[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 1677 Introduced in Senate (IS)]







107th CONGRESS
  1st Session
                                S. 1677

To amend title I of the Employee Retirement Income Security Act of 1974 
to create a safe harbor for retirement plan sponsors in the designation 
   and monitoring of investment advisers for workers managing their 
                       retirement income assets.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           November 13, 2001

  Mr. Bingaman (for himself and Ms. Collins) introduced the following 
  bill; which was read twice and referred to the Committee on Health, 
                     Education, Labor, and Pensions

_______________________________________________________________________

                                 A BILL


 
To amend title I of the Employee Retirement Income Security Act of 1974 
to create a safe harbor for retirement plan sponsors in the designation 
   and monitoring of investment advisers for 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 ``Independent Investment Advice Act of 
2001''.

SEC. 2. SAFE HARBOR FOR PLAN SPONSORS DESIGNATING INVESTMENT ADVISERS.

    (a) In General.--Section 404 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1104) is amended by adding at the end 
the following new subsection:
    ``(e)(1) In the case of a pension plan which provides individual 
accounts and permits a plan participant or beneficiary to exercise 
control over the assets in such an account, if a plan sponsor or other 
person who is a fiduciary designates and monitors a qualified 
investment adviser pursuant to the requirements of paragraph (3), such 
fiduciary--
            ``(A) shall be deemed to have satisfied the requirements 
        under this section for the prudent designation and periodic 
        review of an investment adviser with whom the plan sponsor or 
        other person who is a fiduciary enters into an arrangement for 
        the provision of advice referred to in section 3(21)(A)(ii),
            ``(B) shall not be liable under this section for any loss, 
        or by reason of any breach, with respect to the provision of 
        investment advice given by such adviser to any plan participant 
        or beneficiary, and
            ``(C) shall not be liable for any co-fiduciary liability 
        under subsections (a)(2) and (b) of section 405 with respect to 
        the provision of investment advice given by such adviser to any 
        plan participant or beneficiary.
    ``(2) For purposes of this subsection:
            ``(A) The term `qualified investment adviser' means, with 
        respect to a plan, a person--
                    ``(i) who is a fiduciary of the plan by reason of 
                the provision of investment advice by such person to a 
                plan participant or beneficiary;
                    ``(ii) who--
                            ``(I) is registered as an investment 
                        adviser under the Investment Advisers Act of 
                        1940 (15 U.S.C. 80b-1 et seq.),
                            ``(II) is registered as an investment 
                        adviser under the laws of the State in which 
                        such adviser maintains the principal office and 
                        place of business of such adviser, but only if 
                        such State has an examination requirement to 
                        qualify for such registration,
                            ``(III) is a bank or similar financial 
                        institution referred to in section 408(b)(4),
                            ``(IV) is an insurance company qualified to 
                        do business under the laws of a State, or
                            ``(V) is any other comparably qualified 
                        entity which satisfies such criteria as the 
                        Secretary determines appropriate, consistent 
                        with the purposes of this subsection; and
                    ``(iii) who meets the requirements of subparagraph 
                (B).
            ``(B) The requirements of this subparagraph are met, if 
        every individual employed (or otherwise compensated) by a 
        person described in subparagraph (A)(ii) who provides 
        investment advice on behalf of such person to any plan 
        participant or beneficiary, is--
                    ``(i) an individual described in subclause (I) or 
                (II) of subparagraph (A)(ii),
                    ``(ii) registered as a broker or dealer under the 
                Securities Exchange Act of 1934 (15 U.S.C. 78a et 
                seq.),
                    ``(iii) a registered representative as 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)), or
                    ``(iv) any other comparably qualified individual 
                who satisfies such criteria as the Secretary determines 
                appropriate, consistent with the purposes of this 
                subsection.
    ``(3) The requirements of this paragraph are met, if--
            ``(A) the plan sponsor or other person who is a fiduciary 
        in designating an investment adviser, and annually thereafter, 
        receives in writing verification that the investment adviser--
                    ``(i) is and remains a qualified investment 
                adviser,
                    ``(ii) acknowledges it is a fiduciary with respect 
                to the plan and is solely responsible for its 
                investment advice,
                    ``(iii) has reviewed the plan documents including 
                investment options and upon review has determined that 
                its relationship with the plan and the investment 
                advice provided to any plan participant or beneficiary, 
                including any fees or other compensation it will 
                receive, will not constitute a violation of section 
                406, and
                    ``(iv) has the necessary insurance coverage (as 
                determined by the Secretary) for any claim by any plan 
                participant or beneficiary;
            ``(B) the plan sponsor or other person who is a fiduciary 
        in designating a qualified investment adviser reviews the 
        following documents it receives from such adviser and 
        determines that there is no material reason not to enter into 
        an arrangement for the provision of advice by such qualified 
        investment adviser:
                    ``(i) The contract with the plan sponsor or other 
                person who is a fiduciary for the services to be 
                provided by the investment adviser to the plan 
                participants and beneficiaries.
                    ``(ii) A disclosure as to any fees or other 
                compensation that will be received by the investment 
                adviser for the provision of such investment advice.
                    ``(iii) The Uniform Application for Investment 
                Adviser Registration as filed with the Securities and 
                Exchange Commission or a substantially similar 
                disclosure application as determined by and filed with 
                the Secretary; and
            ``(C) the plan sponsor or other person who is a fiduciary 
        determines whether or not to continue the designation of the 
        investment adviser as a qualified investment adviser within 30 
        days of having information brought to its attention that the 
        investment adviser is no longer qualified or that a substantial 
        number of plan participants or beneficiaries raise concerns 
        about the services being provided by the investment adviser.
    ``(4) Any qualified investment adviser that acknowledges it is a 
fiduciary pursuant to paragraph (3)(A)(ii) shall be deemed a fiduciary 
under this part with respect to the provision of investment advice to a 
plan participant or beneficiary.
    ``(5) Any recovery to the plan under section 409 as a result of a 
fiduciary breach by a qualified investment adviser under this part 
shall inure to the benefit of the individual accounts of the affected 
plan participants or beneficiaries.''.
    (b) Effective Date.--The amendment made by this section shall apply 
with respect to advisers designated on or after the date of the 
enactment of this Act.
                                 <all>