IB 

Union Calendar No. 392 

114TH CONGRESS 

2D SESSION H. R. 4294 

[Report No. 114–512, Parts I and II] 

To amend the Internal Revenue Code of 1986 to ensure that retirement 

investors receive advice in their best interests, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

DECEMBER 18, 2015 

Mr. ROSKAM (for himself, Mr. NEAL, Mr. ROE of Tennessee, Mr. LARSON of 

Connecticut, Mr. REED, and Ms. MICHELLE LUJAN GRISHAM of New 

Mexico) introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on Education and the Workforce, 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 

APRIL 20, 2016 

Additional sponsors: Mr. DAVID SCOTT of Georgia, Mr. CARTER of Georgia, 

Mr. YOUNG of Indiana, Mr. BYRNE, Mr. BOUSTANY, Mr. WILSON of 

South Carolina, Mr. CLAY, Mr. HOLDING, Mr. RENACCI, Ms. JENKINS

of Kansas, Mr. MACARTHUR, Mrs. WALORSKI, Mr. PAULSEN, Mr. 

ASHFORD, Mr. ZINKE, Mr. DUNCAN of Tennessee, Mr. TIBERI, Mr. MEEHAN, Mr. NUNES, Mr. REICHERT, Mr. GIBBS, Mr. GUTHRIE, Mr. 

THOMPSON of Pennsylvania, Mr. BISHOP of Michigan, Mr. MARCHANT, 

Mr. BARLETTA, Mr. ALLEN, Mr. CRAMER, Mr. OLSON, Mr. LATTA, Mr. 

SESSIONS, Mr. AMODEI, and Mr. GOHMERT

APRIL 20, 2016 

Reported from the Committee on Ways and Means with an amendment 

[Strike out all after the enacting clause and insert the part printed in italic] 


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APRIL 20, 2016 

Reported from the Committee on Education and the Workforce with an 

amendment, committed to the Committee of the Whole House on the 

State of the Union, and ordered to be printed 

[Strike out all after the enacting clause and insert the part printed in boldface roman] 

[For text of introduced bill, see copy of bill as introduced on December 18, 2015] 

A BILL 

To amend the Internal Revenue Code of 1986 to ensure 

that retirement investors receive advice in their best interests, and for other purposes. 


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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 ‘‘Strengthening Access 

5 to Valuable Education and Retirement Support Act of 

6 2015’’ or the ‘‘SAVERS Act of 2015’’. 

7 SEC. 2. PURPOSE. 

8 The purpose of this Act is to provide that advisors 

9 who— 

10 (1) provide advice that is impermissible under 

11 the prohibited transaction provisions under section 

12 4975 of the Internal Revenue Code of 1986, or 

13 (2) breach the best interest standard for the pro14 vision of investment advice, 

15 are subject to liability under the Internal Revenue Code of 

16 1986. 

17 SEC. 3. RULES RELATING TO THE PROVISION OF INVEST18 MENT ADVICE. 

19 (a) AMENDMENTS TO THE INTERNAL REVENUE CODE

20 OF 1986.— 

21 (1) EXEMPTION FOR INVESTMENT ADVICE WHICH

22 IS BEST INTEREST RECOMMENDATION.—Section 

23 4975(d) of the Internal Revenue Code of 1986 is 

24 amended by striking ‘‘or’’ at the end of paragraph 

25 (22), by striking the period at the end of paragraph 


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1 (23) and inserting ‘‘, or’’, and by inserting after 

2 paragraph (23) the following: 

3 ‘‘(24) provision of investment advice by a fidu4 ciary to a plan, plan participant, or beneficiary with 

5 respect to the plan, which is a best interest rec6 ommendation or a transaction connected to such ad7 vice.’’. 

8 (2) INVESTMENT ADVICE; BEST INTEREST REC9 OMMENDATION.—Section 4975(e) of such Code is 

10 amended by adding at the end the following: 

11 ‘‘(10) INVESTMENT ADVICE.— 

12 ‘‘(A) IN GENERAL.—For purposes of this 

13 section, the term ‘investment advice’ means a 

14 recommendation that— 

15 ‘‘(i) relates to— 

16 ‘‘(I) the advisability of acquiring, 

17 holding, disposing, or exchanging any 

18 moneys or other property of a plan by 

19 the plan, plan participants, or plan 

20 beneficiaries, including any rec21 ommendation whether to take a dis22 tribution of benefits from such plan or 

23 any recommendation relating to the 

24 investment of any moneys or other 


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1 property of such plan to be distributed 

2 from such plan; 

3 ‘‘(II) the management of moneys 

4 or other property of such plan, includ5 ing recommendations relating to the 

6 management of moneys or other prop7 erty to be distributed from such plan; 

8 or 

9 ‘‘(III) the advisability of retain10 ing or ceasing to retain a person who 

11 would receive a fee or other compensa12 tion for providing any of the types of 

13 advice described in this subclause; and 

14 ‘‘(ii) is rendered pursuant to— 

15 ‘‘(I) a written acknowledgment 

16 that the person is a fiduciary with re17 spect to the provision of such rec18 ommendation; or 

19 ‘‘(II) a mutual agreement, ar20 rangement, or understanding which 

21 may include limitations on scope, tim22 ing, and responsibility to provide on23 going monitoring or advice services, be24 tween the person making such rec25 ommendation and the plan, plan parVerDate Sep 11 2014 20:58 Apr 20, 2016 Jkt 059200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6203 E:\BILLS\H4294.RH H4294

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1 ticipant, or beneficiary that such rec2 ommendation is individualized to the 

3 plan, plan participant, or beneficiary 

4 and such plan, plan participant, or 

5 beneficiary intends to materially rely 

6 on such recommendation in making in7 vestment or management decisions 

8 with respect to any moneys or other 

9 property of such plan. 

