II

104TH CONGRESS

2D SESSION S. 1818

To amend the Employee Retirement Income Security Act of 1974 to provide

for retirement savings and security.

IN THE SENATE OF THE UNITED STATES

MAY 23, 1996

Mr. DASCHLE (by request) (for himself, Mr. BRYAN, Mr. DODD, Mr. KENNEDY, Mr. LEAHY, Ms. MIKULSKI, Ms. MOSELEY-BRAUN, Mr. ROCKEFELLER, and Mr. SIMON) introduced the following bill; which was read

twice and referred to the Committee on Labor and Human Resources

A BILL

To amend the Employee Retirement Income Security Act

of 1974 to provide for retirement savings and security.

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

3 TITLE I—SHORT TITLE; TABLE

4 OF CONTENTS

5 SEC. 1000. SHORT TITLE; TABLE OF CONTENTS.

6 (a) SHORT TITLE.—This Act may be cited as the

7 ‘‘Retirement Savings and Security Act’’.

8 (b) TABLE OF CONTENTS.—

TITLE I—SHORT TITLE; TABLE OF CONTENTS
2

•S 1818 IS

Sec. 1000. Short title; table of contents.

TITLE II—ERISA PROVISIONS

Sec. 2000. Amendment of ERISA.

Subtitle A—Expanded Pension Coverage and Simplification

Sec. 2001. Reporting and fiduciary requirements relating to NESTs.

Sec. 2002. Elimination of requirement for plan descriptions and the filing requirement for summary plan descriptions and descriptions of

material modifications to a plan; technical corrections.

Sec. 2003. Conforming amendment relating to investment in qualified State

prepaid tuition programs.

Subtitle B—Portability

Sec. 2011. Missing participants.

Sec. 2012. Elimination of special vesting rule for multiemployer plans.

Sec. 2013. Treatment of loans during military service.

Subtitle C—Enhanced Security

CHAPTER 1—GENERAL PROVISIONS

Sec. 2021. Multiemployer plan benefits guaranteed.

Sec. 2022. Reversion report.

Sec. 2023. Full funding limitation for multiemployer plans.

Sec. 2024. Prohibited transactions.

Sec. 2025. Substantial owner benefits.

CHAPTER 2—ERISA ENFORCEMENT

Sec. 2031. Short title.

Sec. 2032. Repeal of limited scope audit.

Sec. 2033. Reporting and enforcement requirements for employee benefit plans.

Sec. 2034. Additional requirements for qualified public accountants.

Sec. 2035. Clarification of fiduciary penalties.

1 TITLE II—ERISA PROVISIONS

2 SEC. 2000. AMENDMENT OF ERISA.

3 Except as otherwise expressly provided, whenever in

4 this title an amendment or repeal is expressed in terms

5 of an amendment to, or repeal of, a section or other provi6 sion, the reference shall be considered to be made to a

7 section or other provision of the Employee Retirement In8 come Security Act of 1974.
3

•S 1818 IS

1 Subtitle A—Expanded Pension

2 Coverage and Simplification

3 SEC. 2001. REPORTING AND FIDUCIARY REQUIREMENTS

4 RELATING TO NESTS.

5 (a) REPORTING REQUIREMENTS.—Section 101 (29

6 U.S.C. 1021) is amended by redesignating subsection (g)

7 as subsection (h) and by inserting after subsection (f) the

8 following new subsection:

9 ‘‘(g) NESTS.—

10 ‘‘(1) IN GENERAL.—Except as provided in this

11 subsection, no reporting or disclosure requirements

12 under this title shall apply with respect to a pension

13 plan under section 408(p) of the Internal Revenue

14 Code of 1986.

15 ‘‘(2) SUMMARY DESCRIPTION.—The trustee or

16 issuer of any NEST established pursuant to a pen17 sion plan under section 408(p) of such Code shall

18 provide to the employer maintaining the arrange19 ment each year a description containing the follow20 ing information:

21 ‘‘(A) The name and address of the em22 ployer and the trustee.

23 ‘‘(B) The requirements for eligibility for

24 participation.
4

•S 1818 IS

1 ‘‘(C) The benefits provided with respect to

2 the arrangement.

3 ‘‘(D) The time and method of making elec4 tions with respect to the arrangement.

5 ‘‘(E) The procedures for, and effects of,

6 distributions (including rollovers) from the ar7 rangement.

8 ‘‘(3) EMPLOYEE NOTIFICATION.—The employer

9 shall notify each employee immediately before the

10 period for which an election described in section

11 408(p)(7)(B) of such Code may be made of the em12 ployee’s opportunity to make such election. Such no13 tice shall include a copy of the description described

14 in paragraph (2) and shall indicate whether match15 ing contributions will be made with respect to the

16 employee’s elective contributions, and the level of

17 employer matching and nonelective contributions

18 which will be made, for the year for which the elec19 tion may be made.’’

20 (b) FIDUCIARY DUTIES.—Section 404 (29 U.S.C.

