[House Report 114-511]
[From the U.S. Government Publishing Office]


114th Congress    }                                   {       Report
                        HOUSE OF REPRESENTATIVES
 2d Session       }                                   {        114-511
======================================================================
 
              AFFORDABLE RETIREMENT ADVICE PROTECTION ACT

                                _______
                                

 April 20, 2016.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Kline, from the Committee on Education and the Workforce, submitted 
                             the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 4293]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Education and the Workforce, to whom was 
referred the bill (H.R. 4293) to amend the Employee Retirement 
Income Security Act of 1974 to ensure that retirement investors 
receive advice in their best interests, and for other purposes, 
having considered the same, report favorably thereon with an 
amendment and recommend that the bill as amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Affordable Retirement Advice 
Protection Act''.

SEC. 2. PURPOSE.

  The purpose of this Act is to provide that advisors who--
          (1) provide advice that is impermissible under the prohibited 
        transaction provisions under section 406 of the Employee 
        Retirement Income Security Act of 1974, or
          (2) breach the best interest standard for the provision of 
        investment advice,
are subject to liability under the Employee Retirement Income Security 
Act of 1974.

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

  (a) Amendments to the Employee Retirement Income Security Act of 
1974.--
          (1) Definition of investment advice.--Section 3(21) of the 
        Employee Retirement Income Security Act of 1974 (29 U.S.C. 
        1002(21)) is amended by adding at the end the following:
  ``(C)(i) For purposes of clause (ii) of subparagraph (A), the term 
`investment advice' means a recommendation that--
          ``(I) relates to--
                  ``(aa) the advisability of acquiring, holding, 
                disposing, or exchanging any moneys or other property 
                of a plan by the plan, plan participants, or plan 
                beneficiaries, including any recommendation whether to 
                take a distribution of benefits from such plan or any 
                recommendation relating to the investment of any moneys 
                or other property of such plan to be distributed from 
                such plan;
                  ``(bb) the management of moneys or other property of 
                such plan, including recommendations relating to the 
                management of moneys or other property to be 
                distributed from such plan; or
                  ``(cc) the advisability of retaining or ceasing to 
                retain a person who would receive a fee or other 
                compensation for providing any of the types of advice 
                described in this subclause; and
          ``(II) is rendered pursuant to--
                  ``(aa) a written acknowledgment of the obligation of 
                the advisor to comply with section 404 with respect to 
                the provision of such recommendation; or
                  ``(bb) a mutual agreement, arrangement, or 
                understanding, which may include limitations on scope, 
                timing, and responsibility to provide ongoing 
                monitoring or advice services, between the person 
                making such recommendation and the plan that such 
                recommendation is individualized to the plan and such 
                plan intends to materially rely on such recommendation 
                in making investment or management decisions with 
                respect to any moneys or other property of such plan.
  ``(ii) For purposes of clause (i)(II)(bb), any disclaimer of a mutual 
agreement, arrangement, or understanding shall only state the 
following: `This information is not individualized to you, and you are 
not intended to materially rely on this information in making 
investment or management decisions.'. Such disclaimer shall not be 
effective unless such disclaimer is in writing and is communicated in a 
clear and prominent manner and an objective person would reasonably 
conclude that, based on all the facts and circumstances, there was not 
a mutual agreement, arrangement, or understanding.
  ``(iii) For purposes of clause (i)(II)(bb), information shall not be 
considered to be a recommendation made pursuant to a mutual agreement, 
arrangement, or understanding, and such information shall contain the 
disclaimer required by clause (ii), if--
          ``(I) it is provided in conjunction with full and fair 
        disclosure in writing to a plan, plan participant, or 
        beneficiary that the person providing the information is doing 
        so in its marketing or sales capacity, including any 
        information regarding the terms and conditions of the 
        engagement of the person providing the information, and that 
        the person is not intending to provide investment advice within 
        the meaning of this subparagraph or to otherwise act within and 
        under the obligations of the best interest standard as 
        described in this subparagraph;
          ``(II) the person providing the information is a counterparty 
        or service provider to the plan in connection with any 
        transaction based on the information (including a service 
        arrangement, sale, purchase, loan, bilateral contract, swap (as 
        defined in section 1a of the Commodity Exchange Act (7 U.S.C. 
        1a)), or security-based swap (as defined in section 3(a) of the 
        Securities Exchange Act (15 U.S.C. 78c(a)))), but only if--
                  ``(aa) the plan is represented, in connection with 
                such transaction, by a plan fiduciary that is 
                independent of the person providing the information, 
                and, except in the case of a swap or security-based 
                swap, independent of the plan sponsor; and
                  ``(bb) prior to such transaction, the independent 
                plan fiduciary represents in writing to the person 
                providing the information that it is aware that the 
                person has a financial interest in the transaction and 
                that it has determined that the person is not intending 
                to provide investment advice within the meaning of this 
                subparagraph or to otherwise act as a fiduciary to the 
                plan subject to section 404;
          ``(III) the person providing the information is an employee 
        of any sponsoring employer or employee organization who 
        provides the information to the plan for no fee or other 
        compensation other than the employee's normal compensation;
          ``(IV) the person providing the information discloses in 
        writing to the plan fiduciary that the person is not 
        undertaking to provide investment advice as a fiduciary to the 
        plan subject to section 404 and the information consists solely 
        of--
                  ``(aa) making available to the plan, without regard 
                to the individualized needs of the plan, securities or 
                other property through a platform or similar mechanism 
                from which a plan fiduciary may select or monitor 
                investment alternatives, including qualified default 
                investment alternatives, into which plan participants 
                or beneficiaries may direct the investment of assets 
                held in, or contributed to, their individual accounts; 
                or
                  ``(bb) in connection with a platform or similar 
                mechanism described in item (aa)--
                          ``(AA) identifying investment alternatives 
                        that meet objective criteria specified by the 
                        plan, such as criteria concerning expense 
                        ratios, fund sizes, types of asset, or credit 
                        quality; or
                          ``(BB) providing objective financial data and 
                        comparisons with independent benchmarks to the 
                        plan;
          ``(V) the information consists solely of valuation 
        information; or
          ``(VI) the information consists solely of--
                  ``(aa) information described in Department of Labor 
                Interpretive Bulletin 96-1 (29 C.F.R. 2509.96-1, as in 
                effect on January 1, 2015), regardless of whether such 
                education is provided to a plan or plan fiduciary or a 
                participant or beneficiary;
                  ``(bb) information provided to participants or 
                beneficiaries regarding the factors to consider in 
                deciding whether to elect to receive a distribution 
                from a plan or an individual retirement plan (as 
                defined in section 7701(a)(37) of the Internal Revenue 
                Code of 1986) and whether to roll over such 
                distribution to a plan or an individual retirement plan 
                (as defined in section 7701(a)(37) of the Internal 
                Revenue Code of 1986), so long as any examples of 
                different distribution alternatives are accompanied by 
                all material facts and assumptions on which the 
                examples are based; or
                  ``(cc) any additional information treated as 
                education by the Secretary.''.
          (2) Exemption relating to investment advice.--Section 408(b) 
        of the Employee Retirement Income Security Act of 1974 is 
        amended by adding at the end the following:
          ``(21)(A) Any transaction, including a contract for service, 
        between a person providing investment advice described in 
        section 3(21)(A)(ii) and the advice recipient in connection 
        with such investment advice, and any transaction consisting of 
        the provision of such investment advice, if the following 
        conditions are satisfied:
                  ``(i) No more than reasonable compensation is paid 
                (as determined under section 408(b)(2)) for such 
                investment advice.
                  ``(ii) If the investment advice is based on a limited 
                range of investment options (which may consist, in 
                whole or in part, of proprietary products), such 
                limitations shall be clearly disclosed to the advice 
                recipient prior to any transaction based on the 
                investment advice in the form of a notice that only 
                states the following: `This recommendation is based on 
                a limited range of investment options, and the same or 
                similar investments may be available at a different 
                cost (greater or lesser) from other sources.'.
                  ``(iii) If the investment advice may result in 
                variable compensation to the person providing the 
                investment advice (or any affiliate of such person), 
                the receipt of such compensation shall be clearly 
                disclosed to the advice recipient prior to any 
                transaction based on the investment advice. For 
                purposes of this subparagraph, clear disclosure of 
                variable compensation shall include, in a manner 
                calculated to be understood by the average individual, 
                each of the following:
                          ``(I) A notice that states only the 
                        following: `This recommendation may result in 
                        varying amounts of fees or other compensation 
                        to the person providing the recommendation (or 
                        its affiliate), and the same or similar 
                        investments may be available at a different 
                        cost (greater or lesser) from other sources.'. 
                        Any regulations or administrative guidance 
                        implementing this subclause may not require 
                        this notice to be updated more than annually.
                          ``(II) A description of any fee or other 
                        compensation that is directly or indirectly 
                        payable to the person (or its affiliate) by the 
                        advice recipient with respect to such 
                        transaction (expressed as an amount, formula, 
                        percentage of assets, per capita charge, or 
                        estimate or range of such compensation).
                          ``(III) A description of the types and ranges 
                        of any compensation that may be directly or 
                        indirectly payable to the person (or its 
                        affiliate) by any third party in connection 
                        with such transaction (expressed as an amount, 
                        formula, percentage of assets, per capita 
                        charge, or estimate or range of such 
                        compensation).
                          ``(IV) Upon request of the advice recipient, 
                        a disclosure of the specific amounts of 
                        compensation described in clause (iii) that the 
                        person will receive in connection with the 
                        particular transaction (expressed as an amount, 
                        formula, percentage of assets, per capita 
                        charge, or estimate of such compensation).
          ``(B) No recommendation will fail to satisfy the conditions 
        described in clauses (i) through (iii) of subparagraph (A) 
        solely because the person, acting in good faith and with 
        reasonable diligence, makes an error or omission in disclosing 
        the information specified in such clauses, provided that the 
        person discloses the correct information to the advice 
        recipient as soon as practicable, but not later than 30 days 
        from the date on which the person knows of such error or 
        omission.
          ``(C) Any notice provided pursuant to a requirement under 
        clause (ii) or clause (iii)(I) of subparagraph (A) shall have 
        no effect on any other notice otherwise required without regard 
        to this title, and shall be provided in addition to, and not in 
        lieu of, any other such notice.
          ``(D) For purposes of this paragraph, the term `affiliate' 
        has the meaning given in subsection (g)(11)(B).''.
  (b) Effective Date.--
          (1) Modification of certain rules, and rules and 
        administrative positions promulgated before enactment but not 
        effective on january 1, 2015, prohibited.--The Department of 
        Labor is prohibited from amending any rules or administrative 
        positions promulgated under, or applicable for purposes of, 
        section 3(21) of the Employee Retirement Income Security Act of 
        1974 (including Department of Labor Interpretive Bulletin 96-1 
        (29 C.F.R. 2509.96-1) and Department of Labor Advisory Opinion 
        2005-23A), and no such rule or administrative position 
        promulgated by the Department of Labor prior to the date of the 
        enactment of this Act but not effective on January 1, 2015, may 
        become effective unless a bill or joint resolution referred to 
        in paragraph (3) is enacted as described in such paragraph not 
        later than 60 days after the date of the enactment of this Act.
          (2) General effective date of amendments.--Except as provided 
        in paragraph (3), the amendments made by subsection (a) of this 
        section shall take effect on the 61st day after the date of the 
        enactment of this Act and shall apply with respect to 
        information provided or recommendations made on or after 2 
        years after the date of the enactment of this Act.
          (3) Exception.--If a bill or joint resolution is enacted 
        prior to the 61st day after the date of the enactment of this 
        Act that specifically approves any rules or administrative 
        positions promulgated under, or applicable for purposes of, 
        section 3(21) of the Employee Retirement Income Security Act of 
        1974 that are not in effect on January 1, 2015, the amendments 
        made by subsection (a) of this section shall not take effect.
  (c) Grandfathered Transactions and Services.--The amendments made by 
subsection (a) shall not apply to any service or transaction rendered, 
entered into, or for which a person has been compensated prior to the 
date on which the amendments made by subsection (a) of this Act become 
effective under subsection (b)(2).
  (d) Transition.--If the amendments made by subsection (a) of this 
section take effect, then nothing in this section shall be construed to 
prohibit the issuance of guidance to carry out such amendments so long 
as such guidance is necessary to implement such amendments. Until such 
time as regulations or other guidance are issued to carry out such 
amendments, a plan or a fiduciary shall be treated as meeting the 
requirements of such amendments if the plan or fiduciary, as the case 
may be, complies with a reasonable good faith interpretation of such 
amendments.

                                Purpose

    H.R. 4293, the Affordable Retirement Advice Protection Act 
(ARAPA), prohibits the Department of Labor (DOL or department) 
from implementing its proposed regulation* amending the 
regulatory definition of ``fiduciary''\1\ under the Employee 
Retirement Income Security Act of 1974 (ERISA)\2\ and the 
Internal Revenue Code of 1986 (Code),\3\ unless Congress 
affirmatively approves the final rule. Instead, the bill 
updates current law to ensure that all financial professionals 
providing personalized advice about investments, distributions, 
or the use of other fiduciaries are legally required to act in 
the best interest of their customers. However, unlike the DOL 
proposed regulation, ARAPA ensures low- and medium-income 
savers and small businesses have continued access to affordable 
retirement advice.
---------------------------------------------------------------------------
    *The Committee ordered this bill reported to the House of 
Representatives on February 2, 2016, and this report reflects the 
Committee's views on that date. In the intervening time, the Department 
of Labor has published a final regulatory package that changed certain 
aspects of the previously proposed rule and exemptions discussed 
herein. See, e.g., Definition of the Term ``Fiduciary''; Conflict of 
Interest Rule-Retirement Investment Advice, 81 Fed. Reg. 20945 (Apr. 8, 
2016). Despite these revisions, the Committee continues to have serious 
concerns the final regulation will reduce access to affordable 
retirement advice. Press Release, H. Comm. on Educ. and the Workforce, 
Committee Leaders Respond to Labor Department's Final Fiduciary Rule 
(Apr. 6, 2016), http://edworkforce.house.gov/news/
documentsingle.aspx?DocumentID=400576.
    \1\Definition of the Term ``Fiduciary''; Conflict of Interest Rule-
Retirement Investment Advice, 80 Fed. Reg. 21928 (Apr. 20, 2015).
    \2\29 U.S.C. Sec. 1001 et seq. ERISA section citations will be used 
throughout.
    \3\26 U.S.C. Sec. 1 et seq. [hereinafter the Code].
---------------------------------------------------------------------------

                            Committee Action


                             112TH CONGRESS

Full Committee hearing reviewing Policies and Priorities at the U.S. 
        Department of Labor

    On February 16, 2011, the Committee on Education and the 
Workforce (Committee) held a hearing entitled ``Policies and 
Priorities at the U.S. Department of Labor'' to examine, among 
other things, DOL's Employee Benefits Security Administration's 
(EBSA) October 2010 proposed regulation significantly expanding 
the definition of ``fiduciary'' under ERISA and the Code. The 
Honorable Hilda L. Solis, then-Secretary of the U.S. Department 
of Labor, was the sole witness. During the hearing, 
Representatives Judy Biggert (R-IL) and Carolyn McCarthy (D-NY) 
expressed concerns regarding DOL's proposed rule, specifically 
in regard to the department's lack of coordination with the 
Securities and Exchange Commission.\4\
---------------------------------------------------------------------------
    \4\Policies and Priorities at the U.S. Department of Labor: Hearing 
Before the H. Comm. on Educ. and the Workforce, 112th Cong. 15, 38 
(Feb. 16, 2011).
---------------------------------------------------------------------------

Subcommittee hearing Assessing the Impact of the Labor Department's 
        Proposal on Workers and Retirees

    On July 26, 2011, the Subcommittee on Health, Employment, 
Labor, and Pensions (HELP) held a hearing entitled ``Redefining 
Fiduciary': Assessing the Impact of the Labor Department's 
Proposal on Workers and Retirees'' to examine the consequences 
of EBSA's 2010 proposed rule. Witnesses included the Honorable 
Phyllis Borzi, Assistant Secretary of Labor, Employee Benefits 
Security Administration, Washington, D.C.; Mr. Kenneth Bentsen, 
Executive Vice President, Securities Industry and Financial 
Markets Association, Washington, D.C.; Mr. Kent Mason, Partner, 
Davis & Harman LLP, Washington, D.C.; Mr. Donald Myers, 
Partner, Morgan, Lewis & Bockius LLP, Washington, D.C.; Mr. 
Norman Stein, Professor, Earle Mack School of Law, Drexel 
University, Philadelphia, Pennsylvania; and Mr. Jeffrey 
Tarbell, Director, Houlihan Lokey, San Francisco, California.

Full Committee hearing Reviewing the President's Fiscal Year 2013 
        Budget Proposal for the Department of Labor

    On March 21, 2012, the Committee held a hearing entitled 
``Reviewing the President's Fiscal Year 2013 Budget Proposal 
for the Department of Labor.'' Then-Secretary Solis was the 
sole witness. During the hearing, Representatives of both 
parties thanked Secretary Solis for withdrawing the 2010 
proposed fiduciary rule and inquired as to what criteria would 
be considered in a subsequent regulatory proposal.\5\
---------------------------------------------------------------------------
    \5\Reviewing the President's Fiscal Year 2013 Budget Proposal for 
the Department of Labor: Hearing Before the H. Comm. on Educ. and the 
Workforce, 112th Cong. (Mar. 21, 2012).
---------------------------------------------------------------------------

                             113TH CONGRESS

Full Committee hearing Reviewing the President's Fiscal Year 2015 
        Budget Proposal for the Department of Labor

    On March 26, 2014, the Committee held a hearing entitled 
``Reviewing the President's Fiscal Year 2015 Budget Proposal 
for the Department of Labor.'' The Honorable Thomas E. Perez, 
Secretary of the U.S. Department of Labor, was the sole 
witness. During this hearing, Committee on Education and the 
Workforce Chairman John Kline reiterated bipartisan concerns 
regarding DOL's ongoing fiduciary rulemaking. Addressing the 
consequences of the department's proposed rule, Chairman Kline 
urged Secretary Perez to keep in mind ``what the impact will be 
on important advice that people, particularly low-income 
people, might need.''\6\
---------------------------------------------------------------------------
    \6\Reviewing the President's Fiscal Year 2015 Budget Proposal for 
the Department of Labor: Hearing Before the H. Comm. on Educ. and the 
Workforce, 113th Cong. 86 (Mar. 26, 2014) (closing statement of Rep. 
John Kline, Chairman, H. Comm. on Educ. and the Workforce).
---------------------------------------------------------------------------

                             114TH CONGRESS

Full Committee hearing reviewing the President's Fiscal Year 2016 
        Budget Proposal for the Department of Labor

    On March 18, 2015, the Committee held a hearing entitled 
``Reviewing the President's Fiscal Year 2016 Budget Proposal 
for the Department of Labor.'' Secretary Perez was the sole 
witness. During the hearing, Representative Frederica Wilson 
(D-FL) warned that a new proposed fiduciary rule should not 
``impact the availability of affordable investment advice.''\7\
---------------------------------------------------------------------------
    \7\Reviewing the President's Fiscal Year 2016 Budget Proposal for 
the Department of Labor: Hearing Before the H. Comm. on Educ. and the 
Workforce, 114th Cong. (Mar. 18, 2015) (statement of Rep. Frederica S. 
Wilson, Member, H. Comm. on Educ. and the Workforce).
---------------------------------------------------------------------------

Subcommittee hearing examining Restricting Access to Financial Advice: 
        Evaluating the Costs and Consequences for Working Families and 
        Retirees

    On June 17, 2015, the HELP Subcommittee held a hearing 
entitled ``Restricting Access to Financial Advice: Evaluating 
the Costs and Consequences for Working Families and Retirees''' 
to examine the new DOL Notice of Proposed Rulemaking (NPRM) 
amending the regulatory definition of ``fiduciary'' under 
ERISA. Witnesses before the Subcommittee included Secretary 
Perez; Mr. Jack Haley, Executive Vice President, Fidelity 
Investments, Boston, Massachusetts; Mr. Dean Harman, CFP, 
Managing Director, Harman Wealth Management, The Woodlands, 
Texas; Mr. Dennis Kelleher, President and CEO, Better Markets, 
Washington, D.C.; Mr. Kent Mason, Partner, Davis & Harman LLP, 
Washington, D.C.; and Dr. Brian Reid, Ph.D., Chief Economist, 
Investment Company Institute, Washington, D.C. During the 
hearing, Dr. Reid testified opposing DOL's reproposed fiduciary 
rule, saying, ``[A]ny policy that impairs retirement savers'' 
ability to get the help that they need will significantly harm 
the prospects of millions of workers. Unfortunately, the DOL 
proposal will do just that.''\8\ Additionally, Jack Haley of 
Fidelity Investments testified in support of a ``best-interest 
fiduciary standard crafted in a way that allows workers choice 
and access to the services they need and desire.''\9\
---------------------------------------------------------------------------
    \8\Restricting Access to Financial Advice: Evaluating the Costs and 
Consequences for Working Families and Retirees: Hearing Before the 
Subcomm. on Health, Employment, Labor, and Pensions of the H. Comm. on 
Educ. and the Workforce, 114th Cong. (Jun. 17, 2015) (oral testimony of 
Dr. Brian Reid, Ph.D., Chief Economist, Investment Company Institute).
    \9\Restricting Access to Financial Advice: Evaluating the Costs and 
Consequences for Working Families and Retirees: Hearing Before the 
Subcomm. on Health, Employment, Labor, and Pensions of the H. Comm. on 
Educ. and the Workforce, 114th Cong. (Jun. 17, 2015) (oral testimony of 
Mr. Jack Haley, Executive Vice President, Fidelity Investments).
---------------------------------------------------------------------------

Subcommittee hearing examining the Principles for Ensuring Retirement 
        Advice Serves the Best Interests of Working Families and 
        Retirees

    On December 2, 2015, the HELP Subcommittee held a hearing 
entitled ``Principles for Ensuring Retirement Advice Serves the 
Best Interests of Working Families and Retirees''' to further 
examine the DOL NPRM amending the regulatory definition of 
``fiduciary'' under ERISA. Notably, the Subcommittee considered 
the potential negative effects of the NPRM on small businesses 
and low- and middle-income families. Witnesses before the 
Subcommittee included the Honorable Bradford (Brad) Campbell, 
Counsel, Drinker Biddle & Reath LLP, Washington, D.C.; Ms. 
Rachel A. Doba, President, DB Engineering, LLC, Indianapolis, 
Indiana; Mr. Jules O. Gaudreau, Jr. ChFC, CIC, President, The 
Gaudreau Group, Inc., Wilbraham, Massachusetts; and Ms. Marilyn 
Mohrman-Gillis, Esq., Managing Director, Public Policy & 
Communications, Certified Financial Planner Board of Standards, 
Washington, D.C. During the hearing,\10\ witnesses praised the 
bipartisan principles outlined by Representatives Phil Roe (R-
TN), Richard Neal (D-MA), Peter Roskam (R-IL), and Michelle 
Lujan Grisham (D-NM) for a legislative solution to help 
strengthen retirement security.
---------------------------------------------------------------------------
    \10\Principles for Ensuring Retirement Advice Serves the Best 
Interests of Working Families and Retirees: Hearing Before the Subcomm. 
on Health, Employment, Labor, and Pensions of the H. Comm. on Educ. and 
the Workforce, 114th Cong. (Dec. 2, 2015).
---------------------------------------------------------------------------