10 ‘‘(B) DISCLAIMER OF A MUTUAL AGREE11 MENT, ARRANGEMENT, OR UNDERSTANDING.— 

12 For purposes of subparagraph (A)(ii)(II), any 

13 disclaimer of a mutual agreement, arrangement, 

14 or understanding shall only state the following: 

15 ‘This information is not individualized to you, 

16 and you are not intended to materially rely on 

17 this information in making investment or man18 agement decisions.’. Such disclaimer shall not be 

19 effective unless such disclaimer is in writing and 

20 is communicated in a clear and prominent man21 ner and an objective person would reasonably 

22 conclude that, based on all the facts and cir23 cumstances, there was not a mutual agreement, 

24 arrangement, or understanding. 


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1 ‘‘(C) WHEN RECOMMENDATION TREATED AS

2 MADE PURSUANT TO A MUTUAL AGREEMENT, AR3 RANGEMENT, OR UNDERSTANDING.—For pur4 poses of subparagraph (A)(ii)(II), information 

5 shall not be treated as a recommendation made 

6 pursuant to a mutual agreement, arrangement, 

7 or understanding, and such information shall 

8 contain the disclaimer required by subparagraph 

9 (B), if— 

10 ‘‘(i) SELLER’S EXCEPTION.—The infor11 mation is provided in conjunction with full 

12 and fair disclosure in writing to a plan, 

13 plan participant, or beneficiary that the 

14 person providing the information is doing 

15 so in its marketing or sales capacity, in16 cluding any information regarding the 

17 terms and conditions of the engagement of 

18 the person providing the information, and 

19 that the person is not intending to provide 

20 investment advice within the meaning of 

21 this subparagraph or to otherwise act as a 

22 fiduciary to the plan or under the obliga23 tions of a best interest recommendation. 

24 ‘‘(ii) SWAP AND SECURITY-BASED SWAP

25 TRANSACTION.—The person providing the 


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1 information is a counterparty or service 

2 provider to the plan in connection with any 

3 transaction based on the information (in4 cluding a service arrangement, sale, pur5 chase, loan, bilateral contract, swap (as de6 fined in section 1a of the Commodity Ex7 change Act (7 U.S.C. 1a)), or security-based 

8 swap (as defined in section 3(a) of the Se9 curities Exchange Act (15 U.S.C. 78c(a)))), 

10 but only if— 

11 ‘‘(I) the plan is represented, in 

12 connection with such transaction, by a 

13 plan fiduciary that is independent of 

14 the person providing the information, 

15 and, except in the case of a swap or se16 curity-based swap, independent of the 

17 plan sponsor; and 

18 ‘‘(II) prior to entering into such 

19 transaction, the independent plan fidu20 ciary represents in writing to the per21 son providing the information that it 

22 is aware that the person has a finan23 cial interest in the transaction and 

24 that it has determined that the person 

25 is not intending to provide investment 


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1 advice within the meaning of this sub2 paragraph or to otherwise act as a fi3 duciary to the plan, plan participants, 

4 or plan beneficiaries. 

5 ‘‘(iii) EMPLOYEES OF A PLAN SPON6 SOR.—The person providing the informa7 tion is an employee of any sponsoring em8 ployer or employee organization who pro9 vides the information to the plan for no fee 

10 or other compensation other than the em11 ployee’s normal compensation. 

12 ‘‘(iv) PLATFORM PROVIDERS SELEC13 TION AND MONITORING ASSISTANCE.—The 

14 person providing the information discloses 

15 in writing to the plan fiduciary that the 

16 person is not undertaking to provide invest17 ment advice as a fiduciary (within the 

18 meaning of this paragraph) or under the 

19 obligations of a best interest recommenda20 tion and the information consists solely 

21 of— 

22 ‘‘(I) making available to the plan, 

23 plan participants, or plan bene24 ficiaries, without regard to the individ25 ualized needs of the plan, plan particiVerDate Sep 11 2014 20:58 Apr 20, 2016 Jkt 059200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6203 E:\BILLS\H4294.RH H4294

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1 pants, or plan beneficiaries, securities 

2 or other property through a platform 

3 or similar mechanism from which a 

4 plan fiduciary may select or monitor 

5 investment alternatives, including 

6 qualified default investment alter7 natives, into which plan participants 

8 or beneficiaries may direct the invest9 ment of assets held in, or contributed 

10 to, their individual accounts, or 

11 ‘‘(II) in connection with a plat12 form or similar mechanism described 

13 in subclause (I)— 

14 ‘‘(aa) identifying investment 

15 alternatives that meet objective 

16 criteria specified by the plan, such 

17 as criteria concerning expense ra18 tios, fund sizes, types of asset, or 

19 credit quality, or 

20 ‘‘(bb) providing objective fi21 nancial data and comparisons 

22 with independent benchmarks to 

23 the plan. 

24 ‘‘(v) VALUATION.—The information 

25 consists solely of valuation information. 


