[Congressional Record (Bound Edition), Volume 147 (2001), Part 16]
[House]
[Pages 22599-22621]
[From the U.S. Government Publishing Office, www.gpo.gov]



                 RETIREMENT SECURITY ADVICE ACT OF 2001

  Ms. PRYCE of Ohio. Mr. Speaker, by direction of the Committee on 
Rules, I call up House Resolution 288 and ask for its immediate 
consideration.
  The Clerk read the resolution, as follows:

                              H. Res. 288

       Resolved, That upon the adoption of this resolution it 
     shall be in order without intervention of any point of order 
     to consider in the House the bill (H.R. 2269) 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. The bill shall be considered as 
     read for amendment. In lieu of the amendments recommended by 
     the Committee on Education and the Workforce and the 
     Committee on Ways and Means now printed in the bill, the 
     amendment in the nature of a substitute printed in part A of 
     the report of the Committee on Rules accompanying this 
     resolution shall be considered as adopted. The previous 
     question shall be considered as ordered on the bill, as 
     amended, and on any further amendment thereto to final 
     passage without intervening motion except: (1) one hour and 
     40 minutes of debate on the bill, as amended, with one hour 
     equally divided and controlled by the chairman and ranking 
     minority member of the Committee on Education and the 
     Workforce and 40 minutes equally divided and controlled by 
     the chairman and ranking minority member of the Committee on 
     Ways and Means; (2) the further amendment printed in part B 
     of the report of the Committee on Rules, if offered by 
     Representative George Miller of California or his designee, 
     which shall be in order without intervention of any point of 
     order, shall be considered as read, and shall be separately 
     debatable for one hour equally divided and controlled by the 
     proponent and an opponent; and (3) one motion to recommit 
     with or without instructions.

  The SPEAKER pro tempore. The gentlewoman from Ohio (Ms. Pryce) is 
recognized for 1 hour.
  Ms. PRYCE of Ohio. Mr. Speaker, for the purpose of debate only, I 
yield the customary 30 minutes to the gentleman from Texas (Mr. Frost), 
pending which I yield myself such time as I may consume. During 
consideration of this resolution, all time yielded is for the purpose 
of debate only.
  Mr. Speaker, House Resolution 288 is an appropriate but fair rule 
providing for the consideration of H.R. 2269, the Retirement Security 
Advice Act of 2001, and it is consistent with previous rules that our 
committee has reported and the House has adopted on bills affecting tax 
policy.
  This rule provides for 100 minutes of general debate in the House 
with 60 minutes equally divided and controlled by the gentleman from 
Ohio (Chairman Boehner) and the ranking member of the Committee on 
Education and the Workforce, the gentleman from California (Mr. George 
Miller). The remaining 40 minutes are equally divided between the 
gentleman from California (Mr. Thomas) and the ranking minority member 
of the Committee on Ways and Means, the gentleman from New York (Mr. 
Rangel).
  In lieu of the amendments recommended by the Committee on Education 
and the Workforce and the Committee on Ways and Means, the amendment 
printed in Part A of the Committee on Rules report accompanying this 
resolution shall be considered as adopted.
  I would simply note for my colleagues that this Part A amendment 
combines the provisions reported by the respective committees into one 
amendment. After general debate, it will be in order to consider only 
the substitute amendment offered by the gentleman from California (Mr. 
George Miller) or his designee, printed in Part B of the Committee on 
Rules report and is debatable for 1 hour.
  Finally, the rule permits the minority to offer a motion to recommit, 
with or without instructions.
  The resume waives all points of order against consideration of the 
bill as amended, as well as the amendment in the nature of a 
substitute.
  Mr. Speaker, today in America more and more working men and women are 
investing. We are no longer living in a world where only the richest 
Americans participate in the stock market. Today's workers are using 
worker-directed or 401(k)-type plans to manage and grow their 
retirement funds. In fact, it is estimated that some 43 million workers 
are, in part, managing nearly $1.5 trillion dollars in assets through 
defined contribution plans.
  Unfortunately, current law does not reflect the new world that we 
live in. For the average worker trying to get ahead, raising a family 
or simply pursuing the American dream in any way they choose, managing 
their retirement funds can be a daunting, difficult and sometimes 
costly task, and current law is keeping them from getting the direction 
that they need.
  Back home, I know many young people who are in their early careers or 
newly married. I see them and their spouses trying to understand 
today's complex financial reality. And these are smart kids. They know 
that you can never be too young to begin planning for your future. But 
with a future that involves starting a family, purchasing a home and a 
car, planning for children's educational needs, understanding 
investments for retirement is just one more difficult piece of a very 
complicated puzzle.
  Everyone who enters the workforce has dreams of one day returning to 
full-time private life. Some dream of a house on the shore or a ranch 
out west. Others dreams are more modest, a small home close to family 
and friends. But the common theme of all retirement dreams is security, 
comfort and a small reward for a lifetime's work.
  Planning for retirement today is not like it was when our mothers and 
fathers and even some of us were new to the workforce. Retirement 
planning does not simply involve Social Security and a savings 
accounts. Today's retirement planning requires an understanding of the 
many investment options and their attendant risk and benefits.
  To be sure, planning for the future through investment is a welcome 
aspect of our country's financial progress and the continued expansion 
of options for American workers. But we would be remiss if we did not 
make sure that the law kept up with these widening options.
  We must recognize that with the wealth of investment options 
available to workers, there must also be options for advice and 
direction. Workers need access to sound advice to help them maximize 
their retirement security as well as minimize their risk.
  H.R. 2269, the Retirement Security Advice Act responds to this need 
and provides Americans with access to this help.
  It allows employers to provide their workers with access to high 
quality, professional investment advice. It retains critical safeguards 
and includes new protections to ensure that participants will receive 
advice solely in their best interests.
  Advice will be provided by fiduciary advisors who will be personally 
liable for failure to act solely in the interest of a worker and 
subject to both criminal and civil sanctions through the Department of 
Labor for any breach of

[[Page 22600]]

their fiduciary duty. It is also important to note that all existing 
securities and State insurance protections will continue to apply as 
well.
  H.R. 2269 also includes a strict, plain-language disclosure 
requirement to inform participants about any and all potential fees or 
possible conflicts of interest when advice is first given. Finally, it 
works to educate and empower workers who have full control over their 
investment decisions and help to close the investment advice gap.
  Mr. Speaker, like President Bush, I too trust Americans to manage 
their own money. Indeed, everyone should be a part owner in the 
American dream. This legislation will finally allow employers to 
sponsor investment advice for their workers and empower them to make 
decisions based on solid and experienced judgment. Today's workers have 
more choices for their future. Let us make sure they have the tools to 
know which choice is best for them.
  Mr. Speaker, I urge all my colleagues to support this rule and the 
underlying legislation.
  Mr. Speaker, I reserve the balance of my time.
  Mr. FROST. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I yield myself such time as I may consume, and thank my 
colleague, the gentlewoman from Ohio (Ms. Pryce) for yielding me the 
customary 30 minutes.
  Mr. Speaker, both the underlying bill and the Democratic substitute 
address an issue of great importance to the millions of Americans who 
will depend upon participant-directed pension accounts for their 
retirement income.
  Nowadays, fewer and fewer employees have traditional pension plans. 
That means that more and more will depend heavily on investments for 
their retirement income. Currently, approximately 42 million workers 
participate in such accounts.
  It is very important that these workers have access to sound 
financial planning and advice to help them make the most of their 
investments. It is also critical that the advice they receive is 
unbiased and in their best interests, not for the benefit of the 
advisor or counselor or the businesses they represent.
  The Democratic substitute makes important improvements in the 
underlying bill. Specifically, the Andrews-Rangel substitute allows 
employees to receive investment advice and education from their 
employers, while still being protected from conflicts of interest and 
unqualified investment advisors.
  The rule provides an hour and 40 minutes of debate on the bill and 
another hour on the substitute. Let us pass this rule so we may get on 
with the debate of this issue of importance to the American worker.
  Mr. Speaker, I have no further speakers, and I yield back the balance 
of my time.
  Ms. PRYCE of Ohio. Mr. Speaker, I yield back the balance of my time, 
and I move the previous question on the resolution.
  The previous question was ordered.
  The resolution was agreed to.
  A motion to reconsider was laid on the table.

                              {time}  1100

  Mr. BOEHNER. Mr. Speaker, pursuant to House Resolution 288, I call up 
the bill (H.R. 2269) to amend title 1 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, and ask for its immediate consideration.
  The Clerk read the title of the bill.
  The SPEAKER pro tempore (Mr. Hansen). Pursuant to House Resolution 
288, the bill is considered read for amendment.
  The text of H.R. 2269 is as follow:

                               H.R. 2269

       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 ``Retirement Security Advice 
     Act of 2001''.

     SEC. 2. PROHIBITED TRANSACTION EXEMPTION FOR THE PROVISION OF 
                   INVESTMENT ADVICE.

       (a) Amendments to the Employee Retirement Income Security 
     Act of 1974.--
       (1) In general.--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) If the requirements of subsection (g) are met--
       ``(A) the provision of investment advice referred to in 
     section 3(21)(A)(ii) provided by a fiduciary adviser (as 
     defined in subsection (g)(4)(A)) to an employee benefit plan 
     or to a participant or beneficiary of an employee benefit 
     plan,
       ``(B) the sale, acquisition, or holding of securities or 
     other property (including any lending of money or other 
     extension of credit associated with the sale, acquisition, or 
     holding of securities or other property) pursuant to such 
     investment advice, and
       ``(C) 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 such investment advice.''.
       (2) Requirements.--Section 408 of such Act is amended 
     further by adding at the end the following new subsection:
       ``(g)(1) The requirements of this subsection are met in 
     connection with the provision of 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 such plan, in connection 
     with any sale or acquisition of a security or other property 
     for purposes of investment of amounts held by such plan, if--
       ``(A) in the case of the initial provision of such advice 
     with regard to a security or other property, by such 
     fiduciary adviser to such plan, participant, or beneficiary, 
     the fiduciary adviser provides to the recipient of such 
     advice, at the time of or before the initial provision of 
     such advice, a clear and conspicuous description, in writing 
     (including by means of electronic communication), of--
       ``(i) all fees or other compensation relating to such 
     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 such advice or in 
     connection with such acquisition or sale,
       ``(ii) any material affiliation or contractual relationship 
     of the fiduciary adviser or affiliates thereof in such 
     security or other property,
       ``(iii) any limitation placed on the scope of the 
     investment advice to be provided by the fiduciary adviser 
     with respect to any such sale or acquisition, and
       ``(iv) the types of services offered by the fiduciary 
     advisor in connection with the provision of investment advice 
     by the fiduciary adviser,
       ``(B) in the case of the initial or any subsequent 
     provision of such advice to such plan, participant, or 
     beneficiary, the fiduciary adviser, throughout the 1-year 
     period following the provision of such advice, maintains the 
     information described in clauses (i) through (iv) of 
     subparagraph (A) in currently accurate form for availability, 
     upon request and without charge, to the recipient of such 
     advice,
       ``(C) the fiduciary adviser provides appropriate 
     disclosure, in connection with any such acquisition or sale, 
     in accordance with all applicable securities laws,
       ``(D) such acquisition or sale occurs solely at the 
     direction of the recipient of such advice,
       ``(E) the compensation received by the fiduciary adviser 
     and affiliates thereof in connection with such acquisition or 
     sale is reasonable, and
       ``(F) the terms of such acquisition or sale are at least as 
     favorable to such plan as an arm's length transaction would 
     be.
       ``(2) 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 such 
     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.
       ``(3)(A) Subject to subparagraph (B), a plan sponsor or 
     other person who is a fiduciary 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 such investment 
     advice), if--
       ``(i) such advice is provided by a fiduciary adviser 
     pursuant to an arrangement between such plan sponsor or other 
     fiduciary and such fiduciary adviser for the provision by 
     such fiduciary adviser of investment advice referred to in 
     such section, and
       ``(ii) the terms of such arrangement require compliance by 
     the fiduciary adviser with the requirements of this 
     subsection.
       ``(B) 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

[[Page 22601]]

     enters into an arrangement for the provision of advice 
     referred to in section 3(21)(A)(ii). Such 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 such advice.
       ``(C) 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).
       ``(4) For purposes of this subsection and subsection 
     (b)(14)--
       ``(A) 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 such 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),
       ``(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).
       ``(B) The term `affiliate' means an affiliated person, as 
     defined in section 2(a)(3) of the Investment Company Act of 
     1940 (15 U.S.C. 80a-2(a)(3)).
       ``(C) The term `registered representative' means a person 
     described in section 3(a)(18) of the Securities Exchange Act 
     of 1934 (15 U.S.C. 78c(a)(18)) or section 202(a)(17) of the 
     Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(17)).''.
       (b) Amendments to the Internal Revenue Code of 1986.--
       (1) In general.--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) If the requirements of subsection (f)(7) are met--
       ``(A) the provision of investment advice referred to in 
     subsection (e)(3)(B) provided by a fiduciary adviser (as 
     defined in subsection (f)(7)(C)(i)) to a plan or to a 
     participant or beneficiary of a plan,
       ``(B) the sale, acquisition, or holding of securities or 
     other property (including any extension of credit associated 
     with the sale, acquisition, or holding of securities or other 
     property) pursuant to such investment advice, and
       ``(C) 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 such investment advice.''.
       (2) 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) Requirements for exemption for investment advice 
     provided by fiduciary advisers.--
       ``(A) In general.--The requirements of this paragraph are 
     met in connection with the provision of 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 
     such plan, in connection with any sale or acquisition of a 
     security or other property for purposes of investment of 
     amounts held by such plan, if--
       ``(i) in the case of the initial provision of such advice 
     by such fiduciary adviser to such plan, participant, or 
     beneficiary, the fiduciary adviser provides to the plan, 
     participant, or beneficiary, at the time of or before the 
     initial provision of such advice, a description, in writing 
     or by means of electronic communication, of--

       ``(I) all fees or other compensation relating to such 
     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 such advice or in 
     connection with such acquisition or sale,

       ``(II) any material affiliation or contractual relationship 
     of the fiduciary adviser or affiliates thereof in such 
     security or other property,
       ``(III) any limitation placed on the scope of the 
     investment advice to be provided by the fiduciary 
     adviser with respect to any such sale or acquisition, and

       ``(IV) the types of services offered by the fiduciary 
     advisor in connection with the provision of investment advice 
     by the fiduciary adviser,

       ``(ii) in the case of the initial or any subsequent 
     provision of such advice to such plan, participant, or 
     beneficiary, the fiduciary adviser, throughout the 1-year 
     period following the provision of such advice, maintains the 
     information described in subclauses (I) through (IV) of 
     clause (i) in currently accurate form for availability, upon 
     request and without charge, to the recipient of such advice,
       ``(iii) the fiduciary adviser provides appropriate 
     disclosure, in connection with any such acquisition or sale, 
     in accordance with all applicable securities laws,
       ``(iv) such acquisition or sale occurs solely at the 
     discretion of the recipient of such advice,
       ``(v) the compensation received by the fiduciary adviser 
     and affiliates thereof in connection with such acquisition or 
     sale is reasonable, and
       ``(vi) the terms of such acquisition or sale are at least 
     as favorable to such plan as an arm's length transaction 
     would be.
       ``(B) Maintenance of records.--A fiduciary adviser referred 
     to in subparagraph (A) who has provided advice referred to in 
     such subparagraph shall, for a period of not less than 6 
     years after the provision of such advice, maintain any 
     records necessary for determining whether the requirements of 
     the preceding provisions of this subsection and of subsection 
     (d)(16) have been met. A prohibited transaction described in 
     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.
       ``(C) 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 
     such 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),
       ``(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).

       ``(ii) Affiliate.--The term `affiliate' means an affiliated 
     person, 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' means a person described in section 3(a)(18) 
     of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(18)) 
     or section 202(a)(17) of the Investment Advisers Act of 1940 
     (15 U.S.C. 80b-2(a)(17)).''.

     SEC. 3. EFFECTIVE DATE.

       The amendments made by this Act shall apply with respect to 
     advice referred to in section 3(21)(A)(ii) of the Employee 
     Retirement Income Security Act of 1974 or section 
     4975(e)(3)(B) of the Internal Revenue Code of 1986 provided 
     on or after January 1, 2002.

  The SPEAKER pro tempore. In lieu of the amendments recommended by the 
Committees on Education and the Workforce and Ways and Means printed in 
the bill, the amendment in the nature of a substitute printed in part A 
of House Report 107-289 is adopted.
  The text of H.R. 2269, as amended pursuant to House Resolution 288, 
is as follows:

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Retirement Security Advice 
     Act of 2001''.

     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

[[Page 22602]]

     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 
     advisor in connection with the provision of investment advice 
     by the fiduciary adviser, and
       ``(v) that the adviser is acting as a fiduciary of the plan 
     in connection with the provision of the advice,
       ``(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.--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.
       ``(3) Exemption conditioned on continued availability of 
     required information on request for 1 year.--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 subparagraph (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 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),
       ``(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), 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.''