H.R. 4293, Affordable Retirement Advice Protection Act, introduced

    On December 18, 2015, Representative Phil Roe (R-TN), 
Chairman of the HELP Subcommittee, introduced the Affordable 
Retirement Advice Protection Act (H.R. 4293),\11\ with five 
cosponsors.\12\ Recognizing the threat of DOL's proposed rule, 
Representative Roe introduced the bipartisan bill to protect 
consumers and preserve access to affordable financial advice 
for low- and middle-income families. The legislation amends 
ERISA to require retirement advisors act in their clients' best 
interest, and prohibits DOL from implementing its flawed 
proposal unless Congress affirmatively approves the final rule.
---------------------------------------------------------------------------
    \11\H.R. 4293, 114th Cong. (2015).
    \12\Original co-sponsors of H.R. 4293 include Representatives 
Richard Neal (D-MA), Peter Roskam (R-IL), John Larson (D-CT), Earl L. 
``Buddy'' Carter (R-GA), and David Scott (D-GA).
---------------------------------------------------------------------------

Committee passes H.R. 4293, Affordable Retirement Advice Protection Act

    On February 2, 2016, the Committee on Education and the 
Workforce considered H.R. 4293, the Affordable Retirement 
Advice Protection Act.\13\ Representative Roe offered an 
amendment in the nature of a substitute, making technical 
changes to the introduced bill. The Committee voted to adopt 
the amendment in the nature of a substitute by voice vote. One 
additional amendment was offered but was voted down by voice 
vote. The Committee favorably reported H.R. 4293, as amended, 
to the House of Representatives by a vote of 22-14.
---------------------------------------------------------------------------
    \13\H.R. 4293, Affordable Retirement Advice Protection Act: Markup 
Before the H. Comm. on Educ. and the Workforce, 114th Cong. (Feb. 2, 
2016).
---------------------------------------------------------------------------

                               Background


                              PRESENT LAW

Pension plans and fiduciary requirements under ERISA

    ERISA, generally administered by the Secretary of Labor 
(Secretary), applies various requirements with respect to 
employee pension benefit plans (pension plans).\14\ A pension 
plan may be a defined contribution plan (also referred to as an 
``individual account plan'') or a defined benefit plan.
---------------------------------------------------------------------------
    \14\ERISA applies also to employee welfare benefit plans. ERISA 
generally does not apply to church plans or plans of governmental 
employers.
---------------------------------------------------------------------------
    Under a defined contribution plan, benefits are based on an 
individual account for each participant, to which are allocated 
contributions, earnings, and losses.\15\ Defined contribution 
plans commonly allow participants to direct the investment of 
their accounts, usually by choosing among investment options 
offered under the plan. Under a defined benefit plan, benefits 
are determined under a plan formula, and benefits under a 
defined benefit plan are funded by the general assets of the 
trust established under the plan, which are invested by plan 
fiduciaries; individual accounts are not maintained for 
employees participating in the plan.\16\
---------------------------------------------------------------------------
    \15\Defined contribution plan (or individual account plan) is 
defined at ERISA section 3(34).
    \16\As defined in ERISA section 3(35), a defined benefit plan 
generally is any plan that is not a defined contribution plan.
---------------------------------------------------------------------------
    ERISA requires a fiduciary of a plan to discharge his 
duties with respect to the plan solely in the interest of the 
participants and beneficiaries, for the exclusive purpose of 
providing benefits to participants and their beneficiaries and 
defraying reasonable expenses of administering the plan, and 
with the care, skill, prudence, and diligence under the 
circumstances then prevailing that a prudent man acting in a 
like capacity and familiar with such matters would use in the 
conduct of an enterprise of a like character and with like 
aims.\17\ With respect to plan assets, ERISA requires a 
fiduciary to diversify the investments of the plan so as to 
minimize the risk of large losses unless under the 
circumstances it is clearly prudent not to do so.
---------------------------------------------------------------------------
    \17\ERISA Sec. 404(a)(1). ERISA section 402(a)(1) requires a plan 
to be established pursuant to a written instrument that provides for 
one or more named fiduciaries who jointly or severally have authority 
to control and manage the operation and administration of the plan. For 
this purpose, the term ``named fiduciary'' means a fiduciary who is 
named in the plan instrument, or who, pursuant to a procedure specified 
in the plan, is identified as a fiduciary by a person who is an 
employer or employee organization with respect to the plan or by an 
employer and an employee organization acting jointly.
---------------------------------------------------------------------------
    A plan fiduciary that breaches any of the fiduciary 
responsibilities, obligations, or duties imposed by ERISA 
(including the prohibited transaction rules discussed below) is 
personally liable to make good to the plan any losses to the 
plan resulting from such breach and to restore to the plan any 
profits the fiduciary has made through the use of plan 
assets.\18\ A plan fiduciary may be liable also for a breach of 
responsibility by another fiduciary (a ``co-fiduciary'') in 
certain circumstances, for example, if the fiduciary's failure 
to fulfill his own fiduciary duties enabled the co-fiduciary to 
commit the breach.\19\ Certain fiduciary violations may result 
in the imposition of civil penalties.\20\
---------------------------------------------------------------------------
    \18\ERISA Sec. 409. Under ERISA section 502(a)(2), an action for a 
breach of fiduciary responsibility may be brought by DOL, a plan 
participant or beneficiary, or another fiduciary.
    \19\ERISA Sec. 405.
    \20\ERISA Sec. 502(i) and (l).
---------------------------------------------------------------------------
    ERISA provides a special rule in the case of a defined 
contribution plan that permits participants to exercise control 
over the assets in their individual accounts (often referred to 
as ``participant-directed investments'').\21\ Under the special 
rule, if a participant exercises control over the assets in his 
or her account, the participant is not deemed to be a fiduciary 
by reason of such exercise, and no person who is otherwise a 
fiduciary is liable for any loss, or by reason of any breach, 
that results from the participant's exercise of control.
---------------------------------------------------------------------------
    \21\ERISA Sec. 404(c), implemented by regulations at 29 C.F.R. sec. 
2550.404c-1. 29 C.F.R. sec. 2550.404c-5 provides rules for qualified 
default investment alternatives (QDIAs) if a participant does not 
select any investment options.
---------------------------------------------------------------------------

General prohibited transaction rules

    ERISA prohibits a plan fiduciary from causing the plan to 
engage in any of certain transactions (``prohibited 
transactions'') between the plan and a party in interest if the 
fiduciary knows or should know that the transaction is a 
prohibited transaction.\22\ Prohibited transactions include the 
following, whether direct or indirect, between a plan and a 
party in interest: (1) the sale or exchange or leasing of 
property, (2) the lending of money or other extension of 
credit, (3) the furnishing of goods, services, or facilities, 
(4) the transfer to, or use by or for the benefit of, a party 
in interest, of any assets of the plan, or (5) an acquisition, 
on behalf of the plan, of any employer security or employer 
real property in violation of ERISA restrictions.\23\ In 
addition, these rules prohibit a fiduciary that has authority 
or discretion to control or manage the assets of a plan to 
permit the plan to hold any employer security or employer real 
property if the fiduciary knows or should know that holding the 
security or real property violates ERISA restrictions. These 
rules also provide that a fiduciary with respect to a plan must 
not (1) deal with the assets of the plan in his own interest or 
for his own account, (2) in his individual or in any other 
capacity, act in any transaction involving the plan on behalf 
of a party (or represent a party) whose interests are adverse 
to the interests of the plan or the interests of its 
participants or beneficiaries, or (3) receive any consideration 
for his own personal account from any party dealing with the 
plan in connection with a transaction involving the assets of 
the plan.
---------------------------------------------------------------------------
    \22\ERISA Sec. 406.
    \23\ERISA sec. 407 restricts the acquisition or holding of employer 
securities and employer real property by a plan.
---------------------------------------------------------------------------
    For purposes of ERISA, a party in interest includes any 
fiduciary (including, but not limited to, any administrator, 
officer, trustee, or custodian), counsel, or employee of the 
plan; a person providing services to the plan; an employer, any 
of whose employees are covered by the plan; an employee 
organization, any of whose members are covered by the plan; and 
certain owners, relatives, employees, officers, directors, and 
related entities.\24\ In general, a person is a fiduciary with 
respect to a plan to the extent he (1) exercises any 
discretionary authority or discretionary control respecting 
management of the plan or exercises any authority or control 
respecting management or disposition of plan assets, (2) 
renders investment advice for a fee or other compensation, 
direct or indirect, with respect to any moneys or other 
property of such plan, or has any authority or responsibility 
to do so, or (3) has any discretionary authority or 
discretionary responsibility in the administration of the 
plan.\25\
---------------------------------------------------------------------------
    \24\ERISA Sec. 3(14).
    \25\ERISA Sec. 3(21). Fiduciary also includes a person designated 
by a named fiduciary to carry out fiduciary responsibilities (other 
than trustee responsibilities) under the plan.
---------------------------------------------------------------------------
    Certain transactions are statutorily exempt from prohibited 
transaction treatment, for example, certain loans to plan 
participants and arrangements with a party in interest for 
legal, accounting or other services necessary for the 
establishment or operation of a plan if no more than reasonable 
compensation is paid for the services.\26\ In addition, an 
administrative exemption may be granted, on either an 
individual or class basis, subject to a finding that the 
exemption is administratively feasible, in the interests of the 
plan and of its participants and beneficiaries, and protective 
of the rights of participants and beneficiaries of the 
plan.\27\
---------------------------------------------------------------------------
    \26\ERISA Sec. 408(b).
    \27\ERISA Sec. 408(a).
---------------------------------------------------------------------------

Rules relating to investment advice

            Fiduciary status
    As described above, a fiduciary includes a person who 
renders investment advice for a fee or other compensation, 
direct or indirect, with respect to any moneys or other 
property of the plan, or has any authority or responsibility to 
do so.
    Existing DOL regulations, issued in 1975, provide that a 
person is deemed to be rendering ``investment advice'' to an 
employee benefit plan for this purpose only if he--
         renders advice to the plan as to the value of 
        securities or other property or makes recommendation as 
        to the advisability of investing in, purchasing, or 
        selling securities or other property; and
         either directly or indirectly (for example, 
        through or together with any affiliate) (1) has 
        discretionary authority or control, whether or not 
        pursuant to agreement, arrangement, or understanding, 
        with respect to purchasing or selling securities or 
        other property for the plan, or (2) renders any advice 
        as described above on a regular basis to the plan 
        pursuant to a mutual agreement, arrangement, or 
        understanding, written or otherwise, between the person 
        and the plan or a fiduciary with respect to the plan, 
        that the person's services will serve as a primary 
        basis for investment decisions with respect to plan 
        assets, and that the person will render individualized 
        investment advice to the plan based on the particular 
        needs of the plan regarding matters such as, among 
        other things, investment policies or strategy, overall 
        portfolio composition, or diversification of plan 
        investments.\28\
---------------------------------------------------------------------------
    \28\29 C.F.R. Sec. 2510.3-21(c). Under Sec. 102 of Reorganization 
Plan No. 4 of 1978, 43 Fed. Reg. 47713 (Oct. 17, 1978), with certain 
exceptions, the Secretary of the Treasury's authority with respect to 
regulations, rulings, opinions, and exemptions under the prohibited 
transaction provisions of the Code was transferred to the Secretary of 
Labor. As a result, DOL regulations and other guidance relating to 
prohibited transactions, including the grant of exemptions, apply for 
Code purposes, as well as for ERISA purposes.
---------------------------------------------------------------------------
    The regulations further provide that a person who is a 
fiduciary with respect to a plan by reason of rendering 
investment advice (as described above) for a fee or other 
compensation, direct or indirect, with respect to any moneys or 
other property of the plan, or having any authority or 
responsibility to do so, is not deemed to be a fiduciary 
regarding any assets of the plan with respect to which the 
person does not have any discretionary authority, discretionary 
control, or discretionary responsibility, does not exercise any 
authority or control, does not render investment advice (as 
described above) for a fee or other compensation, and does not 
have any authority or responsibility to render such investment 
advice. However, this rule does not exempt the person from 
ERISA liability attributable to a breach of responsibility by a 
co-fiduciary or exclude the person from the definition of the 
term ``party in interest'' based on providing services to the 
plan with respect to any assets of the plan.
    In addition to the regulations, other guidance issued by 
DOL in 1996 (Interpretive Bulletin 96-1) provides that the 
furnishing of mere investment education to a participant or 
beneficiary in a participant-directed individual account plan 
does not constitute the rendering of investment advice.\29\ For 
this purpose, investment education includes the following 
categories of information and materials: plan information, 
general financial and investment information, asset allocation 
models, and interactive investment materials. Interpretive 
Bulletin 96-1 more fully describes these categories and notes 
that the information and materials merely represent examples of 
the type that may be furnished to participants and 
beneficiaries without such information and materials 
constituting investment advice, and that there may be many 
other examples of information, materials, and educational 
services, which if furnished to participants and beneficiaries, 
would not constitute investment advice. Accordingly, 
Interpretive Bulletin 96-1 provides that no inferences should 
be drawn from the description of the four categories with 
respect to whether the furnishing of any information, 
materials, or educational services not described therein may 
constitute investment advice.
---------------------------------------------------------------------------
    \29\29 C.F.R. Sec. 2905.96-1. This treatment applies irrespective 
of who provides the information (for example, the plan sponsor, 
fiduciary or service provider), the frequency with which the 
information is shared, the form in which the information and materials 
are provided (for example, on an individual or group basis, in writing 
or orally, or via video or computer software), or whether an identified 
category of information and materials is furnished alone or in 
combination with other identified categories of information and 
materials.
---------------------------------------------------------------------------
            Statutory exemptions relating to investment advice
    If certain requirements are met, specific transactions 
relating to investment advice are exempt from prohibited 
transaction treatment if the advice is provided by a fiduciary 
advisor through an eligible investment advice arrangement.\30\ 
The exemptions apply to (1) the provision of investment advice 
to a plan participant or beneficiary with respect to a security 
or other property available as an investment under the plan, 
(2) an investment transaction (that is, a sale, acquisition, or 
holding of a security or other property) pursuant to the 
advice, and (3) the direct or indirect receipt of fees or other 
compensation in connection with the provision of the advice or 
an investment transaction pursuant to the advice.
---------------------------------------------------------------------------
    \30\ERISA Sec. 408(b)(14) and (g), enacted by section 601 of the 
Pension Protection Act of 2006, Pub. L. No. 109-280.
---------------------------------------------------------------------------
    For purposes of the exemptions, an eligible investment 
advice arrangement is generally an arrangement that either (1) 
provides that any fees (including any commission or 
compensation) received by the fiduciary advisor for investment 
advice or with respect to an investment transaction with 
respect to plan assets do not vary depending on the basis of 
any investment option selected (sometimes referred to as ``fee-
leveling''), or (2) uses a computer model under an investment 
advice program that meets specified requirements in connection 
with the provision of investment advice to a participant or 
beneficiary.\31\ The arrangement must be expressly authorized 
by a plan fiduciary other than (1) the person offering the 
investment advice program, (2) any person providing investment 
options under the plan, or (3) any affiliate of (1) or (2).\32\ 
In addition, the fiduciary advisor must provide disclosures 
applicable under securities laws; any investment transaction 
must occur solely at the direction of the investment advice 
recipient; the compensation received by the fiduciary advisor 
and affiliates in connection with the investment transaction 
must be reasonable; and the terms of the investment transaction 
must be at least as favorable to the plan as an arm's length 
transaction would be.
---------------------------------------------------------------------------
    \31\Various requirements with respect to notices and disclosure, 
recordkeeping and audits must also be met.
    \32\Affiliate for this purpose means an affiliated person as 
defined under section 2(a)(3) of the Investment Company Act of 1940, 15 
U.S.C. Sec. 80a-2(a)(3).
---------------------------------------------------------------------------

         DOL'S 2015 PROPOSED REGULATIONS AND ``BIC'' EXEMPTION

    On April 20, 2015, DOL proposed regulations that would 
replace the current regulations relating to investment advice 
with a new standard as to whether a person is a fiduciary based 
on rendering investment advice, generally to be applicable 
eight months after final regulations are published.\33\ Under 
the proposed regulations, a person is a fiduciary based on 
rendering investment advice if the person--
---------------------------------------------------------------------------
    \33\Definition of the Term ``Fiduciary,'' 80 Fed. Reg. at 21928. 
The proposed regulations would apply for purposes of ERISA and the 
prohibited transaction rules of the Code. DOL had previously proposed a 
regulation similarly expanding fiduciary liability. Definition of the 
Term ``Fiduciary,'' 75 Fed. Reg. 65263 (Oct. 15, 2010) [hereinafter 
2010 Proposal]. That proposal was withdrawn due to bipartisan 
opposition.
---------------------------------------------------------------------------
         provides to a plan, a plan fiduciary, an 
        IRA,\34\ or an IRA owner certain types of 
        recommendations or statements (as described below) that 
        constitute investment advice with respect to plan or 
        IRA assets in exchange for a fee or other compensation, 
        and
---------------------------------------------------------------------------
    \34\IRA is defined in the proposed guidance to include HSAs, Archer 
MSAs, and Coverdell ESAs, as well as IRAs. In Part IV.E of the preamble 
to the proposed regulations, DOL requests comments as to whether it is 
appropriate to cover individual accounts other than IRAs and treat them 
in a manner similar to IRAs. Definition of the Term ``Fiduciary,'' 80 
Fed. Reg. at 21947.
---------------------------------------------------------------------------
         either directly or indirectly (such as through 
        an affiliate) (1) represents or acknowledges that it is 
        acting as a fiduciary with respect to the investment 
        advice or (2) renders the advice pursuant to a written 
        or verbal agreement, arrangement, or understanding that 
        the advice is individualized to, or that the advice is 
        specifically directed to, the advice recipient for 
        consideration in making investment or management 
        decisions with respect to securities or other property 
        of the plan or IRA.
    Under the proposed regulations, investment advice 
includes--
           a recommendation as to the advisability of 
        acquiring, holding, disposing of, or exchanging 
        securities or other property, including a 
        recommendation to take a distribution of benefits or a 
        recommendation as to the investment of securities or 
        other property to be rolled over or otherwise 
        distributed from the plan or IRA;\35\
---------------------------------------------------------------------------
    \35\DOL Advisory Opinion 2005-23A (Dec. 7, 2005) addresses the 
question of whether a recommendation that a participant in a pension 
plan roll over his or her account balance to an IRA to take advantage 
of investment options not available under the plan constitutes 
investment advice with respect to plan assets. The advisory opinion 
expresses the view that, with respect to a person who is not otherwise 
a plan fiduciary, merely advising a plan participant to take an 
otherwise permissible plan distribution, even when the advice is 
combined with a recommendation as to how the distribution should be 
invested, does not constitute investment advice within the meaning of 
the existing DOL investment advice regulations defining when a person 
is a fiduciary by virtue of providing investment advice with respect to 
employee benefit plan assets. The advisory opinion provides that DOL 
does not view a recommendation to take a distribution as advice or a 
recommendation concerning a particular investment (that is, purchasing 
or selling securities or other property) as contemplated by the 
regulations and that any investment recommendation regarding the 
proceeds of a distribution would be advice with respect to funds that 
are no longer plan assets. Part IV.A(1) of the preamble to the proposed 
regulations notes that the proposed regulations, if finalized, would 
supersede Advisory Opinion 2005-23A. Definition of the Term 
``Fiduciary,'' 80 Fed. Reg. at 21939.
---------------------------------------------------------------------------
           a recommendation as to the management of 
        securities or other property, including recommendations 
        as to the management of securities or other property to 
        be rolled over or otherwise distributed from the plan 
        or IRA;
           an appraisal, fairness opinion, or similar 
        statement, whether verbal or written, concerning the 
        value of securities or other property if provided in 
        connection with a specific transaction or transactions 
        involving the acquisition, disposition, or exchange of 
        such securities or other property by the plan or IRA; 
        and
           a recommendation of a person who is also 
        going to receive a fee or other compensation for 
        providing any of the types of advice described above.
    Subject to specified requirements for each exception, the 
proposed regulations provide exceptions (referred to as ``carve 
outs''') for (1) certain counterparties in transactions with an 
employee benefit plan (referred to as the ``seller's carve 
out''); (2) swap and security-based swap transactions with an 
employee benefit plan; (3) employees of an employee benefit 
plan sponsor; (4) platform providers to employee benefit plans; 
(5) persons providing selection and monitoring assistance to 
employee benefit plans; (6) financial reports and valuations 
(including to an IRA or IRA owner); and (7) investment 
education (including to an IRA or IRA owner), under standards 
somewhat different from the standards in the existing DOL 
guidance. However, an exception does not apply if the person 
represents or acknowledges that it is acting as a fiduciary 
with respect to the advice. In conjunction with the proposed 
regulations, DOL proposed new prohibited transaction class 
exemptions, including a ``best interest contract'' (or BIC) 
exemption,\36\ as well as proposing changes to various existing 
class exemptions.
---------------------------------------------------------------------------
    \36\Proposed Best Interest Contract Exemption, 80 Fed. Reg. 21960 
(Apr. 20, 2015). This class exemption is proposed to become applicable 
at the same time as the 2015 proposed fiduciary regulations, eight 
months after publication of final regulations.
---------------------------------------------------------------------------
    The proposed BIC class exemption generally applies to 
compensation received by an investment advisor or related party 
in connection with a transaction (that is, a purchase, sale, or 
holding of assets) resulting from investment advice provided to 
``retirement investors,'' meaning plan participants or 
beneficiaries who direct the investment of the assets in their 
accounts, IRA owners who make investment decisions with respect 
to their IRAs, and a plan sponsor (or employee, officer, or 
director thereof) of a plan with fewer than 100 participants 
where the plan does not provide for participant-directed 
investments and the plan sponsor acts as a fiduciary who has 
authority to make plan investment decisions. Only advice in the 
best interest of the saver under the proposed regulation 
qualifies for the exemption.\37\
---------------------------------------------------------------------------
    \37\The preamble to the proposed exemption states, ``Under this 
standard, the Adviser and Financial Institution must put the interests 
of the Retirement Investor ahead of the financial interests of the 
Adviser, Financial Institution or their Affiliates, Related Entities or 
any other party.'' Proposed Best Interest Contract Exemption, 80 Fed. 
Reg. at 21970.
---------------------------------------------------------------------------
    Assets subject to the proposed BIC class exemption include 
the following: bank deposits; certificates of deposit (CDs); 
shares or interests in mutual funds; bank collective funds; 
insurance company separate accounts; exchange-traded REITs 
(Real Estate Investment Trusts); exchange-traded funds; 
corporate bonds offered pursuant to a registration statement 
under the Securities Act of 1933; agency debt securities and 
U.S. Treasury Securities; insurance and annuity contracts; 
guaranteed investment contracts; and exchange-traded equity 
securities.
    The proposed BIC class exemption requires that, before 
making any recommendations on investment transactions, the 
advisor and financial institution enter into a written contract 
with the retirement investor as follows:
           The contract affirmatively states that the 
        advisor and financial institution are fiduciaries under 
        ERISA, the Code, or both, with respect to any 
        investment recommendation to the retirement investor;
           Under the contract, the advisor and 
        financial institution specifically agree to adhere to 
        certain impartial conduct standards, which include 
        providing investment advice that is in the best 
        interest of the retirement investor, not recommending 
        investment in an asset if they (or affiliates) will 
        receive more than reasonable compensation in relation 
        to the total services they provide to the retirement 
        investor with respect to the investment, and not 
        providing any statements about an asset, fees, material 
        conflict of interest, and any other matter related to 
        the retirement investor's investment decision that are 
        misleading;
           Under the contract, the advisor and 
        financial institution provide certain warranties and 
        make certain disclosures related to fees and conflicts 
        of interest; and
           The contract must not have exculpatory 
        provisions disclaiming or otherwise limiting liability 
        of the advisor or financial institution for a violation 
        of the contract's terms, or a provision under which a 
        plan, IRA, or retirement investor waives or qualifies 
        its right to bring or participate in a class action or 
        other representative action in court in a dispute with 
        the advisor or financial institution.\38\
---------------------------------------------------------------------------
    \38\As described in DOL's background discussion of the proposed 
exemption, the contract terms to which advisors and financial 
institutions must agree in order to qualify for the proposed BIC class 
exemption potentially create a cause of action that may be used by 
retirement investors to enforce these contract terms. Proposed Best 
Interest Contract Exemption, 80 Fed. Reg. at 21972, 21973.
---------------------------------------------------------------------------

                          Summary of H.R. 4293

    The bill specifies that its purpose is to provide that 
advisors who (1) provide advice that is impermissible under the 
prohibited transaction provisions of ERISA or (2) breach the 
best interest standard for the provision of investment advice 
are subject to liability under ERISA.
    The bill amends the statutory definition of fiduciary by 
adding a definition of investment advice. In addition, subject 
to specified requirements, the bill adds a new statutory 
prohibited transaction exemption for any transaction, including 
a contract for service, between a person providing investment 
advice and the advice recipient in connection with the 
investment advice, and any transaction consisting of the 
provision of the investment advice.

