[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[S. 2505 Introduced in Senate (IS)]

<DOC>






114th CONGRESS
  2d Session
                                S. 2505

 To amend the Internal Revenue Code of 1986 to ensure that retirement 
    investors receive advice in their best interests, and for other 
                               purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            February 4, 2016

Mr. Kirk (for himself, Mr. Isakson, Mr. Blunt, Ms. Ayotte, Mr. Cotton, 
and Mr. Wicker) introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to ensure that retirement 
    investors receive advice in their best interests, 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 ``Strengthening Access to Valuable 
Education and Retirement Support Act of 2016'' or the ``SAVERS Act of 
2016''.

SEC. 2. PURPOSE.

    The purpose of this Act is to provide that advisors who--
            (1) provide advice that is impermissible under the 
        prohibited transaction provisions under section 4975 of the 
        Internal Revenue Code of 1986, or
            (2) breach the best interest standard for the provision of 
        investment advice,
are subject to liability under the Internal Revenue Code of 1986.

SEC. 3. RULES RELATING TO THE PROVISION OF INVESTMENT ADVICE.

    (a) In General.--
            (1) Exemption for investment advice which is best interest 
        recommendation.--Section 4975(d) of the Internal Revenue Code 
        of 1986 is amended by striking ``or'' at the end of paragraph 
        (22), by striking the period at the end of paragraph (23) and 
        inserting ``, or'', and by inserting after paragraph (23) the 
        following:
            ``(24) provision of investment advice by a fiduciary to a 
        plan, plan participant, or beneficiary with respect to the 
        plan, which is a best interest recommendation.''.
            (2) Investment advice; best interest recommendation.--
        Section 4975(e) of such Code is amended by adding at the end 
        the following:
            ``(10) Investment advice.--
                    ``(A) In general.--For purposes of this section, 
                the term `investment advice' means a recommendation 
                that--
                            ``(i) relates to--
                                    ``(I) the advisability of 
                                acquiring, holding, disposing, or 
                                exchanging any moneys or other property 
                                of a plan by the plan, plan 
                                participants, or plan beneficiaries, 
                                including any recommendation whether to 
                                take a distribution of benefits from 
                                such plan or any recommendation 
                                relating to the investment of any 
                                moneys or other property of such plan 
                                to be rolled over or otherwise 
                                distributed from such plan;
                                    ``(II) the management of moneys or 
                                other property of such plan, including 
                                recommendations relating to the 
                                management of moneys or other property 
                                to be rolled over or otherwise 
                                distributed from such plan; or
                                    ``(III) the advisability of 
                                retaining or ceasing to retain a person 
                                who would receive a fee or other 
                                compensation for providing any of the 
                                types of advice described in this 
                                subclause; and
                            ``(ii) is rendered pursuant to--
                                    ``(I) a written acknowledgment that 
                                the person is a fiduciary with respect 
                                to the provision of such 
                                recommendation; or
                                    ``(II) a mutual agreement, 
                                arrangement, or understanding which may 
                                include limitations on scope, timing, 
                                and responsibility to provide ongoing 
                                monitoring or advice services, between 
                                the person making such recommendation 
                                and the plan, plan participant, or 
                                beneficiary that such recommendation is 
                                individualized to the plan, plan 
                                participant, or beneficiary and such 
                                plan, plan participant, or beneficiary 
                                intends to materially rely on such 
                                recommendation in making investment or 
                                management decisions with respect to 
                                any moneys or other property of such 
                                plan.
                    ``(B) Disclaimer of a mutual agreement, 
                arrangement, or understanding.--For purposes of 
                subparagraph (A)(ii)(II), any disclaimer of a mutual 
                agreement, arrangement, or understanding shall only 
                state the following: `This information is not 
                individualized to you, and there is no intent for you 
                to materially rely on this information in making 
                investment or management decisions.'. Such disclaimer 
                shall not be effective unless such disclaimer is in 
                writing and is communicated in a clear and prominent 
                manner and an objective person would reasonably 
                conclude that, based on all the facts and 
                circumstances, there was not a mutual agreement, 
                arrangement, or understanding.
                    ``(C) When recommendation treated as made pursuant 
                to a mutual agreement, arrangement, or understanding.--
                For purposes of subparagraph (A)(ii)(II), information 
                shall not be treated as a recommendation made pursuant 
                to a mutual agreement, arrangement, or understanding if 
                such information contains the disclaimer required by 
                clause (ii) and--
                            ``(i) Seller's exception.--The information 
                        is provided in conjunction with full and fair 
                        disclosure in writing to a plan, plan 
                        participant, or beneficiary that the person 
                        providing the information is doing so in its 