21 1104) is amended by redesignating subsection (d) as sub22 section (e) and by adding after subsection (c) the following

23 new subsection:

24 ‘‘(d)(1) In the case of a NEST established pursuant

25 to a plan under section 408(p) of the Internal Revenue
5

•S 1818 IS

1 Code of 1986, no plan sponsor who is otherwise a fiduciary

2 shall be liable under this part for any loss, or by reason

3 of any breach, which results from—

4 ‘‘(A) the designation of the trustee or issuer of

5 the NEST, or

6 ‘‘(B) the manner in which the assets in the

7 NEST are invested,

8 after the earliest of the dates described in paragraph (2).

9 ‘‘(2) The dates described in this paragraph are as fol10 lows:

11 ‘‘(A) The date on which an affirmative election

12 with respect to the initial investment of any con13 tribution is made by the individual for whose benefit

14 the NEST is established.

15 ‘‘(B) The date on which there is a rollover of

16 the assets of the NEST to any other NEST or indi17 vidual retirement account or annuity described in

18 section 408 of the Internal Revenue Code of 1986.

19 ‘‘(C) The date which is 1 year after the NEST

20 is established.

21 ‘‘(3) This subsection shall not apply to a participant

22 in a plan unless the participant is notified in writing (ei23 ther separately or as part of the notice under section

24 101(g)(3)) that the participant’s balance may be trans25 ferred without cost or penalty to another individual ac-
6

•S 1818 IS

1 count or annuity in accordance with section 408(d)(3)(G)

2 of the Internal Revenue Code of 1986.’’

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

4 this section shall apply to years beginning after December

5 31, 1996.

6 SEC. 2002. ELIMINATION OF REQUIREMENT FOR PLAN DE7 SCRIPTIONS AND THE FILING REQUIREMENT

8 FOR SUMMARY PLAN DESCRIPTIONS AND DE9 SCRIPTIONS OF MATERIAL MODIFICATIONS

10 TO A PLAN; TECHNICAL CORRECTIONS.

11 (a) FILING REQUIREMENTS.—Section 101(b) (29

12 U.S.C. 1021(b)) is amended by striking paragraphs (1),

13 (2), and (3) and by redesignating paragraphs (4) and (5)

14 as paragraphs (1) and (2), respectively.

15 (b) PLAN DESCRIPTION.—

16 (1) IN GENERAL.—Section 102(a) (29 U.S.C.

17 1022(a)) is amended—

18 (A) by striking paragraph (2), and

19 (B) by striking ‘‘(a)(1)’’ and inserting

20 ‘‘(a)’’.

21 (2) CONFORMING AMENDMENTS.—

22 (A) Section 102(b) (29 U.S.C. 1022(b)) is

23 amended by striking ‘‘The plan description and

24 summary plan description shall contain’’ and
7

•S 1818 IS

1 inserting ‘‘The summary plan description shall

2 contain’’.

3 (B) The heading for section 102 is amend4 ed by striking ‘‘PLAN DESCRIPTION AND’’.

5 (c) FURNISHING OF REPORTS.—

6 (1) IN GENERAL.—Section 104(a)(1) (29

7 U.S.C. 1024(a)(1)) is amended to read as follows:

8 ‘‘SEC. 104. (a)(1) The administrator of any employee

9 benefit plan subject to this part shall file with the Sec10 retary the annual report for a plan year within 210 days

11 after the close of such year (or within such time as may

12 be required by regulations promulgated by the Secretary

13 in order to reduce duplicative filing). The Secretary shall

14 make copies of such annual reports available for inspection

15 in the public document room of the Department of

16 Labor.’’

17 (2) SECRETARY MAY REQUEST DOCUMENTS.—

18 (A) IN GENERAL.—Section 104(a) (29

19 U.S.C. 1024(a)) is amended by adding at the

20 end the following new paragraph:

21 ‘‘(6) The administrator of any employee benefit plan

22 subject to this part shall furnish to the Secretary, upon

23 request, any documents relating to the employee benefit

24 plan, including but not limited to, the latest summary plan

25 description (including any summaries of plan changes not
8

•S 1818 IS

1 contained in the summary plan description), and the bar2 gaining agreement, trust agreement, contract, or other in3 strument under which the plan is established or operated.’’

4 (B) PENALTY.—Section 502(c) (29 U.S.C.

5 1132(c)) is amended by adding at the end the

6 following new paragraph:

7 ‘‘(5) If, within 30 days of a request by the Secretary

8 to a plan administrator for documents under section

9 104(a)(6), the plan administrator fails to furnish the ma10 terial requested to the Secretary, the Secretary may assess

11 a civil penalty against the plan administrator of up to

12 $100 a day from the date of such failure (but in no event

13 in excess of $1,000 per request). No penalty shall be im14 posed under this paragraph for any failure resulting from

15 matters reasonably beyond the control of the plan admin16 istrator.’’

