ATTACHMENT 1

September 17, 2015

TIAA-CREF Proposal for BIC Exemption – General Principles

Assumptions for Definition of Fiduciary Advice

• The standard for “advice” is the FINRA guidance about what is a “recommendation” -- a “call to 

action”

• A “hire me” carveout will be available for a person or an entity who merely recommends, urges, 

responds to an RFP, or otherwise promotes its or an affiliate’s hiring

General Changes to the Proposed BIC Exemption

• Provides relief for compensation related to advice to fiduciaries of all plans (not only nonparticipant-directed plans with < 100 participants), and transactions with participants and 

beneficiaries in the institution’s own employee plans

• Provides relief for recommending another fiduciary advice provider or investment manager 

(affiliated or not), for rollover or distribution recommendations, and for specific investment 

recommendations

• Adds a “good faith” compliance provision to protect against inappropriate loss of exemption, 

modeled after the Department’s 408(b)(2) regulation

• Redefines “Asset” to include all securities, other property or instruments, and IRA vehicles, and 

recommendations of individuals to provide advice and management services

Contract

Every advice recipient is covered by a written contract enforceable requiring the provider to act in the 

Best Interest of the Retirement Investor:

• Delivered before recommended transaction is executed

• “Best Interest” defined strictly according to the ERISA 404 prudence standard (including duty of 

loyalty); potentially confusing language has been removed

• The provider acknowledges it is acting as a fiduciary when giving the advice

• May be documented by a promissory undertaking from the advisor’s firm to the recipient 

(unilateral contract) that the recipient may reasonably rely on; no need for signatures

• Preserves the Department’s prohibition on class action waivers 

• Maintains the Department’s Impartial Conduct Standards requiring no misleading statements 

and reasonable compensation, and clarifies that guaranty features or other benefits should be 

considered in that determination, e.g., in the case of an annuity 

• Adopts FINRA’s suggestion that the contract may restrict contractual damages within limits

specified in the PTE

Disclosure

• Follows the 404a -5 investment related fee and expense disclosure requirements for all 

recommended investments
ATTACHMENT 1

• Informs the investor that upon request the Financial Institution will supply information as if (i) 

the investor were the responsible fiduciary under the 408(b)(2) regulations, (ii) the Institution is 

a covered service provider, and (iii) the plan or IRA is a covered plan

• No specific disclosure of individual Advisor’s compensation would be required

• If the Financial Institution offers only products within a limited range of asset classes the 

exemption would still be available if that fact is disclosed 
ATTACHMENT 2

September 17, 2015

Hire Me Carve-Out

Our proposed changes to the Best Interest Exemption are premised on anticipated changes to the 

regulation itself. In particular, we expect that there will be a clarification regarding the “selling of 

investment advice or managed account services”- as distinguished from the provision of investment 

recommendations. Many in the industry commented during the first round of comments on the fact that 

merely selling investment advice or managed account services cannot be a fiduciary act and this concept 

was discussed as a “hire me” provision during the August hearings. Consistent with DOL guidance under 

ERISA section 408(b)(2), a person must be permitted to advocate for his or her own hiring to provide 

investment advice or managed account services. While there are many ways to address this issue, we 

believe that an appropriate approach would be to include a “hire me” provision as an additional carve-out 

as set forth below:

(b) Carve-outs – investment advice. Except for persons described in paragraph (a)(2)(i)

of this section, the rendering of advice or other communications in conformance with a carve-out 

set forth in paragraph (b)(1) through (7) of this section shall not cause the person who renders the 

advice to be treated as a fiduciary under paragraph (a) of this section.

. . .

(7) Recommendations of One’s Own Engagement. The person merely recommends that 

itself or an affiliate be engaged to provide investment advice or management services for a fee, if

such person:

(i) is providing the recommendation in its capacity as a seller of its own services or those 

of an affiliate;

(ii) is not undertaking to provide impartial recommendation in connection with such 

recommendation; 

(iii) fairly informs the plan fiduciary, plan participant or beneficiary, or the beneficial 

owner of an IRA acting on behalf of the IRA (who is receiving the recommendation) of the 

existence and nature of the person’s financial interests in the transaction; and

(iv) does not receive any fee or other compensation directly from the plan or the IRA for 

the provision of such recommendation (as opposed to other services).
DRAFT 

September 17, 2015

Proposed Exemption

Section I – Best Interest Contract Exemption

(a) In general. ERISA and the Internal Revenue Code prohibit fiduciary advisers to

employee benefit plans (Plans) and individual retirement plans (IRAs) from receiving

compensation that varies based on their investment recommendations. Similarly,

fiduciary advisers are prohibited from receiving compensation from third parties in

connection with their advice. This exemption permits certain persons who provide

investment advice to Retirement Investors, and their associated financial institutions,

affiliates and other related entities, to receive such otherwise prohibited compensation as

described below.

(b) Covered transactions. This exemption permits Advisers, Financial Institutions, and their

Affiliates and Related Entities to receive compensation for services provided in connection

with a purchase, sale or holding of an Asset by a Plan, participant or beneficiary account, or

IRA, as a result of the Adviser’s and Financial Institution’s advice, which includes 

distribution recommendations, recommendations as to the management of securities and 

other property, and recommendation of persons to provide investment advice or 

management services to any of the following “Retirement Investors:”

(1) A participant or beneficiary of a Plan subject to Title I of ERISA with authority to

direct the investment of assets in his or her Plan account or to take a distribution, 

including a participant or beneficiary of a Plan subject to Title I of ERISA 

sponsored by the Financial Institution or sponsored by a member of its controlled 

group or under common control with the Financial Institution as defined in Code 

 1
DRAFT 

September 17, 2015

section 414(b) and (c), respectively;

(2) The beneficial owner of an IRA acting on behalf of the IRA; or

(3) A plan sponsor as described in ERISA section 3(16)(B) (or any employee, officer or 

director thereof) of a non-participant-directedfiduciary of a Plan subject to Title I of

ERISA with fewer than 100 participants, to the extent it acts as a fiduciary who has

authority to make investment decisions for the Plan.

As detailed below, parties seeking to rely on the exemption must contractually agree to

adhere to Impartial Conduct Standards in rendering advice regarding Assets; warrant that 

they have adopted policies and procedures designed to mitigate the dangers posed by

Material Conflicts of Interest; disclose important information relating to fees,

compensation, and Material Conflicts of Interest; and retain documents and data relating to

investment recommendations regarding Assetscompliance with the exemption conditions.

The exemption provides relief from the restrictions of ERISA section 406(a)(1)(D) and

406(b) and the sanctions imposed by Code section 4975(a) and (b), by reason of Code

section 4975(c)(1)(D), (E) and (F). The Adviser andor Financial Institution, as applicable,

must comply with the conditions of Sections II-V to rely on this exemption.

(c) Exclusions. This exemption does not apply if:

(1) The Plan is covered by Title I of ERISA, and (i) the Adviser, Financial Institution 

or any Affiliate is the employer of employees covered by the Plan, or (ii) the 

Adviser or Financial Institution is a named fiduciary or plan administrator (as 

defined in ERISA section 3(16)(A)) with respect to the Plan, or an affiliate thereof, 

that was selected to provide advice to the Plan by a fiduciary who is not 

Independent;(2) The compensation is received as a result of a transaction in which

 2
DRAFT 

September 17, 2015

the Adviser is acting on behalf of its own account or the account of the Financial

Institution, or the account of a person directly or indirectly, through one or more

intermediaries, controlling, controlled by, or under common control with the

Financial Institution (i.e., a principal transaction); for avoidance of doubt, the sale 

or disposition of a Proprietary Product is not a principal transaction);

(32) The compensation is received as a result of investment advice to a Retirement

Investor generated solely by an interactive website in which computer

software-based models or applications provide investment advice based on personal

information each investor supplies through the website without any personal

interaction or advice from an individual Adviser (i.e., “robo advice”); or

(43) The Adviser (i) exercises any discretionary authority or discretionary control

respecting management of the Plan or IRA assets involved in thewith respect to a

transaction recommended by the Adviser or exercises any authority or control

respecting management or disposition of the assets, or (ii) has any discretionary

authority or discretionary responsibility in the administration of the Plan or 

IRAAssets with respect to a transaction recommended by the Adviser. That is, the 

Adviser may not utilize this exemption if it exercises authority or control over 

whether to act upon the investment advice.

 3
DRAFT 

September 17, 2015

(d) Good faith. Notwithstanding any other provision to the contrary, the failure to comply with 

any term, condition or requirement of this exemption will not result in the loss of the 

exemption if the failure to comply was inadvertent and a good faith and reasonable attempt 

was made to comply with all applicable terms, conditions and requirements. 

