[House Report 114-512]
[From the U.S. Government Publishing Office]


114th Congress   }                                  {   Rept. 114-512
                        HOUSE OF REPRESENTATIVES
 2d Session      }                                  {          Part 2
======================================================================
 
 STRENGTHENING ACCESS TO VALUABLE EDUCATION AND RETIREMENT SUPPORT ACT 
                                OF 2015

                                _______
                                
                                                                                                  
 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. 4294]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Education and the Workforce, to whom was 
referred the bill (H.R. 4294) to amend the Internal Revenue 
Code of 1986 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 ``Strengthening Access to Valuable 
Education and Retirement Support Act of 2015'' or the ``SAVERS Act of 
2015''.

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 4975 of the Internal 
        Revenue Code of 1986, or
          (2) breach the best interest standard for the provision of 
        investment advice,
are subject to liability under the Internal Revenue Code of 1986.

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

  (a) Amendments to the Internal Revenue Code of 1986.--
          (1) Exemption for investment advice which is best interest 
        recommendation.--Section 4975(d) of the Internal Revenue Code 
        of 1986 is amended by striking ``or'' at the end of paragraph 
        (22), by striking the period at the end of paragraph (23) and 
        inserting ``, or'', and by inserting after paragraph (23) the 
        following:
          ``(24) provision of investment advice by a fiduciary to a 
        plan, plan participant, or beneficiary with respect to the 
        plan, which is a best interest recommendation.''.
          (2) Investment advice; best interest recommendation.--Section 
        4975(e) of such Code is amended by adding at the end the 
        following:
          ``(10) Investment advice.--
                  ``(A) In general.--For purposes of this section, the 
                term `investment advice' means a recommendation that--
                          ``(i) relates to--
                                  ``(I) 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 rolled over 
                                or otherwise distributed from such 
                                plan;
                                  ``(II) the management of moneys or 
                                other property of such plan, including 
                                recommendations relating to the 
                                management of moneys or other property 
                                to be rolled over or otherwise 
                                distributed from such plan; or
                                  ``(III) 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--
                                  ``(I) a written acknowledgment that 
                                the person is a fiduciary with respect 
                                to the provision of such 
                                recommendation; or
                                  ``(II) 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, plan participant, or 
                                beneficiary that such recommendation is 
                                individualized to the plan, plan 
                                participant, or beneficiary and such 
                                plan, plan participant, or beneficiary 
                                intends to materially rely on such 
                                recommendation in making investment or 
                                management decisions with respect to 
                                any moneys or other property of such 
                                plan.
                  ``(B) Disclaimer of a mutual agreement, arrangement, 
                or understanding.--For purposes of subparagraph 
                (A)(ii)(II), any disclaimer of a mutual agreement, 
                arrangement, or understanding shall only state 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 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.
                  ``(C) When recommendation treated as made pursuant to 
                a mutual agreement, arrangement, or understanding.--For 
                purposes of subparagraph (A)(ii)(II), information shall 
                not be treated as a recommendation made pursuant to a 
                mutual agreement, arrangement, or understanding, and 
                such information shall contain the disclaimer required 
                by subparagraph (B), if--
                          ``(i) Seller's exception.--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 within 
                        the meaning of this subparagraph or to 
                        otherwise act as a fiduciary to the plan or 
                        under the obligations of a best interest 
                        recommendation.
                          ``(ii) Swap and security-based swap 
                        transaction.--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--
                                  ``(I) the plan is represented, in 
                                connection with such transaction, by a 
                                plan fiduciary who 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
                                  ``(II) prior to entering into 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, plan 
                                participants, or plan beneficiaries.
                          ``(iii) Employees of a plan sponsor.--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) Platform providers selection and 
                        monitoring assistance.--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 (within the meaning of this 
                        paragraph) or under the obligations of a best 
                        interest recommendation and the information 
                        consists solely of--
                                  ``(I) making available to the plan, 
                                plan participants, or plan 
                                beneficiaries, without regard to the 
                                individualized needs of the plan, plan 
                                participants, or plan beneficiaries, 
                                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
                                  ``(II) in connection with a platform 
                                or similar mechanism described in 
                                subclause (I)--
                                          ``(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) Valuation.--The information consists 
                        solely of valuation information.
                          ``(vi) Financial education.--The information 
                        consists solely of--
                                  ``(I) 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,
                                  ``(II) information provided to 
                                participants or beneficiaries regarding 
                                the factors to consider in deciding 
                                whether to elect to receive a 
                                distribution from a plan and whether to 
                                roll over such distribution to a plan, 
                                so long as any examples of different 
                                distribution and rollover alternatives 
                                are accompanied by all material facts 
                                and assumptions on which the examples 
                                are based, or
                                  ``(III) any additional information 
                                treated as education by the Secretary.
          ``(11) Best interest recommendation.--For purposes of this 
        subsection--
                  ``(A) In general.--The term `best interest 
                recommendation' means a recommendation--
                          ``(i) for which no more than reasonable 
                        compensation is paid (as determined under 
                        subsection (d)(2)),
                          ``(ii) provided by a person acting with the 
                        care, skill, prudence, and diligence under the 
                        circumstances then prevailing that a prudent 
                        person would exercise based on--
                                  ``(I) the information obtained 
                                through the reasonable diligence of the 
                                person regarding factors such as the 
                                advice recipient's age, and
                                  ``(II) any other information that the 
                                advice recipient discloses to the 
                                person in connection with receiving 
                                such recommendation, and
                          ``(iii) where the person places the interests 
                        of the plan or advice recipient above its own.
                  ``(B) Investment options; variable compensation.--A 
                best interest recommendation may include a 
                recommendation that--
                          ``(i) is based on a limited range of 
                        investment options (which may consist, in whole 
                        or in part, of proprietary products), but only 
                        if any such limitations, including a clearly-
                        stated notice that the same or similar 
                        investments may be available at a different 
                        cost (greater or lesser) from other sources, 
                        are clearly disclosed to the advice recipient 
                        prior to any transaction based on the 
                        recommendation, or
                          ``(ii) may result in variable compensation to 
                        the person providing the recommendation (or any 
                        affiliate of such person), but only if the 
                        receipt of such compensation, including a 
                        clearly-stated notice that the same or similar 
                        investments may be available at a different 
                        cost (greater or lesser) from other sources, is 
                        clearly disclosed to the advice recipient prior 
                        to any transaction based on the recommendation.
                The notices provided pursuant to clauses (i) and (ii) 
                shall only state the following: `The same or similar 
                investments may be available at a different cost 
                (greater or lesser) from other sources.'.
                  ``(C) Clear disclosure of variable compensation.--For 
                purposes of subparagraph (B)(ii), variable compensation 
                is clearly disclosed if notification is provided at any 
                time prior to a transaction based on the person's 
                recommendation, in a manner calculated to be understood 
                by the average individual, of the following:
                          ``(i) A notice in writing, including a 
                        clearly-stated notice that the same or similar 
                        investments may be available at a different 
                        cost (greater or lesser) from other sources, 
                        that the person providing the recommendation 
                        (or its affiliate) may receive varying amounts 
                        of fees or other compensation with respect to 
                        such transaction.
                          ``(ii) A description of any fee or other 
                        compensation that is directly payable to the 
                        person (or its affiliate) from 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 indirect compensation that may be paid 
                        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 of such 
                        ranges of 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).
                  ``(D) Definition of affiliate.--For purposes of this 
                paragraph, the term `affiliate' has the meaning given 
                in subsection (f)(8)(J)(ii).
                  ``(E) Correction of certain errors and omissions.--A 
                recommendation shall not fail to be a best interest 
                recommendation solely because a person who, acting in 
                good faith and with reasonable diligence, makes an 
                error or omission in disclosing the information 
                specified in subparagraph (B), 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 such error or omission.''.
          (3) Failures relating to best interest recommendation.--
                  (A) Correction.--Section 4975(f)(5) of such Code is 
                amended--
                          (i) by striking ``(5) Correction.--The 
                        terms'' and inserting:
          ``(5) Correction.--
                  ``(A) In general.--Except as provided in subparagraph 
                (B), the terms'', and
                          (ii) by adding at the end the following:
                  ``(B) Determination of `correction' and `correct' 
                with respect to best interest advice recommendations.--
                In the case of a prohibited advice transaction arising 
                by the failure of investment advice to be a best 
                interest recommendation, the terms `correction' and 
                `correct' mean the payment to, or reimbursement of, 
                actual damages of the plan, plan participants, or plan 
                beneficiaries resulting directly from the plan's, plan 
                participant's, or plan beneficiary's reliance on such 
                investment advice, if any, that have not otherwise been 
                paid or reimbursed to the plan, plan participants, or 
                plan beneficiaries, including payments and 
                reimbursements made pursuant to subparagraph (A).''.
                  (B) Amount involved for purposes of excise tax.--The 
                first sentence of section 4975(f)(4) of such Code is 
                amended by striking ``excess compensation.'' and 
                inserting ``excess compensation, and in the case of a 
                prohibited transaction arising by the failure of 
                investment advice to be a best interest recommendation, 
                the amount involved shall be the amount paid to the 
                person providing the advice (or its affiliate, as 
                defined in paragraph (8)(J)(ii)) that has not been paid 
                or reimbursed to the plan, plan participants, or plan 
                beneficiaries, including payments and reimbursements 
                made pursuant to paragraph (5).''.
          (4) Exemption relating to investment advice with respect to 
        certain fee arrangements.--Section 4975(d) of such Code (as 
        amended by paragraph (1)) is amended by striking ``or'' at the 
        end of paragraph (23), by striking the period at the end of 
        paragraph (24) and inserting ``, or'', and by adding after 
        paragraph (24) the following:
          ``(25) any transaction, including a contract for service, 
        between a person providing investment advice described in 
        subsection (e)(3)(B) and the advice recipient in connection 
        with such investment advice, if--
                  ``(A) no more than reasonable compensation is paid 
                (as determined under section 4975(d)(2)) for such 
                investment advice,
                  ``(B) in a case in which 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, including a clearly-stated 
                notice that the same or similar investments may be 
                available at a different cost (greater or lesser) from 
                other sources), shall be clearly disclosed to the 
                advice recipient prior to any transaction based on the 
                investment advice,
                  ``(C) in a case in which 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, including a 
                clearly-stated notice that the same or similar 
                investments may be available at a different cost 
                (greater or lesser) from other sources, shall be 
                clearly disclosed to the advice recipient (within the 
                meaning of subsection (e)(11)(C)), and
                  ``(D) in any case in which a person who, acting in 
                good faith and with reasonable diligence, makes an 
                error or omission in disclosing the information 
                specified in subparagraphs (B) or (C), 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.''.
  (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 section 3(21) of the Employee 
        Retirement Income Security Act of 1974 and section 4975(e)(3) 
        of the Internal Revenue Code of 1986 (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 section 3(21) of the Employee 
        Retirement Security Act of 1974 and section 4975(e)(3) of the 
        Internal Revenue Code of 1986 that is 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 and a fiduciary shall be treated as meeting the 
requirements of such amendments if the plan or fiduciary, as the case 
may be, makes a good faith effort to comply with such requirements.

