[Congressional Record Volume 149, Number 137 (Wednesday, October 1, 2003)]
[Senate]
[Pages S12289-S12293]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. ENZI (for himself, Mr. Gregg, Mr. Bond, and Mr. Santorum):
  S. 1698. 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; to the Committee on Health, Education, Labor, 
and Pensions.
  Mr. ENZI. Mr. President, with the passage of the Sarbanes-Oxley Act, 
Congress acted swiftly and surely to restore investor confidence in our 
capital markets. Something needed to be done to assure people that it 
was OK for them to start investing in and relying on the market again. 
People wanted to feel certain that the rules had been fixed and the 
market was fair for all.
  Although I am proud we were able to do that, we all knew that there 
was still more that needed to be done to help the millions of American 
workers whose retirement savings are fueled by the financial markets.
  There's a gap that still threatens the retirement security of the 42 
million Americans who participate in defined contribution plans, like 
401(k) plans. In defined contribution plans, the employee--not the 
employer--decides how much and how to invest retirement assets. As 
anyone who has been investing their hard earned dollars through their 
employer provided plans knows, there are quite a few choices out there. 
They each have their own risks and rewards, but they have one thing in 
common--they require an employee who is investing his or her pay to 
have a good sense of the market. Employees find themselves having to 
navigate bull and bear markets, weather changes in personal and 
professional circumstances, and use long-term planning to set a course 
that leads to retirement security.
  401(k) plans provide great opportunity as well as risk. The 
difference between the employee who can maximize opportunity and 
minimize risk and the employee who cannot is sound investment advice. 
Unfortunately, only 16 percent of plan participants have an investment 
advisory service available to them through their retirement plans. This 
survey by the Spectrum Group confirms the existence of an advice gap 
that must be addressed. The legislation I am introducing today is 
intended to close the advice gap and help workers choose wisely and 
chart their course to retirement security.
  Both workers and employers are acutely aware of the advice gap. 
According to the 2002 Transamerica Small Business Retirement Survey, 76 
percent of employees felt they don't know as much about retirement 
investing as they should--up from 65 percent in 2001. This view is held 
even more strongly by employers, with 91 percent believing their 
workers don't know enough about retirement investing.
  There is another gap that exists with respect to retirement 
investment advice. Wealthier individuals or high-level executives are 
more likely to have access to quality investment advice than rank-and-
file workers. The Retirement Security Advice Act of 2003 will bring 
access to quality investment advice, and thereby retirement security, 
to rank-and-file workers who need it most, particularly those employed 
at small businesses.

  Access to investment advice has not kept pace with either the 
increasing number of workers participating in 401(k) plans or the 
increasing complexity of investment options. What accounts for the gulf 
between the need for and the supply of investment advice?
  The 1974 Employee Retirement Income Security Act (ERISA) imposes 
outdated barriers to the provision of investment advice to workers 
participating in 401(k) plans. ERISA prevents investment advisors who 
have an affiliation with the investment options available under the 
plan from providing investment advice to plan participants. This 
restriction might have

[[Page S12290]]

seemed reasonable in 1974 when retirement plans were dominated by 
traditional defined benefit pension plans. However, the explosion in 
401(k) plans--and thus the need to provide workers with investment 
advice services--was not imagined in 1974.
  This bill will allow employers to provide their employees with access 
to quality investment advice so long as the advisors fully and clearly 
disclose their fees and any potential conflicts of interest. 
Furthermore, investment advisors are subject to ERISA's stringent 
fiduciary obligations, which requires them to act solely in the best 
interest of plan participants. Investment advisors who breach this 
fiduciary duty are subject to a lawsuit by the worker, another plan 
fiduciary, the plan itself, or the Department of Labor. Employers also 
have the fiduciary obligation of prudently selecting and periodically 
reviewing advice providers.
  Let us remember that workers are not required to either seek or 
follow the investment advice. All advice given is strictly voluntary. 
With clear and full disclosure of fee arrangements and potential 
conflicts of interest, plan participants can decide for themselves 
whether or not to act on it.
  Some of my colleagues might argue that only independent investment 
advisors should be allowed to provide investment advice to plan 
participants. This ignores both the realities of the marketplace for 
investment advice and the needs of employees and employers. Excluding 
many of the most qualified financial services companies from offering 
investment advice to plan participants will leave a large void in the 
401(k) advice marketplace. Conversely, increasing competition in this 
marketplace will promote better quality and lower costs--both to the 
benefit of plan participants.
  Restricting the provision of investment advice services to 
independent advisors ensures that the advice gap will remain wide--
particularly at small businesses. Employers would be required to look 
outside of their plan's current administrative arrangement and hire 
another financial institution to provide investment advice services to 
employees. For small companies like those in Wyoming, meeting this 
criteria would be almost impossible. Small employers face unique 
resource and personnel limitations. The cost of researching, selecting, 
and paying for the services of an independent advice provider will 
deter small employers from providing this valued benefit to employees.
  The key to retirement security for 401(k) participants is quality 
investment advice, tailored to the needs of each worker. The key to 
expanding the number of workers getting such advice is increasing 
competition in the marketplace for investment advice while providing 
meaningful protection and disclosure to workers. The Retirement 
Security Advice Act will open the door to both.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1698

