I 

114TH CONGRESS 

1ST SESSION H. R. 3922 

To amend the Internal Revenue Code of 1986 and the Employee Retirement 

Income and Security Act of 1974 to provide for a best interest standard 

for advice fiduciaries, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

NOVEMBER 4, 2015 

Mr. KELLY of Pennsylvania (for himself and Mr. SAM JOHNSON of Texas) introduced the following bill; which was referred to the Committee on Education and the Workforce, and in addition to the Committee on Ways and 

Means, for a period to be subsequently determined by the Speaker, in 

each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To amend the Internal Revenue Code of 1986 and the Employee Retirement Income and Security Act of 1974 to 

provide for a best interest standard for advice fiduciaries, 

and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Retirement Choice 

5 Protection Act of 2015’’. 


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1 SEC. 2. TRANSFER TO SECRETARY OF THE TREASURY OF 

2 AUTHORITIES REGARDING INDIVIDUAL RE3 TIREMENT PLANS. 

4 (a) IN GENERAL.—Section 102 of Reorganization 

5 Plan No. 4 of 1978 (ratified and affirmed as law by Public 

6 Law 98–532 (98 Stat. 2705)) is amended— 

7 (1) in subsection (a)— 

8 (A) by striking ‘‘and’’ at the end of clause 

9 (ii); 

10 (B) by striking ‘‘and’’ at the end of clause 

11 (iii); and 

12 (C) by inserting after clause (iii) the fol13 lowing: 

14 ‘‘(iv) regulations, rulings, opinions, 

15 and exemptions relating to individual re16 tirement accounts described in section 

17 408(a) of the Code and individual retire18 ment annuities described in section 408(b) 

19 of the Code, including simplified employee 

20 pensions under section 408(k) of the Code 

21 and simple retirement accounts under sec22 tion 408(p) of the Code; and 

23 ‘‘(v) regulations described in section 

24 103(b) of this Plan;’’; and 

25 (2) by adding at the end the following new 

26 flush sentence: ‘‘The Secretary of the Treasury shall 


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1 consult with the Securities and Exchange Commis2 sion in prescribing regulations, rulings, opinions, 

3 and exemptions under subsection (a)(iv) that provide 

4 guidance of general application as to the professional 

5 standards of care (whether involving fiduciary, suit6 ability, or other standards) owed by brokers and in7 vestment advisors to owners and account holders of 

8 accounts and annuities described in such sub9 section.’’. 

10 (b) JOINT AUTHORITY.—Section 103 of such Plan is 

11 amended— 

12 (1) by striking ‘‘In the case of’’ and inserting: 

13 ‘‘(a) In the case of’’; and 

14 (2) by adding at the end the following: 

15 ‘‘(b)(1) The Secretary of the Treasury and the Sec16 retary of Labor shall have joint authority to issue regula17 tions described in this subsection, and any such regula18 tions shall be issued jointly by such Secretaries. 

19 ‘‘(2) A regulation is described in this subsection if 

20 (i) the regulation is not described in clause (i), (ii), (iii), 

21 or (iv) of section 102(a) of this Plan and (ii) defines or 

22 interprets a term or requirement that is included in sec23 tion 4975 of the Code or section 406 of ERISA. The de24 termination of whether any regulation is described in this 

25 subsection shall be made without regard to whether any 


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1 such term or requirement is also used or defined in any 

2 other provision of the Code or ERISA.’’. 

3 (c) EFFECTIVE DATE.— 

4 (1) IN GENERAL.—The amendments made by 

5 this section shall apply to regulations, rulings, opin6 ions, and exemptions which have not been finalized 

7 as of July 8, 2013. 

8 (2) TRANSITION.—Any final regulation, ruling, 

9 opinion, or exemption described in section 102(a)(iv) 

10 or 103(b) of Reorganization Plan No. 4 of 1978 (as 

11 added by the amendments made by this section) 

12 which was issued by the Secretary of Labor before 

13 July 9, 2013, shall apply until such time as such 

14 regulation, ruling, opinion, or exemption is revoked 

15 or modified pursuant to such amendments. 

16 SEC. 3. BEST INTEREST STANDARD FOR ADVICE FIDU17 CIARIES. 

18 (a) AMENDMENTS TO THE INTERNAL REVENUE

19 CODE OF 1986.— 

20 (1) BEST INTEREST STANDARD FOR ADVICE FI21 DUCIARIES REGARDING IRAS AND NON-ERISA

22 PLANS.—Section 4975(c) of the Internal Revenue 

23 Code of 1986 is amended by adding the following 

24 new paragraph (7): 


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1 ‘‘(7) BEST INTEREST RECOMMENDATION RULE

2 FOR ADVICE FIDUCIARIES TO IRAS AND NON-ERISA

3 PLANS.— 

4 ‘‘(A) BEST INTEREST PROHIBITED TRANS5 ACTION.—For purposes of this section and with 

6 respect to plans not subject to section 404 of 

7 title I, subtitle B of the Employee Retirement 

8 Income Security Act of 1974 (relating to fidu9 ciary obligations), the term ‘prohibited trans10 action’ includes the receipt of any consideration 

11 for his own personal account by any disqualified 

12 person who is a fiduciary by reason of providing 

13 investment advice (within the meaning of sec14 tion 4975(e)(3)(B)) from the plan or any party 

15 in connection with a transaction involving the 

16 investment of income or assets of the plan re17 sulting from the recommendation of such per18 son, unless such investment advice constitutes a 

19 best interest recommendation. This paragraph 

20 shall not apply to any transaction unless such 

21 transaction is described in subparagraph (E) or 

22 (F) of subsection (c)(1) (without regard to any 

23 exemption from the prohibitions of subsection 

24 (c)). 