                                Purpose

    H.R. 4294, the Strengthening Access to Valuable Education 
and Retirement Support Act of 2015 (SAVERS Act), 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, the 
SAVERS Act 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. 
    \3\26 U.S.C. Sec. 1 et seq. [hereinafter the Code; All section 
references herein are to the Code unless otherwise indicated].
---------------------------------------------------------------------------

                            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. 4294, Strengthening Access to Valuable Education and Retirement 
        Support Act of 2015, introduced

    On December 18, 2015, Representative Peter Roskam (R-IL), 
along with Representatives Phil Roe (R-TN), Richard Neal (D-
MA), John Larson (D-CT), Tom Reed (R-NY), and Michelle Lujan 
Grisham (D-NM), introduced the Strengthening Access to Valuable 
Education and Retirement Support Act of 2015 (H.R. 4294).\11\ 
Recognizing the threat of DOL's proposed ``fiduciary'' rule, 
the bipartisan bill was introduced to protect consumers and 
preserve access to affordable financial advice for low- and 
middle-income families. The legislation amends the Internal 
Revenue Code to require retirement advisors to act in their 
clients' best interest, and prohibits DOL from implementing its 
flawed proposal unless Congress affirmatively approves the 
final rule.
---------------------------------------------------------------------------
    \11\H.R. 4294, 114th Cong. (2015).
---------------------------------------------------------------------------

Committee passes H.R.4294, Strengthening Access to Valuable Education 
        and Retirement Support Act of 2015

    On February 2, 2016, the Committee on Education and the 
Workforce considered H.R. 4294, the Strengthening Access to 
Valuable Education and Retirement Support Act of 2015.\12\ 
Representative Earl L. ``Buddy'' Carter (R-GA) 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 and subsequently withdrawn. 
The Committee favorably reported H.R. 4294, as amended, to the 
House of Representatives by a vote of 22-14.
---------------------------------------------------------------------------
    \12\H.R. 4294, Strengthening Access to Valuable Education and 
Retirement Support Act of 2015: Markup Before the H. Comm. on Educ. and 
the Workforce, 114th Cong. (Feb. 2, 2016).
---------------------------------------------------------------------------

                               Background


                              PRESENT LAW

Tax-favored savings arrangements

            Tax-favored retirement savings
    The Code provides two general vehicles for tax-favored 
retirement savings: employer-sponsored retirement plans and 
individual retirement arrangements (IRAs).\13\ Various 
requirements must be met for tax-favored treatment to apply. 
Retirement plans of private employers are also generally 
subject to the ERISA, over which the Secretary of Labor has 
jurisdiction.
---------------------------------------------------------------------------
    \13\Sections 219, 408 and 408A provide rules for IRAs.
---------------------------------------------------------------------------
    The most common type of tax-favored employer-sponsored plan 
is a qualified retirement plan, which may be a defined 
contribution plan or a defined benefit plan.\14\ Under a 
defined contribution plan, benefits are based on a separate 
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\
---------------------------------------------------------------------------
    \14\Sec. 401(a). A qualified annuity plan under section 403(a) is 
similar to a qualified retirement plan (and subject to similar 
requirements) except that plan assets consist of annuity contracts, 
rather than investments held in a trust or custodial account. 
References herein to a qualified retirement plan include a qualified 
annuity plan. Simplified employee pension (SEP) plans under section 
408(k) and SIMPLE IRA plans under section 408(p) are employer-sponsored 
plans funded through contributions by the employer to an IRA 
established for each employee.
    \15\Defined contribution plan is defined at section 414(i).
    \16\As defined in section 414(j), a defined benefit plan is any 
plan that is not a defined contribution plan.
---------------------------------------------------------------------------
    A distribution from an employer-sponsored retirement plan 
or IRA is includible in income except to the extent it consists 
of a return of basis or an excludible distribution from a Roth 
arrangement.\17\ In most cases, however, a distribution may be 
rolled over on a nontaxable basis to another such plan or an 
IRA, either by a direct rollover or by contributing the 
distribution to the other plan or IRA within 60 days of 
receiving the distribution.\18\
---------------------------------------------------------------------------
    \17\Sections 402A and 408A provide rules for Roth arrangements.
    \18\Sec. Sec. 402(c), 403(a)(4), 403(b)(8), 408(d)(3), 408A(e), and 
457(e)(16).
---------------------------------------------------------------------------
            Health Savings Accounts and Archer MSAs
    An individual with a high deductible health plan (and, 
subject to exceptions, no other health plan) generally may make 
contributions to a health savings account (HSA).\19\ In some 
cases, such an individual may contribute to an Archer MSA.\20\ 
Subject to limits, an individual's HSA and Archer MSA 
contributions are deductible in determining adjusted gross 
income and are excludable from an employee's income and wages 
if made by an employer. HSA and Archer MSA distributions used 
for qualified medical expenses are not includible in gross 
income. Distributions may also be rolled over to another HSA or 
Archer MSA.
---------------------------------------------------------------------------
    \19\Section 223 provides rules for HSAs.
    \20\Section 220 provides rules for Archer MSAs.
---------------------------------------------------------------------------
            Coverdell Education Savings Accounts
    A Coverdell education savings account (Coverdell ESA) is an 
account created exclusively for the purpose of paying qualified 
education expenses of a designated beneficiary.\21\ Subject to 
income limits, annual after-tax contributions up to $2,000 may 
be made until a designated beneficiary reaches age 18. Earnings 
on contributions to a Coverdell ESA generally are includible in 
income when withdrawn; however, distributions are excludable 
from income up to the beneficiary's qualified education 
expenses for the year. Amounts in a Coverdell ESA may be rolled 
over to another Coverdell ESA for the same beneficiary or 
certain family members. In general, the balance in a Coverdell 
ESA is deemed distributed within 30 days after the date that 
the beneficiary reaches age 30.
---------------------------------------------------------------------------
    \21\Section 530 provides rules for Coverdell ESAs.
---------------------------------------------------------------------------

Prohibited transaction rules

    The Code prohibits certain transactions (prohibited 
transaction) between a qualified retirement plan and a 
disqualified person.\22\ The prohibited transaction rules under 
the Code apply also to IRAs, Archer MSAs, HSAs, and Coverdell 
ESAs.\23\
---------------------------------------------------------------------------
    \22\Sec. 4975. Under section 4975 of the Internal Revenue Code of 
1986 (the Code), similar rules apply to qualified retirement plans 
under Code sec. 401(a) and qualified annuities under Code sec. 403(a) 
of private employers, as well as individual retirement arrangements 
(IRAs) under Code section 408, health savings accounts (HSAs) under 
Code section 223, Archer MSAs under Code section 220, and Coverdell 
education savings accounts (Coverdell ESAs) under Code section 530. The 
prohibited transaction rules under the Code generally do not apply to 
governmental plans or church plans. However, under section 503, the 
trust holding assets of a governmental or church plan may lose its tax-
exempt status in the case of a prohibited transaction listed in section 
503(b).
    \23\These are included in the definition of ``plan'' under section 
4975(e)(1).
---------------------------------------------------------------------------
    Prohibited transactions include the following transactions, 
whether direct or indirect, between a plan and a disqualified 
person: (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, the income or assets of 
the plan, (5) in the case of a fiduciary, an act dealing with 
the plan's income or assets in the fiduciary's own interest or 
for the fiduciary's own account, and (6) the receipt by a 
fiduciary of any consideration for the fiduciary's own personal 
account from any party dealing with the plan in connection with 
a transaction involving the income or assets of the plan.\24\
---------------------------------------------------------------------------
    \24\Sec. 4975(c)(1).
---------------------------------------------------------------------------
    Disqualified persons include a fiduciary of the plan; a 
person providing services to the plan; an employer with 
employees covered by the plan; an employee organization any of 
whose members are covered by the plan; and certain owners, 
officers, directors, highly compensated employees, family 
members, and related entities.\25\ A fiduciary includes any 
person who (1) exercises any discretionary authority or 
discretionary control respecting management of the plan or 
exercises any authority or control respecting management or 
disposition of the plan's assets, (2) 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, or (3) has any 
discretionary authority or discretionary responsibility in the 
administration of the plan.\26\
---------------------------------------------------------------------------
    \25\Sec. 4975(e)(2).
    \26\Sec. 4975(e)(3). Fiduciary also includes any named fiduciary 
under ERISA section 405(c)(1)(B).
---------------------------------------------------------------------------
    Certain transactions are statutorily exempt from prohibited 
transaction treatment, for example, certain loans to plan 
participants and arrangements with a disqualified person 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.\27\ 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.\28\ Before an administrative exemption is granted, notice 
must be provided to interested persons, notice must be 
published in the Federal Register of the pendency of the 
exemption, and interested persons must be given an opportunity 
to provide comments.
---------------------------------------------------------------------------
    \27\Sec. 4975(d)(1) and (d)(2).
    \28\Sec. 4975(c)(2).
---------------------------------------------------------------------------
            Excise tax on prohibited transactions
    If a prohibited transaction occurs, the disqualified person 
who participated in the transaction is generally subject to a 
two-tiered excise tax.\29\ The first tier tax is 15 percent of 
the amount involved in the transaction. The second tier tax, 
imposed if the prohibited transaction is not corrected within a 
certain period, is 100 percent of the amount involved.
---------------------------------------------------------------------------
    \29\In the case of an IRA, HSA, Archer MSA or Coverdell ESA, the 
sanction for some prohibited transactions is the loss of tax-favored 
status, rather than an excise tax. See section 408(e)(2), also cross-
referenced in sections 220(e)(2), 223(e)(2) and 530(e).
---------------------------------------------------------------------------
    For purposes of the excise tax, the amount involved with 
respect to a prohibited transaction is generally the greater of 
(1) the amount of money and the fair market value of the other 
property given or (2) the amount of money and the fair market 
value of the other property received.\30\ For purposes of the 
excise tax, ``correction'' and ``correct'' mean, with respect 
to a prohibited transaction, undoing the transaction to the 
extent possible, but in any case placing the plan in a 
financial position not worse than that in which it would be if 
the disqualified person were acting under the highest fiduciary 
standards.
---------------------------------------------------------------------------
    \30\In the case of certain transactions for services for which more 
than reasonable compensation is paid, the amount involved is only the 
excess compensation.
---------------------------------------------------------------------------
            Jurisdiction over the prohibited transaction rules
    Jurisdiction over the Code provisions governing qualified 
retirement plans and similar ERISA provisions is divided 
between the Department of the Treasury (Treasury) and the DOL 
by Executive Order, referred to as Reorganization Plan No. 4 of 
1978 (Reorganization Plan).\31\ As part of this division, with 
certain exceptions, Treasury authority was transferred to DOL 
with respect to regulations, rulings, opinions, and exemptions 
under the prohibited transaction provisions of the Code.\32\ As 
a result, DOL regulations and other guidance relating to 
prohibited transactions applies for Code purposes, as well as 
for ERISA purposes, and DOL has the authority to grant 
individual and class exemptions applicable under the Code, 
including with respect to IRAs, HSAs, Archer MSAs, and 
Coverdell ESAs.
---------------------------------------------------------------------------
    \31\Reorganization Plan No. 4 of 1978, 43 Fed. Reg. 47713 (Oct. 17, 
1978).
    \32\Sec. Sec. 102 and 105 of Reorganization Plan No. 4 of 1978, 43 
Fed. Reg. 47713. Rules for coordination concerning certain fiduciary 
actions are provided under section 103 of the Reorganization Plan. In 
addition, under section 3003 of ERISA, Treasury and DOL are directed to 
consult with each other from time to time with respect to the 
prohibited transaction rules and exemptions.
---------------------------------------------------------------------------