[[Page 22603]]

       (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 
     advisor in connection with the provision of investment advice 
     by the fiduciary adviser, and
       ``(V) that the adviser is acting as a fiduciary of the plan 
     in connection with the provision of the advice,

       ``(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 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),
       ``(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).''

     SEC. 3. EFFECTIVE DATE.

       The amendments made by this Act shall apply with respect to 
     advice referred to in section 3(21)(A)(ii) of the Employee 
     Retirement Income Security Act of 1974 or section 
     4975(e)(3)(B) of the Internal Revenue Code of 1986 provided 
     on or after January 1, 2002.

  The SPEAKER pro tempore. After debate on the bill, as amended, it 
shall be in order to consider a further amendment printed in part B of 
the report, if offered by the gentleman from California (Mr. George 
Miller), or his designee, which shall be considered read, and shall be 
debatable for 60 minutes, equally divided and controlled by the 
proponent and an opponent.
  The gentleman from Ohio (Mr. Boehner) and the gentleman from New 
Jersey (Mr. Andrews) each will control 30 minutes of debate on the 
bill, and the gentleman from California (Mr. Thomas) and the gentleman 
from Washington (Mr. McDermott) each will control 20 minutes of debate 
on the bill.
  The Chair recognizes the gentleman from Ohio (Mr. Boehner).


                             General Leave

  Mr. BOEHNER. Mr. Speaker, I ask unanimous consent that all Members

[[Page 22604]]

may have 5 legislative days in which to revise and extend their remarks 
and to include extraneous material on H.R. 2269.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Ohio?
  There was no objection.
  Mr. BOEHNER. Mr. Speaker, I yield myself such time as I may consume.
  My colleagues, this week we found that for the first time in our 
Nation's history, more than half of all American families have invested 
in the stock market. I think that is enormously significant. For years, 
certainly when I was growing up, we thought of the stock market as 
something only the wealthy cared about. And for the most part, it was. 
As late as 1982, fewer than 15 percent of all American households held 
stocks, bonds, or mutual funds. Right now, the number is 52 percent. 
Today, the working class and the investor class are one and the same.
  It is these new entrants into the investment markets that H.R. 2269, 
the Retirement Security Advice Act, is meant to help. We have seen an 
explosion in the number of 401(k) plans and IRAs, defined contribution 
plans in which the employee decides how much to invest and how to 
invest. As we see from this chart next to us, more than 48 million 
Americans participate in defined contribution plans today. These plans 
offer great opportunities for investors, but they also pose many risks. 
The best way to maximize opportunities and to minimize risk is to have 
access to high-quality investment advice.
  But access to advice has not kept pace with participation in these 
defined contribution plans. Every day, workers who are trying to figure 
out how to best invest their money go to their employers and ask for 
guidance. Sadly, current law cripples employers who want to provide it.
  So, how did we get to this point? The 1974 Employee Retirement Income 
Security Act, enacted long before the advent of 401(k)s and other 
defined contribution plans, continues to needlessly deny many employers 
the opportunity to provide their workers with investment advice 
benefits that could help them enhance their retirement savings.
  We have heard from employers that they want to provide this service 
as a benefit to help retain skilled workers. We have heard from workers 
that they want quality advisers to guide investment decisions. The 
authors of ERISA never intended for millions of individuals to have to 
become investment experts. To illustrate this point, we have the chart 
next to me. Betty Shepard, the Human Resources administrator at Mohawk 
Industries Carpet Company in Kennesaw, Georgia, testified before our 
committee that, and I will quote ``Without this bill, I fear that many 
of our employees may overreact to market fluctuations and listen to the 
commentary of family, friends or the media to make retirement planning 
decisions.''
  We know from survey after survey that a large majority of employees 
do not have access to quality investment guidance. In fact, as we see 
from this chart, only 16 percent of 401(k) participants have investment 
advice options available through their retirement plan, according to 
the Spectrum Group.
  It is this investment advice gap that H.R. 2269 seeks to close, and 
it does it in several ways. First, it streamlines the employer's duty 
in selecting and monitoring investment advisers. Employers will not be 
responsible for every piece of advice or every transaction, but when 
general problems arise, they must respond to them. Employers tell us 
this will give them the clear guidance they need to offer quality 
investment advice to their employees as a benefit. The following chart 
summarizes how this bill changes current law.
  Second, the bill maximizes competition in the investment advice 
market by allowing many of the most highly regarded investment firms to 
offer investment advice through employers. It will also protect workers 
by clearly requiring advisers to act at all times in the workers' best 
interest, and, if they have any possible conflicts of interest, to 
disclose them early and clearly.
  If they breach that fiduciary duty, they will be subject to civil 
litigation and even criminal prosecution by the Labor Department. The 
Department of Labor, which has the responsibility for protecting 
workers, tells us that this structure gives it all the authority 
necessary to protect workers from abuses. But competition is the best 
consumer protection available, and our bill creates a competitive 
marketplace that would be flexible and dynamic enough to respond to 
worker needs.
  I think everyone in this House shares the same ultimate goal of 
providing quality investment advice to workers who critically need it, 
and I urge Members today to support this bill. Employers, workers, both 
the Commerce and Treasury Secretaries, and the Nation's chief pension 
law enforcement official all support this commonsense measure. It takes 
a balanced approach for increasing worker access to advice while 
including safeguards to protect their investments without discouraging 
employers from offering any advice at all.
  I want to thank my colleague, the gentleman from Texas (Mr. Sam 
Johnson), who, as a Member of the Committee on Ways and Means and also 
as chairman of our Subcommittee on Employer-Employee Relations, has 
been instrumental in moving this bill through the two committees; and I 
want to thank him for the vital role he has played in this process.
  Mr. Speaker, we must ensure that the American dream is within the 
grasp of all of our Nation's workers, not just a select few. Access to 
quality investment advice is one way we can help rank-and-file workers 
maximize their retirement security.
  Mr. Speaker, I reserve the balance of my time.
  The SPEAKER pro tempore. Without objection, the time originally 
allotted to the gentleman from California (Mr. Thomas) will be 
controlled by the gentleman from Texas (Mr. Sam Johnson).
  There was no objection.
  Mr. ANDREWS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise in opposition to the bill; and later in the 
debate the gentleman from New York (Mr. Rangel), the ranking member of 
the Committee on Ways and Means, and myself will offer a substitute 
which we believe is a more positive alternative.
  I want to proceed by agreeing with the gentleman from Ohio (Mr. 
Boehner), the chairman, and my friend, the gentleman from Texas (Mr. 
Sam Johnson), the subcommittee chairman, that there is a serious 
problem that requires a remedy, and that problem is the fact that there 
are millions of Americans, a majority of Americans, who now hold 
interest in the equity markets, in the stock markets, and that many of 
these Americans do not receive adequate advice as to the options and 
strategies they should follow in investing their money.
  There are too many people who get their investment advice from a 
neighbor, over the back yard fence, or through hearsay at an office 
gathering, or what have you, and we all agree that that is a situation 
that we want to change.
  I also want to say that Chairman Boehner and Chairman Johnson have 
been open and fair throughout this process, and I hope that we are able 
to continue working together as the legislation advances to the other 
body so that we may reach a mutually agreeable solution, and I thank 
the chairman for his openness and fairness throughout this process.
  We think that this bill is the wrong way to give investment advice 
because we think it is flawed in four essential ways:
  First of all, it is important to understand that this bill will make 
it possible for a person to receive investment advice about their 
pension assets, perhaps along with their home the most important assets 
a person owns, from someone who has a vested interest in that decision, 
in addition to or other than the interest of the pension. In other 
words, an employee of an insurance company or a bank or a financial 
services company can give advice to a pensioner that would result in 
that pensioner putting valuable pension assets into a fund where the 
advisor would do better or where the advisor would profit from the 
result of that decision. That is an important conflict of

[[Page 22605]]

interest that we think is a very serious and troubling one.
  The bill does not properly reconcile that conflict of interest in 
four important ways:
  First of all, its disclosure provisions do not adequately or 
contemporaneously disclose to the investor what the risks are. If there 
is to be such advice given, we believe, Mr. Speaker, that the person 
receiving the advice should know with great clarity exactly what the 
nature of a potential conflict is at the time he or she is making the 
decision. It is not good enough to receive that disclosure months or 
even years before one makes the decision. It is not good enough that 
that disclosure be confusing, presented in the verbiage of financial 
planning professionals and not the commonsense language most of us 
would be able to understand. Because the bill does not provide for 
adequate disclosure of potential or real conflicts by investment 
advisers, it is flawed.
  Secondly, the bill does not provide for adequate qualifications of 
the investment advisers. If someone is going to be giving investment 
advice to American pensioners and American workers, that someone ought 
to be trained and qualified and accountable. There is a serious 
loophole in the underlying bill with respect to that training and 
qualification. Where there are cases where employees of large banks, 
large insurance companies, large financial services companies do not 
have that kind of adequate training, as we read the bill, they would 
still be able to give such advice. We believe that only people who are 
duly licensed and trained and qualified should be giving such advice.
  The third major flaw of this bill is it does not take adequate 
measures to make the investor aware that there are alternatives, in 
many cases better alternatives to receiving advice other than receiving 
advice from a conflicted advisor; that there is someone else to whom 
the pensioner could turn, someone else to whom the employee could turn 
who has no stake in the outcome of his or her decision, who has no 
conflict of interest. We believe that if conflicted advice is to be 
given at all, it should only be given where there is a clear disclosure 
of the available option of an independent advisor for that worker or 
retiree, so that the person receiving the advice knows that there is 
someone to whom she or he can turn who has no stake whatsoever in the 
outcome to have the decision other than the best interests of the 
investor.

                              {time}  1115

  Finally, this bill is significantly flawed because it does not 
provide adequate remedies if someone receives advice that is wrong and 
that is a breach of fiduciary duties. The bill recognizes the fact that 
the fiduciary relationship between the adviser and the investor 
continues under this bill.
  But what happens if the advisor breaches that duty. Well, the bill 
would permit present law to continue, and present law permits the 
recovery of the lost investment; it does not permit the recovery of 
damages for the consequences of that lost investment. As a practical 
reality that means that a person who gets bad advice that is a breach 
of the fiduciary duty of the advisor will never get his or her claim to 
a court of competent jurisdiction and will never be made whole again. 
Once the horse has left the barn, it cannot be returned because the 
remedies are not sufficient under this bill.
  Mr. Speaker, for these four reasons we think that this bill is 
flawed. That is why our position in opposing this is supported by the 
voice of working people in this country, the AFL-CIO and the American 
Association of Retired Persons.
  Finally, I would recognize that the gentleman from Ohio (Mr. Boehner) 
made reference to Ms. Shepard who is the human resources administrator 
at Mohawk Industries. I would like to read for the Record some remarks 
she made in the October 21, 2001 issue of the New York Times. At the 
appropriate time I will submit the entire article for inclusion in the 
Record.
  ``Betty Shepard, human resources administrator at Mohawk Industries, 
said it had not offered advice because rules and liability were 
unclear,'' for the employer. That is my insertion. `` `We want to give 
employees a way to get easy access to reliable investment advice within 
the confines of the law.' Ms. Shepard, who testified before Congress 
last summer in favor of the bill said she `would prefer hiring an 
impartial advisor to assist employees.' '' Well, so would we.
  We believe that the four reasons that I have outlined today that are 
weaknesses in this bill justify a vote against the bill.
  Mr. Speaker, I reserve the balance of my time.
  Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield myself such time as I 
may consume.
  Mr. Speaker, first of all, the process is entirely voluntary for the 
employees. The workers have full control over their investment 
decisions, not the investment advisor. H.R. 2269 does not require any 
employer to contract with an investment advisor, and no employee is 
under any obligation to accept or follow any of the advice.
  Furthermore, it requires financial service providers to fully 
disclose their fees and any potential conflict because investment 
advice may be offered only by fiduciary advisers, qualified entities 
that are already fully regulated under other Federal and State laws. 
The courts have consistently held that fiduciary duty is the highest 
form of financial responsibility to which an investment advisor can be 
held under the law.
  This bill authorizes, contrary to what the gentleman tried to imply, 
the individual participant and the Department of Labor can seek both 
criminal and civil penalties for infractions of such fiduciary duty. 
Comprehensive disclosure will inform participants of any financial 
interest advisors may have, the nature of the advisor's affiliation, if 
any, and any limits that may be placed on the advisor's ability.
  Mr. Speaker, it is a privilege to serve as the chairman of the 
Subcommittee on Employer-Employee Relations under the wing of the 
gentleman from Ohio (Mr. Boehner), and I am also the only Member of the 
House on both committees. I am pleased to report that both committees 
have passed this bill, and it was passed with bipartisan support. Now, 
more than ever, economic security goes hand in hand with retirement 
security. People are concerned when they watch their nest egg dwindle.
  Russell Morgan, a defined contribution consultant at Watson Wyatt 
Worldwide in Dallas, a management consulting firm, said ``Employees are 
having a tough time doing it on their own. For those who choose poorly, 
retirement may not be an option.'' That is just plain wrong.
  It is obvious that people need investment advice and they need it 
now. This bill does just that. This measure removes the obstacles for 
employers to provide millions of workers access to professional 
investment advice.
  The bill requires financial service providers to fully disclose their 
fees and any potential conflicts, as I said before. This bill protects 
people from fly-by-night groups or people trying to make a quick buck. 
There are a number of safeguards.
  One, under this bill, sound investment advice can only be offered by 
fiduciary advisors, qualified entities that are already fully regulated 
under other Federal and State laws. Courts have consistently held that 
fiduciary duty is the highest form of financial responsibility to which 
an investment advisor can be held under the law.
  Two, this bill authorizes the individual plan participant and the 
Department of Labor to seek both criminal and civil penalties for 
infractions of fiduciary duty.
  Three, comprehensive disclosure will inform participants of any 
financial interest, outside interest, that advisors may have. The 
nature of the advisor's affiliation, if any, with the available 
investment options, and any limits that may be placed on the advisor's 
ability to provide advice, these types of disclosure obligations, along 
with fiduciary duties, have worked well in regulating the conduct of 
advisors under Federal security laws for more than 60

[[Page 22606]]

years in protecting innocent people from scams and fraud.
  Both committees have worked hard to take a balanced approach to 
increasing access to advice while including safeguards to protect 
employers and employees.
  Without this bill, employees will continue to fend for themselves in 
today's roller-coaster market when it comes to planning their 
retirement. Help people who want to help themselves and vote for this 
bill. It is the right thing to do.
  Mr. Speaker, I reserve the balance of my time.
  Mr. McDERMOTT. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, H.R. 2269 is a bill that is sort of sitting out here, 
and there does not seem to be much interest. There are not many people 
over here, but this is a very important bill. American industry has 
moved away from fixed benefit pension systems and given people 401(k)s. 
People on this floor, we have 401(k)s, those of us who came after a 
certain date. We do not have a fixed benefit for all of our money. We 
have to put it in the stock market and see what happens.
  In 1974, we set up a restriction that the advice investors got had to 
come from somebody that was disinterested. In the last few years, the 
stock market has gone crazy and everybody has been watching their 
401(k) go up, up, up. Somebody must have gotten the idea that they were 
left out of the process, so they came with this piece of legislation.
  This legislation eliminates workers' protections. All of us want our 
workers to have people give them some advice, but we also know 
something about human nature. Human nature says if I am going to 
recommend something that is in my interest or something that is not in 
my interest, but might be good for workers, I have a tension. I have a 
conflict whether I recommend investors buy my product or whether 
investors buy the product over here that might be better for them.
  Members know everybody is not above slanting things. Everybody wants 
an advantage, as long it comes to them. What the present law does is 
prevent somebody who is offering a product from benefiting from it. 
What this piece of legislation does is say, we are going to let anybody 
give advice, no criteria whatsoever for what they know about, financial 
instruments or anything else. They can recommend, if they work in the 
trust department of a bank, they can make a recommendation; and the 
American workers are putting their pension, a substantial portion of 
what their future pension is, in the hands of people who have a vested 
interest in directing them in a particular direction.
  Mr. Speaker, that, in my view, is not responsible on the part of 
Congress. I do not think we should be doing this. We have an 
alternative which the gentleman from New York (Mr. Rangel) and the 
gentleman from New Jersey (Mr. Andrews) will put forward that corrects 
this.
  Members say included in this there is disclosure. I do not know how 
many Members in this Congress can honestly say that they have ever read 
any contract they have been involved in, such as a life insurance 
policy, automobile insurance policy, a policy related to homeowners 
insurance and whatever information that is given about investments.
  Do Members read all of the way down that Charlie Brown, who is making 
the investment offerings or giving advice, also makes 3 percent on 
everything that is bought from XYZ Company? How many Members see that? 
Would it be the requirement that the person making the advice say, I 
want to bring investor's attention to page 3, line 1, that says I am 
going to make money off this if I recommend XYZ Company. There is 
nothing like that in this bill.
  My belief is that this is a bad piece of legislation; if we do not 
adopt the Rangel-Andrews amendment or the alternative, we will be doing 
a disservice to the American people.
  I do not know how many Members have been getting advice on their 
401(k)s in this place, but I bet there are not very many Members who 
have made much money in the last little while. Probably they would have 
been smarter to get out of stocks and into government securities. Who 
was telling us that? Nobody.
  That is what we are saying to the workers out there. Workers are 
going to have somebody who is running a company who says buy the stock 
in our company, put that in your 401(k). Of course, if the company goes 
belly up or whatever, we do some financial shenanigans like Enron has 
done and the investor gets clobbered, too bad. The investor has Enron 
stock, right, while the guys at the top are doing all kinds of things 
that are getting them in trouble with the Securities and Exchange 
Commission.
  I think the advice should come from somebody who does not have a 
vested interest. I think we should all vote against this bill.
  Mr. Speaker, I reserve the balance of my time.
  Mr. BOEHNER. Mr. Speaker, I yield 1 minute to the gentleman from 
Texas (Mr. Culberson).
  Mr. CULBERSON. Mr. Speaker, the Members of this Congress have many 
reasons to support this legislation, and again I believe it illustrates 
a fundamental difference between the Republican and Democrat 
philosophy. We trust people to manage their own money and their lives 
with intelligence. Nearly 42 million Americans have saved about $1.7 
trillion in 401(k) plans, and under current law those people must 
either hire their own investment advisor, rely on an employer-sponsored 
advisor, or make investment decisions on their own; whereas this 
legislation, the Retirement Security Advice Act, will give workers 
access to professional investment advice from the administrators of 
their own plan for the first time, as long as those advisors make a 
full disclosure concerning any potential conflict.
  The bill also protects employees by holding the financial advisor, 
not the employer, personally liable and subject to other criminal 
penalties if they act on behalf of any interest other than that of the 
investment portfolio or those who contribute to it.