                        marketing or sales capacity, including any 
                        information regarding the terms and conditions 
                        of the engagement of the person providing the 
                        information, and that the person is not 
                        intending to provide investment advice within 
                        the meaning of this subparagraph or to 
                        otherwise act as a fiduciary to the plan or 
                        under the obligations of a best interest 
                        recommendation.
                            ``(ii) Swap and security-based swap 
                        transaction.--The person providing the 
                        information is a counterparty or service 
                        provider to the plan in connection with any 
                        transaction based on the information (including 
                        a service arrangement, sale, purchase, loan, 
                        bilateral contract, swap (as defined in section 
                        1a of the Commodity Exchange Act (7 U.S.C. 
                        1a)), or security-based swap (as defined in 
                        section 3(a) of the Securities Exchange Act (15 
                        U.S.C. 78c(a)))), but only if--
                                    ``(I) the plan is represented, in 
                                connection with such transaction, by a 
                                plan fiduciary who is independent of 
                                the person providing the information, 
                                and, except in the case of a swap or 
                                security-based swap, independent of the 
                                plan sponsor; and
                                    ``(II) prior to entering into such 
                                transaction, the independent plan 
                                fiduciary represents in writing to the 
                                person providing the information that 
                                it is aware that the person has a 
                                financial interest in the transaction 
                                and that it has determined that the 
                                person is not intending to provide 
                                investment advice within the meaning of 
                                this subparagraph or to otherwise act 
                                as a fiduciary to the plan, plan 
                                participants, or plan beneficiaries.
                            ``(iii) Employees of a plan sponsor.--The 
                        person providing the information is an employee 
                        of any sponsoring employer or employee 
                        organization who provides the information to 
                        the plan for no fee or other compensation other 
                        than the employee's normal compensation.
                            ``(iv) Platform providers selection and 
                        monitoring assistance.--The person providing 
                        the information discloses in writing to the 
                        plan fiduciary that the person is not 
                        undertaking to provide investment advice as a 
                        fiduciary (within the meaning of this 
                        paragraph) or under the obligations of a best 
                        interest recommendation and the information 
                        consists solely of--
                                    ``(I) making available to the plan, 
                                plan participants, or plan 
                                beneficiaries, without regard to the 
                                individualized needs of the plan, plan 
                                participants, or plan beneficiaries, 
                                securities or other property through a 
                                platform or similar mechanism from 
                                which a plan fiduciary may select or 
                                monitor investment alternatives, 
                                including qualified default investment 
                                alternatives, into which plan 
                                participants or beneficiaries may 
                                direct the investment of assets held 
                                in, or contributed to, their individual 
                                accounts, or
                                    ``(II) in connection with a 
                                platform or similar mechanism described 
                                in subclause (I)--
                                            ``(aa) identifying 
                                        investment alternatives that 
                                        meet objective criteria 
                                        specified by the plan, such as 
                                        criteria concerning expense 
                                        ratios, fund sizes, types of 
                                        asset, or credit quality, or
                                            ``(bb) providing objective 
                                        financial data and comparisons 
                                        with independent benchmarks to 
                                        the plan.
                            ``(v) Valuation.--The information consists 
                        solely of valuation information.
                            ``(vi) Financial education.--The 
                        information consists solely of--
                                    ``(I) information described in 
                                Department of Labor Interpretive 
                                Bulletin 96-1 (29 C.F.R. 2509.96-1, as 
                                in effect on January 1, 2015), 
                                regardless of whether such education is 
                                provided to a plan or plan fiduciary or 
                                a participant or beneficiary,
                                    ``(II) information provided to 
                                participants or beneficiaries regarding 
                                the factors to consider in deciding 
                                whether to elect to receive a 
                                distribution from a plan and whether to 
                                roll over such distribution to a plan, 
                                so long as any examples of different 
                                distribution and rollover alternatives 
                                are accompanied by all material facts 
                                and assumptions on which the examples 