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--
         the person 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
         the person 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.\33\
---------------------------------------------------------------------------
    \33\29 C.F.R. Sec. 2510.3-21(c). Under Sec. 102 of Reorganization 
Plan No. 4 of 1978, 43 Fed. Reg. 47713, 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.\34\ 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.
---------------------------------------------------------------------------
    \34\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.\35\ 
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.
---------------------------------------------------------------------------
    \35\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.\36\ 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).\37\ 
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.
---------------------------------------------------------------------------
    \36\Various requirements with respect to notices and disclosure, 
recordkeeping and audits must also be met.
    \37\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.\38\ Under 
the proposed regulations, a person is a fiduciary based on 
rendering investment advice if the person does the following:
---------------------------------------------------------------------------
    \38\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,\39\ 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
---------------------------------------------------------------------------
    \39\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 
the following:
           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;\40\
---------------------------------------------------------------------------
    \40\Under the Code, a distribution from an employer-sponsored 
retirement plan, IRA, HSA, Archer MSA, or Coverdell ESA may be rolled 
over (often referred to as a ``rollover'') to a similar arrangement and 
continue to receive tax-favored treatment. 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,\41\ as well as proposing changes to various 
existing class exemptions.
---------------------------------------------------------------------------
    \41\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.\42\
---------------------------------------------------------------------------
    \42\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.\43\
---------------------------------------------------------------------------
    \43\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. 4294

    The bill\44\ specifies that its purpose is to provide that 
advisors who (1) provide advice that is impermissible under the 
prohibited transaction provisions of the Code or (2) breach the 
best interest standard for the provision of investment advice 
are subject to liability under the Code.
---------------------------------------------------------------------------
    \44\H.R. 4294, 114th Cong. (2015).
---------------------------------------------------------------------------
    The bill adds a statutory definition of investment advice 
to the prohibited transaction provisions of the Code. In 
addition, subject to specified requirements, the bill adds new 
statutory exemptions for the provision of investment advice by 
a fiduciary to a plan, plan participant, or beneficiary with 
respect to the plan, referred to as a ``best interest 
recommendation,'' and any transaction between a person 
providing investment advice for a fee or other compensation, 
direct or indirect, with respect to any moneys or other 
property of the plan.

                    DEFINITION OF INVESTMENT ADVICE

General rule

    The statutory definition of investment advice under the 
bill applies (as the regulatory definition applies under 
present law) for purposes of determining if a person is a 
fiduciary with respect to a plan based on rendering investment 
advice 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, and thus, is a 
disqualified person with respect to the plan. As defined under 
the bill, investment advice includes certain recommendations 
rendered under certain conditions.
    Specifically, under the bill, 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 rolled over or 
        otherwise 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 rolled 
        over or otherwise 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.
    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, plan 
        participant, or beneficiary that (1) the recommendation 
        is individualized to the plan, plan participant, or 
        beneficiary and (2) the plan, plan participant, or 
        beneficiary 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 there is no intent for you 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.
    Seller's exception: 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 a best interest 
recommendation (described below).
    Swap and security-based swap transaction: 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,\45\ or security-based 
swap\46\). 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 entering into 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, plan participants, or plan 
beneficiaries.
---------------------------------------------------------------------------
    \45\A swap for this purpose is defined in section 1a of the 
Commodity Exchange Act, 7 U.S.C. Sec. 1a.
    \46\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).
---------------------------------------------------------------------------
    Employees of a plan sponsor: 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.
    Platform providers selection and monitoring assistance: 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 or under the obligations of a 
best interest recommendation. In addition, the information 
provided consists solely of either of the following:
           Making available to the plan, plan 
        participants, or plan beneficiaries, without regard to 
        the individualized needs of the plan, plan 
        participants, or plan beneficiaries, 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.
    Valuation: The information consists solely of valuation 
information.
    Financial education: 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 and whether to roll over the distribution 
        to a plan, so long as any examples of different 
        distribution and rollover 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.

                EXEMPTIONS RELATING TO INVESTMENT ADVICE

Best interest recommendation exemption

    The bill includes a prohibited transaction exemption for 
the provision of investment advice by a fiduciary to a plan, 
plan participant, or beneficiary with respect to the plan in 
the case of a ``best interest recommendation.''
    As defined under the bill, a best interest recommendation 
is a recommendation:
           For which no more than reasonable 
        compensation is paid (determined as described below),
           Provided by a person (referred to in this 
        description as the ``advisor'') acting with the care, 
        skill, prudence, and diligence under the circumstances 
        then prevailing that a prudent person would exercise 
        based on the information obtained through the advisor's 
        reasonable diligence regarding factors such as the 
        advice recipient's age and any other information that 
        the advice recipient discloses to the advisor in 
        connection with receiving the recommendation, and
           Where the advisor places the interests of 
        the plan or advice recipient above its own.
    A best interest recommendation may include a recommendation 
(1) that is based on a limited range of investment options, 
which may consist, in whole or in part, of proprietary 
products, but only if any limitations (including a clearly-
stated notice that the same or similar investments may be 
available at a different cost (greater or lesser) from other 
sources) are clearly disclosed to the advice recipient before 
any transaction based on the recommendation, or (2) that may 
result in variable compensation to the advisor (or any 
affiliate\47\ of the advisor), but only if the receipt of the 
compensation (including a clearly-stated notice that the same 
or similar investments may be available at a different cost 
(greater or lesser) from other sources) is clearly disclosed to 
the advice recipient before any transaction based on the 
recommendation. The notices required under this rule must state 
only the following: ``The same or similar investments may be 
available at a different cost (greater or lesser) from other 
sources.''
---------------------------------------------------------------------------
    \47\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).
---------------------------------------------------------------------------
    In addition, for purposes of the required disclosure of 
variable compensation, variable compensation is considered 
clearly disclosed if notification is provided at any time 
before a transaction based on the advisor's recommendation, in 
a manner calculated to be understood by the average individual. 
The notification must include the following:
          (1) A notice in writing (including a clearly-stated 
        notice that the same or similar investments may be 
        available at a different cost (greater or lesser) from 
        other sources) that the advisor (or its affiliate) may 
        receive varying amounts of fees or other compensation 
        with respect to the transaction,
          (2) A description of any fee or other compensation 
        that is directly payable to the advisor (or its 
        affiliate) from 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),
          (3) A description of the types and ranges of any 
        indirect compensation that may be paid to the advisor 
        (or its affiliate) by any third party in connection 
        with a transaction based on the advisor's 
        recommendation (expressed as an amount, formula, 
        percentage of assets, per capita charge, or estimate of 
        the ranges of compensation),
          (4) On request of the advice recipient, a disclosure 
        of the specific amounts of compensation described in 
        (3) that the 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).
    Under the bill, a recommendation will not fail to be a best 
interest recommendation solely because a person who, 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.
    The bill also provides special rules relating to the amount 
involved and correction with respect to a prohibited 
transaction arising by the failure of investment advice to be a 
best interest recommendation. In that case, the amount involved 
is the amount paid to the person providing the advice (or its 
affiliate) that has not been paid or reimbursed to the plan, 
plan participants, or plan beneficiaries, including payments 
and reimbursements made pursuant to a correction (as described 
in the following sentence). In addition, ``correction'' and 
``correct'' in this case mean the payment to, or reimbursement 
of, actual damages of the plan, plan participants, or plan 
beneficiaries resulting directly from the plan's, plan 
participant's, or plan beneficiary's reliance on the investment 
advice, if any, that have not otherwise been paid or reimbursed 
to the plan, plan participants, or plan beneficiaries, 
including payments and reimbursements made pursuant to the 
general correction rule under present law (that is, undoing the 
transaction to the extent possible, but in any case placing the 
plan in a financial position not worse than that in which it 
would be if the disqualified person were acting under the 
highest fiduciary standards).

