[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2290 Introduced in House (IH)]







105th CONGRESS
  1st Session
                                H. R. 2290

To amend title I of the Employee Retirement Income Security Act of 1974 
                 to improve enforcement under such Act.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 29, 1997

 Mr. Shays (for himself and Mr. Payne) 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

_______________________________________________________________________

                                 A BILL


 
To amend title I of the Employee Retirement Income Security Act of 1974 
                 to improve enforcement under such Act.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Security and 
Enforcement Compliance for Retirement under ERISA''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Repeal of limited scope audit.
Sec. 3. Reporting and enforcement requirements for employee benefit 
                            plans.
Sec. 4. Additional requirements for qualified public accountants.
Sec. 5. Clarification of fiduciary penalties.
Sec. 6. Inspector General study.

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 
amending subparagraph (C) to read as follows:
    ``(C) An accountant who is offering an opinion under this section 
shall, to the extent consistent with generally accepted auditing 
standards, rely on the work of any independent public accountant of an 
entity that holds assets or processes transactions of the employee 
benefit plan.''
    (b) Conforming Amendment.--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''.
    (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) inserting after section 110 the following new section:

                  ``direct reporting of certain events

    ``Sec. 111. (a) Required Notifications.--
            ``(1) Notifications by plan administrator.--Within 5 
        business days after an administrator of an employee benefit 
        plan determines that there is evidence (or after the 
        administrator is notified under paragraph (2)) that an 
        irregularity may have occurred with respect to the plan, the 
        administrator shall--
                    ``(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.-- Within 5 business days after an 
                accountant engaged by the administrator of an employee 
                benefit plan under section 103(a)(3)(A) determines in 
                connection with such engagement that there is evidence 
                that an irregularity may have occurred with respect to 
                the plan, the accountant shall--
                            ``(i) notify the plan administrator of the 
                        irregularity in writing, or
                            ``(ii) if the accountant determines that 
                        there is evidence 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 in paragraph (1) 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 title 18, United States Code 
                        (relating to interference with commerce by 
                        threats or violence);
                            ``(iii) a bribery, a kickback, or a 
                        violation of section 1954 of title 18, United 
                        States Code (relating to offer, acceptance, or 
                        solicitation to influence operations of an 
                        employee benefit plan);
                            ``(iv) a violation of section 1027 of title 
                        18, United States Code (relating to false 
                        statements and concealment of facts in relation 
                        to employee benefit plan records); or
                            ``(v) a violation of section 411, 501, or 
                        511 of this title (relating to criminal 
                        violations).
                    ``(B) The term `irregularity' does 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 of an 
        accountant 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 business.
    ``(d) Immunity for Good Faith Notification.--No accountant or plan 
administrator 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 
under those subsections, if the 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 inserting after paragraph (6) the 
        following new paragraph:
    ``(7)(A) The Secretary may assess a civil penalty of up to $50,000 
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 $50,000 
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) (29 U.S.C. 
        1132(a)(6)) is amended by striking ``or (5)'' and inserting 
        ``(5), or (7)''.
    (c) Clerical Amendments.--
            (1) Section 514(d) (29 U.S.C. 114(d)) is amended by 
        striking ``111'' and inserting ``112''.
            (2) The table of contents in section 1 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 the amendments only if the 5-day period described in the 
amendments in connection with the irregularity or termination commences 
at least 90 days after the date of the enactment of this Act.

SEC. 4. ADDITIONAL REQUIREMENTS FOR QUALIFIED PUBLIC ACCOUNTANTS.