                                are based, or
                                    ``(III) any additional information 
                                treated as education by the Secretary.
            ``(11) Best interest recommendation.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `best interest 
                recommendation' means a recommendation--
                            ``(i) for which no more than reasonable 
                        compensation is paid (as determined under 
                        subsection (d)(2)),
                            ``(ii) provided by a person acting with the 
                        care, skill, prudence, and diligence under the 
                        circumstances then prevailing that a prudent 
                        person would exercise based on--
                                    ``(I) the information obtained 
                                through the reasonable diligence of the 
                                person regarding factors such as the 
                                advice recipient's age, and
                                    ``(II) any other information that 
                                the advice recipient discloses to the 
                                person in connection with receiving 
                                such recommendation, and
                            ``(iii) where the person places the 
                        interests of the plan or advice recipient above 
                        its own.
                    ``(B) Investment options; variable compensation.--A 
                best interest recommendation may include a 
                recommendation that--
                            ``(i) is based on a limited range of 
                        investment options (which may consist, in whole 
                        or in part, of proprietary products), but only 
                        if any such limitations, including a clearly 
                        stated notice that the same or similar 
                        investments may be available at a different 
                        cost (greater or lesser) from other sources, 
                        are clearly disclosed to the advice recipient 
                        prior to any transaction based on the 
                        recommendation, or
                            ``(ii) may result in variable compensation 
                        to the person providing the recommendation (or 
                        any affiliate of such person), but only if the 
                        receipt of such compensation, including a 
                        clearly stated notice that the same or similar 
                        investments may be available at a different 
                        cost (greater or lesser) from other sources, is 
                        clearly disclosed to the advice recipient prior 
                        to any transaction based on the recommendation.
                The notices provided pursuant to clauses (i) and (ii) 
                shall only state the following: `The same or similar 
                investments may be available at a different cost 
                (greater or lesser) from other sources.'.
                    ``(C) Clear disclosure of variable compensation.--
                For purposes of subparagraph (B)(ii), variable 
                compensation is clearly disclosed if notification is 
                provided at any time prior to a transaction based on 
                the person's recommendation, in a manner calculated to 
                be understood by the average individual, of the 
                following:
                            ``(i) A notice in writing, including a 
                        clearly stated notice that the same or similar 
                        investments may be available at a different 
                        cost (greater or lesser) from other sources, 
                        that the person providing the recommendation 
                        (or its affiliate) may receive varying amounts 
                        of fees or other compensation with respect to 
                        such transaction.
                            ``(ii) A description of any fee or other 
                        compensation that is directly payable to the 
                        person (or its affiliate) from the advice 
                        recipient with respect to such transaction 
                        (expressed as an amount, formula, percentage of 
                        assets, per capita charge, or estimate or range 
                        of such compensation).
                            ``(iii) A description of the types and 
                        ranges of any indirect compensation that may be 
                        paid to the person (or its affiliate) by any 
                        third party in connection with such transaction 
                        (expressed as an amount, formula, percentage of 
                        assets, per capita charge, or estimate of such 
                        ranges of compensation).
                            ``(iv) Upon request of the advice 
                        recipient, a disclosure of the specific amounts 
                        of compensation described in clause (iii) that 
                        the person will receive in connection with the 
                        particular transaction (expressed as an amount, 
                        formula, percentage of assets, per capita 
                        charge, or estimate of such compensation).
                    ``(D) Definition of affiliate.--For purposes of 
                this paragraph, the term `affiliate' has the meaning 
                given in subsection (f)(8)(J)(ii).
                    ``(E) Correction of certain errors and omissions.--
                A recommendation shall not fail to be a best interest 
                recommendation solely because a person who, acting in 
                good faith and with reasonable diligence, makes an 
                error or omission in disclosing the information 
                specified in subparagraph (B), if the person discloses 
                the correct information to the advice recipient as soon 
                as practicable but not later than 30 days from the date 
                on which the person knows of such error or omission.''.
            (3) Failures relating to best interest recommendation.--
                    (A) Correction.--Section 4975(f)(5) of such Code is 
                amended--
                            (i) by striking ``(5) Correction.--The 
                        terms'' and inserting ``(5) Correction.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the terms'', and
                            (ii) by adding at the end the following:
                    ``(B) Determination of `correction' and `correct' 