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1 ‘‘(B) BEST INTEREST RECOMMENDA2 TION.— 

3 ‘‘(i) For purposes of this paragraph, 

4 the term ‘best interest recommendation’ 

5 means a recommendation provided by a 

6 person acting with the care, skill, pru7 dence, and diligence under the cir8 cumstances then prevailing that a prudent 

9 person would exercise based on the infor10 mation obtained through the reasonable 

11 diligence of the person regarding factors 

12 such as the advice recipient’s age, and any 

13 other information that the advice recipient 

14 discloses to the person in connection with 

15 receiving such recommendation, where the 

16 person does not subordinate the interests 

17 of the plan or advice recipient, as applica18 ble, to its own. 

19 ‘‘(ii) Best interest recommendations 

20 may include, without limitation, rec21 ommendations that— 

22 ‘‘(I) are based on a limited range 

23 of products, providers or offerings (in24 cluding recommendations that include, 

25 or are limited only to, proprietary 


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1 products and providers), where such 

2 limits are clearly disclosed to the ad3 vice recipient at any time prior to a 

4 transaction based on the recommenda5 tion, or 

6 ‘‘(II) may result in variable com7 pensation to the person (or its affil8 iate), such as transaction, services, 

9 placement, or other types of com10 pensation that differ by product or 

11 service, where the receipt of such com12 pensation is clearly disclosed to the 

13 advice recipient. 

14 ‘‘(iii) For purposes of this paragraph, 

15 clear disclosure of variable compensation 

16 means notification at any time prior to a 

17 transaction based on the person’s rec18 ommendation, in a manner calculated to be 

19 understood by the average individual, of 

20 the following information, which can be 

21 provided in one or more statements or doc22 uments: 

23 ‘‘(I) The person (or its affiliate) 

24 may receive varying amounts of fees 

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1 ation with respect to recommended 

2 transactions. 

3 ‘‘(II) The amount of any fee or 

4 other compensation or consideration 

5 that is directly payable to the person 

6 (or its affiliate) from the plan or ad7 vice recipient with respect to rec8 ommended transactions, provided that 

9 any such amount may be expressed in 

10 terms of a monetary amount, formula, 

11 percentage of assets, per capita 

12 charge, or estimate or range of such 

13 compensation or consideration. 

14 ‘‘(III) A description of the types 

15 and ranges of indirect compensation 

16 that may be paid to the person (or its 

17 affiliate) by any third party in connec18 tion with recommended transactions, 

19 provided that any such ranges may be 

20 expressed in terms of a monetary 

21 amount, formula, percentage of as22 sets, per capita charge, or estimate of 

23 such compensation or consideration. 

24 ‘‘(IV) Upon the advice recipient’s 

25 request prior to the transaction, a disVerDate Sep 11 2014 04:36 Nov 06, 2015 Jkt 059200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H3922.IH H3922

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1 closure of the specific amounts of 

2 compensation described in subclause 

3 (II) or (III) that the person will re4 ceive in connection with the particular 

5 transaction, provided that any such 

6 amounts may be expressed in terms of 

7 a monetary amount, formula, percent8 age of assets, per capita charge, or es9 timate of such compensation or con10 sideration. 

11 No recommendation will fail to be a best 

12 interest recommendation solely because the 

13 person, acting in good faith and with rea14 sonable diligence, makes an error or omis15 sion in disclosing the information specified 

16 in this subparagraph, provided that the 

17 person discloses the correct information to 

18 the advice recipient as soon as practicable, 

19 but not later than 30 days from the date 

20 on which the person knows of such error or 

21 omission. 

22 ‘‘(C) CORRECTION.—For purposes of this 

23 section and notwithstanding subsection (f)(5) to 

24 the contrary, the terms ‘correction’ and ‘cor25 rect’ mean, with respect to this prohibited 


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1 transaction only, the payment to, or reimburse2 ment of, actual damages of the plan resulting 

3 directly from the plan’s reliance on such invest4 ment advice, if any, that have not otherwise 

5 been paid or reimbursed to the plan, including 

6 payments and reimbursements made pursuant 

7 to subsection (f)(5). Any such damages shall be 

8 determined in a manner consistent with the 

9 damages that would be payable with respect to 

10 such prohibited transaction under the Employee 

11 Retirement Income Security Act of 1974. 

12 ‘‘(D) CALCULATION OF AMOUNT IN13 VOLVED.—For purposes of this section and not14 withstanding subsection (f)(4) to the contrary, 

15 the term ‘amount involved’ means, with respect 

16 to this prohibited transaction only, the amount 

17 of such consideration received by the disquali18 fied person with respect to the transaction that 

19 has not otherwise been paid or reimbursed to 

20 the plan, including payments and reimburse21 ments made pursuant to subsection (f)(5).’’. 