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1 ‘‘(vi) FINANCIAL EDUCATION.—The in2 formation consists solely of— 

3 ‘‘(I) information described in De4 partment of Labor Interpretive Bul5 letin 96–1 (29 C.F.R. 2509.96–1, as in 

6 effect on January 1, 2015), regardless 

7 of whether such education is provided 

8 to a plan or plan fiduciary or a par9 ticipant or beneficiary, 

10 ‘‘(II) information provided to 

11 participants or beneficiaries regarding 

12 the factors to consider in deciding 

13 whether to elect to receive a distribu14 tion from a plan and whether to roll 

15 over such distribution to a plan, so 

16 long as any examples of different dis17 tribution alternatives are accompanied 

18 by all material facts and assumptions 

19 on which the examples are based, or 

20 ‘‘(III) any additional information 

21 treated as education by the Secretary. 

22 ‘‘(11) BEST INTEREST RECOMMENDATION.—For 

23 purposes of this subsection— 

24 ‘‘(A) IN GENERAL.—The term ‘best interest 

25 recommendation’ means a recommendation— 


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1 ‘‘(i) for which no more than reasonable 

2 compensation is paid (as determined under 

3 subsection (d)(2)), 

4 ‘‘(ii) provided by a person acting with 

5 the care, skill, prudence, and diligence 

6 under the circumstances then prevailing 

7 that a prudent person would exercise based 

8 on— 

9 ‘‘(I) the information obtained 

10 through the reasonable diligence of the 

11 person regarding factors such as the 

12 advice recipient’s age, and 

13 ‘‘(II) any other information that 

14 the advice recipient discloses to the 

15 person in connection with receiving 

16 such recommendation, and 

17 ‘‘(iii) where the person places the inter18 ests of the plan or advice recipient above its 

19 own. 

20 ‘‘(B) INVESTMENT OPTIONS; VARIABLE COM21 PENSATION.—A best interest recommendation 

22 may include a recommendation that— 

23 ‘‘(i) is based on a limited range of in24 vestment options (which may consist, in 

25 whole or in part, of proprietary products), 


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1 but only if any such limitations shall be 

2 clearly disclosed to the advice recipient 

3 prior to any transaction based on the in4 vestment advice in the form of a notice that 

5 only states the following: ‘This recommenda6 tion is based on a limited range of invest7 ment options, and the same or similar in8 vestments may be available at a different 

9 cost (greater or lesser) from other sources.’, 

10 or 

11 ‘‘(ii) may result in variable compensa12 tion to the person providing the rec13 ommendation (or any affiliate of such per14 son), but only if the receipt of such com15 pensation shall be clearly disclosed to the 

16 advice recipient prior to any transaction 

17 based on the investment advice. 

18 ‘‘(C) CLEAR DISCLOSURE OF VARIABLE

19 COMPENSATION.—For purposes of this para20 graph, clear disclosure of variable compensation 

21 shall include, in a manner calculated to be un22 derstood by the average individual, each of the 

23 following: 

24 ‘‘(i) A notice that states only the fol25 lowing: ‘This recommendation may result 


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1 in varying amounts of fees or other com2 pensation to the person providing the rec3 ommendation (or its affiliate), and the 

4 same or similar investments may be avail5 able at a different cost (greater or lesser) 

6 from other sources.’. Any regulations or ad7 ministrative guidance implementing this 

8 clause may not require this notice to be up9 dated more than annually. 

10 ‘‘(ii) A description of any fee or other 

11 compensation that is directly or indirectly 

12 payable to the person (or its affiliate) by 

13 the advice recipient with respect to such 

14 transaction (expressed as an amount, for15 mula, percentage of assets, per capita 

16 charge, or estimate or range of such com17 pensation). 

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

19 ranges of any compensation that may be di20 rectly or indirectly payable to the person 

21 (or its affiliate) by any third party in con22 nection with such transaction (expressed as 

23 an amount, formula, percentage of assets, 

24 per capita charge, or estimate or range of 

25 such compensation). 


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1 ‘‘(iv) Upon request of the advice recipi2 ent, a disclosure of the specific amounts of 

3 compensation described in clause (iii) that 

4 the person will receive in connection with 

5 the particular transaction (expressed as an 

6 amount, formula, percentage of assets, per 

7 capita charge, or estimate of such com8 pensation). 

9 ‘‘(D) DEFINITION OF AFFILIATE.—For pur10 poses of this paragraph, the term ‘affiliate’ has 

11 the meaning given in subsection (f)(8)(J)(ii). 

12 ‘‘(E) CORRECTION OF CERTAIN ERRORS AND

13 OMISSIONS.—A recommendation shall not fail to 

14 be a best interest recommendation solely because 

15 a person who, acting in good faith and with rea16 sonable diligence, makes an error or omission in 

17 disclosing the information specified in subpara18 graph (B), if the person discloses the correct in19 formation to the advice recipient as soon as 

20 practicable but not later than 30 days from the 

21 date on which the person knows of such error or 

22 omission. 

23 ‘‘(F) SPECIAL RULE.—Any notice provided 

24 pursuant to a requirement under subparagraph 

25 (B)(i) or subparagraph (C)(i) shall have no effect 


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1 on any other notice otherwise required without 

2 regard to this title, and shall be provided in ad3 dition to, and not in lieu of, any other such no4 tice.’’. 