Exemption for certain fee arrangements

    The bill also provides a prohibited transaction exemption 
for any transaction, including a contract for service, between 
a person (referred to in this description 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.
    The exemption applies if--
           No more than reasonable compensation is paid 
        for the investment advice;\48\
---------------------------------------------------------------------------
    \48\Reasonable compensation for this purpose is determined as under 
the present-law prohibited transaction exemption 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, Sec. 4975(d)(2).
---------------------------------------------------------------------------
           In a case in which 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 (including a clearly-stated 
        notice that the same or similar investments may be 
        available at a different cost (greater or lesser) from 
        other sources) must be clearly disclosed to the advice 
        recipient before any transaction based on the 
        investment advice;
           In a case in which the investment advice may 
        result in variable compensation to the investment 
        advisor (or any affiliate), the receipt of the 
        compensation (including a clearly-stated notice that 
        the same or similar investments may be available at a 
        different cost (greater or lesser) from other sources) 
        must be clearly disclosed to the advice recipient (in 
        accordance with the requirements under the best 
        interest recommendation exemption); and
           In any case in which a person who, acting in 
        good faith and with reasonable diligence, makes an 
        error or omission in disclosing the required 
        information, 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 
the Code and ERISA statutory definitions of fiduciary\49\ 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.
---------------------------------------------------------------------------
    \49\Sec. 4975(e)(3) and ERISA Sec. 3(21).
---------------------------------------------------------------------------
    DOL is prohibited from amending any rules or administrative 
positions promulgated under the Code and ERISA statutory 
definitions of fiduciary (including DOL Interpretive Bulletin 
96-1 and Advisory Opinion 2005-23A, discussed in Present Law), 
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. 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 is issued to carry 
out the amendments, a plan and a fiduciary will be treated as 
meeting the requirements of the amendments if the plan or 
fiduciary, as applicable, makes a good faith effort to comply 
with the requirements.

                            Committee Views


                     DOL'S ABANDONED 2010 PROPOSAL

    The Obama administration has long argued the regulatory 
definition of an investment advice fiduciary is insufficiently 
restrictive.\50\ To address this concern, in 2010, EBSA issued 
a complicated proposed regulation expanding the definition of 
fiduciary.''\51\ 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.\52\
---------------------------------------------------------------------------
    \50\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].
    \51\2010 Proposal, 75 Fed. Reg. 65263.
    \52\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.\53\ 
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.\54\ The new proposal 
was preceded by a Council of Economic Advisors report arguing 
that ``conflicted advice'' costs Americans $17 billion 
annually.\55\ 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.\56\
---------------------------------------------------------------------------
    \53\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.
    \54\Definition of the Term ``Fiduciary,'' 80 Fed. Reg. at 21928.
    \55\CEA Report, supra note 50, at 2.
    \56\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.\57\
---------------------------------------------------------------------------
    \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. 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.\58\ 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.\59\ At 
a HELP Subcommittee hearing in June 2015, Mr. Kent Mason, 
Partner of Davis and Harman LLP, testified to this effect:
---------------------------------------------------------------------------
    \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. 8 (Jun. 17, 2015) (written 
testimony of Kent Mason, Partner, Davis & Harman LLP).
    \59\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.\60\
---------------------------------------------------------------------------
    \60\Id. at 5.

    DOL claims its goal is not to eliminate commission-based 
accounts,\61\ but 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.\62\ 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.\63\ At the same 
hearing, Mr. Dean Harman, CFP, Managing Director at Harman 
Wealth Management, stated:
---------------------------------------------------------------------------
    \61\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).
    \62\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).
    \63\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 proposal . . . by 
        hugely increasing the burdens on financial advisors and 
        financial institutions.\64\
---------------------------------------------------------------------------
    \64\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.\65\
---------------------------------------------------------------------------
    \65\Haley, supra note 57, at 8.

    The exemption imposes burdensome new disclosure and data 
collection requirements on investment advisors.\66\ 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.\67\ 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.\68\
---------------------------------------------------------------------------
    \66\Proposed Best Interest Contract Exemption, 80 Fed. Reg. at 
21987.
    \67\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.).
    \68\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.\69\
---------------------------------------------------------------------------
    \69\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.\70\
---------------------------------------------------------------------------
    \70\Mason, supra note 58, 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.\71\
---------------------------------------------------------------------------
    \71\Gaudreau, supra note 67, 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.\72\ 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.\73\
---------------------------------------------------------------------------
    \72\Id. at 4.
    \73\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.\74\ 
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:
---------------------------------------------------------------------------
    \74\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.\75\
---------------------------------------------------------------------------
    \75\Reid, supra note 69, 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.\76\
---------------------------------------------------------------------------
    \76\Haley, supra note 57, 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.\77\
---------------------------------------------------------------------------
    \77\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.''\78\
---------------------------------------------------------------------------
    \78\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.\79\ 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:
---------------------------------------------------------------------------
    \79\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.\80\
---------------------------------------------------------------------------
    \80\Doba, supra note 77, 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.\81\ 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.\82\ 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.''\83\
---------------------------------------------------------------------------
    \81\Sec. 102 of Reorganization Plan No. 4 of 1978, 43 Fed. Reg. at 
47713.
    \82\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.
    \83\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.\84\ 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:
---------------------------------------------------------------------------
    \84\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.\85\
---------------------------------------------------------------------------
    \85\Mason, supra note 58, 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.\86\ 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.\87\
---------------------------------------------------------------------------
    \86\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).
    \87\Mason, supra note 58, at 10.
---------------------------------------------------------------------------

Congressional comment letters

    The 2015 NPRM received thousands of comments, including 
numerous letters from Members of Congress.\88\ 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.\89\ A number of other Democratic letters have 
expressed concerns that the current proposal could reduce 
access to investment advice for both small businesses and low- 
and middle-income individuals.\90\ In all, over half of House 
Democrats have signed letters questioning the DOL's proposal.
---------------------------------------------------------------------------
    \88\Comments received through September 24, 2015, are published on 
EBSA's website, 
http://www.dol.gov/ebsa/regs/cmt-1210-AB32-2.html.
    \89\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-
2951e9520e07371e6076e0c8af900fc2.r54.cf5.rackcdn.com/wp-content/
uploads/Secretary-Perez-Fiduciary-Comment-Period-Letter-10-30-15.pdf.
    \90\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.\91\ 
This comment letter also explained the Committee's longstanding 
interest in pursuing a responsible best interest standard.
---------------------------------------------------------------------------
    \91\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 (Jul. 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,\92\ a 
number of other committees examined the rule, including the 
House Committee on Financial Services\93\ and the House 
Committee on Ways and Means.\94\ 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.\95\ 
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.
---------------------------------------------------------------------------
    \92\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).
    \93\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).
    \94\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).
    \95\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. 4294, the Strengthening Access to Valuable Education 
and Retirement Support Act of 2015, 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. Carter 
and reported favorably by the Committee.
    Section 1. Provides the short title is the ``Strengthening 
Access to Valuable Education and Retirement Support Act of 
2015.''
    Section 2. Describes the purpose of the Act to provide that 
financial advisors that violate the prohibited transaction 
rules under the Internal Revenue Code of 1986 or breach the 
best interest standard for the provision of investment advice 
are subject to liability under the Code.
    Section 3. Amends the definition of ``investment advice'' 
under the tax code; exempts certain transactions from tax code 
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. 4294, the Strengthening Access to Valuable 
Education and Retirement Support Act of 2015 (SAVERS Act), 
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, 
the SAVERS Act 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. 4294 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. 4294 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. 4294 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. 4294 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. 4294 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,
Washington, DC.
    Dear Mr. Chairman. The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 4294, the 
Strengthening Access to Valuable Education and Retirement 
Support Act of 2015.
    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. 4294--Strengthening Access to Valuable Education and Retirement 
        Support Act of 2015

    H.R. 4294, the Strengthening Access to Valuable Education 
and Retirement Support Act of 2015, would amend the section of 
the Internal Revenue Code that prohibits self-dealing 
transactions by fiduciaries of certain tax-favored plans, 
including employer-sponsored retirement plans, individual 
retirement accounts, and health savings accounts. The bill 
would add a definition of investment advice to that section of 
the Internal Revenue Code. The bill also would add a new 
statutory exemption related to investment advice that a 
fiduciary can provide to those tax-favored plans, plan 
participants, or beneficiaries. Among other provisions, H.R. 
4294 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. 4294 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. 4294.
    The staff of the Joint Committee on Taxation (JCT) 
estimates that the bill would have a negligible effect on 
revenues over the 2016-2026 period. Enacting the bill would not 
affect direct spending. Because enacting H.R. 4294 would affect 
revenues, pay-as-you-go procedures apply.
    CBO and JCT estimate that enacting H.R. 4294 would not 
increase net direct spending or on-budget deficits in any of 
the four consecutive 10-year periods beginning in 2027.
    JCT has determined that the bill contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act.

                        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. 4294. 
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 (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

                     INTERNAL REVENUE CODE OF 1986




           *       *       *       *       *       *       *
Subtitle D--Miscellaneous Excise Taxes

           *       *       *       *       *       *       *


CHAPTER 43--QUALIFIED PENSION, ETC., PLANS

           *       *       *       *       *       *       *


SEC. 4975. TAX ON PROHIBITED TRANSACTIONS.

