I

103D CONGRESS

2D SESSION H. R. 5226

To amend title I of the Employee Retirement Income Security Act of 1974

to improve enforcement of such title by adding certain provisions with

respect to the auditing of employee benefit plans, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

OCTOBER 6, 1994

Mrs. MINK introduced the following bill; which was referred to the Committee

on Education and Labor

A BILL

To amend title I of the Employee Retirement Income Security Act of 1974 to improve enforcement of such title

by adding certain provisions with respect to the auditing

of employee benefit plans, 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 ‘‘ERISA Audit Improve5 ment Act of 1994’’.

6 SEC. 2. REPEAL OF LIMITED SCOPE AUDIT.

7 (a) IN GENERAL.—Section 103(a)(3) of the Em8 ployee Retirement Income Security Act of 1974 (29
2

•HR 5226 IH

1 U.S.C. 1023(a)(3)) is amended by striking subparagraph

2 (C) and by redesignating subparagraph (D) as subpara3 graph (C).

4 (b) CONFORMING AMENDMENT.—Section

5 104(a)(5)(A) of such Act (29 U.S.C. 1024(a)(5)(D)) is

6 amended by striking ‘‘section 103(a)(3)(D)’’ and inserting

7 ‘‘section 103(a)(3)(C)’’.

8 (c) EFFECTIVE DATE.—The amendments made by

9 this section shall apply with respect to opinions required

10 under section 103(a)(3)(A) of the Employee Retirement

11 Income Security Act of 1974 for plan years beginning on

12 or after January 1 of the calendar year following the date

13 of the enactment of this Act.

14 SEC. 3. EXTERNAL QUALITY CONTROL REVIEW REQUIRE15 MENT FOR QUALIFIED PUBLIC ACCOUNT16 ANTS.

17 (a) IN GENERAL.—Section 103(a)(3)(C) of the Em18 ployee Retirement Income Security Act of 1974 (as redes19 ignated by section 2) is amended—

20 (1) by striking ‘‘means’’ and inserting ‘‘means,

21 with respect to any engagement of an accountant

22 under subparagraph (A)’’;

23 (2) by redesignating clauses (i), (ii), and (iii) as

24 subclauses (I), (II), and (III), respectively;

25 (3) by inserting ‘‘(i)’’ after ‘‘(C)’’;
3

•HR 5226 IH

1 (4) in subclause (III) (as redesignated), by

2 striking the period and inserting a comma;

3 (5) by adding after and below such subclause

4 (III) the following:

5 ‘‘if such person meets the requirements of clause (ii) with

6 respect to such engagement.’’; and

7 (6) by adding at the end the following new

8 clauses:

9 ‘‘(ii) A person meets the requirements of this clause

10 with respect to an engagement of such person as an ac11 countant under subparagraph (A) if such person—

12 ‘‘(I) has in operation an appropriate internal

13 quality control system, and

14 ‘‘(II) has undergone a qualified external quality

15 control review of the person’s accounting and audit16 ing practices, including such practices relevant to

17 employee benefit plans (if any), during the 3-year

18 period immediately preceding such engagement.

19 ‘‘(iii) For purposes of clause (ii)(II), an external qual20 ity control review shall be treated as ‘qualified’ with re21 spect to a person referred to in clause (ii) if—

22 ‘‘(I) such review is performed in accordance

23 with the requirements of external quality control re24 view programs of recognized auditing standard-set25 ting bodies, as determined by the Comptroller Gen-
4

•HR 5226 IH

1 eral of the United States or in regulations of the

2 Secretary, and

3 ‘‘(II) in the case of any such person who has

4 conducted one or more previous audits of employee

5 benefit plans, such review includes the review of an

6 appropriate number (determined as shall be provided

7 in such regulations but in no case less than one) of

8 plan audits in relation to the scale of such person’s

9 auditing practice.’’.