17 (d) CONFORMING AMENDMENTS.—

18 (1) Section 104(b)(1) (29 U.S.C. 1024(b)(1)) is

19 amended by striking ‘‘section 102(a)(1)’’ each place

20 it appears and inserting ‘‘section 102(a)’’.

21 (2) Section 104(b)(2) (29 U.S.C. 1024(b)(2)) is

22 amended by striking ‘‘the plan description and’’ and

23 inserting ‘‘the latest updated summary plan descrip24 tion and’’.
9

•S 1818 IS

1 (3) Section 104(b)(4) (29 U.S.C. 1024(b)(4)) is

2 amended by striking ‘‘plan description’’.

3 (4) Section 106(a) (29 U.S.C. 1026(a)) is

4 amended by striking ‘‘descriptions,’’.

5 (5) Section 107 (29 U.S.C. 1027) is amended

6 by striking ‘‘description or’’.

7 (6) Paragraph (2)(B) of section 108 (29 U.S.C.

8 1028) is amended to read as follows: ‘‘(B) after pub9 lishing or filing the annual reports,’’.

10 (7) Section 502(a)(6) (29 U.S.C. 1132(a)(6)) is

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

12 and inserting ‘‘paragraph (2), (4), or (5) of sub13 section (c) or subsection (i) or (l)’’.

14 (e) TECHNICAL CORRECTIONS TO ERISA.—

15 (1) Section 502(c)(1) (29 U.S.C. 1132(c)(1)) is

16 amended by adding at the end the following new

17 sentence: ‘‘For purposes of this paragraph, each vio18 lation described in subparagraph (A) with respect to

19 any single participant, and each violation described

20 in subparagraph (B) with respect to any single par21 ticipant or beneficiary, shall be treated as a separate

22 violation.’’

23 (2) Section 502(c) (29 U.S.C. 1132(c)) is

24 amended—
10

•S 1818 IS

1 (A) by striking the last two sentences of

2 paragraph (4), and

3 (B) by adding at the end the following new

4 paragraph:

5 ‘‘(5) The Secretary and the Secretary of Health and

6 Human Services shall maintain such ongoing consultation

7 as may be necessary and appropriate to coordinate en8 forcement under this subsection with enforcement under

9 section 1144(c)(9) of the Social Security Act.’’

10 (f) EFFECTIVE DATE.—The provisions of this section

11 shall take effect on the date of the enactment of this Act.

12 SEC. 2003. CONFORMING AMENDMENT RELATING TO IN13 VESTMENTS IN QUALIFIED STATE PREPAID

14 TUITION PROGRAMS.

15 (a) IN GENERAL.—Subsection (b) of section 408 is

16 amended by adding at the end the following new para17 graph:

18 ‘‘(14) any purchase of a qualified State prepaid

19 tuition program instrument to which section 408(q)

20 of the Internal Revenue Code of 1986 applies.’’

21 (b) EFFECTIVE DATE.—The amendment made by

22 this section shall apply to taxable years beginning after

23 December 31, 1995.
11

•S 1818 IS

1 Subtitle B—Portability

2 SEC. 2011. MISSING PARTICIPANTS.

3 (a) IN GENERAL.—Section 4050 (29 U.S.C. 1350)

4 is amended by redesignating subsection (c) as subsection

5 (e) and by inserting after subsection (b) the following new

6 subsections:

7 ‘‘(c) MULTIEMPLOYER PLANS.—The corporation

8 shall prescribe rules similar to the rules in subsection (a)

9 for multiemployer plans covered by this title that termi10 nate under section 4041A.

11 ‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.—

12 ‘‘(1) TRANSFER TO CORPORATION.—The plan

13 administrator of a plan described in paragraph (4)

14 may elect to transfer a missing participant’s benefits

15 to the corporation upon termination of the plan.

16 ‘‘(2) INFORMATION TO THE CORPORATION.—To

17 the extent provided in regulations, the plan adminis18 trator of a plan described in paragraph (4) shall,

19 upon termination of the plan, provide the corpora20 tion information with respect to benefits of a miss21 ing participant if the plan transfers such benefits—

22 ‘‘(A) to the corporation, or

23 ‘‘(B) to an entity other than the corpora24 tion or a plan described in paragraph (4)(B)(ii).
12

•S 1818 IS

1 ‘‘(3) PAYMENT BY THE CORPORATION.—If ben2 efits of a missing participant were transferred to the

3 corporation under paragraph (1), the corporation

4 shall, upon location of the participant or beneficiary,

5 pay to the participant or beneficiary the amount

6 transferred (or the appropriate survivor benefit) ei7 ther—

8 ‘‘(A) in a single sum (plus interest), or

9 ‘‘(B) in such other form as is specified in

10 regulations of the corporation.