  (a) Initial Taxes on Disqualified Person.--There is hereby 
imposed a tax on each prohibited transaction. The rate of tax 
shall be equal to 15 percent of the amount involved with 
respect to the prohibited transaction for each year (or part 
thereof) in the taxable period. The tax imposed by this 
subsection shall be paid by any disqualified person who 
participates in the prohibited transaction (other than a 
fiduciary acting only as such).
  (b) Additional Taxes on Disqualified Person.--In any case in 
which an initial tax is imposed by subsection (a) on a 
prohibited transaction and the transaction is not corrected 
within the taxable period, there is hereby imposed a tax equal 
to 100 percent of the amount involved. The tax imposed by this 
subsection shall be paid by any disqualified person who 
participated in the prohibited transaction (other than a 
fiduciary acting only as such).
  (c) Prohibited Transaction.--
          (1) General rule.--For purposes of this section, the 
        term ``prohibited transaction'' means any direct or 
        indirect--
                  (A) sale or exchange, or leasing, of any 
                property between a plan and a disqualified 
                person;
                  (B) lending of money or other extension of 
                credit between a plan and a disqualified 
                person;
                  (C) furnishing of goods, services, or 
                facilities between a plan and a disqualified 
                person;
                  (D) transfer to, or use by or for the benefit 
                of, a disqualified person of the income or 
                assets of a plan;
                  (E) act by a disqualified person who is a 
                fiduciary whereby he deals with the income or 
                assets of a plan in his own interests or for 
                his own account; or
                  (F) receipt of any consideration for his own 
                personal account by any disqualified person who 
                is a fiduciary from any party dealing with the 
                plan in connection with a transaction involving 
                the income or assets of the plan.
          (2) Special exemption.--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 disqualified person 
        or transaction, orders of disqualified persons or 
        transactions, from all or part of the restrictions 
        imposed by paragraph (1) of this subsection. Action 
        under this subparagraph may be taken only after 
        consultation and coordination with the Secretary of 
        Labor. The Secretary may not grant an exemption under 
        this paragraph unless he finds that such exemption is--
                  (A) administratively feasible,
                  (B) in the interests of the plan and of its 
                participants and beneficiaries, and
                  (C) protective of the rights of participants 
                and beneficiaries of the plan.
        Before granting an exemption under this paragraph, the 
        Secretary shall require adequate notice to be given to 
        interested persons and shall publish notice in the 
        Federal Register of the pendency of such exemption and 
        shall afford interested persons an opportunity to 
        present views. No exemption may be granted under this 
        paragraph with respect to a transaction described in 
        subparagraph (E) or (F) of paragraph (1) unless the 
        Secretary affords an opportunity for a hearing and 
        makes a determination on the record with respect to the 
        findings required under subparagraphs (A), (B), and (C) 
        of this paragraph, except that in lieu of such hearing 
        the Secretary may accept any record made by the 
        Secretary of Labor with respect to an application for 
        exemption under section 408(a) of title I of the 
        Employee Retirement Income Security Act of 1974.
          (3) Special rule for individual retirement 
        accounts.--An individual for whose benefit an 
        individual retirement account is established and his 
        beneficiaries shall be exempt from the tax imposed by 
        this section with respect to any transaction concerning 
        such account (which would otherwise be taxable under 
        this section) if, with respect to such transaction, the 
        account ceases to be an individual retirement account 
        by reason of the application of section 408(e)(2)(A) or 
        if section 408(e)(4) applies to such account.
          (4) Special rule for Archer MSAs.--An individual for 
        whose benefit an Archer MSA (within the meaning of 
        section 220(d)) is established shall be exempt from the 
        tax imposed by this section with respect to any 
        transaction concerning such account (which would 
        otherwise be taxable under this section) if section 
        220(e)(2) applies to such transaction.
          (5) Special rule for Coverdell education savings 
        accounts.--An individual for whose benefit a Coverdell 
        education savings account is established and any 
        contributor to such account shall be exempt from the 
        tax imposed by this section with respect to any 
        transaction concerning such account (which would 
        otherwise be taxable under this section) if section 
        530(d) applies with respect to such transaction.
          (6) Special rule for health savings accounts.--An 
        individual for whose benefit a health savings account 
        (within the meaning of section 223(d)) is established 
        shall be exempt from the tax imposed by this section 
        with respect to any transaction concerning such account 
        (which would otherwise be taxable under this section) 
        if, with respect to such transaction, the account 
        ceases to be a health savings account by reason of the 
        application of section 223(e)(2) to such account.
  (d) Exemptions.--Except as provided in subsection (f)(6), the 
prohibitions provided in subsection (c) shall not apply to--
          (1) any loan made by the plan to a disqualified 
        person who is a participant or beneficiary of the plan 
        if such loan--
                  (A) is available to all such participants or 
                beneficiaries on a reasonably equivalent basis,
                  (B) is not made available to highly 
                compensated employees (within the meaning of 
                section 414(q)) in an amount greater than the 
                amount made available to other employees,
                  (C) is made in accordance with specific 
                provisions regarding such loans set forth in 
                the plan,
                  (D) bears a reasonable rate of interest, and
                  (E) is adequately secured;
          (2) any contract, or reasonable arrangement, made 
        with a disqualified person 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) any loan to an leveraged employee stock ownership 
        plan (as defined in subsection (e)(7)), if--
                  (A) such loan is primarily for the benefit of 
                participants and beneficiaries of the plan, and
                  (B) such loan is at a reasonable rate of 
                interest, and any collateral which is given to 
                a disqualified person by the plan consists only 
                of qualifying employer securities (as defined 
                in subsection (e)(8));
          (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 
                affiliates 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 disqualified person which is wholly 
                owned (directly or indirectly) by the employer 
                establishing the plan, or by any person which 
                is a disqualified person 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 
                disqualified persons (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 provision of any ancillary service by a bank 
        or similar financial institution supervised by the 
        United States or a State, if such service is provided 
        at not more than reasonable compensation, 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 provision 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 under such 
                guidelines the bank or similar financial 
                institution does not provide 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;
          (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 a common or 
        collective trust fund or pooled investment fund 
        maintained by a disqualified person which is a bank or 
        trust company supervised by a State or Federal agency 
        or between a plan and 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 a 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) receipt by a disqualified person of 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;
          (10) receipt by a disqualified person of 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, but 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 fund, except for reimbursement of expenses 
        properly and actually incurred;
          (11) service by a disqualified person as a fiduciary 
        in addition to being an officer, employee, agent, or 
        other representative of a disqualified person;
          (12) the making by a fiduciary of a distribution of 
        the assets of the trust in accordance with the terms of 
        the plan if such assets are distributed in the same 
        manner as provided under section 4044 of title IV of 
        the Employee Retirement Income Security Act of 1974 
        (relating to allocation of assets);
          (13) any transaction which is exempt from section 406 
        of such Act by reason of section 408(e) of such Act (or 
        which would be so exempt if such section 406 applied to 
        such transaction) or which is exempt from section 406 
        of such Act by reason of section 408(b)(12) of such 
        Act;
          (14) any transaction required or permitted under part 
        1 of subtitle E of title IV or section 4223 of the 
        Employee Retirement Income Security Act of 1974, but 
        this paragraph shall not apply with respect to the 
        application of subsection (c)(1) (E) or (F);
          (15) 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 of such Act, 
        but this paragraph shall not apply with respect to the 
        application of subsection (c)(1) (E) or (F);
          (16) a sale of stock held by a trust which 
        constitutes an individual retirement account under 
        section 408(a) to the individual for whose benefit such 
        account is established if--
                  (A) such stock is in a bank (as defined in 
                section 581) or a depository institution 
                holding company (as defined in section 3(w)(1) 
                of the Federal Deposit Insurance Act (12 U.S.C. 
                1813(w)(1)),
                  (B) such stock is held by such trust as of 
                the date of the enactment of this paragraph,
                  (C) such sale is pursuant to an election 
                under section 1362(a) by such bank or company,
                  (D) such sale is for fair market value at the 
                time of sale (as established by an independent 
                appraiser) and the terms of the sale are 
                otherwise at least as favorable to such trust 
                as the terms that would apply on a sale to an 
                unrelated party,
                  (E) such trust does not pay any commissions, 
                costs, or other expenses in connection with the 
                sale, and
                  (F) the stock is sold in a single transaction 
                for cash not later than 120 days after the S 
                corporation election is made;
          (17) Any transaction in connection with the provision 
        of investment advice described in subsection (e)(3)(B) 
        to a participant or beneficiary in a plan that permits 
        such participant or beneficiary to direct the 
        investment of plan assets in an 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 (f)(8) are 
                met,
          (18) any transaction involving the purchase or sale 
        of securities, or other property (as determined by the 
        Secretary of Labor), between a plan and a disqualified 
        person (other than a fiduciary described in subsection 
        (e)(3)) with respect to a plan if--
                  (A) the transaction involves a block trade,
                  (B) 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,
                  (C) the terms of the transaction, including 
                the price, are at least as favorable to the 
                plan as an arm's length transaction, and
                  (D) 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,
          (19) any transaction involving the purchase or sale 
        of securities, or other property (as determined by the 
        Secretary of Labor), between a plan and a disqualified 
        person 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 of Labor 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 disqualified person 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,
          (20) transactions described in subparagraphs (A), 
        (B), and (D) of subsection (c)(1) between a plan and a 
        person that is a disqualified person 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 subsection (e)(3)(B)) 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 subsection (e)(2), or both, but only if 
        in connection with such transaction the plan receives 
        no less, nor pays no more, than adequate consideration,
          (21) any foreign exchange transactions, between a 
        bank or broker-dealer (or any affiliate of either) and 
        a plan (as defined in this section) with respect to 
        which such bank or broker-dealer (or affiliate) is a 
        trustee, custodian, fiduciary, or other disqualified 
        person person, 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,
          (22) any transaction described in subsection 
        (c)(1)(A) 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) of the Employee Retirement 
                Income Security Act of 1974), 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 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, 
        [or]
          (23) except as provided in subsection (f)(11), a 
        transaction described in subparagraph (A), (B), (C), or 
        (D) of subsection (c)(1) 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[.],
          (24) provision of investment advice by a fiduciary to 
        a plan, plan participant, or beneficiary with respect 
        to the plan, which is a best interest recommendation, 
        or
          (25) any transaction, including a contract for 
        service, between a person providing investment advice 
        described in subsection (e)(3)(B) and the advice 
        recipient in connection with such investment advice, 
        if--
                  (A) no more than reasonable compensation is 
                paid (as determined under section 4975(d)(2)) 
                for such investment advice,
                  (B) in a case in which 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, including a clearly-stated notice 
                that the same or similar investments may be 
                available at a different cost (greater or 
                lesser) from other sources), shall be clearly 
                disclosed to the advice recipient prior to any 
                transaction based on the investment advice,
                  (C) in a case in which 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, including a clearly-stated notice 
                that the same or similar investments may be 
                available at a different cost (greater or 
                lesser) from other sources, shall be clearly 
                disclosed to the advice recipient (within the 
                meaning of subsection (e)(11)(C)), and
                  (D) in any case in which a person who, acting 
                in good faith and with reasonable diligence, 
                makes an error or omission in disclosing the 
                information specified in subparagraphs (B) or 
                (C), 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.
  (e) Definitions.--
          (1) Plan.--For purposes of this section, the term 
        ``plan'' means--
                  (A) a trust described in section 401(a) which 
                forms a part of a plan, or a plan described in 
                section 403(a), which trust or plan is exempt 
                from tax under section 501(a),
                  (B) an individual retirement account 
                described in section 408(a),
                  (C) an individual retirement annuity 
                described in section 408(b),
                  (D) an Archer MSA described in section 
                220(d),
                  (E) a health savings account described in 
                section 223(d),
                  (F) a Coverdell education savings account 
                described in section 530, or
                  (G) a trust, plan, account, or annuity which, 
                at any time, has been determined by the 
                Secretary to be described in any preceding 
                subparagraph of this paragraph.
          (2) Disqualified person.--For purposes of this 
        section, the term ``disqualified person'' means a 
        person who is--
                  (A) a fiduciary;
                  (B) a person providing services to the plan;
                  (C) an employer any of whose employees are 
                covered by the plan;
                  (D) an employee organization any of whose 
                members are covered by the 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 member of the family (as defined in 
                paragraph (6)) 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 officer, director (or an individual 
                having powers or responsibilities similar to 
                those of officers or directors), a 10 percent 
                or more shareholder, or a highly compensated 
                employee (earning 10 percent or more of the 
                yearly wages of an employer) of a person 
                described in subparagraph (C), (D), (E), or 
                (G); or
                  (I) a 10 percent or more (in capital or 
                profits) partner or joint venturer of a person 
                described in subparagraph (C), (D), (E), or 
                (G).
        The Secretary, after consultation and coordination with 
        the Secretary of Labor or his delegate, may by 
        regulation prescribe a percentage lower than 50 percent 
        for subparagraphs (E) and (G) and lower than 10 percent 
        for subparagraphs (H) and (I).
          (3) Fiduciary.--For purposes of this section, the 
        term ``fiduciary'' means any person who--
                  (A) 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,
                  (B) 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
                  (C) 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) of the Employee Retirement Income Security 
        Act of 1974.
          (4) Stockholdings.--For purposes of paragraphs 
        (2)(E)(i) and (G)(i) there shall be taken into account 
        indirect stockholdings which would be taken into 
        account under section 267(c), except that, for purposes 
        of this paragraph, section 267(c)(4) shall be treated 
        as providing that the members of the family of an 
        individual are the members within the meaning of 
        paragraph (6).
          (5) Partnerships; trusts.--For purposes of paragraphs 
        (2)(E)(ii) and (iii), (G)(ii) and (iii), and (I) the 
        ownership of profits or beneficial interests shall be 
        determined in accordance with the rules for 
        constructive ownership of stock provided in section 
        267(c) (other than paragraph (3) thereof), except that 