                    DEFINITION OF INVESTMENT ADVICE

General rule

    As defined under the bill, investment advice includes 
certain recommendations rendered under certain conditions. 
Specifically, the recommendations that may be investment advice 
(if rendered under the conditions described below) are those 
that relate to the following:
           the advisability of acquiring, holding, 
        disposing, or exchanging any moneys or other property 
        of a plan by the plan, plan participants, or plan 
        beneficiaries, including any recommendation whether to 
        take a distribution of benefits from the plan or any 
        recommendation relating to the investment of any moneys 
        or other property of the plan to be distributed from 
        the plan;
           the management of moneys or other property 
        of the plan, including recommendations relating to the 
        management of moneys or other property to be 
        distributed from the plan; or
           the advisability of retaining or ceasing to 
        retain a person who would receive a fee or other 
        compensation for providing any of these types of 
        advice.\39\
---------------------------------------------------------------------------
    \39\Because a rollover always occurs in connection with a 
distribution, recommendations relating to moneys or other property to 
be distributed from a plan include recommendations relating to 
rollovers of such moneys or other property.
---------------------------------------------------------------------------
    In order for a recommendation to be investment advice, it 
must be rendered pursuant to either of the following:
           a written acknowledgment that the person is 
        a fiduciary with respect to the provision of the 
        recommendation; or
           a mutual agreement, arrangement, or 
        understanding, which may include limitations as to the 
        scope, timing, and responsibility to provide ongoing 
        monitoring or advice services, between the person 
        making the recommendation and the plan that the 
        recommendation is individualized to the plan and the 
        plan intends to materially rely on the recommendation 
        in making investment or management decisions with 
        respect to any moneys or other property of the plan.

Disclaimer of a mutual agreement, arrangement, or understanding

    Under the bill, any disclaimer of a mutual agreement, 
arrangement, or understanding with respect to a recommendation 
must only state the following: ``This information is not 
individualized to you, and you are not intended to materially 
rely on this information in making investment or management 
decisions.'' Further, this disclaimer is not effective unless 
it is in writing and is communicated in a clear and prominent 
manner, and an objective person would reasonably conclude that, 
based on all the facts and circumstances, there was not a 
mutual agreement, arrangement, or understanding.

Information not treated as investment advice

    Under the bill, information provided in the circumstances 
described below is not treated as a recommendation made 
pursuant to a mutual agreement, arrangement, or understanding 
for purposes of the definition of investment advice. The 
information in these circumstances shall contain the disclaimer 
described above.
    1. The information is provided in conjunction with full and 
fair disclosure in writing to a plan, plan participant, or 
beneficiary that the person providing the information is doing 
so in its marketing or sales capacity, including any 
information regarding the terms and conditions of the 
engagement of the person providing the information, and that 
the person is not intending to provide investment advice (as 
defined under the bill) or to otherwise act as a fiduciary to 
the plan or to act under the obligations of the best interest 
standard.
    2. The person providing the information is a counterparty 
or service provider to the plan in connection with any 
transaction based on the information (including a service 
arrangement, sale, purchase, loan, bilateral contract, 
swap,\40\ or security-based swap\41\). In addition, the plan is 
represented, in connection with the transaction, by a plan 
fiduciary that is independent of the person providing the 
information, and, except in the case of a swap or security-
based swap, independent of the plan sponsor. Further, prior to 
the transaction, the independent plan fiduciary represents in 
writing to the person providing the information that it is 
aware that the person has a financial interest in the 
transaction and that it has determined that the person is not 
intending to provide investment advice (as defined under the 
bill) or to otherwise act as a fiduciary to the plan.
---------------------------------------------------------------------------
    \40\A swap for this purpose is defined in section 1a of the 
Commodity Exchange Act, 7 U.S.C. Sec. 1a.
    \41\A security-based swap for this purpose is defined in section 
3(a) of the Securities Exchange Act, 15 U.S.C. Sec. 78c(a).
---------------------------------------------------------------------------
    3. The person providing the information is an employee of 
any sponsoring employer or employee organization who provides 
the information to the plan for no fee or other compensation 
other than the employee's normal compensation.
    4. The person providing the information discloses in 
writing to the plan fiduciary that the person is not 
undertaking to provide investment advice as a fiduciary. In 
addition, the information provided consists solely of--
           making available to the plan, without regard 
        to the individualized needs of the plan, securities or 
        other property through a platform or similar mechanism 
        from which a plan fiduciary may select or monitor 
        investment alternatives, including qualified default 
        investment alternatives, into which plan participants 
        or beneficiaries may direct the investment of assets 
        held in, or contributed to, their individual accounts, 
        or
           in connection with a platform or similar 
        mechanism described above, either (1) identifying 
        investment alternatives that meet objective criteria 
        specified by the plan, such as criteria concerning 
        expense ratios, fund sizes, types of asset, or credit 
        quality, or (2) providing objective financial data and 
        comparisons with independent benchmarks to the plan.
    5. The information consists solely of valuation 
information.
    6. The information consists solely of the following:
           information described in DOL Interpretive 
        Bulletin 96-1 as in effect on January 1, 2015, 
        regardless of whether the education is provided to a 
        plan or plan fiduciary or a participant or beneficiary,
           information provided to participants or 
        beneficiaries regarding the factors to consider in 
        deciding whether to elect to receive a distribution 
        from a plan or an IRA and whether to roll over the 
        distribution to a plan or an IRA, so long as any 
        examples of different distribution alternatives are 
        accompanied by all material facts and assumptions on 
        which the examples are based, or
           any additional information treated as 
        education by the Secretary.

                               EXEMPTION

    The bill provides a prohibited transaction exemption for 
any transaction, including a contract for service, between a 
person (referred to herein as the ``investment advisor'') 
providing investment advice for a fee or other compensation, 
direct or indirect, with respect to any moneys or other 
property of the plan, and the advice recipient in connection 
with the investment advice, as well as any transaction 
consisting of the provision of the investment advice.
    The exemption applies if the following conditions are 
met:\42\
---------------------------------------------------------------------------
    \42\Like all fiduciary acts, transactions covered by the exemption 
are also subject to the general fiduciary standard under ERISA.
---------------------------------------------------------------------------
    1. No more than reasonable compensation is paid for the 
investment advice.\43\
---------------------------------------------------------------------------
    \43\Reasonable compensation for this purpose is determined as under 
the present-law prohibited transaction exemption under ERISA section 
408(b)(2) for an arrangement with a disqualified person for services 
necessary for the establishment or operation of a plan if no more than 
reasonable compensation is paid therefor.
---------------------------------------------------------------------------
    2. If the investment advice is based on a limited range of 
investment options, which may consist, in whole or in part, of 
proprietary products, the limitations must be clearly disclosed 
to the advice recipient before any transaction based on the 
investment advice in the form of a notice that states only the 
following: ``This recommendation is based on a limited range of 
investment options, and the same or similar investments may be 
available at a different cost (greater or lesser) from other 
sources.''
    3. If the investment advice may result in variable 
compensation to the investment advisor (or any affiliate\44\ 
thereof), the receipt of the compensation must be clearly 
disclosed to the advice recipient before any transaction based 
on the investment advice. For this purpose, clear disclosure of 
variable compensation, must include, in a manner calculated to 
be understood by the average individual, each of the following:
---------------------------------------------------------------------------
    \44\Under the bill, affiliate is defined as under the present-law 
exemption relating to investment advice, that is, an affiliated person 
as defined under section 2(a)(3) of the Investment Company Act of 1940. 
15 U.S.C. Sec. 80a-2(a)(3).
---------------------------------------------------------------------------
           A notice that states only the following: 
        ``This recommendation may result in varying amounts of 
        fees or other compensation to the person providing the 
        recommendation (or its affiliate), and the same or 
        similar investments may be available at a different 
        cost (greater or lesser) from other sources.''\45\
---------------------------------------------------------------------------
    \45\Any regulations or other administrative guidance implementing 
this requirement may not require this notice to be updated more 
frequently than annually.
---------------------------------------------------------------------------
           A description of any fee or other 
        compensation that is directly or indirectly payable to 
        the investment advisor (or its affiliate) by the advice 
        recipient with respect to the transaction (expressed as 
        an amount, formula, percentage of assets, per capita 
        charge, or estimate or range of the compensation).
           A description of the types and ranges of any 
        compensation that may be directly or indirectly payable 
        to the investment advisor (or its affiliate) by any 
        third party in connection with the transaction 
        (expressed as an amount, formula, percentage of assets, 
        per capita charge, or estimate or range of the 
        compensation).
           On request of the advice recipient, a 
        disclosure of the specific amounts of compensation that 
        the investment advisor will receive in connection with 
        the particular transaction (expressed as an amount, 
        formula, percentage of assets, per capita charge, or 
        estimate of the compensation).
    A notice with respect to limitations on the range of 
investment options on which investment advice is based or with 
respect to variable compensation shall have no effect on any 
other notice otherwise required without regard to ERISA and 
shall be provided in addition to, and not in lieu of, any other 
such notice.
    Under the bill, a recommendation will not fail to satisfy 
the conditions for the exemption solely because the person, 
acting in good faith and with reasonable diligence, makes an 
error or omission in disclosing the information specified above 
if the person discloses the correct information to the advice 
recipient as soon as practicable, but not later than 30 days 
from the date on which the person knows of the error or 
omission.

                             EFFECTIVE DATE

    The amendments made by the bill generally are effective on 
the 61st day after the date of enactment of the bill and apply 
with respect to information provided or recommendations made on 
or after two years after the date of enactment. However, if, 
before the 61st day after the date of enactment, a bill or 
joint resolution is enacted that specifically approves any 
rules or administrative positions that are promulgated under, 
or applicable for purposes of, the ERISA statutory definition 
of fiduciary and are not in effect on January 1, 2015, the 
amendments made by the bill will not take effect. In addition, 
the amendments made by the bill do not apply to any service or 
transaction rendered, entered into, or for which a person has 
been compensated before the date on which the amendments 
generally become effective.
    DOL is prohibited from amending any rules or administrative 
positions promulgated under, or applicable for purposes of, the 
ERISA statutory definition of fiduciary (including DOL 
Interpretive Bulletin 96-1 and Advisory Opinion 2005-23A), and 
no rule or administrative position promulgated by DOL before 
the date of enactment of the bill but not effective on January 
1, 2015, may become effective unless a bill or joint resolution 
as described above is enacted not later than 60 days after the 
date of enactment of the bill. If the amendments made by the 
bill take effect, nothing in the bill is to be construed to 
prohibit the issuance of guidance to carry out the amendments 
so long as the guidance is necessary to implement the 
amendments. Until the time when regulations or other guidance 
are issued to carry out the amendments, a plan or a fiduciary 
will be treated as meeting the requirements of the amendments 
if the plan or fiduciary, as applicable, complies with a 
reasonable good faith interpretation of the amendments.

                            Committee Views


                     DOL'S ABANDONED 2010 PROPOSAL

    The Obama administration has long argued the regulatory 
definition of an ``investment advice'' fiduciary is 
insufficiently restrictive.\46\ To address this concern, in 
2010, EBSA issued a complicated proposed regulation expanding 
the definition of ``fiduciary.''\47\ On September 19, 2011, in 
the face of bipartisan opposition from the Committee and others 
in Congress related to access to advice and cost, EBSA withdrew 
its original proposal and announced it would repropose a 
revised rulemaking.\48\
---------------------------------------------------------------------------
    \46\See Council of Economic Advisors, The Effects of Conflicted 
Investment Advice on Retirement Saving, (Feb. 2015) http://
www.whitehouse.gov/sites/default/files/docs/cea_coi_report_final.pdf. 
[hereinafter CEA Report].
    \47\2010 Proposal, 75 Fed. Reg. at 65263.
    \48\See Press Release, Dept. of Labor, U.S. Labor Department's EBSA 
to re-propose rule on definition of a fiduciary (Sept. 19, 2011), 
http://www.dol.gov/ebsa/newsroom/2011/11-1382-NAT.html.
---------------------------------------------------------------------------

                   CONCERNS WITH DOL'S 2015 PROPOSAL

DOL's April 2015 Notice of Proposed Rulemaking

    At a February 2015 speech at AARP, President Obama 
announced his intention to go forward with this rulemaking.\49\ 
In this speech and subsequent public statements, the 
administration rebranded the proposed regulation as a consumer 
protection against ``backdoor payments and hidden fees'' 
generated by structural conflicts of interest in the retirement 
advice industry. After review by the Office of Management and 
Budget (OMB), DOL released its new notice of proposed 
rulemaking (the 2015 NPRM) in April 2015.\50\ The new proposal 
was preceded by a Council of Economic Advisors report arguing 
that ``conflicted advice'' costs Americans $17 billion 
annually.\51\ This figure assumes that IRA investors were duped 
into rolling over 401(k) funds into high cost mutual funds by 
advisors and brokers and, as a result, pay on average 1 percent 
more annually. These assumptions have come under intense 
scrutiny from analysts who argue IRA holders actually pay only 
0.16 percent more and that these fees are justifiable due to a 
higher level of service.\52\
---------------------------------------------------------------------------
    \49\Press Release, White House Office of the Press Secretary, 
Remarks by the President at the AARP (Feb. 23, 2015), http://
www.whitehouse.gov/the-press-office/2015/02/23/remarks-president-aarp.
    \50\Definition of the Term ``Fiduciary,'' 80 Fed. Reg. 21928.
    \51\CEA Report, supra note 46, at 2.
    \52\Letter from David M. Abbey, Deputy Gen. Counsel, Retirement 
Policy, Inv. Co. Inst. and Brian Reid, Chief Economist, Investment 
Company Inst., to the Hon. Howard Shelanski, Admin., Office of Info. 
and Reg. Aff., OMB (Apr. 7, 2015), http://www.ici.org/pdf/
15_ici_omb_data.pdf.
---------------------------------------------------------------------------

Proposed exemptions

    In addition to the NPRM itself, DOL's proposed regulatory 
package also includes six prohibited transaction exemptions--
some new and a few revisions of existing exemptions. The most 
notable is the BIC exemption. DOL claims this exemption will 
provide a framework permitting newly-minted fiduciaries to 
continue to receive commissions and other payments that would 
otherwise be prohibited by ERISA. However, to qualify for the 
exemption, an investment advisor would need to enter into a 
contract (before any investment recommendation is made) 
acknowledging fiduciary status and agree to abide by certain 
requirements. While advisors should work in the best interest 
of their clients, this requirement is unworkable because 
potential clients would be required to sign this contract 
before the advisory relationship actually begins.\53\
---------------------------------------------------------------------------
    \53\Restricting Access to Financial Advice: Evaluating the Costs 
and Consequences for Working Families and Retirees: Hearing Before the 
Subcomm. on Health, Employment, Labor, and Pensions of the H. Comm. on 
Educ. and the Workforce, 114th Cong. 8 (Jun. 17, 2015) (written 
testimony of Jack Haley, Exec. Vice President, Fidelity Invs.).
---------------------------------------------------------------------------

Summary of key concerns

    Based on overwhelming testimony from a diverse group of 
stakeholders, the Committee has concluded the DOL proposal 
would disrupt advisory relationships, contains a multitude of 
technical shortcomings, and would bring about a number of 
unacceptable consequences. There are three general criticisms: 
(1) if finalized, the proposal would restrict access to 
affordable financial advice for lower- and middle-income 
Americans; (2) if finalized, the proposal would make it harder 
for employers (especially small businesses) to set up 
retirement plans; and (3) DOL's rushed and uncoordinated 
process resulted in an unworkable proposal. DOL received 
comment letters from stakeholders and Congress reflecting these 
concerns.

Restricted access to advice

    The proposed regulation will have the net effect of locking 
lower- and middle-income investors out of the advice 
market.\54\ Advisors should have a legal duty to act in the 
``best interests'' of their clients; however, ``fiduciary'' 
status would result in the legal prohibition of most 
transactions because of how the advisor is compensated.\55\ At 
a HELP Subcommittee hearing in June 2015, Mr. Kent Mason, 
Partner of Davis and Harman LLP, testified to this effect:
---------------------------------------------------------------------------
    \54\Restricting Access to Financial Advice: Evaluating the Costs 
and Consequences for Working Families and Retirees: Hearing Before the 
Subcomm. on Health, Employment, Labor, and Pensions of the H. Comm. on 
Educ. and the Workforce, 114th Cong. 5 (Jun. 17, 2015) (written 
testimony of Kent Mason, Partner, Davis & Harman LLP).
    \55\Id. at 3-4.
---------------------------------------------------------------------------
          The framework set up by the DOL could work 
        conceptually, but in its current form, it would, like 
        the original 2010 proposal, cut off the option for low 
        and middle-income individuals and small businesses to 
        receive personalized investment assistance, even if 
        that assistance is in the best interest of the 
        recipient.\56\
---------------------------------------------------------------------------
    \56\Id. at 5.

    DOL claims its goal is not to eliminate commission-based 
accounts,\57\ but it failed to adequately rectify this gaping 
inadequacy in the proposal. For example, the BIC exemption--the 
main exemption that would be used--is too complex and 
ultimately unusable.\58\ Specifically, while the BIC exemption 
permits advisors to continue to receive commissions, there are 
several onerous disclosure and information-gathering 
requirements that will increase costs, which will be passed on 
to investors or make continued advice to small- and mid-size 
accounts unaffordable and thereby unavailable.\59\ At the same 
hearing, Mr. Dean Harman, CFP, Managing Director at Harman 
Wealth Management, stated:
---------------------------------------------------------------------------
    \57\Restricting Access to Financial Advice: Evaluating the Costs 
and Consequences for Working Families and Retirees: Hearing Before the 
Subcomm. on Health, Employment, Labor, and Pensions of the H. Comm. on 
Educ. and the Workforce, 114th Cong. 5 (Jun. 17, 2015) (written 
testimony of The Hon. Thomas E. Perez, U.S. Sec'y, Dept. of Labor).
    \58\Restricting Access to Financial Advice: Evaluating the Costs 
and Consequences for Working Families and Retirees: Hearing Before the 
Subcomm. on Health, Employment, Labor, and Pensions of the H. Comm. on 
Educ. and the Workforce, 114th Cong. 10 (Jun. 17, 2015) (written 
testimony of Dean Harman, CFP, Managing Dir., Harman Wealth 
Management).
    \59\Id. at 14.

          The DOL has created a new exemption, [the BIC 
        exemption or BICE] Unfortunately, BICE has missed the 
        mark and, as currently proposed, would lead to the same 
        unwanted consequence as the 2010 proposalby hugely 
        increasing the burdens on financial advisors and 
        financial institutions.\60\
---------------------------------------------------------------------------
    \60\Id. at 15.

    Even more troubling, an advisor and client would need to 
have a signed contract prior to any meaningful conversation. At 
the same hearing, Mr. Jack Haley, Executive Vice President of 
Fidelity Investments, summarized the consequences of this 
---------------------------------------------------------------------------
proposed rule:

          Today, we are able to help these workers by 
        discussing potential product and service offerings with 
        them. The proposed DOL exemption would require a signed 
        contract before a conversation could even occur. And 
        since our customers speak to different phone reps each 
        time they call, the rule would require each of our 
        customers to have a signed contact with each of our 
        phone reps in order to get answers to these basic 
        questions. For Fidelity, requiring nearing 25 million 
        customers to sign contracts before we can continue to 
        service them would be a significant impediment to 
        ongoing engagement with them, potentially suppressing 
        their savings levels and retirement security.\61\
---------------------------------------------------------------------------
    \61\Haley, supra note 53, at 8.

    The exemption imposes burdensome new disclosure and data 
collection requirements on investment advisors.\62\ However, 
the exemption would only cover recommendations with respect to 
limited categories of investments; fiduciaries could not 
recommend real estate, securities futures, or some non-publicly 
traded securities, limiting investor options.\63\ The exemption 
also requires reporting and prediction of all direct and 
indirect compensation for recommended investments, costs for 
competing alternative products, and cost projections at one-, 
five-, and ten-year intervals.\64\
---------------------------------------------------------------------------
    \62\Proposed Best Interest Contract Exemption, 80 Fed. Reg. at 
21987.
    \63\Principles for Ensuring Retirement Advice Serves the Best 
Interests of Working Families and Retirees: Hearing Before the Subcomm. 
on Health, Employment, Labor, and Pensions of the H. Comm. on Educ. and 
the Workforce, 114th Cong. 5 (Dec. 2, 2015) (written testimony of Jules 
Gaudreau, Jr., ChFC, CIC, President, The Gaudreau Group, Inc.).
    \64\Proposed Best Interest Contract Exemption, 80 Fed. Reg. at 
21985.
---------------------------------------------------------------------------
    The Committee has heard extensive witness testimony from 
advisors and other experts explaining why these requirements 
are unworkable. For example, at a June 17, 2015, HELP 
Subcommittee hearing, Dr. Brian Reid, Ph.D. Chief Economist, 
Investment Company Institute, testified:

          The Best Interest Contact Exemption is prohibitively 
        costly, in addition to being convoluted and unworkable. 
        Brokers subject to the Exemption's many new 
        limitations, burdens, and costs, as well as increased 
        exposure liability, are not likely to work for less 
        compensation, as the DOL presumes.\65\
---------------------------------------------------------------------------
    \65\Restricting Access to Financial Advice: Evaluating the Costs 
and Consequences for Working Families and Retirees: Hearing Before the 
Subcomm. on Health, Employment, Labor, and Pensions of the H. Comm. on 
Educ. and the Workforce, 114th Cong. 4 (Jun. 17, 2015) (written 
testimony of Dr. Brian Reid, Ph.D., Chief Economist, Inv. Co. Inst.).