5 (3) FAILURES RELATING TO BEST INTEREST

6 RECOMMENDATION.— 

7 (A) CORRECTION.—Section 4975(f)(5) of 

8 such Code is amended— 

9 (i) by striking ‘‘(5) CORRECTION.—The 

10 terms’’ and inserting: 

11 ‘‘(5) CORRECTION.— 

12 ‘‘(A) IN GENERAL.—Except as provided in 

13 subparagraph (B), the terms’’, and 

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

15 ‘‘(B) DETERMINATION OF ‘CORRECTION’ 

16 AND ‘CORRECT’ WITH RESPECT TO BEST INTER17 EST ADVICE RECOMMENDATIONS.—In the case of 

18 a prohibited transaction arising by the failure of 

19 investment advice to be a best interest rec20 ommendation, the terms ‘correction’ and ‘correct’ 

21 mean the payment to, or reimbursement of, ac22 tual damages of the plan, plan participants, or 

23 plan beneficiaries resulting directly from the 

24 plan’s, plan participant’s, or plan beneficiary’s 

25 reliance on such investment advice, if any, that 


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1 have not otherwise been paid or reimbursed to 

2 the plan, plan participants, or plan bene3 ficiaries, including payments and reimburse4 ments made pursuant to subparagraph (A) if 

5 such amount is greater than the amount deter6 mined under subparagraph (A).’’. 

7 (B) AMOUNT INVOLVED FOR PURPOSES OF

8 EXCISE TAX.—The first sentence of section 

9 4975(f)(4) of such Code is amended by striking 

10 ‘‘excess compensation.’’ and inserting ‘‘excess 

11 compensation, and in the case of a prohibited 

12 transaction arising by the failure of investment 

13 advice to be a best interest recommendation, the 

14 amount involved shall be the amount paid to the 

15 person providing the advice (or its affiliate, as 

16 defined in paragraph (8)(J)(ii)) that has not 

17 been paid or reimbursed to the plan, plan par18 ticipants, or plan beneficiaries, including pay19 ments and reimbursements made pursuant to 

20 paragraph (5).’’. 

21 (b) EFFECTIVE DATE.— 

22 (1) MODIFICATION OF CERTAIN RULES, AND

23 RULES AND ADMINISTRATIVE POSITIONS PROMUL24 GATED BEFORE ENACTMENT BUT NOT EFFECTIVE ON

25 JANUARY 1, 2015, PROHIBITED.—The Department of 


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1 Labor is prohibited from amending any rules or ad2 ministrative positions promulgated under section 

3 3(21) of the Employee Retirement Security Act of 

4 1974 and section 4975(e)(3) of the Internal Revenue 

5 Code of 1986 (including Department of Labor Inter6 pretive Bulletin 96–1 (29 C.F.R. 2509.96–1) and De7 partment of Labor Advisory Opinion 2005–23A), and 

8 no such rule or administrative position promulgated 

9 by the Department of Labor prior to the date of the 

10 enactment of this Act but not effective on January 1, 

11 2015, may become effective unless a bill or joint reso12 lution referred to in paragraph (3) is enacted as de13 scribed in such paragraph not later than 60 days 

14 after the date of the enactment of this Act. 

15 (2) GENERAL EFFECTIVE DATE OF AMEND16 MENTS.—Except as provided in paragraph (3), the 

17 amendments made by subsection (a) of this section 

18 shall take effect on the 61st day after the date of the 

19 enactment of this Act and shall apply with respect to 

20 information provided or recommendations made on or 

21 after 2 years after the date of the enactment of this 

22 Act. 

23 (3) EXCEPTION.—If a bill or joint resolution is 

24 enacted prior to the 61st day after the date of the en25 actment of this Act that specifically approves any 


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1 rules or administrative positions promulgated under 

2 section 3(21) of the Employee Retirement Income Se3 curity Act of 1974 and section 4975(e)(3) of the Inter4 nal Revenue Code of 1986 that is not in effect on Jan5 uary 1, 2015, the amendments made by subsection (a) 

6 of this section shall not take effect. 

7 (c) GRANDFATHERED TRANSACTIONS AND SERV8 ICES.—The amendments made by subsection (a) shall not 

9 apply to any service or transaction rendered, entered into, 

10 or for which a person has been compensated prior to the 

11 date on which the amendments made by subsection (a) of 

12 this Act become effective under subsection (b)(2). 

13 (d) TRANSITION.—If the amendments made by sub14 section (a) of this section take effect, then nothing in this 

15 section shall be construed to prohibit the issuance of guid16 ance to carry out such amendments so long as such guid17 ance is necessary to implement such amendments. Until 

18 such time as regulations or other guidance is issued to carry 

19 out such amendments, a plan or a fiduciary shall be treated 

20 as meeting the requirements of such amendments if the plan 

21 or fiduciary, as the case may be, complies with a reasonable 

22 good faith interpretation of such amendments. 

23 SECTION 1. SHORT TITLE. 

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1 tirement Support Act of 2015’’ or the ‘‘SAVERS 

2 Act of 2015’’. 

3 SEC. 2. PURPOSE. 

4 The purpose of this Act is to provide that 

5 advisors who— 

6 (1) provide advice that is impermis7 sible under the prohibited transaction 

8 provisions under section 4975 of the In9 ternal Revenue Code of 1986, or 

10 (2) breach the best interest standard 

11 for the provision of investment advice, 

12 are subject to liability under the Internal Rev13 enue Code of 1986. 