                              {time}  1130

  Finally, Mr. Speaker, the best part of this legislation is that it is 
completely voluntary. The bill strengthens retirement security and 
gives workers access to expert investment advice when they need it. I 
urge my colleagues to join me in supporting it.
  Mr. ANDREWS. Mr. Speaker, I yield myself 20 seconds. I would simply 
say that it is of very little comfort to a pensioner who has just lost 
everything in their 401(k) that the Department of Labor may someday 
institute some civil proceeding. People need to get their money back, 
and under this bill they do not.
  Mr. Speaker, I yield such time as he may consume to the gentleman 
from California (Mr. George Miller), the ranking member of our full 
committee.
  Mr. GEORGE MILLER of California. Mr. Speaker, I thank the gentleman 
from New Jersey for yielding time and I rise in opposition to this 
legislation.
  It has been said time and again, and we all agree, that pension plan 
participants need to get additional advice on the investment of their 
moneys. We have made the point that for the new generation of workers, 
these pension plans, the 401(k) plans, are going to become an ever more 
important part of their future retirement and that we must take care 
with the investment of those funds by these employees to make sure that 
in fact that will be there when they decide to retire.
  We also know that these funds, unlike their Social Security 
retirement, are subject to the ups and downs of the market. It will be 
important how they make these investment decisions because the timing 
of when they retire may not necessarily coincide with the good cycle in 
the market, as many people have found out over the last 2 years. We now 
hear more and more of our constituents telling us because of the loss 
of the markets, because of the placement of their investments, they are 
going to have to work a couple of more years, they are not going to be 
able to retire like they thought, or one of the wage earners in the 
family is

[[Page 22607]]

going to have to continue to work. So these funds are subject to the 
volatility of the market, but that is understood. And it is also 
understood that we believe that over the long run people will be better 
off with the investment of these funds in their 401(k)s.
  The question then comes, the question of the type of advice that they 
can be given by their employer. We know that there were many, many 
employers over the last many years that basically made a decision that 
the 401(k) funds if they were a publicly held corporation would be 
invested in the stock of that corporation. Obviously in many, many 
instances the workers in that corporation lost much of their 
investment, some of them did very well; but the concentration of the 
money in those funds, the failure to diversify that investment in many 
instances harmed the employees; and now we require that they be given 
other alternatives, that they be given other options so that they too 
can diversify their portfolio and they are not locked into a single 
stock.
  But the question now that arises in this legislation when we give 
them the option of that advice, do we give them the right to have an 
independent review of their account, an independent advisor who is in 
the business of advising, not necessarily in the business of advising 
and also managing stocks and portfolios for this client and for other 
clients?
  I think it is just basic and fundamental about treating workers with 
a set of rights about the dominion over their funds. The notion that 
somehow this changes the expense of it and is not worthwhile, this 
advice given to a group of participants is not that expensive but it 
may be terribly, terribly expensive to the employee if they do not get 
advice that is not conflicted.
  We have great brand names. We have Lehman Brothers, we have Merrill 
Lynch, we have Charles Schwab. We have houses that now are not just any 
longer investment banks, they are not just any longer stock brokerages. 
They run the gamut. They are wholly owned subsidiaries of Citicorp, or 
in fact they own other subsidiaries; and what we have are very 
complicated financial arrangements.
  In many instances, we have seen over the last couple of years, and 
especially in the downturn in the market, that a number of these 
companies hold on to advice long beyond the time when the prudent 
ordinary person would decide to sell that stock. It has become a 
standing joke now. I think they even have theme music on CNBC in the 
morning for those advisors who will not give up their recommendation to 
buy stocks even though the stock now has been down for 7 or 8 months in 
a row; it has lost 70 to 90 percent of its value, and they are still 
telling them to be in there. Lo and behold, when you start to look at 
some of this, as the stock exchanges have, you find out that they hold 
a position or they are managing the money for the executives of the 
company, not necessarily do they hold a position in that company, but 
they hold another position with the executives in managing their 
portfolios. They do not want to upset them, so they are telling the old 
American public, ``Buy this stock. We're on our way back.'' The fact of 
the matter is people have been torched. That is subject to disciplinary 
actions again.
  But in this legislation, that conflicted advice necessarily is not 
out of order here because they have a system of disclosure, and that 
disclosure is given once a year and then you are on your way. What you 
find out is the way the bill is written, under the law, that the 
fiduciary relationship that we keep talking about does not really exist 
because the law is set up that the person whose funds it is, the 
employee, has to make a decision, buy this stock, make this investment, 
put it in this fund. Once they do that act, they relieve the advisor 
under the law of all responsibility.
  Obviously, they should be making the decisions; but the way this 
legislation is written, once they do that, they have cleared the decks 
in terms of liability under any sense of fiduciary relationships under 
the law, because as we see under section 404 of the ERISA law: ``No 
person who is otherwise a fiduciary shall be liable under this part for 
any loss, or by reason of any breach, which results from such 
participant's, or beneficiary's exercise of control.'' Then you go to 
the law, and the law says the beneficiary must exercise control. At 
that point we are home free.
  I just think that we have to understand now that the change in the 
marketplace, the interlocking relationship between a whole range of 
financial services, a whole range of financial entities requires that 
in fact we have the means by which the employee can get independent 
advice to make their decision on. I do not believe that this 
legislation as it is currently configured does that. That is why I 
would hope that Members would support the Andrews-Rangel substitute, 
which I think is a very reasonable compromise. It provides for minimum 
advisor qualifications. Imagine that, having somebody who is in fact 
qualified to make this determination advising the individual.
  How about having meaningful disclosure? We just passed here 
legislation where we told the banks that they had to disclose what they 
are going to do with your financial data. What we found out is people 
got in the mail, sometimes they got two or three pages, sometimes they 
got one page, they got little tiny print; and the Congress is running 
around saying to the banks, Gee, that's not the disclosure we intended. 
It was the disclosure the banks intended. That is why they sent it out. 
Most people did not recognize it when they got it. But it satisfied 
disclosure. So we thought you ought to have meaningful disclosure in 
this case since you are playing with people's future retirements. We 
also think you ought to have meaningful recourse when you get bad 
advice, when you get the wrong advice. Of course, this legislation as 
it is currently written does not really provide for that.
  But most importantly, what we believe you ought to have is an 
employee who is trying to make these decisions, decisions that they 
must make today that can impact their livelihood 20 and 30, 40 years 
down the road, that they ought to have some access to independent 
advice through their employer so that they can in fact make that 
decision.
  So I would hope that we would support the substitute by the gentleman 
from New Jersey (Mr. Andrews) and the gentleman from New York (Mr. 
Rangel); and then I think we would have a workable piece of legislation 
that would do what we all recognize must be done in terms of giving 
employees greater options about the investment and more information 
about how to invest their money, but to make sure that that is offered 
in a fair and open manner to the employees.
  Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield 3 minutes to the 
gentleman from Florida (Mr. Foley), a distinguished member of the 
Committee on Ways and Means.
  Mr. FOLEY. Mr. Speaker, I thank the gentleman from Texas (Mr. Sam 
Johnson) and the gentleman from Ohio (Mr. Boehner) for their leadership 
on this issue.
  In this bill there are adequate disclosure requirements. This is a 
good bill. I have heard some interesting debate today about whether the 
person should have an investment in the firm or not; should they be 
strictly giving advice. There are two schools of thought to that. I 
particularly like somebody whose money is riding along with mine 
investing in the market. If they are willing to put in their equity, I 
am a little comforted by the fact that maybe they are interested in the 
risk/reward.
  I remember in Palm Beach County, we had a bank that sold a preferred 
note and on the front of the note, it was an 11 percent coupon. But 
huge disclosure: ``This is a risky investment. This is not FDIC 
insured.''
  What happened was the consumer, the constituent, decided because of 
greed that they were willing to gamble on that. Of course when the bank 
went bankrupt and they lost their money, they started blaming the 
advisor, the person who sold them the bill. But on every document it 
was very emphatic, that this was risk based, highly speculative, no 
guarantees; and everybody

[[Page 22608]]

then looks to the little print and says, Oh, boy, I didn't really read 
that. Well, you could not miss it.
  This legislation updates important remedies for those who invest. I 
have a 401(k) here in Congress and they send me advice and they tell me 
that over the last several years government funds have done such, 
401(k) or equities has done such. It is my decision to make whether I 
invest in equity bonds or other fixed incomes. I can choose the more 
speculative route of equities. They make it clear that that is risk 
based. That advice is mine for the taking. If I do not want to use it 
and want to test the fates and roll it all in my equity portfolio, I 
have the right to do that. In this bill, every American has that right.
  This bill, or the base text prior to this bill, has not been updated 
since 1974. That is like asking people in this Chamber to drive a 1974 
automobile. This provides a great balance between the ability of those 
savers, those consumers, to increase their retirement funds through 
prudent investment. It is specific. The solutions, the benefits and the 
problems listed in the Retirement Security Advice Act should allay any 
fears.
  Let me underscore. Today, 42 million workers invest more than $2 
trillion of assets in a 401(k). This legislation would update these 
rules to reflect this new pension environment. In addition, the bill 
would encourage employers to offer investment advisory services by 
clarifying liability rules that currently discourage employees from 
hiring employee investment advisors.
  It is a balanced, fair, fundamentally sound way for consumers to 
ready their portfolios for retirement. I encourage the House adoption 
of this important measure and thank the respective chairmen for their 
leadership on the issue.
  Mr. McDERMOTT. Mr. Speaker, I yield 4 minutes to the gentleman from 
North Dakota (Mr. Pomeroy).
  Mr. POMEROY. I thank the gentleman for yielding time.
  Mr. Speaker, I think the biggest problem today for plan participants 
of 401(k)s is that they have been given responsibility for the 
investment of their retirement funds without being given access to 
information to help them make informed decisions as they deal with 
something as important as trying to find optimal earnings on their 
retirement savings.
  I think many of us in puzzling with our Thrift Savings Plan options 
think, This is hard, this is confusing, I don't quite know if I am 
doing this in the right way. I will tell my colleagues, looking at my 
returns from the last little while, I am quite sure I am not doing it 
the right way. I could use more advice. An awful lot of people in the 
workforce today are thinking exactly the same thing. And so we need a 
strategy to get them more advice. I think the chairman's strategy 
represents a very excellent and constructive way of approaching it. The 
chairman and I are in strong agreement that as we try and get more 
advice to plan participants, we do not want to put people at risk of 
heavy sales practices that might be against their interest and have 
them investing in funds that are inappropriate for their situations.
  Therefore, if we have the following standards in a new investment 
advice regimen advanced by this legislation, I think you can actually 
get more advice and still protect the employee's interest. You need to 
have the fiduciary standard apply so that the advisor must be providing 
advice solely for the interest of the plan participant or the employee. 
You have got to have some type of administrative recourse so that if 
the individual violates that advice, you can withdraw that individual's 
license. You can take away their employment. You can put them out of 
business.
  I used to be an insurance regulator. There is not a better policing 
mechanism than being able to put the guy out of business to make 
certain that they are providing advice that is appropriate and comports 
with the legal requirements.
  Thirdly, you need to have fee disclosure. These things have cost 
loads. Increasingly, employers have shifted all of the expense to the 
employees on the loads of 401(k)s. Employees need to know what it is 
going to cost them as they look at these different options. Having a 
disclosure plan and in fact having a uniform disclosure format of fees 
is going to help the individual make sure they know what they are 
getting into as they make various investment options. And so with this 
legislation, subject to some further amendment, we are able actually to 
achieve the goal of getting more investment advice out there and 
helping people with their choices.
  I do not think that the opponents of this legislation have reflected 
enough upon the disservice we do to those in the workforce by giving 
them the responsibility of investing their own money but depriving them 
of the information to do it. Defined contribution plans presently 
represent 90 percent of all retirement savings plans in the workforce. 
There are $1.5 trillion worth of investment in 401(k) plans. But still 
we have less than a quarter of employer-sponsored defined contribution 
plans provide for advice to the workers in terms of how to invest 
within those plans.
  I have held a number of round tables across North Dakota visiting 
with employees, visiting with employers, about how we can do a better 
job with facilitating retirement savings in this country. Information 
in terms of how to best handle their retirement money is a constant 
theme raised not by the big bad industry that some on this side of the 
aisle would talk about, but by employees themselves or by employers 
reflecting what employees are asking for. We can do a better job, and 
this legislation will do it.
  Mr. BOEHNER. Mr. Speaker, I yield myself such time as I may consume, 
and I yield to the gentleman from North Dakota (Mr. Pomeroy).
  Mr. POMEROY. I thank the gentleman for yielding.
  Mr. Speaker, defined contribution plans which place the burden of 
investment decisions on workers will be the primary source of 
retirement income for an increasing number of workers. Unfortunately, 
these workers have little access to professional investment advice 
which could help them grow their retirement savings in a prudent 
manner. Current law restricts many sources of advice to workers. We 
must get additional advice to participants. I salute the gentleman from 
Ohio for his earnest efforts in trying to achieve this goal.
  This bill goes a long way in giving workers access to professional 
investment advice. In addition, it provides two important features that 
will help insulate workers from advisors who may otherwise pose a 
conflict of interest, a fiduciary duty owed to the worker and a 
disclosure of all fees and conflicts. We agree that the fiduciary duty 
of an advisor is a high standard not to be taken lightly and that any 
advisor breaching this duty should not be able to continue to give 
advice. We also agree that the bill's disclosure requirements will give 
workers a clear picture of what fees would impact their accounts and 
what conflicts the advisor has with any offered recommendation. 
However, this bill, with a few modifications, can provide further 
protections to workers without burdening financial institutions. I am 
glad that we have been able to reach an agreement in regard to these 
modifications.
  Unfortunately, we are considering this bill under a modified closed 
rule and cannot make these modifications on the floor today. These 
modifications would require the disclosure of the availability of 
independent advice providers and require the Secretary to draft model 
disclosure forms for fees. The disclosure would remind participants 
that independent advice can be sought outside of the plan context and 
the model disclosure forms will assist service providers in complying 
with the disclosure requirements. Furthermore, these models will ensure 
uniformity among the disclosures to the reasonable understanding of the 
average plan participant.
  Lastly, we have agreed to provide further clarity in this bill with 
regard to banks by restricting the provision of investment advice to 
their trust departments. It is my belief that every

[[Page 22609]]

advisor giving advice under this bill should be individually licensed 
by a Federal or State regulatory agency so that when an advisor 
breaches his fiduciary duty to a participant, the regulator will have 
the authority to put the bad actor out of business.
  However, I understand that banks operate under a special regulatory 
scheme in which some investment advisors are not individually licensed 
but work within their bank's trust department. I am satisfied that 
these investment advisors working within trust departments under an 
umbrella trust license can be subject to the same administrative 
sanctions as registered investment advisors, insurance agents and 
broker dealers under this bill.
  Therefore, with these three modifications, we can provide further 
protections to workers without burdening financial institutions. As 
this bill moves through the legislative process, I ask for the 
chairman's support to make these modifications.
  Mr. BOEHNER. Mr. Speaker, in reclaiming my time, I want to thank the 
gentleman from New Jersey (Mr. Andrews), who has worked on this bill 
with me over the last several years. Although we may be in some slight 
disagreement today over how much protection is available in this bill, 
he has been a faithful partner as we have tried to reach some accord. 
The gentleman from North Dakota and I have also been working together 
to try to bring the protections in this bill into a proper balance. I 
want to thank him for bringing these pertinent modifications to my 
attention.
  I support the changes that the gentleman has described which will 
further protect workers' retirement income security. I support the 
creation of a model disclosure form as well as a requirement for 
advisors to disclose to plan participants that independent advice is 
available. In addition, I support the gentleman's proposed changes to 
the qualification section which would ensure that only licensed 
individuals provide this advice; or in the case of banks, such advice 
be provided by trust or custody department employees who are 
individually accountable to State or Federal regulators.
  During conference negotiations with the Senate, I will work with my 
colleague from North Dakota and others to make these modifications for 
the further protection of workers managing their retirement income 
assets.
  Mr. POMEROY. I thank the gentleman.
  Mr. ANDREWS. Mr. Speaker, I am pleased to yield 3 minutes to the 
gentlewoman from California (Ms. Sanchez).
  Ms. SANCHEZ. Mr. Speaker, many Americans have little knowledge about 
investing their own money. Mutual funds, stocks and bonds are very 
complicated instruments to which people pay little attention, 
especially when they have got other things to do all day long.

