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108th CONGRESS
1st Session
S. 1698
To amend title I of the Employee Retirement Income Security Act of 1974
and the Internal Revenue Code of 1986 to promote the provision of
retirement investment advice to workers managing their retirement
income assets.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
October 1, 2003
Mr. Enzi (for himself, Mr. Gregg, Mr. Bond, and Mr. Santorum)
introduced the following bill; which was read twice and referred to the
Committee on Health, Education, Labor, and Pensions
_______________________________________________________________________
A BILL
To amend title I of the Employee Retirement Income Security Act of 1974
and the Internal Revenue Code of 1986 to promote the provision of
retirement investment advice to workers managing their retirement
income assets.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
This Act may be cited as the ``Retirement Security Advice Act of
2003''.
SEC. 2. PROHIBITED TRANSACTION EXEMPTION FOR THE PROVISION OF
INVESTMENT ADVICE.
(a) Amendments to the Employee Retirement Income Security Act of
1974.--
(1) Exemption from prohibited transactions.--Section 408(b)
of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1108(b)) is amended by adding at the end the following
new paragraph:
``(14)(A) Any transaction described in subparagraph (B) in
connection with the provision of investment advice described in
section 3(21)(A)(ii), in any case in which--
``(i) the investment of assets of the plan is
subject to the direction of plan participants or
beneficiaries,
``(ii) the advice is provided to the plan or a
participant or beneficiary of the plan by a fiduciary
adviser in connection with any sale, acquisition, or
holding of a security or other property for purposes of
investment of plan assets, and
``(iii) the requirements of subsection (g) are met
in connection with the provision of the advice.
``(B) The transactions described in this subparagraph are
the following:
``(i) the provision of the advice to the plan,
participant, or beneficiary;
``(ii) the sale, acquisition, or holding of a
security or other property (including any lending of
money or other extension of credit associated with the
sale, acquisition, or holding of a security or other
property) pursuant to the advice; and
``(iii) the direct or indirect receipt of fees or
other compensation by the fiduciary adviser or an
affiliate thereof (or any employee, agent, or
registered representative of the fiduciary adviser or
affiliate) in connection with the provision of the
advice or in connection with a sale, acquisition, or
holding of a security or other property pursuant to the
advice.''.
(2) Requirements.--Section 408 of such Act is amended
further by adding at the end the following new subsection:
``(g) Requirements Relating to Provision of Investment Advice by
Fiduciary Advisers.--
``(1) In general.--The requirements of this subsection are
met in connection with the provision of investment advice
referred to in section 3(21)(A)(ii), provided to an employee
benefit plan or a participant or beneficiary of an employee
benefit plan by a fiduciary adviser with respect to the plan in
connection with any sale, acquisition, or holding of a security
or other property for purposes of investment of amounts held by
the plan, if--
``(A) in the case of the initial provision of the
advice with regard to the security or other property by
the fiduciary adviser to the plan, participant, or
beneficiary, the fiduciary adviser provides to the
recipient of the advice, at a time reasonably
contemporaneous with the initial provision of the
advice, a written notification (which may consist of
notification by means of electronic communication)--
``(i) of all fees or other compensation
relating to the advice that the fiduciary
adviser or any affiliate thereof is to receive
(including compensation provided by any third
party) in connection with the provision of the
advice or in connection with the sale,
acquisition, or holding of the security or
other property,
``(ii) of any material affiliation or
contractual relationship of the fiduciary
adviser or affiliates thereof in the security
or other property,
``(iii) of any limitation placed on the
scope of the investment advice to be provided
by the fiduciary adviser with respect to any
such sale, acquisition, or holding of a
security or other property,
``(iv) of the types of services provided by
the fiduciary adviser in connection with the
provision of investment advice by the fiduciary
adviser,
``(v) that the adviser is acting as a
fiduciary of the plan in connection with the
provision of the advice, and
``(vi) that a recipient of the advice may
separately arrange for the provision of advice
by another adviser, that could have no material
affiliation with and receive no fees or other
compensation in connection with the security or
other property,
``(B) the fiduciary adviser provides appropriate
disclosure, in connection with the sale, acquisition,
or holding of the security or other property, in
accordance with all applicable securities laws,
``(C) the sale, acquisition, or holding occurs
solely at the direction of the recipient of the advice,
``(D) the compensation received by the fiduciary
adviser and affiliates thereof in connection with the
sale, acquisition, or holding of the security or other
property is reasonable, and
``(E) the terms of the sale, acquisition, or
holding of the security or other property are at least
as favorable to the plan as an arm's length transaction
would be.
``(2) Standards for presentation of information.--
``(A) In general.--The notification required to be
provided to participants and beneficiaries under
paragraph (1)(A) shall be written in a clear and
conspicuous manner and in a manner calculated to be
understood by the average plan participant and shall be
sufficiently accurate and comprehensive to reasonably
apprise such participants and beneficiaries of the
information required to be provided in the
notification.
``(B) Model form for disclosure of fees and other
compensation.--The Secretary shall issue a model form
for the disclosure of fees and other compensation
required in paragraph (1)(A)(i) which meets the
requirements of subparagraph (A).