14 SEC. 3. RULES RELATING TO THE PROVISION OF INVEST15 MENT ADVICE. 

16 (a) AMENDMENTS TO THE INTERNAL REVENUE

17 CODE OF 1986.— 

18 (1) EXEMPTION FOR INVESTMENT ADVICE

19 WHICH IS BEST INTEREST RECOMMENDA20 TION.—Section 4975(d) of the Internal 

21 Revenue Code of 1986 is amended by 

22 striking ‘‘or’’ at the end of paragraph (22), 

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1 serting after paragraph (23) the fol2 lowing: 

3 ‘‘(24) provision of investment advice 

4 by a fiduciary to a plan, plan participant, 

5 or beneficiary with respect to the plan, 

6 which is a best interest recommenda7 tion.’’. 

8 (2) INVESTMENT ADVICE; BEST INTEREST

9 RECOMMENDATION.—Section 4975(e) of 

10 such Code is amended by adding at the 

11 end the following: 

12 ‘‘(10) INVESTMENT ADVICE.— 

13 ‘‘(A) IN GENERAL.—For purposes of 

14 this section, the term ‘investment ad15 vice’ means a recommendation that— 

16 ‘‘(i) relates to— 

17 ‘‘(I) the advisability of ac18 quiring, holding, disposing, or 

19 exchanging any moneys or 

20 other property of a plan by 

21 the plan, plan participants, or 

22 plan beneficiaries, including 

23 any recommendation whether 

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1 ommendation relating to the 

2 investment of any moneys or 

3 other property of such plan to 

4 be rolled over or otherwise 

5 distributed from such plan; 

6 ‘‘(II) the management of 

7 moneys or other property of 

8 such plan, including rec9 ommendations relating to the 

10 management of moneys or 

11 other property to be rolled 

12 over or otherwise distributed 

13 from such plan; or 

14 ‘‘(III) the advisability of 

15 retaining or ceasing to retain 

16 a person who would receive a 

17 fee or other compensation for 

18 providing any of the types of 

19 advice described in this sub20 clause; and 

21 ‘‘(ii) is rendered pursuant to— 

22 ‘‘(I) a written acknowledg23 ment that the person is a fidu24 ciary with respect to the proVerDate Sep 11 2014 20:58 Apr 20, 2016 Jkt 059200 PO 00000 Frm 00022 Fmt 6652 Sfmt 6202 E:\BILLS\H4294.RH H4294

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1 vision of such recommenda2 tion; or 

3 ‘‘(II) a mutual agreement, 

4 arrangement, or under5 standing which may include 

6 limitations on scope, timing, 

7 and responsibility to provide 

8 ongoing monitoring or advice 

9 services, between the person 

10 making such recommendation 

11 and the plan, plan partici12 pant, or beneficiary that such 

13 recommendation is individ14 ualized to the plan, plan par15 ticipant, or beneficiary and 

16 such plan, plan participant, or 

17 beneficiary intends to materi18 ally rely on such rec19 ommendation in making in20 vestment or management de21 cisions with respect to any 

22 moneys or other property of 

23 such plan. 

24 ‘‘(B) DISCLAIMER OF A MUTUAL

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1 STANDING.—For purposes of subpara2 graph (A)(ii)(II), any disclaimer of a 

3 mutual agreement, arrangement, or 

4 understanding shall only state the fol5 lowing: ‘This information is not indi6 vidualized to you, and there is no in7 tent for you to materially rely on this 

8 information in making investment or 

9 management decisions.’. Such dis10 claimer shall not be effective unless 

11 such disclaimer is in writing and is 

12 communicated in a clear and promi13 nent manner and an objective person 

14 would reasonably conclude that, 

15 based on all the facts and cir16 cumstances, there was not a mutual 

17 agreement, arrangement, or under18 standing. 

19 ‘‘(C) WHEN RECOMMENDATION

20 TREATED AS MADE PURSUANT TO A MU21 TUAL AGREEMENT, ARRANGEMENT, OR

22 UNDERSTANDING.—For purposes of 

23 subparagraph (A)(ii)(II), information 

24 shall not be treated as a recommenda25 tion made pursuant to a mutual 


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1 agreement, arrangement, or under2 standing, and such information shall 

3 contain the disclaimer required by 

4 subparagraph (B), if— 

5 ‘‘(i) SELLER’S EXCEPTION.—The 

6 information is provided in con7 junction with full and fair disclo8 sure in writing to a plan, plan 

9 participant, or beneficiary that 

10 the person providing the informa11 tion is doing so in its marketing 

12 or sales capacity, including any 

13 information regarding the terms 

14 and conditions of the engagement 

15 of the person providing the infor16 mation, and that the person is not 

17 intending to provide investment 

18 advice within the meaning of this 

19 subparagraph or to otherwise act 

20 as a fiduciary to the plan or 

21 under the obligations of a best in22 terest recommendation. 

23 ‘‘(ii) SWAP AND SECURITY-BASED

24 SWAP TRANSACTION.—The person 

25 providing the information is a 


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1 counterparty or service provider 

2 to the plan in connection with 

3 any transaction based on the in4 formation (including a service ar5 rangement, sale, purchase, loan, 

6 bilateral contract, swap (as de7 fined in section 1a of the Com8 modity Exchange Act (7 U.S.C. 

9 1a)), or security-based swap (as 

10 defined in section 3(a) of the Se11 curities Exchange Act (15 U.S.C. 