Section II – Contract, Impartial Conduct, and Other Requirements

(a) Contract. Prior to recommending that the Plan, participant or beneficiary account, or 

IRA purchase, sell or hold the Asset, the Adviser andengaging in a transaction described 

in Section I, Financial Institution enter into a written contract withfurnishes, delivers, 

publishes or otherwise makes available to the Retirement Investor a promise that

incorporates the terms required by Section II(b)- (e) and which, when reasonably relied 

upon by the Retirement Investor for purposes of such transaction, may be enforced by the 

Retirement Investor as a contract (“Contract”).

(b) Fiduciary. The written contractContract affirmatively states that the Adviser and Financial

Institution are fiduciaries under ERISA or the Code, or both, with respect to anythe

investment recommendations to the Retirement Investor made by the Adviser or Financial 

Institution.

(c) Impartial Conduct Standards. The Adviser and the Financial InstitutionContract

affirmatively agreeto, and comply with, the followingstates:

(1) When providing investment advice to the Retirement Investor regarding the Asset,

the Adviser and Financial Institution and its authorized Advisers will provide

investment advice that is in the Best Interest of the Retirement Investor (i.e., advice

that reflects the care, skill, prudence, and diligence under the circumstances then 

 4
DRAFT 

September 17, 2015

prevailing that a prudent person would exercise based on the investment objectives,

risk tolerance, financial circumstances, and needs of the Retirement Investor,

without regard to the financial or other interests of the Adviser, Financial Institution 

or any Affiliate, Related Entity, or other party);

(2) When providing investment advice to the Retirement Investor regarding the Asset,

the Adviser and Financial Institution and its authorized Advisers will not

recommend an Asset if the total amount of compensation anticipated to be received

by the Adviser, Financial Institution, Affiliates and Related Entities in connection

with the purchase, sale or holding of the Asset by the Plan, participant or beneficiary

account, or IRA, will exceed reasonable compensation in relation to the investment 

features, guarantees, and related benefits of the Asset and the total services they

provide to the Retirement Investor; and

(3) The Adviser’s andstatements of the Financial Institution’s statements and its 

authorized Advisers about the Asset, fees, Material Conflicts of Interest, and any

other matters relevant to a Retirement Investor’s investment decisions, will not be

misleading.

(d) Warranties. The Adviser and Financial Institution affirmatively warrantPolicies and 

Procedures. The relief under Section I shall be further conditioned upon the

following:

(1) The Adviser, Financial Institution, and Affiliates will comply with all applicable 

federal and state laws regarding the rendering of the investment advice, the 

purchase, sale and holding of the Asset, and the payment of compensation related 

to the purchase, sale and holding of the Asset;(2) The Financial Institution has

 5
DRAFT 

September 17, 2015

adopted written policies and procedures reasonably designed to mitigate the

impact of Material Conflicts of Interest and ensure that its individualauthorized

Advisers adhere to the Impartial Conduct Standards set forth in Section II(c);

(3) In formulating its policies and procedures,2) If the Financial Institution has 

specifically identified Material Conflicts of Interest and adopted measures to 

prevent the Material Conflicts of Interest from causing violations of the Impartial

Conduct Standards set forth in Section II(c); andor (to the best of its knowledge) any

Affiliate or Related Entity pays any form of compensation to Advisers that varies 

based on the Assets that they recommend, including payouts based upon 

commissions, trail commissions or 12b-1 fees, ticket charge discounts, awards, or 

product contests, and not solely on neutral factors such as the difference in time, 

effort, and analysis necessary to provide prudent advice, then the written policies 

and procedures described in paragraph (1) must be reasonably designed to ensure 

that such Advisers only make recommendations that are in the Best Interest of the 

Retirement Investor. These policies and procedures must include procedures to 

mitigate, to the extent practical, the effects of these forms of compensation on an 

Adviser’s choice of Asset, to supervise the recommendations made by those 

Advisers, to promptly detect possible recommendations that may not be in the Best 

Interest of the Retirement Investor, and to take prompt and appropriate action 

concerning any recommendation that is found to have not been in the Best Interest 

of the Retirement Investor.

(4) Neither the Financial Institution nor (to the best of its knowledge) any Affiliate or 

Related Entity uses quotas, appraisals, performance or personnel actions, bonuses, 

 6
DRAFT 

September 17, 2015

contests, special awards, differential compensation or other actions or incentives to 

the extent they would tend to encourage individual Advisers to make 

recommendations that are not in the Best Interest of the Retirement Investor. 

Notwithstanding the foregoing, the contractual warranty set forth in this Section

II(d)(4) does not prevent the Financial Institution or its Affiliates and Related Entities

from providing Advisers with differential compensation based on investments by Plans, 

participant or beneficiary accounts, or IRAs, to the extent such compensation would 

not encourage advice that runs counter to the Best Interest of the Retirement 

Investor (e.g., differential compensation based on such neutral factors as the 

difference in time and analysis necessary to provide prudent advice with respect to 

different types of investments would be permissible).

(e) Disclosures. The written contractFinancial Institution must specifically:

(1) Identify and disclose any Material Conflicts of Interest;

(2) Inform the Retirement Investor that, upon request, the Financial Institution shall 

furnish the Retirement Investor has the right to obtain complete information about 

all the fees currently associated with the Assets in which it is invested, including all 

of the direct and indirect fees paid payable to the Adviser, Financial Institution, and 

any Affiliates; andwith a disclosure containing the information described in 29 

C.F.R. section 2550.408b-2(c)(1)(iv)(C) as though the Retirement Investor were 

the “responsible plan fiduciary” under 29 C.F.R. section 2550.408b-2 

(c)(1)(viii)(E) entitled to a 29 C.F.R. section 2550.408b-2 disclosure from the 

Advisor as a “covered service provider” with respect to the recommendation 

provided to the Retirement Investor and the Plan or IRA were a “covered plan”

 7
DRAFT 

September 17, 2015

under 29 C.F.R. section 2550.408b-2 (c)(1)(ii). 

(3) Disclose to the Retirement Investor whether the Financial Institution offers 

Proprietary Products or receives Third Party Payments with respect to the

purchase, sale or holding of any Asset, and of the address of the website required 

by Section III(c) that discloses the compensation arrangements entered into by

Advisers and the

Financial Institution.

(f) Prohibited Contractual Provisions. The written contract shall not contain the following:

(1) Exculpatory provisions disclaiming or otherwise limiting liability of the Adviser 

orFinancial Institution and its authorized Advisers for a violation of the contract’s

terms; and

(2) A provision under which the Plan, IRA or Retirement Investor waives or qualifies

its right to bring or participate in a class action or other representative action in

court in a dispute with the Adviser or Financial Institution and its authorized 

Advisers, provided that the Contract may limit damages to an amount equal to the 

return an investor would have earned from an investment that was in the Best 

Interest of the Retirement Investor at the time of the recommendation and the return 

that the Retirement Investor actually earned, and to preclude the right to rescind any

transaction the rescission of which is not otherwise contemplated by federal law.

Section III – Disclosure RequirementsTransaction Disclosure Requirements

(a)Transaction Disclosure.

(1) Disclosure. Prior to the execution of the purchase of the Asset by the Plan,

participant or beneficiary account, or IRA, the Adviser furnishes to the Retirement Investor 

 8
DRAFT 

September 17, 2015

a chart that provides, with respect to each Asset recommended, the Total Cost to the Plan, 

participant or beneficiary account, or IRA, of investing in the Asset for 1-, 5- and 10-year 

periods expressed as a dollar amount, assuming an investment of the dollar amount 

recommended by the Adviser and reasonable assumptions about investment performance 

that are disclosed.

The disclosure chart required by this section need not be provided with respect to a 

subsequent recommendation to purchase the same investment product if the chart 

was previously provided to the Retirement Investor within the past twelve months 

and the Total Cost has not materially changed.

(2) Total Cost. The “Total Cost” of investing in an Asset means the sum of the

following, as applicable:

(A) Acquisition costs. Any costs of acquiring the Asset that are paid by direct

charge to the Plan, participant or beneficiary account, or IRA, or that reduce the 

amount invested in the Asset (e.g., any loads, commissions, or mark-ups on Assets 

bought from dealers, and account opening fees, if applicable).

