[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2269 Introduced in House (IH)]







107th CONGRESS
  1st Session
                                H. R. 2269

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 HOUSE OF REPRESENTATIVES

                             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

_______________________________________________________________________

                                 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 
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.
                                 <all>