[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 401 Introduced in Senate (IS)]

111th CONGRESS
  1st Session
                                 S. 401

To amend the Employee Retirement Income Security Act of 1974 to provide 
 special reporting and disclosure rules for individual account plans, 
                        and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            February 9, 2009

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

_______________________________________________________________________

                                 A BILL


 
To amend the Employee Retirement Income Security Act of 1974 to provide 
 special reporting and disclosure rules for individual account plans, 
                        and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Defined Contribution Fee Disclosure 
Act of 2009''.

SEC. 2. SPECIAL REPORTING AND DISCLOSURE RULES FOR INDIVIDUAL ACCOUNT 
              PLANS.

    (a) In General.--Part 1 of subtitle B of title I of the Employee 
Retirement Income Security Act of 1974 is amended--
            (1) by redesignating section 111 (29 U.S.C. 1031) as 
        section 113; and
            (2) by inserting after section 110 (29 U.S.C. 1030) the 
        following new sections:

    ``disclosure to employers sponsoring defined contribution plans

    ``Sec. 111.  (a) Service Disclosure Statement.--The plan 
administrator of an individual account plan which includes a qualified 
cash or deferred arrangement (or any other plan official with 
contracting authority under the terms of the plan) may not enter into 
any contract with any person for services to the plan unless such plan 
administrator or other official has received, reasonably in advance of 
entering into the contract, a written statement from such person 
which--
            ``(1) describes the services for the plan that will be 
        provided under the contract and identifies any other entity 
        that will be performing such services under the contract 
        (including any other affiliated or third party service 
        providers) pursuant to a direct contract with the plan 
        administrator (or any other plan official with contracting 
        authority under the plan), and
            ``(2) provides the expected total annual charges for the 
        services for the plan that will be provided under the contract 
        including a reasonable allocation of such total annual charges 
        among all relevant component charges.
For purposes of paragraph (2), the expected total annual charges and 
each component charge may be provided in the form of a dollar amount or 
in the form of a formula, such as a percent of assets or a dollar 
charge. The form of the such charges shall be consistent throughout the 
statement.
    ``(b) Minimum Allocation Requirements.--
            ``(1) In general.--The allocation required under subsection 
        (a)(2) shall, pursuant to rules prescribed by the Secretary, 
        provide the following component charges (to the extent such 
        services for the plan are provided under the contract):
                    ``(A) Charges for investment management.
                    ``(B) Charges for recordkeeping and administration.
                    ``(C) Sales charges, including commissions, and 
                charges for advisory services.
                    ``(D) Any other charges not described in 
                subparagraphs (A), (B), and (C).
            ``(2) Estimations.--To the extent the actual charges or 
        percentages required to be disclosed under subsection (a)(2) 
        are not known, the service provider may provide a reasonable 
        and representative estimate and shall indicate any such 
        estimate as being such an estimate. If any estimate of a 
        material charge provided under such subsection is subsequently 
        determined to be materially incorrect, the service provider 
        shall provide the correct amount in an amended report as soon 
        as is reasonable after such correct amount is known. Such 
        amended report or, in the case of a plan year in which no 
        estimate of a material charge has been determined to be 
        materially incorrect, a report setting forth such fact, shall 
        be provided not less often than annually.
            ``(3) Definitions.--The Secretary shall provide by 
        regulation definitions of the terms used in this subsection.
    ``(c) Disclosure of Financial Relationships.--
            ``(1) In general.--The statement required under subsection 
        (a) shall include a written disclosure of--
                    ``(A) any payments which the service provider 
                receives from an unaffiliated person other than the 
                plan or plan sponsor in connection with the provision 
                of services to the plan, including any payments 
                received for including certain investment options as 