11 ‘‘(4) PLANS DESCRIBED.—A plan is described

12 in this paragraph if—

13 ‘‘(A) the plan is a pension plan (within the

14 meaning of section 3(2))—

15 ‘‘(i) to which the provisions of this

16 section do not apply (without regard to

17 this subsection), and

18 ‘‘(ii) which is not a plan described in

19 paragraphs (2) through (11) of section

20 4021(b), and

21 ‘‘(B) at the time the assets are to be dis22 tributed upon termination, the plan—

23 ‘‘(i) has missing participants, and

24 ‘‘(ii) has not provided for the transfer

25 of assets to pay the benefits of all missing
13

•S 1818 IS

1 participants to another pension plan (with2 in the meaning of section 3(2)).

3 ‘‘(5) CERTAIN PROVISIONS NOT TO APPLY.—

4 Subsections (a)(1) and (a)(3) shall not apply to a

5 plan described in paragraph (4).’’

6 (b) CONFORMING AMENDMENTS.—Section 206(f)

7 (29 U.S.C. 1056(f)) is amended—

8 (1) by striking ‘‘title IV’’ and inserting ‘‘section

9 4050’’, and

10 (2) by striking ‘‘the plan shall provide that’’.

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

12 this section shall apply to distributions made after final

13 regulations implementing subsections (c) and (d) of sec14 tion 4050 of the Employee Retirement Income Security

15 Act of 1974 (as added by subsection (a)), respectively, are

16 prescribed.

17 SEC. 2012. ELIMINATION OF SPECIAL VESTING RULE FOR

18 MULTIEMPLOYER PLANS.

19 (a) IN GENERAL.—Paragraph (2) of section 203(a)

20 (29 U.S.C. 1053(a)) is amended—

21 (1) by striking ‘‘subparagraph (A), (B), or (C)’’

22 and inserting ‘‘subparagraph (A) or (B)’’; and

23 (2) by striking subparagraph (C).
14

•S 1818 IS

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

2 this section shall apply to plan years beginning on or after

3 the earlier of—

4 (1) the later of—

5 (A) January 1, 1997, or

6 (B) the date on which the last of the col7 lective bargaining agreements pursuant to

8 which the plan is maintained terminates (deter9 mined without regard to any extension thereof

10 after the date of the enactment of this Act), or

11 (2) January 1, 1999.

12 Such amendments shall not apply to any individual who

13 does not have more than 1 hour of service under the plan

14 on or after the 1st day of the 1st plan year to which such

15 amendments apply.

16 SEC. 2013. TREATMENT OF LOANS DURING MILITARY SERV17 ICE.

18 (a) IN GENERAL.—Section 408(b)(1) (29 U.S.C.

19 1148(b)) is amended by adding at the end the following

20 new sentence: ‘‘A loan made by a plan shall not fail to

21 meet the requirements of the preceding sentence by reason

22 of a loan repayment suspension described under section

23 414(u)(4) of the Internal Revenue Code of 1986.’’

24 (b) EFFECTIVE DATE.—The amendment made by

25 this section shall be effective as of December 12, 1994.
15

•S 1818 IS

1 Subtitle C—Enhanced Security

2 CHAPTER 1—GENERAL PROVISIONS

3 SEC. 2021. MULTIEMPLOYER PLAN BENEFITS GUARAN4 TEED.

5 (a) IN GENERAL.—Section 4022A(c) (29 U.S.C.

6 1322a(c)) is amended—

7 (1) by striking ‘‘$5’’ each place it appears in

8 paragraph (1) and inserting ‘‘$11’’,

9 (2) by striking ‘‘$15’’ in paragraph (1) and in10 serting ‘‘$33’’, and

11 (3) by striking paragraphs (2), (5), and (6) and

12 by redesignating paragraphs (3) and (4) as para13 graphs (2) and (3), respectively.

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

15 this section shall apply to any multiemployer plan that has

16 not received financial assistance (within the meaning of

17 section 4261 of the Employee Retirement Income Security

18 Act of 1974) within the 1-year period ending on the date

19 of the enactment of this Act.

20 SEC. 2022. REVERSION REPORT.

21 (a) IN GENERAL.—Section 4008 (29 U.S.C. 1308)

22 is amended by adding at the end the following new sub23 section:

24 ‘‘(b) REVERSION REPORT.—As soon as practicable

25 after the close of each fiscal year, the Secretary of Labor
16

•S 1818 IS

1 (acting in the Secretary’s capacity as chairman of the cor2 poration’s board) shall transmit to the President and the

3 Congress a report providing information on plans from

4 which residual assets were distributed to employers pursu5 ant to section 4044(d).’’

6 (b) CONFORMING AMENDMENT.—Section 4008 (29

7 U.S.C. 1308) is amended by striking ‘‘SEC. 4008.’’ and

8 inserting ‘‘SEC. 4008. (a) ANNUAL REPORT.—’’.

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

10 this section shall apply to fiscal years beginning after Sep11 tember 30, 1996.