22 (2) MODIFICATION OF EXISTING STATUTORY

23 EXEMPTIONS TO APPLY THE BEST INTEREST STAND24 ARD TO ADVICE FIDUCIARIES OF IRAS AND NON25 ERISA PLANS THROUGH SECTION 4975(c)(7).—SecVerDate Sep 11 2014 04:36 Nov 06, 2015 Jkt 059200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H3922.IH H3922

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1 tion 4975(d) of such Code is amended by deleting 

2 the language preceding paragraph (1) and replacing 

3 it with the following: 

4 ‘‘(d) EXEMPTIONS.—Except as provided in sub5 section (f)(6), the prohibitions provided in subsection 

6 (c)(1) shall not apply to—’’. 

7 (3) DEFINITION OF INVESTMENT ADVICE.— 

8 Subparagraph (B) of subsection 4975(e)(3) of such 

9 Code is amended to read as follows: 

10 ‘‘(B) renders investment advice for a fee or 

11 other compensation, direct or indirect, with re12 spect to moneys or other property of such plan, 

13 or has any authority or responsibility to do so. 

14 Investment advice means a recommendation— 

15 ‘‘(i) as to the advisability of acquiring, 

16 holding, disposing, or exchanging securities 

17 or other investment property, including a 

18 recommendation to take a distribution of 

19 benefits or a recommendation as to the in20 vestment of securities or other property to 

21 be rolled over or otherwise distributed from 

22 the plan; 

23 ‘‘(ii) as to the management of securi24 ties or other property, including rec25 ommendations as to the management of seVerDate Sep 11 2014 04:36 Nov 06, 2015 Jkt 059200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H3922.IH H3922

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1 curities or other property to be rolled over 

2 or otherwise distributed from the plan; or 

3 ‘‘(iii) of a person who is also going to 

4 receive a fee or other compensation for 

5 providing any of the types of advice de6 scribed in clause (i) or (ii); 

7 Provided that, such recommendation is rendered 

8 pursuant to a mutual agreement, arrangement, 

9 or understanding between such person and the 

10 plan, plan fiduciary, or advice recipient that 

11 such advice is individualized to the plan and 

12 such plan, fiduciary, or advice recipient intends 

13 to materially rely on such recommendation in 

14 making investment or management decisions 

15 with respect to moneys, securities, or other in16 vestment property of the plan. A person shall 

17 not be considered to be providing investment 

18 advice if such recommendation is provided in 

19 conjunction with full and fair disclosure to the 

20 recipient, which can be written or verbal, that 

21 the person is providing or making the rec22 ommendation of services or property in its mar23 keting, sales, or educational capacity, and that 

24 the person is not undertaking to provide impar25 tial investment advice or to give advice as a fiVerDate Sep 11 2014 04:36 Nov 06, 2015 Jkt 059200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H3922.IH H3922

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1 duciary (within the meaning of this subpara2 graph). In addition, a person shall not be a fi3 duciary under this subparagraph with respect to 

4 the terms and conditions of engagement of the 

5 person, including the scope of the obligation to 

6 provide advice, the products or services with re7 spect to which advice is provided and the com8 pensation payable to the person, provided the 

9 recipient has consented to the terms and condi10 tions of the engagement after disclosure of all 

11 material aspects of such terms and conditions, 

12 including fee disclosure that satisfies subclauses 

13 (I), (II), and (III) of paragraph (7)(B)(i). Ex14 cept as otherwise provided in subparagraph (D) 

15 and notwithstanding subparagraph (E), invest16 ment advice shall include a recommendation 

17 under this subparagraph provided pursuant to a 

18 written acknowledgment of fiduciary status with 

19 respect to the provision of such recommenda20 tion. For purposes of this subparagraph, ‘prop21 erty’ means moneys and investment property, 

22 and ‘management of securities’ means exer23 cising rights or obligations with respect to secu24 rities or other property,’’. 


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1 (4) DEFINITION OF INVESTMENT ADVICE.— 

2 Section 4975(e)(3) of such Code is amended by 

3 striking the period at the end of subparagraph (C) 

4 and inserting a comma and by adding the following 

5 new subparagraphs (D) and (E): 

6 ‘‘(D) The extent of a fiduciary’s obliga7 tions as such can be defined and limited pursu8 ant to a mutual agreement, arrangement, or 

9 understanding between the person and the 

10 party engaging the person as a fiduciary to the 

11 plan. Such limitations can include limits on 

12 scope, timing, and responsibility to provide on13 going monitoring or advice services. 

14 ‘‘(E) A person shall not be deemed to be 

15 a fiduciary on account of section 4975(e)(3)(B) 

16 if such person meets one or more of the fol17 lowing: 

18 ‘‘(i) COUNTERPARTIES AND SERVICES

19 PROVIDERS.—In such person’s capacity as 

20 a counterparty, service provider, or rep21 resentative thereof, the person provides ad22 vice to a plan fiduciary who is independent 

23 of such person and who is independent of 

24 the plan sponsor, with respect to an arm’s25 length service arrangement, sale, purchase, 


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1 loan, or bilateral contract between the plan 

2 and person, each a ‘transaction’ for pur3 poses of this subclause, if, prior to entering 

4 into the transaction, the plan fiduciary 

5 represents that it understands that the 

6 person has a financial interest in the mat7 ter, and that the person is not undertaking 

8 to provide impartial financial advice or to 

9 give advice as a fiduciary (within the 

10 meaning of this paragraph); provided such 

11 person has not acknowledged in writing 

12 that it is acting as a fiduciary (within the 

13 meaning of this paragraph) with respect to 

14 the transaction. 