                part of a menu of investment options,
                    ``(B) any financial or personal relationship with 
                the plan sponsor, the plan, or another person providing 
                services to the plan, if such relationship results in 
                the service provider deriving any material benefit in 
                addition to those already identified in the contract in 
                connection with its services to the plan, and
                    ``(C) such other similar arrangements benefitting 
                the service provider as may be specified by the 
                Secretary.
            ``(2) Inclusions.--Disclosures described under paragraph 
        (1)(B) shall include the extent to which the service provider 
        uses its own proprietary investment products. Disclosures under 
        this subsection may include a description of any applicable 
        prohibited transaction exemption under section 408. Nothing in 
        this subsection affects the operation of section 406 or 408.
    ``(d) Disclosure of Impact of Share Classes.--The statement 
required under subsection (a) shall, to the extent applicable, disclose 
that the share prices of certain mutual fund investments may be 
different from the share price outside of the plan due to the existence 
of different share classes and the basis for these differences.
    ``(e) Disclosure of Certain Arrangements in Connection With Free or 
Discounted Services or Rebates by Service Providers.--
            ``(1) In general.--In any case in which services are 
        provided to the plan, or to the plan sponsor in connection with 
        the plan, by any service provider without charge or for fees 
        set at a discounted rate or subject to rebate, the statement 
        required under subsection (a) shall include a description of 
        the extent to which, and the amount by which, consideration is 
        otherwise obtained by the service provider, the plan, or the 
        plan sponsor for such services, directly or indirectly, by 
        means of any charges against the account of the participant or 
        beneficiary.
            ``(2) Exception.--The Secretary may provide an exception to 
        the requirement under paragraph (1) for small plans, if such 
        requirements are determined by the Secretary to be overly 
        burdensome on such plans.
    ``(f) Model Statement.--The Secretary shall prescribe a model 
statement that may be used for purposes of satisfying the requirements 
of this section.
    ``(g) Form and Manner.--Any statement required under this section--
            ``(1) shall be provided in a form and manner prescribed in 
        regulations of the Secretary,
            ``(2) shall be written in a manner so as to be understood 
        by the average plan participant, and
            ``(3) may be provided in written, electronic, or other 
        appropriate form to the extent such form is reasonably 
        accessible to persons to whom the notice is required to be 
        provided.
    ``(h) Updating.--Each contract with a service provider entered into 
as described in subsection (a) shall require that the service provider 
provide to the plan administrator, during the term of the contract, an 
updated written statement described in subsection (a)--
            ``(1) at least annually, and
            ``(2) as soon as practicable after any material change in 
        the information provided in the statement.
    ``(i) Availability to Participants.--The plan sponsor or plan 
administrator shall provide to participants and beneficiaries a copy of 
any statement received pursuant to this section within 30 days after 
receipt of a written request for such statement.
    ``(j) Limitation.--The requirements of this section shall apply 
with respect to any contract for services only if the total cost for 
such services under such contract equals or exceeds the greater of--
            ``(1) $5,000 per plan year, or
            ``(2) 0.01 percent of the value of plan assets as of the 
        last day of the preceding plan year.
    ``(k) Qualified Cash or Deferred Arrangement.--For purposes of this 
section, the term `qualified cash or deferred arrangement' includes--
            ``(1) an arrangement described in section 401(k)(2) of the 
        Internal Revenue Code of 1986, and
            ``(2) an annuity contract described in section 403(b) of 
        such Code that is subject to this Act.
    ``(l) Regulations Regarding Certain Products.--The Secretary shall 
prescribe regulations identifying any investment alternatives that may 
not have specific fees associated with the investment, including 
investment alternatives that provide a guaranteed rate of return.
    ``(m) Plan Assets.--This section shall not apply to any contract 
under which payment for services is made in a manner that does not 
involve assets of the plan.