12 78c(a)))), but only if— 

13 ‘‘(I) the plan is rep14 resented, in connection with 

15 such transaction, by a plan fi16 duciary who is independent of 

17 the person providing the in18 formation, and, except in the 

19 case of a swap or security20 based swap, independent of 

21 the plan sponsor; and 

22 ‘‘(II) prior to entering into 

23 such transaction, the inde24 pendent plan fiduciary rep25 resents in writing to the perVerDate Sep 11 2014 20:58 Apr 20, 2016 Jkt 059200 PO 00000 Frm 00026 Fmt 6652 Sfmt 6202 E:\BILLS\H4294.RH H4294

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1 son providing the information 

2 that it is aware that the per3 son has a financial interest in 

4 the transaction and that it 

5 has determined that the per6 son is not intending to pro7 vide investment advice within 

8 the meaning of this subpara9 graph or to otherwise act as a 

10 fiduciary to the plan, plan 

11 participants, or plan bene12 ficiaries. 

13 ‘‘(iii) EMPLOYEES OF A PLAN

14 SPONSOR.—The person providing 

15 the information is an employee of 

16 any sponsoring employer or em17 ployee organization who provides 

18 the information to the plan for no 

19 fee or other compensation other 

20 than the employee’s normal com21 pensation. 

22 ‘‘(iv) PLATFORM PROVIDERS SE23 LECTION AND MONITORING ASSIST24 ANCE.—The person providing the 

25 information discloses in writing 


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1 to the plan fiduciary that the per2 son is not undertaking to provide 

3 investment advice as a fiduciary 

4 (within the meaning of this para5 graph) or under the obligations of 

6 a best interest recommendation 

7 and the information consists sole8 ly of— 

9 ‘‘(I) making available to 

10 the plan, plan participants, or 

11 plan beneficiaries, without re12 gard to the individualized 

13 needs of the plan, plan par14 ticipants, or plan bene15 ficiaries, securities or other 

16 property through a platform 

17 or similar mechanism from 

18 which a plan fiduciary may 

19 select or monitor investment 

20 alternatives, including quali21 fied default investment alter22 natives, into which plan par23 ticipants or beneficiaries may 

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1 sets held in, or contributed to, 

2 their individual accounts, or 

3 ‘‘(II) in connection with a 

4 platform or similar mecha5 nism described in subclause 

6 (I)— 

7 ‘‘(aa) identifying in8 vestment alternatives that 

9 meet objective criteria 

10 specified by the plan, such 

11 as criteria concerning ex12 pense ratios, fund sizes, 

13 types of asset, or credit 

14 quality, or 

15 ‘‘(bb) providing objec16 tive financial data and 

17 comparisons with inde18 pendent benchmarks to 

19 the plan. 

20 ‘‘(v) VALUATION.—The informa21 tion consists solely of valuation 

22 information. 

23 ‘‘(vi) FINANCIAL EDUCATION.— 

24 The information consists solely 

25 of— 


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1 ‘‘(I) information described 

2 in Department of Labor Inter3 pretive Bulletin 96–1 (29 

4 C.F.R. 2509.96–1, as in effect 

5 on January 1, 2015), regard6 less of whether such edu7 cation is provided to a plan or 

8 plan fiduciary or a partici9 pant or beneficiary, 

10 ‘‘(II) information provided 

11 to participants or bene12 ficiaries regarding the factors 

13 to consider in deciding wheth14 er to elect to receive a dis15 tribution from a plan and 

16 whether to roll over such dis17 tribution to a plan, so long as 

18 any examples of different dis19 tribution and rollover alter20 natives are accompanied by 

21 all material facts and assump22 tions on which the examples 

23 are based, or 


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1 ‘‘(III) any additional infor2 mation treated as education 

3 by the Secretary. 

4 ‘‘(11) BEST INTEREST RECOMMENDA5 TION.—For purposes of this subsection— 

6 ‘‘(A) IN GENERAL.—The term ‘best 

7 interest recommendation’ means a 

8 recommendation— 

9 ‘‘(i) for which no more than 

10 reasonable compensation is paid 

11 (as determined under subsection 

12 (d)(2)), 

13 ‘‘(ii) provided by a person act14 ing with the care, skill, prudence, 

15 and diligence under the cir16 cumstances then prevailing that a 

17 prudent person would exercise 

18 based on— 

19 ‘‘(I) the information ob20 tained through the reasonable 

21 diligence of the person re22 garding factors such as the 

23 advice recipient’s age, and 

24 ‘‘(II) any other informa25 tion that the advice recipient 


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1 discloses to the person in con2 nection with receiving such 

3 recommendation, and 

4 ‘‘(iii) where the person places 

5 the interests of the plan or advice 

6 recipient above its own. 

7 ‘‘(B) INVESTMENT OPTIONS; VARI8 ABLE COMPENSATION.—A best interest 

9 recommendation may include a rec10 ommendation that— 

11 ‘‘(i) is based on a limited 

12 range of investment options 

13 (which may consist, in whole or 

14 in part, of proprietary products), 

15 but only if any such limitations, 

16 including a clearly-stated notice 

17 that the same or similar invest18 ments may be available at a dif19 ferent cost (greater or lesser) 

20 from other sources, are clearly 

21 disclosed to the advice recipient 

22 prior to any transaction based on 

23 the recommendation, or 

24 ‘‘(ii) may result in variable 

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1 viding the recommendation (or 

2 any affiliate of such person), but 

3 only if the receipt of such com4 pensation, including a clearly5 stated notice that the same or 

6 similar investments may be avail7 able at a different cost (greater or 

8 lesser) from other sources, is 

9 clearly disclosed to the advice re10 cipient prior to any transaction 

11 based on the recommendation. 