10 (b) EFFECTIVE DATE.—The amendments made by

11 this section shall apply with respect to plan years begin12 ning on or after the date which is 3 years after the date

13 of the enactment of this Act.

14 SEC. 4. REQUIREMENT FOR REPORTING OF CERTAIN

15 EVENTS.

16 (a) IN GENERAL.—Part 1 of subtitle B of title I of

17 the Employee Retirement Income Security Act of 1974

18 (29 U.S.C. 1021 et seq.) is amended—

19 (1) by redesignating section 111 as section 112;

20 and

21 (2) by inserting after section 110 the following

22 new section:

23 ‘‘DIRECT REPORTING OF CERTAIN EVENTS

24 ‘‘SEC. 111. (a) REQUIRED NOTIFICATIONS.—

25 ‘‘(1) NOTIFICATIONS BY PLAN ADMINIS26 TRATOR.—In the case of an administrator of an em-
5

•HR 5226 IH

1 ployee benefit plan, within 5 business days after the

2 administrator first has reason to believe (or after the

3 administrator is notified under paragraph (2)) that

4 an irregularity may have occurred with respect to

5 the plan, the administrator shall—

6 ‘‘(A) notify the Secretary of the irregular7 ity in writing; and

8 ‘‘(B) furnish a copy of such notification to

9 the accountant who is currently engaged under

10 section 103(a)(3)(A).

11 ‘‘(2) NOTIFICATIONS BY ACCOUNTANT.—

12 ‘‘(A) IN GENERAL.—In the case of an ac13 countant engaged by the administrator of an

14 employee benefit plan under section

15 103(a)(3)(A), within 5 business days after the

16 accountant first has reason to believe in connec17 tion with such engagement that an irregularity

18 may have occurred with respect to the plan, the

19 accountant shall—

20 ‘‘(i) notify the plan administrator of

21 the irregularity in writing, or

22 ‘‘(ii) if the accountant has reason to

23 believe that the irregularity may have in24 volved an individual who is the plan admin25 istrator or who is a senior official of the
6

•HR 5226 IH

1 plan administrator, notify the Secretary of

2 the irregularity in writing.

3 ‘‘(B) NOTIFICATION UPON FAILURE OF

4 PLAN ADMINISTATOR TO NOTIFY.—In any case

5 in which an accountant who has provided notifi6 cation to the plan administrator pursuant to

7 subparagraph (A)(i) with respect to any irregu8 larity has not received a copy of the administra9 tor’s notification to the Secretary with respect

10 to such irregularity within the 5-business-day

11 period specified under paragraph (1)(B), the

12 accountant shall furnish to the Secretary a copy

13 of the accountant’s notification made to the

14 plan administrator within the next business day

15 following such 5-business-day period.

16 ‘‘(3) IRREGULARITY DEFINED.—For purposes

17 of this subsection, the term ‘irregularity’ means an

18 indication of—

19 ‘‘(A) theft, embezzlement, or a violation of

20 section 664 of title 18, United States Code (re21 lating to theft or embezzlement from employee

22 benefit plan),

23 ‘‘(B) extortion or a violation of section

24 1951 of such title 18 (relating to interference

25 with commerce by threats or violence),
7

•HR 5226 IH

1 ‘‘(C) bribery, a kickback, or a violation of

2 section 1954 of such title 18 (relating to offer,

3 acceptance, or solicitation to influence oper4 ations of employee benefit plan),

5 ‘‘(D) a violation of section 411, 501, or

6 511 of this title (relating to criminal violations),

7 or

8 ‘‘(E) any intentional misstatement or omis9 sion of an amount or disclosure in a financial

10 statement, accounting record, or supporting

11 document undertaken to mislead,

12 except that such term shall not include any act or

13 omission described in this paragraph involving less

14 than $1,000 unless there is reason to believe that

15 the act or omission may bear on the integrity of plan

16 management.