                   ``investment election information

    ``Sec. 112.  (a) Advance Notice of Available Investment Options.--
The plan administrator of an individual account plan which permits a 
participant or beneficiary to exercise control over the assets in the 
account of the participant or beneficiary shall provide to the 
participant or beneficiary, with respect to each plan year, notice of 
the investment options available for election under the plan at least 
15 days prior to--
            ``(1) the participant's initial investment of any 
        contribution made on behalf of such participant, and
            ``(2) the effective date of any material change in 
        investment options.
In the case of an automatic contribution arrangement (as defined in 
subparagraphs (A) and (B) of section 514(e)(2)), the notice required 
under paragraph (1) may be provided within any reasonable period prior 
to such initial investment. With respect to the notice required under 
paragraph (2), the Secretary shall prescribe regulations creating 
exceptions to the 15-day notice requirement in circumstances similar to 
those described in section 101(i)(2)(C).
    ``(b) Information Included in Notice.--The notice required under 
subsection (a) shall--
            ``(1) set forth, with respect to each available investment 
        option--
                    ``(A) the name of the option,
                    ``(B) the investment objectives of the option,
                    ``(C) the risk level associated with the option,
                    ``(D) whether the option is a comprehensive 
                investment designed to achieve long-term retirement 
                security or should be combined with other options,
                    ``(E) whether the investment option is actively or 
                passively managed,
                    ``(F) a comparison to a nationally recognized 
                market-based index or other investment option that is 
                recommended in the retirement industry as a benchmark 
                investment option, as identified by the Secretary,
                    ``(G) where, and the manner in which, additional 
                plan- and option-specific and generally available 
                investment information regarding the option may be 
                obtained,
                    ``(H) the historical return and percentage fee 
                assessed against amounts invested under the option, and
                    ``(I) include, together with any form necessary for 
                making the election of investment options, a statement 
                explaining that investment options should be selected 
                not only on the basis of the level of fees charged by 
                each option but also on the basis of careful 
                consideration of other key factors, including the risk 
                level of the option and historical returns by the 
                option, and
            ``(2) include an investment comparison chart, relating to 
        all investment options available under the plan, as provided in 
        subsection (c).
    ``(c) Investment Comparison Chart.--
            ``(1) In general.--
                    ``(A) Chart requirements.--The notice provided 
                under this section shall include an investment 
                comparison chart consisting of a comparison chart of 
                the potential service fees that could be assessed 
                against the account of the participant or beneficiary 
                with respect to the plan year. The investment 
                comparison chart shall be presented in a manner which 
                is easily understood by the average participant and 
                include such information as the Secretary determines 
                necessary to permit participants and beneficiaries to 
                assess the potential services that could be provided in 
                connection with the investment options and the 
                potential fees that could be assessed against their 
                accounts for such services.
                    ``(B) Form.--For purposes of this subsection, the 
                potential service fees may be provided in the form of a 
                dollar amount or in the form of a formula, such as a 
                percent of assets or a dollar charge for each instance 
                that a participant or beneficiary enters into a 
                specified transaction. The form of the potential 
                service fees shall be consistent throughout the notice.
            ``(2) Categorization of fees.--The investment comparison 
        chart shall provide information in relation to 4 categories of 
        fees paid by the participant or beneficiary, as follows:
                    ``(A) Fees that vary depending on the investment 
                options selected by the participant or beneficiary, 
                including expense ratios and investment-specific asset-
                based fees.
                    ``(B) Fees that are assessed as a percentage of the 
                total assets in the account of the participant or 
                beneficiary, regardless of the investment option 
                selected. Such category shall include a statement 
                noting fees and expenses of 1 or more investment 
                alternatives which pay for services other than 
                investment management and a statement explaining that 
                investment options should be selected not only on the 
                basis of the level of fees charged by each option but 
                also on the basis of careful consideration of other key 
                factors, including the risk level of the option and 
                historical returns by the option.
                    ``(C) Administration and transaction-based fees, 