                              {time}  1145

  I know firsthand how complex these instruments can be because of my 
professional experience as an investment advisor.
  In concept, the Retirement Security Advice Act is a great idea. We 
must find ways to ensure that all Americans participating in retirement 
savings plans are making decisions that will help them in the long run. 
All Americans should have access to licensed investment professionals 
who can advise them on what they should be investing in, how risky 
their portfolio should be and when to change plans.
  There is a major weakness in the current version of the bill, 
however. The bill allows registered, licensed banks or similar 
financial institutions to provide financial investment advice. The 
problem is that the language is not strong enough. It allows bank 
tellers or any unrelated subsidiary of these financial institutions to 
provide this advice.
  Would you want investment advice from a bank teller? How about from a 
member of the cleanup crew at an investment banking firm? These 
examples may be extreme, but they are possible under the current 
language in this bill.
  I want to make sure that all Americans are provided with the best 
opportunity to invest their retirement savings. Think of the time 
period we just went through right now. I have a father-in-law who is a 
banker, and he has plenty of people who would call him and say, ``I 
just went to a cocktail party, and why am I not getting 38 percent 
return this year?'' And no matter how much he tried to talk them 
through about their plan and their situation, they would basically say, 
``I am taking my funds to somebody else who will put me in these types 
of investments.''
  Now, my father-in-law has licenses. He has been in the investment 
banking world a long time. He has character, he has integrity. He also 
makes his living with that license. He protects it. And he would say, 
``Well, if that is what you have to do, that is what you are going to 
do, but I will not put you in those types of investments.''
  Imagine if you have someone who has no license and the pressure comes 
on. What do you do then? Well, you end up being in things you really 
should not be in.
  Sometimes we forget about the people that we are really working to 
assist here. This bill is targeted at those who could not otherwise 
afford investment advice. They are working-class Americans who teach 
our children, build our infrastructure and make this country strong.
  You probably would not take gourmet cooking advice from the fry cook 
at McDonald's, so why should people take investment advice from those 
who may not be qualified to give it?
  Let us do the right thing for all Americans. Let us make sure that 
this advice is given by licensed individuals. There are plenty of 
different types of licenses. We do not have to start a new regulatory 
situation here.
  Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield such time as he may 
consume to the gentleman from Ohio (Mr. Portman), who is a member of 
the Committee on Ways and Means and who has a long history of working 
on retirement issues.
  Mr. PORTMAN. Mr. Speaker, I thank the chairman very much for yielding 
me time, and I congratulate him as a Member of the Committee on Ways 
and Means, but also as the chairman of the Subcommittee on Social 
Security that got this legislation to the floor today. He wears two 
hats, and he has done a great job in moving what is a needed piece of 
legislation to the floor.
  Also, of course, I want to commend my colleague, the gentleman from 
Ohio (Mr. Boehner), who has spent years on this issue, understanding 
that there is a need to change the ERISA laws, which are way out of 
date.
  As more and more people have moved into the defined contribution 
plans, the 401(k)s, the 403(b)s and the 457s, 90 percent of folks now 
are in these defined contribution plans. The law has not changed to 
allow them to get the type of advice they need. Only 16 percent of 
workers out there in these plans are getting any advice, only 16 
percent, yet 75 percent of them say in surveys, they are desperate to 
get that kind of advice.
  So this is a very important change in the law that has to be made in 
order to allow people, those school teachers, those folks who are in 
retirement plans all over this country who need this kind of advice, to 
be able to make better decisions.
  Recently this Congress took the lead on retirement security by 
passing legislation that dramatically expands the availability of 
defined contribution and defined benefit options. We allowed everybody 
to put more money away in their 401(k), for instance. We simplified all 
the rules and regulations for all of the pension plans, to help small 
businesses to get into this area.
  We also allowed portability, to be able to move your plan from job to 
job and to be able to integrate those plans in a seamless way into one 
account. This is extremely important, and we think it will allow for 
millions, millions more Americans, to have the kind of retirement 
security they need and to have the kind of peace of mind in retirement 
that all of us deserve.
  That was passed overwhelmingly by this House, and it is great 
legislation.

[[Page 22610]]

The gentleman from Maryland (Mr. Cardin) and I worked on that for years 
together.
  But now we need to take the next big step, which is education. It is 
providing people with the means to understand the importance of 
retirement savings, first, on a broad sense, but also to understand 
what their options are in terms of what they can invest in if they are 
indeed going to be among those who benefit from this expansion that 
this Congress has pushed forward to get people into 401(k)s, 403(b)s, 
defined benefit plans and so on.
  So this is the next logical step, and I commend the chairman and the 
gentleman from Ohio (Mr. Boehner) for moving this forward, and the 
gentleman from California (Chairman Thomas) for getting it to the floor 
today.
  Now, we have heard some discussion here about what some people see as 
some of the deficiencies in this legislation. I would just remind 
people, read the legislation. If you are going to offer this advice, 
you have to be licensed or have to be a bank trust officer. That is in 
the legislation.
  The gentleman from North Dakota (Mr. Pomeroy), who is going to 
support the bill on the floor today, who worked very hard on this 
legislation over the years and also helped us with all the portability 
provisions in the Portman-Cardin bill, has just indicated he is going 
to support it because the chairman has agreed to even some other slight 
modifications to ensure that you do not have the conflicts of interest 
that would otherwise occur if you did not have that fiduciary duty, to 
be sure that people who do offer this advice are qualified, and, 
finally, to be sure you have the kind of disclosure that is necessary.
  This legislation increases that disclosure. As it has gone through 
the process in the Committee on Ways and Means, we were sure that there 
would be yearly disclosure, disclosure upon request, and disclosure if 
there is a material change.
  Again, this legislation is sorely needed. We wanted to encourage 
people to save more for retirement. One of the impediments now is the 
lack of good advice and the lack of good education.
  So I commend those on both sides of the aisle who have brought this 
legislation to the floor. Let us pass it today in a bipartisan way and 
send a strong message to the Senate that it is about time to help 
people out there be able to make the kind of wise decisions they should 
be making for their own retirement.

                              {time}  1200

  Mr. ANDREWS. Mr. Speaker, may I inquire of the Chair how much time 
the Committee on Education and the Workforce minority has remaining.
  The SPEAKER pro tempore (Mr. LaHood). The gentleman from Ohio (Mr. 
Boehner) has 19 minutes remaining; the gentleman from New Jersey (Mr. 
Andrews) has 11\1/2\ minutes remaining; the gentleman from Texas (Mr. 
Sam Johnson) has 9 minutes remaining; and the gentleman from Washington 
(Mr. McDermott) has 10\1/2\ minutes remaining.
  Mr. ANDREWS. Mr. Speaker, I yield myself 20 seconds.
  Mr. Speaker, the gentleman from Ohio (Mr. Portman), my friend, just 
spoke about his representation that one needs to be a trust officer of 
a bank. I would respectfully disagree. Page 10 of the bill, line 12, 
indicates an employee, agent, or registered representative of a person 
describing an institution who satisfies the requirements is qualified. 
So if there are no local applicable banking or securities laws; a mere 
employee of a bank or an insurance company is qualified to give the 
advice.
  So the gentlewoman from California (Ms. Sanchez) was correct in our 
description.
  Mr. Speaker, I yield 4 minutes to the gentleman from Massachusetts 
(Mr. Tierney), a committee member.
  Mr. TIERNEY. Mr. Speaker, I thank the gentleman from New Jersey for 
yielding me this time.
  Like many Members, I represent people who have worked hard and whose 
entire hope for a secure retirement may well rest on the success of 
their 401(k): leather workers, jet engine assemblers, teachers, nurses, 
and other hard-working, intelligent folks who are bright and able, but 
many of whom have little experience in understanding investment 
fundamentals. They may lack the time or even the knowledge to work 
through a mountain of financial information. They need advice that is 
given by a provider that meets at least minimum standards, one who is 
qualified and one who is subject to the laws of ERISA's fiduciary 
standards, standards of trust, and one who is free from financial 
conflict, free from divided loyalties; and they need an advisor who 
will put the worker's or investor's interests first, above profit.
  Consider this following example: two mutual funds, each posting 
annual gains of 12 percent consistently for 30 years. One fund has an 
expense fee of 1 percent, the other an expense fee of 2 percent. If you 
invested $10,000 in each fund, the fund with the lower expense fee at 
the end of 30 years would earn $229,000, but the one with the higher 
expense fee of 2 percent would have only $174,000. The mutual fund 
would pocket the difference of $55,000.
  Obviously, there may be little incentive for the advisor connected to 
the mutual fund to highlight the significance of this conflict, of his 
or her potential gain in steering someone to the higher fee investment. 
Why should we allow such a conflict of interest to exist when it is not 
necessary?
  Perhaps that is why the fund industry is lobbying so hard for this 
bill, but workers and retirees are not asking for its passage. These 
hard-working people, like other investors, need and want good, sound 
advice; but allowing money managers to make recommendations that will 
generate more income for themselves hardly falls into the realm of 
independent advice.
  In 1974, Congress chose to ban transactions between pension plans and 
parties with a conflict of interest, except under very narrow 
circumstances; and they did that for a simple reason. There is too 
great a danger that a party with a conflict of interest will act in its 
own best interests rather than exclusively for the benefit of the 
workers. That concern is no less valid today.
  Studies by the financial industry itself have found broker conflicts 
have harmed advice received by individuals, audit conflicts have 
undercut the value of audits on financial firms, analyst reports have 
shown significant evidence of bias in comparing ratings. The law, 
ERISA, was designed to protect against just these types of issues.
  Our shared goal should be to increase access to investment advice for 
individual account plan participants. We need not obliterate long-
standing protections for plan participants in order to do that. Surveys 
show that the most important reason advice may not now be offered is 
that employers have fears that they may be held liable for advice gone 
bad. The remedy for that, and it is in the bill, is that Congress 
should encourage more employers to provide independent advice by 
addressing employer liability. It should clarify that an employer would 
not be liable for specific advice if it undertook due diligence 
selecting and monitoring the advice provided. It is as simple as that. 
There is no need for conflicted advice.
  Many plans already provide for investment education. Many plans now 
provide independent investment advice through financial institutions 
and other firms without conflict. Clarifying that employers would not 
be liable if they undertake due diligence with respect to advice 
providers would further increase advice as necessary.
  Disclosure alone will not mitigate potential problems. The 
alternative bill in adding some protections and mandating a choice of 
alternative advice that is not conflicted is a better idea, but the 
best idea remains a prohibition against conflicted advice. Congress, by 
clearing up the liability issue, can encourage independent, unbiased 
investment advice that will better enable employers to improve their 
long-term retirement security, while minimizing the potential for 
employee dissatisfaction and possible litigation. This is what is in 
the best interests of the plan participants and, in fact, the best 
interests of the plan; and it certainly is in the best interests of the

[[Page 22611]]

hard-working people in my district who need to know that their 
retirement is secure.
  Mr. BOEHNER. Mr. Speaker, I am pleased to yield 2 minutes to the 
gentleman from California (Mr. Dooley).
  Mr. DOOLEY of California. Mr. Speaker, I rise in support of H.R. 
2269, and I appreciate all of the work that has gone in to crafting 
this piece of legislation.
  In my estimation, this legislation is long overdue. What we are 
seeing is an increasing number of working people that are participating 
in plans that require a defined contribution. They need to have access 
to the information that allows them to make the decisions that are 
going to maximize the returns on their investments and their retirement 
accounts.
  This is inevitable, as we are seeing more and more people that are 
coming to expect that they will have more choices, more choices in the 
consumer products that they are accessing, as well as more choices in 
the financial alternatives they have to meet their retirement needs.
  I think this legislation takes a very balanced approach, and 
especially with some of the modifications that were agreed to by the 
gentleman from Ohio (Mr. Boehner) that were offered by the gentleman 
from North Dakota (Mr. Pomeroy), and I think it also addresses some of 
the remaining concerns. It does provide for adequate disclosure. It 
does provide for fiduciary responsibility. Sometimes I think we are 
being a little bit condescending to a lot of the people who are 
participating in these plans when we are not giving them the credit for 
engaging in their own due diligence by trying to determine what the 
costs will be and what the values are of the various instruments of 
investment that they are going to be considering.
  Mr. Speaker, most people today are becoming increasingly aware that 
you have to consider the cost of a particular plan. Most people are 
becoming aware that there is increasing risk and volatility with 
different mechanisms that you could invest in.
  I remember when Mr. Lieberman was engaged in his last campaign and he 
said, it is interesting, when I would be making some visits to labor 
groups and, in particular, I went into a firehouse and met with some 
firemen there, and he said, their questions to me were not about some 
of the challenges they face in their jobs, he says, their questions 
were all about their 401(k) plans and the investments that they were 
making. He said they had more information than most people that he had 
come into contact with often on Wall Street.
  Mr. Speaker, this bill takes a balanced approach. I urge its passage. 
I thank all of the people involved in this.
  Mr. BOEHNER. Mr. Speaker, I yield 2 minutes to the gentleman from 
Ohio (Mr. Oxley), the chairman of the Committee on Financial Services.
  Mr. OXLEY. Mr. Speaker, I want to thank the gentleman from Ohio, my 
good friend, for his leadership on this issue, and the gentleman from 
Texas.
  This is an important piece of legislation that really represents 
bringing ERISA into the 21st century. Let us face it, ERISA was passed 
almost a quarter of a century ago; and times have changed. I am 
convinced, after looking at this piece of legislation, that the 
responsibilities of the investment advisors are fully covered and 
regulated by the Securities and Exchange Commission, and by various 
State regulations. I think nobody needs to fear that these folks will 
not be regulated. They have been regulated over the years and will 
continue to be so to make sure that the investors are protected.
  I was reminded of a story the gentleman from California raised about 
the visit to the firehouse by Senator Lieberman. I had a similar 
situation in my office just last year where I had a young worker from 
my congressional district who had come in to talk to me. He was a 
member of the machinist union. He did not want to talk about those 
kinds of issues that he had just heard over at the machinist union. He 
wanted to talk about investments; he wanted to talk about his future, 
his financial future. He told me he was 30 years old, he had a couple 
of kids, he had an IRA, he had a 401(k) plan, and he was interested in 
the future of Social Security, and he was also interested in his 
ability to make sound decisions of his investments and his future.
  That really is a striking example, I think, that we are seeing all 
over the country. We have over half of the households today who are 
invested in equities, over half of the households. That is a sea change 
in the way America looks at its investment opportunities. That is a 
huge change. Just 20, 25 years ago, two-thirds of people's savings were 
in bank deposits. Today, two-thirds of their savings are in equities. 
That is a huge change that we have seen in this country. Let us treat 
these workers, these folks like adults. Let us not say to them they 
need to make decisions on their own. They need the kind of advice that 
this bill provides them. I urge strong support for this legislation.
  Mr. McDERMOTT. Mr. Speaker, I yield 4 minutes to the gentleman from 
New York (Mr. LaFalce).
  Mr. LaFALCE. Mr. Speaker, I rise in opposition to H.R. 2269. I was 
listening to the distinguished chairman of the House Committee on 
Financial Services just now, and I have the honor of serving as the 
ranking member. I guess we have heard different things at the committee 
hearings and drawn different conclusions.
  I heard about the tremendous conflicts of interest that existed 
within securities firms. Absolutely outrageous, individuals getting 
participations within IPOs and then giving analyst advice concerning 
those IPOs. That is just one small example.
  I heard testimony that in the year 2000, of all of the 
recommendations that were given regarding stocks, 1 percent were sell 
recommendations, 1 percent in the year 2000.
  I heard testimony that talked about earnings management or earnings 
manipulation, earnings manipulation on the part of the chief financial 
officers and the chief executive officers of major corporations, 
Fortune 500 companies; earnings management, earnings manipulation by 
the audit committees of the board of directors, all, of course, with 
stock options and a vested interest in what those earnings were. And 
earnings management and earnings manipulation on the part of the 
accounting firms who often had a conflict of interest also.
  Mr. Speaker, disclosure does not do the trick. Disclosure does not 
protect the investor. In a day when we have converted from primarily 
defined benefit plans to overwhelmingly defined contribution plans, the 
need for a strong prophylactic ERISA is greater than ever. We 
eviscerate those protections within ERISA and we say, well, let us 
disclose the conflicts. That is grossly inadequate.
  Surely we need to come up with better investment advice for the 
participants within pension plans, but we also need to protect against 
conflicts. The bill does not do that. The alternative does. Maybe that 
is why the representatives of the employees in the 401(k) plans, the 
AFL-CIO and so many others, the Consumer Federation of America, et 
cetera, say support the substitute, but reject the bill that has been 
reported out of committee.
  Mr. BOEHNER. Mr. Speaker, I am pleased to yield such time as he may 
consume to the gentleman from California (Mr. McKeon), a subcommittee 
chairman over in our committee.
  Mr. McKEON. Mr. Speaker, I thank the gentleman for yielding.
  I rise today in strong support of H.R. 2269, the Retirement Security 
Service Act. I want to thank the gentleman from Ohio (Mr. Boehner) and 
the gentleman from Texas (Mr. Sam Johnson), the subcommittee chairman, 
for bringing this important legislation to the floor for our 
consideration.
  Many workers might not know it, but there is an outdated provision 
within a 27-year-old Federal law that unintentionally prohibits their 
employers from providing access to high-quality investment advice. The 
Employee Retirement Income Security Act, also known as ERISA, was 
written in 1974 at a time when no one had heard of 401(k) plans and no 
one ever imagined that so many people would participate in the stock 
market like they do today.