17 ‘‘(b) NOTIFICATION UPON TERMINATION OF EN18 GAGEMENT OF ACCOUNTANT.—

19 ‘‘(1) NOTIFICATION BY PLAN ADMINIS20 TRATOR.—Within 5 business days after the termi21 nation of an engagement for auditing services under

22 section 103(a)(3)(A) with respect to an employee

23 benefit plan, the administrator of such plan shall—
8

•HR 5226 IH

1 ‘‘(A) notify the Secretary in writing of

2 such termination, giving the reasons for such

3 termination, and

4 ‘‘(B) furnish the accountant whose engage5 ment was terminated with a copy of the notifi6 cation sent to the Secretary.

7 ‘‘(2) NOTIFICATION BY ACCOUNTANT.—If the

8 accountant referred to in paragraph (1)(B) has not

9 received a copy of the administrator’s notification to

10 the Secretary as required under paragraph (1)(B),

11 or if the accountant disagrees with the reasons given

12 in the notification of termination of the engagement

13 for auditing services, the accountant shall notify the

14 Secretary in writing of the termination, giving the

15 reasons for the termination, within 10 business days

16 after the termination of the engagement.

17 ‘‘(c) DETERMINATION OF PERIODS REQUIRED FOR

18 NOTIFICATION.—In determining whether a notification re19 quired under this section with respect to any act or omis20 sion has been made within the required number of busi21 ness days—

22 ‘‘(1) the day on which such act or omission be23 gins shall not be included; and

24 ‘‘(2) Saturdays, Sundays, and legal holidays

25 shall not be included.
9

•HR 5226 IH

1 For purposes of this subsection, the term ‘legal holidays’

2 means the Federal legal holidays of New Year’s Day,

3 Birthday of Martin Luther King, Washington’s Birthday,

4 Memorial Day, Independence Day, Labor Day, Columbus

5 Day, Veterans Day, Thanksgiving Day, Christmas Day,

6 and any other day appointed as a holiday by the President

7 or the Congress of the United States, or by the State in

8 which the person responsible for making the notification

9 principally conducts his business.

10 ‘‘(d) IMMUNITY FOR GOOD FAITH NOTIFICATION.—

11 Except as provided in this Act, no accountant shall be lia12 ble to any person for any finding, conclusion, or statement

13 made in any notification made pursuant to subsections

14 (a)(2) or (b)(2), or pursuant to any regulations issued

15 thereunder, if such finding, conclusion, or statement is

16 made in good faith.’’.

17 (b) CIVIL PENALTY.—

18 (1) IN GENERAL.—Section 502(c) of such Act

19 (29 U.S.C. 1132(c)) is amended by adding at the

20 end the following new paragraph:

21 ‘‘(5) The Secretary may assess a civil penalty of up

22 to $100,000 against any administrator and against any

23 accountant who fails to provide the Secretary with any no24 tification as required under section 111.’’.
10

•HR 5226 IH

1 (2) CONFORMING AMENDMENT.—Section

2 502(a)(6) of such Act (29 U.S.C. 1132(a)(6)) is

3 amended by striking ‘‘subsection (c)(2) or (i) or (l)’’

4 and inserting ‘‘paragraph (2), (3), (4), or (5) of sub5 section (c) or subsection (i) or (l)’’.

6 (c) CLERICAL AMENDMENTS.—

7 (1) Section 514(d) of such Act (29 U.S.C.

8 1144(d)) is amended by striking ‘‘111’’ and insert9 ing ‘‘112’’.

10 (2) The table of contents in section 1 of such

11 Act is amended by striking the item relating to sec12 tion 111 and inserting the following new items:

‘‘Sec. 111. Direct reporting of certain events.

‘‘Sec. 112. Repeal and effective date.’’.

13 (d) EFFECTIVE DATE.—The amendments made by

14 this section shall apply with respect to any irregularity de15 scribed in such amendments only if the 5-day period de16 scribed in such amendments in connection with such irreg17 ularity commences on or after the date of the enactment

18 of this Act.

Æ