    (a) In General.--Section 103(a)(3)(D) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1023(a)(3)(D)) is amended--
            (1) by inserting ``(i)'' after ``(D)'';
            (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 and below subclause (III) (as so 
        redesignated), 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 the person as 
                an accountant under subparagraph (A) if the 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 
                        calendar years immediately preceding such 
                        engagement, such continuing education or 
                        training as the Secretary in regulations 
                        determines is necessary to maintain 
                        professional proficiency in connection with 
                        employee benefit plans.
                    ``(iii) A person meets the requirements of this 
                clause with respect to an engagement of the person as 
                an accountant under subparagraph (A) if the 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 
                        in regulations of the Secretary, and
                            ``(II) in the case of any such person who 
                        has, during the peer review period, conducted 1 
                        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 1) 
                        of plan audits in relation to the scale of the 
                        person's auditing practice.
    (b) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section 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)(1)(D) of the Employee Retirement Income 
        Security Act of 1974 (as added by subsection (a)(6)) takes 
        effect on the date of enactment of this Act.
            (3) Regulations.--The Secretary shall issue regulations 
        under this section no later than December 31, 1998.

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 at the end the following new paragraphs:
    ``(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 if--
            ``(A) the order or requirement to pay arises--
                    ``(i) under a judgment of conviction for a crime 
                involving such plan,
                    ``(ii) under a civil judgment (including a consent 
                order or decree) entered by a court in an action 
                brought in connection with a violation (or alleged 
                violation) of part 4 of this subtitle, or
                    ``(iii) pursuant to a settlement agreement between 
                the Secretary and the participant, or a settlement 
                agreement between the Pension Benefit Guaranty 
                Corporation and the participant, in connection with a 
                violation (or alleged violation) of part 4 by a 
                fiduciary or any other person,
            ``(B) the judgment, order, decree, or settlement agreement 
        expressly provides for the offset, and
            ``(C) in any case in which the participant has a spouse at 
        the time at which the offset is to be made--
                    ``(i) the spouse has consented in writing to the 
                offset and the consent is witnessed by a notary public 
                or representative of the plan,
                    ``(ii) the offset represents an amount which the 
                spouse is ordered in the judgment to pay to the plan, 
                or
                    ``(iii) in the judgment, order, decree, or 
                settlement, the spouse retains the right to receive the 
                value of the survivor annuity under a qualified joint 
                and survivor annuity provided pursuant to section 
                205(a)(1) and under a qualified preretirement survivor 
                annuity provided pursuant to section 205(a)(2), 
                determined in accordance with paragraph (5).
    ``(5)(A) The value of the survivor annuity described in paragraph 
(4)(C)(iii) shall be determined as if--
            ``(i) the participant terminated employment on the date of 
        the offset,
            ``(ii) there was no offset,
            ``(iii) the plan permitted retirement only on or after 
        normal retirement age,
            ``(iv) the plan provided only the minimum-required 
        qualified joint and survivor annuity, and
            ``(v) the amount of the qualified preretirement survivor 
        annuity under the plan is equal to the amount of the survivor 
        annuity payable under the minimum-required qualified joint and 
        survivor annuity.
    ``(B) For purposes of this paragraph, the term `minimum-required 
qualified joint and survivor annuity' means the qualified joint and 
survivor annuity which is the actuarial equivalent of a single annuity 
for the life of the participant and under which the survivor annuity is 
50 percent of the amount of the annuity which is payable during the 
joint lives of the participant and the spouse.''.
            (2) Effective date.--The amendments made by this section 
        apply to judgments, orders, and decrees issued, and settlement 
        agreements entered into, on or after the date of enactment of 
        this Act.
    (b) Conforming Amendments to the Internal Revenue Code Relating to 
ERISA Enforcement.--
            (1) Special rule for certain judgments and settlements.--
        Section 401(a)(13) of the Internal Revenue Code of 1986 (26 
        U.S.C. 401(a)(13)) is amended by adding at the end the 
        following new subparagraphs:
                    ``(C) Special rule for certain judgments and 
                settlements.--Subparagraph (A) shall not apply to any 
                offset of a participant's accrued benefit in a plan 
                against an amount that the participant is ordered or 
                required to pay to the plan if--
                            ``(i) the order or requirement to pay 
                        arises--
                                    ``(I) under a judgment of 
                                conviction for a crime involving such 
                                plan,
                                    ``(II) under a civil judgment 
                                (including a consent order or decree) 
                                entered by a court in an action brought 
                                in connection with a violation (or 
                                alleged violation) of part 4 of 