[[Page 22612]]



                              {time}  1215

  Under ERISA, the mutual funds, banks, and insurance companies that 
administer 401(k)s can only provide general investment education 
directly to participants in those plans. They are prohibited from 
providing advice about a person's specific investments.
  Since last year when the market began to slide and the economy began 
showing signs of weakness, many workers have watched their retirement 
savings dwindle. People need sound advice, especially during these 
times, to maximize their investment opportunities by making it possible 
for workers to be able to get the same kind of advice that wealthy 
individuals are able to pay for out of pocket.
  H.R. 2269 would do just that. This legislation modernizes ERISA to 
let employers give their employees access to high-quality, tailored 
investment advice, as long as financial advisors fully disclose their 
fees and any potential conflicts.
  I have heard some scare talk here about, we need to protect people 
from charlatans or from people who would take advantage of them. But I 
think that we need to give the people credit for understanding and 
being able to separate advice. The important thing is that they should 
be able to get it.
  This bill retains important safeguards and includes new protections 
to ensure that participants receive advice that is solely in their best 
interests. The measure requires that advice be given only by fiduciary 
advisors which are qualified, fully regulated entities, like insurance 
companies and banks, that would be held liable for any failure to act 
solely in the interests of the worker.
  Moreover, the whole process is completely voluntary, because the bill 
does not require any employer to contract with investment advisers, and 
no employee will be obligated to accept any advice.
  As Members can see, Mr. Speaker, H.R. 2269 provides assistance for 
hard-working Americans so that they can wisely plan their retirement 
years. Therefore, I strongly urge all my colleagues to support this 
much-needed legislation.
  Mr. ANDREWS. Mr. Speaker, I am pleased to yield 3 minutes to the 
distinguished gentlewoman from Hawaii (Mrs. Mink), a member of our 
committee.
  Mrs. MINK of Hawaii. Mr. Speaker, I thank the gentleman for yielding 
time to me.
  I rise today, Mr. Speaker, to urge a no vote on H.R. 2269, the 
Retirement Security Advice Act of 2001.
  When Congress enacted the Employee Retirement Income Security Act, 
known as ERISA, in 1964, the goal was to protect employee pension 
benefits, which it has done tenaciously since enactment.
  In the ensuing 27 years, employees have seen significant changes to 
their pension plans. Many companies no longer offer predefined benefit 
plans, and many workers place their retirement funds in stock markets 
using 401(k) and other similar investment plans.
  According to the Investment Company Institute, over 42 million people 
use 401(k)s and other similar plans. Last year, the total value of 
these plans reached $2.6 trillion. These plans offer higher returns 
and, of course, higher risks.
  In today's market, the value of one's investments could change 
drastically in the course of a year or even 1 day. With the highly 
volatile stock market, no one questions the need for providing good, 
sound, reliable advice to invest one's retirement funds. We must 
therefore ensure that the underlying principles behind ERISA remain 
intact. We must protect the interests of workers and their 
beneficiaries.
  H.R. 2269 fails to provide the basic protections that all workers 
deserve. The bill allows unqualified individuals to provide investment 
advice. We should make advisers obtain Federal and State licenses or 
other qualified certifications. They should not be connected in any way 
to the investment industry or investment companies who could benefit 
from the advice given.
  Advisors often receive financial rewards for recommending certain 
investments over others, but H.R. 2269 does not require advisors to 
clearly disclose their incentives for making a particular 
recommendation. Advisors can bury disclosures in a mound of paperwork 
that the average investor will not read or understand. Advisors who 
will make money on giving advice should clearly and continually warn 
workers of any conflicts of interest.
  Proponents of the bill say, well, the advice is free. This is not 
true. Each investment that the worker makes will pay from 1 to 1.5 
percent of the money invested to the broker. There is big money at 
stake involved in the advice given and the advice taken. The bill 
allows investment companies to make billions of dollars every year.
  Advisors entangled with payoffs, depending upon the advice given to 
the worker, should be absolutely forbidden in this access provision.
  The bill does not provide any remedy or penalties for tainted advice. 
I urge this House to reject this legislation.
  Mr. BOEHNER. Mr. Speaker, I am pleased to yield 2 minutes to the 
gentlewoman from Illinois (Mrs. Biggert), a member of our committee.
  Mrs. BIGGERT. Mr. Speaker, I thank the gentleman for yielding time to 
me.
  Mr. Speaker, when a person has a cold, he can go to his local 
drugstore and choose among dozens of different cold remedies. When he 
is not sure which medicine is appropriate, there is a pharmacist 
available who can provide expert advice and help him to make the best 
selection.
  Yet, when it comes to 401(k) plans in the workplace, Congress, in 
effect, has gagged the pharmacist. Employers pay good money to provide 
an excellent benefit to their employees, 401(k) plans run by 
professionals, yet our 27-year-old law, ERISA, effectively silences 
those investment professionals, denying employees a major part of the 
benefit their employer has intended for them.
  Now, more than ever, Americans investing their retirement income in 
401(k) plans need access to critical investment advice that will help 
them achieve their financial goals. The Retirement Security Advice Act 
of 2001 updates our laws so workers can have access to high-quality 
professional investment advice. These advisors will be required to 
fully disclose their fees and any potential conflicts. This legislation 
also establishes important safeguards to ensure that investors' goals 
are met.
  Mr. Speaker, let us stop gagging the pharmacist or silencing the 
investment advisor. Let us make it easier for the 42 million Americans 
who participate in 401(k) plans to choose among investments. Let us 
pass H.R. 2269, which will increase employee participation and enable 
more workers to live out their American dreams.
  I urge my colleagues to support the Retirement Security Advice Act of 
2001.
  Mr. BOEHNER. Mr. Speaker, I yield 2 minutes to the gentleman from New 
Jersey (Mr. Holt), a member of our committee.
  Mr. HOLT. Mr. Speaker, I thank the gentleman for yielding time to me.
  Mr. Speaker, I rise in support of the Retirement Security Advice Act 
of 2001. We need to be sure that the law allows families to have a wide 
range of investment advice as they plan for their retirement. As we do 
so, we need to ensure that there are adequate protections for these 
workers.
  Under the bill, there are protections. The advisors are subject to a 
fiduciary duty and will be personally liable for failure to act solely 
in the interest of the worker. Under the bill, the Labor Department is 
authorized to seek both criminal and civil penalties if an advisor 
breaches that responsibility.
  The language also contains provisions to ensure that there is full 
disclosure in plain language to the workers of fees and conflicts of 
interest. These disclosures and fiduciary protections are significantly 
stronger than the average investor has today.
  Now, the bill is not perfect. I believe that we may strengthen the 
bill by adding provisions to make sure that workers know where they can 
get a financial second opinion. I want to express my appreciation to 
the gentleman from Ohio (Chairman Boehner)

[[Page 22613]]

for representing my views and agreeing to take these into consideration 
in conference. I want to continue to work with him and the gentleman 
from California (Chairman Thomas) on this subject as the bill moves 
through the legislative process.
  This bill gives workers important new options they do not now have. 
That is why we want to do it. It modernizes the law to reflect the 
realities of the real world, the way people actually invest and plan 
their retirements today. This is a step forward and worthy of support.
  Mr. ANDREWS. Mr. Speaker, I am happy to yield 3 minutes to the 
gentlewoman from California (Ms. Woolsey), a real authority on human 
resources and employee relations.
  Ms. WOOLSEY. Mr. Speaker, I thank the gentleman for yielding time to 
me.
  Mr. Speaker, H.R. 2269 is a prime example of how a good idea can be 
turned into a bad bill. It is a good idea to make investment advice 
available to employees at their workplace. Of course it is a good idea. 
But allowing self-interested advisors, those who could benefit from the 
advice they give, in the workplace is not a good idea; it is an 
extremely bad idea. But that is exactly what H.R. 2269 does.
  Please remember why ERISA was enacted in the first place. It was 
enacted to protect workers from abuses related to their benefits. So 
ERISA now prohibits investment advisors from coming to a workplace and 
providing employees with investment advice if there is any reason to 
think that the advisor might benefit from recommending one investment 
or another.
  ERISA was enacted to protect workers from abuses related to their 
benefits, and this protection has worked for over 25 years. But with 
H.R. 2269, we are saying that it is okay to have investment sales folks 
at the workplace under the guise of the employer's endorsement 
providing investment advice to their employees.
  Think about this: We have employees with 401(k) plans, many of whom 
have little or no knowledge of high finance. The employer brings an 
investment advisor to the workplace. That has to appear as if the 
employer endorses whatever this advisor is selling. Members cannot tell 
me that most employees will not be strongly inclined to accept the 
investment advice given them under those circumstances.
  If the advice is poor or, heaven forbid, the advice is downright 
wrong, or if it is some kind of scam in the short run, there is no 
protection for that employee.
  There is hope, however. Fortunately, we have a substitute to H.R. 
2269. That is the Andrews substitute. The Andrews substitute keeps the 
good idea of making investment advice available to employees in the 
workplace, but it builds on the protections in current law that 
employees need and must have and must be able to depend on.
  The Andrews substitute is a win-win for employees, and I urge my 
colleagues to vote against H.R. 2269 unless the substitute is included.


                         PARLIAMENTARY INQUIRY

  Mr. BOEHNER. Parliamentary inquiry, Mr. Speaker.
  The SPEAKER pro tempore (Mr. LaHood). The gentleman will state it.
  Mr. BOEHNER. Mr. Speaker, we just have the remaining time we expect 
to use. Who has the right to close, or what would the order of closing 
be?
  The SPEAKER pro tempore. The Committee on Ways and Means will finish 
their time first, and then the gentleman from Ohio (Mr. Boehner) has 
the right to close.
  Mr. BOEHNER. I thank the Chair.
  Mr. McDERMOTT. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, sometimes when I come out on this floor I think I have 
entered the French theater of the absurd.
  We are having a bill brought here to us about financial advice. I 
remember, when this year started, that we had $5.6 trillion in surplus, 
and all the discussion was about what should we do with it: Shall we 
pay off the debt? Shall we save it for Social Security? Shall we save 
it for Medicare?
  The decision was, oh, the first thing we should do is give about $2 
trillion of it away.

                              {time}  1230

  We are going to do that with a tax break. We said it is 130 trillion, 
but it turned out to be more like two, and so we go.
  We have now spent all the Social Security money. That is the advice 
we are giving to the American people, and then we say, we want to turn 
you over to the hands of these nice salesmen, they will take care of 
you. We have taken away their medical security. We have not even put 
the money that they contributed into the Medicare program. If we were 
under ERISA, we would be before the courts for the way we are handling 
the investments of our constituents.
  We got so wild around here with our tax cuts and all the problems 
after they figured it all out, and said, well, we need an economic 
stimulus bill. So we come out here with a nonsense bill, give it 
another $161 billion off to major companies in this country. This is 
our advice to America. This is what we think and then this bill is the 
follow-on.
  That nonsense of the stimulus package has run into the ditch over in 
the Senate. I never thought I would count on another body to save us 
from ourselves. I know they are going to save us from this bill 
ultimately. This really looks to me like, the other bill, sort of a 
fund-raising bill, and when I stand here and think about it and listen 
to all this talk, I cannot help thinking about my grandfather.
  He was an Irish immigrant, went to the second grade. He could read 
the newspaper a little bit and he could sign his name. That was the 
basis of his education. He was a hod carrier down in central Illinois, 
and in the 1920s, there was a scam in this country. A guy named Samuel 
Insull was selling energy stock or utility stock all over the country, 
and the whole rage in this little town where my grandparents lived, 
Streator, Illinois, everybody was buying Insull stock, you have got to 
buy Insull stock, you are going to get rich, real rich real quick. 
Everybody in the neighborhood was borrowing and putting their money 
into the Insull business.
  My grandmother came to my grandfather and said, well, Jim, I think we 
should buy some of that Insull stock, and he said to her, if this is 
such a good idea, why are those boys from Chicago down here in the 
cornfield selling it to us? He did not put any of his money in. He said 
we have got $500 in the bank. I tell you what, Jane, you can take your 
250 and put it in the stock, but I am keeping mine in the bank.
  She followed his advice, and they had their money when Insull went 
belly up in 1929, and everybody in Streator, Illinois, lost every 
blooming dime they had put in it.
  Investment advice to ordinary people is a big issue. If you are a hod 
carrier or you are a cab driver or you are doing any one of a number of 
jobs in this country and you are suddenly faced with this question of 
what should I do with my money for when I get old and somebody comes to 
you who has a conflict of interest about it, what do you do at that 
point? You say to your employer, give me another advisor.
  The bill does not allow that. It does not say you can give me this 
guy with the vested interest, but I would also like one who is just 
sort of on my side maybe, and maybe I can get back at him if he gives 
me bad advice. We say to the workers of this country, we are going to 
take this away from you at the very time when we are acting financially 
as irresponsible as we could be.
  We are the Congress. If it was run by the House of Representatives, 
we would be borrowing money right now to give back to the companies of 
this country $25 billion they paid back in 1986. That is the kind of 
financial advice we are giving this country. We are saying, well, we 
are going to stimulate things, we are going to give money back to IBM 
and Ford and all those companies while they are laying people off. We 
give $15 billion to the airlines because we do not want them to get in 
trouble, right, and all those investment people are out there selling 
those stocks,