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

     SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

       This Act may be cited as the ``Retirement Security Advice 
     Act of 2003''.

     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 is 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,
       ``(v) that the adviser is acting as a fiduciary of the plan 
     in connection with the provision of the advice, and
       ``(vi) that a recipient of the advice may separately 
     arrange for the provision of advice by another adviser, that 
     could have no material affiliation with and receive no fees 
     or other compensation in connection with the security or 
     other property,
       ``(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.--
       ``(A) In general.--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.
       ``(B) Model form for disclosure of fees and other 
     compensation.--The Secretary shall issue a model form for the 
     disclosure of fees and other compensation required in 
     paragraph (1)(A)(i) which meets the requirements of 
     subparagraph (A).
       ``(3) Exemption conditioned on making required information 
     available annually, on request, and in the event of material 
     change.--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 provision of advisory services to the plan, participant, 
     or beneficiary, the fiduciary adviser fails to maintain the 
     information described in clauses (i) through (iv) of 
     paragraph (1)(A) in currently accurate form and in the manner 
     described in paragraph (2) or fails--
       ``(A) to provide, without charge, such currently accurate 
     information to the recipient of the advice no less than 
     annually,
       ``(B) to make such currently accurate information 
     available, upon request and without charge, to the recipient 
     of the advice, or
       ``(C) in the event of a material change to the information 
     described in clauses (i) through (iv) of paragraph (1)(A), to 
     provide, without charge, such currently accurate information 
     to the recipient of the advice at a

[[Page S12291]]

     time reasonably contemporaneous to the material change in 
     information.
       ``(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) or a savings association (as defined in 
     section 3(b)(1) of the Federal Deposit Insurance Act (12 
     U.S.C. 1813(b)(1))), but only if the advice is provided 
     through a trust department of the bank or similar financial 
     institution or savings association which is subject to 
     periodic examination and review by Federal or State banking 
     authorities,
       ``(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) 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)(i), 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 
     adviser in connection with the provision of investment advice 
     by the fiduciary adviser,
       ``(V) that the adviser is acting as a fiduciary of the plan 
     in connection with the provision of the advice, and
       ``(VI) that a recipient of the advice may separately 
     arrange for the provision of advice by another adviser, that 
     could have no material affiliation with and receive no fees 
     or other compensation in connection with the security or 
     other property,
       ``(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

[[Page S12292]]

     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) Exemption for plan sponsor and certain other 
     fiduciaries.--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 section 
     solely by reason of the provision of investment advice 
     referred to in subsection (e)(3)(B) (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 
     paragraph,
       ``(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, and
       ``(iv) the requirements of part 4 of subtitle B of title I 
     of the Employee Retirement Income Security Act of 1974 are 
     met in connection with the provision of such advice.
       ``(G) 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) or a savings association (as defined in 
     section 3(b)(1) of the Federal Deposit Insurance Act (12 
     U.S.C. 1813(b)(1))), but only if the advice is provided 
     through a trust department of the bank or similar financial 
     institution or savings association which is subject to 
     periodic examination and review by Federal or State banking 
     authorities,
       ``(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).''.