(B) Ongoing costs. Any ongoing (e.g., annual) costs attributable to fees and 

expenses charged for the operation of an Asset that is a pooled investment fund 

(e.g., mutual fund, bank collective investment fund, insurance company pooled 

separate account) that reduces the Asset’s rate of return (e.g., amounts attributable

to a mutual fund expense ratio and account fees). This includes amounts paid by

 9
DRAFT 

September 17, 2015

the pooled investment fund to intermediaries, such as sub-TA fees, sub- accounting 

fees, etc.

(C) Disposition costs. Any costs of disposing of or redeeming an interest in the 

Asset that are paid by direct charge to the Plan, participant or beneficiary account, 

or IRA, or that reduce the amounts received by the Plan, participant or beneficiary

account, or IRA (e.g., surrender fees, back-end loads, etc., that are always 

applicable (i.e., do not sunset), mark-downs on assets sold to dealers, and account

closing fees, if applicable).

(D) Others. Any costs not described in (A)-(C) that reduce the Asset’s rate of

return, are paid by direct charge to the Plan, participant or beneficiary account, or 

IRA, or reduce the amounts received by the Plan, participant or beneficiary account,

or IRA (e.g., contingent fees, such as back-end loads that phase out over time (with 

such terms explained beneath the table)).

(3) Model Chart. Appendix II to this exemption contains a model chart that may be 

used to provide the information required under this Section III(a). Use of the model 

chart is not mandatory. However, use of an appropriately completed model chart 

will be

deemed to satisfy the requirements of this Section III(a).

(b) Annual Disclosure. The Adviser or Financial Institution provides the following 

written

10
DRAFT 

September 17, 2015

information to the Retirement Investor, annually, within 45 days of the end of the 

applicable year, in a succinct single disclosure:

(1) A list identifying each Asset purchased or sold during the applicable period and 

the price at which the Asset was purchased or sold;

(2) A statement of the total dollar amount of all fees and expenses paid by the Plan, 

participant or beneficiary account, or IRA (directly and indirectly) with respect to 

each Asset purchased, held or sold during the applicable period; and

(3) A statement of the total dollar amount of all compensation received by the

Adviser and Financial Institution, directly or indirectly, from any party, as a result

of each Asset sold, purchased or held by the Plan, participant or beneficiary

account, or IRA during the applicable period.

(c) Webpage.

(1) The Financial Institution maintains a webpage, freely accessible to the public, 

which shows the following information:

(A) The direct and indirect material compensation payable to the Adviser, 

Financial Institution and any Affiliate for services provided in connection with each 

Asset (or, if uniform across a class of Assets, the class of Assets) that a Plan, 

participant or beneficiary account, or an IRA is able to purchase, hold, or sell 

through the Adviser or Financial Institution, and that a Plan, participant or 

beneficiary account, or an IRA has purchased, held, or sold within the last 365 days. 

The compensation may be expressed as a monetary amount, formula or percentage 

11
DRAFT 

September 17, 2015

of the assets involved in the purchase, sale or holding; and

(B) The source of the compensation, and how the compensation varies within 

and among Assets.

(2) The Financial Institution’s webpage provides access to the information in 

(1)(A) and

(B) in a machine readable format.

In connection with any covered transaction described in Section I, the Financial Institution and 

its authorized Advisers shall furnish to the Retirement Investor information that provides, with

respect to each Asset recommended, an investment-related fee and expense disclosure in the 

form described by 29 C.F.R. section 2550.404a-5(d)(1)(iv). 

Section IV – Range of Investment Options

(a) General. The Financial Institution offers for purchase, sale or holding, and the Adviser

makes available to the Plan, participant or beneficiary account, or IRA for purchase, sale or

holding, a range of Assets that is broad enough to enable the Adviser to make

recommendations with respect to all of the asset classes reasonably necessary to serve the

Best Interests of the Retirement Investor in light of its investment objectives, risk tolerance,

and specific financial circumstances.

(b) Limited Range of Investment Options. Section (a) notwithstanding,To the extent that a

Financial Institution may limitlimits the Assets available, such that paragraph (a) above is 

not met, for purchase, sale or holding based on whether the Assets are Proprietary Products,

generate Third Party Payments, or for other reasons, and still rely on the exemption, 

provided that:

12
DRAFT 

September 17, 2015

(1) The Financial Institution makes a specific written finding that the limitations it has 

placed on the Assets made available to an Adviser for purchase, sale or holding by

Plans, participant and beneficiary accounts, and IRAs do not prevent the Adviser 

from providing advice that is in the Best Interest of the Retirement Investor (i.e., 

advice that reflects the care, skill, prudence, and diligence under the circumstances 

then prevailing that a prudent person would exercise based on the investment 

objectives, risk tolerance, financial circumstances, and needs of the Retirement 

Investor, without regard to the financial or other interests of the Adviser, Financial 

Institution or any Affiliate, Related Entity, or other party) or otherwise adhering to 

the Impartial Conduct Standards;

(2) Any compensation received in connection with a purchase, sale or holding of the

Asset by a Plan, participant or beneficiary account, or an IRA, is reasonable in

relation to the value of the specific services provided to the Retirement Investor

in exchange for the payments and not in excess of the services’ fair market 

value;(3) Before givingthe exemption may nevertheless be relied upon, provided 

that, prior to the Retirement Investors acting upon the investment

recommendations to Retirement Investors, the Adviser or Financial Institution

gives the Retirement Investor clear written notice of the limitations placed on

the Assets that the Adviser may offer for purchase, sale or holding by a Plan,

participant or beneficiary account, or an IRA. Notice is insufficient if it merely

states that the Financial Institution or Adviser “may” limit investment

recommendations based on whether the Assets are Proprietary Products or

generate Third Party Payments, or for other reasons, without specific disclosure

of the extent to which recommendations are, in fact, limited on that basis; and(4)

13
DRAFT 

September 17, 2015

The Adviser notifies the Retirement Investor if the Adviser does not recommend 

a sufficiently broad range of Assets to meet the Retirement Investor’s needs.

(c) ERISA plan participants and beneficiaries. Some Advisers and Financial Institutions

provide advice to participants in ERISA-covered participant directed individual account

Plans in which the menu of investment options is selected by an Independent Plan fiduciary.

In such cases, provided the Adviser and Financial Institution did not provide investment 

advice to the Plan fiduciary regarding the composition of the menu, the Adviser and

Financial Institution do not have to comply with Section IV(a)-(cb) in connection with their

advice to individual participants and beneficiaries on the selection of Assets from the menu

provided. This exception is not available for advice with respect to investments within

open brokerage windows or otherwise outside the Plan’s designated investment options.

Section V –Disclosure to the Department and Recordkeeping

(a) EBSA Disclosure. Before receiving compensation in reliance on the exemption in Section

I, the Financial Institution notifies the Department of Labor of the intention to rely on this

class exemption. The notice will remain in effect until revoked in writing by the Financial

Institution. The notice need not identify any Plan or IRA.

(b) Data Request. The Financial Institution maintains the data that is subject to request pursuant

to Section IX in a manner that is accessible for examination by the Department for six (6) 

years from the date of the transaction subject to relief hereunder. No party, other than the 

Financial Institution responsible for complying with this paragraph (b), will be subject to

the taxes imposed by Code section 4975(a) and (b), if applicable, if the data is not 

maintained or not available for examination as required by paragraph (b).(c)

Recordkeeping. The Financial Institution maintains for a period of six (6) years, in a

14
DRAFT 

September 17, 2015

manner that is accessible for examination, the records necessary to enable the persons

described in paragraph (db)(1) of this Section to determine whether the conditions of this

exemption have been met, except that:

(1) If such records are lost or destroyed, due to circumstances beyond the control of

the Financial Institution, then no prohibited transaction will be considered to have

occurred solely on the basis of the unavailability of those records; and

(2) No party, other than the Financial Institution responsible for complying with this

paragraph (c), will be subject to the civil penalty that may be assessed under

ERISA section 502(i) or the taxes imposed by Code section 4975(a) and (b), if

applicable, if the records are not maintained or are not available for examination as

required by paragraph (db), below.

(db) (1) Except as provided in paragraph (db)(2) of this Section, and notwithstanding any

provisions of ERISA section 504(a)(2) and (b), the records referred to in paragraph (ca)

of this Section are unconditionally available at their customary location for examination

during normal business hours by:

(A) Any authorized employee or representative of the Department or the Internal

Revenue Service;

(B) Any fiduciary of a Plan that engaged in a purchase, sale or holding of an

Asset described in this exemption, or any authorized employee or

representative of such fiduciary;

(C) Any contributing employer and any employee organization whose

members are covered by a Plan described in paragraph (db)(1)(B), or

any authorized employee or representative of these entities; or

15
DRAFT 

September 17, 2015

(D) Any participant or beneficiary of a Plan described in paragraph (B), IRA

owner, or the authorized representative of such participant, beneficiary or

owner; and

(2) None of the persons described in paragraph (db)(1)(B)-(D) of this Section are

authorized to examine privileged trade secrets or privileged commercial or financial

information, of the Financial Institution, or information identifying other

individuals.