[[Page 22614]]

right, keep buying that American Airlines and United Airlines and all 
those stocks.
  So we give them $15 billion. We are going to stabilize it. We do not 
give one single penny to the workers for their health insurance or for 
their unemployment, and they lay off 100,000 people in the airline 
industry, and Boeing lays off 30,000 because when the airline industry 
goes down, so does Boeing go down and everybody else; but they have 
still got their 401(k), and we say, well, we are going to give you an 
advisor to tell you what to do with your money, and that is business.
  I say this is bad legislation. It looks to me like a fund-raising 
piece, not a real serious effort to take care of people's investments. 
If the amendments that were offered here were accepted, all of us would 
be in favor of it. We think people ought to have advice, but it has got 
to be advice that is not conflicted, that does not have its own pocket 
interest, and I think that we will have a substitute offered by the 
gentleman from New Jersey (Mr. Andrews) and the gentleman from New York 
(Mr. Rangel) which will fix this bill, but I urge people to vote 
against the bill.
  Mr. Speaker, I yield back the balance of my time.
  Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield myself such time as I 
may consume.
  There is a broad consensus that workers need access to expert 
investment advice. I did not know we were going to talk about tax 
relief and other subjects, but there are only 16 percent of 401(k) 
participants that have access to investment advice through their 
retirement plans, and only 17 percent have access through outside 
advisors. Seventy-five percent of full-time employees surveyed said 
they would take advantage of individualized advice service if their 
employers offered it, and we have been hearing about banks.
  Banks are regularly examined. Examinations occur frequently. Bank 
tellers cannot provide investment advice. Bank trust departments have a 
long history of trust investment, and they have been managing trusts 
for over two centuries. Banks manage over $2 trillion in employment 
benefit trusts, and banks have strong capital, which provides added 
protection for funds being invested. I doubt there is a bank in this 
country that would allow their trust department to make bad advice 
because the bank would be out of business.
  Recent market volatility tells us investment decisions must be based 
on solid and experienced judgment. Yet, as of today, we continue to 
deny our employees the same tools that corporations and unions are 
allowed to use in making sound investment decisions for their defined 
benefit plans. This bill changes that. Simply put, this measure ends 
investment ignorance and provides workers full control over their 
investment decisions. It repeals an outdated 1974 law that denies 
millions of Americans access to investment advice that could help them 
make the most of their retirement savings.
  No longer will wealthy individuals be the only ones to enjoy the 
luxury of being able to afford their own professional investment 
advice. Now low and middle income Americans will have the same choice.
  Since individuals bear the risk of stock market volatility in their 
401(k) accounts, they are the ones who must have advice on how to 
better diversify their portfolios so they are financially prepared for 
retirement.
  H.R. 2269 will permit employers to offer investment advice as an 
employee benefit. This legislation does not require any employer to 
contract with an investment advisor and no employee is under any 
obligation to accept or follow any advice.
  This bill is good policy for today's workers and tomorrow's retirees. 
That is why the bill has been endorsed by the Department of Labor, the 
Department of Treasury and the Department of Commerce.
  In testifying before my subcommittee, Department of Labor Assistant 
Secretary Ann Combs praised the bill and said, ``We believe the bill 
creates a strong protective framework for the provision of investment 
advice to participants. Both the Committee on Ways and Means and the 
Committee on Education and the Workforce have worked hard to take a 
balanced approach for increasing worker access to advice while 
including safeguards to protect employees' interests.
  I urge Members to join all of us in supporting H.R. 2269. Without it, 
millions of Americans will be in the dark in protecting and growing 
their retirement nest egg.
  Mr. Speaker, I yield back the balance of my time.
  Mr. ANDREWS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I urge my colleagues to vote against this bill. People 
need investment advice, that is true, but it is also true they are 
getting it from the independent sources that are out there in 
increasingly high numbers.
  Just 2 years ago only 17 percent of employers were offering 
investment advice options; today it is up to 31 percent, nearly double, 
and it is growing. When someone goes for investment advice and the 
advice is being given by a conflicted advisor, that conflict ought to 
be disclosed at the time of the decision. That does not happen under 
this bill.
  The advisor ought to be completely qualified and accountable. That 
does not happen under this bill. The person receiving the advice ought 
to know that he or she has other independent choices. That does not 
happen under this bill. And if the advice that is given is bad and 
hurts the investor, there ought to be adequate remedies to make that 
investor whole. That does not happen under this bill.
  For all of these reasons, and the others stated by my colleagues, I 
would urge a vote against the underlying legislation.
  Mr. Speaker, I yield back the balance of my time.
  Mr. BOEHNER. Mr. Speaker, I yield myself the balance of my time.
  Mr. Speaker, I think all of us agree that we want to do everything 
possible to improve the retirement security of all American workers. 
And I think, based on what we have heard here today, all of the Members 
believe that providing investment advice for those employees who have 
self-directed pension accounts is vital.
  In 1974, when ERISA was enacted, 95 percent of pension assets were in 
defined benefit programs. And no one in 1974 with the enactment of 
ERISA ever envisioned that we would have the number of self-directed 
accounts, such as 401(k) accounts, and the amount of participation and 
the huge shift in assets away from defined benefit plans towards 
defined contribution plans.
  What that has done is leave us in a situation today, where millions 
of American workers have trillions of dollars in their retirement 
savings, that basically they are left to their own ability to hire an 
investment advisor, because under the law as written in 1974, we have 
so protected and insulated American workers that there is really no 
place they can turn for advice. And so where do they turn for advice? 
They turn to Bob at the coffee shop.
  So what we are trying to do here in this bill today is to provide a 
mechanism for providing specific investment advice to employees while 
providing safeguards to protect their retirement security. We believe 
that there has to be a balance between the offering of the advice and 
the amount of protections.
  Is there risk involved in this bill? Yes, there is. Do we think 
American workers are smart enough and bright enough to make these 
decisions? Yes, they are.
  It is a completely voluntary program for employers and employees. 
Once the advice is given within the safeguards that will be outlined in 
this bill, the employee has no inhibitions about making their own 
decisions about how they want to allocate their assets and their needs 
based on their own retirements.
  The problem that we have with the additional safeguards that are 
being proposed here is that they will so restrict the ability to get 
advice that we will get what we have today and that is no advice at 
all. Now, if our goal truly

[[Page 22615]]

is to provide more investment advice for American workers, we have got 
to strike a balance, a balance that will work for employers and those 
who would be there to provide advice.
  Now, we are hearing an awful lot of criticism about people who sell 
products and the fact that under this bill they would be able to give 
advice after they have disclosed any potential conflicts, after they 
have disclosed their fees, and with other protections.
  Now, what they really want to do is, they want to eliminate this 
sector from being able to give advice. These are the most respected 
investment firms in the country, with the best track record of 
investment advice in the country, that we would want to shove out of 
this market and prevent these people from giving their expertise and 
advice to the American workers. I just do not think that that makes any 
sense in the marketplace we are in. And so I think if we all step back 
and look at where we are trying to go, I have worked with Members on 
both sides of the aisle trying to craft a proper set of balances.

                              {time}  1245

  And in the debate today, the gentleman from North Dakota (Mr. 
Pomeroy) and I came to an agreement to add additional protections to 
this bill that I do think will protect American workers more without 
hindering the ability of employers or their agents to provide the kind 
of investment advice that American workers so sorely need and want 
today.
  So I would ask my colleagues, as we continue to move this process 
along, that we continue to work together to try to find the right 
balance, because, as we know, the action in the House today will not be 
the end of the process. It is actually the beginning of the process. 
This bill will have to go through the Senate, and I am confident that 
we will be able to continue to move this in a strong bipartisan manner.
  I ask all of my colleagues today to support the underlying bill and 
do what we can to help American workers increase their retirement 
security.
  Mr. STARK. Mr. Speaker, I oppose H.R. 2269, the falsely named 
Retirement Security Advice Act of 2001, introduced by Representative 
Boehner. The bill not only neglects to provide any type of security for 
workers' retirement, but it actually puts worker retirement plans at 
greater risk for fraudulent activity.
  Workers need independent financial advice, not advice plagued by 
self-interest. Current pension law ensures that those who manage or 
administer assets of a pension plan cannot engage in any transaction 
under the plan in which they have a financial or other conflict of 
interest. These rules, known as the prohibited transaction rules, are 
designed to ensure that the best interest of the investor is 
maintained. When these rules are eliminated, as H.R. 2269 calls for, 
the integrity of the pension system is threatened by fraud and abuse.
  For example, one of our nation's premier investment companies, 
Prudential, in 1996, agreed to pay at least $410 million in restitution 
and fines to compensate investors who suffered losses to fraud as far 
back as 1980. Many Wall Street brokerage firms sold limited 
partnerships in the 1980's to customers seeking tax deductions and the 
potential for profit from asset appreciation. However, these 
investments were typically suitable only for wealthy investors because 
of their speculative nature. Prudential made nearly $1 billion in 
commissions and fees from the sale of its partnerships. In addition to 
the limited partnership claims, widespread securities law violations 
were made at various Prudential branches across the country. These 
practices included:
  Lying about risk--Selling risky real estate and energy partnerships 
to pension funds, retirees and other individual investors who were told 
their investments were safe.
  Lying about return--Publishing promotional material that misled 
investors about the return they could expect on their money.
  Turning a blind eye to a subsidiary--Inadequately supervising the 
subsidiary that advertised and sold the partnerships.
  Turning a blind eye to employees--Inadequately supervising employees 
in nine branch offices, whose fraudulent practices resulted in losses 
of hundreds of thousands of dollars from customers.
  Churning--Trading excessively without authorization in clients' 
accounts to increase brokers' commissions.
  The settlement affected 8 million investors in every state, the 
District of Columbia and Puerto Rico. Many of the investors were 
elderly and faced the risk of not being compensated in their lifetime.
  Workers should have access to investment advice they can be certain 
is neither influenced by corporate profit motives or driven by a 
company's need to unload undesirable financial products. H.R. 2269 
undermines that certainty by permitting advisors to provide plan 
participants with self-interested advice regarding the investment 
options under the plan, as well as asset allocation. Under H.R. 2269, 
both financially sophisticated and financially inexperienced workers 
would lose access to independent investment advice under their 401(k) 
plans. Clearly, this provides less security than employees currently 
receive and has the potential for fraudulent activity that would be 
virtually impossible to remedy under our judicial system.
  The fraudulent Prudential activity illustrates the need for unbiased, 
independent investment advice for employees. We cannot allow motivation 
and campaign contributions from the securities, banking and insurance 
industry to imperil the pensions of 42 million workers who participate 
in self-directed pension plans. It is easy to see who will benefit from 
this bill when organizations like Prudential and Citigroup support the 
bill and organizations that oppose it include AARP and the AFL-CIO.
  Workers won't get the critical independent advice from the Boehner 
bill, but they will from the Democratic substitute bill. The Democratic 
substitute bill requires that if a conflict of interest exists, that 
the investment advisor would be required to provide additional 
independent advice at no additional charge to the investor. If 
Prudential is going to make a greater profit by advising the investor 
to invest in Prudential funds, then an independent advisor with no such 
direct profit interest, must be available to either validate 
Prudential's advice or provide alternative advice to give the employee 
a less biased opinion.
  The debate is clear. The bill before us will hurt the retirement of 
millions of workers, but it will increase profits for investment 
advisors and investment companies. I urge my colleagues to vote for the 
Democratic substitute bill and vote no on H.R. 2269.
  Mr. CARDIN. Mr. Speaker, over the past twenty years, this country has 
witnessed a revolution in the way American workers save for their 
retirement. The central feature of this revolution has been the shift 
from defined benefit to defined contribution plans, and, in particular, 
the explosion in the growth of 401(k) plans. Through employer-sponsored 
401(k) plans, tens of millions of middle class Americans have entered 
the investment class, many of them encountering their first exposure to 
the workings of the stock markets.
  This trend has important implications with respect to the retirement 
security of these workers. Under the defined benefit model, the risk 
and responsibility for making prudent investments rests with the 
employer. At the end of the day, the employer is on the hook to provide 
the promised benefits. Should the employer fail to meet this 
obligation, the federal government, through the Pension Benefit 
Guaranty Corporation, provides added protection to make sure those 
benefits will be there when workers retire.
  In the 401(k) world, however, the risk and the responsibility rest 
with the worker. Individual investment choices and decisions can make a 
huge difference in terms of the size of the retirement nest egg that a 
worker accumulates. For many workers, this reality leads to one very 
basic question: ``Where should I put my money?''
  This bill recognizes the need to provide workers with a responsible, 
reliable answer to that question. I commend the gentleman from Ohio, 
the Chairman of the Education and the Workforce Committee, for his 
leadership on this issue. He has recognized that the need for 
retirement investment advice for America's workers is great, and 
deserves our thanks for bringing this issue to the fore.
  The bill does two things to make it more possible for workers to get 
investment advice. First, it provides liability relief for employers. 
Currently, surveys of employers tell us that a major impediment to 
employers retaining investment advice firms for their employees is the 
concern that they, the employer, will ultimately be held responsible 
for the specific advice provided. The bill before the House says that 
if the employer exercises prudence in selecting the adviser, he or she 
will not be subject to liability for the advice provided. This is a 
good, sensible reform, and I support it.
  The second issue addressed by the bill goes to the current 
restrictions within ERISA dealing with ``prohibited transactions.'' 
ERISA contains important protections that prevent investment advisers 
from advising plan participants to invest in products where the adviser

[[Page 22616]]

has a conflict of interest. It is a sensible protection, and one that 
should only be lifted with great care.
  The bill before us does not, in my judgment, provide satisfactory 
protections for workers faced with investment advisers providing 
conflicted advice. The bill will require advisers to disclose that they 
are in a position to make money on the advice they are offering. That 
is an important provision, and the disclosure provisions were 
strengthened by the amendment presented by the Chairman of the Ways and 
Means Committee.
  But disclosure of the conflict by itself is not enough. Workers need 
to know more than that the person sitting in front of them will make 
money if their advice is followed. They need to have a full range of 
investment options. They need to know the range of fees that are 
charged for different types of investments, and how those fees will 
affect their long-term returns.
  In short, this bill does not provide any assurance or requirement 
that workers will have the information they need to make prudent 
investment decisions. On the other hand, at the end of this debate, we 
will have a substitute that attempts to address these problems. I 
certainly commend the gentleman from New Jersey for his work on this 
issue and for his long-standing commitment to expanding retirement 
savings opportunities for American workers. But I am concerned that the 
substitute imposes requirements that will make it unlikely that 
employers will take the necessary first step of providing investment 
advice to their workers.
  Mr. Speaker, America's workers need investment advice on their 
retirement savings accounts. Unfortunately, today we have two choices. 
The Republican bill takes the position that bad advice is better than 
no advice, and the substitute takes the position that no advice is 
better than bad advice. The right answer, of course, is that what the 
42 million Americans who participate in a 401(k) account need is not 
bad advice, or no advice, but good advice. We need to put together a 
bill that will give employers, workers, and the investment community 
the chance to get that job done.
  Mr. CRANE. Mr. Speaker, I rise in strong support of the Retirement 
Security Advice Act of 2001. As a cosponsor of this legislation, I 
would like to commend Mr. Johnson of Texas, Chairman Thomas, and 
Chairman Boehner for crafting common sense legislation that will help 
millions of hard-working Americans plan more wisely for their 
retirement.
  Mr. Speaker, while ERISA law is quite complicated, this legislation 
is quite simple. It allows employers to provide their workers with 
access to professional investment advice as long as the investment 
advisers fully disclose their fees and any potential conflicts. At the 
same time, it establishes significant safeguards to ensure that these 
workers receive advice that is solely in their best interests.
  Under current law, employers are discouraged from providing this 
service because employers may be held liable for specific advice that 
is provided to their employees. H.R. 2269 removes the barrier to 
employers contracting with advice providers and their workers by 
clarifying that employers are not responsible for the individual advice 
given by professional advisers to individual participants.
  Under this legislation, investment advice may only be offered by 
``fiduciary advisors''--qualified entities that are already fully 
regulated under other federal and state laws, such as registered 
investment advisers, registered broker dealers, insurance companies, 
and banks. Existing federal and state laws that regulate individual 
industries will continue to apply. Moreover, employers will remain 
responsible under ERISA fiduciary rules for the prudent selection and 
periodic review of any investment advisor.
  I urge my colleagues to support H.R. 2269 as amended by the rule.
  Mr. BOEHNER. Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore (Mr. LaHood). All time for general debate on 
this bill has expired.


     Amendment in the Nature of a Substitute Offered by Mr. Andrews

  Mr. ANDREWS. Mr. Speaker, as the designee of the gentleman from 
California (Mr. George Miller), I offer an amendment in the nature of a 
substitute.
  The text of the amendment in the nature of a substitute is as 
follows:

       Amendment in the nature of a substitute printed in part B 
     of House Report 107-289 offered by Mr. Andrews:
       Strike all after the enacting clause and insert the 
     following:

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Retirement Security Advice 
     Act of 2001''.

     SEC. 2. PROHIBITED TRANSACTION EXEMPTION FOR THE PROVISION OF 
                   INVESTMENT ADVICE.

       (a) Amendments to the Internal Revenue Code of 1986.--
       (1) In general.--Subsection (d) of section 4975 of the 
     Internal Revenue Code of 1986 (relating to exemptions from 
     tax on prohibited transactions) is amended by striking ``or'' 
     at the end of paragraph (14), by striking the period at the 
     end of paragraph (15) and inserting ``; or''; and 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), in any case in which--
       ``(A) the plan provides for individual accounts and permits 
     a participant or beneficiary to exercise control over assets 
     in his or her account,
       ``(B) the advice is qualified investment advice provided to 
     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 each instance of the provision of the 
     advice.''.
       (2) Rules relating to Investment advice provided by 
     fiduciary advisers.--Subsection (f) of section 4975 of such 
     Code (relating to other definitions and special rules) is 
     amended by adding at the end the following new paragraph:
       ``(7) Investment advice provided by fiduciary advisers.--
       ``(A) Allowable transactions.--The transactions described 
     in this subsection, in connection with the provision of 
     investment advice by a fiduciary adviser, are the following:
       ``(i) the provision of the advice to the 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.
       ``(B) Requirements for exemption from prohibited 
     transactions with respect to provision of investment 
     advice.--The requirements of this subparagraph are met in 
     connection with the provision of qualified investment advice 
     provided to 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 the requirements of the 
     following clauses are met:
       ``(i) Written or electronic disclosures.--At a time 
     contemporaneous with the provision of the advice in 
     connection with the sale, acquisition, or holding of the 
     security or other property, the fiduciary adviser shall 
     provide to the recipient of the advice a clear and 
     conspicuous notification, written (or by electronic means) in 
     a manner to be reasonably understood by the average plan 
     participant pursuant to regulations which shall be prescribed 
     by the Secretary (including mathematical examples), of the 
     following:

       ``(I) Interests held by the fiduciary adviser.--Any 
     interest of the fiduciary adviser in, or any affiliation or 
     contractual relationship of the fiduciary adviser (or 
     affiliates thereof) with any third party having an interest 
     in, the security or other property.
       ``(II) Related fees or compensation in connection with the 
     provision of the advice.--All fees or other compensation 
     relating to the advice (including fees or other compensation 
     itemized with respect to each security or other property with 
     respect to which the advice is provided) 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.
       ``(III) Ongoing fees or compensation in connection with the 
     security or property involved.--All fees or other 
     compensation that the fiduciary adviser (or any affiliate 
     thereof) is to receive, on an ongoing basis, in connection 
     with any security or other property with respect to which the 
     fiduciary adviser gives the advice.
       ``(IV) Applicable limitations on scope of advice.--Any 
     limitation placed (in accordance with the requirements of 
     this subsection) on the scope of the advice to be provided by 
     the fiduciary adviser with respect to the sale, acquisition, 
     or holding of the security or other property.
       ``(V) Types of services generally offered.--The types of 
     services offered by the fiduciary adviser in connection with 
     the provision of qualified investment advice by the fiduciary 
     adviser.
       ``(VI) Fiduciary status of the fiduciary adviser.--That the 
     fiduciary advisor is a fiduciary of the plan.