        section 267(c)(4) shall be treated as providing that 
        the members of the family of an individual are the 
        members within the meaning of paragraph (6).
          (6) Member of family.--For purposes of paragraph 
        (2)(F), the family of any individual shall include his 
        spouse, ancestor, lineal descendant, and any spouse of 
        a lineal descendant.
          (7) Employee stock ownership plan.--The term 
        ``employee stock ownership plan'' means a defined 
        contribution plan--
                  (A) which is a stock bonus plan which is 
                qualified, or a stock bonus and a money 
                purchase plan both of which are qualified under 
                section 401(a), and which are designed to 
                invest primarily in qualifying employer 
                securities; and
                  (B) which is otherwise defined in regulations 
                prescribed by the Secretary.
        A plan shall not be treated as an employee stock 
        ownership plan unless it meets the requirements of 
        section 409(h), section 409(o), and, if applicable, 
        section 409(n), section 409(p), and section 664(g) and, 
        if the employer has a registration-type class of 
        securities (as defined in section 409(e)(4)), it meets 
        the requirements of section 409(e).
          (8) Qualifying employer security.--The term 
        ``qualifying employer security'' means any employer 
        security within the meaning of section 409(l). If any 
        moneys or other property of a plan are invested in 
        shares of an investment company registered under the 
        Investment Company Act of 1940, the investment shall 
        not cause that investment company or that investment 
        company's investment adviser or principal underwriter 
        to be treated as a fiduciary or a disqualified person 
        for purposes of this section, except when an investment 
        company or its investment adviser or principal 
        underwriter acts in connection with a plan covering 
        employees of the investment company, its investment 
        adviser, or its principal underwriter.
          (9) Section made applicable to withdrawal liability 
        payment funds.--For purposes of this section--
                  (A) In general.--The term ``plan'' includes a 
                trust described in section 501(c)(22).
                  (B) Disqualified person.--In the case of any 
                trust to which this section applies by reason 
                of subparagraph (A), the term ``disqualified 
                person'' includes any person who is a 
                disqualified person with respect to any plan to 
                which such trust is permitted to make payments 
                under section 4223 of the Employee Retirement 
                Income Security Act of 1974.
          (10) Investment advice.--
                  (A) In general.--For purposes of this 
                section, the term ``investment advice'' means a 
                recommendation that--
                          (i) relates to--
                                  (I) 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 rolled over or otherwise 
                                distributed from such plan;
                                  (II) the management of moneys 
                                or other property of such plan, 
                                including recommendations 
                                relating to the management of 
                                moneys or other property to be 
                                rolled over or otherwise 
                                distributed from such plan; or
                                  (III) 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--
                                  (I) a written acknowledgment 
                                that the person is a fiduciary 
                                with respect to the provision 
                                of such recommendation; or
                                  (II) 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, plan participant, or 
                                beneficiary that such 
                                recommendation is 
                                individualized to the plan, 
                                plan participant, or 
                                beneficiary and such plan, plan 
                                participant, or beneficiary 
                                intends to materially rely on 
                                such recommendation in making 
                                investment or management 
                                decisions with respect to any 
                                moneys or other property of 
                                such plan.
                  (B) Disclaimer of a mutual agreement, 
                arrangement, or understanding.--For purposes of 
                subparagraph (A)(ii)(II), any disclaimer of a 
                mutual agreement, arrangement, or understanding 
                shall only state 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 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.
                  (C) When recommendation treated as made 
                pursuant to a mutual agreement, arrangement, or 
                understanding.--For purposes of subparagraph 
                (A)(ii)(II), information shall not be treated 
                as a recommendation made pursuant to a mutual 
                agreement, arrangement, or understanding, and 
                such information shall contain the disclaimer 
                required by subparagraph (B), if--
                          (i) Seller's exception.--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 within the 
                        meaning of this subparagraph or to 
                        otherwise act as a fiduciary to the 
                        plan or under the obligations of a best 
                        interest recommendation.
                          (ii) Swap and security-based swap 
                        transaction.--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--
                                  (I) the plan is represented, 
                                in connection with such 
                                transaction, by a plan 
                                fiduciary who 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
                                  (II) prior to entering into 
                                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, 
                                plan participants, or plan 
                                beneficiaries.
                          (iii) Employees of a plan sponsor.--
                        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) Platform providers selection and 
                        monitoring assistance.--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 
                        (within the meaning of this paragraph) 
                        or under the obligations of a best 
                        interest recommendation and the 
                        information consists solely of--
                                  (I) making available to the 
                                plan, plan participants, or 
                                plan beneficiaries, without 
                                regard to the individualized 
                                needs of the plan, plan 
                                participants, or plan 
                                beneficiaries, 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
                                  (II) in connection with a 
                                platform or similar mechanism 
                                described in subclause (I)--
                                          (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) Valuation.--The information 
                        consists solely of valuation 
                        information.
                          (vi) Financial education.--The 
                        information consists solely of--
                                  (I) 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,
                                  (II) information provided to 
                                participants or beneficiaries 
                                regarding the factors to 
                                consider in deciding whether to 
                                elect to receive a distribution 
                                from a plan and whether to roll 
                                over such distribution to a 
                                plan, so long as any examples 
                                of different distribution and 
                                rollover alternatives are 
                                accompanied by all material 
                                facts and assumptions on which 
                                the examples are based, or
                                  (III) any additional 
                                information treated as 
                                education by the Secretary.
          (11) Best interest recommendation.--For purposes of 
        this subsection--
                  (A) In general.--The term ``best interest 
                recommendation'' means a recommendation--
                          (i) for which no more than reasonable 
                        compensation is paid (as determined 
                        under subsection (d)(2)),
                          (ii) provided by a person acting with 
                        the care, skill, prudence, and 
                        diligence under the circumstances then 
                        prevailing that a prudent person would 
                        exercise based on--
                                  (I) the information obtained 
                                through the reasonable 
                                diligence of the person 
                                regarding factors such as the 
                                advice recipient's age, and
                                  (II) any other information 
                                that the advice recipient 
                                discloses to the person in 
                                connection with receiving such 
                                recommendation, and
                          (iii) where the person places the 
                        interests of the plan or advice 
                        recipient above its own.
                  (B) Investment options; variable 
                compensation.--A best interest recommendation 
                may include a recommendation that--
                          (i) is based on a limited range of 
                        investment options (which may consist, 
                        in whole or in part, of proprietary 
                        products), but only if any such 
                        limitations, including a clearly-stated 
                        notice that the same or similar 
                        investments may be available at a 
                        different cost (greater or lesser) from 
                        other sources, are clearly disclosed to 
                        the advice recipient prior to any 
                        transaction based on the 
                        recommendation, or
                          (ii) may result in variable 
                        compensation to the person providing 
                        the recommendation (or any affiliate of 
                        such person), but only if the receipt 
                        of such compensation, including a 
                        clearly-stated notice that the same or 
                        similar investments may be available at 
                        a different cost (greater or lesser) 
                        from other sources, is clearly 
                        disclosed to the advice recipient prior 
                        to any transaction based on the 
                        recommendation.
                The notices provided pursuant to clauses (i) 
                and (ii) shall only state the following: ``The 
                same or similar investments may be available at 
                a different cost (greater or lesser) from other 
                sources.''.
                  (C) Clear disclosure of variable 
                compensation.--For purposes of subparagraph 
                (B)(ii), variable compensation is clearly 
                disclosed if notification is provided at any 
                time prior to a transaction based on the 
                person's recommendation, in a manner calculated 
                to be understood by the average individual, of 
                the following:
                          (i) A notice in writing, including a 
                        clearly-stated notice that the same or 
                        similar investments may be available at 
                        a different cost (greater or lesser) 
                        from other sources, that the person 
                        providing the recommendation (or its 
                        affiliate) may receive varying amounts 
                        of fees or other compensation with 
                        respect to such transaction.
                          (ii) A description of any fee or 
                        other compensation that is directly 
                        payable to the person (or its 
                        affiliate) from 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 indirect compensation 
                        that may be paid 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 of such ranges of 
                        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).
                  (D) Definition of affiliate.--For purposes of 
                this paragraph, the term ``affiliate'' has the 
                meaning given in subsection (f)(8)(J)(ii).
                  (E) Correction of certain errors and 
                omissions.--A recommendation shall not fail to 
                be a best interest recommendation solely 
                because a person who, acting in good faith and 
                with reasonable diligence, makes an error or 
                omission in disclosing the information 
                specified in subparagraph (B), 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 such error or omission.
  (f) Other Definitions and Special Rules.--For purposes of 
this section--
          (1) Joint and several liability.--If more than one 
        person is liable under subsection (a) or (b) with 
        respect to any one prohibited transaction, all such 
        persons shall be jointly and severally liable under 
        such subsection with respect to such transaction.
          (2) Taxable period.--The term ``taxable period'' 
        means, with respect to any prohibited transaction, the 
        period beginning with the date on which the prohibited 
        transaction occurs and ending on the earliest of--
                  (A) the date of mailing a notice of 
                deficiency with respect to the tax imposed by 
                subsection (a) under section 6212,
                  (B) the date on which the tax imposed by 
                subsection (a) is assessed, or
                  (C) the date on which correction of the 
                prohibited transaction is completed.
          (3) Sale or exchange; encumbered property.--A 
        transfer or real or personal property by a disqualified 
        person to a plan shall be treated as a sale or exchange 
        if the property is subject to a mortgage or similar 
        lien which the plan assumes or if it is subject to a 
        mortgage or similar lien which a disqualified person 
        placed on the property within the 10-year period ending 
        on the date of the transfer.
          (4) Amount involved.--The term ``amount involved'' 
        means, with respect to a prohibited transaction, the 
        greater of the amount of money and the fair market 
        value of the other property given or the amount of 
        money and the fair market value of the other property 
        received; except that, in the case of services 
        described in paragraphs (2) and (10) of subsection (d) 
        the amount involved shall be only the [excess 
        compensation.] excess compensation, and in the case of 
        a prohibited transaction arising by the failure of 
        investment advice to be a best interest recommendation, 
        the amount involved shall be the amount paid to the 
        person providing the advice (or its affiliate, as 
        defined in paragraph (8)(J)(ii)) that has not been paid 
        or reimbursed to the plan, plan participants, or plan 
        beneficiaries, including payments and reimbursements 
        made pursuant to paragraph (5). For purposes of the 
        preceding sentence, the fair market value--
                  (A) in the case of the tax imposed by 
                subsection (a), shall be determined as of the 
                date on which the prohibited transaction 
                occurs; and
                  (B) in the case of the tax imposed by 
                subsection (b), shall be the highest fair 
                market value during the taxable period.
          [(5) Correction.--The terms]
          (5) Correction._
                  (A) In general._Except as provided in 
                subparagraph (B), the terms ``correction'' and 
                ``correct'' mean, with respect to a prohibited 
                transaction, undoing the transaction to the 
                extent possible, but in any case placing the 
                plan in a financial position not worse than 
                that in which it would be if the disqualified 
                person were acting under the highest fiduciary 
                standards.
                  (B) Determination of ``correction'' and 
                ``correct'' with respect to best interest 
                advice recommendations.--In the case of a 
                prohibited advice transaction arising by the 
                failure of investment advice to be a best 
                interest recommendation, the terms 
                ``correction'' and ``correct'' mean the payment 
                to, or reimbursement of, actual damages of the 
                plan, plan participants, or plan beneficiaries 
                resulting directly from the plan's, plan 
                participant's, or plan beneficiary's reliance 
                on such investment advice, if any, that have 
                not otherwise been paid or reimbursed to the 
                plan, plan participants, or plan beneficiaries, 
                including payments and reimbursements made 
                pursuant to subparagraph (A).
          (6) Exemptions not to apply to certain 
        transactions.--
                  (A) In general.--In the case of a trust 
                described in section 401(a) which is part of a 
                plan providing contributions or benefits for 
                employees some or all of whom are owner-
                employees (as defined in section 401(c)(3)), 
                the exemptions provided by subsection (d) 
                (other than paragraphs (9) and (12)) shall not 
                apply to a transaction in which the plan 
                directly or indirectly--
                          (i) lends any part of the corpus or 
                        income of the plan to,
                          (ii) pays any compensation for 
                        personal services rendered to the plan 
                        to, or
                          (iii) acquires for the plan any 
                        property from, or sells any property 
                        to,
                any such owner-employee, a member of the family 
                (as defined in section 267(c)(4)) 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.