(3) Should the Financial Institution refuse to disclose information on the basis that the

information is exempt from disclosure, the Financial Institution must, by the close

of the thirtieth (30th) day following the request, provide a written notice advising

the requestor of the reasons for the refusal and that the Department may request

such information.

Section VI – Insurance and Annuity Contract Exemption

(a) In general. In addition to prohibiting fiduciaries from receiving compensation from third

parties and compensation that varies on the basis of the fiduciaries’ investment advice,

ERISA and the Internal Revenue Code prohibit the purchase by a Plan, participant or

beneficiary account, or IRA of an insurance or annuity product from an insurance

company that is a service provider to the Plan or IRA. This exemption permits a Plan,

participant or beneficiary account, or IRA to purchase an Asset that is an insurance or

annuity contract in accordance with an Adviser’s advice, from a Financial Institution that

is an insurance company and that is a service provider to the Plan or IRA. This

exemption is provided because purchases of insurance and annuity products are often

prohibited purchases and sales involving insurance companies that have a pre-existing

party in interest relationship to the Plan or IRA.

16
DRAFT 

September 17, 2015

(b) Covered transaction. The restrictions of ERISA section 406(a)(1)(A) and (D), and the

sanctions imposed by Code section 4975(a) and (b), by reason of Code section

4975(c)(1)(A) and (D), shall not apply to a fiduciary’s causing the purchase of an Asset that

is an insurance or annuity contract by a non-participant-directed Plan subject to Title I of

ERISA that has fewer than 100 participants, participant or beneficiary account, or IRA,

from a Financial Institution that is an insurance company and that is a party in interest or

disqualified person, if:

(1) The transaction is effected by the insurance company in the ordinary course of

its business as an insurance company;

(2) The combined total of all fees and compensation received by the insurance

company and any Affiliate is not in excess of reasonable compensation under the

circumstances; and

(3) The purchase is for cash only; and(4) The terms of the purchase are at least as

favorable to the Plan, participant or beneficiary account, or IRA as the terms

generally available in an arm’s length transaction with an unrelated party.

(c) Exclusion: The exemption in this Section VI does not apply if the Plan is covered by Title I 

of ERISA, and (i) the Adviser, Financial Institution or any Affiliate is the employer of 

employees covered by the Plan, or (ii) the Adviser and Financial Institution is a named 

fiduciary or plan administrator (as defined in ERISA section 3(16)(A)) with respect to the Plan,

or an affiliate thereof, that was selected to provide advice to the plan by a fiduciary who is not

Independent.

Section VII – Exemption for Pre-Existing Transactions

(a) In general. ERISA and the Internal Revenue Code prohibit Advisers, Financial

Institutions and their Affiliates and Related Entities from receiving variable or third-party

compensation as a result of the Adviser’s and Financial Institution’s advice to a Plan,

17
DRAFT 

September 17, 2015

participant or beneficiary, or IRA owner. Some Advisers and Financial Institutions did not

consider themselves fiduciaries within the meaning of 29 CFR section 2510-3.21 before the

applicability date of the amendment to 29 CFR section 2510-3.21 (the Applicability Date).

Other Advisers and Financial Institutions entered into transactions involving Plans,

participant or beneficiary accounts, or IRAs before the Applicability Date, in accordance

with the terms of a prohibited transaction exemption that has since been amended. This

exemption permits Advisers, Financial Institutions, and their Affiliates and Related Entities,

to receive compensation, such as 12b-1 fees, in connection with the purchase , sale or

holding of an Asset by a Plan, participant or beneficiary account, or an IRA, as a result of

the Adviser’s and Financial Institution’s advice, that occurred prior to the Applicability

Date, as described and limited below.

(b) Covered transaction. Subject to the applicable conditions described below, the restrictions

of ERISA section 406(a)(1)(D) and 406(b) and the sanctions imposed by Code section

4975(a) and (b), by reason of Code section 4975(c)(1)(D), (E) and (F), shall not apply to the

receipt of compensation by an Adviser, Financial Institution, and any Affiliate and Related

Entity, for services provided in connection with the purchase, holding or sale of an Asset,

as a result of the Adviser’s and Financial Institution’s advice, that was purchased, sold, or

held by a Plan, participant or beneficiary account, or an IRA before the Applicability Date

if:

(1) The compensation is not excluded pursuant to Section I(c) of the Best 

Interest

Contract Exemption;(2) The compensation is received pursuant to an agreement,

arrangement or understanding that was entered into prior to the Applicability Date;

(3) The Adviser and Financial Institution do not provide additional advice to the 

Plan regarding the purchase, sale or holding of the Asset after the

Applicability Date; and(42) The purchase or sale of the Asset was not a

non-exempt prohibited transaction pursuant to ERISA section 406 and Code

section 4975 on the date it occurred.

Section VIII – Definitions

18
DRAFT 

September 17, 2015

For purposes of these exemptions:

(a) “Adviser” means an individual who:

(1) Is a fiduciary of a Plan or IRA solely by reason of the provision of investment

advice described in ERISA section 3(21)(A)(ii) or Code section 4975(e)(3)(B), or

both, and the applicable regulations, with respect to the Assets involved in the

transaction;

(2) Is an employee, independent contractor, agent, or registered representative of a

Financial Institution; and

(3) Satisfies the applicable federal and state regulatory and licensing requirements of

insurance, banking, and securities laws with respect to the covered transaction.

(b) “Affiliate” of an Adviser or Financial Institution means –

(1) Any person directly or indirectly through one or more intermediaries, controlling,

controlled by, or under common control with the Adviser or Financial Institution.

For this purpose, “control’’ means the power to exercise a controlling influence over

the management or policies of a person other than an individual;

(2) Any officer, director, employee, agent, registered representative, relative (as

defined in ERISA section 3(15)), member of family (as defined in Code section

4975(e)(6)) of, or partner in, the Adviser or Financial Institution; and

(3) Any corporation or partnership of which the Adviser or Financial Institution is

an officer, director or employee or in which the Adviser or Financial Institution

is a partner.

(c) An “Asset,” for purposes of this exemption, includes only the following investment 

products: bank deposits, certificates of deposit (CDs), shares or interests in registered 

19
DRAFT 

September 17, 2015

investment companies, bank collective funds, insurance company separate accounts, 

exchange-traded REITs, exchange-traded funds, corporate bonds offered pursuant to a

registration statement under the Securities Act of 1933, agency debt securities as defined in 

FINRA Rule 6710(l) orsecurities, other property, and other financial instruments or 

arrangements recommended to a Retirement Investor including, in the case of a 

recommendation that a plan participant or beneficiary or beneficial owner of an IRA acting 

on behalf of the IRA take a distribution of benefits in a rollover transaction, a rollover IRA 

vehicle recommended for purposes of accepting the proceeds of such rollover distribution 

and in the case of a recommendation that a plan participant or beneficiary or beneficial 

owner of an IRA acting on behalf of the IRA utilize the services of an investment advice or 

management services provider, the recommendation of such fiduciary services. 

its successor, U.S. Treasury securities as defined in FINRA Rule 6710(p) or its

successor, insurance and annuity contracts, guaranteed investment contracts, and equity

securities

within the meaning of 17 CFR section 230.405 that are exchange-traded securities within 

the meaning of 17 CFR 242.600. Excluded from this definition is any equity security that is 

a security future or a put, call, straddle, or other option or privilege of buying an equity

security from or selling an equity security to another without being bound to do so.

(d) Investment advice is in the “Best Interest” of the Retirement Investor when the Adviser

andor Financial Institution providing the advice actacts i) with the care, skill, prudence, and

diligence under the circumstances then prevailing that a prudent person would exercise 

based on the investment objectives, risk tolerance, financial circumstances, and needsacting 

in a like capacity and familiar with such matters would use in the conduct of an enterprise 

20
DRAFT 

September 17, 2015

of a like character and with like aims and (ii) solely in the interest of the Retirement

Investor, without regard to the financial or other interests of the Adviser, Financial 

Institution or any Affiliate, Related Entity, or other party.in each case as such standards are 

interpreted under Section 404 of ERISA. 