---------------------------------------------------------------------------
    At the same hearing, Mr. Mason asserted:

          Under the DOL proposal, financial institutions would 
        be prohibited from providing any specific assistance to 
        individuals seeking help with the rollover and 
        distribution process. This is the case in large part 
        because any financial institution providing IRA 
        services would have a conflict of interest with respect 
        to advice regarding the rollover decision, thus 
        creating a prohibited transaction. Most read the BIC 
        exemption in the re-proposal as not covering this type 
        of assistance, thus rendering the assistance 
        categorically prohibited. Others read the BIC exemption 
        as technically applicable to this assistance, but 
        effectively unavailable because of the exemption's 
        unworkable conditions. Either interpretation denies 
        assistance to many in need of help in navigating the 
        retirement savings options that exist after termination 
        of employment. Among many unfortunate consequences, 
        this would cause a drastic curtailment of call center, 
        brokerage, and other assistance to those terminating 
        employment, leading to greatly increased leakage of 
        assets from the retirement system.\66\
---------------------------------------------------------------------------
    \66\Mason, supra note 54, at 8.

    Mr. Jules Gaudreau, Jr. ChFC, CIC, President of The 
Gaudreau Group, Inc., at a December 2, 2015, HELP Subcommittee 
---------------------------------------------------------------------------
hearing echoed these concerns:

          It is, therefore, important to make sure that U.S. 
        retirement savings and tax policies encourage 
        individuals to take personal responsibility for the 
        need to save to protect their financial futures. It is 
        also important to be sure that the rules in place to 
        protect these savers and savings do not so burden the 
        mechanisms for saving that the rules themselves become 
        a barrier to achieving the goal of post-retirement 
        financial security.\67\
---------------------------------------------------------------------------
    \67\Gaudreau, supra note 63, at 3.

    There is also concern that the disclosure requirements will 
overwhelm investors with the volume of fine print, resulting in 
confusion or functional non-disclosure.\68\ Cumulatively, these 
burdensome requirements will serve to discourage savings, 
ultimately harming low- and middle-income savers. Finally, 
fiduciaries of employee benefit plans would continue to be 
subject to the DOL enforcement regime, while aggrieved private 
parties could sue IRA fiduciaries under state contract law, 
empowering the plaintiffs' bar.\69\
---------------------------------------------------------------------------
    \68\Id. at 4.
    \69\Proposed Best Interest Contract Exemption, 80 Fed. Reg. at 
21985; Principles for Ensuring Retirement Advice Serves the Best 
Interests of Working Families and Retirees: Hearing Before the Subcomm. 
on Health, Employment, Labor, and Pensions of the H. Comm. on Educ. and 
the Workforce, 114th Cong. 7 (Dec. 2, 2015) (written testimony of the 
Hon. Bradford Campbell, Counsel, Drinker Biddle & Reath LLP).
---------------------------------------------------------------------------

Fewer employer-provided retirement plans

    Small business owners provide nearly half a trillion 
dollars in retirement savings for 9 million households.\70\ 
Employers are very concerned that the new rule makes it much 
harder, or perhaps impossible, for small businesses to set up 
retirement plans and for plan participants to receive advice. 
During the June 17, 2015, HELP Subcommittee hearing, Dr. Brian 
Reid, Ph.D., Chief Economist, Investment Company Institute, 
warned:
---------------------------------------------------------------------------
    \70\U.S. Chamber of Commerce, Locked Out of Retirement: The Threat 
to Small Business Retirement Savings (Jun. 9, 2015), http://
www.centerforcapitalmarkets.com/wp-content/uploads/2013/08/US-Chamber-
Locked-Out-of-Retirement-White-Paper.pdf.

          Research shows that investors with access to advice 
        have more diversified portfolios and take on more 
        appropriate levels of risk than those who do not 
        receive advice or information. Indeed, in its 
        justification of an earlier rule change, the DOL said 
        that retirement investors who do not receive investment 
        advice are twice as likely to make poor investment 
        choices as those who do receive that advice. The 
        benefits of advice--and, conversely, the harm of losing 
        access to advice--are significant.\71\
---------------------------------------------------------------------------
    \71\Reid, supra note 65, at 6.

    At the same hearing, Mr. Jack Haley, Executive Vice 
---------------------------------------------------------------------------
President of Fidelity Investments, concurred:

          Under the DOL proposal, access to affordable 
        financial help will be effectively prohibited--even 
        when it is the in investor's best interest. Small 
        businesses and lower- and middle-income investors will 
        be harmed the most. . . . The proposed DOL rule 
        specifically prohibits service providers from assisting 
        small businesses. The result would have a devastating 
        impact on retirement coverage and savings for millions 
        of workers employed by small businesses across the 
        country.\72\
---------------------------------------------------------------------------
    \72\Haley, supra note 53, at 3, 6.

    Additionally, DOL's proposed rule holds large and small 
businesses to different standards, with greater restrictions 
and additional burdens placed on small businesses. At a 
December 2, 2015, HELP Subcommittee hearing, Ms. Rachel Doba, 
President of DB Engineering, LLC, voiced concerns about the 
effects of the more stringent rules in DOL's proposal on her 
---------------------------------------------------------------------------
small business and employees:

          DOL seems to believe that small business owners, such 
        as me, are not as sophisticated as large businesses, 
        and therefore, need additional protections. The 
        validity of this rationale is based on faulty 
        assumptions, and does not justify discriminatory 
        treatment. When I work with my financial advisor, I am 
        aware that he is providing a service for a fee and 
        selling a product. I would not be able to run a 
        successful business if I were not able to understand 
        when I am involved in a sales discussion--particularly, 
        if it follows a basic disclosure that an advisor is 
        selling a proprietary financial product, that the 
        advisor is paid to see the product, and the advisor is 
        not providing fiduciary advice. . . . The assumption 
        that small plans, participants and IRA owners cannot 
        understand the difference between sales and advice does 
        not match my real world experience. The Department can 
        protect participants, IRA owners, and small plans with 
        the same kind of disclosures that it requires of large 
        plans under the large plan carve out, but without 
        eliminating their right to choose the services and 
        products that best fit their needs.\73\
---------------------------------------------------------------------------
    \73\Principles for Ensuring Retirement Advice Serves the Best 
Interests of Working Families and Retirees: Hearing Before the Subcomm. 
on Health, Employment, Labor, and Pensions of the H. Comm. on Educ. and 
the Workforce, 114th Cong. 5 (Dec. 2, 2015) (written testimony of 
Rachel Doba, President, DB Engineering, LLC).

    At the same hearing, the Honorable Brad Campbell, Counsel, 
Drinker Biddle & Reath LLP, and former U.S. Assistant Secretary 
of Labor for Employee Benefits, also warned about the potential 
detrimental effects of DOL's proposal on small businesses, 
saying, ``Small plans and small-account IRA owners may be most 
in need of basic investment advice, but they would be least 
likely to be served by the Proposal due to the increased 
compliance costs and increased legal liability risks it 
unnecessarily creates.''\74\
---------------------------------------------------------------------------
    \74\Principles for Ensuring Retirement Advice Serves the Best 
Interests of Working Families and Retirees: Hearing Before the Subcomm. 
on Health, Employment, Labor, and Pensions of the H. Comm. on Educ. and 
the Workforce, 114th Cong. 5 (Dec. 2, 2015) (written testimony of the 
Hon. Bradford Campbell, Counsel, Drinker Biddle & Reath LLP).
---------------------------------------------------------------------------
    Because of the complicated new requirements, institutions 
providing retirement plans would be prohibited from offering 
assistance to small business plan sponsors in selecting 
investment options to offer their employees. While public 
policy should encourage employers to help workers save for 
retirement, it is counterproductive for DOL to refuse to 
provide an exemption for advice provided to small businesses.
    Even worse, the DOL proposal actually will drive up costs 
for small businesses, while shielding larger businesses from 
the same costs. The proposal requires that advisors to plans 
with fewer than 100 participants or less than $100 million in 
plan assets assume fiduciary status, with the attendant burdens 
and costs passed onto the small business.\75\ However, larger 
plans do not have this requirement. To continue to provide 
services to small businesses, advisors will either need to 
increase fees or qualify for an exemption. Ms. Rachel Doba, 
provided further testimony to this effect at the December 2, 
2015, HELP Subcommittee hearing:

    \75\Definition of the Term ``Fiduciary,'' 80 Fed. Reg. at 12957.

          Because advisors to small businesses are not carved 
        out of the fiduciary definition, they must change their 
        fee arrangements, or qualify for a special rule called 
        an ``exemption'' in order to provide services on the 
        same terms [as] before. . . . There are certain 
        exceptions to these new rules, called ``prohibited 
        transaction exemptions,'' but as DOL has proposed the 
        new rules, the exemptions generally won't help 
        financial advisors who are working with small 
        businesses to set up plans.\76\
---------------------------------------------------------------------------
    \76\Doba, supra note 73, at 6.

    However, while these exemptions apply for IRAs, it is not 
clear that the exemption will apply for other tax-preferred 
vehicles frequently used by small businesses.\77\ Echoing 
similar concerns, the National Federation of Independent 
Business sent a letter to DOL noting its concern that advisors 
will no longer provide advice to small businesses that 
establish retirement plans because the proposed regulation 
could prohibit (or make cost-prohibitive) the arrangements 
currently prevalent.\78\ Additionally, the Small Business 
Administration's Office of Advocacy submitted a comment letter 
to the Department warning, ``the proposed rule would likely 
increase the [advisors'] costs and burdens associated with 
serving smaller plans . . . [and] could limit financial 
advisors' ability to offer savings and investment advice to 
clients . . . ultimately lead[ing] advisors to stop providing 
retirement services to small businesses.''\79\
---------------------------------------------------------------------------
    \77\Sec. 102 of Reorganization Plan No. 4 of 1978, 43 Fed. Reg. 
47713.
    \78\Letter from Amanda Austin, Vice President, Public Policy, Nat'l 
Fed'n of Indep. Bus. to the Emp. Benefits Sec. Admin. (May 5, 2015), 
http://www.dol.gov/ebsa/pdf/1210-AB32-2-00039.pdf.
    \79\Comment letter from the Small Bus. Admin's Office of Advocacy 
5, 6 (Jul. 17, 2015),
http://www.dol.gov/ebsa/pdf/1210-AB32-2-00403.pdf.
---------------------------------------------------------------------------

Procedural concerns

    DOL's process in developing the rule and considering 
industry comments has been called into question. Through 
oversight inquiries and a request for an extended comment 
period, the Committee examined the process that led to the 
proposal.
    The Committee also has procedural concerns with the 
proposed rule. According to some estimates, the average OMB 
review for DOL proposals is nearly 120 days.\80\ However, the 
2015 NPRM was only in the OMB formal review process for less 
than half the average time (only 50 days). This shorter 
timeframe indicates the administration has not adequately 
considered stakeholder concerns. At the HELP Subcommittee's 
June 17, 2015, hearing, Mr. Kent Mason explained DOL's 
defective process:

    \80\Meagan Leonhardt, DOL Fiduciary Rule Released Publicly (Apr. 
13, 2015), http://wealthmanagement.com/industry/dol-fiduciary-rule-
released-publicly.

          OMB's 50-day review of the re-proposal was 
        startlingly brief:
           The review period was almost a month shorter 
        than the next shortest review period for any 
        significant retirement regulatory proposal in the last 
        10 years.
           It was less than half the average review 
        period of other significant retirement regulatory 
        proposals in the last 10 years (which was 109 days).
           Equally startling is that the review period 
        after OMB received significant public input was 
        actually just a few days. For example, a critical 
        meeting to discuss new information was held on April 9, 
        2015, and the DOL proposal was issued on April 14, 
        2015, a mere five days later.\81\
---------------------------------------------------------------------------
    \81\Mason, supra note 54, at 11.

    Additionally, the proposed rule provided the public less 
time to review and offer feedback than the department's 2010 
proposal (90 days versus 104 days respectively). A number of 
letters requesting an extension of the comment period were 
circulated, including a letter from Education and the Workforce 
Committee Republicans.\82\ Finally, the 2015 NPRM provides for 
an eight-month transition period between final approval and the 
effective date of the new rules. According to stakeholders, 
eight months is insufficient to overhaul business operations 
and data collection systems necessary to comply with the 
requirements of both the 2015 NPRM and the primary exemption--
the BIC exemption.\83\
---------------------------------------------------------------------------
    \82\Letter from the Hon. John Kline, Chairman, H. Comm. on Educ. 
and the Workforce, et al to the Hon. Thomas E. Perez, Sec'y, Dep't of 
Labor (May 29, 2015), http://edworkforce.house.gov/uploadedfiles/05-29-
15-dol-fiduciary_comment_extension.pdf.; See also, e.g., Letter from 
the Hon. Frederica S. Wilson, et al to the Hon. Thomas Perez, Sec'y, 
Dep't of Labor (May 6, 2015), http://wealthmanagement.com/site-files/
wealthmanagement.com/files/uploads/2015/02/
Fiduciary%20Rule%20Letter%20to%20Secretary%20Perez.pdf (Letter from 18 
House Democrats.)
    \83\Mason, supra note 54, at 10.
---------------------------------------------------------------------------

Congressional comment letters

    The 2015 NPRM received thousands of comments, including 
numerous letters from Members of Congress.\84\ Notably, 46 
House Democrats signed a letter led by HELP Subcommittee 
Ranking Member Polis (D-CO) calling for publication of the 
revised rule prior to finalizing, as well as a supplemental 
comment period.\85\ Another letter, signed by 96 House 
Democrats, expressed concerns that the current proposal could 
reduce access to investment advice for both small businesses 
and low- and middle-income individuals.\86\ In all, over half 
of House Democrats have signed letters questioning the DOL's 
proposal.
---------------------------------------------------------------------------
    \84\Comments received through September 24, 2015, are published on 
EBSA's website, 
http://www.dol.gov/ebsa/regs/cmt-1210-AB32-2.html.
    \85\See, e.g., Letter from the Hon. Jared Polis, et al to the Hon. 
Thomas E. Perez, Sec'y, Dep't of Labor (Oct. 30, 2015), http://
df2d4c59ccf47b6bc124-2951e9520e07371
e6076e0c8af900fc2.r54.cf5.rackcdn.com/wp-content/uploads/Secretary-
Perez-Fiduciary-Comment-Period-Letter-10-30-15.pdf.
    \86\Letter from the Hon. Gwen Moore, et al to the Hon. Thomas E. 
Perez, Sec'y, Dep't of Labor (Sept. 24, 2015) (on file with the 
Committee).
---------------------------------------------------------------------------
    On July 21, 2015, every Republican member of the Committee 
on Education and the Workforce signed a comment letter calling 
for the proposal to be withdrawn, highlighting testimony from a 
hearing held by the HELP Subcommittee on June 17, 2015.\87\ 
This comment letter also explained the Committee's longstanding 
interest in pursuing a responsible best interest standard.
---------------------------------------------------------------------------
    \87\Letter from the Hon. John Kline, Chairman, H. Comm. on Educ. 
and the Workforce, et al to the Hon. Thomas E. Perez, Sec'y, Dep't of 
Labor (July 21, 2015), http://edworkforce.house.gov/uploadedfiles/7-21-
15-dol_fiduciary_rule.pdf.
---------------------------------------------------------------------------

H.R. 4293 AND H.R. 4294: BIPARTISAN BILLS ENHANCING RETIREMENT SECURITY

    After the HELP Subcommittee's June 17, 2015, hearing,\88\ a 
number of other committees examined the rule, including the 
House Committee on Financial Services\89\ and the House 
Committee on Ways and Means.\90\ On November 5, 2015, HELP 
Subcommittee Chairman Roe led a group of bipartisan lawmakers 
in announcing their intention to introduce a substantive 
alternative to the DOL's proposed fiduciary regulation.\91\ 
Subsequently, two complementary bills were introduced on 
December 18, 2015. H.R. 4293 (ARAPA) amends ERISA, while H.R. 
4294 (SAVERS Act) adds similar provisions in the Code. The 
technical provisions of this legislation were described supra.
---------------------------------------------------------------------------
    \88\Restricting Access to Financial Advice: Evaluating the Costs 
and Consequences for Working Families and Retirees: Hearing Before the 
Subcomm. on Health, Employment, Labor, and Pensions of the H. Comm. on 
Educ. and the Workforce, 114th Cong. (Jun. 17, 2015).
    \89\Preserving Retirement Security and Investment Choices for All 
Americans: Joint Hearing Before the Subcomms. on Oversight and 
Investigations and Capital Markets and Government Sponsored Enterprises 
of the H. Comm. on Financial Services, 114th Cong. (Sept. 10, 2015).
    \90\Hearing on the Department of Labor's Proposed Fiduciary Rule: 
Hearing Before the Subcomm. on Oversight of the H. Comm. on Ways and 
Means, 114th Cong. (Sept. 30, 2015).
    \91\Press Release, H. Comm. on Educ. and the Workforce, Bipartisan 
House Members Outline Legislative Principles to Ensure Retirement 
Advisors Protect Clients' Best Interests (Nov. 5, 2015), http://
edworkforce.house.gov/news/documentsingle.aspx?DocumentID=399747.
---------------------------------------------------------------------------
    The legislation reflects the sponsors' shared commitment to 
preserving access to affordable retirement advice for workers, 
retirees, and small business owners. More specifically, the 
legislation embodies the following principles:
     Promoting families and individuals saving for a 
financially-secure retirement is an essential public policy 
good.
     Retirement advisors must serve in their clients' 
best interests and must be required to do so.
     Retirement advisors must deliver clear, simple, 
and relevant disclosure of material conflicts, including 
compensation received and all investment fees to individuals 
saving for retirement.
     Public policies must protect access to investment 
advice and education for low- and middle-income workers and 
retirees.
     Public policies should never deny individuals the 
financial information they need to make informed decisions.
     Investor choice and consumer access to all 
investment services--such as proprietary products, commission-
based sales, and guaranteed lifetime income--should be 
preserved in a way that does not pick winners and losers.
     Small business owners should have access to the 
financial advice and products they need to establish and 
maintain retirement plans and help workers save for retirement.
    At their core, the bipartisan legislative proposals achieve 
DOL's stated goal of ensuring that retirement advisors act in 
their clients' best interests. However, unlike the DOL's 
proposal, the bills effectively balance this higher standard 
with the need to protect access to affordable retirement advice 
for low- and middle-income workers and retirees.

                               Conclusion

    H.R. 4293, the Affordable Retirement Advice Protection Act, 
enhances retirement security without the pitfalls of the recent 
DOL proposed regulation amending the regulatory definition of 
``fiduciary'' in ERISA. The bill prohibits DOL from 
implementing its proposed regulation without affirmative 
Congressional approval. The bill also updates current law to 
ensure that all financial professionals providing personalized 
advice about investments, distributions, or the use of other 
fiduciaries are legally required to act in the best interest of 
their customers. However, unlike the DOL proposed regulation, 
the bill ensures individual and small businesses have continued 
access to affordable retirement advice.

                           Section-by-Section

    The following is a section-by-section analysis of the 
Amendment in the Nature of a Substitute offered by Rep. Roe and 
reported favorably by the Committee.
    Section 1. Provides the short title is the ``Affordable 
Retirement Advice Protection Act.''
    Section 2. Describes the purpose of the Act to provide that 
financial advisors that violate the prohibited transaction 
rules under the Employee Retirement Income Security Act of 1974 
ERISA or breach the best interest standard for the provision of 
investment advice are subject to liability under ERISA.
    Section 3. Amends the definition of ``investment advice'' 
under ERISA; exempts certain transactions from ERISA 
prohibitions; prescribes effective dates and transition rules.

                       Explanation of Amendments

    The amendments, including the amendment in the nature of a 
substitute, are explained in the body of this report.

              Application of Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1 requires a 
description of the application of this bill to the legislative 
branch. H.R. 4293, the Affordable Retirement Advice Protection 
Act (ARAPA), prohibits the Department of Labor (DOL or 
department) from implementing its proposed regulation amending 
the regulatory definition of ``fiduciary'' under the Employee 
Retirement Income Security Act of 1974 (ERISA) and the Internal 
Revenue Code of 1986 (Code), unless Congress affirmatively 
approves the final rule. Instead, the bill updates current law 
to ensure that all financial professionals providing 
personalized advice about investments, distributions, or the 
use of other fiduciaries are legally required to act in the 
best interest of their customers. However, unlike the DOL 
proposed regulation, ARAPA ensures low- and medium-income 
savers and small businesses have continued access to affordable 
retirement advice.

                       Unfunded Mandate Statement

    Section 423 of the Congressional Budget and Impoundment 
Control Act (as amended by Section 101(a)(2) of the Unfunded 
Mandates Reform Act, P.L. 104-4) requires a statement of 
whether the provisions of the reported bill include unfunded 
mandates. This issue is addressed in the CBO letter.

                           Earmark Statement

    H.R. 4293 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of House Rule XXI.

                            Roll Call Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee Report to include for 
each record vote on a motion to report the measure or matter 
and on any amendments offered to the measure or matter the 
total number of votes for and against and the names of the 
Members voting for and against.


         Statement of General Performance Goals and Objectives

    In accordance with clause (3)(c) of House Rule XIII, the 
goals of H.R. 4293 are to reduce the federal footprint and 
restore local control of education, while empowering parents 
and education leaders to hold schools accountable for 
effectively teaching students.

                    Duplication of Federal Programs

    No provision of H.R. 4293 establishes or reauthorizes a 
program of the Federal Government known to be duplicative of 
another Federal program, a program that was included in any 
report from the Government Accountability Office to Congress 
pursuant to section 21 of Public Law 111-139, or a program 
related to a program identified in the most recent Catalog of 
Federal Domestic Assistance.

                  Disclosure of Directed Rule Makings

    The committee estimates that enacting H.R. 4293 does not 
specifically direct the completion of any specific rule makings 
within the meaning of 5 U.S.C. 551.

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
the committee's oversight findings and recommendations are 
reflected in the body of this report.

               New Budget Authority and CBO Cost Estimate

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the Rules of the House of Representatives and section 
308(a) of the Congressional Budget Act of 1974 and with respect 
to requirements of clause 3(c)(3) of rule XIII of the Rules of 
the House of Representatives and section 402 of the 
Congressional Budget Act of 1974, the committee has received 
the following estimate for H.R. 4293 from the Director of the 
Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, April 20, 2016.
Hon. John Kline,
Chairman, Committee on Education and the Workforce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 4293, the 
Affordable Retirement Advice Protection Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Noah 
Meyerson.
            Sincerely,
                                                        Keith Hall.
    Enclosure.