``(3) Exemption conditioned on making required information
available annually, on request, and in the event of material
change.--The requirements of paragraph (1)(A) shall be deemed
not to have been met in connection with the initial or any
subsequent provision of advice described in paragraph (1) to
the plan, participant, or beneficiary if, at any time during
the provision of advisory services to the plan, participant, or
beneficiary, the fiduciary adviser fails to maintain the
information described in clauses (i) through (iv) of paragraph
(1)(A) in currently accurate form and in the manner described
in paragraph (2) or fails--
``(A) to provide, without charge, such currently
accurate information to the recipient of the advice no
less than annually,
``(B) to make such currently accurate information
available, upon request and without charge, to the
recipient of the advice, or
``(C) in the event of a material change to the
information described in clauses (i) through (iv) of
paragraph (1)(A), to provide, without charge, such
currently accurate information to the recipient of the
advice at a time reasonably contemporaneous to the
material change in information.
``(4) Maintenance for 6 years of evidence of compliance.--A
fiduciary adviser referred to in paragraph (1) who has provided
advice referred to in such paragraph shall, for a period of not
less than 6 years after the provision of the advice, maintain
any records necessary for determining whether the requirements of the
preceding provisions of this subsection and of subsection (b)(14) have
been met. A transaction prohibited under section 406 shall not be
considered to have occurred solely because the records are lost or
destroyed prior to the end of the 6-year period due to circumstances
beyond the control of the fiduciary adviser.
``(5) Exemption for plan sponsor and certain other
fiduciaries.--
``(A) In general.--Subject to subparagraph (B), a
plan sponsor or other person who is a fiduciary (other
than a fiduciary adviser) shall not be treated as
failing to meet the requirements of this part solely by
reason of the provision of investment advice referred
to in section 3(21)(A)(ii) (or solely by reason of
contracting for or otherwise arranging for the
provision of the advice), if--
``(i) the advice is provided by a fiduciary
adviser pursuant to an arrangement between the
plan sponsor or other fiduciary and the
fiduciary adviser for the provision by the
fiduciary adviser of investment advice referred
to in such section,
``(ii) the terms of the arrangement require
compliance by the fiduciary adviser with the
requirements of this subsection, and
``(iii) the terms of the arrangement
include a written acknowledgment by the
fiduciary adviser that the fiduciary adviser is
a fiduciary of the plan with respect to the
provision of the advice.
``(B) Continued duty of prudent selection of
adviser and periodic review.--Nothing in subparagraph
(A) shall be construed to exempt a plan sponsor or
other person who is a fiduciary from any requirement of
this part for the prudent selection and periodic review
of a fiduciary adviser with whom the plan sponsor or
other person enters into an arrangement for the
provision of advice referred to in section
3(21)(A)(ii). The plan sponsor or other person who is a
fiduciary has no duty under this part to monitor the
specific investment advice given by the fiduciary
adviser to any particular recipient of the advice.
``(C) Availability of plan assets for payment for
advice.--Nothing in this part shall be construed to
preclude the use of plan assets to pay for reasonable
expenses in providing investment advice referred to in
section 3(21)(A)(ii).
``(6) Definitions.--For purposes of this subsection and
subsection (b)(14)--
``(A) Fiduciary adviser.--The term `fiduciary
adviser' means, with respect to a plan, a person who is
a fiduciary of the plan by reason of the provision of
investment advice by the person to the plan or to a
participant or beneficiary and who is--
``(i) registered as an investment adviser
under the Investment Advisers Act of 1940 (15
U.S.C. 80b-1 et seq.) or under the laws of the
State in which the fiduciary maintains its
principal office and place of business,
``(ii) a bank or similar financial
institution referred to in section 408(b)(4) or
a savings association (as defined in section
3(b)(1) of the Federal Deposit Insurance Act
(12 U.S.C. 1813(b)(1))), but only if the advice
is provided through a trust department of the
bank or similar financial institution or
savings association which is subject to
periodic examination and review by Federal or
State banking authorities,
``(iii) an insurance company qualified to
do business under the laws of a State,
``(iv) a person registered as a broker or
dealer under the Securities Exchange Act of
1934 (15 U.S.C. 78a et seq.),
``(v) an affiliate of a person described in
any of clauses (i) through (iv), or
``(vi) an employee, agent, or registered
representative of a person described in any of
clauses (i) through (v) who satisfies the
requirements of applicable insurance, banking,
and securities laws relating to the provision
of the advice.
``(B) Affiliate.--The term `affiliate' of another
entity means an affiliated person of the entity (as
defined in section 2(a)(3) of the Investment Company
Act of 1940 (15 U.S.C. 80a-(a)(3))).
``(C) Registered representative.--The term
`registered representative' of another entity means a
person described in section 3(a)(18) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a)(18))
(substituting the entity for the broker or dealer
referred to in such section) or a person described in
section 202(a)(17) of the Investment Advisers Act of
1940 (15 U.S.C. 80b-(a)(17)) (substituting the entity
for the investment adviser referred to in such
section).''.
(b) Amendments to the Internal Revenue Code of 1986.--
(1) Exemption from prohibited transactions.--Subsection (d)
of section 4975 of the Internal Revenue Code of 1986 (relating
to exemptions from tax on prohibited transactions) is amended--
(A) in paragraph (14), by striking ``or'' at the
end;
(B) in paragraph (15), by striking the period at
the end and inserting ``; or''; and
(C) by adding at the end the following new
paragraph:
``(16) any transaction described in subsection (f)(7)(A) in
connection with the provision of investment advice described in
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