(e) “Financial Institution” means the entity that employs the Adviser or otherwise retains

such individual as an independent contractor, agent or registered representative and that

is:

(1) Registered as an investment adviser under the Investment Advisers Act of 1940 (15

USC 80b-1 et seq.) or under the laws of the state in which the adviser maintains its

principal office and place of business;

(2) A bank or similar financial institution supervised by the United States or state, or

a savings association (as defined in section 3(b)(1) of the Federal Deposit

Insurance Act (12 USC 1813(b)(1)), but only if the advice resulting in the

compensation is provided through a trust department of the bank or similar

financial institution or savings association which is subject to periodic

examination and review by federal or state banking authorities;

(3) An insurance company qualified to do business under the laws of a state,

provided that such insurance company:

(A) Has obtained a Certificate of Authority from the insurance commissioner

of its domiciliary state which has neither been revoked nor suspended,

(B) Has undergone and shall continue to undergo an examination by an

Independent certified public accountant for its last completed taxable year

or has undergone a financial examination (within the meaning of the law of

21
DRAFT 

September 17, 2015

its domiciliary state) by the state’s insurance commissioner within the

preceding 5 years, and

(C) Is domiciled in a state whose law requires that actuarial review of reserves

be conducted annually by an Independent firm of actuaries and reported to

the appropriate regulatory authority; or

(4) A broker or dealer registered under the Securities Exchange Act of 1934 (15 USC

78a et seq.).

(f) “Independent” means a person that:

(1) Is not the Adviser, the Financial Institution or any Affiliate relying on the

exemption,

(2) Does not receive compensation or other consideration for his or her own account

from the Adviser, the Financial Institution or Affiliate; and

(3) Does not have a relationship to or an interest in the Adviser, the Financial

Institution or Affiliate that might affect the exercise of the person’s best judgment

in connection with transactions described in this exemption.

(g) “Individual Retirement Account” or “IRA” means any trust, account or annuity described in

Code section 4975(e)(1)(B) through (F), including, for example, an individual retirement

account described in section 408(a) of the Code and a health savings account described in

section 223(d) of the Code.

(h) A “Material Conflict of Interest” exists when an Adviser or Financial Institution has a

financial interest that could affect the exercise of its best judgment as a fiduciary in

rendering advice to a Retirement Investor regarding an Asset.

(i) “Plan” means any employee benefit plan described in section 3(3) of the Act and any

22
DRAFT 

September 17, 2015

plan described in section 4975(e)(1)(A) of the Code.

(j) “Proprietary Product” means a product that is managed or issued by the Financial

Institution or any of its Affiliates.

(k) “Related Entity” means any entity other than an Affiliate in which the Adviser or Financial

Institution has an interest which may affect the exercise of its best judgment as a fiduciary.

(l) “Retirement Investor” means –

(1) A participant or beneficiary of a Plan subject to Title I of ERISA with authority

to direct the investment of assets in his or her Plan account or to take a

distribution, including a participant or beneficiary of a Plan subject to Title I of

ERISA sponsored by the Financial Institution or sponsored by a member of its 

controlled group or a under common control with the Financial Institution as 

defined in Code section 414(b) and (c) respectively;

(2) The beneficial owner of an IRA acting on behalf of the IRA,; or

(3) A plan sponsor as described in ERISA section 3(16)(B) (or any employee, 

officer or director thereof), of a non-participant-directedfiduciary of a Plan

subject to Title I of ERISA that has fewer than 100 participants, to the extent it

acts as a fiduciary with authority to make investment decisions for the Plan.

(m) “Third-Party Payments” mean sales charges when not paid directly by the Plan,

participant or beneficiary account, or IRA, 12b-1 fees and other payments paid to the

Financial Institution or an Affiliate or Related Entity by a third party as a result of the

purchase, sale or holding of an Asset by a Plan, participant or beneficiary account, or IRA.

Section IX - Data Request

Upon request by the Department, a Financial Institution that relies on the exemption in 

23
DRAFT 

September 17, 2015

Section I shall provide, within a reasonable time, but in no event longer than six (6) months, 

after receipt of the request, the following information for the preceding six (6) year period:

(a) Inflows. At the Financial Institution level, for each Asset purchased, for each 

quarter: (1) The aggregate number and identity of shares/units bought;

(2) The aggregate dollar amount invested and the cost to the Plan, participant 

or beneficiary account, or IRA associated with the purchase;

(3) The revenue received by the Financial Institution and any Affiliate in connection 

with the purchase of each Asset disaggregated by source; and

(4) The identity of each revenue source (e.g., mutual fund, mutual fund adviser) and the

reason the compensation was paid.

(b) Outflows. At the Financial Institution level for each Asset sold, for each quarter:

(1) The aggregate number of and identity of shares/units sold;

(2) The aggregate dollar amount received and the cost to the Plan, participant 

or beneficiary account, or IRA, associated with the sale;

(3) The revenue received by the Financial Institution and any Affiliate in connection 

with the sale of each Asset disaggregated by source; and

(4) The identity of each revenue source (e.g., mutual fund, mutual fund adviser) and 

the reason the compensation was paid.

(c) Holdings. At the Financial Institution level for each Asset held at any time during each

quarter:

(1) The aggregate number and identity of shares/units held at the end of such quarter; 

24
DRAFT 

September 17, 2015

25

(2) The aggregate cost incurred by the Plan, participant or beneficiary account, or 

IRA,

during such quarter in connection with the holdings;

(3) The revenue received by the Financial Institution and any Affiliate in connection

with the holding of each Asset during such quarter for each Asset disaggregated by

source; and

(4) The identity of each revenue source (e.g., mutual fund, mutual fund adviser) and 

the reason the compensation was paid.

(d) Returns. At the Retirement Investor level:

(1) The identity of the Adviser;

(2) The beginning-of-quarter value of the Retirement Investor’s

Portfolio; (3) The end-of-quarter value of the Retirement Investor’s 

Portfolio; and

(4) Each external cash flow to or from the Retirement Investor’s Portfolio during 

the quarter and the date on which it occurred.

For purposes of this subparagraph (d), “Portfolio” means the Retirement Investor’s 

combined holding of assets held in a Plan account or IRA advised by the Adviser.

(e) Public Disclosure. The Department reserves the right to publicly disclose information 

provided by the Financial Institution pursuant to subparagraph (d). If publicly disclosed, 

such information would be aggregated at the Adviser level, and the Department would not 

disclose any individually identifiable financial information regarding Retirement Investor 

accounts.

Appendix I Financial Institution ABC - Website Disclosure Model
DRAFT 

September 17, 2015

Form

26
DRAFT 

September 17, 2015

Type of

Investment

Provider, 

Name,

Transactional Ongoing Affiliate Special Rules

sub-type To investor To firm To adviser To

investor

To firm To adviser

NonProprietary

Mutual Fund

(Load Fund)

XYZ MF

Large Cap

Fund, 

Class A 

Class B 

Class C

[ • ]% sales

load as 

applicable

[ • ]% dealer

concession

[ • ]% of

transactional 

fee

Extent 

considered in 

annual bonus

[ • ]%

expense 

ratio

[ • ]%

12b-1 fee, 

revenue

sharing (paid

by fund/

affiliate)

[ • ]% of

ongoing fees

Extent 

considered in 

annual bonus

N/A Breakpoints

(as 

applicable)

Contingent 

deferred 

shares charge 

(as 

applicable)

Proprietary

Mutual Fund

(No load)

ABC MF

Large Cap

Fund

No upfront

charge

N/A N/A [ • ]%

expense 

ratio

[ • ]%

asset-based 

annual fee for 

shareholder 

servicing (paid 

by fund/ 

affiliate)

[ • ]% of

ongoing fees

Extent 

considered in 

annual bonus

[ • ]%

asset-based 

investment 

advisory

fee paid by

fund to

affiliate of

Financial

Institution

N/A

Equities,

ETFs, Fixed

Income

$[ • ]

commission 

per 

transaction

$[ • ]

commission 

per transaction

[ • ]% of

commission

Extent 

considered in 

annual bonus

N/A N/A N/A

Extent 

considered in 

annual bonus

N/A N/A

Annuities

(Fixed and

Variable)

Insurance

Company

A

No upfront

charge on 

amount 

invested

$[ • ]

commission 

(paid by 

insurer)

[ • ]% of

commission

Extent 

considered in 

annual bonus

[ • ]%

M&E fee

[ • ]% 

underlying 

expense 

ratio

$[ • ]

Ongoing 

trailing 

commission 

(paid by 

underlying 

investment 

providers)

[ • ]% of

ongoing fees

Extent 

considered in 

annual bonus

N/A Surrender

charge

Appendix II Financial Institution XZY - Transaction Disclosure Model Chart

YOUR

INVESTMENT

TOTAL COST OF YOUR INVESTMENT IF HELD FOR:

1 year 5 years 10 years

27
DRAFT 

September 17, 2015

Asset 1

Asset 2

Asset 3

Account fees

Total

28
ATTACHMENT 4

DRAFT 

September 17, 2015

1

Proposed Exemption

Section I – Best Interest Contract Exemption

(a) In general. ERISA and the Internal Revenue Code prohibit fiduciary advisers to 

employee benefit plans (Plans) and individual retirement plans (IRAs) from receiving 

compensation that varies based on their investment recommendations. Similarly, 

fiduciary advisers are prohibited from receiving compensation from third parties in

connection with their advice. This exemption permits certain persons who provide 

investment advice to Retirement Investors, and their associated financial institutions, 

affiliates and other related entities, to receive such otherwise prohibited compensation as 

described below.