12 SEC. 2023. FULL FUNDING LIMITATION FOR MULTIEM13 PLOYER PLANS.

14 (a) FULL-FUNDING LIMITATION.—Section

15 302(c)(7)(C) (29 U.S.C. 1082(c)(7)(C)) is amended—

16 (1) by inserting ‘‘or in the case of a multiem17 ployer plan,’’ after ‘‘paragraph (6)(B),’’, and

18 (2) by inserting ‘‘AND MULTIEMPLOYER PLANS’’

19 after ‘‘PARAGRAPH (6)(B)’’ in the heading thereof.

20 (b) VALUATION.—Section 302(c)(9) (29 U.S.C.

21 1082(c)(9)) is amended—

22 (1) by inserting ‘‘(3 years in the case of a mul23 tiemployer plan)’’ after ‘‘year’’, and

24 (2) by striking ‘‘ANNUAL VALUATION’’ in the

25 heading and inserting ‘‘VALUATION’’.
17

•S 1818 IS

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

2 this section shall apply to plan years beginning after De3 cember 31, 1996.

4 SEC. 2024. PROHIBITED TRANSACTIONS.

5 (a) IN GENERAL.—Section 502(i) (29 U.S.C.

6 1132(i)) is amended by striking ‘‘5 percent’’ and inserting

7 ‘‘10 percent’’.

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

9 this section shall apply to prohibited transactions occur10 ring after the date of enactment of this Act.

11 SEC. 2025. SUBSTANTIAL OWNER BENEFITS.

12 (a) MODIFICATION OF PHASE-IN OF GUARANTEE.—

13 Subparagraphs (B) and (C) of section 4022(b)(5) (29

14 U.S.C. 1322(b)(5)) are amended to read as follows:

15 ‘‘(B) For purposes of this title, the term ‘majority

16 owner’ has the same meaning as substantial owner under

17 subparagraph (A), except that subparagraph (A) shall be

18 applied by substituting ‘50 percent or more’ for ‘more

19 than 10 percent’ each place it appears.

20 ‘‘(C) In the case of a participant who is a majority

21 owner, the amount of benefits guaranteed under this sec22 tion shall not exceed the product of—

23 ‘‘(i) a fraction (not to exceed 1) the numerator

24 of which is the number of years from the later of the

25 effective date or the adoption date of the plan to the
18

•S 1818 IS

1 termination date, and the denominator of which is

2 30, and

3 ‘‘(ii) the amount of the majority owner’s month4 ly benefits guaranteed under subsection (a) (as lim5 ited by paragraph (3) of this subsection).’’

6 (b) MODIFICATION OF ALLOCATION OF ASSETS.—

7 (1) Section 4044(a)(4)(B) (29 U.S.C.

8 1344(a)(4)(B)) is amended by striking ‘‘section

9 4022(b)(5)’’ and inserting ‘‘section 4022(b)(5)(C)’’.

10 (2) Section 4044(b) (29 U.S.C. 1344(b)) is

11 amended—

12 (A) by striking ‘‘(5)’’ in paragraph (2) and

13 inserting ‘‘(4), (5),’’, and

14 (B) by redesignating paragraphs (3)

15 through (6) as paragraphs (4) through (7), re16 spectively, and by inserting after paragraph (2)

17 the following new paragraph:

18 ‘‘(3) If assets available for allocation under

19 paragraph (4) of subsection (a) are insufficient to

20 satisfy in full the benefits of all individuals who are

21 described in that paragraph, the assets shall be allo22 cated first to benefits described in subparagraph (A)

23 of that paragraph. Any remaining assets shall then

24 be allocated to subparagraph (B). If assets allocated

25 to subparagraph (B) are insufficient to satisfy in full
19

•S 1818 IS

1 the benefits in that subparagraph, the assets shall

2 be allocated pro rata among individuals on the basis

3 of the present value (as of the termination date) of

4 their respective benefits described in that subpara5 graph.’’

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

7 this section shall apply to plan terminations—

8 (1) under section 4041(c) of the Employee Re9 tirement Income Security Act of 1974 (29 U.S.C.

10 1341(c)) with respect to which notices of intent to

11 terminate are provided under section 4041(a)(2) of

12 such Act (29 U.S.C. 1341(a)(2)) on or after the

13 date of the enactment of this Act, or

14 (2) under section 4042 of such Act (29 U.S.C.

15 1342) with respect to which proceedings are insti16 tuted by the corporation on or after such date.

17 CHAPTER 2—ERISA ENFORCEMENT

18 SEC. 2031. SHORT TITLE.

19 This part may be cited as the ‘‘Pension Audit Im20 provement Act of 1996’’.

21 SEC. 2032. REPEAL OF LIMITED SCOPE AUDIT.

22 (a) IN GENERAL.—Section 103(a)(3) (29 U.S.C.

23 1023(a)(3)) is amended by striking subparagraph (C) and

24 by redesignating subparagraph (D) as subparagraph (C).

25 (b) CONFORMING AMENDMENTS.—
20

•S 1818 IS

1 (1) Section 103(a)(3)(A) (29 U.S.C.

2 1023(a)(3)(A)) is amended by striking ‘‘Except as

3 provided in subparagraph (C), the’’ and inserting

4 ‘‘The’’.

