laws relating to the provision
of the advice.
``(B) Affiliate.--The term `affiliate' of another
entity means an affiliated person of the entity (as
defined in section 2(a)(3) of the Investment Company
Act of 1940 (15 U.S.C. 80a-2(a)(3))).
``(C) Registered representative.--The term
`registered representative' of another entity means a
person described in section 3(a)(18) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a)(18))
(substituting the entity for the broker or dealer
referred to in such section) or a person described in
section 202(a)(17) of the Investment Advisers Act of
1940 (15 U.S.C. 80b-2(a)(17)) (substituting the entity
for the investment adviser referred to in such
section).''.
(b) Amendments to the Internal Revenue Code of 1986.--
(1) Exemption from prohibited transactions.--Subsection (d)
of section 4975 of the Internal Revenue Code of 1986 (relating
to exemptions from tax on prohibited transactions) is amended--
(A) in paragraph (14), by striking ``or'' at the
end;
(B) in paragraph (15), by striking the period at
the end and inserting ``; or''; and
(C) by adding at the end the following new
paragraph:
``(16) any transaction described in subsection (f)(7)(A) in
connection with the provision of investment advice described in
subsection (e)(3)(B), in any case in which--
``(A) the investment of assets of the plan is
subject to the direction of plan participants or
beneficiaries,
``(B) the advice is provided to the plan or a
participant or beneficiary of the plan by a fiduciary
adviser in connection with any sale, acquisition, or
holding of a security or other property for purposes of
investment of plan assets, and
``(C) the requirements of subsection (f)(7)(B) are
met in connection with the provision of the advice.''.
(2) Allowed transactions and requirements.--Subsection (f)
of such section 4975 (relating to other definitions and special
rules) is amended by adding at the end the following new
paragraph:
``(7) Provisions relating to investment advice provided by
fiduciary advisers.--
``(A) Transactions allowable in connection with
investment advice provided by fiduciary advisers.--The
transactions referred to in subsection (d)(16), in
connection with the provision of investment advice by a
fiduciary adviser, are the following:
``(i) the provision of the advice to the
plan, participant, or beneficiary;
``(ii) the sale, acquisition, or holding of
a security or other property (including any
lending of money or other extension of credit
associated with the sale, acquisition, or
holding of a security or other property)
pursuant to the advice; and
``(iii) the direct or indirect receipt of
fees or other compensation by the fiduciary
adviser or an affiliate thereof (or any
employee, agent, or registered representative
of the fiduciary adviser or affiliate) in
connection with the provision of the advice or
in connection with a sale, acquisition, or
holding of a security or other property
pursuant to the advice.
``(B) Requirements relating to provision of
investment advice by fiduciary advisers.--The
requirements of this subparagraph (referred to in
subsection (d)(16)(C)) are met in connection with the
provision of investment advice referred to in
subsection (e)(3)(B), provided to a plan or a
participant or beneficiary of a plan by a fiduciary
adviser with respect to the plan in connection with any
sale, acquisition, or holding of a security or other
property for purposes of investment of amounts held by
the plan, if--
``(i) in the case of the initial provision
of the advice with regard to the security or
other property by the fiduciary adviser to the
plan, participant, or beneficiary, the
fiduciary adviser provides to the recipient of
the advice, at a time reasonably
contemporaneous with the initial provision of
the advice, a written notification (which may
consist of notification by means of electronic
communication)--
``(I) of all fees or other
compensation relating to the advice
that the fiduciary adviser or any
affiliate thereof is to receive
(including compensation provided by any
third party) in connection with the
provision of the advice or in
connection with the sale, acquisition,
or holding of the security or other
property,
``(II) of any material affiliation
or contractual relationship of the
fiduciary adviser or affiliates thereof
in the security or other property,
``(III) of any limitation placed on
the scope of the investment advice to
be provided by the fiduciary adviser
with respect to any such sale,
acquisition, or holding of a security
or other property,
``(IV) of the types of services
provided by the fiduciary adviser in
connection with the provision of
investment advice by the fiduciary
adviser, and
``(V) that the adviser is acting as
a fiduciary of the plan in connection
with the provision of the advice,
``(ii) the fiduciary adviser provides
appropriate disclosure, in connection with the
sale, acquisition, or holding of the security
or other property, in accordance with all
applicable securities laws,
``(iii) the sale, acquisition, or holding
occurs solely at the direction of the recipient
of the advice,
``(iv) the compensation received by the
fiduciary adviser and affiliates thereof in
connection with the sale, acquisition, or
holding of the security or other property is
reasonable, and
``(v) the terms of the sale, acquisition,
or holding of the security or other property
are at least as favorable to the plan as an
arm's length transaction would be.