(b) Covered transactions. This exemption permits Advisers, Financial Institutions, and their 

Affiliates and Related Entities to receive compensation for services provided in connection 

with a purchase, sale or holding of an Asset by a Plan, participant or beneficiary account, 

or IRA, as a result of the Adviser’s and Financial Institution’s advice, which includes 

distribution recommendations, recommendations as to the management of securities and 

other property, and recommendation of persons to provide investment advice or 

management services to any of the following “Retirement Investors:”

(1) A participant or beneficiary of a Plan subject to Title I of ERISA with authority

to direct the investment of assets in his or her Plan account or to take a 

distribution, including a participant or beneficiary of a Plan subject to Title I of

ERISA sponsored by the Financial Institution or sponsored by a member of its 

controlled group or under common control with the Financial Institution as 
ATTACHMENT 4

DRAFT 

September 17, 2015

2

defined in Code section 414(b) and (c), respectively;

(2) The beneficial owner of an IRA acting on behalf of the IRA; or

(3) A fiduciary of a Plan subject to Title I of ERISA who has authority to make 

investment decisions for the Plan.

As detailed below, parties seeking to rely on the exemption must agree to adhere to 

Impartial Conduct Standards in rendering advice regarding Assets; disclose important

information relating to fees, compensation, and Material Conflicts of Interest; and retain 

documents relating to compliance with the exemption conditions. The exemption provides

relief from the restrictions of ERISA section 406(a)(1)(D) and 406(b) and the sanctions 

imposed by Code section 4975(a) and (b), by reason of Code section 4975(c)(1)(D), (E) and

(F). The Adviser or Financial Institution, as applicable, must comply with the conditions of

Sections II-V to rely on this exemption.

(c) Exclusions. This exemption does not apply if:

(1) The compensation is received as a result of a transaction in which the Adviser is 

acting on behalf of its own account or the account of the Financial Institution, or

the account of a person directly or indirectly, through one or more intermediaries, 

controlling, controlled by, or under common control with the Financial Institution 

(i.e., a principal transaction; for avoidance of doubt, the sale or disposition of a 

Proprietary Product is not a principal transaction);

(2) The compensation is received as a result of investment advice to a Retirement

Investor generated solely by an interactive website in which computer softwarebased models or applications provide investment advice based on personal

information each investor supplies through the website without any personal
ATTACHMENT 4

DRAFT 

September 17, 2015

3

interaction or advice from an individual Adviser (i.e., “robo advice”); or

(3) The Adviser exercises any discretionary authority or discretionary control 

respecting management of the Plan or IRA with respect to a transaction 

recommended by the Adviser or exercises any authority or control respecting 

management or disposition of the Assets with respect to a transaction recommended 

by the Adviser. That is, the Adviser may not utilize this exemption if it exercises 

authority or control over whether to act upon the investment advice.

(d) Good faith. Notwithstanding any other provision to the contrary, the failure to comply with 

any term, condition or requirement of this exemption will not result in the loss of the 

exemption if the failure to comply was inadvertent and a good faith and reasonable attempt 

was made to comply with all applicable terms, conditions and requirements.

Section II – Contract, Impartial Conduct, and Other Requirements

(a) Contract. Prior to engaging in a transaction described in Section I, Financial Institution

furnishes, delivers, publishes or otherwise makes available to the Retirement Investor a 

promise that incorporates the terms required by Section II(b)-(e) and which, when 

reasonably relied upon by the Retirement Investor for purposes of such transaction, may 

be enforced by the Retirement Investor as a contract (“Contract”).

(b) Fiduciary. The Contract affirmatively states that the Adviser and Financial Institution are 

fiduciaries under ERISA or the Code, or both, with respect to the investment 

recommendations to the Retirement Investor made by the Adviser or Financial Institution.

(c) Impartial Conduct Standards. The Contract affirmatively states:

(1) When providing investment advice to the Retirement Investor regarding the Asset,
ATTACHMENT 4

DRAFT 

September 17, 2015

4

the Financial Institution and its authorized Advisers will provide investment advice 

that is in the Best Interest of the Retirement Investor;

(2) When providing investment advice to the Retirement Investor regarding the Asset,

the Financial Institution and its authorized Advisers will not recommend an Asset if

the total amount of compensation anticipated to be received by the Adviser, 

Financial Institution, Affiliates and Related Entities in connection with the purchase, 

sale or holding of the Asset by the Plan, participant or beneficiary account, or IRA, 

will exceed reasonable compensation in relation to the investment features, 

guarantees, and related benefits of the Asset and the total services they provide to 

the Retirement Investor; and

(3) The statements of the Financial Institution and its authorized Advisers about the

Asset, fees, Material Conflicts of Interest, and any other matters relevant to a 

Retirement Investor’s investment decisions, will not be misleading.

(d) Policies and Procedures. The relief under Section I shall be further conditioned upon

the following: 

(1) The Financial Institution has adopted written policies and procedures reasonably 

designed to mitigate the impact of Material Conflicts of Interest and ensure that

its authorized Advisers adhere to the Impartial Conduct Standards set forth in

Section II(c);

(2) If the Financial Institution or (to the best of its knowledge) any Affiliate or Related 

Entity pays any form of compensation to Advisers that varies based on the Assets 

that they recommend, including payouts based upon commissions, trail 

commissions or 12b-1 fees, ticket charge discounts, awards, or product contests, 
ATTACHMENT 4

DRAFT 

September 17, 2015

5

and not solely on neutral factors such as the difference in time, effort, and analysis 

necessary to provide prudent advice, then the written policies and procedures 

described in paragraph (1) must be reasonably designed to ensure that such 

Advisers only make recommendations that are in the Best Interest of the Retirement 

Investor. These policies and procedures must include procedures to mitigate, to the 

extent practical, the effects of these forms of compensation on an Adviser’s choice 

of Asset, to supervise the recommendations made by those Advisers, to promptly 

detect possible recommendations that may not be in the Best Interest of the 

Retirement Investor, and to take prompt and appropriate action concerning any 

recommendation that is found to have not been in the Best Interest of the 

Retirement Investor.

(e) Disclosures. The Financial Institution must specifically:

(1) Identify and disclose any Material Conflicts of Interest;

(2) Inform the Retirement Investor that, upon request, the Financial Institution shall 

furnish the Retirement Investor with a disclosure containing the information 

described in 29 C.F.R. section 2550.408b-2(c)(1)(iv)(C) as though the Retirement 

Investor were the “responsible plan fiduciary” under 29 C.F.R. section 2550.408b2 (c)(1)(viii)(E) entitled to a 29 C.F.R. section 2550.408b-2 disclosure from the 

Advisor as a “covered service provider” with respect to the recommendation 

provided to the Retirement Investor and the Plan or IRA were a “covered plan” 

under 29 C.F.R. section 2550.408b-2 (c)(1)(ii).

(f) Prohibited Contractual Provisions. The written contract shall not contain the following:

(1) Exculpatory provisions disclaiming or otherwise limiting liability of the Financial 
ATTACHMENT 4

DRAFT 

September 17, 2015

6

Institution and its authorized Advisers for a violation of the contract’s terms; and

(2) A provision under which the Plan, IRA or Retirement Investor waives or qualifies

its right to bring or participate in a class action or other representative action in court 

in a dispute with the Financial Institution and its authorized Advisers, provided that 

the Contract may limit damages to an amount equal to the return an investor would 

have earned from an investment that was in the Best Interest of the Retirement 

Investor at the time of the recommendation and the return that the Retirement 

Investor actually earned, and to preclude the right to rescind any transaction the 

rescission of which is not otherwise contemplated by federal law.