                  (B) Special rules for shareholder-employees, 
                etc.
                          (i) In general.--For purposes of 
                        subparagraph (A), 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)).
                                  (III) An employer or 
                                association of employees which 
                                establishes such an individual 
                                retirement plan under section 
                                408(c).
                          (ii) Exception for certain 
                        transactions involving shareholder-
                        employees.--Subparagraph (A)(iii) shall 
                        not apply to a transaction which 
                        consists of a sale of employer 
                        securities to an employee stock 
                        ownership plan (as defined in 
                        subsection (e)(7)) by a shareholder- 
                        employee, a member of the family (as 
                        defined in section 267(c)(4)) of such 
                        shareholder-employee, or a corporation 
                        in which such a shareholder-employee 
                        owns stock representing a 50 percent or 
                        greater interest described in 
                        subparagraph (A).
                          (iii) Loan exception.--For purposes 
                        of subparagraph (A)(i), the term 
                        ``owner-employee'' shall only include a 
                        person described in subclause (II) or 
                        (III) of clause (i).
                  (C) Shareholder-employee.--For purposes of 
                subparagraph (B), the term ``shareholder-
                employee'' means an employee or officer of an S 
                corporation who owns (or is considered as 
                owning within the meaning of section 318(a)(1)) 
                more than 5 percent of the outstanding stock of 
                the corporation on any day during the taxable 
                year of such corporation.
          (7) S corporation repayment of loans for qualifying 
        employer securities.--A plan shall not be treated as 
        violating the requirements of section 401 or 409 or 
        subsection (e)(7), or as engaging in a prohibited 
        transaction for purposes of subsection (d)(3), merely 
        by reason of any distribution (as described in section 
        1368(a)) with respect to S corporation stock that 
        constitutes qualifying employer securities, which in 
        accordance with the plan provisions is used to make 
        payments on a loan described in subsection (d)(3) the 
        proceeds of which were used to acquire such qualifying 
        employer securities (whether or not allocated to 
        participants). The preceding sentence shall not apply 
        in the case of a distribution which is paid with 
        respect to any employer security which is allocated to 
        a participant unless the plan provides that employer 
        securities with a fair market value of not less than 
        the amount of such distribution are allocated to such 
        participant for the year which (but for the preceding 
        sentence) such distribution would have been allocated 
        to such participant.
          (8) Provision of investment advice to participant and 
        beneficiaries.--
                  (A) In general.--The prohibitions provided in 
                subsection (c) shall not apply to transactions 
                described in subsection (d)(17) if the 
                investment advice provided by a fiduciary 
                adviser is provided under an eligible 
                investment advice arrangement.
                  (B) Eligible investment advice arrangement.--
                For purposes of this paragraph, the term 
                ``eligible investment advice arrangement'' 
                means an arrangement--
                          (i) 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 subparagraph 
                                (C) in connection with the 
                                provision of investment advice 
                                by a fiduciary adviser to a 
                                participant or beneficiary, and
                          (ii) with respect to which the 
                        requirements of subparagraphs (D), (E), 
                        (F), (G), (H), and (I) are met.
                  (C) Investment advice program using computer 
                model.--
                          (i) In general.--An investment advice 
                        program meets the requirements of this 
                        subparagraph if the requirements of 
                        clauses (ii), (iii), and (iv) are met.
                          (ii) Computer model.--The 
                        requirements of this clause 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.
                          (iii) Certification.--
                                  (I) In general.--The 
                                requirements of this clause 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 of Labor, that the 
                                computer model meets the 
                                requirements of clause (ii).
                                  (II) Renewal of 
                                certifications.--If, as 
                                determined under regulations 
                                prescribed by the Secretary of 
                                Labor, there are material 
                                modifications to a computer 
                                model, the requirements of this 
                                clause are met only if a 
                                certification described in 
                                subclause (I) is obtained with 
                                respect to the computer model 
                                as so modified.
                                  (III) Eligible investment 
                                expert.--The term ``eligible 
                                investment expert'' means any 
                                person which meets such 
                                requirements as the Secretary 
                                of Labor may provide and which 
                                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).
                          (iv) Exclusivity of recommendation.--
                        The requirements of this clause 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 clause (ii), and
                                  (II) any transaction 
                                described in subsection 
                                (d)(17)(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 clause (i), but 
                        only if such request has not been 
                        solicited by any person connected with 
                        carrying out the arrangement.
                  (D) Express authorization by separate 
                fiduciary.--The requirements of this 
                subparagraph 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.
                  (E) Audits.--
                          (i) In general.--The requirements of 
                        this subparagraph are met if an 
                        independent auditor, who has 
                        appropriate technical training or 
                        experience and proficiency and so 
                        represents in writing--
                                  (I) conducts an annual audit 
                                of the arrangement for 
                                compliance with the 
                                requirements of this paragraph, 
                                and
                                  (II) 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 
                                paragraph.
                          (ii) Special rule for individual 
                        retirement and similar plans.--In the 
                        case of a plan described in 
                        subparagraphs (B) through (F) (and so 
                        much of subparagraph (G) as relates to 
                        such subparagraphs) of subsection 
                        (e)(1), in lieu of the requirements of 
                        clause (i), audits of the arrangement 
                        shall be conducted at such times and in 
                        such manner as the Secretary of Labor 
                        may prescribe.
                          (iii) Independent auditor.--For 
                        purposes of this subparagraph, 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.
                  (F) Disclosure.--The requirements of this 
                subparagraph are met if--
                          (i) 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
                          (ii) at all times during the 
                        provision of advisory services to the 
                        participant or beneficiary, the 
                        fiduciary adviser--
                                  (I) maintains the information 
                                described in clause (i) in 
                                accurate form and in the manner 
                                described in subparagraph (H),
                                  (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.
                  (G) Other conditions.--The requirements of 
                this subparagraph are met if--
                          (i) 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,
                          (ii) the sale, acquisition, or 
                        holding occurs solely at the direction 
                        of the recipient of the advice,
                          (iii) 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
                          (iv) 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.
                  (H) Standards for presentation of 
                information.--
                          (i) In general.--The requirements of 
                        this subparagraph are met if the 
                        notification required to be provided to 
                        participants and beneficiaries under 
                        subparagraph (F)(i) 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.
                          (ii) Model form for disclosure of 
                        fees and other compensation.--The 
                        Secretary of Labor shall issue a model 
                        form for the disclosure of fees and 
                        other compensation required in 
                        subparagraph (F)(i)(III) which meets 
                        the requirements of clause (i).
                  (I) Maintenance for 6 years of evidence of 
                compliance.--The requirements of this 
                subparagraph are met if a fiduciary adviser who 
                has provided advice referred to in subparagraph 
                (A) 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 paragraph and of subsection (d)(17) have 
                been met. A transaction prohibited under 
                subsection (c) 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.
                  (J) Definitions.--For purposes of this 
                paragraph and subsection (d)(17)--
                          (i) Fiduciary adviser.--The term 
                        ``fiduciary adviser'' means, with 
                        respect to a plan, a person who is a 
                        fiduciary of the plan by reason of the 
                        provision of investment advice referred 
                        to in subsection (e)(3)(B) 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 (d)(4) or a 
                                savings association (as defined 
                                in section 3(b)(1) of the 
                                Federal Deposit Insurance Act 
                                (12 U.S.C. 1813(b)(1)), but 
                                only if the advice is provided 
                                through a trust department of 
                                the bank or similar financial 
                                institution or savings 
                                association which is subject to 
                                periodic examination and review 
                                by Federal or State banking 
                                authorities,
                                  (III) an insurance company 
                                qualified to do business under 
                                the laws of a State,
                                  (IV) a person registered as a 
                                broker or dealer under the 
                                Securities Exchange Act of 1934 
                                (15 U.S.C. 78a et seq.),
                                  (V) an affiliate of a person 
                                described in any of subclauses 
                                (I) through (IV), or
                                  (VI) an employee, agent, or 
                                registered representative of a 
                                person described in subclauses 
                                (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 title, a person 
                        who develops the computer model 
                        described in subparagraph (C)(ii) 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 
                        subsection (e)(3)(B) to a participant 
                        or beneficiary and shall be treated as 
                        a fiduciary adviser for purposes of 
                        this paragraph and subsection (d)(17), 
                        except that the Secretary of Labor may 
                        prescribe rules under which only 1 
                        fiduciary adviser may elect to be 
                        treated as a fiduciary with respect to 
                        the plan.
                          (ii) Affiliate.--The term 
                        ``affiliate'' of another entity means 
                        an affiliated person of the entity (as 
                        defined in section 2(a)(3) of the 
                        Investment Company Act of 1940 (15 
                        U.S.C. 80a-2(a)(3))).
                          (iii) Registered representative.--The 
                        term ``registered representative'' of 
                        another entity means a person described 
                        in section 3(a)(18) of the Securities 
                        Exchange Act of 1934 (15 U.S.C. 
                        78c(a)(18)) (substituting the entity 
                        for the broker or dealer referred to in 
                        such section) or a person described in 
                        section 202(a)(17) of the Investment 
                        Advisers Act of 1940 (15 U.S.C. 80b-
                        2(a)(17)) (substituting the entity for 
                        the investment adviser referred to in 
                        such section).
          (9) Block trade.--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.
          (10) Adequate consideration.--The term ``adequate 
        consideration'' means--
                  (A) 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
                  (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 a 
                fiduciary or fiduciaries in accordance with 
                regulations prescribed by the Secretary of 
                Labor.
          (11) Correction period.--
                  (A) In general.--For purposes of subsection 
                (d)(23), the term ``correction period'' means 
                the 14-day period beginning on the date on 
                which the disqualified person discovers, or 
                reasonably should have discovered, that the 
                transaction would (without regard to this 
                paragraph and subsection (d)(23)) constitute a 
                prohibited transaction.
                  (B) Exceptions.--
                          (i) Employer securities.--Subsection 
                        (d)(23) 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) of the Employee Retirement 
                        Income Security Act of 1974) or the 
                        acquisition, sale, or lease of employer 
                        real property (as defined in section 
                        407(d)(2) of such Act).
                          (ii) Knowing prohibited 
                        transaction.--In the case of any 
                        disqualified person, subsection (d)(23) 
                        does not apply to a transaction if, at 
                        the time the transaction is entered 
                        into, the disqualified person knew (or 
                        reasonably should have known) that the 
                        transaction would (without regard to 
                        this paragraph) constitute a prohibited 
                        transaction.
                  (C) Abatement of tax where there is a 
                correction.--If a transaction is not treated as 
                a prohibited transaction by reason of 
                subsection (d)(23), then no tax under 
                subsections (a) and (b) shall be assessed with 
                respect to such transaction, and if assessed 
                the assessment shall be abated, and if 
                collected shall be credited or refunded as an 
                overpayment.
                  (D) Definitions.--For purposes of this 
                paragraph and subsection (d)(23)--
                          (i) Security.--The term ``security'' 
                        has the meaning given such term by 
                        section 475(c)(2) (without regard to 
                        subparagraph (F)(iii) and the last 
                        sentence thereof).
                          (ii) Commodity.--The term 
                        ``commodity'' has the meaning given 
                        such term by section 475(e)(2) (without 
                        regard to subparagraph (D)(iii) 
                        thereof).
                          (iii) Correct.--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.
  (g) Application of Section.--This section shall not apply--
          (1) in the case of a plan to which a guaranteed 
        benefit policy (as defined in section 401(b)(2)(B) of 
        the Employee Retirement Income Security Act of 1974) is 
        issued, to any assets of the insurance company, 
        insurance service, or insurance organization merely 
        because of its issuance of such policy;
          (2) to a governmental plan (within the meaning of 
        section 414(d)); or
          (3) to a church plan (within the meaning of section 
        414(e)) with respect to which the election provided by 
        section 410(d) has not been made.
In the case of a plan which invests in any security issued by 
an investment company registered under the Investment Company 
Act of 1940, the assets of such plan shall be deemed to include 
such security but shall not, by reason of such investment, be 
deemed to include any assets of such company.
  (h) Notification of Secretary of Labor.--Before sending a 
notice of deficiency with respect to the tax imposed by 
subsection (a) or (b), the Secretary shall notify the Secretary 
of Labor and provide him a reasonable opportunity to obtain a 
correction of the prohibited transaction or to comment on the 
imposition of such tax.
  (i) Cross Reference.--For provisions concerning coordination 
procedures between Secretary of Labor and Secretary of the 
Treasury with respect to application of tax imposed by this 
section and for authority to waive imposition of the tax 
imposed by subsection (b), see section 3003 of the Employee 
Retirement Income Security Act of 1974.