5 (2) Section 104(a)(5)(A) (29 U.S.C.

6 1024(a)(5)(A)) is amended by striking ‘‘section

7 103(a)(3)(D)’’ and inserting ‘‘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. 2033. REPORTING AND ENFORCEMENT REQUIRE15 MENTS FOR EMPLOYEE BENEFIT PLANS.

16 (a) IN GENERAL.—Part 1 of subtitle B of title I (29

17 U.S.C. 1021 et seq.) is amended—

18 (1) by redesignating section 111 as section 112,

19 and

20 (2) by inserting after section 110 the following

21 new section:

22 ‘‘DIRECT REPORTING OF CERTAIN EVENTS

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

24 ‘‘(1) NOTIFICATIONS BY PLAN ADMINIS25 TRATOR.—The administrator of an employee benefit

26 plan shall, within 5 business days after the adminis-
21

•S 1818 IS

1 trator determines that there is evidence (or after the

2 administrator is notified under paragraph (2)) that

3 an irregularity may have occurred with respect to

4 the plan—

5 ‘‘(A) notify the Secretary of the irregular6 ity in writing; and

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

8 the accountant who is currently engaged under

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

10 ‘‘(2) NOTIFICATIONS BY ACCOUNTANT.—

11 ‘‘(A) IN GENERAL.—An accountant en12 gaged by the administrator of an employee ben13 efit plan under section 103(a)(3)(A) shall, with14 in 5 business days after the accountant in con15 nection with such engagement determines that

16 there is evidence that an irregularity may have

17 occurred with respect to the plan—

18 ‘‘(i) notify the plan administrator of

19 the irregularity in writing, or

20 ‘‘(ii) if the accountant determines that

21 there is evidence that the irregularity may

22 have involved an individual who is the plan

23 administrator or who is a senior official of

24 the plan administrator, notify the Sec25 retary of the irregularity in writing.
22

•S 1818 IS

1 ‘‘(B) NOTIFICATION UPON FAILURE OF

2 PLAN ADMINISTRATOR TO NOTIFY.—If an ac3 countant who has provided notification to the

4 plan administrator pursuant to subparagraph

5 (A)(i) does not receive a copy of the administra6 tor’s notification to the Secretary required

7 under paragraph (1)(B) within the 5-business

8 day period specified therein, the accountant

9 shall furnish to the Secretary a copy of the ac10 countant’s notification made to the plan admin11 istrator on the next business day following such

12 period.

13 ‘‘(3) IRREGULARITY DEFINED.—

14 ‘‘(A) For purposes of this subsection, the

15 term ‘irregularity’ means—

16 ‘‘(i) a theft, embezzlement, or a viola17 tion of section 664 of title 18, United

18 States Code (relating to theft or embezzle19 ment from an employee benefit plan);

20 ‘‘(ii) an extortion or a violation of sec21 tion 1951 of such title 18 (relating to in22 terference with commerce by threats or vi23 olence);

24 ‘‘(iii) a bribery, a kickback, or a viola25 tion of section 1954 of such title 18 (relat-
23

•S 1818 IS

1 ing to offer, acceptance, or solicitation to

2 influence operations of an employee benefit

3 plan);

4 ‘‘(iv) a violation of section 1027 of

5 such title 18 (relating to false statements

6 and concealment of facts in relation to em7 ployer benefit plan records); or

8 ‘‘(v) a violation of section 411, 501, or

9 511 of this title (relating to criminal viola10 tions).

11 ‘‘(B) The term ‘irregularity’ shall not in12 clude any act or omission described in this

13 paragraph involving less than $1,000 unless

14 there is reason to believe that the act or omis15 sion may bear on the integrity of plan manage16 ment.

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—
24

•S 1818 IS

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.
25

•S 1818 IS

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

2 means any Federal legal holiday and any other day ap3 pointed as a holiday by the State in which the person re4 sponsible for making the notification principally conducts

5 his business.

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

7 Except as provided in this Act, no accountant or plan ad8 ministrator shall be liable to any person for any finding,

9 conclusion, or statement made in any notification made

10 pursuant to subsection (a)(2) or (b)(2), or pursuant to any

11 regulations issued thereunder, if such finding, conclusion,

12 or statement is made in good faith.’’

13 (b) CIVIL PENALTY.—

14 (1) IN GENERAL.—Section 502(c) (29 U.S.C.

15 1132(c)), as amended by section 2002, is amended

16 by redesignating paragraph (6) as paragraph (7)

17 and by inserting after paragraph (5) the following

18 new paragraph:

19 ‘‘(6)(A) The Secretary may assess a civil penalty of

20 up to $100,000 against any administrator who fails to

21 provide the Secretary with any notification as required

22 under section 111.

23 ‘‘(B) The Secretary may assess a civil penalty of up

24 to $100,000 against any accountant who knowingly and
26

•S 1818 IS

1 willfully fails to provide the Secretary with any notification

2 as required under section 111.’’