       ``(ii) Disclosure by fiduciary adviser in accordance with 
     applicable securities laws.--The fiduciary adviser shall 
     provide appropriate disclosure, in connection with

[[Page 22617]]

     the sale, acquisition, or holding of the security or other 
     property, in accordance with all applicable securities laws.
       ``(iii) Transaction occurring solely at direction of 
     recipient of advice.--The sale, acquisition, or holding of 
     the security or other property shall occur solely at the 
     direction of the recipient of the advice.
       ``(iv) Reasonable compensation.--The compensation received 
     by the fiduciary adviser and affiliates thereof in connection 
     with the sale, acquisition, or holding of the security or 
     other property shall be reasonable.
       ``(v) Arm's length transaction.--The terms of the sale, 
     acquisition, or holding of the security or other property 
     shall be at least as favorable to the plan as an arm's length 
     transaction would be.
       ``(C) Continued availability of information for at least 1 
     year.--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) if, at any time during the 1-year period following the 
     provision of the advice, the fiduciary adviser fails to 
     maintain the information described in subclauses (I) through 
     (IV) of subparagraph (B)(i) in currently accurate form or to 
     make the information available, upon request and without 
     charge, to the recipient of the advice.
       ``(D) Evidence of compliance maintained for at least 6 
     years.--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.
       ``(E) Model disclosure forms.--The Secretary shall 
     prescribe regulations setting forth model disclosure forms to 
     assist fiduciary advisers in complying with the disclosure 
     requirements of under this paragraph.
       ``(F) Annual reviews by the Secretary.--The Secretary shall 
     conduct annual reviews of randomly selected fiduciary 
     advisers providing qualified investment advice to 
     participants and beneficiaries. In the case of each review, 
     the Secretary shall review the following:
       ``(i) Compliance by advice computer models with reasonable 
     investment methodologies.--The extent to which advice 
     computer models employed by the fiduciary adviser comply with 
     reasonable investment methodologies.
       ``(ii) Compliance with disclosure requirements.--The extent 
     to which disclosures provided by the fiduciary adviser have 
     complied with the requirements of this subsection.
       ``(iii) Extent of violations.--The extent to which any 
     violations of fiduciary duties have occurred in connection 
     with the provision of the advice.
       ``(iv) Extent of reported complaints.--The extent to which 
     complaints to relevant agencies have been made in connection 
     with the provision of the advice.
     Any proprietary information obtained by the Secretary shall 
     be treated as confidential.
       ``(G) Duty of conflicted fiduciary adviser to provide for 
     alternative independent advice.--
       ``(i) In general.--In connection with any qualified 
     investment advice provided by a fiduciary adviser to a 
     participant or beneficiary regarding any security or other 
     property, if the fiduciary adviser--

       ``(I) has an interest in the security or other property, or
       ``(II) has an affiliation or contractual relationship with 
     any third party that has an interest in the security or other 
     property,

     the requirements of subparagraph (B) shall be treated as not 
     met in connection with the advice unless the fiduciary 
     adviser has arranged, as an alternative to the advice that 
     would otherwise be provided by the fiduciary advisor, for 
     qualified investment advice with respect to the security or 
     other property provided by at least one alternative 
     investment adviser meeting the requirements of clause (ii).
       ``(ii) Independence and qualifications of alternative 
     investment adviser.--Any alternative investment adviser whose 
     qualified investment advice is arranged for by a fiduciary 
     adviser pursuant to clause (i)--

       ``(I) shall have no material interest in, and no material 
     affiliation or contractual relationship with any third party 
     having a material interest in, the security or other property 
     with respect to which the investment adviser is providing the 
     advice, and
       ``(II) shall meet the requirements of a fiduciary adviser 
     under subparagraph (H)(ii) and (iii), except that an 
     alternative investment adviser may not be a fiduciary of the 
     plan other than in connection with the provision of the 
     advice.

       ``(iii) Scope and fees of alternative investment advice.--
     Any qualified investment advice provided pursuant to this 
     subparagraph by an alternative investment adviser shall be of 
     the same type and scope, and provided under the same terms 
     and conditions (including no additional charge to the 
     participant or beneficiary), as apply with respect to the 
     qualified investment advice to be provided by the fiduciary 
     adviser.
       ``(H) Fiduciary adviser defined.--For purposes of this 
     paragraph and subsection (d)(16)--
       ``(i) In general.--The term `fiduciary adviser' means, with 
     respect to a plan, a person who--

       ``(I) is a fiduciary of the plan by reason of the provision 
     of qualified investment advice by such person to a 
     participant or beneficiary,
       ``(II) meets the qualifications of clause (ii), and
       ``(III) meets the additional requirements of clause (iii).

       ``(ii) Qualifications.--A person meets the qualifications 
     of this clause if such person--

       ``(I) is registered as an investment adviser under the 
     Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.),
       ``(II) if not registered as an investment adviser under 
     such Act by reason of section 203A(a)(1) of such Act (15 
     U.S.C. 80b-3a(a)(1)), is registered under the laws of the 
     State in which the fiduciary maintains its principal office 
     and place of business, and, at the time the fiduciary last 
     filed the registration form most recently filed by the 
     fiduciary with such State in order to maintain the 
     fiduciary's registration under the laws of such State, also 
     filed a copy of such form with the Secretary,
       ``(III) is registered as a broker or dealer under the 
     Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.),
       ``(IV) is a bank or similar financial institution referred 
     to in subsection (d)(4),
       ``(V) is an insurance company qualified to do business 
     under the laws of a State, or
       ``(VI) is any other comparable qualified entity which 
     satisfies such criteria as the Secretary determines 
     appropriate consistent with the purpose of this subsection.

       ``(iii) Additional requirements with respect to certain 
     employees or other agents of certain advisers.--A person 
     meets the additional requirements of this clause if every 
     individual who is employed (or otherwise compensated) by such 
     person and whose scope of duties includes the provision of 
     qualified investment advice on behalf of such person to any 
     participant or beneficiary is--

       ``(I) a registered representative of such person,
       ``(II) an individual described in subclause (I), (II), or 
     (III) of clause (ii), or
       ``(III) such other comparable qualified individual who 
     satisfies such criteria as the Secretary determines 
     appropriate consistent with the purpose of this subsection.

       ``(I) Additional definitions.--For purposes of this 
     paragraph and subsection (d)(16)--
       ``(i) Qualified investment advice.--The term `qualified 
     investment advice' means, in connection with a participant or 
     beneficiary, investment advice referred to in subsection 
     (e)(3)(B) which--

       ``(I) consists of an individualized recommendation to the 
     participant or beneficiary with respect to the purchase, 
     sale, or retention of securities or other property for the 
     individual account of the participant or beneficiary, in 
     accordance with generally accepted investment management 
     principles, and
       ``(II) takes into account all investment options under the 
     plan.

       ``(ii) 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 such 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 such entity for the 
     investment adviser referred to in such section).''.
       (3) Assumption of liability.--Subsection (b) of section 
     4975 of such Code is amended--
       (A) by striking ``Person.--In'' and inserting ``Person.--
       ``(1) In general.--In'', and moving the text 2 ems to the 
     right, and
       (B) by adding at the end the following new paragraph:
       ``(2) Assumption of liability.--If a court determines that 
     a fiduciary advisor has breached his fiduciary responsibility 
     as a result of a failure to meet the requirements of 
     subparagraph (B), (C), (D), or (G) of subsection (e)(7), 
     then, notwithstanding any other provision of this title or 
     the Employee Retirement Income Security Act of 1974, the 
     fiduciary advisor shall be liable for any monetary losses 
     suffered by a participant or beneficiary as a result of such 
     breach.''.
       (b) Amendments to the Employee Retirement Income Security 
     Act of 1974.--
       (1) In general.--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 plan provides for individual accounts and permits 
     a participant or beneficiary to exercise control over assets 
     in his or her account,
       ``(ii) the advice is qualified investment advice provided 
     to a participant or beneficiary

[[Page 22618]]

     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 each instance of the provision of the advice.
       ``(B) The transactions described in this subparagraph are 
     the following:
       ``(i) the provision of the advice to the 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.''.
       (2) Requirements.--Section 408 of such Act is amended 
     further by adding at the end the following new subsection:
       ``(g) Requirements for Exemption from Prohibited 
     Transactions with Respect to Provision of Investment 
     Advice.--
       ``(1) In general.--The requirements of this subsection are 
     met in connection with the provision of qualified investment 
     advice provided to 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 the requirements of the 
     following subparagraphs are met:
       ``(A) Written disclosures.--At a time contemporaneous with 
     the provision of the advice in connection with the sale, 
     acquisition, or holding of the security or other property, 
     the fiduciary adviser shall provide to the recipient of the 
     advice a clear and conspicuous notification, written in a 
     manner to be reasonably understood by the average plan 
     participant pursuant to regulations which shall be prescribed 
     by the Secretary (including mathematical examples), of the 
     following:
       ``(i) Interests held by the fiduciary adviser.--Any 
     interest of the fiduciary adviser in, or any affiliation or 
     contractual relationship of the fiduciary adviser (or 
     affiliates thereof) with any third party having an interest 
     in, the security or other property.
       ``(ii) Related fees or compensation in connection with the 
     provision of the advice.--All fees or other compensation 
     relating to the advice (including fees or other compensation 
     itemized with respect to each security or other property with 
     respect to which the advice is provided) 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.
       ``(iii) Ongoing fees or compensation in connection with the 
     security or property involved.--All fees or other 
     compensation that the fiduciary adviser (or any affiliate 
     thereof) is to receive, on an ongoing basis, in connection 
     with any security or other property with respect to which the 
     fiduciary adviser gives the advice.
       ``(iv) Applicable limitations on scope of advice.--Any 
     limitation placed (in accordance with the requirements of 
     this subsection) on the scope of the advice to be provided by 
     the fiduciary adviser with respect to the sale, acquisition, 
     or holding of the security or other property.
       ``(v) Types of services generally offered.--The types of 
     services offered by the fiduciary adviser in connection with 
     the provision of qualified investment advice by the fiduciary 
     adviser.
       ``(vi) Fiduciary status of the fiduciary adviser.--That the 
     fiduciary advisor is a fiduciary of the plan.
       ``(B) Disclosure by fiduciary adviser in accordance with 
     applicable securities laws.--The fiduciary adviser shall 
     provide appropriate disclosure, in connection with any the 
     sale, acquisition, or holding of the security or other 
     property, in accordance with all applicable securities laws.
       ``(C) Transaction occurring solely at direction of 
     recipient of advice.--The sale, acquisition, or holding of 
     the security or other property shall occur solely at the 
     direction of the recipient of the advice.
       ``(D) Reasonable compensation.--The compensation received 
     by the fiduciary adviser and affiliates thereof in connection 
     with the sale, acquisition, or holding of the security or 
     other property shall be reasonable.
       ``(E) Arm's length transaction.--The terms of the sale, 
     acquisition, or holding of the security or other property 
     shall be at least as favorable to the plan as an arm's length 
     transaction would be.
       ``(2) Continued availability of information for at least 1 
     year.--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) if, 
     at any time during the 1-year period following the provision 
     of the advice, the fiduciary adviser fails to maintain the 
     information described in clauses (i) through (iv) of 
     subparagraph (A) in currently accurate form or to make the 
     information available, upon request and without charge, to 
     the recipient of the advice.
       ``(3) Evidence of compliance maintained for at least 6 
     years.--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.
       ``(4) Model disclosure forms.--The Secretary shall 
     prescribe regulations setting forth model disclosure forms to 
     assist fiduciary advisers in complying with the disclosure 
     requirements of under this subsection.
       ``(5) Exemption for employers contracting for qualified 
     investment advice.--
       ``(A) Reliance on contractual arrangements.--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 qualified investment 
     advice (or solely by reason of contracting for or otherwise 
     arranging for the provision of the investment 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 qualified investment advice, and
       ``(ii) the terms of the arrangement require compliance by 
     the fiduciary adviser with the requirements of this 
     subsection.
       ``(B) Continued duty for employer to prudently select and 
     review fiduciary advisers.--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 qualified investment advice. 
     The plan sponsor or other person who is a fiduciary shall not 
     be liable under this part with respect to the specific 
     qualified investment advice given by the fiduciary adviser to 
     any particular recipient of the advice. Pursuant to 
     regulations which shall be prescribed by the Secretary, the 
     fiduciary adviser shall provide appropriate disclosures to 
     the plan sponsor to enable the plan sponsor to fulfill its 
     fiduciary responsibilities under this part. In connection 
     with the provision of the advice by a fiduciary adviser on an 
     ongoing basis, such regulations shall provide for such 
     disclosures on at least an annual basis.
       ``(C) Plan assets may be used to pay reasonable expenses.--
     Nothing in this part shall be construed to preclude the use 
     of plan assets to pay for reasonable expenses in providing 
     qualified investment advice.
       ``(6) Annual reviews by the Secretary.--The Secretary shall 
     conduct annual reviews of randomly selected fiduciary 
     advisers providing qualified investment advice to 
     participants and beneficiaries. In the case of each review, 
     the Secretary shall review the following:
       ``(A) Compliance by advice computer models with generally 
     accepted investment management principles.--The extent to 
     which advice computer models employed by the fiduciary 
     adviser comply with generally accepted investment management 
     principles.
       ``(B) Compliance with disclosure requirements.--The extent 
     to which disclosures provided by the fiduciary adviser have 
     complied with the requirements of this subsection.
       ``(C) Extent of violations.--The extent to which any 
     violations of fiduciary duties have occurred in connection 
     with the provision of the advice.
       ``(D) Extent of reported complaints.--The extent to which 
     complaints to relevant agencies have been made in connection 
     with the provision of the advice.
     Any proprietary information obtained by the Secretary shall 
     be treated as confidential.
       ``(7) Duty of conflicted fiduciary adviser to provide for 
     alternative independent advice.--
       ``(A) In general.--In connection with any qualified 
     investment advice provided by a fiduciary adviser to a 
     participant or beneficiary regarding any security or other 
     property, if the fiduciary adviser--
       ``(i) has an interest in the security or other property, or
       ``(ii) has an affiliation or contractual relationship with 
     any third party that has an interest in the security or other 
     property,
     the requirements of paragraph (1) shall be treated as not met 
     in connection with the advice unless the fiduciary adviser 
     has arranged, as an alternative to the advice that would 
     otherwise be provided by the fiduciary advisor, for qualified 
     investment advice with respect to the security or other 
     property provided by at least one alternative investment 
     adviser meeting the requirements of subparagraph (B).