15 ‘‘(ii) SWAP TRANSACTIONS.—The per16 son is a counterparty, service provider or 

17 representative thereof in connection with a 

18 swap or security-based swap, as defined in 

19 section 1(a) of the Commodity Exchange 

20 Act (7 U.S.C. 1(a)) and section 3(a) of the 

21 Securities Exchange Act (15 U.S.C. 

22 78c(a)), if: the plan is represented by a fi23 duciary independent of the person; the per24 son is a swap clearing firm or other service 

25 provider in relation to a swap, swap dealer, 


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1 security-based swap dealer, major swap 

2 participant, or major security-based swap 

3 participant; the person (if a swap dealer, 

4 security-based swap dealer, clearing firm, 

5 or other similar service provider) is not 

6 acting as an advisor to the plan (within the 

7 meaning of section 4s(h) of the Commodity 

8 Exchange Act or section 15F(h) of the Se9 curities Exchange Act of 1934) in connec10 tion with the transaction; and in advance 

11 of providing any recommendations with re12 spect to the transaction, the person obtains 

13 a written representation from the inde14 pendent plan fiduciary, that the fiduciary 

15 will not rely on recommendations provided 

16 by the person. 

17 ‘‘(iii) EMPLOYEES.—In his or her ca18 pacity as an employee of any employer or 

19 employee organization sponsoring the plan 

20 or an affiliate of such plan sponsor, the 

21 person provides the advice (directly or indi22 rectly) to the plan, plan fiduciary, partici23 pant, or beneficiary, and he or she receives 

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1 yond the employee’s normal compensation 

2 for work performed for the employer or 

3 employee organization or an affiliate. In 

4 such cases, such an employee is not ren5 dering investment advice for a fee or other 

6 compensation. No inference is intended 

7 with respect to whether any other person 

8 shall be treated as rendering investment 

9 advice for a fee or other compensation. 

10 ‘‘(iv) PLATFORM PROVIDERS.—The 

11 person merely markets and makes available 

12 to a plan (including its participants, bene13 ficiaries, and fiduciaries (which includes an 

14 owner of an individual retirement plan (as 

15 defined in section 7701(a)(37)))), without 

16 regard to the individualized needs of the 

17 plan, its participants, or beneficiaries, se18 curities or other property through a plat19 form or similar mechanism (which may 

20 consist of or include one or more annuity 

21 contracts) from which a plan fiduciary may 

22 select or monitor investment alternatives, 

23 including qualified default investment al24 ternatives, into which plan participants or 

25 beneficiaries may direct the investment of 


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1 assets held in, or contributed to, their indi2 vidual accounts, if the person discloses in 

3 writing to the plan fiduciary that the per4 son is not undertaking to provide impartial 

5 investment advice or to give advice as a fi6 duciary (within the meaning of this para7 graph) when establishing or maintaining 

8 the platform. 

9 ‘‘(v) SELECTION AND MONITORING AS10 SISTANCE.—The person merely identifies 

11 investment alternatives that meet objective 

12 criteria specified by the plan fiduciary (in13 cluding an owner of an individual retire14 ment plan (as defined in section 

15 7701(a)(37))), participant, or beneficiary 

16 (e.g., stated parameters concerning ex17 pense ratios, size of fund, type of asset, or 

18 credit quality); or merely provides objective 

19 financial data and comparisons with inde20 pendent benchmarks to the plan fiduciary, 

21 participant or beneficiary. 

22 ‘‘(vi) FINANCIAL REPORTS AND VALU23 ATIONS.—The person provides or reports 

24 valuation information, but does not rep25 resent in writing that it is undertaking to 


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1 provide such valuation information as a fi2 duciary (within the meaning of this sub3 section). 

4 ‘‘(vii) EDUCATION.—The person pro5 vides the information— 

6 ‘‘(I) described in Department of 

7 Labor Interpretive Bulletin 96–1 (29 

8 C.F.R. 2509.96–1, as in effect on 

9 January 1, 2015); 

10 ‘‘(II) described in Department of 

11 Labor Interpretive Bulletin 96–1 (29 

12 C.F.R. 2509.96–1, as in effect on 

13 January 1, 2015) but for the fact that 

14 such education is provided to a plan 

15 or plan fiduciary; 

16 ‘‘(III) described in Department 

17 of Labor Interpretive Bulletin 96–1 

18 (29 C.F.R. 2509.96–1, as in effect on 

19 January 1, 2015) but for the fact that 

20 such education is provided to an 

21 owner of an individual retirement plan 

22 (as defined in section 7701(a)(37)); 

23 ‘‘(IV) to participants and bene24 ficiaries regarding the factors to con25 sider in deciding whether to elect to 


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1 receive a distribution from a plan or 

2 an individual retirement plan (as de3 fined in section 7701(a)(37)) and 

4 whether to roll over such distribution 

5 to a plan or an individual retirement 

6 plan (as defined in section 

7 7701(a)(37)); such education can in8 clude examples of different distribu9 tion and rollover alternatives, so long 

10 as all material facts and assumptions 

11 on which the examples are based ac12 company the examples; or 

13 ‘‘(V) any additional information 

14 treated as education by the Secretary 

15 of Labor.’’. 