H.R. 4293--Affordable Retirement Advice Protection Act

    H.R. 4293, the Affordable Retirement Advice Protection Act, 
would amend portions of the Employee Retirement Income Security 
Act of 1974 (ERISA) that prohibit self-dealing transactions by 
fiduciaries of employer-sponsored retirement plans. The bill 
would add a definition of investment advice to ERISA. The bill 
also would add a new statutory exemption related to investment 
advice that a fiduciary can provide to those plans, plan 
participants, or beneficiaries. Among other provisions, H.R. 
4293 would change requirements regarding disclosure of 
potential compensation accruing to the fiduciary or an 
affiliate.
    On April 6, 2016, the Department of Labor issued new 
regulations relating to investment advice within pension and 
retirement plans; those regulations are sometimes referred to 
as the ``fiduciary rule.'' H.R. 4293 would prevent those or any 
similar regulations from becoming effective unless a bill or 
joint resolution approving them was passed within 60 days of 
enactment of H.R. 4293.
    CBO and the staff of the Joint Committee on Taxation (JCT) 
estimate that the bill would have a negligible effect on 
revenues over the 2017-2026 period. Enacting the bill would not 
affect direct spending. Because enacting H.R. 4293 would affect 
revenues, pay-as-you-go procedures apply.
    CBO and JCT estimate that enacting H.R. 4293 would not 
increase net direct spending or on-budget deficits in any of 
the four consecutive 10-year periods beginning in 2027.
    H.R. 4293 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would impose no costs on state, local, or tribal governments.
    On February 10, 2016, CBO transmitted a cost estimate of 
H.R. 4294, the Strengthening Access to Valuable Education and 
Retirement Support Act of 2015, as ordered reported by the 
House Committee on Ways and Means on February 3, 2016. On April 
20, 2016, CBO transmitted a cost estimate of H.R. 4294, the 
Strengthening Access to Valuable Education and Retirement 
Support Act of 2015, as ordered reported by the House Committee 
on Education and the Workforce on February 2, 2016. Both 
versions of H.R. 4294 would amend the Internal Revenue Code in 
a manner consistent with the way that H.R. 4293 would amend 
ERISA. All three versions of the legislation would have a 
negligible effect on revenues.
    The CBO staff contact for this estimate is Noah Meyerson. 
The estimate was approved by H. Samuel Papenfuss, Deputy 
Assistant Director for Budget Analysis.

                        Committee Cost Estimate

    Clause 3(d)(1) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison of the 
costs that would be incurred in carrying out H.R. 4293. 
However, clause 3(d)(2)(B) of that rule provides that this 
requirement does not apply when the committee has included in 
its report a timely submitted cost estimate of the bill 
prepared by the Director of the Congressional Budget Office 
under section 402 of the Congressional Budget Act.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italic and existing law in which no change is 
proposed is shown in roman):

            EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974




           *       *       *       *       *       *       *
             TITLE I--PROTECTION OF EMPLOYEE BENEFIT RIGHTS


Subtitle A--General Provisions

           *       *       *       *       *       *       *



                              DEFINITIONS

  Sec. 3. For purposes of this title:
  (1) The terms ``employee welfare benefit plan'' and ``welfare 
plan'' mean any plan, fund, or program which was heretofore or 
is hereafter established or maintained by an employer or by an 
employee organization, or by both, to the extent that such 
plan, fund, or program was established or is maintained for the 
purpose of providing for its participants or their 
beneficiaries, through the purchase of insurance or otherwise, 
(A) medical, surgical, or hospital care or benefits, or 
benefits in the event of sickness, accident, disability, death 
or unemployment, or vacation benefits, apprenticeship or other 
training programs, or day care centers, scholarship funds, or 
prepaid legal services, or (B) any benefit described in section 
302(c) of the Labor Management Relations Act, 1947 (other than 
pensions on retirement or death, and insurance to provide such 
pensions).
  (2)(A) Except as provided in subparagraph (B), the terms 
``employee pension benefit plan'' and ``pension plan'' mean any 
plan, fund, or program which was heretofore or is hereafter 
established or maintained by an employer or by an employee 
organization, or by both, to the extent that by its express 
terms or as a result of surrounding circumstances such plan, 
fund, or program--
          (i) provides retirement income to employees, or
          (ii) results in a deferral of income by employees for 
        periods extending to the termination of covered 
        employment or beyond,
regardless of the method of calculating the contributions made 
to the plan, the method of calculating the benefits under the 
plan or the method of distributing benefits from the plan. A 
distribution from a plan, fund, or program shall not be treated 
as made in a form other than retirement income or as a 
distribution prior to termination of covered employment solely 
because such distribution is made to an employee who has 
attained age 62 and who is not separated from employment at the 
time of such distribution.
  (B) The Secretary may by regulation prescribe rules 
consistent with the standards and purposes of this Act 
providing one or more exempt categories under which--
          (i) severance pay arrangements, and
          (ii) supplemental retirement income payments, under 
        which the pension benefits of retirees or their 
        beneficiaries are supplemented to take into account 
        some portion or all of the increases in the cost of 
        living (as determined by the Secretary of Labor) since 
        retirement,
shall, for purposes of this title, be treated as welfare plans 
rather than pension plans. In the case of any arrangement or 
payment a principal effect of which is the evasion of the 
standards or purposes of this Act applicable to pension plans, 
such arrangement or payment shall be treated as a pension plan. 
An applicable voluntary early retirement incentive plan (as 
defined in section 457(e)(11)(D)(ii) of the Internal Revenue 
Code of 1986) making payments or supplements described in 
section 457(e)(11)(D)(i) of such Code, and an applicable 
employment retention plan (as defined in section 457(f)(4)(C) 
of such Code) making payments of benefits described in section 
457(f)(4)(A) of such Code, shall, for purposes of this title, 
be treated as a welfare plan (and not a pension plan) with 
respect to such payments and supplements.
  (3) The term ``employee benefit plan'' or ``plan'' means an 
employee welfare benefit plan or an employee pension benefit 
plan or a plan which is both an employee welfare benefit plan 
and an employee pension benefit plan.
  (4) The term ``employee organization'' means any labor union 
or any organization of any kind, or any agency or employee 
representation committee, association, group, or plan, in which 
employees participate and which exists for the purpose, in 
whole or in part, of dealing with employers concerning an 
employee benefit plan, or other matters incidental to 
employment relationships; or any employees' beneficiary 
association organized for the purpose in whole or in part, of 
establishing such a plan.
  (5) The term ``employer'' means any person acting directly as 
an employer, or indirectly in the interest of an employer, in 
relation to an employee benefit plan; and includes a group or 
association of employers acting for an employer in such 
capacity.
  (6) The term ``employee'' means any individual employed by an 
employer.
  (7) The term ``participant'' means any employee or former 
employee of an employer, or any member or former member of an 
employee organization, who is or may become eligible to receive 
a benefit of any type from an employee benefit plan which 
covers employees of such employer or members of such 
organization, or whose beneficiaries may be eligible to receive 
any such benefit.
  (8) The term ``beneficiary'' means a person designated by a 
participant, or by the terms of an employee benefit plan, who 
is or may become entitled to a benefit thereunder.
  (9) The term ``person'' means an individual, partnership, 
joint venture, corporation, mutual company, joint-stock 
company, trust, estate, unincorporated organization, 
association, or employee organization.
  (10) The term ``State'' includes any State of the United 
States, the District of Columbia, Puerto Rico, the Virgin 
Islands, American Samoa, Guam, Wake Island, and the Canal Zone. 
The term ``United States'' when used in the geographic sense 
means the States and the Outer Continental Shelf lands defined 
in the Outer Continental Shelf Lands Act (43 U.S.C. 1331-1343).
  (11) The term ``commerce'' means trade, traffic, commerce, 
transportation, or communication between any State and any 
place outside thereof.
  (12) The term ``industry or activity affecting commerce'' 
means any activity, business, or industry in commerce or in 
which a labor dispute would hinder or obstruct commerce or the 
free flow of commerce, and includes any activity or industry 
``affecting commerce'' within the meaning of the Labor 
Management Relations Act, 1947, or the Railway Labor Act.
  (13) The term ``Secretary'' means the Secretary of Labor.
  (14) The term ``party in interest'' means, as to an employee 
benefit plan--
          (A) any fiduciary (including, but not limited to, any 
        administrator, officer, trustee, or custodian), 
        counsel, or employee of such employee benefit plan;
          (B) a person providing services to such plan;
          (C) an employer any of whose employees are covered by 
        such plan;
          (D) an employee organization any of whose members are 
        covered by such plan;
          (E) an owner, direct or indirect, of 50 percent or 
        more of--
                  (i) the combined voting power of all classes 
                of stock entitled to vote or the total value of 
                shares of all classes of stock of a 
                corporation,
                  (ii) the capital interest or the profits 
                interest of a partnership, or
                  (iii) the beneficial interest of a trust or 
                unincorporated enterprise,
        which is an employer or an employee organization 
        described in subparagraph (C) or (D);
          (F) a relative (as defined in paragraph (15)) of any 
        individual described in subparagraph (A), (B), (C), or 
        (E);
          (G) a corporation, partnership, or trust or estate of 
        which (or in which) 50 percent or more of--
                  (i) the combined voting power of all classes 
                of stock entitled to vote or the total value of 
                shares of all classes of stock of such 
                corporation,
                  (ii) the capital interest or profits interest 
                of such partnership, or
                  (iii) the beneficial interest of such trust 
                or estate,
        is owned directly or indirectly, or held by persons 
        described in subparagraph (A), (B), (C), (D), or (E);
          (H) an employee, officer, director (or an individual 
        having powers or responsibilities similar to those of 
        officers or directors), or a 10 percent or more 
        shareholder directly or indirectly, of a person 
        described in subparagraph (B), (C), (D), (E), or (G), 
        or of the employee benefit plan; or
          (I) a 10 percent or more (directly or indirectly in 
        capital or profits) partner or joint venturer of a 
        person described in subparagraph (B), (C), (D), (E), or 
        (G).
The Secretary, after consultation and coordination with the 
Secretary of the Treasury, may by regulation prescribe a 
percentage lower than 50 percent for subparagraph (E) and (G) 
and lower than 10 percent for subparagraph (H) or (I). The 
Secretary may prescribe regulations for determining the 
ownership (direct or indirect) of profits and beneficial 
interests, and the manner in which indirect stockholdings are 
taken into account. Any person who is a party in interest with 
respect to a plan to which a trust described in section 
501(c)(22) of the Internal Revenue Code of 1986 is permitted to 
make payments under section 4223 shall be treated as a party in 
interest with respect to such trust.
  (15) The term ``relative'' means a spouse, ancestor, lineal 
descendant, or spouse of a lineal descendant.
  (16)(A) The term ``administrator'' means--
          (i) the person specifically so designated by the 
        terms of the instrument under which the plan is 
        operated;
          (ii) if an administrator is not so designated, the 
        plan sponsor; or
          (iii) in the case of a plan for which an 
        administrator is not designated and a plan sponsor 
        cannot be identified, such other person as the 
        Secretary may by regulation prescribe.
  (B) The term ``plan sponsor'' means (i) the employer in the 
case of an employee benefit plan established or maintained by a 
single employer, (ii) the employee organization in the case of 
a plan established or maintained by an employee organization, 
or (iii) in the case of a plan established or maintained by two 
or more employers or jointly by one or more employers and one 
or more employee organizations, the association, committee, 
joint board of trustees, or other similar group of 
representatives of the parties who establish or maintain the 
plan.
  (17) The term ``separate account'' means an account 
established or maintained by an insurance company under which 
income, gains, and losses, whether or not realized, from assets 
allocated to such account, are, in accordance with the 
applicable contract, credited to or charged against such 
account without regard to other income, gains, or losses of the 
insurance company.
  (18) The term ``adequate consideration'' when used in part 4 
of subtitle B means (A) in the case of a security for which 
there is a generally recognized market, either (i) the price of 
the security prevailing on a national securities exchange which 
is registered under section 6 of the Securities Exchange Act of 
1934, or (ii) if the security is not traded on such a national 
securities exchange, a price not less favorable to the plan 
than the offering price for the security as established by the 
current bid and asked prices quoted by persons independent of 
the issuer and of any party in interest; and (B) in the case of 
an asset other than a security for which there is a generally 
recognized market, the fair market value of the asset as 
determined in good faith by the trustee or named fiduciary 
pursuant to the terms of the plan and in accordance with 
regulations promulgated by the Secretary.
  (19) The term ``nonforfeitable'' when used with respect to a 
pension benefit or right means a claim obtained by a 
participant or his beneficiary to that part of an immediate or 
deferred benefit under a pension plan which arises from the 
participant's service, which is unconditional, and which is 
legally enforceable against the plan. For purposes of this 
paragraph, a right to an accrued benefit derived from employer 
contributions shall not be treated as forfeitable merely 
because the plan contains a provision described in section 
203(a)(3).
  (20) The term ``security'' has the same meaning as such term 
has under section 2(1) of the Securities Act of 1933 (15 U.S.C. 
77b(1)).
  (21)(A) Except as otherwise provided in subparagraph (B), a 
person is a fiduciary with respect to a plan to the extent (i) 
he exercises any discretionary authority or discretionary 
control respecting management of such plan or exercises any 
authority or control respecting management or disposition of 
its assets, (ii) he renders investment advice for a fee or 
other compensation, direct or indirect, with respect to any 
moneys or other property of such plan, or has any authority or 
responsibility to do so, or (iii) he has any discretionary 
authority or discretionary responsibility in the administration 
of such plan. Such term includes any person designated under 
section 405(c)(1)(B).
  (B) If any money or other property of an employee benefit 
plan is invested in securities issued by an investment company 
registered under the Investment Company Act of 1940, such 
investment shall not by itself cause such investment company or 
such investment company's investment adviser or principal 
underwriter to be deemed to be a fiduciary or a party in 
interest as those terms are defined in this title, except 
insofar as such investment company or its investment adviser or 
principal underwriter acts in connection with an employee 
benefit plan covering employees of the investment company, the 
investment adviser, or its principal underwriter. Nothing 
contained in this subparagraph shall limit the duties imposed 
on such investment company, investment adviser, or principal 
underwriter by any other law.
  (C)(i) For purposes of clause (ii) of subparagraph (A), the 
term ``investment advice'' means a recommendation that--
          (I) relates to--
                  (aa) the advisability of acquiring, holding, 
                disposing, or exchanging any moneys or other 
                property of a plan by the plan, plan 
                participants, or plan beneficiaries, including 
                any recommendation whether to take a 
                distribution of benefits from such plan or any 
                recommendation relating to the investment of 
                any moneys or other property of such plan to be 
                distributed from such plan;
                  (bb) the management of moneys or other 
                property of such plan, including 
                recommendations relating to the management of 
                moneys or other property to be distributed from 
                such plan; or
                  (cc) the advisability of retaining or ceasing 
                to retain a person who would receive a fee or 
                other compensation for providing any of the 
                types of advice described in this subclause; 
                and
          (II) is rendered pursuant to--
                  (aa) a written acknowledgment of the 
                obligation of the advisor to comply with 
                section 404 with respect to the provision of 
                such recommendation; or
                  (bb) a mutual agreement, arrangement, or 
                understanding, which may include limitations on 
                scope, timing, and responsibility to provide 
                ongoing monitoring or advice services, between 
                the person making such recommendation and the 
                plan that such recommendation is individualized 
                to the plan and such plan intends to materially 
                rely on such recommendation in making 
                investment or management decisions with respect 
                to any moneys or other property of such plan.
  (ii) For purposes of clause (i)(II)(bb), any disclaimer of a 
mutual agreement, arrangement, or understanding shall only 
state the following: ``This information is not individualized 
to you, and you are not intended to materially rely on this 
information in making investment or management decisions.''. 
Such disclaimer shall not be effective unless such disclaimer 
is in writing and is communicated in a clear and prominent 
manner and an objective person would reasonably conclude that, 
based on all the facts and circumstances, there was not a 
mutual agreement, arrangement, or understanding.
  (iii) For purposes of clause (i)(II)(bb), information shall 
not be considered to be a recommendation made pursuant to a 
mutual agreement, arrangement, or understanding, and such 
information shall contain the disclaimer required by clause 
(ii), if--
          (I) it is provided in conjunction with full and fair 
        disclosure in writing to a plan, plan participant, or 
        beneficiary that the person providing the information 
        is doing so in its marketing or sales capacity, 
        including any information regarding the terms and 
        conditions of the engagement of the person providing 
        the information, and that the person is not intending 
        to provide investment advice within the meaning of this 
        subparagraph or to otherwise act within and under the 
        obligations of the best interest standard as described 
        in this subparagraph;
          (II) the person providing the information is a 
        counterparty or service provider to the plan in 
        connection with any transaction based on the 
        information (including a service arrangement, sale, 
        purchase, loan, bilateral contract, swap (as defined in 
        section 1a of the Commodity Exchange Act (7 U.S.C. 
        1a)), or security-based swap (as defined in section 
        3(a) of the Securities Exchange Act (15 U.S.C. 
        78c(a)))), but only if--
                  (aa) the plan is represented, in connection 
                with such transaction, by a plan fiduciary that 
                is independent of the person providing the 
                information, and, except in the case of a swap 
                or security-based swap, independent of the plan 
                sponsor; and
                  (bb) prior to such transaction, the 
                independent plan fiduciary represents in 
                writing to the person providing the information 
                that it is aware that the person has a 
                financial interest in the transaction and that 
                it has determined that the person is not 
                intending to provide investment advice within 
                the meaning of this subparagraph or to 
                otherwise act as a fiduciary to the plan 
                subject to section 404;
          (III) the person providing the information is an 
        employee of any sponsoring employer or employee 
        organization who provides the information to the plan 
        for no fee or other compensation other than the 
        employee's normal compensation;
          (IV) the person providing the information discloses 
        in writing to the plan fiduciary that the person is not 
        undertaking to provide investment advice as a fiduciary 
        to the plan subject to section 404 and the information 
        consists solely of--
                  (aa) making available to the plan, without 
                regard to the individualized needs of the plan, 
                securities or other property through a platform 
                or similar mechanism from which a plan 
                fiduciary may select or monitor investment 
                alternatives, including qualified default 
                investment alternatives, into which plan 
                participants or beneficiaries may direct the 
                investment of assets held in, or contributed 
                to, their individual accounts; or
                  (bb) in connection with a platform or similar 
                mechanism described in item (aa)--
                          (AA) identifying investment 
                        alternatives that meet objective 
                        criteria specified by the plan, such as 
                        criteria concerning expense ratios, 
                        fund sizes, types of asset, or credit 
                        quality; or
                          (BB) providing objective financial 
                        data and comparisons with independent 
                        benchmarks to the plan;
          (V) the information consists solely of valuation 
        information; or
          (VI) the information consists solely of--
                  (aa) information described in Department of 
                Labor Interpretive Bulletin 96-1 (29 C.F.R. 
                2509.96-1, as in effect on January 1, 2015), 
                regardless of whether such education is 
                provided to a plan or plan fiduciary or a 
                participant or beneficiary;
                  (bb) information provided to participants or 
                beneficiaries regarding the factors to consider 
                in deciding whether to elect to receive a 
                distribution from a plan or an individual 
                retirement plan (as defined in section 
                7701(a)(37) of the Internal Revenue Code of 
                1986) and whether to roll over such 
                distribution to a plan or an individual 
                retirement plan (as defined in section 
                7701(a)(37) of the Internal Revenue Code of 
                1986), so long as any examples of different 
                distribution alternatives are accompanied by 
                all material facts and assumptions on which the 
                examples are based; or
                  (cc) any additional information treated as 
                education by the Secretary.
  (22) The term ``normal retirement benefit'' means the greater 
of the early retirement benefit under the plan, or the benefit 
under the plan commencing at normal retirement age. The normal 
retirement benefit shall be determined without regard to--
          (A) medical benefits, and
          (B) disability benefits not in excess of the 
        qualified disability benefit.
For purposes of this paragraph, a qualified disability benefit 
is a disability benefit provided by a plan which does not 
exceed the benefit which would be provided for the participant 
if he separated from the service at normal retirement age. For 
purposes of this paragraph, the early retirement benefit under 
a plan shall be determined without regard to any benefit under 
the plan which the Secretary of the Treasury finds to be a 
benefit described in section 204(b)(1)(G).
  (23) The term ``accrued benefit'' means--
          (A) in the case of a defined benefit plan, the 