[[Page 22619]]

       ``(B) Independence and qualifications of alternative 
     investment adviser.--Any alternative investment adviser whose 
     qualified investment advice is arranged for by a fiduciary 
     adviser pursuant to subparagraph (A)--
       ``(i) shall have no material interest in, and no material 
     affiliation or contractual relationship with any third party 
     having a material interest in, the security or other property 
     with respect to which the investment adviser is providing the 
     advice, and
       ``(ii) shall meet the requirements of a fiduciary adviser 
     under paragraph (7)(A), except that an alternative investment 
     adviser may not be a fiduciary of the plan other than in 
     connection with the provision of the advice.
       ``(C) Scope and fees of alternative investment advice.--Any 
     qualified investment advice provided pursuant to this 
     paragraph by an alternative investment adviser shall be of 
     the same type and scope, and provided under the same terms 
     and conditions (including no additional charge to the 
     participant or beneficiary), as apply with respect to the 
     qualified investment advice to be provided by the fiduciary 
     adviser.
       ``(8) Fiduciary adviser defined.--For purposes of this 
     subsection and subsection (b)(14)--
       ``(A) In general.--The term `fiduciary adviser' means, with 
     respect to a plan, a person--
       ``(i) who is a fiduciary of the plan by reason of the 
     provision of qualified investment advice by such person to a 
     participant or beneficiary,
       ``(ii) who--

       ``(I) is registered as an investment adviser under the 
     Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.),
       ``(II) if not registered as an investment adviser under 
     such Act by reason of section 203A(a)(1) of such Act (15 
     U.S.C. 80b-3a(a)(1)), is registered under the laws of the 
     State in which the fiduciary maintains its principal office 
     and place of business, and, at the time the fiduciary last 
     filed the registration form most recently filed by the 
     fiduciary with such State in order to maintain the 
     fiduciary's registration under the laws of such State, also 
     filed a copy of such form with the Secretary,
       ``(III) is registered as a broker or dealer under the 
     Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.),
       ``(IV) is a bank or similar financial institution referred 
     to in section 408(b)(4),
       ``(V) is an insurance company qualified to do business 
     under the laws of a State, or
       ``(VI) is any other comparable entity which satisfies such 
     criteria as the Secretary determines appropriate, and

       ``(iii) who is an entity meeting the requirements of 
     subparagraph (B).
       ``(B) Additional requirements with respect to certain 
     employees or other agents of certain advisers.--The 
     requirements of this subparagraph are met if every individual 
     who is employed (or otherwise compensated) by a person 
     described subparagraph (A)(ii) and whose scope of duties 
     includes the provision of qualified investment advice on 
     behalf of such person to any participant or beneficiary is--
       ``(i) a registered representative of such person,
       ``(ii) an individual described in subclause (I), (II), or 
     (III) of subparagraph (A)(ii), or
       ``(iii) such other comparable qualified individual as may 
     be designated in regulations of the Secretary.
       ``(9) Additional definitions.--For purposes of this 
     subsection and subsection (b)(14)--
       ``(A) Qualified investment advice.--The term `qualified 
     investment advice' means, in connection with a participant or 
     beneficiary, investment advice referred to in section 
     3(21)(A)(ii) which--
       ``(i) consists of an individualized recommendation to the 
     participant or beneficiary with respect to the purchase, 
     sale, or retention of securities or other property for the 
     individual account of the participant or beneficiary, in 
     accordance with generally accepted investment management 
     principles, and
       ``(ii) takes into account all investment options under the 
     plan.
       ``(B) Affiliate.--The term `affiliate' of another entity 
     means an affiliated person of such 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 such 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 such entity for the 
     investment adviser referred to in such section).''.
       (c) Enforcement.--
       (1) Liability for breach.--
       (A) Liability in connection with individual account 
     plans.--Section 409 of such Act (29 U.S.C. 1109) is amended 
     by adding at the end the following new subsection:
       ``(c)(1) In any case in which the provision by a fiduciary 
     adviser of qualified investment advice to a participant or 
     beneficiary regarding any security or other property consists 
     of a breach described in subsection (a), the fiduciary 
     adviser shall be personally liable to make good to the 
     individual account of the participant or beneficiary any 
     losses to the individual account resulting from the breach, 
     and to restore to the individual account any profits of the 
     fiduciary adviser which have been made through use of assets 
     of the individual account by--
       ``(A) the fiduciary adviser, or
       ``(B) any other party with respect to whom a material 
     affiliation or contractual relationship of the fiduciary 
     adviser resulted in a violation of section 408(g)(1)(A) in 
     connection with the advice.
       ``(2) In the case of any action under this title by a 
     participant or beneficiary against a fiduciary adviser for 
     relief under this subsection in connection with the provision 
     of any qualified investment advice--
       ``(A) if the participant or beneficiary shows that the 
     fiduciary adviser had any interest in, or had any affiliation 
     or contractual relationship with a third party having an 
     interest in, the security or other property, there shall be a 
     presumption (rebuttable by a preponderance of the evidence) 
     that the fiduciary adviser failed to meet the requirements of 
     subparagraphs (A) and (B) of section 404(a)(1) in connection 
     with the provision of the advice, and
       ``(B) the dispute may be settled by arbitration, but only 
     pursuant to terms and conditions established by agreement 
     entered into voluntarily by both parties after the 
     commencement of the dispute.
       ``(3) For purposes of this subsection, the terms `fiduciary 
     adviser' and `qualified investment advice' shall have the 
     meanings provided such terms in subparagraphs (A) and (B), 
     respectively, of section 406(g)(7).''.
       (B) Limitation on exemption from liability.--Section 404(c) 
     of such Act (29 U.S.C. 1104(c)) is amended--
       (i) by redesignating paragraph (2) as paragraph (3) (and by 
     adjusting the margination of such paragraph to full measure 
     and adjusting the margination of subparagraphs (A) through 
     (B) thereof accordingly); and
       (ii) by inserting after paragraph (1) the following new 
     paragraph:
       ``(2)(A) In any case in which--
       ``(i) a participant or beneficiary exercises control over 
     the assets in his or her account by means of a sale, 
     acquisition, or holding of a security or other property with 
     regard to which qualified investment advice was provided by a 
     fiduciary adviser, and
       ``(ii) any transaction in connection with the exercise of 
     such control is not a prohibited transaction solely by reason 
     of section 408(b)(14),

     paragraph (1) shall not apply with respect to the fiduciary 
     adviser in connection with the provision of the advice.
       ``(B) For purposes of this subsection, the terms `fiduciary 
     adviser' and `qualified investment advice' shall have the 
     meanings provided such terms in subparagraphs (A) and (B), 
     respectively, of section 408(g)(7).''.
       (2) Attorney's fees.--Section 502(g) of such Act (29 U.S.C. 
     1132(g)) is amended--
       (A) in paragraph (1), by inserting ``or (3)'' after 
     ``paragraph (2)''; and
       (B) by adding at the end the following new paragraph:
       ``(3) In any action under this title by the participant or 
     beneficiary against a fiduciary adviser for relief under 
     section 409(c) in which the plaintiff prevails, the court 
     shall allow a reasonable attorney's fee and costs of action 
     to the prevailing plaintiff.''.
       (3) Applicability of state fraud laws.--Section 514(b) of 
     such Act (29 U.S.C. 1144(b)) is amended--
       (A) by redesignating paragraph (9) as paragraph (10); and
       (B) by inserting after paragraph (8) the following new 
     paragraph:
       ``(9) Nothing in this title shall be construed to supersede 
     any State action for fraud against a fiduciary adviser for 
     any act or failure to act by the fiduciary adviser 
     constituting a violation of section 409(c).''.

     SEC. 3. EFFECTIVE DATE.

       The amendments made by this Act shall apply with respect to 
     advice referred to in section 3(21)(A)(ii) of the Employee 
     Retirement Income Security Act of 1974 or section 
     4975(e)(3)(B) of the Internal Revenue Code of 1986 provided 
     on or after January 1, 2002.

  The SPEAKER pro tempore. Pursuant to House Resolution 288, the 
gentleman from New Jersey (Mr. Andrews) and a Member opposed each will 
control 30 minutes.
  The Chair recognizes the gentleman from New Jersey (Mr. Andrews).
  Mr. ANDREWS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, this piece of legislation is about a person who is at 
the age of 30 or 40 in his or her life and starting to think about 
retirement, hopefully sooner than that, and they find they have a few 
thousand dollars in an account, in an IRA or a 401(k). They pick up the 
newspaper and they see wild fluctuations in the Dow Jones average, and 
they hear from some of their neighbors that they are doing great in 
their investments, and from others they are not doing so well; and they 
realize they need some help. They need some good sound advice as to 
what to do with this very crucial asset.
  Both sides of this debate agree that the present situation is not 
very good;

[[Page 22620]]

that the advice does come from people who are like Bob at the coffee 
shop, the friend of the gentleman from Ohio (Mr. Boehner), someone who 
is not really qualified, that people get advice through hearsay, and we 
think something should be done about that. The proposal the gentleman 
from New York (Mr. Rangel) and myself are putting forward now, we 
think, is a more sensible way to address this need.
  We think that when this individual goes to get advice as to what to 
do with his or her money, that there ought to be some choices of the 
advisor. We do not rule out the prospect of an advisor who has an 
interest in a fund that he or she is advising about. We do say, though, 
that if such advice is going to be given, if the person giving the 
advice has a vested interest in our hypothetical investor putting his 
or her money in one fund as opposed to another, if there is a higher 
commission or some other gain that derives to that advisor, we say the 
following:
  Each time a decision is made by the investor as to what to do, the 
advisor has to tell the investor in plain language, in plain math, in 
an understandable way what the nature of the advisor's interest is. The 
advisor has to say to the investor, You know, if you put your money in 
fund A instead of fund B, I make a little more money than I otherwise 
would, and you ought to know that before you make the decision.
  Our substitute says that the person giving that advice must be 
qualified, and not most of the time but all of the time. The person 
giving the advice must have proper education. The person giving the 
advice must be part of a regulated industry, whether he or she is a 
broker or some other form of advisor. And if the person gives advice 
that is in violation of law, that is a violation of what we call the 
fiduciary duty, then the person must lose their license, and not most 
of the time, but all of the time, to make sure that the advisor is 
properly qualified.
  Our substitute says that there must be some mechanism so that when 
our investor goes to ask for advice, and the advice may be given by a 
conflicted advisor, by someone having an interest in one or more of the 
funds, the employee should also be told that there is at least one 
other choice; that if they do not want to take advice from this person 
who has an interest in some of the funds that he or she is advising 
about, there is somewhere else that individual can go, to a person who 
has no interest whatsoever in the advice that he or she is giving. At 
least one other option on the menu so that the investor knows that 
there is somewhere else to go.
  Finally, this substitute differs from the underlying bill because the 
substitute provides that if the advisor gives advice that is so bad 
that it is a violation of the law, so bad that it subverts and violates 
the fiduciary duty of that advisor, the investor can be made whole. He 
or she can get their pension money back, get back any lost profits or 
gains they would have had while they were waiting to get it back, and 
can get the cost of recovering those funds back in attorneys' fees as 
well. The investor does not have to wait for some bureaucracy in 
Washington to take action on his or her behalf; they do not have to 
hope that they can get represented in a case that is not worth very 
much money to an attorney, but worth an awful lot to them. They have 
the ability to be made whole.
  The proposal that the gentleman from New York and I are putting 
forward provides for more advice for people who need it, but it does so 
in a way that is careful and it does so in a way that does not subvert 
and discard the 27-year history of the ERISA statute that has provided 
safer pensions and sounder investments for our citizens.
  Mr. Speaker, I urge Members of both sides to consider this proposal, 
and I urge a ``yes'' vote on it.
  Mr. Speaker, I reserve the balance of my time.
  The SPEAKER pro tempore. Does the gentleman from Ohio (Mr. Boehner) 
claim the time in opposition?
  Mr. BOEHNER. Mr. Speaker, I am opposed to the amendment, and I do so 
claim the time.
  The SPEAKER pro tempore. The gentleman from Ohio is recognized for 30 
minutes.
  Mr. BOEHNER. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I first want to thank the gentleman from New Jersey (Mr. 
Andrews) and the gentleman from New York (Mr. Rangel) for the serious 
and hard work they have brought to our debate today. The entire process 
has been marked by bipartisan respect, and I am glad to see that is 
continuing today. I look forward to working with both my friends as 
this process continues.


  Nonetheless, I must oppose their amendment because it falls into the 
trap of so overprotecting people from one set of dangers that, instead, 
we push them into another. If the Andrews-Rangel amendment were 
adopted, we could say that workers would never receive misleading or 
self-serving advice, but it is almost certain that they would not 
receive any advice at all. Despite my good friends' intentions, I 
believe the substitute would practically guarantee that no employers 
would provide investment advice at all to their workers.
  First, the substitute unnecessarily intrudes upon an extensive and 
effective regulatory regime that protects investors who are paying for 
advice with their own money outside of an ERISA plan. In addition to 
this regulatory scheme, which includes banking, securities, insurance 
laws, regulations, and agencies at the Federal and State levels, the 
substitute requires Department of Labor qualitative oversight on 
computer models of advice, the substantive qualifications of financial 
advisors, and the adequacy of disclosure forms. Now, this not only 
creates overlapping and confusing jurisdiction between the Department 
of Labor and the Securities and Exchange Commission, it adds additional 
and unnecessary regulations to existing securities laws.
  H.R. 2269, the underlying bill, seeks to reduce and streamline 
regulatory burdens on employers and financial advisors rather than to 
create additional rules and regulations. The new and unnecessary 
burdens created by the substitute will only drive up the cost of 
investment advice, discourage competition, and, in the end, mean that 
fewer numbers of American workers will ever get real investment advice.
  The substitute also requires that if investment advice is offered, 
two investment advisors must be offered to plan participants. Employers 
have told us that this simply will not work. When we are trying to make 
investment advice more accessible and affordable, I do not see any 
sense in driving up costs and compliance effort by, in effect, forcing 
employers to select and monitor two advisors instead of just one.
  Finally, the substitute creates huge problems with ERISA's remedy 
structure and would subject employers to a stream of unfair and costly 
lawsuits by reversing the burden of proof and dramatically increasing 
ERISA's already intimidating remedies provisions. The substitute also 
erodes ERISA's careful preemption which gives employers legal certainty 
and clarity amongst our 50 States.
  The underlying bill is meant to make very minor change to ERISA to 
allow employers to offer investment advice to their employees. H.R. 
2269 works within the existing ERISA structure to do this without 
affecting ERISA's important protections or modifying the flexibility 
that courts have to fashion appropriate remedies within ERISA.
  Amending ERISA's remedy structure will likely have unintended 
consequences on all ERISA claims. And before significantly changing 
ERISA's structure, we should look at the remedies offered in more 
detail. ERISA's current remedies structure permits courts to flexibly 
fashion appropriate remedies, including attorneys' fees, economic 
damages, disgorgement of profits, and banning advisors. Moreover, 
reversing the assumption of proof will not protect plan participants, 
but will only line the pockets of trial attorneys. So I urge my 
colleagues to vote against the substitutes for these reasons.
  Put yourself in the place of an employer. Why would you offer 
investment advice to your workers if your litigation risks were so high 
that you

[[Page 22621]]

might lose your entire business? Or in the place of an advisor, why 
would you even try to enter the investment advice market when, by doing 
so, would subject yourself to 50 different standards of litigation, 50 
States under a standard of proof that guarantees you costly litigation, 
even if you have done nothing wrong?
  H.R. 2269 effectively protects plan participants in a way that still 
makes employer-provided investment advice economically viable to 
employers and their employees. The fiduciary duty that it imposes on 
employers and advisers alike is the highest duty of loyalty in the law. 
Its disclosure requirements are actually more consumer friendly than 
the Andrews-Rangel substitute because it requires disclosure on an 
annual basis, or when there is a material change in disclosure. And it 
provides for the most vital consumer protection of all, a vibrant 
competitive marketplace, by opening the field to many of the most 
highly regarded investment advice firms in the country. The underlying 
bill reaches the right balance of increasing worker access to advice 
while safeguarding the interests of the American workers without 
discouraging employers from offering any advice at all.
  Mr. Speaker, the Andrews-Rangel substitute, I do not believe, will 
protect workers; and I do think it will discourage any employer from 
offering advice. This will not help workers that desperately need this 
kind of advice to try to increase their own retirement securities. So I 
urge my colleagues to oppose the substitute.
  Mr. Speaker, I reserve the balance of my time.
  Mr. ANDREWS. Mr. Speaker, I yield myself 30 seconds.
  The liability provisions in this substitute do not impose new 
liability upon employers. What they do is impose new responsibility and 
liability upon advisors who breach their fiduciary duty.
  And the employer-protection provisions in this substitute are 
essentially identical to those in the underlying bill.
  Mr. Speaker, I yield 4 minutes to the gentleman from Washington (Mr. 
McDermott), a member of the Committee on Ways and Means.
  Mr. McDERMOTT. Mr. Speaker, I rise in support of the Andrews-Rangel 
substitute. I told a story earlier which sort of makes you wonder about 
why it is that the employee groups are not here saying this is such a 
good deal. Where is the AFL-CIO? Why are they not running in here? Why 
is the AARP not coming in here saying we want old folks to have this 
investment? Because the bill is not a good one, that is why.
  Now, the substitute that has been offered, really deals with the four 
issues that we need to deal with: one is the disclosure of conflicts, 
and that has to be done in a way that people actually hear it and know 
what is going on. Under the disclosure requirements contained in this 
substitute, plan participants or beneficiaries under the plan would 
receive adequate disclosure of fees and other compensation that would 
be received by the advisor with respect to the product being 
recommended.

                              {time}  1300

  So they would know at the time they are getting this pitch, who is 
doing what.
  Secondly, the qualification of advisors. We hear a lot of talk about 
banks are regulated. Yes, banks are regulated. But the fact is that 
under the Investors' Advisors Act, that is, the Federal law that 
controls advisors on money, banks are exempted. So all this talk about 
banks are regulated, blah, blah, blah, but not in this area. Our 
substitute closes that loophole.
  Now, the ability to get some nonconflicted advice, investors should 
be able to have at least two, one that is selling something and someone 
who is not selling something.
  The fourth area is the question of remedies. If someone sells us 
something, and most Americans do not know what is going on in the stock 
market, if somebody says this is the thing to buy, and they know that 
it is about to take a dive, maybe they have even sold short. Who knows? 
I do not know that. Here is somebody that is gives me that advice. We 
close that possibility by the conflicted question, and then we give a 
remedy.
  Mr. Speaker, to do any less than this is to say to people, yes, we 
are going to give Members another chance. Maybe Members can get it in 
the Senate or in the conference committee; or maybe we will pass a bill 
next year and fix this. This ought to be fixed right now. We have the 
opportunity. We know what the problems are.
  We have the chairman suggesting he agrees with the gentleman from 
North Dakota (Mr. Pomeroy). We should be able to do it. There is a real 
question here that we cannot do what we all agree from the chairman on 
down is the thing to do. I urge Members to vote for this Andrews-Rangel 
substitute, and then we will have a pretty good bill.

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