[Congressional Record Volume 147, Number 156 (Tuesday, November 13, 2001)]
[Senate]
[Pages S11721-S11722]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BINGAMAN (for himself and Ms. Collins):
  S. 1677. 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; to the Committee on 
Health, Education, Labor, and Pensions.
  Mr. BINGAMAN. Madam President, I rise today to introduce legislation 
with my colleague from Maine, Senator Collins, that will significantly 
help employees get better advice on how to invest their 401(k) plans. 
The Independent Investment Advice Act of 2001 removes an existing 
impediment that prevents employers from offering this needed 
information to their employees. This legislation was carefully prepared 
with input and consultation with affected groups and interested 
stakeholders and is supported by the American Association of Retired 
Persons, AARP, the American Society of Pension Actuaries, ASPA, 
Committee on

[[Page S11722]]

Investment of Employee Benefit Assets, CIEBA, the Financial Planning 
Association, FPA, and the Small Business Council of America, SBCA.
  Over the past several years, the demand by 401(k) plan participants 
for individualized investment advice has been growing, yet less than a 
third of employers offer this service. Primarily, employers do not 
offer this invaluable resource due to concerns about being responsible 
and ultimately liable for the selection and monitoring of an investment 
adviser. In general, current law relieves employers of their liability 
for the actual investment decisions made by their employees in a 401(k) 
plan. It is therefore illogical to make employers liable for providing 
their employees with sound, independent investment advice when we have 
intentionally shifted the burden to employees to invest their 
retirement funds wisely. The creation of a safe harbor for offering 
qualified independent investment advisers will remove this 
inconsistency and facilitate the flow of reliable, informed advice to 
employees.
  The Independent Investment Advice Act of 2001 creates a safe harbor 
for plan sponsors by giving them clear guidance as to what is necessary 
to ensure that they will not have liability for the selection and 
monitoring of qualified investment advisers. Employers will be deemed 
to have satisfied their fiduciary responsibilities under ERISA with 
respect to the selection and monitoring of qualified investment 
advisers, provided they meet the following strict criteria.
  First, the employer must contract with qualified investment advisers. 
Entities such as Federal and most State registered investment advisers, 
banks and insurance companies will be deemed to be qualified providers 
of investment advice provided the individual actually offering the 
advice is a registered investment adviser, registered representative or 
a registered broker or dealer. The Secretary of Labor has the authority 
to expand this category for other comparably qualified entities and 
individuals.
  Next, the investment adviser must verify in writing that it has met 
several standards. The investment adviser must state that it is 
currently qualified as defined above and acknowledge that it is a 
fiduciary and as such, solely responsible for the information provided 
to the participants. The investment adviser must also review the plan 
documents, including investment options, and guarantee that the 
relationship with the investment adviser will not be in violation of 
any existing prohibited transaction rules under ERISA. It must also 
provide documentation that it has the necessary insurance coverage, as 
determined by the Secretary of Labor, for potential claims by plan 
participants.
  Finally, before hiring the investment adviser, the plan sponsor must 
review the verification as previously described from the investment 
advisor. It must also review the investment adviser's fee structure and 
contract. Finally, it must review the Uniform Application for 
Investment Registration as filed with SEC or comparable filing with the 
Department of Labor. After reviewing all of these documents, the 
adviser must determine that there is no material reason to not enter 
into a contract with the investment advisor. The plan sponsor has a 
continuous duty to investigate the investment adviser if information is 
brought to its attention questioning whether the adviser remains 
qualified or if a significant number of employees register complaints. 
Based on this review the plan sponsor must determine whether or not to 
continue using the investment adviser's services.
  I look forward to working with my colleagues on both sides of the 
aisle in advancing this legislation.
                                 ______