[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 1490 Introduced in Senate (IS)]

  1st Session
                                S. 1490

To amend title I of the Employee Retirement Income Security Act of 1974 
     to improve enforcement of such title and benefit security for 
participants by adding certain provisions with respect to the auditing 
           of employee benefit plans, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           December 20, 1995

    Mr. Simon (for himself, Mr. Jeffords Mr. Leahy, and Mrs. Boxer) 
introduced the following bill; which was read twice and referred to the 
                 Committee on Labor and Human Resources

_______________________________________________________________________

                                 A BILL


 
To amend title I of the Employee Retirement Income Security Act of 1974 
     to improve enforcement of such title and benefit security for 
participants by adding certain provisions with respect to the auditing 
           of employee benefit plans, and for other purposes.

    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 ``Pension Audit Improvement Act of 
1995''.

SEC. 2. REPEAL OF LIMITED SCOPE AUDIT.

    (a) In General.--Section 103(a)(3) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1023(a)(3)) is amended by 
striking subparagraph (C) and by redesignating subparagraph (D) as 
subparagraph (C).
    (b) Conforming Amendments.--
            (1) Section 103(a)(3)(A) of such Act (29 U.S.C. 
        1023(a)(3)(A)) is amended by striking ``Except as provided in 
        subparagraph (C), the'' and inserting ``The''.
            (2) Section 104(a)(5)(A) of such Act (29 U.S.C. 
        1024(a)(5)(A)) is amended by striking ``section 103(a)(3)(D)'' 
        and inserting ``section 103(a)(3)(C)''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to opinions required under section 103(a)(3)(A) of 
the Employee Retirement Income Security Act of 1974 for plan years 
beginning on or after January 1 of the calendar year following the date 
of the enactment of this Act.

SEC. 3. REPORTING AND ENFORCEMENT REQUIREMENTS FOR EMPLOYEE BENEFIT 
              PLANS.

    (a) In General.--Part 1 of subtitle B of title I of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1021 et seq.) is 
amended--
            (1) by redesignating section 111 as section 112, and
            (2) by inserting after section 110 the following new 
        section:

                  ``direct reporting of certain events

    ``Sec. 111. (a) Required Notifications.--
            ``(1) Notifications by plan administrator.--The 
        administrator of an employee benefit plan shall, within 5 
        business days after the administrator first has reason to 
        believe (or after the administrator is notified under paragraph 
        (2)) that an irregularity may have occurred with respect to the 
        plan--
                    ``(A) notify the Secretary of the irregularity in 
                writing; and
                    ``(B) furnish a copy of such notification to the 
                accountant who is currently engaged under section 
                103(a)(3)(A).
            ``(2) Notifications by accountant.--
                    ``(A) In general.--An accountant engaged by the 
                administrator of an employee benefit plan under section 
                103(a)(3)(A) shall, within 5 business days after the 
                accountant first has reason to believe in connection 
                with such engagement that an irregularity may have 
                occurred with respect to the plan--
                            ``(i) notify the plan administrator of the 
                        irregularity in writing, or
                            ``(ii) if the accountant has reason to 
                        believe that the irregularity may have involved 
                        an individual who is the plan administrator or 
                        who is a senior official of the plan 
                        administrator, notify the Secretary of the 
                        irregularity in writing.
                    ``(B) Notification upon failure of plan 
                administrator to notify.--If an accountant who has 
                provided notification to the plan administrator 
                pursuant to subparagraph (A)(i) does not receive a copy 
                of the administrator's notification to the Secretary 
                required under paragraph (1)(B) within the 5-business 
                day period specified therein, the accountant shall 
                furnish to the Secretary a copy of the accountant's 
                notification made to the plan administrator on the next 
                business day following such period.
            ``(3) Irregularity defined.--
                    ``(A) For purposes of this subsection, the term 
                `irregularity' means--
                            ``(i) a theft, embezzlement, or a violation 
                        of section 664 of title 18, United States Code 
                        (relating to theft or embezzlement from an 
                        employee benefit plan);
                            ``(ii) an extortion or a violation of 
                        section 1951 of such title 18 (relating to 
                        interference with commerce by threats or 
                        violence);
                            ``(iii) a bribery, a kickback, or a 
                        violation of section 1954 of such title 18 
                        (relating to offer, acceptance, or solicitation 
                        to influence operations of an employee benefit 
                        plan);
                            ``(iv) a violation of section 411, 501, or 
                        511 of this title (relating to criminal 
                        violations); or
                            ``(v) any intentional misstatement or 
                        omission of an amount or disclosure in a 
                        financial statement, accounting record, or 
                        supporting document undertaken to mislead.
                    ``(B) The term `irregularity' shall not include any 
                act or omission described in this paragraph involving 
                less than $1,000 unless there is reason to believe that 
                the act or omission may bear on the integrity of plan 
                management.
    ``(b) Notification Upon Termination of Engagement of Accountant.--
            ``(1) Notification by plan administrator.--Within 5 
        business days after the termination of an engagement for 
        auditing services under section 103(a)(3)(A) with respect to an 
        employee benefit plan, the administrator of such plan shall--
                    ``(A) notify the Secretary in writing of such 
                termination, giving the reasons for such termination, 
                and
                    ``(B) furnish the accountant whose engagement was 
                terminated with a copy of the notification sent to the 
                Secretary.
            ``(2) Notification by accountant.--If the accountant 
        referred to in paragraph (1)(B) has not received a copy of the 
        administrator's notification to the Secretary as required under 
        paragraph (1)(B), or if the accountant disagrees with the 
        reasons given in the notification of termination of the 
        engagement for auditing services, the accountant shall notify 
        the Secretary in writing of the termination, giving the reasons 
        for the termination, within 10 business days after the 
        termination of the engagement.
    ``(c) Determination of Periods Required for Notification.--In 
determining whether a notification required under this section with 
respect to any act or omission has been made within the required number 
of business days--
            ``(1) the day on which such act or omission begins shall 
        not be included; and
            ``(2) Saturdays, Sundays, and legal holidays shall not be 
        included.
For purposes of this subsection, the term `legal holiday' means any 
Federal legal holiday and any other day appointed as a holiday by the 
State in which the person responsible for making the notification 
principally conducts his business.
    ``(d) Immunity for Good Faith Notification.--Except as provided in 
this Act, no accountant shall be liable to any person for any finding, 
conclusion, or statement made in any notification made pursuant to 
subsection (a)(2) or (b)(2), or pursuant to any regulations issued 
thereunder, if such finding, conclusion, or statement is made in good 
faith.''
    (b) Civil Penalty.--
            (1) In general.--Section 502(c) of such Act (29 U.S.C. 
        1132(c)) is amended by adding at the end the following new 
        paragraph:
            ``(5)(A) The Secretary may assess a civil penalty of up to 
        $100,000 against any administrator who fails to provide the 
        Secretary with any notification as required under section 111.
            ``(B) The Secretary may assess a civil penalty of up to 
        $100,000 against any accountant who knowingly and willfully 
        fails to provide the Secretary with any notification as 
        required under section 111.''
            (2) Conforming amendment.--Section 502(a)(6) of such Act 
        (29 U.S.C. 1132(a)(6)) is amended by striking ``subsection 
        (c)(2) or (i) or (l)'' and inserting ``paragraph (2), (4), or 
        (5) of subsection (c) or subsection (i) or (l)''.
    (c) Clerical Amendments.--
            (1) Section 514(d) of such Act (29 U.S.C. 114(d)) is 
        amended by striking ``111'' and inserting ``112''.
            (2) The table of contents in section 1 of such Act is 
        amended by striking the item relating to section 111 and 
        inserting the following new items:

``Sec. 111. Direct reporting of certain events.
``Sec. 112. Repeal and effective date.''
    (d) Effective Date.--The amendments made by this section shall 
apply with respect to any irregularity or termination of engagement 
described in such amendments only if the 5-day period described in such 
amendments in connection with such irregularity or termination 
commences on or after the date of the enactment of this Act.

