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.

June 21, 2001

Mr. BOEHNER (for himself, Mr. ARMEY, Mr. SAM JOHNSON of Texas, Mr. TANCREDO, Mr. BAIRD, Mr. LUCAS of Kentucky, Mr. MCINNIS, Mr. FOLEY, and Mr. SMITH of Washington, Mr. OXLEY, Mr. DICKS, Mrs. ROUKEMA, Mr. BAKER, Mr. CAMP, Mr. ENGLISH, Mr. GUTKNECHT, Mr. KIRK, Mrs. TAUSCHER, and Mr. HOLT) introduced the following bill; which was referred to the Committee on Education and the Workforce, and in addition to the Committee on Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

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 2001'.

SEC. 2. PROHIBITED TRANSACTION EXEMPTION FOR THE PROVISION OF INVESTMENT ADVICE.

(a) AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974-

(1) IN GENERAL- 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) If the requirements of subsection (g) are met--

`(A) the provision of investment advice referred to in section 3(21)(A)(ii) provided by a fiduciary adviser (as defined in subsection (g)(4)(A)) to an employee benefit plan or to a participant or beneficiary of an employee benefit plan,

`(B) the sale, acquisition, or holding of securities or other property (including any lending of money or other extension of credit associated with the sale, acquisition, or holding of securities or other property) pursuant to such investment advice, and

`(C) 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 such investment advice.'.

(2) REQUIREMENTS- Section 408 of such Act is amended further by adding at the end the following new subsection:

`(g)(1) The requirements of this subsection are met in connection with the provision of 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 such plan, in connection with any sale or acquisition of a security or other property for purposes of investment of amounts held by such plan, if--

`(A) in the case of the initial provision of such advice with regard to a security or other property, by such fiduciary adviser to such plan, participant, or beneficiary, the fiduciary adviser provides to the recipient of such advice, at the time of or before the initial provision of such advice, a clear and conspicuous description, in writing (including by means of electronic communication), of--

`(i) all fees or other compensation relating to such 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 such advice or in connection with such acquisition or sale,

`(ii) any material affiliation or contractual relationship of the fiduciary adviser or affiliates thereof in such security or other property,

`(iii) any limitation placed on the scope of the investment advice to be provided by the fiduciary adviser with respect to any such sale or acquisition, and

`(iv) the types of services offered by the fiduciary advisor in connection with the provision of investment advice by the fiduciary adviser,

`(B) in the case of the initial or any subsequent provision of such advice to such plan, participant, or beneficiary, the fiduciary adviser, throughout the 1-year period following the provision of such advice, maintains the information described in clauses (i) through (iv) of subparagraph (A) in currently accurate form for availability, upon request and without charge, to the recipient of such advice,

`(C) the fiduciary adviser provides appropriate disclosure, in connection with any such acquisition or sale, in accordance with all applicable securities laws,

`(D) such acquisition or sale occurs solely at the direction of the recipient of such advice,

`(E) the compensation received by the fiduciary adviser and affiliates thereof in connection with such acquisition or sale is reasonable, and

`(F) the terms of such acquisition or sale are at least as favorable to such plan as an arm's length transaction would be.

`(2) 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 such 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.

`(3)(A) Subject to subparagraph (B), a plan sponsor or other person who is a fiduciary 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 such investment advice), if--

`(i) such advice is provided by a fiduciary adviser pursuant to an arrangement between such plan sponsor or other fiduciary and such fiduciary adviser for the provision by such fiduciary adviser of investment advice referred to in such section, and

`(ii) the terms of such arrangement require compliance by the fiduciary adviser with the requirements of this subsection.

`(B) 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). Such 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 such advice.

`(C) 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).

`(4) For purposes of this subsection and subsection (b)(14)--

`(A) 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 such 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).

`(B) The term `affiliate' means an affiliated person, as defined in section 2(a)(3) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)).

`(C) The term `registered representative' means a person described in section 3(a)(18) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(18)) or section 202(a)(17) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(17)).'.

(b) Amendments to the Internal Revenue Code of 1986-

(1) IN GENERAL- 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) If the requirements of subsection (f)(7) are met--

`(A) the provision of investment advice referred to in subsection (e)(3)(B) provided by a fiduciary adviser (as defined in subsection (f)(7)(C)(i)) to a plan or to a participant or beneficiary of a plan,

`(B) the sale, acquisition, or holding of securities or other property (including any extension of credit associated with the sale, acquisition, or holding of securities or other property) pursuant to such investment advice, and

`(C) 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 such investment advice.'.

(2) 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) REQUIREMENTS FOR EXEMPTION FOR INVESTMENT ADVICE PROVIDED BY FIDUCIARY ADVISERS-

`(A) IN GENERAL- The requirements of this paragraph are met in connection with the provision of 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 such plan, in connection with any sale or acquisition of a security or other property for purposes of investment of amounts held by such plan, if--

`(i) in the case of the initial provision of such advice by such fiduciary adviser to such plan, participant, or beneficiary, the fiduciary adviser provides to the plan, participant, or beneficiary, at the time of or before the initial provision of such advice, a description, in writing or by means of electronic communication, of--

`(I) all fees or other compensation relating to such 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 such advice or in connection with such acquisition or sale,

`(II) any material affiliation or contractual relationship of the fiduciary adviser or affiliates thereof in such security or other property,

`(III) any limitation placed on the scope of the investment advice to be provided by the fiduciary adviser

with respect to any such sale or acquisition, and

`(IV) the types of services offered by the fiduciary advisor in connection with the provision of investment advice by the fiduciary adviser,

`(ii) in the case of the initial or any subsequent provision of such advice to such plan, participant, or beneficiary, the fiduciary adviser, throughout the 1-year period following the provision of such advice, maintains the information described in subclauses (I) through (IV) of clause (i) in currently accurate form for availability, upon request and without charge, to the recipient of such advice,

`(iii) the fiduciary adviser provides appropriate disclosure, in connection with any such acquisition or sale, in accordance with all applicable securities laws,

`(iv) such acquisition or sale occurs solely at the discretion of the recipient of such advice,

`(v) the compensation received by the fiduciary adviser and affiliates thereof in connection with such acquisition or sale is reasonable, and

`(vi) the terms of such acquisition or sale are at least as favorable to such plan as an arm's length transaction would be.

`(B) MAINTENANCE OF RECORDS- A fiduciary adviser referred to in subparagraph (A) who has provided advice referred to in such subparagraph shall, for a period of not less than 6 years after the provision of such advice, maintain any records necessary for determining whether the requirements of the preceding provisions of this subsection and of subsection (d)(16) have been met. A prohibited transaction described in 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.

`(C) 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 such 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).

`(ii) AFFILIATE- The term `affiliate' means an affiliated person, 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' means a person described in section 3(a)(18) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(18)) or section 202(a)(17) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(17)).'.

SEC. 3. EFFECTIVE DATE.

The amendments made by this Act shall apply with respect to advice referred to in section 3(21)(A)(ii) of the Employee Retirement Income Security Act of 1974 or section 4975(e)(3)(B) of the Internal Revenue Code of 1986 provided on or after January 1, 2002.

END