  Mr. BOND. Mr. President, I rise today to cosponsor the Retirement 
Security Advice Act of 2003, introduced by my good friend from Wyoming, 
Senator Mike Enzi. I do so because this bill holds important 
implications for small businesses in this county and for the millions 
of Americans they employ.
  In 1996, we created the Savings Incentive Match Plans for Employees 
(SIMPLE) as a pension-plan option for small firms in this country. The 
goal was a simple one: provide a pension plan with low administrative 
costs for employers so they can offer pension benefits to encourage 
employees to save for their retirement. I am pleased that these plans 
have become quite popular, and together with the other pension 
simplifications and improvements enacted since then, they have 
contributed to better access to pension benefits by small businesses 
and their employees.
  Greater retirement savings, however, have raised new and complex 
issues for many employees who have seen their pension accounts grow 
substantially. As a member of both the Senate Small Business Committee 
and the Health, Education, Labor, and Pension Committee, I have heard 
many constitents raise difficult questions in this area: What are 
appropriate investments for my personal circumstances and risk 
tolerance? Should I buy stocks, bonds, annuities, or something else? 
How should I diversify my investments? When should I modify my 
investment mix? And so on.
  The importance of these questions has increased substantially in 
light of recent high-profile business failures and economic downtown. 
Gone are the days of the momentum market where any dollar invested 
seemed to grow with little effort or no risk.
  The return to more cautious investing has left employees who 
participate in employer-sponsored pension plans in a real dilemma--hire 
an outside investment advisor or go it alone in most cases. Why? 
Current pension rules effectively preclude most employers from offering 
investment advice to their employees. In fact, recent estimates are 
that only about 16 percent of participants have access to investment 
advice through their pension plan. In today's complex investment 
environment that is simply too little help for employees who are trying 
to manage their retirement security.
  Senator Enzi's bill addresses this situation in a responsible way. 
For most businesses, and particularly small firms, the logical place to 
look for an investment advisor would be the company that manage's the 
plan's investment options or an affiliated firm. Under Senator Enzi's 
bill that option would now be available, opening the door for countless 
businesses to offer this important benefit at a low cost to their 
employees who participate in the company's pension plan. In addition, 
by allowing more businesses to offer investment-advice benefits, the 
bill creates an opportunity for increased competition among investment 
advisors, which can lead to better advice products and lower costs 
overall.
  Senator Enzi's bill, however, does not simply change the rules to 
help the business community. It also includes critical protections for 
the plan participants. Investment advisors must satisfy strict 
requirements concerning their qualifications, and they must disclose on 
a regular basis all their business relationships, fees, and potential 
conflicts of interest directly to the participants. In addition, and 
arguably most importantly, the investment advisor must assume fiduciary 
liability for the investment advice it renders to the employee 
participants in the plan. In short, if the investment advisor does not 
act solely in the interest of the participant, it will be liable for 
damages resulting from the breach of its fidicuary duty. Together, the 
bill's provisions provide substantive safeguards to protect the 
interests of the plan participants who take advantage of the new 
investment-advice benefit.
  Some have contended that a better alternative is to force small 
businesses to engage an independent third party to provide investment 
advice. I disagree. The result would simply be the same as under 
current law. Cost is a real issue for small businesses seeking to offer 
benefits like pension plans and related investment advice--hence, the 
genesis of the SIMPLE pension plan. As under the current rules, if the 
only option is a costly outside advisor, the small firm will not offer 
the investment-advise benefit. As a result, we would not move the ball 
even a yard further--employers would still be left to their own devices 
to figure out the complex world of investing or they would have to seek 
out and hire their own advisor, which few have the wherewithal to do.
  More to the point, nothing under the Enzi bill prevents a business 
from engaging an independent advisor if the employer deems that the 
best alternative. The standard under the Enzi bill for selecting the 
investment advisor is prudence; the same criteria that the employer 
must exercise under current law when selecting the company

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that manages the pension plan and its investment options. If a prudent 
person would not hire or retain the investment advisor, then under the 
Enzi bill, the employer should not do so either or face liability for 
breach of fiduciary duty. Again, additional protection for the plan 
participants.
  In my assessment, investment advice is an increasingly important 
benefit that employers want and need. Morover, small businesses in 
particular need the flexibility to offer benefits that keep them 
competitive with big companies as they seek to hire and retain the very 
best employees possible. And when we talk about small businesses, we 
are not dealing with an insignificant employer in this country. In 
fact, according to Small Business Administration data, small businesses 
represent 99 percent of all employers and provide 60 to 80 percent of 
the net new jobs annually in this country.
  The Retirement Security Advice Act provides a carefully balanced and 
responsible solution to this situation. Most importantly, it provides a 
solution that employers will actually use to offer the investment 
advice sought by their employers who struggle to put money aside in the 
hopes of having a nest egg that someday will provide them with a 
comfortable retirement. I am pleased to co-sponsor this bill and look 
forward to working with my colleague from Wyoming to see it enacted 
into law.
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