SEC. 4. ADDITIONAL REQUIREMENTS FOR QUALIFIED PUBLIC ACCOUNTANTS.

    (a) In General.--Section 103(a)(3)(C) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1023(a)(3)(C)), as redesignated 
by section 2, is amended--
            (1) by inserting ``(i)'' after ``(C)'';
            (2) by inserting ``, with respect to any engagement of an 
        accountant under subparagraph (A)'' after ``means'';
            (3) by redesignating clauses (i), (ii), and (iii) as 
        subclauses (I), (II), and (III), respectively;
            (4) by striking the period at the end of subclause (III) 
        (as so redesignated) and inserting a comma;
            (5) by adding after subclause (III) (as so redesignated), 
        and flush with clause (i), the following:
                        ``but only if such person meets the 
                        requirements of clauses (ii) and (iii) with 
                        respect to such engagement.''; and
            (6) by adding at the end the following new clauses:
                            ``(ii) A person meets the requirements of 
                        this clause with respect to an engagement of 
                        such person as an accountant under subparagraph 
                        (A) if such person--
                                    ``(I) has in operation an 
                                appropriate internal quality control 
                                system;
                                    ``(II) has undergone a qualified 
                                external quality control review of the 
                                person's accounting and auditing 
                                practices, including such practices 
                                relevant to employee benefit plans (if 
                                any), during the 3-year period 
                                immediately preceding such engagement; 
                                and
                                    ``(III) has completed, within the 
                                2-year period immediately preceding 
                                such engagement, at least 80 hours of 
                                continuing education or training which 
                                contributes to the accountant's 
                                professional proficiency, at least 20 
                                hours of which have been completed 
                                during the 1-year period immediately 
                                preceding the engagement, and at least 
                                16 hours of which relate to employee 
                                benefit plan matters.
                            ``(iii) A person meets the requirements of 
                        this clause with respect to an engagement of 
                        such person as an accountant under subparagraph 
                        (A) if such person meets such additional 
                        requirements and qualifications of regulations 
                        which the Secretary deems necessary to ensure 
                        the quality of plan audits.
                            ``(iv) For purposes of clause (ii)(II), an 
                        external quality control review shall be 
                        treated as qualified with respect to a person 
                        referred to in clause (ii) if--
                                    ``(I) such review is performed in 
                                accordance with the requirements of 
                                external quality control review 
                                programs of recognized auditing 
                                standard-setting bodies, as determined 
                                under regulations of the Secretary, and
                                    ``(II) in the case of any such 
                                person who has, during the peer review 
                                period, conducted one or more previous 
                                audits of employee benefit plans, such 
                                review includes the review of an 
                                appropriate number (determined as 
                                provided in such regulations, but in no 
                                case less than one) of plan audits in 
                                relation to the scale of such person's 
                                auditing practice.
                        The Secretary shall issue the regulations under 
                        subclause (I) no later than December 31, 
                        1997.''
    (b) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply with respect to 
        plan years beginning on or after the date which is 3 years 
        after the date of the enactment of this Act.
            (2) Restrictions on conducting examinations.--Clause (iii) 
        of section 103(a)(3)(C) of the Employee Retirement Income 
        Security Act of 1974 (as added by subsection (a)(6)) shall take 
        effect on the date of enactment of this Act.

SEC. 5. CLARIFICATION OF FIDUCIARY PENALTIES.