        individual's accrued benefit determined under the plan 
        and, except as provided in section 204(c)(3), expressed 
        in the form of an annual benefit commencing at normal 
        retirement age, or
          (B) in the case of a plan which is an individual 
        account plan, the balance of the individual's account.
The accrued benefit of an employee shall not be less than the 
amount determined under section 204(c)(2)(B) with respect to 
the employee's accumulated contribution.
  (24) The term ``normal retirement age'' means the earlier 
of--
          (A) the time a plan participant attains normal 
        retirement age under the plan, or
          (B) the later of--
                  (i) the time a plan participant attains age 
                65, or
                  (ii) the 5th anniversary of the time a plan 
                participant commenced participation in the 
                plan.
  (25) The term ``vested liabilities'' means the present value 
of the immediate or deferred benefits available at normal 
retirement age for participants and their beneficiaries which 
are nonforfeitable.
  (26) The term ``current value'' means fair market value where 
available and otherwise the fair value as determined in good 
faith by a trustee or a named fiduciary (as defined in section 
402(a)(2)) pursuant to the terms of the plan and in accordance 
with regulations of the Secretary, assuming an orderly 
liquidation at the time of such determination.
  (27) The term ``present value'', with respect to a liability, 
means the value adjusted to reflect anticipated events. Such 
adjustments shall conform to such regulations as the Secretary 
of the Treasury may prescribe.
  (28) The term ``normal service cost'' or ``normal cost'' 
means the annual cost of future pension benefits and 
administrative expenses assigned, under an actuarial cost 
method, to years subsequent to a particular valuation date of a 
pension plan. The Secretary of the Treasury may prescribe 
regulations to carry out this paragraph.
  (29) The term ``accrued liability'' means the excess of the 
present value, as of a particular valuation date of a pension 
plan, of the projected future benefit costs and administrative 
expenses for all plan participants and beneficiaries over the 
present value of future contributions for the normal cost of 
all applicable plan participants and beneficiaries. The 
Secretary of the Treasury may prescribe regulations to carry 
out this paragraph.
  (30) The term ``unfunded accrued liability'' means the excess 
of the accrued liability, under an actuarial cost method which 
so provides, over the present value of the assets of a pension 
plan. The Secretary of the Treasury may prescribe regulations 
to carry out this paragraph.
  (31) The term ``advance funding actuarial cost method'' or 
``actuarial cost method'' means a recognized actuarial 
technique utilized for establishing the amount and incidence of 
the annual actuarial cost of pension plan benefits and 
expenses. Acceptable actuarial cost methods shall include the 
accrued benefit cost method (unit credit method), the entry age 
normal cost method, the individual level premium cost method, 
the aggregate cost method, the attained age normal cost method, 
and the frozen initial liability cost method. The terminal 
funding cost method and the current funding (pay-as-you-go) 
cost method are not acceptable actuarial cost methods. The 
Secretary of the Treasury shall issue regulations to further 
define acceptable actuarial cost methods.
  (32) The term ``governmental plan'' means a plan established 
or maintained for its employees by the Government of the United 
States, by the government of any State or political subdivision 
thereof, or by any agency or instrumentality of any of the 
foregoing. The term ``governmental plan'' also includes any 
plan to which the Railroad Retirement Act of 1935 or 1937 
applies, and which is financed by contributions required under 
that Act and any plan of an international organization which is 
exempt from taxation under the provisions of the International 
Organizations Immunities Act (59 Stat. 669). The term 
``governmental plan'' includes a plan which is established and 
maintained by an Indian tribal government (as defined in 
section 7701(a)(40) of the Internal Revenue Code of 1986), a 
subdivision of an Indian tribal government (determined in 
accordance with section 7871(d) of such Code), or an agency or 
instrumentality of either, and all of the participants of which 
are employees of such entity substantially all of whose 
services as such an employee are in the performance of 
essential governmental functions but not in the performance of 
commercial activities (whether or not an essential government 
function)
  (33)(A) The term ``church plan'' means a plan established and 
maintained (to the extent required in clause (ii) of 
subparagraph (B)) for its employees (or their beneficiaries) by 
a church or by a convention or association of churches which is 
exempt from tax under section 501 of the Internal Revenue Code 
of 1986.
  (B) The term ``church plan'' does not include a plan--
          (i) which is established and maintained primarily for 
        the benefit of employees (or their beneficiaries) of 
        such church or convention or association of churches 
        who are employed in connection with one or more 
        unrelated trades or businesses (within the meaning of 
        section 513 of the Internal Revenue Code of 1986), or
          (ii) if less than substantially all of the 
        individuals included in the plan are individuals 
        described in subparagraph (A) or in clause (ii) of 
        subparagraph (C) (or their beneficiaries).
  (C) For purposes of this paragraph--
          (i) A plan established and maintained for its 
        employees (or their beneficiaries) by a church or by a 
        convention or association of churches includes a plan 
        maintained by an organization, whether a civil law 
        corporation or otherwise, the principal purpose or 
        function of which is the administration or funding of a 
        plan or program for the provision of retirement 
        benefits or welfare benefits, or both, for the 
        employees of a church or a convention or association of 
        churches, if such organization is controlled by or 
        associated with a church or a convention or association 
        of churches.
          (ii) The term employee of a church or a convention or 
        association of churches includes--
                  (I) a duly ordained, commissioned, or 
                licensed minister of a church in the exercise 
                of his ministry, regardless of the source of 
                his compensation;
                  (II) an employee of an organization, whether 
                a civil law corporation or otherwise, which is 
                exempt from tax under section 501 of the 
                Internal Revenue Code of 1986 and which is 
                controlled by or associated with a church or a 
                convention or association of churches; and
                  (III) an individual described in clause (v).
          (iii) A church or a convention or association of 
        churches which is exempt from tax under section 501 of 
        the Internal Revenue Code of 1986 shall be deemed the 
        employer of any individual included as an employee 
        under clause (ii).
          (iv) An organization, whether a civil law corporation 
        or otherwise, is associated with a church or a 
        convention or association of churches if it shares 
        common religious bonds and convictions with that church 
        or convention or association of churches.
          (v) If an employee who is included in a church plan 
        separates from the service of a church or a convention 
        or association of churches or an organization, whether 
        a civil law corporation or otherwise, which is exempt 
        from tax under section 501 of the Internal Revenue Code 
        of 1986 and which is controlled by or associated with a 
        church or a convention or association of churches, the 
        church plan shall not fail to meet the requirements of 
        this paragraph merely because the plan--
                  (I) retains the employee's accrued benefit or 
                account for the payment of benefits to the 
                employee or his beneficiaries pursuant to the 
                terms of the plan; or
                  (II) receives contributions on the employee's 
                behalf after the employee's separation from 
                such service, but only for a period of 5 years 
                after such separation, unless the employee is 
                disabled (within the meaning of the disability 
                provisions of the church plan or, if there are 
                no such provisions in the church plan, within 
                the meaning of section 72(m)(7) of the Internal 
                Revenue Code of 1986) at the time of such 
                separation from service.
  (D)(i) If a plan established and maintained for its employees 
(or their beneficiaries) by a church or by a convention or 
association of churches which is exempt from tax under section 
501 of the Internal Revenue Code of 1986 fails to meet one or 
more of the requirements of this paragraph and corrects its 
failure to meet such requirements within the correction period, 
the plan shall be deemed to meet the requirements of this 
paragraph for the year in which the correction was made and for 
all prior years.
  (ii) If a correction is not made within the correction 
period, the plan shall be deemed not to meet the requirements 
of this paragraph beginning with the date on which the earliest 
failure to meet one or more of such requirements occurred.
  (iii) For purposes of this subparagraph, the term 
``correction period'' means--
          (I) the period ending 270 days after the date of 
        mailing by the Secretary of the Treasury of a notice of 
        default with respect to the plan's failure to meet one 
        or more of the requirements of this paragraph; or
          (II) any period set by a court of competent 
        jurisdiction after a final determination that the plan 
        fails to meet such requirements, or, if the court does 
        not specify such period, any reasonable period 
        determined by the Secretary of the Treasury on the 
        basis of all the facts and circumstances, but in any 
        event not less than 270 days after the determination 
        has become final; or
          (III) any additional period which the Secretary of 
        the Treasury determines is reasonable or necessary for 
        the correction of the default,
whichever has the latest ending date.
  (34) The term ``individual account plan'' or ``defined 
contribution plan'' means a pension plan which provides for an 
individual account for each participant and for benefits based 
solely upon the amount contributed to the participant's 
account, and any income, expenses, gains and losses, and any 
forfeitures of accounts of other participants which may be 
allocated to such participant's account.
  (35) The term ``defined benefit plan'' means a pension plan 
other than an individual account plan; except that a pension 
plan which is not an individual account plan and which provides 
a benefit derived from employer contributions which is based 
partly on the balance of the separate account of a 
participant--
          (A) for the purposes of section 202, shall be treated 
        as an individual account plan, and
          (B) for the purposes of paragraph (23) of this 
        section and section 204, shall be treated as an 
        individual account plan to the extent benefits are 
        based upon the separate account of a participant and as 
        a defined benefit plan with respect to the remaining 
        portion of benefits under the plan.
  (36) The term ``excess benefit plan'' means a plan maintained 
by an employer solely for the purpose of providing benefits for 
certain employees in excess of the limitations on contributions 
and benefits imposed by section 415 of the Internal Revenue 
Code of 1986 on plans to which that section applies, without 
regard to whether the plan is funded. To the extent that a 
separable part of a plan (as determined by the Secretary of 
Labor) maintained by an employer is maintained for such 
purpose, that part shall be treated as a separate plan which is 
an excess benefit plan.
  (37)(A) The term ``multiemployer plan'' means a plan--
          (i) to which more than one employer is required to 
        contribute,
          (ii) which is maintained pursuant to one or more 
        collective bargaining agreements between one or more 
        employee organizations and more than one employer, and
          (iii) which satisfies such other requirements as the 
        Secretary may prescribe by regulation.
  (B) For purposes of this paragraph, all trades or businesses 
(whether or not incorporated) which are under common control 
within the meaning of section 4001(b)(1) are considered a 
single employer.
  (C) Notwithstanding subparagraph (A), a plan is a 
multiemployer plan on and after its termination date if the 
plan was a multiemployer plan under this paragraph for the plan 
year preceding its termination date.
  (D) For purposes of this title, notwithstanding the preceding 
provisions of this paragraph, for any plan year which began 
before the date of the enactment of the Multiemployer Pension 
Plan Amendments Act of 1980, the term ``multiemployer plan'' 
means a plan described in section 3(37) of this Act as in 
effect immediately before such date.
  (E) Within one year after the date of the enactment of the 
Multiemployer Pension Plan Amendments Act of 1980, a 
multiemployer plan may irrevocably elect, pursuant to 
procedures established by the corporation and subject to the 
provisions of sections 4403(b) and (c), that the plan shall not 
be treated as a multiemployer plan for all purposes under this 
Act or the Internal Revenue Code of 1954 if for each of the 
last 3 plan years ending prior to the effective date of the 
Multiemployer Pension Plan Amendments Act of 1980--
          (i) the plan was not a multiemployer plan because the 
        plan was not a plan described in section 3(37)(A)(iii) 
        of this Act and section 414(f)(1)(C) of the Internal 
        Revenue Code of 1954 (as such provisions were in effect 
        on the day before the date of the enactment of the 
        Multiemployer Pension Plan Amendments Act of 1980 ); 
        and
          (ii) the plan had been identified as a plan that was 
        not a multiemployer plan in substantially all its 
        filings with the corporation, the Secretary of Labor 
        and the Secretary of the Treasury.
  (F)(i) For purposes of this title a qualified football 
coaches plan--
          (I) shall be treated as a multiemployer plan to the 
        extent not inconsistent with the purposes of this 
        subparagraph; and
          (II) notwithstanding section 401(k)(4)(B) of the 
        Internal Revenue Code of 1986, may include a qualified 
        cash and deferred arrangement.
  (ii) For purposes of this subparagraph, the term ``qualified 
football coaches plan'' means any defined contribution plan 
which is established and maintained by an organization--
          (I) which is described in section 501(c) of such 
        Code;
          (II) the membership of which consists entirely of 
        individuals who primarily coach football as full-time 
        employees of 4-year colleges or universities described 
        in section 170(b)(1)(A)(ii) of such Code; and
          (III) which was in existence on September 18, 1986.
          (G)(i) Within 1 year after the enactment of the 
        Pension Protection Act of 2006--
                  (I) an election under subparagraph (E) may be 
                revoked, pursuant to procedures prescribed by 
                the Pension Benefit Guaranty Corporation, if, 
                for each of the 3 plan years prior to the date 
                of the enactment of that Act, the plan would 
                have been a multiemployer plan but for the 
                election under subparagraph (E), and
                  (II) a plan that meets the criteria in 
                clauses (i) and (ii) of subparagraph (A) of 
                this paragraph or that is described in clause 
                (vi) may, pursuant to procedures prescribed by 
                the Pension Benefit Guaranty Corporation, elect 
                to be a multiemployer plan, if--
                          (aa) for each of the 3 plan years 
                        immediately preceding the first plan 
                        year for which the election under this 
                        paragraph is effective with respect to 
                        the plan, the plan has met those 
                        criteria or is so described,
                          (bb) substantially all of the plan's 
                        employer contributions for each of 
                        those plan years were made or required 
                        to be made by organizations that were 
                        exempt from tax under section 501 of 
                        the Internal Revenue Code of 1986, and
                          (cc) the plan was established prior 
                        to September 2, 1974.
          (ii) An election under this subparagraph shall be 
        effective for all purposes under this Act and under the 
        Internal Revenue Code of 1986, starting with any plan 
        year beginning on or after January 1, 1999, and ending 
        before January 1, 2008, as designated by the plan in 
        the election made under clause (i)(II).
          (iii) Once made, an election under this subparagraph 
        shall be irrevocable, except that a plan described in 
        clause (i)(II) shall cease to be a multiemployer plan 
        as of the plan year beginning immediately after the 
        first plan year for which the majority of its employer 
        contributions were made or required to be made by 
        organizations that were not exempt from tax under 
        section 501 of the Internal Revenue Code of 1986.
          (iv) The fact that a plan makes an election under 
        clause (i)(II) does not imply that the plan was not a 
        multiemployer plan prior to the date of the election or 
        would not be a multiemployer plan without regard to the 
        election.
          (v)(I) No later than 30 days before an election is 
        made under this subparagraph, the plan administrator 
        shall provide notice of the pending election to each 
        plan participant and beneficiary, each labor 
        organization representing such participants or 
        beneficiaries, and each employer that has an obligation 
        to contribute to the plan, describing the principal 
        differences between the guarantee programs under title 
        IV and the benefit restrictions under this title for 
        single employer and multiemployer plans, along with 
        such other information as the plan administrator 
        chooses to include.
          (II) Within 180 days after the date of enactment of 
        the Pension Protection Act of 2006, the Secretary shall 
        prescribe a model notice under this clause.
          (III) A plan administrator's failure to provide the 
        notice required under this subparagraph shall be 
        treated for purposes of section 502(c)(2) as a failure 
        or refusal by the plan administrator to file the annual 
        report required to be filed with the Secretary under 
        section 101(b)(1).
          (vi) A plan is described in this clause if it is a 
        plan sponsored by an organization which is described in 
        section 501(c)(5) of the Internal Revenue Code of 1986 
        and exempt from tax under section 501(a) of such Code 
        and which was established in Chicago, Illinois, on 
        August 12, 1881.
  (vii) For purposes of this Act and the Internal Revenue Code 
of 1986, a plan making an election under this subparagraph 
shall be treated as maintained pursuant to a collective 
bargaining agreement if a collective bargaining agreement, 
expressly or otherwise, provides for or permits employer 
contributions to the plan by one or more employers that are 
signatory to such agreement, or participation in the plan by 
one or more employees of an employer that is signatory to such 
agreement, regardless of whether the plan was created, 
established, or maintained for such employees by virtue of 
another document that is not a collective bargaining agreement.
  (38) The term ``investment manager'' means any fiduciary 
(other than a trustee or named fiduciary, as defined in section 
402(a)(2))--
          (A) who has the power to manage, acquire, or dispose 
        of any asset of a plan;
          (B) who (i) is registered as an investment adviser 
        under the Investment Advisers Act of 1940; (ii) is not 
        registered as an investment adviser under such Act by 
        reason of paragraph (1) of section 203A(a) of such Act, 
        is registered as an investment adviser under the laws 
        of the State (referred to in such paragraph (1)) in 
        which it 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 a bank, 
        as defined in that Act; or (iv) is an insurance company 
        qualified to perform services described in subparagraph 
        (A) under the laws of more than one State; and
          (C) has acknowledged in writing that he is a 
        fiduciary with respect to the plan.
  (39) The terms ``plan year'' and ``fiscal year of the plan'' 
mean, with respect to a plan, the calendar, policy, or fiscal 
year on which the records of the plan are kept.
  (40)(A) The term ``multiple employer welfare arrangement'' 
means an employee welfare benefit plan, or any other 
arrangement (other than an employee welfare benefit plan), 
which is established or maintained for the purpose of offering 
or providing any benefit described in paragraph (1) to the 
employees of two or more employers (including one or more self-
employed individuals), or to their beneficiaries, except that 
such term does not include any such plan or other arrangement 
which is established or maintained--
          (i) under or pursuant to one or more agreements which 
        the Secretary finds to be collective bargaining 
        agreements,
          (ii) by a rural electric cooperative, or
          (iii) by a rural telephone cooperative association.
  (B) For purposes of this paragraph--
          (i) two or more trades or businesses, whether or not 
        incorporated, shall be deemed a single employer if such 
        trades or businesses are within the same control group,
          (ii) the term ``control group'' means a group of 
        trades or businesses under common control,
          (iii) the determination of whether a trade or 
        business is under ``common control'' with another trade 
        or business shall be determined under regulations of 
        the Secretary applying principles similar to the 
        principles applied in determining whether employees of 
        two or more trades or businesses are treated as 
        employed by a single employer under section 4001(b), 
        except that, for purposes of this paragraph, common 
        control shall not be based on an interest of less than 
        25 percent,
          (iv) the term ``rural electric cooperative'' means--
                  (I) any organization which is exempt from tax 
                under section 501(a) of the Internal Revenue 
                Code of 1986 and which is engaged primarily in 
                providing electric service on a mutual or 
                cooperative basis, and
                  (II) any organization described in paragraph 
                (4) or (6) of section 501(c) of the Internal 
                Revenue Code of 1986 which is exempt from tax 
                under section 501(a) of such Code and at least 
                80 percent of the members of which are 
                organizations described in subclause (I), and
          (v) the term ``rural telephone cooperative 
        association'' means an organization described in 
        paragraph (4) or (6) of section 501(c) of the Internal 
        Revenue Code of 1986 which is exempt from tax under 
        section 501(a) of such Code and at least 80 percent of 
        the members of which are organizations engaged 
        primarily in providing telephone service to rural areas 
        of the United States on a mutual, cooperative, or other 
        basis.
  (41) Single-employer plan.--The term ``single-employer plan'' 
means an employee benefit plan other than a multiemployer plan.
  (41) The term ``single-employer plan'' means a plan which is 
not a multiemployer plan.
  (42) the term ``plan assets'' means plan assets as defined by 
such regulations as the Secretary may prescribe, except that 
under such regulations the assets of any entity shall not be 
treated as plan assets if, immediately after the most recent 
acquisition of any equity interest in the entity, less than 25 
percent of the total value of each class of equity interest in 
the entity is held by benefit plan investors. For purposes of 
determinations pursuant to this paragraph, the value of any 
equity interest held by a person (other than such a benefit 
plan investor) who has discretionary authority or control with 
respect to the assets of the entity or any person who provides 
investment advice for a fee (direct or indirect) with respect 
to such assets, or any affiliate of such a person, shall be 
disregarded for purposes of calculating the 25 percent 
threshold. An entity shall be considered to hold plan assets 
only to the extent of the percentage of the equity interest 
held by benefit plan investors. For purposes of this paragraph, 
the term ``benefit plan investor'' means an employee benefit 
plan subject to part 4, any plan to which section 4975 of the 
Internal Revenue Code of 1986 applies, and any entity whose 
underlying assets include plan assets by reason of a plan's 
investment in such entity.