                including plan loan origination fees, possible 
                redemption fees, and possible surrender charges, that 
                are either automatically deducted each year or result 
                from certain transactions engaged in by the participant 
                or beneficiary.
                    ``(D) Fees and expenses which may be deducted from 
                participants' or beneficiaries' accounts and which are 
                not reflected in subparagraphs (A), (B), and (C).
    ``(d) Estimations.--To the extent the actual charges or percentages 
required to be disclosed under subsection (b) or (c) are not known, the 
plan administrator may provide a reasonable and representative estimate 
and shall indicate any such estimate as being such an estimate. If any 
estimate of material information provided under this subsection is 
subsequently determined to be materially incorrect, the plan 
administrator shall provide the correct amount in an amended report as 
soon as is reasonable after such correct amount is known.
    ``(e) Model Notice.--The Secretary shall prescribe a model notice 
that may be used for purposes of satisfying the requirements of this 
section, including a model investment comparison chart.
    ``(f) Form and Manner.--Any notice required under this section--
            ``(1) shall be provided in a form and manner prescribed in 
        regulations of the Secretary,
            ``(2) shall be written in a manner so as to be understood 
        by the average plan participant, and
            ``(3) may be provided in written, electronic, or other 
        appropriate form to the extent such form is reasonably 
        accessible to persons to whom the notice is required to be 
        provided.
    ``(g) Regulations Regarding Certain Products.--The Secretary shall 
prescribe regulations identifying any investment alternatives that may 
not have specific fees associated with them, including investment 
alternatives that provide a guaranteed rate of return. In addition, the 
Secretary shall prescribe regulations providing for distinct reporting 
of investment alternatives that--
            ``(1) are difficult to value with reasonable certainty on 
        an annual basis, or
            ``(2) do not have generally accepted benchmarks for 
        comparison purposes.''.
    (b) Quarterly Benefit Statements.--Section 105 of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1025) is amended--
            (1) in subsection (a)(2)--
                    (A) by redesignating subparagraph (C) as 
                subparagraph (D); and
                    (B) in subparagraph (B)(ii)--
                            (i) in subclause (II), by striking 
                        ``diversified, and'' and inserting 
                        ``diversified,'';
                            (ii) in subclause (III), by striking the 
                        period and inserting ``, and''; and
                            (iii) by adding at the end the following:
                            ``(IV) with respect to the portion of a 
                        participant's account for which the participant 
                        has the right to direct the investment of 
                        assets--
                                    ``(aa) the starting balance of the 
                                participant's account,
                                    ``(bb) the participant's vesting 
                                status,
                                    ``(cc) contributions made during 
                                the quarter, itemizing separately 
                                totals for employer and totals for 
                                employee contributions,
                                    ``(dd) interest earnings on the 
                                account balance during the quarter,
                                    ``(ee) actual or estimated fees 
                                assessed from the account during the 
                                quarter, expressed in dollars or as an 
                                expense ratio,
                                    ``(ff) the ending balance of the 
                                account,
                                    ``(gg) the participant's asset 
                                allocation, categorized by investment 
                                option, including the current asset 
                                value, the changes in the asset value 
                                during the quarter, and the net return 
                                for the quarter, expressed as an amount 
                                and as a percentage, and
                                    ``(hh) the performance of the 
                                investment options selected by the 
                                participant during the quarter as 
                                compared to at least 1 nationally 
                                recognized market-based index, as 
                                identified by the Secretary.
            ``(C) Additional requirements.--With respect to a pension 
        benefit plan described under paragraph (1)(A)(i), the following 
        shall apply:
                    ``(i) Information to be available upon request.--At 
                the request of the participant or beneficiary, the plan 
                administrator shall, not later than 30 days after the 
                receipt of such request, provide information on the 
                service fees charged against the participant's account 
                for the quarter for each investment option, indicating 
                separately--
                            ``(I) fees that vary depending on the 
                        investment options selected by the participant 