                with respect to best interest advice recommendations.--
                In the case of a prohibited advice transaction arising 
                from the failure of investment advice to be a best 
                interest recommendation, the terms `correction' and 
                `correct' mean the payment to, or reimbursement of, 
                actual damages of the plan, plan participants, or plan 
                beneficiaries resulting directly from the plan's, plan 
                participant's, or plan beneficiary's reliance on such 
                investment advice, if any, that have not otherwise been 
                paid or reimbursed to the plan, plan participants, or 
                plan beneficiaries, including payments and 
                reimbursements made pursuant to subparagraph (A).''.
                    (B) Amount involved for purposes of excise tax.--
                The first sentence of section 4975(f)(4) of such Code 
                is amended by striking ``excess compensation.'' and 
                inserting ``excess compensation, and in the case of a 
                prohibited transaction arising by the failure of 
                investment advice to be a best interest recommendation, 
                the amount involved shall be the amount paid to the 
                person providing the advice (or its affiliate, as 
                defined in paragraph (8)(J)(ii)) that has not been paid 
                or reimbursed to the plan, plan participants, or plan 
                beneficiaries, including payments and reimbursements 
                made pursuant to paragraph (5).''.
            (4) Exemption relating to investment advice with respect to 
        certain fee arrangements.--Section 4975(d) of such Code (as 
        amended by paragraph (1)) is amended by striking ``or'' at the 
        end of paragraph (23), by striking the period at the end of 
        paragraph (24) and inserting ``, or'', and by adding after 
        paragraph (24) the following:
            ``(25) any transaction, including a contract for service, 
        between a person providing investment advice described in 
        subsection (e)(3)(B) and the advice recipient in connection 
        with such investment advice, if--
                    ``(A) no more than reasonable compensation is paid 
                (as determined under paragraph (2)) for such investment 
                advice,
                    ``(B) in a case in which the investment advice is 
                based on a limited range of investment options (which 
                may consist, in whole or in part, of proprietary 
                products), such limitations, including a clearly stated 
                notice that the same or similar investments may be 
                available at a different cost (greater or lesser) from 
                other sources), shall be clearly disclosed to the 
                advice recipient prior to any transaction based on the 
                investment advice,
                    ``(C) in a case in which the investment advice may 
                result in variable compensation to the person providing 
                the investment advice (or any affiliate of such 
                person), the receipt of such compensation, including a 
                clearly stated notice that the same or similar 
                investments may be available at a different cost 
                (greater or lesser) from other sources, shall be 
                clearly disclosed to the advice recipient (within the 
                meaning of subsection (e)(11)(C)), and
                    ``(D) in any case in which a person who, acting in 
                good faith and with reasonable diligence, makes an 
                error or omission in disclosing the information 
                specified in subparagraphs (B) or (C), the person 
                discloses the correct information to the advice 
                recipient as soon as practicable but not later than 30 
                days from the date on which the person knows of such 
                error or omission.''.
    (b) Effective Date.--
            (1) Modification of certain rules, and rules and 
        administrative positions promulgated before enactment but not 
        effective on january 1, 2015, prohibited.--The Department of 
        Labor is prohibited from amending any rules or administrative 
        positions promulgated under section 3(21) of the Employee 
        Retirement Security Act of 1974 and section 4975(e)(3) of the 
        Internal Revenue Code of 1986 (including Department of Labor 
        Interpretive Bulletin 96-1 (29 C.F.R. 2509.96-1) and Department 
        of Labor Advisory Opinion 2005-23A), and no such rule or 
        administrative position promulgated by the Department of Labor 
        prior to the date of the enactment of this Act but not 
        effective on January 1, 2015, may become effective unless a 
        bill or joint resolution referred to in paragraph (3) is 
        enacted as described in such paragraph not later than 60 days 
        after the date of the enactment of this Act.
            (2) General effective date of amendments.--Except as 
        provided in paragraph (3), the amendments made by subsection 
        (a) shall take effect on the 61st day after the date of the 
        enactment of this Act and shall apply with respect to 
        information provided or recommendations made on or after 2 
        years after the date of the enactment of this Act.
            (3) Exception.--If a bill or joint resolution is enacted 
        prior to the 61st day after the date of the enactment of this 
        Act that specifically approves any rules or administrative 
        positions promulgated under section 3(21) of the Employee 
        Retirement Security Act of 1974 and section 4975(e)(3) of the 
        Internal Revenue Code of 1986 that is not in effect on January 
        1, 2015, the amendments made by subsection (a) shall not take 
        effect.
    (c) Grandfathered Transactions and Services.--The amendments made 
by subsection (a) shall not apply to any service or transaction 
rendered, entered into, or for which a person has been compensated 
prior to the date on which the amendments made by subsection (a) become 
effective under subsection (b)(2).
    (d) Transition.--If the amendments made by subsection (a) take 
effect, then nothing in this section shall be construed to prohibit the 
issuance of guidance to carry out such amendments so long as such 
guidance is necessary to implement such amendments. Until such time as 
regulations or other guidance are issued to carry out such amendments, 
a plan and a fiduciary shall be treated as meeting the requirements of 
such amendments if the plan or fiduciary, as the case may be, makes a 
good faith effort to comply with such requirements.
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