           *       *       *       *       *       *       *


Subtitle B--Regulatory Provisions

           *       *       *       *       *       *       *


Part 4--Fiduciary Responsibility

           *       *       *       *       *       *       *


                EXEMPTIONS FROM PROHIBITED TRANSACTIONS

  Sec. 408. (a) The Secretary shall establish an exemption 
procedure for purposes of this subsection. Pursuant to such 
procedure, he may grant a conditional or unconditional 
exemption of any fiduciary or transaction, or class of 
fiduciaries or transactions, from all or part of the 
restrictions imposed by sections 406 and 407(a). Action under 
this subsection may be taken only after consultation and 
coordination with the Secretary of the Treasury. An exemption 
granted under this section shall not relieve a fiduciary from 
any other applicable provision of this Act. The Secretary may 
not grant an exemption under this subsection unless he finds 
that such exemption is--
          (1) administratively feasible,
          (2) in the interests of the plan and of its 
        participants and beneficiaries, and
          (3) protective of the rights of participants and 
        beneficiaries of such plan.
Before granting an exemption under this subsection from section 
406(a) or 407(a), the Secretary shall publish notice in the 
Federal Register of the pendency of the exemption, shall 
require that adequate notice be given to interested persons, 
and shall afford interested persons opportunity to present 
views. The Secretary may not grant an exemption under this 
subsection from section 406(b) unless he affords an opportunity 
for a hearing and makes a determination on the record with 
respect to the findings required by paragraphs (1), (2), and 
(3) of this subsection.
  (b) The prohibitions provided in section 406 shall not apply 
to any of the following transactions:
          (1) Any loans made by the plan to parties in interest 
        who are participants or beneficiaries of the plan if 
        such loans (A) are available to all such participants 
        and beneficiaries on a reasonably equivalent basis, (B) 
        are not made available to highly compensated employees 
        (within the meaning of section 414(q) of the Internal 
        Revenue Code of 1986) in an amount greater than the 
        amount made available to other employees, (C) are made 
        in accordance with specific provisions regarding such 
        loans set forth in the plan, (D) bear a reasonable rate 
        of interest, and (E) are adequately secured. A loan 
        made by a plan shall not fail to meet the requirements 
        of the preceding sentence by reason of a loan repayment 
        suspension described under section 414(u)(4) of the 
        Internal Revenue Code of 1986.
          (2) Contracting or making reasonable arrangements 
        with a party in interest for office space, or legal, 
        accounting, or other services necessary for the 
        establishment or operation of the plan, if no more than 
        reasonable compensation is paid therefor.
          (3) A loan to an employee stock ownership plan (as 
        defined in section 407(d)(6)), if--
                  (A) such loan is primarily for the benefit of 
                participants and beneficiaries of the plan, and
                  (B) such loan is at an interest rate which is 
                not in excess of a reasonable rate.
        If the plan gives collateral to a party in interest for 
        such loan, such collateral may consist only of 
        qualifying employer securities (as defined in section 
        407(d)(5)).
          (4) The investment of all or part of a plan's assets 
        in deposits which bear a reasonable interest rate in a 
        bank or similar financial institution supervised by the 
        United States or a State, if such bank or other 
        institution is a fiduciary of such plan and if--
                  (A) the plan covers only employees of such 
                bank or other institution and employees of 
                affiliates of such bank or other institution, 
                or
                  (B) such investment is expressly authorized 
                by a provision of the plan or by a fiduciary 
                (other than such bank or institution or 
                affiliate thereof) who is expressly empowered 
                by the plan to so instruct the trustee with 
                respect to such investment.
          (5) Any contract for life insurance, health 
        insurance, or annuities with one or more insurers which 
        are qualified to do business in a State, if the plan 
        pays no more than adequate consideration, and if each 
        such insurer or insurers is--
                  (A) the employer maintaining the plan, or
                  (B) a party in interest which is wholly owned 
                (directly or indirectly) by the employer 
                maintaining the plan, or by any person which is 
                a party in interest with respect to the plan, 
                but only if the total premiums and annuity 
                considerations written by such insurers for 
                life insurance, health insurance, or annuities 
                for all plans (and their employers) with 
                respect to which such insurers are parties in 
                interest (not including premiums or annuity 
                considerations written by the employer 
                maintaining the plan) do not exceed 5 percent 
                of the total premiums and annuity 
                considerations written for all lines of 
                insurance in that year by such insurers (not 
                including premiums or annuity considerations 
                written by the employer maintaining the plan).
          (6) The providing of any ancillary service by a bank 
        or similar financial institution supervised by the 
        United States or a State, if such bank or other 
        institution is a fiduciary of such plan, and if--
                  (A) such bank or similar financial 
                institution has adopted adequate internal 
                safeguards which assure that the providing of 
                such ancillary service is consistent with sound 
                banking and financial practice, as determined 
                by Federal or State supervisory authority, and
                  (B) the extent to which such ancillary 
                service is provided is subject to specific 
                guidelines issued by such bank or similar 
                financial institution (as determined by the 
                Secretary after consultation with Federal and 
                State supervisory authority), and adherence to 
                such guidelines would reasonably preclude such 
                bank or similar financial institution from 
                providing such ancillary service (i) in an 
                excessive or unreasonable manner, and (ii) in a 
                manner that would be inconsistent with the best 
                interests of participants and beneficiaries of 
                employee benefit plans.
        Such ancillary services shall not be provided at more 
        than reasonable compensation.
          (7) The exercise of a privilege to convert 
        securities, to the extent provided in regulations of 
        the Secretary, but only if the plan receives no less 
        than adequate consideration pursuant to such 
        conversion.
          (8) Any transaction between a plan and (i) a common 
        or collective trust fund or pooled investment fund 
        maintained by a party in interest which is a bank or 
        trust company supervised by a State or Federal agency 
        or (ii) a pooled investment fund of an insurance 
        company qualified to do business in a State, if--
                  (A) the transaction is a sale or purchase of 
                an interest in the fund,
                  (B) the bank, trust company, or insurance 
                company receives not more than reasonable 
                compensation, and
                  (C) such transaction is expressly permitted 
                by the instrument under which the plan is 
                maintained, or by a fiduciary (other than the 
                bank, trust company, or insurance company, or 
                an affiliate thereof) who has authority to 
                manage and control the assets of the plan.
          (9) The making by a fiduciary of a distribution of 
        the assets of the plan in accordance with the terms of 
        the plan if such assets are distributed in the same 
        manner as provided under section 4044 of this Act 
        (relating to allocation of assets).
          (10) Any transaction required or permitted under part 
        1 of subtitle E of title IV.
          (11) A merger of multiemployer plans, or the transfer 
        of assets or liabilities between multiemployer plans, 
        determined by the Pension Benefit Guaranty Corporation 
        to meet the requirements of section 4231.
          (12) The sale by a plan to a party in interest on or 
        after December 18, 1987, of any stock, if--
                  (A) the requirements of paragraphs (1) and 
                (2) of subsection (e) are met with respect to 
                such stock,
                  (B) on the later of the date on which the 
                stock was acquired by the plan, or January 1, 
                1975, such stock constituted a qualifying 
                employer security (as defined in section 
                407(d)(5) as then in effect), and
                  (C) such stock does not constitute a 
                qualifying employer security (as defined in 
                section 407(d)(5) as in effect at the time of 
                the sale).
          (13) Any transfer made before January 1, 2026, of 
        excess pension assets from a defined benefit plan to a 
        retiree health account in a qualified transfer 
        permitted under section 420 of the Internal Revenue 
        Code of 1986 (as in effect on the date of the enactment 
        of the Surface Transportation and Veterans Health Care 
        Choice Improvement Act of 2015).
          (14) Any transaction in connection with the provision 
        of investment advice described in section 3(21)(A)(ii) 
        to a participant or beneficiary of an individual 
        account plan that permits such participant or 
        beneficiary to direct the investment of assets in their 
        individual account, if--
                  (A) the transaction is--
                          (i) the provision of the investment 
                        advice to the participant or 
                        beneficiary of the plan with respect to 
                        a security or other property available 
                        as an investment under the plan,
                          (ii) the acquisition, holding, or 
                        sale of a security or other property 
                        available as an investment under the 
                        plan pursuant to the investment advice, 
                        or
                          (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 an 
                        acquisition, holding, or sale of a 
                        security or other property available as 
                        an investment under the plan pursuant 
                        to the investment advice; and
                  (B) the requirements of subsection (g) are 
                met.
          (15)(A) Any transaction involving the purchase or 
        sale of securities, or other property (as determined by 
        the Secretary), between a plan and a party in interest 
        (other than a fiduciary described in section 3(21)(A)) 
        with respect to a plan if--
                  (i) the transaction involves a block trade,
                  (ii) at the time of the transaction, the 
                interest of the plan (together with the 
                interests of any other plans maintained by the 
                same plan sponsor), does not exceed 10 percent 
                of the aggregate size of the block trade,
                  (iii) the terms of the transaction, including 
                the price, are at least as favorable to the 
                plan as an arm's length transaction, and
                  (iv) the compensation associated with the 
                purchase and sale is not greater than the 
                compensation associated with an arm's length 
                transaction with an unrelated party.
          (B) For purposes of this paragraph, the term ``block 
        trade'' means any trade of at least 10,000 shares or 
        with a market value of at least $200,000 which will be 
        allocated across two or more unrelated client accounts 
        of a fiduciary.
          (16) Any transaction involving the purchase or sale 
        of securities, or other property (as determined by the 
        Secretary), between a plan and a party in interest if--
                  (A) the transaction is executed through an 
                electronic communication network, alternative 
                trading system, or similar execution system or 
                trading venue subject to regulation and 
                oversight by--
                          (i) the applicable Federal regulating 
                        entity, or
                          (ii) such foreign regulatory entity 
                        as the Secretary may determine by 
                        regulation,
                  (B) either--
                          (i) the transaction is effected 
                        pursuant to rules designed to match 
                        purchases and sales at the best price 
                        available through the execution system 
                        in accordance with applicable rules of 
                        the Securities and Exchange Commission 
                        or other relevant governmental 
                        authority, or
                          (ii) neither the execution system nor 
                        the parties to the transaction take 
                        into account the identity of the 
                        parties in the execution of trades,
                  (C) the price and compensation associated 
                with the purchase and sale are not greater than 
                the price and compensation associated with an 
                arm's length transaction with an unrelated 
                party,
                  (D) if the party in interest has an ownership 
                interest in the system or venue described in 
                subparagraph (A), the system or venue has been 
                authorized by the plan sponsor or other 
                independent fiduciary for transactions 
                described in this paragraph, and
                  (E) not less than 30 days prior to the 
                initial transaction described in this paragraph 
                executed through any system or venue described 
                in subparagraph (A), a plan fiduciary is 
                provided written or electronic notice of the 
                execution of such transaction through such 
                system or venue.
          (17)(A) Transactions described in subparagraphs (A), 
        (B), and (D) of section 406(a)(1) between a plan and a 
        person that is a party in interest other than a 
        fiduciary (or an affiliate) who has or exercises any 
        discretionary authority or control with respect to the 
        investment of the plan assets involved in the 
        transaction or renders investment advice (within the 
        meaning of section 3(21)(A)(ii)) with respect to those 
        assets, solely by reason of providing services to the 
        plan or solely by reason of a relationship to such a 
        service provider described in subparagraph (F), (G), 
        (H), or (I) of section 3(14), or both, but only if in 
        connection with such transaction the plan receives no 
        less, nor pays no more, than adequate consideration.
          (B) For purposes of this paragraph, the term 
        ``adequate consideration'' means--
                  (i) in the case of a security for which there 
                is a generally recognized market--
                          (I) the price of the security 
                        prevailing on a national securities 
                        exchange which is registered under 
                        section 6 of the Securities Exchange 
                        Act of 1934, taking into account 
                        factors such as the size of the 
                        transaction and marketability of the 
                        security, or
                          (II) if the security is not traded on 
                        such a national securities exchange, a 
                        price not less favorable to the plan 
                        than the offering price for the 
                        security as established by the current 
                        bid and asked prices quoted by persons 
                        independent of the issuer and of the 
                        party in interest, taking into account 
                        factors such as the size of the 
                        transaction and marketability of the 
                        security, and
                  (ii) in the case of an asset other than a 
                security for which there is a generally 
                recognized market, the fair market value of the 
                asset as determined in good faith by a 
                fiduciary or fiduciaries in accordance with 
                regulations prescribed by the Secretary.
          (18) Foreign exchange transactions.--Any foreign 
        exchange transactions, between a bank or broker-dealer 
        (or any affiliate of either), and a plan (as defined in 
        section 3(3)) with respect to which such bank or 
        broker-dealer (or affiliate) is a trustee, custodian, 
        fiduciary, or other party in interest, if--
                  (A) the transaction is in connection with the 
                purchase, holding, or sale of securities or 
                other investment assets (other than a foreign 
                exchange transaction unrelated to any other 
                investment in securities or other investment 
                assets),
                  (B) at the time the foreign exchange 
                transaction is entered into, the terms of the 
                transaction are not less favorable to the plan 
                than the terms generally available in 
                comparable arm's length foreign exchange 
                transactions between unrelated parties, or the 
                terms afforded by the bank or broker-dealer (or 
                any affiliate of either) in comparable arm's-
                length foreign exchange transactions involving 
                unrelated parties,
                  (C) the exchange rate used by such bank or 
                broker-dealer (or affiliate) for a particular 
                foreign exchange transaction does not deviate 
                by more than 3 percent from the interbank bid 
                and asked rates for transactions of comparable 
                size and maturity at the time of the 
                transaction as displayed on an independent 
                service that reports rates of exchange in the 
                foreign currency market for such currency, and
                  (D) the bank or broker-dealer (or any 
                affiliate of either) does not have investment 
                discretion, or provide investment advice, with 
                respect to the transaction.
          (19) Cross trading.--Any transaction described in 
        sections 406(a)(1)(A) and 406(b)(2) involving the 
        purchase and sale of a security between a plan and any 
        other account managed by the same investment manager, 
        if--
                  (A) the transaction is a purchase or sale, 
                for no consideration other than cash payment 
                against prompt delivery of a security for which 
                market quotations are readily available,
                  (B) the transaction is effected at the 
                independent current market price of the 
                security (within the meaning of section 
                270.17a-7(b) of title 17, Code of Federal 
                Regulations),
                  (C) no brokerage commission, fee (except for 
                customary transfer fees, the fact of which is 
                disclosed pursuant to subparagraph (D)), or 
                other remuneration is paid in connection with 
                the transaction,
                  (D) a fiduciary (other than the investment 
                manager engaging in the cross-trades or any 
                affiliate) for each plan participating in the 
                transaction authorizes in advance of any cross-
                trades (in a document that is separate from any 
                other written agreement of the parties) the 
                investment manager to engage in cross trades at 
                the investment manager's discretion, after such 
                fiduciary has received disclosure regarding the 
                conditions under which cross trades may take 
                place (but only if such disclosure is separate 
                from any other agreement or disclosure 
                involving the asset management relationship), 
                including the written policies and procedures 
                of the investment manager described in 
                subparagraph (H),
                  (E) each plan participating in the 
                transaction has assets of at least 
                $100,000,000, except that if the assets of a 
                plan are invested in a master trust containing 
                the assets of plans maintained by employers in 
                the same controlled group (as defined in 
                section 407(d)(7)), the master trust has assets 
                of at least $100,000,000,
                  (F) the investment manager provides to the 
                plan fiduciary who authorized cross trading 
                under subparagraph (D) a quarterly report 
                detailing all cross trades executed by the 
                investment manager in which the plan 
                participated during such quarter, including the 
                following information, as applicable: (i) the 
                identity of each security bought or sold; (ii) 
                the number of shares or units traded; (iii) the 
                parties involved in the cross-trade; and (iv) 
                trade price and the method used to establish 
                the trade price,
                  (G) the investment manager does not base its 
                fee schedule on the plan's consent to cross 
                trading, and no other service (other than the 
                investment opportunities and cost savings 
                available through a cross trade) is conditioned 
                on the plan's consent to cross trading,
                  (H) the investment manager has adopted, and 
                cross-trades are effected in accordance with, 
                written cross-trading policies and procedures 
                that are fair and equitable to all accounts 
                participating in the cross-trading program, and 
                that include a description of the manager's 
                pricing policies and procedures, and the 
                manager's policies and procedures for 
                allocating cross trades in an objective manner 
                among accounts participating in the cross-
                trading program, and
                  (I) the investment manager has designated an 
                individual responsible for periodically 
                reviewing such purchases and sales to ensure 
                compliance with the written policies and 
                procedures described in subparagraph (H), and 
                following such review, the individual shall 
                issue an annual written report no later than 90 
                days following the period to which it relates 
                signed under penalty of perjury to the plan 
                fiduciary who authorized cross trading under 
                subparagraph (D) describing the steps performed 
                during the course of the review, the level of 
                compliance, and any specific instances of non-
                compliance.
        The written report under subparagraph (I) shall also 
        notify the plan fiduciary of the plan's right to 
        terminate participation in the investment manager's 
        cross-trading program at any time.
          (20)(A) Except as provided in subparagraphs (B) and 
        (C), a transaction described in section 406(a) in 
        connection with the acquisition, holding, or 
        disposition of any security or commodity, if the 
        transaction is corrected before the end of the 
        correction period.
          (B) Subparagraph (A) does not apply to any 
        transaction between a plan and a plan sponsor or its 
        affiliates that involves the acquisition or sale of an 
        employer security (as defined in section 407(d)(1)) or 
        the acquisition, sale, or lease of employer real 
        property (as defined in section 407(d)(2)).
          (C) In the case of any fiduciary or other party in 
        interest (or any other person knowingly participating 
        in such transaction), subparagraph (A) does not apply 
        to any transaction if, at the time the transaction 
        occurs, such fiduciary or party in interest (or other 
        person) knew (or reasonably should have known) that the 
        transaction would (without regard to this paragraph) 
        constitute a violation of section 406(a).
          (D) For purposes of this paragraph, the term 
        ``correction period'' means, in connection with a 
        fiduciary or party in interest (or other person 
        knowingly participating in the transaction), the 14-day 
        period beginning on the date on which such fiduciary or 
        party in interest (or other person) discovers, or 
        reasonably should have discovered, that the transaction 
        would (without regard to this paragraph) constitute a 
        violation of section 406(a).
          (E) For purposes of this paragraph--
                  (i) The term ``security'' has the meaning 
                given such term by section 475(c)(2) of the 
                Internal Revenue Code of 1986 (without regard 
                to subparagraph (F)(iii) and the last sentence 
                thereof).
                  (ii) The term ``commodity'' has the meaning 
                given such term by section 475(e)(2) of such 
                Code (without regard to subparagraph (D)(iii) 
                thereof).
                  (iii) The term ``correct'' means, with 
                respect to a transaction--
                          (I) to undo the transaction to the 
                        extent possible and in any case to make 
                        good to the plan or affected account 
                        any losses resulting from the 
                        transaction, and
                          (II) to restore to the plan or 
                        affected account any profits made 
                        through the use of assets of the plan.
          (21)(A) Any transaction, including a contract for 
        service, between a person providing investment advice 
        described in section 3(21)(A)(ii) and the advice 
        recipient in connection with such investment advice, 
        and any transaction consisting of the provision of such 
        investment advice, if the following conditions are 
        satisfied:
                  (i) No more than reasonable compensation is 
                paid (as determined under section 408(b)(2)) 
                for such investment advice.
                  (ii) If the investment advice is based on a 
                limited range of investment options (which may 
                consist, in whole or in part, of proprietary 
                products), such limitations shall be clearly 
                disclosed to the advice recipient prior to any 
                transaction based on the investment advice in 
                the form of a notice that only states the 
                following: ``This recommendation is based on a 
                limited range of investment options, and the 
                same or similar investments may be available at 
                a different cost (greater or lesser) from other 
                sources.''.
                  (iii) If the investment advice may result in 
                variable compensation to the person providing 
                the investment advice (or any affiliate of such 
                person), the receipt of such compensation shall 
                be clearly disclosed to the advice recipient 
                prior to any transaction based on the 
                investment advice. For purposes of this 
                subparagraph, clear disclosure of variable 
                compensation shall include, in a manner 
                calculated to be understood by the average 
                individual, each of the following:
                          (I) A notice that states only the 
                        following: ``This recommendation may 
                        result in varying amounts of fees or 
                        other compensation to the person 
                        providing the recommendation (or its 
                        affiliate), and the same or similar 
                        investments may be available at a 
                        different cost (greater or lesser) from 
                        other sources.''. Any regulations or 
                        administrative guidance implementing 
                        this subclause may not require this 
                        notice to be updated more than 
                        annually.
                          (II) A description of any fee or 
                        other compensation that is directly or 
                        indirectly payable to the person (or 
                        its affiliate) by the advice recipient 
                        with respect to such transaction 
                        (expressed as an amount, formula, 
                        percentage of assets, per capita 
                        charge, or estimate or range of such 
                        compensation).
                          (III) A description of the types and 
                        ranges of any compensation that may be 
                        directly or indirectly payable to the 
                        person (or its affiliate) by any third 
                        party in connection with such 
                        transaction (expressed as an amount, 
                        formula, percentage of assets, per 
                        capita charge, or estimate or range of 
                        such compensation).
                          (IV) Upon request of the advice 
                        recipient, a disclosure of the specific 
                        amounts of compensation described in 
                        clause (iii) that the person will 
                        receive in connection with the 
                        particular transaction (expressed as an 
                        amount, formula, percentage of assets, 
                        per capita charge, or estimate of such 
                        compensation).
          (B) No recommendation will fail to satisfy the 
        conditions described in clauses (i) through (iii) of 
        subparagraph (A) solely because the person, acting in 
        good faith and with reasonable diligence, makes an 
        error or omission in disclosing the information 
        specified in such clauses, provided that the person 
        discloses the correct information to the advice 
        recipient as soon as practicable, but not later than 30 
        days from the date on which the person knows of such 
        error or omission.
          (C) Any notice provided pursuant to a requirement 
        under clause (ii) or clause (iii)(I) of subparagraph 
        (A) shall have no effect on any other notice otherwise 
        required without regard to this title, and shall be 
        provided in addition to, and not in lieu of, any other 
        such notice.
          (D) For purposes of this paragraph, the term 
        ``affiliate'' has the meaning given in subsection 
        (g)(11)(B).
  (c) Nothing in section 406 shall be construed to prohibit any 
fiduciary from--
          (1) receiving any benefit to which he may be entitled 
        as a participant or beneficiary in the plan, so long as 
        the benefit is computed and paid on a basis which is 
        consistent with the terms of the plan as applied to all 
        other participants and beneficiaries;
          (2) receiving any reasonable compensation for 
        services rendered, or for the reimbursement of expenses 
        properly and actually incurred, in the performance of 
        his duties with the plan; except that no person so 
        serving who already receives full time pay from an 
        employer or an association of employers, whose 
        employees are participants in the plan, or from an 
        employee organization whose members are participants in 
        such plan shall receive compensation from such plan, 
        except for reimbursement of expenses properly and 
        actually incurred; or
          (3) serving as a fiduciary in addition to being an 
        officer, employee, agent, or other representative of a 
        party in interest.
  (d)(1) Section 407(b) and subsections (b), (c), and (e) of 
this section shall not apply to a transaction in which a plan 
directly or indirectly--
          (A) lends any part of the corpus or income of the 
        plan to,
          (B) pays any compensation for personal services 
        rendered to the plan to, or
          (C) acquires for the plan any property from, or sells 
        any property to,
any person who is with respect to the plan an owner-employee 
(as defined in section 401(c)(3) of the Internal Revenue Code 
of 1986), a member of the family (as defined in section 
267(c)(4) of such Code) of any such owner-employee, or any 
corporation in which any such owner-employee owns, directly or 
indirectly, 50 percent or more of the total combined voting 
power of all classes of stock entitled to vote or 50 percent or 
more of the total value of shares of all classes of stock of 
the corporation.
  (2)(A) For purposes of paragraph (1), the following shall be 
treated as owner-employees:
          (i) A shareholder-employee.
          (ii) A participant or beneficiary of an individual 
        retirement plan (as defined in section 7701(a)(37) of 
        the Internal Revenue Code of 1986).
          (iii) An employer or association of employees which 
        establishes such an individual retirement plan under 
        section 408(c) of such Code.
  (B) Paragraph (1)(C) shall not apply to a transaction which 
consists of a sale of employer securities to an employee stock 
ownership plan (as defined in section 407(d)(6)) by a 
shareholder-employee, a member of the family (as defined in 
section 267(c)(4) of such Code) of any such owner-employee, or 
a corporation in which such a shareholder-employee owns stock 
representing a 50 percent or greater interest described in 
paragraph (1).
  (C) For purposes of paragraph (1)(A), the term ``owner-
employee'' shall only include a person described in clause (ii) 
or (iii) of subparagraph (A).
  (3) For purposes of paragraph (2), the term ``shareholder-
employee'' means an employee or officer of an S corporation (as 
defined in section 1361(a)(1) of such Code) who owns (or is 
considered as owning within the meaning of section 318(a)(1) of 
such Code) more than 5 percent of the outstanding stock of the 
corporation on any day during the taxable year of such 
corporation.
  (e) Sections 406 and 407 shall not apply to the acquisition 
or sale by a plan of qualifying employer securities (as defined 
in section 407(d)(5)) or acquisition, sale or lease by a plan 
of qualifying employer real property (as defined in section 
407(d)(4))--
          (1) if such acquisition, sale, or lease is for 
        adequate consideration (or in the case of a marketable 
        obligation, at a price not less favorable to the plan 
        than the price determined under section 407(e)(1)),
          (2) if no commission is charged with respect thereto, 
        and
          (3) if--
                  (A) the plan is an eligible individual 
                account plan (as defined in section 407(d)(3)), 
                or
                  (B) in the case of an acquisition or lease of 
                qualifying employer real property by a plan 
                which is not an eligible individual account 
                plan, or of an acquisition of qualifying 
                employer securities by such a plan, the lease 
                or acquisition is not prohibited by section 
                407(a).
  (f) Section 406(b)(2) shall not apply to any merger or 
transfer described in subsection (b)(11).
  (g) Provision of Investment Advice to Participant and 
Beneficiaries.--
          (1) In general.--The prohibitions provided in section 
        406 shall not apply to transactions described in 
        subsection (b)(14) if the investment advice provided by 
        a fiduciary adviser is provided under an eligible 
        investment advice arrangement.
          (2) Eligible investment advice arrangement.--For 
        purposes of this subsection, the term ``eligible 
        investment advice arrangement'' means an arrangement--
                  (A) which either--
                          (i) provides that any fees (including 
                        any commission or other compensation) 
                        received by the fiduciary adviser for 
                        investment advice or with respect to 
                        the sale, holding, or acquisition of 
                        any security or other property for 
                        purposes of investment of plan assets 
                        do not vary depending on the basis of 
                        any investment option selected, or
                          (ii) uses a computer model under an 
                        investment advice program meeting the 
                        requirements of paragraph (3) in 
                        connection with the provision of 
                        investment advice by a fiduciary 
                        adviser to a participant or 
                        beneficiary, and
                  (B) with respect to which the requirements of 
                paragraph (4), (5), (6), (7), (8), and (9) are 
                met.
          (3) Investment advice program using computer model.--
                  (A) In general.--An investment advice program 
                meets the requirements of this paragraph if the 
                requirements of subparagraphs (B), (C), and (D) 
                are met.
                  (B) Computer model.--The requirements of this 
                subparagraph are met if the investment advice 
                provided under the investment advice program is 
                provided pursuant to a computer model that--
                          (i) applies generally accepted 
                        investment theories that take into 
                        account the historic returns of 
                        different asset classes over defined 
                        periods of time,
                          (ii) utilizes relevant information 
                        about the participant, which may 
                        include age, life expectancy, 
                        retirement age, risk tolerance, other 
                        assets or sources of income, and 
                        preferences as to certain types of 
                        investments,
                          (iii) utilizes prescribed objective 
                        criteria to provide asset allocation 
                        portfolios comprised of investment 
                        options available under the plan,
                          (iv) operates in a manner that is not 
                        biased in favor of investments offered 
                        by the fiduciary adviser or a person 
                        with a material affiliation or 
                        contractual relationship with the 
                        fiduciary adviser, and
                          (v) takes into account all investment 
                        options under the plan in specifying 
                        how a participant's account balance 
                        should be invested and is not 
                        inappropriately weighted with respect 
                        to any investment option.
                  (C) Certification.--
                          (i) In general.--The requirements of 
                        this subparagraph are met with respect 
                        to any investment advice program if an 
                        eligible investment expert certifies, 
                        prior to the utilization of the 
                        computer model and in accordance with 
                        rules prescribed by the Secretary, that 
                        the computer model meets the 
                        requirements of subparagraph (B).
                          (ii) Renewal of certifications.--If, 
                        as determined under regulations 
                        prescribed by the Secretary, there are 
                        material modifications to a computer 
                        model, the requirements of this 
                        subparagraph are met only if a 
                        certification described in clause (i) 
                        is obtained with respect to the 
                        computer model as so modified.
                          (iii) Eligible investment expert.--
                        The term ``eligible investment expert'' 
                        means any person--
                                  (I) which meets such 
                                requirements as the Secretary 
                                may provide, and
                                  (II) does not bear any 
                                material affiliation or 
                                contractual relationship with 
                                any investment adviser or a 
                                related person thereof (or any 
                                employee, agent, or registered 
                                representative of the 
                                investment adviser or related 
                                person).
                  (D) Exclusivity of recommendation.--The 
                requirements of this subparagraph are met with 
                respect to any investment advice program if--
                          (i) the only investment advice 
                        provided under the program is the 
                        advice generated by the computer model 
                        described in subparagraph (B), and
                          (ii) any transaction described in 
                        subsection (b)(14)(A)(ii) occurs solely 
                        at the direction of the participant or 
                        beneficiary.
                Nothing in the preceding sentence shall 
                preclude the participant or beneficiary from 
                requesting investment advice other than that 
                described in subparagraph (A), but only if such 
                request has not been solicited by any person 
                connected with carrying out the arrangement.
          (4) Express authorization by separate fiduciary.--The 
        requirements of this paragraph are met with respect to 
        an arrangement if the arrangement is expressly 
        authorized by a plan fiduciary other than the person 
        offering the investment advice program, any person 
        providing investment options under the plan, or any 
        affiliate of either.
          (5) Annual audit.--The requirements of this paragraph 
        are met if an independent auditor, who has appropriate 
        technical training or experience and proficiency and so 
        represents in writing--
                  (A) conducts an annual audit of the 
                arrangement for compliance with the 
                requirements of this subsection, and
                  (B) following completion of the annual audit, 
                issues a written report to the fiduciary who 
                authorized use of the arrangement which 
                presents its specific findings regarding 
                compliance of the arrangement with the 
                requirements of this subsection.
        For purposes of this paragraph, an auditor is 
        considered independent if it is not related to the 
        person offering the arrangement to the plan and is not 
        related to any person providing investment options 
        under the plan.
          (6) Disclosure.--The requirements of this paragraph 
        are met if--
                  (A) the fiduciary adviser provides to a 
                participant or a beneficiary before the initial 
                provision of the investment advice with regard 
                to any security or other property offered as an 
                investment option, a written notification 
                (which may consist of notification by means of 
                electronic communication)--
                          (i) of the role of any party that has 
                        a material affiliation or contractual 
                        relationship with the fiduciary adviser 
                        in the development of the investment 
                        advice program and in the selection of 
                        investment options available under the 
                        plan,
                          (ii) of the past performance and 
                        historical rates of return of the 
                        investment options available under the 
                        plan,
                          (iii) 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,
                          (iv) of any material affiliation or 
                        contractual relationship of the 
                        fiduciary adviser or affiliates thereof 
                        in the security or other property,
                          (v) the manner, and under what 
                        circumstances, any participant or 
                        beneficiary information provided under 
                        the arrangement will be used or 
                        disclosed,
                          (vi) of the types of services 
                        provided by the fiduciary adviser in 
                        connection with the provision of 
                        investment advice by the fiduciary 
                        adviser,
                          (vii) that the adviser is acting as a 
                        fiduciary of the plan in connection 
                        with the provision of the advice, and
                          (viii) that a recipient of the advice 
                        may separately arrange for the 
                        provision of advice by another adviser, 
                        that could have no material affiliation 
                        with and receive no fees or other 
                        compensation in connection with the 
                        security or other property, and
                  (B) at all times during the provision of 
                advisory services to the participant or 
                beneficiary, the fiduciary adviser--
                          (i) maintains the information 
                        described in subparagraph (A) in 
                        accurate form and in the manner 
                        described in paragraph (8),
                          (ii) provides, without charge, 
                        accurate information to the recipient 
                        of the advice no less frequently than 
                        annually,
                          (iii) provides, without charge, 
                        accurate information to the recipient 
                        of the advice upon request of the 
                        recipient, and
                          (iv) provides, without charge, 
                        accurate information to the recipient 
                        of the advice concerning any material 
                        change to the information required to 
                        be provided to the recipient of the 
                        advice at a time reasonably 
                        contemporaneous to the change in 
                        information.
          (7) Other conditions.--The requirements of this 
        paragraph are met if--
                  (A) 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,
                  (B) the sale, acquisition, or holding occurs 
                solely at the direction of the recipient of the 
                advice,
                  (C) 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
                  (D) 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.
          (8) Standards for presentation of information.--
                  (A) In general.--The requirements of this 
                paragraph are met if the notification required 
                to be provided to participants and 
                beneficiaries under paragraph (6)(A) is written 
                in a clear and conspicuous manner and in a 
                manner calculated to be understood by the 
                average plan participant and is sufficiently 
                accurate and comprehensive to reasonably 
                apprise such participants and beneficiaries of 
                the information required to be provided in the 
                notification.
                  (B) Model form for disclosure of fees and 
                other compensation.--The Secretary shall issue 
                a model form for the disclosure of fees and 
                other compensation required in paragraph 
                (6)(A)(iii) which meets the requirements of 
                subparagraph (A).
          (9) Maintenance for 6 years of evidence of 
        compliance.--The requirements of this paragraph are met 
        if a fiduciary adviser who has provided advice referred 
        to in paragraph (1) maintains, for a period of not less 
        than 6 years after the provision of the advice, 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.
          (10) 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 
                        eligible investment advice 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 eligible 
                        investment advice arrangement require 
                        compliance by the fiduciary adviser 
                        with the requirements of this 
                        subsection, and
                          (iii) the terms of the eligible 
                        investment advice 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 eligible investment 
                advice arrangement for the provision of 
                investment 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).
          (11) 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 referred 
                to in section 3(21)(A)(ii) by the person to a 
                participant or beneficiary of the plan 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 
                        (b)(4) or a savings association (as 
                        defined in section 3(b)(1) of the 
                        Federal Deposit Insurance Act (12 
                        U.S.C. 1813(b)(1)), but only if the 
                        advice is provided through a trust 
                        department of the bank or similar 
                        financial institution or savings 
                        association which is subject to 
                        periodic examination and review by 
                        Federal or State banking authorities,
                          (iii) an insurance company qualified 
                        to do business under the laws of a 
                        State,
                          (iv) a person registered as a broker 
                        or dealer under the Securities Exchange 
                        Act of 1934 (15 U.S.C. 78a et seq.),
                          (v) an affiliate of a person 
                        described in any of clauses (i) through 
                        (iv), or
                          (vi) an employee, agent, or 
                        registered representative of a person 
                        described in clauses (i) through (v) 
                        who satisfies the requirements of 
                        applicable insurance, banking, and 
                        securities laws relating to the 
                        provision of the advice.
                For purposes of this part, a person who 
                develops the computer model described in 
                paragraph (3)(B) or markets the investment 
                advice program or computer model shall be 
                treated as a person who is a fiduciary of the 
                plan by reason of the provision of investment 
                advice referred to in section 3(21)(A)(ii) to a 
                participant or beneficiary and shall be treated 
                as a fiduciary adviser for purposes of this 
                subsection and subsection (b)(14), except that 
                the Secretary may prescribe rules under which 
                only 1 fiduciary adviser may elect to be 
                treated as a fiduciary with respect to the 
                plan.
                  (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).