``(C) Standards for presentation of information.--
The notification required to be provided to
participants and beneficiaries under subparagraph
(B)(i) shall be written in a clear and conspicuous
manner and in a manner calculated to be understood by
the average plan participant and shall be sufficiently
accurate and comprehensive to reasonably apprise such
participants and beneficiaries of the information
required to be provided in the notification.
``(D) Exemption conditioned on making required
information available annually, on request, and in the
event of material change.--The requirements of
subparagraph (B)(i) shall be deemed not to have been
met in connection with the initial or any subsequent
provision of advice described in subparagraph (B) to
the plan, participant, or beneficiary if, at any time
during the provision of advisory services to the plan,
participant, or beneficiary, the fiduciary adviser
fails to maintain the information described in
subclauses (I) through (IV) of subparagraph (B)(i) in
currently accurate form and in the manner required by
subparagraph (C), or fails--
``(i) to provide, without charge, such
currently accurate information to the recipient
of the advice no less than annually,
``(ii) to make such currently accurate
information available, upon request and without
charge, to the recipient of the advice, or
``(iii) in the event of a material change
to the information described in subclauses (I)
through (IV) of subparagraph (B)(i), to
provide, without charge, such currently
accurate information to the recipient of the
advice at a time reasonably contemporaneous to
the material change in information.
``(E) Maintenance for 6 years of evidence of
compliance.--A fiduciary adviser referred to in
subparagraph (B) who has provided advice referred to in
such subparagraph shall, for a period of not less than
6 years after the provision of the advice, maintain any
records necessary for determining whether the
requirements of the preceding provisions of this
paragraph and of subsection (d)(16) have been met. A
transaction prohibited under subsection (c)(1) shall
not be considered to have occurred solely because the
records are lost or destroyed prior to the end of the
6-year period due to circumstances beyond the control
of the fiduciary adviser.
``(F) Exemption for plan sponsor and certain other
fiduciaries.--A plan sponsor or other person who is a
fiduciary (other than a fiduciary adviser) shall not be
treated as failing to meet the requirements of this
section solely by reason of the provision of investment
advice referred to in subsection (e)(3)(B) (or solely
by reason of contracting for or otherwise arranging for
the provision of the advice), if--
``(i) the advice is provided by a fiduciary
adviser pursuant to an arrangement between the
plan sponsor or other fiduciary and the
fiduciary adviser for the provision by the
fiduciary adviser of investment advice referred
to in such section,
``(ii) the terms of the arrangement require
compliance by the fiduciary adviser with the
requirements of this paragraph,
``(iii) the terms of the arrangement
include a written acknowledgment by the
fiduciary adviser that the fiduciary adviser is
a fiduciary of the plan with respect to the
provision of the advice, and
``(iv) the requirements of part 4 of
subtitle B of title I of the Employee
Retirement Income Security Act of 1974 are met
in connection with the provision of such
advice.
``(G) Definitions.--For purposes of this paragraph
and subsection (d)(16)--
``(i) Fiduciary adviser.--The term
`fiduciary adviser' means, with respect to a
plan, a person who is a fiduciary of the plan
by reason of the provision of investment advice
by the person to the plan or to a participant
or beneficiary and who is--
``(I) registered as an investment
adviser under the Investment Advisers
Act of 1940 (15 U.S.C. 80b-1 et seq.)
or under the laws of the State in which
the fiduciary maintains its principal
office and place of business,
``(II) a bank or similar financial
institution referred to in subsection
(d)(4),
``(III) an insurance company
qualified to do business under the laws
of a State,
``(IV) a person registered as a
broker or dealer under the Securities
Exchange Act of 1934 (15 U.S.C. 78a et
seq.),
``(V) an affiliate of a person
described in any of subclauses (I)
through (IV), or
``(VI) an employee, agent, or
registered representative of a person
described in any of subclauses (I)
through (V) who satisfies the
requirements of applicable insurance,
banking, and securities laws relating
to the provision of the advice.
``(ii) Affiliate.--The term `affiliate' of
another entity means an affiliated person of
the entity (as defined in section 2(a)(3) of
the Investment Company Act of 1940 (15 U.S.C.
80a-2(a)(3))).
``(iii) Registered representative.--The
term `registered representative' of another
entity means a person described in section
3(a)(18) of the Securities Exchange Act of 1934
(15 U.S.C. 78c(a)(18)) (substituting the entity
for the broker or dealer referred to in such
section) or a person described in section
202(a)(17) of the Investment Advisers Act of
1940 (15 U.S.C. 80b-2(a)(17)) (substituting the
entity for the investment adviser referred to
in such section).''
<all>
Introduced in Senate
Read twice and referred to the Committee on Health, Education, Labor, and Pensions. (text of measure as introduced: CR S1394-1396)
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