3 (2) CONFORMING AMENDMENT.—Section

4 502(a)(6) (29 U.S.C. 1132(a)(6)), as amended by

5 section 2002, is amended by striking ‘‘or (5)’’ and

6 inserting ‘‘(5), or (6)’’.

7 (c) CLERICAL AMENDMENTS.—

8 (1) Section 514(d) (29 U.S.C. 1144(d)) is

9 amended by striking ‘‘111’’ and inserting ‘‘112’’.

10 (2) The table of contents in section 1 is amend11 ed by striking the item relating to section 111 and

12 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 or

15 termination of engagement described in such amendments

16 only if the 5-day period described in such amendments in

17 connection with such irregularity or termination com18 mences at least 90 days after the date of the enactment

19 of this Act.

20 SEC. 2034. ADDITIONAL REQUIREMENTS FOR QUALIFIED

21 PUBLIC ACCOUNTANTS.

22 (a) IN GENERAL.—Section 103(a)(3)(C) (29 U.S.C.

23 1023(a)(3)(C)), as redesignated by section 2032, is

24 amended—
27

•S 1818 IS

1 (1) by inserting ‘‘(i)’’ after ‘‘(C)’’;

2 (2) by inserting ‘‘, with respect to any engage3 ment of an accountant under subparagraph (A)’’

4 after ‘‘means’’;

5 (3) by redesignating clauses (i), (ii), and (iii) as

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

7 (4) by striking the period at the end of sub8 clause (III) (as so redesignated) and inserting a

9 comma;

10 (5) by adding after subclause (III) (as so redes11 ignated), and flush with clause (i), the following:

12 ‘‘but only if such person meets the requirements of clauses

13 (ii) and (iii) with respect to such engagement.’’; and

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

15 clauses:

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

17 with respect to an engagement of such person as an ac18 countant under subparagraph (A) if such person—

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

20 quality control system;

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

22 control review of the person’s accounting and audit23 ing practices, including such practices relevant to

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

25 period immediately preceding such engagement; and
28

•S 1818 IS

1 ‘‘(III) has completed, within the 2-year period

2 immediately preceding such engagement, at least 80

3 hours of continuing education or training which con4 tributes to the accountant’s professional proficiency,

5 at least 20 hours of which have been completed dur6 ing the 1-year period immediately preceding the en7 gagement, and at least 16 hours of which relate to

8 employee benefit plan matters.

9 ‘‘(iii) 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 meets

12 such additional requirements and qualifications of regula13 tions which the Secretary deems necessary to ensure the

14 quality of plan audits.

15 ‘‘(iv) For purposes of clause (ii)(II), an external qual16 ity control review shall be treated as qualified with respect

17 to a person referred to in clause (ii) if—

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

19 with the requirements of external quality control re20 view programs of recognized auditing standard-set21 ting bodies, as determined under regulations of the

22 Secretary, and

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

24 during the peer review period, conducted one or

25 more previous audits of employee benefit plans, such
29

•S 1818 IS

1 review includes the review of an appropriate number

2 (determined as provided in such regulations, but in

3 no case less than one) of plan audits in relation to

4 the scale of such person’s auditing practice.

5 The Secretary shall issue the regulations under subclause

6 (I) no later than December 31, 1997.’’

7 (b) EFFECTIVE DATES.—

8 (1) IN GENERAL.—Except as provided in para9 graph (2), the amendments made by this section

10 shall apply with respect to plan years beginning on

11 or after the date which is 3 years after the date of

12 the enactment of this Act.

13 (2) RESTRICTIONS ON CONDUCTING EXAMINA14 TIONS.—Clause (iii) of section 103(a)(3)(C) of the

15 Employee Retirement Income Security Act of 1974

16 (as added by subsection (a)(6)) shall take effect on

17 the date of enactment of this Act.

18 SEC. 2035. CLARIFICATION OF FIDUCIARY PENALTIES.

19 (a) MODIFICATION OF PROHIBITION OF ASSIGNMENT

20 OR ALIENATION.—

21 (1) AMENDMENT TO ERISA.—Section 206(d)

22 (29 U.S.C. 1056(d)) is amended by adding at the

23 end the following new paragraphs:

24 ‘‘(4) Paragraph (1) shall not apply to any offset of

25 a participant’s accrued benefit in an employee pension
30

•S 1818 IS

1 benefit plan against an amount that the participant is or2 dered or required to pay to the plan if—

3 ‘‘(A) the order or requirement to pay arises—

4 ‘‘(i) under a judgment of conviction for a

5 crime involving such plan,

6 ‘‘(ii) under a civil judgment (including a

7 consent order or decree) entered by a court in

8 an action brought in connection with a violation

9 (or alleged violation) of part 4 of this subtitle,

10 or

11 ‘‘(iii) pursuant to a settlement agreement

12 between the Secretary and the participant, or a

13 settlement agreement between the Pension Ben14 efit Guaranty Corporation and the participant,