           *       *       *       *       *       *       *


                             MINORITY VIEWS

    After decades of hard work, many middle-class Americans 
seek out financial advice on how to invest their retirement 
nest egg. This is one of the biggest financial decisions they 
will make in their lives. When making it, they often rely on 
the financial advice they are given and implicitly trust that 
it is in their best interest. Unfortunately, that's not always 
the case. Loopholes in a decades-old regulation allow 
unscrupulous advisors to provide ``conflicted advice'' and put 
their financial interests ahead of their retirement clients'. 
Conflicted advice costs retirement plan participants $17 
billion in losses every year and could result in a loss of 
almost a quarter of an individual's savings over a 35-year 
period.\1\ Rather than taking steps to fix this problem, H.R. 
4293 perpetuates this unacceptable status quo.
---------------------------------------------------------------------------
    \1\Council of Economic Advisors, The Effects of Conflicted 
Investment Advice on Retirement Savings 17-18 (Feb. 2015); available 
at: https://www.whitehouse.gov/sites/default/files/docs/
cea_coi_report_final.pdf.
---------------------------------------------------------------------------
    H.R. 4293 also includes an unnecessary, constitutionally-
suspect procedural mechanism that prohibits the Department of 
Labor's (DOL's) final conflict of interest rule from taking 
effect unless it is approved by Congress within 60 days. This 
``affirmative approval'' process is similar to the one 
enumerated in the Regulations from the Executive in Need of 
Scrutiny (REINS) Act. The REINS Act is a central component of 
the Republican-led Congress's hyper-partisan, anti-regulatory 
agenda. The Coalition for Sensible Safeguards (CSS), an 
alliance of over 150 labor, scientific, research, good 
government, faith, community, health, environment, and public 
interest groups, urged opposition to H.R. 4293 and another 
bill, H.R. 4294, which is nearly identical to H.R. 4293. In 
crafting a so-called alternative to the DOL's conflict of 
interest rule, House Republicans decided to advance two 
companion bills: H.R. 4293 amends the Employee Retirement 
Income Security Act (ERISA; P.L. 93-406), which governs 
retirement plans of private employers. H.R. 4294 amends the 
Internal Revenue Code (IRC), which governs tax-favored 
retirement savings such as Individual Retirement Accounts 
(IRAs). The core provisions of both bills are nearly identical, 
and the Education and Workforce Committee considered H.R. 4293 
and H.R. 4294 during the same mark-up.
    Many groups, including CSS, registered their opposition to 
both bills. CSS cited H.R. 4293 and H.R. 4294's procedural 
requirement as a ``threat to our democratic process.''\2\ In 
its opposition letter, the CSS said using ``a REINS-like 
mechanism to overturn this particular rule is unprecedented. 
These bills' passage will only embolden radical members of both 
chambers to attempt this scheme to derail other rules, 
potentially jeopardizing crucial public health and safety and 
environmental protections.''\3\
---------------------------------------------------------------------------
    \2\Coalition for Sensible Safeguards, ``Mark-up on H.R. 4293, the 
Affordable Retirement Advice Protection Act and H.R. 4294, 
Strengthening Access to Valuable Education and Retirement Support 
Act,'' (Feb. 2016); available at: http://www.sensiblesafeguards.org/wp-
content/uploads/CSS-letter-on-H.R.-4293-4294-.pdf
    \3\ Id.
---------------------------------------------------------------------------
    In addition to the CSS, a diverse stakeholder coalition 
weighed in against H.R. 4293. That coalition includes: AARP, 
AFL-CIO, Alliance for Retired Americans, American Federation of 
State, County, and Municipal Employees (AFSCME), Association of 
University Centers on Disabilities, Better Markets, Center for 
Economic Justice, Center for Global Policy Solutions, Center 
for Responsible Lending, The Committee for the Fiduciary 
Standard, Consumer Action, Consumer Federation of America, 
Consumers Union, Demos, Financial Planning Coalition, 
International Association of Machinists and Aerospace Workers, 
International Association of Sheet Metal, Air, Rail, and 
Transportation Workers, International Brotherhood of Electrical 
Workers, Leadership Conference on Civil and Human Rights, Main 
Street Alliance, NAACP, National Active and Retired Federal 
Employees Association (NARFE), National Committee to Preserve 
Social Security and Medicare, National Consumers League, 
National Council of La Raza, Pension Rights Center, Public 
Citizen, Public Investors Arbitration Bar Association, Service 
Employees International Union (SEIU), and U.S. PIRG.

H.R. 4293 ENABLES UNSCRUPULOUS ADVISORS TO CONTINUE TO EVADE FIDUCIARY 
 OBLIGATIONS AND PUT THEIR FINANCIAL INTERESTS AHEAD OF THEIR CLIENTS'

    Enacted in 1974, ERISA describes the circumstances when a 
person has a fiduciary obligation for rendering investment 
advice.\4\ The DOL issued regulations in 1975 that further 
defined such circumstances using a five-part test. Under the 
regulations, to be held to ERISA's fiduciary standard with 
respect to providing investment advice, an individual must: (1) 
make recommendations on investing in, purchasing or selling 
securities or other property, or give advice as to their value 
(2) on a regular basis (3) pursuant to a mutual understanding 
that the advice (4) will serve as a primary basis for 
investment decisions, and (5) will be individualized to the 
particular needs of the plan.\5\ Unless each of the five 
elements of this test is satisfied for each time advice is 
given, then an investment advisor is not treated as a 
fiduciary.
---------------------------------------------------------------------------
    \4\29 U.S.C. 1002(21).
    \5\29 C.F.R. 2510.3-21(c), 40 Fed. Reg. 50843 (Oct. 1975); 
available at: http://www.gpo.gov/fdsys/pkg/CFR-2011-title29-vol9/pdf/
CFR-2011-title29-vol9-sec2510-3-21.pdf.
---------------------------------------------------------------------------
    This five-part test has not kept pace with the changed 
retirement savings and planning landscape, and loopholes have 
emerged that can be exploited. For instance, an unscrupulous 
advisor providing individualized investment advice to a 
retirement client about rolling over assets from an employer-
sponsored retirement plan--such as a 401(k)--to an IRA does not 
have to abide by a fiduciary obligation. Neither does an 
advisor who provides retirement savings advice on a one-time 
basis. As a result of this deficient five-part test, certain 
advisors are able to provide substandard advice and steer 
retirement clients toward financial products with sky-high fees 
that are not in their clients' best interest. Such products may 
enrich the advisor yet insidiously erode the savings of workers 
and retirees. To get away with this, so-called advisors can 
insert boilerplate disclaimers in the fine print. As Secretary 
Perez has correctly noted, ``the corrosive power of fine print 
and buried fees can eat away like a chronic illness at a 
person's savings.''\6\
---------------------------------------------------------------------------
    \6\Testimony of Secretary of Labor Thomas E. Perez before the 
Health, Employment, Labor, and Pensions (HELP) Subcommittee of the 
Education and Workforce Committee (June 2015); available at: http://
www.dol.gov/newsroom/congress/20150617_Perez.
---------------------------------------------------------------------------
    Recognizing that the existing regulation is broken and in 
desperate need of reform, the DOL undertook a rulemaking effort 
to revise the definition of who is a fiduciary under the 
Employee Retirement Income Security Act (ERISA) as a result of 
giving investment advice. H.R. 4293 represents a deeply flawed 
response to the DOL's conflict of interest rulemaking effort. 
Rather than closing loopholes in the existing regulation that 
enable unscrupulous advisors to offer substandard retirement 
savings advice to middle-class Americans, the bill codifies 
them.
    Specifically, to qualify as a fiduciary under the 
provisions of H.R. 4293, investment advice must be rendered for 
a fee pursuant to 1) ``written acknowledgement'' of the 
fiduciary obligation; or 2) ``a mutual agreement, arrangement, 
or understanding'' that it is ``individualized'' to the client 
and the client ``intends to materially rely'' on the advice.
    However, under H.R. 4293, financial advisors would be able 
to continue to avoid their fiduciary obligations just by 
providing a written disclaimer that says the following:

         This information is not individualized to you, and 
        there is no intent for you to materially rely on this 
        information in making investment and management 
        decisions.

    This language mirrors the kind of boilerplate disclaimer 
currently used by certain firms and advisors to avoid fiduciary 
obligations. While Committee Democrats believe disclosures and 
disclaimers are no substitute for a meaningful, enforceable 
fiduciary standard, there is also research to suggest that, on 
their own, disclosures and disclaimers can be ineffective and 
even detrimental to clients:
     According to an industry association study, ``two-
thirds of Americans with defined contribution (DC) plans or 
IRAs admit to spending less than five minutes examining their 
retirement plan disclosures--one in five say they rarely or 
never read the disclosure paperwork at all.''\7\
---------------------------------------------------------------------------
    \7\Life Insurance Management Research Association (LIMRA), ``Many 
Americans Don't Fully Read Retirement Plan Disclosures; Few Know What 
Fees they Pay,'' (August 2012); available at: http://www.limra.com/
Posts/PR/News _ Releases/LIMRA_Study_Many_Americans_
Don_t_Fully _Read_Retirement_Plan_Disclosures;_Few_Know_What_Fees 
_They_Pay.aspx.
---------------------------------------------------------------------------
     Disclosures often fail to make clients aware of 
the nature of their advisors' conflicts, let alone understand 
the potential implications of such conflicts.\8\
---------------------------------------------------------------------------
    \8\Department of Labor, ``Fiduciary Investment Advice, Regulatory 
Impact Analysis,'' (April 2015); available at: http://www.dol.gov/ebsa/
pdf/conflictsofinterestria.pdf.
---------------------------------------------------------------------------
     Disclosure of advisor conflicts can backfire since 
clients can interpret disclosure of advisor conflicts as a sign 
of honesty.\9\ In this case, disclosure may even be harmful to 
workers and retirees seeking to invest their savings because 
they could potentially create an illusion of fiduciary 
protection.
---------------------------------------------------------------------------
    \9\ Id.
---------------------------------------------------------------------------
    Committee Democrats believe H.R. 4293 includes two other 
incredibly broad and ill-advised exemptions from fiduciary 
responsibilities. According to the Financial Planning 
Coalition, ``firms and advisors will be allowed to provide an 
unlimited amount of advice to their clients, as long as they 
provide disclosure in writing that they are only providing the 
advice in a marketing or sales capacity' . . . In addition, the 
bills allow for advisors to escape fiduciary duty by claiming 
they made a good-faith' error in their disclosure to their 
clients.''\10\
---------------------------------------------------------------------------
    \10\Financial Planning Coalition, ``H.R. 4293 and H.R. 4294 Would 
Reduce Protections for Retirement Investors,'' (Jan. 2016); available 
at: https://filemanager.capwiz.com/filemanager/file-mgr/cfp/
2016_01_29_HR_4294_and_4293_Would_Reduce_Protection_for_Retirement_Inves
tors.pdf.
---------------------------------------------------------------------------

H.R. 4293 ESTABLISHES AN UNNECESSARY, CONSTITUTIONALLY-SUSPECT PROCESS 
TO ENABLE THE REPUBLICAN-LED CONGRESS TO ASSERT VETO POWER OVER THE DOL 
                                  RULE

    H.R. 4293 requires that Congress affirmatively approve the 
DOL's final ``conflict of interest'' rule within 60 days after 
the bill's enactment. If a bill or joint resolution is not 
approved within 60 days, then H.R. 4293's provisions shall take 
effect. The bill's ``affirmative approval'' requirement is akin 
to the one specified in the REINS Act (H.R. 427). In July 2015, 
the REINS Act was brought to the House floor for a vote. The 
bill passed on a near party-line vote. Only 2 House Democrats 
supported it.
    Committee Democrats believe the bill's ``affirmative 
approval'' mechanism is not necessary. Under the Congressional 
Review Act (CRA), which was enacted as part of then-Speaker 
Gingrich and House Republicans' so-called Contract with 
America, Congress already possesses the authority to review and 
nullify a rule. According to the Government Accountability 
Office (GAO), the CRA ``gives Congress an opportunity to review 
most rules before they take effect and to disapprove those 
found to be too burdensome, excessive, inappropriate, 
duplicative, or otherwise objectionable.''\11\
---------------------------------------------------------------------------
    \11\United States Government Accountability Office, Testimony 
Before the Subcommittee on Commercial and Administrative Law, House 
Committee on Judiciary, ``Perspectives of Years of Congressional Review 
Act Implementation,'' (March 2006); available at: http://www.gao.gov/
new.items/d06601t.pdf.
---------------------------------------------------------------------------
    Additionally, Committee Democrats share the concerns that 
have been raised about the potential constitutionality of the 
bill's ``affirmative approval'' mechanism. After the 
Immigration and Naturalization Service (INS) suspended a 
particular deportation, the agency was overruled by the U.S. 
House of Representatives under certain provisions of the 
Immigration and Nationality Act. In INS v. Chadha, the Supreme 
Court found this House veto to be unconstitutional because 
Congress was taking a legislative action, which had to be 
passed by both houses of Congress and presented to the 
President for approval in order to satisfy the bicameralism and 
presentment clauses of the U.S. Constitution.\12\
---------------------------------------------------------------------------
    \12\INS v. Chadha, 462 U.S. 919 (1983).
---------------------------------------------------------------------------
    The ``affirmative approval'' mechanism in H.R. 4293 may run 
afoul of the Court's decision in Chadha, as either the House or 
Senate--acting alone--could reject or not act upon the bill or 
joint resolution. Such an outcome may raise similar ``one House 
legislative veto'' concerns that the Court ruled to be 
unconstitutional in Chadha.

                    DEMOCRATIC MOTION AND AMENDMENT

    Ranking Member Scott offered a motion to indefinitely 
postpone the mark-up, asserting it was premature for the 
Committee to consider H.R. 4293 and H.R. 4294 prior to the 
DOL's finalization of the conflict of interest rule. The motion 
failed on a voice vote.
    Congresswoman Bonamici offered a substitute amendment to 
H.R. 4293 to require the Congressional Budget Office (CBO) to 
certify to Congress that the bills will prevent investment 
advisors from putting their financial interests ahead of their 
clients'. The amendment failed on a voice vote.

                    ROLL CALL VOTES ON FINAL PASSAGE

    H.R. 4293 was reported by straight party-line votes of 22 
ayes and 14 nays. No Democratic Committee Members voted in 
favor of the bills.

                               CONCLUSION

    Committee Democrats remain committed to responsible 
solutions that help workers earn and collectively bargain for 
decent wages, achieve a better balance between work and family 
life, end workplace discrimination, and retire with security 
and dignity. H.R. 4293 is not among these solutions.
    Instead of reserving judgment on the DOL's final conflict 
of interest rulemaking, the Majority rushed to mark-up these 
deeply flawed, constitutionally-questionable bills. Committee 
Democrats believe that we can do better. Workers and retirement 
savers deserve better. They deserve fiduciary protections when 
investing their hard-earned retirement savings; and, 
regrettably, that's not what H.R. 4293 delivers.
    For the reasons stated above, among others, Committee 
Democrats unanimously opposed H.R. 4293 when the Committee on 
Education and the Workforce considered them on February 2, 
2016. We urge the full House of Representatives to do the same.

                                   Robert C. ``Bobby'' Scott,
                                     Ranking Member.
                                   Joe Courtney.
                                   Frederica S. Wilson.
                                   Mark Pocan.
                                   Raul M. Grijalva.
                                   Mark DeSaulnier.
                                   Susan A. Davis.
                                   Jared Polis.
                                   Alma S. Adams.
                                   Marcia L. Fudge.
                                   Mark Takano.
                                   Hakeem S. Jeffries.
                                   Suzanne Bonamici.
                                   Ruben Hinojosa.

                                  [all]