[Congressional Record (Bound Edition), Volume 146 (2000), Part 9]
[Extensions of Remarks]
[Pages 12378-12379]
[From the U.S. Government Publishing Office, www.gpo.gov]



                   THE RETIREMENT SECURITY ADVICE ACT

                                 ______
                                 

                          HON. JOHN A. BOEHNER

                                of ohio

                    in the house of representatives

                         Monday, June 26, 2000

  Mr. BOEHNER. Mr. Speaker, for the past several months, the 
Subcommittee on Employer-Employee Relations has held a series of 
bipartisan hearings examining the changes in the financial world since 
the 1974 passage of the Employee Retirement Income Security Act (ERISA) 
and looking for ways for American workers and retirees to take 
advantage of the economic opportunities created since then. To most 
people in 1974, personal savings meant a bank account. Now it means 
401(k)s, IRAs, annuities, mutual funds, and a whole range of investment 
products that go well beyond what was available to the average American 
25 years ago. Economists predict that this year, for the first time, 
nearly 50 percent of all Americans will have invested in some form of 
equity.
  Moreover, in the past 25 years, the number of workers covered by a 
defined contribution plan has increased 35 percent, from 12 to 42 
million. The explosive growth of defined contribution plans has left 
employees with the responsibility for investment decisions that many 
are ill equipped to make. ERISA creates barriers that currently prevent 
employers and investment intermediaries from giving individualized 
investment advice to plan participants.
  The drafters of ERISA were preoccupied with the problems of defined 
benefit plans, where the participant has no responsibility for 
investment decisions. Only a small fraction of plan assets in 1974 were 
in defined contribution world. Today the picture is very different-- 
almost all new plan formation is taking the form of defined 
contributions plans, especially 401(k) plans. A typical 401(k) plan 
offers a range of stock and bond portfolios from one or more of mutual 
fund companies, banks, and insurance companies. The plan participant 
makes his or her own investment selections. Part of what many employees 
find attractive

[[Page 12379]]

about defined contributions plans is that the employee pockets the 
investment gain on the assets in his or her account.
  Employers and investment intermediaries would like to assist 
employees to make the most of their retirement saving opportunities. 
But an employer who arranges for financial professionals to deliver the 
tailored investment advice that those employees need risks a lawsuit by 
being deemed an ERISA fiduciary. Moreover, the arcane and highly 
complex ERISA prohibited transaction rules severely limited the ability 
of service providers (such as mutual funds, banks or insurers) to 
provide investment advice to workers in the plans they service. These 
rules are inconsistent with federal securities laws, which permit the 
provision of such advisory services when certain disclosures are made.
  The result is that ERISA has been read to insist that individual 
workers by the millions become investment experts. It has not happened 
and it is causing workers to be less well invested than if employers or 
investment intermediaries were allowed to guide the individual employee 
on the asset allocation appropriate to his or her place in the life 
cycle, family circumstances, and other assets.
  To address this problem, I am introducing the ``Retirement Security 
Advice Act,'' which permits investment service firms to provide 
investment advice about all investment products, including their own, 
as long as material information is disclosed. Use of disclosure as a 
means of dealing with potential conflicts is well accepted in the 
securities laws and has been used in a number of ERISA exemptions 
granted by the Department of Labor.
  The ``Retirement Security Advice Act'' would provide a statutory 
exemption from the ERISA prohibited transactions rules for: (1) the 
provision of investment advice to a plan, its participants and 
beneficiaries, (2) the purchase or sale of assets pursuant to such 
investment advice, and (3) the direct or indirect receipt of fees or 
other compensation in connection with providing the advice. The advice 
provider, by virtue of providing the advice, would assume fiduciary 
status as a ``fiduciary adviser.''
  Only specified qualified and regulated entities would be permitted to 
deliver advice: registered investment advisers, banks, insurance 
companies, registered broker-dealers, and the affiliates, employees, 
agents, or registered representatives of those entities. Any investment 
advice provided to participants or beneficiaries would be implemented 
(through a purchase or sale of assets) only at their discretion. The 
terms of the transaction must be at least as favorable to the plan as 
an arms' length transaction would be, and the compensation received by 
the fiduciary adviser (and its affiliates) in connection with any 
transaction must be reasonable.
  The fiduciary adviser, at or before the initial delivery of 
investment advice and annually thereafter, would have to provide a 
written or electronic disclosure of: (1) the fees or other compensation 
that the fiduciary adviser and its affiliates receive relating to the 
provision of investment advice or a resulting sale or acquisition of 
assets (including from third parties), (2) any interest of the 
fiduciary adviser or its affiliates in any asset recommended, purchased 
or sole, (3) any limitation placed on the fiduciary's ability to 
provide advice, (4) the advisory services offered, and (5) any 
information required to be disclosed under applicable securities laws.
  A plan sponsor or other fiduciary that arranges for a fiduciary 
adviser to provide investment advice to participants and beneficiaries 
would not be liable under ERISA for the specific investment advice 
provided to individual participants or beneficiaries, but would not be 
exempted from any other ERISA fiduciary obligations. No employer would 
be required to contract with an investment adviser and no employee 
would have to accept or follow any advice. The entire process is 
completely voluntary.
  The ``Retirement Security Advice Act'' will empower workers with the 
information they need to make the most of the retirement savings and 
investment opportunities afforded them by today's 401(k)-type plans.

                          ____________________