Section III – Transaction Disclosure Requirements

In connection with any covered transaction described in Section I, the Financial Institution and 

its authorized Advisers shall furnish to the Retirement Investor information that provides, with

respect to each Asset recommended, an investment-related fee and expense disclosure in the 

form described by 29 C.F.R. section 2550.404a-5(d)(1)(iv).

Section IV – Range of Investment Options

(a) General. The Financial Institution offers for purchase, sale or holding, and the Adviser 

makes available to the Plan, participant or beneficiary account, or IRA for purchase, sale or 

holding, a range of Assets that is broad enough to enable the Adviser to make 

recommendations with respect to all of the asset classes reasonably necessary to serve the 

Best Interests of the Retirement Investor in light of its investment objectives, risk tolerance, 

and specific financial circumstances.

(b) Limited Range of Investment Options. To the extent that a Financial Institution limits the 

Assets available, such that paragraph (a) above is not met, for purchase, sale or holding 
ATTACHMENT 4

DRAFT 

September 17, 2015

7

based on whether the Assets are Proprietary Products, generate Third Party Payments, or for 

other reasons, the exemption may nevertheless be relied upon, provided that, prior to the 

Retirement Investors acting upon the investment recommendations, the Adviser or Financial 

Institution gives the Retirement Investor clear written notice of the limitations placed on the

Assets that the Adviser may offer for purchase, sale or holding by a Plan, participant or 

beneficiary account, or an IRA. Notice is insufficient if it merely states that the Financial 

Institution or Adviser “may” limit investment recommendations based on whether the Assets 

are Proprietary Products or generate Third Party Payments, or for other reasons, without 

specific disclosure of the extent to which recommendations are, in fact, limited on that basis.

(c) ERISA plan participants and beneficiaries. Some Advisers and Financial Institutions 

provide advice to participants in ERISA-covered participant directed individual account 

Plans in which the menu of investment options is selected by an Independent Plan

fiduciary. In such cases, the Adviser and Financial Institution do not have to comply with 

Section IV(b) in connection with their advice to individual participants and beneficiaries on

the selection of Assets from the menu provided. This exception is not available for advice

with respect to investments within open brokerage windows or otherwise outside the Plan’s 

designated investment options.

Section V –Disclosure to the Department and Recordkeeping

(a) Recordkeeping. The Financial Institution maintains for a period of six (6) years, in a

manner that is accessible for examination, the records necessary to enable the persons 

described in paragraph (b)(1) of this Section to determine whether the conditions of this

exemption have been met, except that:

(1) If such records are lost or destroyed, due to circumstances beyond the control of
ATTACHMENT 4

DRAFT 

September 17, 2015

8

the Financial Institution, then no prohibited transaction will be considered to have 

occurred solely on the basis of the unavailability of those records; and

(2) No party, other than the Financial Institution responsible for complying with this 

paragraph (c), will be subject to the civil penalty that may be assessed under 

ERISA section 502(i) or the taxes imposed by Code section 4975(a) and (b), if

applicable, if the records are not maintained or are not available for examination as 

required by paragraph (b), below.

(b) (1) Except as provided in paragraph (b)(2) of this Section, and notwithstanding any 

provisions of ERISA section 504(a)(2) and (b), the records referred to in paragraph (a) 

of this Section are unconditionally available at their customary location for examination 

during normal business hours by:

(A) Any authorized employee or representative of the Department or the Internal 

Revenue Service;

(B) Any fiduciary of a Plan that engaged in a purchase, sale or holding of an 

Asset described in this exemption, or any authorized employee or 

representative of such fiduciary;

(C) Any contributing employer and any employee organization whose 

members are covered by a Plan described in paragraph (b)(1)(B), or 

any authorized employee or representative of these entities; or

(D) Any participant or beneficiary of a Plan described in paragraph (B), IRA 

owner, or the authorized representative of such participant, beneficiary or

owner; and

(2) None of the persons described in paragraph (b)(1)(B)-(D) of this Section are 
ATTACHMENT 4

DRAFT 

September 17, 2015

9

authorized to examine privileged trade secrets or privileged commercial or financial 

information, of the Financial Institution, or information identifying other

individuals.

(3) Should the Financial Institution refuse to disclose information on the basis that the 

information is exempt from disclosure, the Financial Institution must, by the close 

of the thirtieth (30th) day following the request, provide a written notice advising 

the requestor of the reasons for the refusal and that the Department may request 

such information.

Section VI – Insurance and Annuity Contract Exemption

(a) In general. In addition to prohibiting fiduciaries from receiving compensation from third 

parties and compensation that varies on the basis of the fiduciaries’ investment advice, 

ERISA and the Internal Revenue Code prohibit the purchase by a Plan, participant or 

beneficiary account, or IRA of an insurance or annuity product from an insurance 

company that is a service provider to the Plan or IRA. This exemption permits a Plan, 

participant or beneficiary account, or IRA to purchase an Asset that is an insurance or 

annuity contract in accordance with an Adviser’s advice, from a Financial Institution that 

is an insurance company and that is a service provider to the Plan or IRA. This 

exemption is provided because purchases of insurance and annuity products are often 

prohibited purchases and sales involving insurance companies that have a pre-existing 

party in interest relationship to the Plan or IRA.

(b) Covered transaction. The restrictions of ERISA section 406(a)(1)(A) and (D), and the

sanctions imposed by Code section 4975(a) and (b), by reason of Code section 

4975(c)(1)(A) and (D), shall not apply to a fiduciary’s causing the purchase of an Asset that 
ATTACHMENT 4

DRAFT 

September 17, 2015

10

is an insurance or annuity contract by a Plan subject to Title I of ERISA, participant or 

beneficiary account, or IRA, from a Financial Institution that is an insurance company and 

that is a party in interest or disqualified person, if:

(1) The transaction is effected by the insurance company in the ordinary course of

its business as an insurance company;

(2) The combined total of all fees and compensation received by the insurance 

company and any Affiliate is not in excess of reasonable compensation under the 

circumstances; and

(3) The terms of the purchase are at least as favorable to the Plan, participant or 

beneficiary account, or IRA as the terms generally available in an arm’s length 

transaction with an unrelated party.

Section VII – Exemption for Pre-Existing Transactions

(a) In general. ERISA and the Internal Revenue Code prohibit Advisers, Financial Institutions

and their Affiliates and Related Entities from receiving variable or third-party compensation 

as a result of the Adviser’s and Financial Institution’s advice to a Plan, participant or 

beneficiary, or IRA owner. Some Advisers and Financial Institutions did not consider 

themselves fiduciaries within the meaning of 29 CFR section 2510-3.21 before the 

applicability date of the amendment to 29 CFR section 2510-3.21 (the Applicability Date). 

Other Advisers and Financial Institutions entered into transactions involving Plans, 

participant or beneficiary accounts, or IRAs before the Applicability Date, in accordance 

with the terms of a prohibited transaction exemption that has since been amended. This

exemption permits Advisers, Financial Institutions, and their Affiliates and Related Entities,

to receive compensation, such as 12b-1 fees, in connection with the purchase , sale or 
ATTACHMENT 4

DRAFT 

September 17, 2015

11

holding of an Asset by a Plan, participant or beneficiary account, or an IRA, as a result of

the Adviser’s and Financial Institution’s advice, that occurred prior to the Applicability 

Date, as described and limited below.

(b) Covered transaction. Subject to the applicable conditions described below, the restrictions 

of ERISA section 406(a)(1)(D) and 406(b) and the sanctions imposed by Code section 

4975(a) and (b), by reason of Code section 4975(c)(1)(D), (E) and (F), shall not apply to 

the receipt of compensation by an Adviser, Financial Institution, and any Affiliate and 

Related Entity, for services provided in connection with the purchase, holding or sale of an 

Asset, as a result of the Adviser’s and Financial Institution’s advice, that was purchased, 

sold, or held by a Plan, participant or beneficiary account, or an IRA before the 

Applicability Date if:

(1) The compensation is received pursuant to an agreement, arrangement 

or understanding that was entered into prior to the Applicability Date;

(2) The purchase or sale of the Asset was not a non-exempt prohibited 

transaction pursuant to ERISA section 406 and Code section 4975 on the 

date it occurred.

Section VIII – Definitions

For purposes of these exemptions:

(a) “Adviser” means an individual who:

(1) Is a fiduciary of a Plan or IRA solely by reason of the provision of investment 

advice described in ERISA section 3(21)(A)(ii) or Code section 4975(e)(3)(B), or

both, and the applicable regulations, with respect to the Assets involved in the

transaction;
ATTACHMENT 4

DRAFT 

September 17, 2015

12

(2) Is an employee, independent contractor, agent, or registered representative of a

Financial Institution; and

(3) Satisfies the applicable federal and state regulatory and licensing requirements of 

insurance, banking, and securities laws with respect to the covered transaction.