16 (5) EXEMPTION TO PRESERVE INVESTOR

17 CHOICE.—Section 4975(d) of such Code is amended 

18 by adding at the end thereof the following new para19 graph: 

20 ‘‘(24) with respect to transactions described in 

21 section 4975(c)(1) (A)–(F), any transaction or serv22 ice in connection with the provision of investment 

23 advice described in section 4975(e)(3)(B) if the con24 ditions under subparagraphs (A), (B), and (C) are 

25 satisfied: 


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1 ‘‘(A) The provision of investment advice 

2 with respect to the transaction is subject to 

3 subsection (c)(7) or section 404 of title I, sub4 title B of the Employee Retirement Income Se5 curity Act of 1974 (relating to fiduciary obliga6 tions). 

7 ‘‘(B) The conditions of section 4975(d)(2) 

8 are satisfied when otherwise applicable. 

9 ‘‘(C) With respect to plans subject to sec10 tion 404 of title I, subtitle B of the Employee 

11 Retirement Income Security Act of 1974, the 

12 investment advice may include recommenda13 tions that— 

14 ‘‘(i) are based on a limited range of 

15 products, providers, or offerings (including 

16 recommendations that include, or are lim17 ited only to, proprietary products and pro18 viders), where such limits are clearly dis19 closed to the advice recipient at any time 

20 prior to a transaction based on the rec21 ommendation, or 

22 ‘‘(ii) may result in variable compensa23 tion to the person (or its affiliate), such as 

24 transaction, services, placement, or other 

25 types of compensation that differ by prodVerDate Sep 11 2014 04:36 Nov 06, 2015 Jkt 059200 PO 00000 Frm 00021 Fmt 6652 Sfmt 6201 E:\BILLS\H3922.IH H3922

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1 uct or service, where the receipt of such 

2 compensation is clearly disclosed to the ad3 vice recipient. 

4 ‘‘(D) For purposes of this paragraph, clear 

5 disclosure of variable compensation means noti6 fication at any time prior to a transaction based 

7 on the person’s recommendation, in a manner 

8 calculated to be understood by the average indi9 vidual, of the following information, which can 

10 be provided in one or more statements or docu11 ments: 

12 ‘‘(i) The person (or its affiliate) may 

13 receive varying amounts of fees or other 

14 compensation or consideration with respect 

15 to recommended transactions. 

16 ‘‘(ii) The amount of any fee or other 

17 compensation or consideration that is di18 rectly payable to the person (or its affil19 iate) from the plan or advice recipient with 

20 respect to recommended transactions, pro21 vided that any such amount may be ex22 pressed in terms of a monetary amount, 

23 formula, percentage of assets, per capita 

24 charge, or estimate or range of such com25 pensation or consideration. 


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1 ‘‘(iii) A description of the types and 

2 ranges of indirect compensation that may 

3 be paid to the person (or its affiliate) by 

4 any third party in connection with the rec5 ommended transaction, provided that any 

6 such range may be expressed in terms of 

7 a monetary amount, formula, percentage of 

8 assets, per capita charge or estimate of 

9 such compensation or consideration. 

10 ‘‘(iv) Upon the advice recipient’s re11 quest prior to the transaction, a disclosure 

12 of the specific amounts of compensation 

13 described in clause (ii) or (iii) that the per14 son will receive in connection with the par15 ticular transaction, provided that any such 

16 amounts may be expressed in terms of a 

17 monetary amount, formula, percentage of 

18 assets, per capita charge, or estimate of 

19 such compensation or consideration. 

20 The disclosure requirements described in this 

21 subparagraph will not fail to be met solely be22 cause the person, acting in good faith and with 

23 reasonable diligence, makes an error or omis24 sion in disclosing the information specified in 

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1 closes the correct information to the advice re2 cipient as soon as practicable, but not later 

3 than 30 days from the date on which the person 

4 knows of such error or omission.’’. 

5 (6) EFFECTIVE DATE.—The amendments made 

6 by this subsection shall apply on or after the 1st day 

7 of the 36th month after the date of the enactment 

8 of this Act, but the exemption added under section 

9 4975(d)(24) of such Code shall be available imme10 diately upon enactment of this Act for persons meet11 ing its conditions (including the conditions of a best 

12 interest recommendation which may not be effective 

13 at such time). The Secretary of Labor is prohibited 

14 from amending any rules or administrative positions 

15 promulgated under section 3(21) of ERISA or sec16 tion 4975(e)(3) of such Code (including Department 

17 of Labor Interpretive Bulletin 96–1 (29 C.F.R. 

18 2509.96–1) and Department of Labor Advisory 

19 Opinion 2005–23A) prior to the effective date of this 

20 Act, and no such rules or positions promulgated by 

21 the Secretary of Labor prior to the date of the en22 actment of this Act, but not yet effective or applica23 ble, may become effective prior to the effective date 

24 of this Act. 