    (a) Modification of Prohibition of Assignment or Alienation.--
            (1) Amendment to erisa.--Section 206(d) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1056(d)) is 
        amended by adding the following new paragraph:
            ``(4) Paragraph (1) shall not apply to any offset of a 
        participant's accrued benefit in an employee pension benefit 
        plan against an amount that the participant is ordered or 
required to pay to the plan--
                    ``(A) under a judgment of conviction for a crime 
                involving such plan, or
                    ``(B) under a civil judgment (including a consent 
                order or decree) entered--
                            ``(i) by a court in an action brought under 
                        section 502(a) of this title, or
                            ``(ii) pursuant to a settlement agreement 
                        between the Secretary and the participant in 
                        connection with a violation (or alleged 
                        violation) of part 4 of this title by a 
                        fiduciary or any other person,
                if the judgment, order, decree, or settlement agreement 
                expressly provides for the offset of all or part of the 
                amount ordered or required to be paid to the plan 
                against the participant's accrued benefit in the 
                plan.''
            (2) Amendment to 1986 code.--Section 401(a)(13) of the 
        Internal Revenue Code of 1986 is made by adding at the end the 
        following new subparagraph:
                    ``(C) Special rule for certain judgments and 
                settlements.--Subparagraph (A) shall not apply to any 
                offset of a participant's accrued benefit in an 
                employee pension benefit plan against an amount that 
                the participant is ordered or required to pay to the 
                plan--
                            ``(i) under a judgment of conviction for a 
                        crime involving such plan, or
                            ``(ii) under a civil judgment (including a 
                        consent order or decree) entered--
                                    ``(I) by a court in an action 
                                brought under section 502(a) of the 
                                Employee Retirement Income Security Act 
                                of 1974, or
                                    ``(II) pursuant to a settlement 
                                agreement between the Secretary of 
                                Labor and the participant in connection 
                                with a violation (or alleged violation) 
                                of part 4 of title I of such Act by a 
                                fiduciary or any other person,
                if the judgment, order, decree or settlement agreement 
                expressly provides for the offset of all or part of the 
                amount ordered or required to be paid to the plan 
                against the participant's accrued benefit in the 
                plan.''
            (3) Effective date.--The amendments made by this subsection 
        shall take effect on the date of enactment of this Act.
    (b) Civil Penalties for Breach of Fiduciary Responsibility.--
            (1) Imposition and amount of penalty made discretionary.--
        Section 502(l)(1) of the Employee Retirement Income Security 
        Act of 1974 (29 U.S.C. 1132(l)(1)) is amended--
                    (A) by striking ``shall'' and inserting ``may'', 
                and
                    (B) by striking ``equal to'' and inserting ``not 
                greater than''.
            (2) Applicable recovery amount.--Section 502(l)(2) of such 
        Act (29 U.S.C. 1132(l)(2)) is amended to read as follows:
            ``(2) For purposes of paragraph (1), the term `applicable 
        recovery amount' means any amount which is recovered from (or 
        on behalf of) any fiduciary or other person with respect to a 
        breach or violation described in paragraph (1) on or after the 
        30th day following receipt by such fiduciary or other person of 
        written notice from the Secretary of the violation, whether 
        paid voluntarily or by order of a court in a judicial 
        proceeding instituted by the Secretary under subsection (a)(2) 
        or (a)(5). The Secretary may, in the Secretary's sole 
        discretion, extend the 30-day period described in the preceding 
        sentence.''
            (3) Other rules.--Section 502(l) of such Act (29 U.S.C. 
        1132(l)) is amended by adding at the end the following new 
        paragraphs:
            ``(5) A person shall be jointly and severally liable for 
        the penalty described in paragraph (1) to the same extent that 
        such person is jointly and severally liable for the applicable 
        recovery amount on which the penalty is based.
            ``(6) No penalty shall be assessed under this subsection 
        unless the person against whom the penalty is assessed is given 
        notice and opportunity for a hearing with respect to the 
        violation and applicable recovery amount.''
            (4) Effective dates.--
                    (A) In general.--The amendments made by this 
                subsection shall apply to any breach of fiduciary 
                responsibility or other violation of part 4 of title I 
                of the Employment Retirement Income Security Act of 
                1974 occurring on or after the date of enactment of 
                this Act.
                    (B) Transition rule.--In applying the amendment 
                made by paragraph (2) (relating to applicable recovery 
                amount), a breach or other violation occurring before 
                the date of the enactment of this Act which continues 
                after the 180th day after such date (and which may have 
                been discontinued at any time during its existence) 
                shall be treated as having occurred after such date of 
                enactment.
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