                        or beneficiary, including expense ratios, 
                        investment-specific asset-based fees, possible 
                        redemption fees, wrap fees, and possible 
                        surrender charges,
                            ``(II) fees that are assessed as a 
                        percentage of the total assets in the account 
                        of the participant or beneficiary, regardless 
                        of the investment option selected,
                            ``(III) administration and transaction-
                        based fees, including plan loan origination 
                        fees, that are either automatically deducted 
                        each year or result from certain transactions 
                        engaged in by the participant or beneficiary, 
                        and
                            ``(IV) fees and expenses that may be 
                        deducted from participants' or beneficiaries' 
                        accounts that are not reflected in subclauses 
                        (I), (II), and (III).
                For purposes of this clause, the service fees may be 
                provided in the form of a dollar amount or in the form 
                of a formula, such as a percent of assets or a dollar 
                charge for each instance that a plan participant or 
                beneficiary enters into a specified transaction. The 
                form of the service fees shall be consistent throughout 
                the statement.
                    ``(ii) Other information.--The plan administrator 
                shall include in such quarterly pension benefit 
                statement information relating to the historical return 
                and risk of each investment option and the estimated 
                amount that the participant needs to save each month to 
                retire at age 65.
                    ``(iii) Estimations.--To the extent that the actual 
                charges or percentages required to be disclosed under 
                this subparagraph are not known, the plan administrator 
                may provide a reasonable and representative estimate 
                and shall indicate any such estimate as being such an 
                estimate. If any estimate of material information 
                provided under this subparagraph is subsequently 
                determined to be materially incorrect, the plan 
                administrator shall provide the correct amount in an 
                amended statement as soon as is reasonable after such 
                correct amount is known.
                    ``(iv) Model statement.--The Secretary shall 
                prescribe a model quarterly pension benefit statement 
                that may be used for purposes of satisfying the 
                requirements of this subparagraph or subparagraph 
                (B)(ii).
                    ``(v) Exception for small employers.--Any plan 
                described in paragraph (1)(A)(i) that has fewer than 
                100 participants and beneficiaries may provide the 
                pension benefit statement under such paragraph on an 
                annual rather than a quarterly basis.''; and
            (2) by adding at the end the following new subsections:
    ``(d) Assistance to Small Employers.--The Secretary shall make 
available to small employers--
            ``(1) educational and compliance materials designed to 
        assist such employers in selecting and monitoring service 
        providers for individual account plans, investment options 
        under such plans, and fees relating to such options, without 
        any bias as to the size of the service provider and the way any 
        particular service provider delivers plan services, and
            ``(2) services designed to assist small employers in 
        finding and understanding affordable investment options for 
        such plans.
    ``(e) Assistance to Plan Sponsors and Plan Participants and 
Beneficiaries.--The Secretary shall provide assistance to plan sponsors 
of individual account plans and participants and beneficiaries under 
such plans with any questions or problems regarding compliance with the 
requirements of this section.
    ``(f) Form and Manner.--Any statement required under this section--
            ``(1) shall be provided in a form and manner prescribed in 
        regulations of the Secretary,
            ``(2) shall be written in a manner so as to be understood 
        by the average plan participant, and
            ``(3) may be provided in written, electronic, or other 
        appropriate form to the extent such form is reasonably 
        accessible to persons to whom the notice is required to be 
        provided.
    ``(g) Regulations Regarding Certain Products.--The Secretary shall 
prescribe regulations identifying any investment alternatives that may 
not have fees associated with them, including investment alternatives 
that provide a guaranteed rate of return. In addition, the Secretary 
shall prescribe regulations providing for distinct reporting of 
investment alternatives that--
            ``(1) are difficult to value with reasonable certainty on 
        an annual basis, or
            ``(2) do not have generally accepted benchmarks for 
        comparison purposes.''.
    (c) Enforcement.--Section 502(c)(7) of such Act (29 U.S.C. 
1132(c)(7)) is amended by striking ``section 101.'' and inserting 
``section 101, or to provide a statement to participants and 
beneficiaries or to plan administrators in accordance with section 
105(a)(2)(B)(ii), 111, or 112.''
    (d) Conforming Amendment.--The table of contents in section 1 of 
such Act, as amended by section 2, is amended by striking the item 
relating to section 111 and inserting the following new items:

``Sec. 111. Disclosure to employers sponsoring defined contribution 
                            plans.
``Sec. 112. Investment election information.
``Sec. 113. Repeal and effective date.''.
    (e) Effective Date.--
            (1) Final regulations.--The Secretary of Labor shall issue 
        final regulations to carry out the amendments made by this 
        section not later than December 31, 2010.
            (2) Application of provisions.--The amendments made by this 
        section shall apply to plan years beginning after December 31, 
        2011.

SEC. 3. ANNUAL PUBLICATION OF SURVEY DATA.

    (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.), as 
amended by section 2, is amended--
            (1) by redesignating section 113 as section 114; and
            (2) by inserting after section 112 the following new 
        section:

                  ``annual publication of survey data

    ``Sec. 113.  On an annual basis, the Secretary shall survey and 
publish, on the Internet website of the Department of Labor, data on 
plan investment options and median fee levels of index, lifecycle 
investment options, balanced investment options, and other investment 
options as the Secretary deems relevant.''.
    (b) Conforming Amendment.--The table of contents in section 1 of 
such Act is amended by striking the item relating to section 113 and 
inserting the following new items:

``Sec. 113. Investment election information.
``Sec. 114. Repeal and effective date.''.

SEC. 4. ENFORCEMENT COORDINATION AND REVIEW BY THE DEPARTMENT OF LABOR.

    (a) In General.--Section 502 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1132) is amended by adding at the end 
the following new subsection:
    ``(n) Enforcement Coordination of Certain Disclosure Requirements 
and Review by the Department of Labor.--
            ``(1) In general.--
                    ``(A) Notification and action.--The Secretary shall 
                notify the applicable regulatory authority (including, 
                as determined appropriate by the Secretary, the 
                Securities and Exchange Commission or the Comptroller 
                of the Currency) in any case in which the Secretary 
                determines that a service provider is engaged in a 
                pattern or practice that precludes compliance by plan 
                administrators with section 111 or 112. The Secretary 
                shall, in consultation with the applicable authority, 
                take such timely enforcement action under this title as 
                is necessary to assure that such pattern or practice 
                ceases and desists and assess any appropriate 
                penalties.
                    ``(B) Dissemination.--The Secretary shall widely 
                disseminate to employee pension benefit plans covered 
                by this title and their participants and beneficiaries 
                the identity of any service providers with respect to 
                such plans found to be engaged in any pattern or 
                practice that precludes compliance by plan 
                administrators with section 111 or 112 and the 
                particulars of such pattern or practice. Prior to the 
                dissemination of the identity of any service providers 
                identified and determined by the Secretary to be 
                engaged in such a pattern or practice, such service 
                provider shall receive a notice of intent to 
                disseminate, an opportunity to request an 
                administrative hearing, and a timely appeal to the 
                Secretary.
                    ``(C) Regulations.--The Secretary shall issue 
                regulations for the administration and enforcement of 
                this subsection.
            ``(2) Annual audit of representative sampling of individual 
        account plans.--The Secretary shall annually audit a 
        representative sampling of individual account plans covered by 
        this title to determine compliance with the requirements of 
        sections 111 and 112. The Secretary shall annually report the 
        results of such audit and any related recommendations of the 
        Secretary to the Committee on Education and Labor of the House 
        of Representatives and the Committee on Health, Education, 
        Labor, and Pensions of the Senate.''.
    (b) Review and Report to the Congress by the Secretary of Labor 
Relating to Reporting and Disclosure Requirements.--
            (1) Study.--As soon as practicable after the date of the 
        enactment of this Act, the Secretary of Labor (referred to in 
        this subsection as the ``Secretary'') shall review the 
        reporting and disclosure requirements of part 1 of subtitle B 
        of this title and related provisions of the Pension Protection 
        Act of 2006.
            (2) Report.--Not later than 18 months after the date of the 
        enactment of this Act, the Secretary shall make such 
        recommendations as the Secretary considers appropriate to the 
        appropriate committees of the Congress to consolidate, 
        simplify, standardize, and improve the applicable reporting and 
        disclosure requirements so as to simplify reporting for 
        employee pension benefit plans and ensure that needed 
        understandable information is provided to participants and 
        beneficiaries of such plans.
                                 <all>