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1 (7) GRANDFATHERED TRANSACTIONS AND

2 SERVICES.—The amendments made to section 

3 4975(e)(3)(B) of such Code by this Act shall not 

4 apply to any services if such services— 

5 (A) were rendered prior to the effective 

6 date of this Act, 

7 (B) relate to a transaction entered into 

8 prior to the effective date of this Act, 

9 (C) were paid for prior to the effective date 

10 of this Act, or 

11 (D) are not described in subparagraph (A), 

12 (B), or (C) but the person performing the serv13 ices does not receive more compensation (either 

14 as a fixed dollar amount or as a percentage of 

15 assets) as a result of the services than the per16 son is contractually eligible to receive for such 

17 services prior to the effective date of this Act. 

18 (b) AMENDMENTS TO THE EMPLOYEE RETIREMENT

19 INCOME SECURITY ACT OF 1974.— 

20 (1) DEFINITION OF INVESTMENT ADVICE.— 

21 Subparagraph (A) of section 3(21) of the Employee 

22 Retirement Security Act of 1974 is amended by 

23 amending clause (ii) to read as follows: 

24 ‘‘(ii) renders investment advice for a 

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1 rect, with respect to moneys or other prop2 erty of such plan, or has any authority or 

3 responsibility to do so. Investment advice 

4 means a recommendation— 

5 ‘‘(I) as to the advisability of ac6 quiring, holding, disposing, or ex7 changing securities or other invest8 ment property, including a rec9 ommendation to take a distribution of 

10 benefits or a recommendation as to 

11 the investment of securities or other 

12 property to be rolled over or otherwise 

13 distributed from the plan; 

14 ‘‘(II) as to the management of 

15 securities or other property, including 

16 recommendations as to the manage17 ment of securities or other property to 

18 be rolled over or otherwise distributed 

19 from the plan; or 

20 ‘‘(III) of a person who is also 

21 going to receive a fee or other com22 pensation for providing any of the 

23 types of advice described in subclause 

24 (I) or (II); 


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1 Provided that, such recommendation is ren2 dered pursuant to a mutual agreement, ar3 rangement, or understanding between such 

4 person and the plan, plan fiduciary, or ad5 vice recipient that such advice is individ6 ualized to the plan and such plan, fidu7 ciary, or advice recipient intends to materi8 ally rely on such recommendation in mak9 ing investment or management decisions 

10 with respect to moneys, securities, or other 

11 investment property of the plan. A person 

12 shall not be considered to be providing in13 vestment advice if such recommendation is 

14 provided in conjunction with full and fair 

15 disclosure to the recipient, which can be 

16 written or verbal, that the person is pro17 viding or making the recommendation of 

18 services or property in its marketing, sales, 

19 or educational capacity, and that the per20 son is not undertaking to provide impartial 

21 investment advice or to give advice as a fi22 duciary (within the meaning of this sub23 paragraph). In addition, a person shall not 

24 be a fiduciary under this subparagraph 

25 with respect to the terms and conditions of 


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1 engagement of the person, including the 

2 scope of the obligation to provide advice, 

3 the products or services with respect to 

4 which advice is provided and the com5 pensation payable to the person, provided 

6 the recipient has consented to the terms 

7 and conditions of the engagement after 

8 disclosure of all material aspects of such 

9 terms and conditions, including fee disclo10 sure that satisfies clauses (i), (ii), and (iii) 

11 of section 408(b)(21)(C). Except as other12 wise provided in subparagraph (C) and 

13 notwithstanding subparagraph (D), invest14 ment advice shall include a recommenda15 tion under this subparagraph provided pur16 suant to a written acknowledgment of fidu17 ciary status with respect to the provision 

18 of such recommendation. For purposes of 

19 this clause, ‘property’ means moneys and 

20 investment property, and ‘management of 

21 securities’ means exercising rights or obli22 gations with respect to securities or other 

23 property.’’. 


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1 (2) DEFINITION OF INVESTMENT ADVICE.— 

2 Subsection 3(21) of such Act is amended by adding 

3 the following new subparagraphs (C) and (D): 

4 ‘‘(C) The extent of a fiduciary’s obligations 

5 as such can be defined and limited pursuant to 

6 a mutual agreement, arrangement, or under7 standing between the person and the party en8 gaging the person as a fiduciary to the plan. 

9 Such limitations can include limits on scope, 

10 timing, and responsibility to provide ongoing 

11 monitoring or advice services. 

12 ‘‘(D) A person shall not be deemed to be 

13 a fiduciary on account of subparagraph (A)(ii) 

14 if such person meets one or more of the fol15 lowing: 

16 ‘‘(i) COUNTERPARTIES AND SERVICES

17 PROVIDERS.—In such person’s capacity as 

18 a counterparty, service provider, or rep19 resentative thereof, the person provides ad20 vice to a plan fiduciary who is independent 

21 of such person and who is independent of 

22 the plan sponsor, with respect to an arm’s23 length service arrangement, sale, purchase, 

24 loan, or bilateral contract between the plan 

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1 poses of this clause if, prior to entering 

2 into the transaction, the plan fiduciary 

3 represents that it understands that the 

4 person has a financial interest in the mat5 ter, and that the person is not undertaking 

6 to provide impartial financial advice or to 

7 give advice as a fiduciary (within the 

8 meaning of this subsection); provided such 

9 person has not acknowledged in writing 

10 that it is acting as a fiduciary (within the 

11 meaning of this subsection) with respect to 

12 the transaction. 