(b) “Affiliate” of an Adviser or Financial Institution means –

(1) Any person directly or indirectly through one or more intermediaries, controlling, 

controlled by, or under common control with the Adviser or Financial Institution. 

For this purpose, “control’’ means the power to exercise a controlling influence over

the management or policies of a person other than an individual;

(2) Any officer, director, employee, agent, registered representative, relative (as 

defined in ERISA section 3(15)), member of family (as defined in Code section 

4975(e)(6)) of, or partner in, the Adviser or Financial Institution; and

(3) Any corporation or partnership of which the Adviser or Financial Institution is 

an officer, director or employee or in which the Adviser or Financial Institution 

is a partner.

(c) An “Asset,” for purposes of this exemption, includes securities, other property, and other 

financial instruments or arrangements recommended to a Retirement Investor including, in 

the case of a recommendation that a plan participant or beneficiary or beneficial owner of

an IRA acting on behalf of the IRA take a distribution of benefits in a rollover transaction, 

a rollover IRA vehicle recommended for purposes of accepting the proceeds of such 

rollover distribution and in the case of a recommendation that a plan participant or 

beneficiary or beneficial owner of an IRA acting on behalf of the IRA utilize the services 

of an investment advice or management services provider, the recommendation of such 
ATTACHMENT 4

DRAFT 

September 17, 2015

13

fiduciary services.

(d) Investment advice is in the “Best Interest” of the Retirement Investor when the Adviser or 

Financial Institution providing the advice acts i) with the care, skill, prudence, and diligence 

under the circumstances then prevailing that a prudent person acting in a like capacity and 

familiar with such matters would use in the conduct of an enterprise of a like character and 

with like aims and (ii) solely in the interest of the Retirement Investor, in each case as such 

standards are interpreted under Section 404 of ERISA.

(e) “Financial Institution” means the entity that employs the Adviser or otherwise retains

such individual as an independent contractor, agent or registered representative and that

is:

(1) Registered as an investment adviser under the Investment Advisers Act of 1940 (15

USC 80b-1 et seq.) or under the laws of the state in which the adviser maintains its 

principal office and place of business;

(2) A bank or similar financial institution supervised by the United States or state, or 

a savings association (as defined in section 3(b)(1) of the Federal Deposit 

Insurance Act (12 USC 1813(b)(1)), but only if the advice resulting in the 

compensation is provided through a trust department of the bank or similar 

financial institution or savings association which is subject to periodic 

examination and review by federal or state banking authorities;

(3) An insurance company qualified to do business under the laws of a state,

provided that such insurance company:

(A) Has obtained a Certificate of Authority from the insurance commissioner 

of its domiciliary state which has neither been revoked nor suspended,
ATTACHMENT 4

DRAFT 

September 17, 2015

14

(B) Has undergone and shall continue to undergo an examination by an 

Independent certified public accountant for its last completed taxable year

or has undergone a financial examination (within the meaning of the law of

its domiciliary state) by the state’s insurance commissioner within the 

preceding 5 years, and

(C) Is domiciled in a state whose law requires that actuarial review of reserves 

be conducted annually by an Independent firm of actuaries and reported to 

the appropriate regulatory authority; or

(4) A broker or dealer registered under the Securities Exchange Act of 1934 (15 USC 

78a et seq.).

(f) “Independent” means a person that:

(1) Is not the Adviser, the Financial Institution or any Affiliate relying on the 

exemption, 

(2) Does not receive compensation or other consideration for his or her own account

from the Adviser, the Financial Institution or Affiliate; and

(3) Does not have a relationship to or an interest in the Adviser, the Financial 

Institution or Affiliate that might affect the exercise of the person’s best judgment 

in connection with transactions described in this exemption.

(g) “Individual Retirement Account” or “IRA” means any trust, account or annuity described in 

Code section 4975(e)(1)(B) through (F), including, for example, an individual retirement 

account described in section 408(a) of the Code and a health savings account described in 

section 223(d) of the Code.

(h) A “Material Conflict of Interest” exists when an Adviser or Financial Institution has a 
ATTACHMENT 4

DRAFT 

September 17, 2015

15

financial interest that could affect the exercise of its best judgment as a fiduciary in 

rendering advice to a Retirement Investor regarding an Asset.

(i) “Plan” means any employee benefit plan described in section 3(3) of the Act and any

plan described in section 4975(e)(1)(A) of the Code.

(j) “Proprietary Product” means a product that is managed or issued by the Financial 

Institution or any of its Affiliates.

(k) “Related Entity” means any entity other than an Affiliate in which the Adviser or Financial

Institution has an interest which may affect the exercise of its best judgment as a fiduciary.

(l) “Retirement Investor” means –

(1) A participant or beneficiary of a Plan subject to Title I of ERISA with authority

to direct the investment of assets in his or her Plan account or to take a 

distribution, including a participant or beneficiary of a Plan subject to Title I of

ERISA sponsored by the Financial Institution or sponsored by a member of its 

controlled group or a under common control with the Financial Institution as 

defined in Code section 414(b) and (c) respectively;

(2) The beneficial owner of an IRA acting on behalf of the IRA; or

(3) A fiduciary of a Plan subject to Title I of ERISA, to the extent it acts as a 

fiduciary with authority to make investment decisions for the Plan.

(m) “Third-Party Payments” mean sales charges when not paid directly by the Plan, 

participant or beneficiary account, or IRA, 12b-1 fees and other payments paid to the

Financial Institution or an Affiliate or Related Entity by a third party as a result of the 

purchase, sale or holding of an Asset by a Plan, participant or beneficiary account, or IRA.
ATTACHMENT 5

Amendment to the definition of Fiduciary Advice as a Call to Action

“(f) Definitions. For purposes of this section—

(1) “Recommendation” means a

(i) A particularized communication that, based on its content, context, and presentation,

would reasonably be viewed as a suggestion that the advice recipient engage in or call to take 

action or to refrain from taking a particular course of action; and

(ii) With respect to a Financial Institution or Adviser that recommends a transaction or

investment strategy involving a security or securities, “recommendation” shall have the

same meaning as Financial Industry Regulatory Authority (FINRA) Rule 2111 (Suitability) or 

any successor rule, as interpreted by FINRA.

We further propose that the Department include the following in the preamble to the final 

regulation:

With respect to the scope or types of communications that might constitute a “call to 

action,” it is the Department’s view that communications that merely inform or educate 

but do not result in a “call to action” to invest in a particular investment product or pursue 

a particular investment strategy, would not result in a recommendation. By way of 

example, descriptions on how an annuity works, what the features are of the annuity and 

what fees and charges might apply, would not cross the line and constitute a 

recommendation under the regulation even though the information might relate to 

proprietary products or services. Another example of education would include an 

explanation about what options would be available to an employee participating in a 

401(k) plan where the employee is separating from employment. In this context, 

information about the benefits of staying in a plan or rolling over assets to an IRA, the 

advantages of annuitization or other forms of lifetime income benefits, including 
ATTACHMENT 5

proprietary products and services, would constitute non-fiduciary education under the 

regulation, absent a “call to action” referencing a specific course of action to be taken.

We believe these proposed modifications would help draw the line between education and 

fiduciary recommendation and thus open the door for the flow of critical education assistance to 

plan participants and IRA holders.
ATTACHMENT 6

Hire me as an amendment to fiduciary advice 

Our proposed changes to the Best Interest Exemption are premised on there being 

reasonable changes to the regulation itself. In particular, we expect that there will be clarification 

regarding the “selling of investment advice services”- as distinguished from the provision of 

investment advice. Many in the industry commented during the first round of comments on the 

fact that merely selling investment advice services cannot be a fiduciary act and this concept was 

discussed as a “hire me” provision during the August hearings. Consistent with DOL guidance 

under section 408(b)(2), a person must be permitted to advocate for his or her own hiring to 

provide investment advice, especially in a Request For Proposal or “RFP.” While there are many 

ways to address this issue, we believe that an appropriate approach would be to provide under 

section 2550.3-21(a)(iv) new language as shown by the following underlined language: 

(iv) A recommendation of a person who is also going to receive a fee or other 

compensation for providing any of the types of advice described in (i) through (iii); and provided 

however, that a recommendation of one’s self, one’s employer, or an affiliate to provide any of 

the types of advice described in (i) through (iii) or to provide investment advisory or 

management services, through a response to a request for proposals or any other urging, shall not 

be deemed the provision of investment advice.