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






                                                 Union Calendar No. 174
107th CONGRESS
  1st Session
                                H. R. 2269

                  [Report No. 107-262, Parts I and II]

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, 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

                            October 31, 2001

  Reported from the Committee on Education and the Workforce with an 
                               amendment
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]

                            October 31, 2001

   Referral to the Committee on Ways and Means extended for a period 
                 ending not later than November 9, 2001

                            November 9, 2001

   Referral to the Committee on Ways and Means extended for a period 
                ending not later than November 13, 2001

                           November 13, 2001

  Additional sponsors: Mr. Shaw, Mr. Paul, Mr. Crane, Mr. Frost, Mr. 
 Chambliss, Mr. Tiberi, Mr. McCrery, Mr. Ballenger, Mr. Fletcher, Mr. 
 McKeon, Mr. Shays, Mr. Cantor, Mrs. Biggert, Mr. Platts, Mr. Graham, 
 Mr. Nussle, Mr. Rogers of Michigan, Mr. Blunt, Mr. Ney, Mr. Portman, 
Ms. Dunn, Mr. Greenwood, Ms. Pryce of Ohio, Mr. Clement, Mr. Matheson, 
Mr. Cannon, Mr. Keller, Mr. Bass, Mr. Jones of North Carolina, Mr. Burr 
 of North Carolina, Mr. Osborne, Mr. Latham, Mr. Calvert, Mr. Ryun of 
   Kansas, Mr. Culberson, Mr. Brown of South Carolina, Mr. Moran of 
           Virginia, Mr. Sessions, Mr. Herger, and Mr. Grucci
   Deleted sponsors: Mr. Brown of Ohio (added July 23, 2001; deleted 
  September 24, 2001), and Mr. Pascrell (added July 30, 2001; deleted 
                          September 10, 2001)

                           November 13, 2001

   Reported from the Committee on Ways and Means with an amendment; 
   committed to the Committee of the Whole House on the State of the 
                    Union, and ordered to be printed
 [Strike out all after the enacting clause and insert the part printed 
                           in boldface roman]
 [For text of introduced bill, see copy of bill as introduced on June 
                               21, 2001]

_______________________________________________________________________

                                 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) 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 are 
                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 
        further 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 1-year period following 
        the provision of the advice, the fiduciary adviser fails to 
        maintain the information described in clauses (i) through (iv) 
        of subparagraph (A) in currently accurate form or to make the 
        information available, upon request and without charge, to the 
        recipient of the advice.
            ``(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) 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.

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) 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 advisor 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) 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).''

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.




                                                 Union Calendar No. 174

107th CONGRESS

  1st Session

                               H. R. 2269

                  [Report No. 107-262, Parts I and II]

_______________________________________________________________________

                                 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.

_______________________________________________________________________

                           November 13, 2001

   Reported from the Committee on Ways and Means with an amendment; 
   committed to the Committee of the Whole House on the State of the 
                    Union, and ordered to be printed