13 ‘‘(ii) SWAP TRANSACTIONS.—The per14 son is a counterparty, service provider or 

15 representative thereof in connection with a 

16 swap or security-based swap, as defined in 

17 section 1(a) of the Commodity Exchange 

18 Act (7 U.S.C. 1(a)) and section 3(a) of the 

19 Securities Exchange Act (15 U.S.C. 

20 78c(a)), if: the plan is represented by a fi21 duciary independent of the person; the per22 son is a swap clearing firm or other service 

23 provider in relation to a swap, swap dealer, 

24 security-based swap dealer, major swap 

25 participant, or major security-based swap 


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1 participant; the person (if a swap dealer, 

2 security-based swap dealer, clearing firm, 

3 or other similar service provider) is not 

4 acting as an advisor to the plan (within the 

5 meaning of section 4s(h) of the Commodity 

6 Exchange Act or section 15F(h) of the Se7 curities Exchange Act of 1934) in connec8 tion with the transaction; and in advance 

9 of providing any recommendations with re10 spect to the transaction, the person obtains 

11 a written representation from the inde12 pendent plan fiduciary, that the fiduciary 

13 will not rely on recommendations provided 

14 by the person. 

15 ‘‘(iii) EMPLOYEES.—In his or her ca16 pacity as an employee of any employer or 

17 employee organization sponsoring the plan 

18 or an affiliate of such plan sponsor, the 

19 person provides the advice (directly or indi20 rectly) to the plan, plan fiduciary, partici21 pant, or beneficiary, and he or she receives 

22 no fee or other compensation, direct or in23 direct, in connection with the advice be24 yond the employee’s normal compensation 

25 for work performed for the employer or 


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1 employee organization or an affiliate. In 

2 such cases, such an employee is not ren3 dering investment advice for a fee or other 

4 compensation. No inference is intended 

5 with respect to whether any other person 

6 shall be treated as rendering investment 

7 advice for a fee or other compensation. 

8 ‘‘(iv) PLATFORM PROVIDERS.—The 

9 person merely markets and makes available 

10 to a plan (including its participants, bene11 ficiaries, and fiduciaries), without regard 

12 to the individualized needs of the plan, its 

13 participants, or beneficiaries, securities or 

14 other property through a platform or simi15 lar mechanism (which may consist of or in16 clude one or more annuity contracts) from 

17 which a plan fiduciary may select or mon18 itor investment alternatives, including 

19 qualified default investment alternatives, 

20 into which plan participants or bene21 ficiaries may direct the investment of as22 sets held in, or contributed to, their indi23 vidual accounts, if the person discloses in 

24 writing to the plan fiduciary that the per25 son is not undertaking to provide impartial 


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1 investment advice or to give advice as a fi2 duciary (within the meaning of this sub3 section) when establishing or maintaining 

4 the platform. 

5 ‘‘(v) SELECTION AND MONITORING AS6 SISTANCE.—The person merely identifies 

7 investment alternatives that meet objective 

8 criteria specified by the plan fiduciary, 

9 participant, or beneficiary (e.g., stated pa10 rameters concerning expense ratios, size of 

11 fund, type of asset, or credit quality); or 

12 merely provides objective financial data 

13 and comparisons with independent bench14 marks to the plan fiduciary, participant or 

15 beneficiary. 

16 ‘‘(vi) FINANCIAL REPORTS AND VALU17 ATIONS.—The person provides or reports 

18 valuation information, but does not rep19 resent in writing that it is undertaking to 

20 provide such valuation information as a fi21 duciary (within the meaning of this sub22 section). 

23 ‘‘(vii) EDUCATION.—The person pro24 vides the information— 


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1 ‘‘(I) described in Department of 

2 Labor Interpretive Bulletin 96–1 (29 

3 C.F.R. 2509.96–1, as in effect on 

4 January 1, 2015); 

5 ‘‘(II) described in Department of 

6 Labor Interpretive Bulletin 96–1 (29 

7 C.F.R. 2509.96–1, as in effect on 

8 January 1, 2015) but for the fact that 

9 such education is provided to a plan 

10 or plan fiduciary; 

11 ‘‘(III) to participants and bene12 ficiaries regarding the factors to con13 sider in deciding whether to elect to 

14 receive a distribution from a plan or 

15 an individual retirement plan (as de16 fined in section 7701(a)(37) of the In17 ternal Revenue Code of 1986) and 

18 whether to roll over such distribution 

19 to a plan or an individual retirement 

20 plan (as defined in section 

21 7701(a)(37) of the Internal Revenue 

22 Code of 1986); such education can in23 clude examples of different distribu24 tion and rollover alternatives, so long 

25 as all material facts and assumptions 


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1 on which the examples are based ac2 company the examples; or 

3 ‘‘(IV) any additional information 

4 treated as education by the Sec5 retary.’’. 