                                subtitle B of title I of the Employee 
                                Retirement Income Security Act of 1974, 
                                or
                                    ``(III) pursuant to a settlement 
                                agreement between the Secretary of 
                                Labor and the participant, or a 
                                settlement agreement between the 
                                Pension Benefit Guaranty Corporation 
                                and the participant, in connection with 
                                a violation (or alleged violation) of 
                                part 4 of subtitle B of title I of such 
                                Act,
                            ``(ii) 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, and
                            ``(iii) if the participant has a spouse at 
                        the time at which the offset is to be made--
                                    ``(I) such spouse has consented in 
                                writing to such offset and such consent 
                                is witnessed by a notary public or 
                                representative of the plan,
                                    ``(II) such spouse is ordered or 
                                required to pay in such judgment, 
                                order, decree, or settlement an amount 
                                to the plan in connection with a 
                                violation of part 4 of subtitle B of 
                                title I of such Act, or
                                    ``(III) in such judgment, order, 
                                decree, or settlement, such spouse 
                                retains the right to receive the value 
                                of the survivor annuity under a 
                                qualified joint and survivor annuity 
                                provided pursuant to paragraph 
                                (11)(A)(i) and under a qualified 
                                preretirement survivor annuity provided 
                                pursuant to paragraph (11)(A)(ii), 
                                determined in accordance with 
                                subparagraph (D).
                    ``(D) Determination of value of survivor annuity in 
                connection with offset.--The value of the survivor 
                annuity described in subparagraph (C)(iii)(III) shall 
                be determined as if--
                            ``(i) the participant terminated employment 
                        on the date of the offset,
                            ``(ii) there was no offset,
                            ``(iii) the plan permitted retirement only 
                        on or after normal retirement age,
                            ``(iv) the plan provided only the minimum-
                        required qualified joint and survivor annuity, 
                        and
                            ``(v) the amount of the qualified 
                        preretirement survivor annuity under the plan 
                        is equal to the amount of the survivor annuity 
                        payable under the minimum-required qualified 
                        joint and survivor annuity.
                For purposes of this subparagraph, the term `minimum-
                required qualified joint and survivor annuity' means 
                the qualified joint and survivor annuity which is the 
                actuarial equivalent of a single annuity for the life 
                of the participant and under which the survivor annuity 
                is 50 percent of the amount of the annuity which is 
                payable during the joint lives of the participant and 
                the spouse.
                    ``(E) Waiver of certain distribution 
                requirements.--With respect to the requirements of this 
                subsection and subsection(k), and sections 403(b) and 
                409(d), a plan shall not be treated as failing to meet 
                such requirements solely by reason of an offset under 
                subparagraph (C).''.
            (2) Effective date.--The amendment made by subsection (a) 
        shall apply to judgments, orders, and decrees issued, and 
        settlement agreements entered into, on or after the date of 
        enactment of this Act.
    (c) 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)) 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 in connection with a breach or violation 
described in paragraph (1), following receipt by the 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) if the 
recovery is not made within 30 days. 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) (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 the 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 Employee 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 that date (disregarding any 
                break in the continuance before the end of the 180th 
                day period) shall be treated as having occurred after 
                the date of enactment.

SEC. 6. INSPECTOR GENERAL STUDY.

    (a) Study.--The Inspector General of the Department of Labor shall 
conduct a study on the need for regulatory standards and procedures to 
authorize the Secretary, in appropriate cases, to prohibit persons from 
serving as qualified accountants for purposes of section 103 of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1023).
    (b) Matters To Be Studied.--In conducting the study under this 
section, the Inspector General shall address whether standards and 
procedures to prohibit persons from serving as qualified public 
accountants are likely to improve the quality of employee benefit plan 
audits, and the potential for increased costs to plans. If the 
Inspector General concludes that regulations incorporating standards 
and procedures would be appropriate, the study shall include 
recommended standards and procedures.
    (c) Report.--Not later than 1 year after the date of the enactment 
of this Act, the Inspector General shall submit a report on the results 
of the study conducted pursuant to this section to each house of 
Congress and the Secretary of Labor.
                                 <all>