15 in connection with a violation (or alleged viola16 tion) of part 4 of this subtitle,

17 ‘‘(B) the judgment, order, decree, or settlement

18 agreement expressly provides for the offset of all or

19 part of the amount ordered or required to be paid

20 to the plan against the participant’s accrued benefit

21 in the plan, and

22 ‘‘(C) if the participant has a spouse at the time

23 at which the offset is to be made—
31

•S 1818 IS

1 ‘‘(i) such spouse has consented in writing

2 to such offset and such consent is witnessed by

3 a notary public or representative of the plan,

4 ‘‘(ii) such spouse is ordered or required in

5 such judgment, order, decree, or settlement to

6 pay an amount to the plan in connection with

7 a violation of part 4 of this title, or

8 ‘‘(iii) in such judgment, order, decree, or

9 settlement, such spouse retains the right to re10 ceive the value of the survivor annuity under a

11 qualified joint and survivor annuity provided

12 pursuant to section 205(a)(1) and under a

13 qualified preretirement survivor annuity pro14 vided pursuant to section 205(a)(2), determined

15 in accordance with paragraph (5).

16 ‘‘(5)(A) The value of the survivor annuity described

17 in paragraph (4)(C)(iii) shall be determined as if—

18 ‘‘(i) the participant terminated employment on

19 the date of the offset,

20 ‘‘(ii) there was no offset,

21 ‘‘(iii) the plan permitted retirement only on or

22 after normal retirement age,

23 ‘‘(iv) the plan provided only the minimum-re24 quired qualified joint and survivor annuity, and
32

•S 1818 IS

1 ‘‘(v) the amount of the qualified preretirement

2 survivor annuity under the plan is equal to the

3 amount of the survivor annuity payable under the

4 minimum-required qualified joint and survivor annu5 ity.

6 ‘‘(B) For purposes of this paragraph, the term ‘mini7 mum-required qualified joint and survivor annuity’ means

8 the qualified joint and survivor annuity which is the actu9 arial equivalent of a single annuity for the life of the par10 ticipant and under which the survivor annuity is 50 per11 cent of the amount of the annuity which is payable during

12 the joint lives of the participant and the spouse.’’

13 (2) EFFECTIVE DATE.—The amendment made

14 by this subsection shall apply to judgments, orders,

15 and decrees issued, and settlement agreements en16 tered into, on or after the date of enactment of this

17 Act.

18 (b) CIVIL PENALTIES FOR BREACH OF FIDUCIARY

19 RESPONSIBILITY.—

20 (1) IMPOSITION AND AMOUNT OF PENALTY

21 MADE DISCRETIONARY.—Section 502(l)(1) (29

22 U.S.C. 1132(l)(1)) is amended—

23 (A) by striking ‘‘shall’’ and inserting

24 ‘‘may’’, and
33

•S 1818 IS

1 (B) by striking ‘‘equal to’’ and inserting

2 ‘‘not greater than’’.

3 (2) APPLICABLE RECOVERY AMOUNT.—Section

4 502(l)(2) (29 U.S.C. 1132(l)(2)) is amended to read

5 as follows:

6 ‘‘(2) For purposes of paragraph (1), the term ‘appli7 cable recovery amount’ means any amount which is recov8 ered from (or on behalf of) any fiduciary or other person

9 with respect to a breach or violation described in para10 graph (1) on or after the 30th day following receipt by

11 such fiduciary or other person of written notice from the

12 Secretary of the violation, whether paid voluntarily or by

13 order of a court in a judicial proceeding instituted by the

14 Secretary under subsection (a)(2) or (a)(5). The Secretary

15 may, in the Secretary’s sole discretion, extend the 30-day

16 period described in the preceding sentence.’’

17 (3) OTHER RULES.—Section 502(l) (29 U.S.C.

18 1132(l)) is amended by adding at the end the follow19 ing new paragraphs:

20 ‘‘(5) A person shall be jointly and severally liable for

21 the penalty described in paragraph (1) to the same extent

22 that such person is jointly and severally liable for the ap23 plicable recovery amount on which the penalty is based.

24 ‘‘(6) No penalty shall be assessed under this sub25 section unless the person against whom the penalty is as-
34

•S 1818 IS

1 sessed is given notice and opportunity for a hearing with

2 respect to the violation and applicable recovery amount.’’

3 (4) EFFECTIVE DATES.—

4 (A) IN GENERAL.—The amendments made

5 by this subsection shall apply to any breach of

6 fiduciary responsibility or other violation of part

7 4 of subtitle B of title I of the Employee Re8 tirement Income Security Act of 1974 occurring

9 on or after the date of enactment of this Act.

10 (B) TRANSITION RULE.—In applying the

11 amendment made by paragraph (2) (relating to

12 applicable recovery amount), a breach or other

13 violation occurring before the date of the enact14 ment of this Act which continues after the

15 180th day after such date (and which may have

16 been discontinued at any time during its exist17 ence) shall be treated as having occurred after

18 such date of enactment.

Æ