12 The notices provided pursuant to 

13 clauses (i) and (ii) shall only state the 

14 following: ‘The same or similar invest15 ments may be available at a different 

16 cost (greater or lesser) from other 

17 sources.’. 

18 ‘‘(C) CLEAR DISCLOSURE OF VARI19 ABLE COMPENSATION.—For purposes of 

20 subparagraph (B)(ii), variable com21 pensation is clearly disclosed if notifi22 cation is provided at any time prior 

23 to a transaction based on the person’s 

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1 culated to be understood by the aver2 age individual, of the following: 

3 ‘‘(i) A notice in writing, in4 cluding a clearly-stated notice 

5 that the same or similar invest6 ments may be available at a dif7 ferent cost (greater or lesser) 

8 from other sources, that the per9 son providing the recommenda10 tion (or its affiliate) may receive 

11 varying amounts of fees or other 

12 compensation with respect to 

13 such transaction. 

14 ‘‘(ii) A description of any fee 

15 or other compensation that is di16 rectly payable to the person (or 

17 its affiliate) from the advice re18 cipient with respect to such 

19 transaction (expressed as an 

20 amount, formula, percentage of 

21 assets, per capita charge, or esti22 mate or range of such compensa23 tion). 

24 ‘‘(iii) A description of the 

25 types and ranges of any indirect 


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1 compensation that may be paid to 

2 the person (or its affiliate) by any 

3 third party in connection with 

4 such transaction (expressed as an 

5 amount, formula, percentage of 

6 assets, per capita charge, or esti7 mate of such ranges of compensa8 tion). 

9 ‘‘(iv) Upon request of the ad10 vice recipient, a disclosure of the 

11 specific amounts of compensation 

12 described in clause (iii) that the 

13 person will receive in connection 

14 with the particular transaction 

15 (expressed as an amount, formula, 

16 percentage of assets, per capita 

17 charge, or estimate of such com18 pensation). 

19 ‘‘(D) DEFINITION OF AFFILIATE.—For 

20 purposes of this paragraph, the term 

21 ‘affiliate’ has the meaning given in 

22 subsection (f)(8)(J)(ii). 

23 ‘‘(E) CORRECTION OF CERTAIN ER24 RORS AND OMISSIONS.—A recommenda25 tion shall not fail to be a best interest 


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•HR 4294 RH

1 recommendation solely because a per2 son who, acting in good faith and 

3 with reasonable diligence, makes an 

4 error or omission in disclosing the in5 formation specified in subparagraph 

6 (B), if the person discloses the correct 

7 information to the advice recipient as 

8 soon as practicable but not later than 

9 30 days from the date on which the 

10 person knows of such error or omis11 sion.’’. 

12 (3) FAILURES RELATING TO BEST INTER13 EST RECOMMENDATION.— 

14 (A) CORRECTION.—Section 

15 4975(f)(5) of such Code is amended— 

16 (i) by striking ‘‘(5) CORREC17 TION.—The terms’’ and inserting: 

18 ‘‘(5) CORRECTION.— 

19 ‘‘(A) IN GENERAL.—Except as pro20 vided in subparagraph (B), the 

21 terms’’, and 

22 (ii) by adding at the end the 

23 following: 

24 ‘‘(B) DETERMINATION OF ‘CORREC25 TION’ AND ‘CORRECT’ WITH RESPECT TO


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1 BEST INTEREST ADVICE RECOMMENDA2 TIONS.—In the case of a prohibited ad3 vice transaction arising by the failure 

4 of investment advice to be a best in5 terest recommendation, the terms 

6 ‘correction’ and ‘correct’ mean the 

7 payment to, or reimbursement of, ac8 tual damages of the plan, plan par9 ticipants, or plan beneficiaries result10 ing directly from the plan’s, plan par11 ticipant’s, or plan beneficiary’s reli12 ance on such investment advice, if 

13 any, that have not otherwise been 

14 paid or reimbursed to the plan, plan 

15 participants, or plan beneficiaries, in16 cluding payments and reimburse17 ments made pursuant to subpara18 graph (A).’’. 

19 (B) AMOUNT INVOLVED FOR PUR20 POSES OF EXCISE TAX.—The first sen21 tence of section 4975(f)(4) of such 

22 Code is amended by striking ‘‘excess 

23 compensation.’’ and inserting ‘‘excess 

24 compensation, and in the case of a 

25 prohibited transaction arising by the 


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1 failure of investment advice to be a 

2 best interest recommendation, the 

3 amount involved shall be the amount 

4 paid to the person providing the ad5 vice (or its affiliate, as defined in 

6 paragraph (8)(J)(ii)) that has not been 

7 paid or reimbursed to the plan, plan 

8 participants, or plan beneficiaries, in9 cluding payments and reimburse10 ments made pursuant to paragraph 

11 (5).’’. 