           *       *       *       *       *       *       *


                             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. 
4294 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. 4294 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. 4294 and another 
bill, H.R. 4293, which is nearly identical to H.R. 4294. In 
crafting a so-called alternative to the DOL's conflict of 
interest rule, House Republicans decided to advance two 
companion bills: H.R. 4294 amends the Internal Revenue Code 
(IRC), which governs tax-favored retirement savings such as 
Individual Retirement Accounts (IRAs). H.R. 4293 amends the 
Employee Retirement Income Security Act (ERISA; P.L. 93-406), 
which governs retirement plans of private employers. The core 
provisions of both bills are nearly identical, and the 
Education and Workforce Committee considered H.R. 4294 and H.R. 
4293 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. 4294. 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. 4294 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-vo19/pdf/
CFR-2011-title29-vo19-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 Individual 
Retirement Account (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. 4294 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. 4294, 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. 4294, 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. 4294 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. 4294 ESTABLISHES AN UNNECESSARY, CONSTITUTIONALLY-SUSPECT PROCESS 
TO ENABLE THE REPUBLICAN-LED CONGRESS TO ASSERT VETO POWER OVER THE DOL 
                                  RULE

    H.R. 4294 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. 4294'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 10 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. 4294 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.

                    ROLL CALL VOTES ON FINAL PASSAGE

    H.R. 4294 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. 4294 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. 4294 delivers.
    For the reasons stated above, among others, Committee 
Democrats unanimously opposed H.R. 4294 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]