6 (3) EXEMPTION TO PRESERVE INVESTOR

7 CHOICE.—Section 408(b) of such Act is amended by 

8 adding at the end thereof the following new para9 graph: 

10 ‘‘(21) with respect to transactions described in 

11 sections 406(a) and 406(b), any transaction or serv12 ice in connection with the provision of investment 

13 advice described in section 3(21)(A)(ii) if the condi14 tions under subparagraphs (A), (B), and (C) are 

15 satisfied: 

16 ‘‘(A) The provision of investment advice 

17 with respect to the transaction is subject to sec18 tion 404. 

19 ‘‘(B) The conditions of section 408(b)(2) 

20 are satisfied when otherwise applicable. 

21 ‘‘(C) The investment advice may include 

22 recommendations that— 

23 ‘‘(i) are based on a limited range of 

24 products, providers, or offerings (including 

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1 ited only to, proprietary products and pro2 viders), where such limits are clearly dis3 closed to the advice recipient at any time 

4 prior to a transaction based on the rec5 ommendation, or 

6 ‘‘(ii) may result in variable compensa7 tion to the person (or its affiliate), such as 

8 transaction, services, placement, or other 

9 types of compensation that differ by prod10 uct or service, where the receipt of such 

11 compensation is clearly disclosed to the ad12 vice recipient. 

13 ‘‘(D) For purposes of this paragraph, clear 

14 disclosure of variable compensation means noti15 fication at any time prior to a transaction based 

16 on the person’s recommendation, in a manner 

17 calculated to be understood by the average indi18 vidual, of the following information, which can 

19 be provided in one or more statements or docu20 ments: 

21 ‘‘(i) The person (or its affiliate) may 

22 receive varying amounts of fees or other 

23 compensation or consideration with respect 

24 to recommended transactions. 


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1 ‘‘(ii) The amount of any fee or other 

2 compensation or consideration that is di3 rectly payable to the person (or its affil4 iate) from the plan or advice recipient with 

5 respect to recommended transactions, pro6 vided that any such amount may be ex7 pressed in terms of a monetary amount, 

8 formula, percentage of assets, per capita 

9 charge, or estimate or range of such com10 pensation or consideration. 

11 ‘‘(iii) A description of the types and 

12 ranges of indirect compensation that may 

13 be paid to the person (or its affiliate) by 

14 any third party in connection with the rec15 ommended transaction, provided that any 

16 such ranges may be expressed in terms of 

17 a monetary amount, formula, percentage of 

18 assets, per capita charge or estimate of 

19 such compensation or consideration. 

20 ‘‘(iv) Upon the advice recipient’s re21 quest prior to the transaction, a disclosure 

22 of the specific amounts of compensation 

23 described in clauses (ii) and (iii) that the 

24 person will receive in connection with the 

25 particular transaction, provided that any 


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1 such amounts may be expressed in terms 

2 of a monetary amount, formula, percentage 

3 of assets, per capita charge, or estimate of 

4 such compensation or consideration. 

5 The disclosure requirements described in this 

6 paragraph will not fail to be met solely because 

7 the person, acting in good faith and with rea8 sonable diligence, makes an error or omission in 

9 disclosing the information specified in this sub10 section, provided that the person discloses the 

11 correct information to the advice recipient as 

12 soon as practicable, but not later than 30 days 

13 from the date on which the person knows of 

14 such error or omission.’’. 

15 (4) EFFECTIVE DATE.—The amendments made 

16 by this subsection shall apply on or after the 1st day 

17 of the 36th month after the date of the enactment 

18 of this Act, but the exemption added under section 

19 408(b)(21) of the Employee Retirement Security Act 

20 of 1974 shall be available immediately upon enact21 ment of this Act for persons meeting its conditions 

22 (including the conditions of a best interest rec23 ommendation which may not be effective at such 

24 time). The Secretary of Labor is prohibited from 

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1 mulgated under section 3(21) of ERISA or section 

2 4975(e)(3) of the Internal Revenue Code of 1986 

3 (including Department of Labor Interpretive Bul4 letin 96–1 (29 C.F.R. 2509.96–1) and Department 

5 of Labor Advisory Opinion 2005–23A) prior to the 

6 effective date of this Act, and no such rules or posi7 tions promulgated by the Secretary of Labor prior to 

8 the date of the enactment of this Act, but not yet 

9 effective or applicable, may become effective prior to 

10 the effective date of this Act. 

11 (5) GRANDFATHERED TRANSACTIONS AND

12 SERVICES.—The amendments made to section 

13 3(21)(A)(ii) by this Act shall not apply to any serv14 ices if such services— 

15 (A) were rendered prior to the effective 

16 date of this Act, 

17 (B) relate to a transaction entered into 

18 prior to the effective date of this Act, 

19 (C) were paid for prior to the effective date 

20 of this Act, or 

21 (D) are not described in subparagraph (A), 

22 (B), or (C) but the person performing the serv23 ices does not receive more compensation (either 

24 as a fixed dollar amount or as a percentage of 

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1 son is contractually eligible to receive for such 

2 services prior to the effective date of this Act. 

3 SEC. 4. REGULATIONS. 

4 The Secretary of the Treasury and the Secretary of 

5 Labor shall make rules, in accordance with subchapter II 

6 of chapter 5 of title 5, United States Code, to carry out 

7 this Act and the amendments made by this Act. 

Æ 


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