12 (4) EXEMPTION RELATING TO INVEST13 MENT ADVICE WITH RESPECT TO CERTAIN FEE

14 ARRANGEMENTS.—Section 4975(d) of such 

15 Code (as amended by paragraph (1)) is 

16 amended by striking ‘‘or’’ at the end of 

17 paragraph (23), by striking the period at 

18 the end of paragraph (24) and inserting ‘‘, 

19 or’’, and by adding after paragraph (24) 

20 the following: 

21 ‘‘(25) any transaction, including a 

22 contract for service, between a person 

23 providing investment advice described in 

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1 ent in connection with such investment 

2 advice, if— 

3 ‘‘(A) no more than reasonable 

4 compensation is paid (as determined 

5 under section 4975(d)(2)) for such in6 vestment advice, 

7 ‘‘(B) in a case in which the invest8 ment advice is based on a limited 

9 range of investment options (which 

10 may consist, in whole or in part, of 

11 proprietary products), such limita12 tions, including a clearly-stated no13 tice that the same or similar invest14 ments may be available at a different 

15 cost (greater or lesser) from other 

16 sources), shall be clearly disclosed to 

17 the advice recipient prior to any 

18 transaction based on the investment 

19 advice, 

20 ‘‘(C) in a case in which the invest21 ment advice may result in variable 

22 compensation to the person providing 

23 the investment advice (or any affil24 iate of such person), the receipt of 

25 such compensation, including a clearVerDate Sep 11 2014 20:58 Apr 20, 2016 Jkt 059200 PO 00000 Frm 00039 Fmt 6652 Sfmt 6202 E:\BILLS\H4294.RH H4294

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1 ly-stated notice that the same or simi2 lar investments may be available at a 

3 different cost (greater or lesser) from 

4 other sources, shall be clearly dis5 closed to the advice recipient (within 

6 the meaning of subsection (e)(11)(C)), 

7 and 

8 ‘‘(D) in any case in which a per9 son who, acting in good faith and 

10 with reasonable diligence, makes an 

11 error or omission in disclosing the in12 formation specified in subparagraphs 

13 (B) or (C), the person discloses the 

14 correct information to the advice re15 cipient as soon as practicable but not 

16 later than 30 days from the date on 

17 which the person knows of such error 

18 or omission.’’. 

19 (b) EFFECTIVE DATE.— 

20 (1) MODIFICATION OF CERTAIN RULES, 

21 AND RULES AND ADMINISTRATIVE POSITIONS

22 PROMULGATED BEFORE ENACTMENT BUT NOT

23 EFFECTIVE ON JANUARY 1, 2015, PROHIB24 ITED.—The Department of Labor is pro25 hibited from amending any rules or adVerDate Sep 11 2014 20:58 Apr 20, 2016 Jkt 059200 PO 00000 Frm 00040 Fmt 6652 Sfmt 6202 E:\BILLS\H4294.RH H4294

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1 ministrative positions promulgated under 

2 section 3(21) of the Employee Retirement 

3 Income Security Act of 1974 and section 

4 4975(e)(3) of the Internal Revenue Code 

5 of 1986 (including Department of Labor 

6 Interpretive Bulletin 96–1 (29 C.F.R. 

7 2509.96–1) and Department of Labor Advi8 sory Opinion 2005–23A), and no such rule 

9 or administrative position promulgated 

10 by the Department of Labor prior to the 

11 date of the enactment of this Act but not 

12 effective on January 1, 2015, may become 

13 effective unless a bill or joint resolution 

14 referred to in paragraph (3) is enacted as 

15 described in such paragraph not later 

16 than 60 days after the date of the enact17 ment of this Act. 

18 (2) GENERAL EFFECTIVE DATE OF

19 AMENDMENTS.—Except as provided in 

20 paragraph (3), the amendments made by 

21 subsection (a) of this section shall take 

22 effect on the 61st day after the date of the 

23 enactment of this Act and shall apply 

24 with respect to information provided or 

25 recommendations made on or after 2 


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1 years after the date of the enactment of 

2 this Act. 

3 (3) EXCEPTION.—If a bill or joint reso4 lution is enacted prior to the 61st day 

5 after the date of the enactment of this 

6 Act that specifically approves any rules 

7 or administrative positions promulgated 

8 under section 3(21) of the Employee Re9 tirement Security Act of 1974 and section 

10 4975(e)(3) of the Internal Revenue Code 

11 of 1986 that is not in effect on January 1, 

12 2015, the amendments made by sub13 section (a) of this section shall not take 

14 effect. 

15 (c) GRANDFATHERED TRANSACTIONS AND

16 SERVICES.—The amendments made by sub17 section (a) shall not apply to any service or 

18 transaction rendered, entered into, or for 

19 which a person has been compensated prior 

20 to the date on which the amendments made 

21 by subsection (a) of this Act become effective 

22 under subsection (b)(2). 

23 (d) TRANSITION.—If the amendments made 

24 by subsection (a) of this section take effect, 

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1 strued to prohibit the issuance of guidance to 

2 carry out such amendments so long as such 

3 guidance is necessary to implement such 

4 amendments. Until such time as regulations 

5 or other guidance are issued to carry out such 

6 amendments, a plan and a fiduciary shall be 

7 treated as meeting the requirements of such 

8 amendments if the plan or fiduciary, as the 

9 case may be, makes a good faith effort to com10 ply with such requirements. 


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Union Calendar No. 392 

114TH CONGRESS 

2D SESSION H. R. 4294 

[Report No. 114–512, Parts I and II] 

A BILL 

To amend the Internal Revenue Code of 1986 to 

their best interests, and for other purposes. ensure that retirement investors receive advice in 

APRIL 20, 2016 

Reported from the Committee on Ways and Means with 

A

an amendment 

PRIL 20, 2016 

Reported from the Committee on Education and the 

and ordered to be printed mittee of the Whole House on the State of the Union, Workforce with an amendment, committed to the ComVerDate Sep 11 2014 02:57 Apr 21, 2016 Jkt 059200 PO 00000 Frm 00044 Fmt 6651 Sfmt 6651 E:\BILLS\H4294.RH H4294

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