512
(B). If the Secretary makes such subse-
quent determination, then the class exemp-
tion described in subparagraph (C)(ii) shall 
cease to apply after the later of—
(I) the date which is 2 years 
after such subsequent determination, 
or 
(II) the date which is 3 years 
after the first date on which such ex-
emption took effect. 
(ii) 
REQUESTS
FOR
DETERMINA-
TION.—Any person may request the Sec-
retary of Labor to make a determination 
under this subparagraph with respect to 
any computer model investment advice pro-
gram, and the Secretary of Labor shall 
make a determination with respect to such 
request within 90 days. If the Secretary of 
Labor makes a determination that such 
program is not described in subparagraph 
(B), the Secretary shall, within 10 days of 
such determination, notify the Committee 
on Ways and Means and the Committee on 
Education and the Workforce of the House 
of Representatives and the Committee on
513
Finance and the Committee on Health, 
Education, Labor, and Pensions of the 
Senate of such determination and the rea-
sons for such determination. 
(E) EFFECTIVE DATE.—The provisions of 
this paragraph shall take effect on the date of 
the enactment of this Act. 
(4) EFFECTIVE DATE.—Except as provided in 
this subsection, the amendments made by this sub-
section shall apply with respect to advice referred to 
in section 4975(c)(3)(B) of the Internal Revenue 
Code of 1986 provided after December 31, 2006. 
(c) COORDINATION WITH EXISTING EXEMPTIONS.—
Any exemption under section 408(b) of the Employee Re-
tirement Income Security Act of 1974 and section 4975(d) 
of the Internal Revenue Code of 1986 provided by the 
amendments made by this section shall not in any manner 
alter existing individual or class exemptions, provided by 
statute or administrative action. 
Subtitle B—Prohibited 
Transactions 
SEC. 611. PROHIBITED TRANSACTION RULES RELATING TO 
FINANCIAL INVESTMENTS. 
(a) EXEMPTION FOR BLOCK TRADING.—
514
(1) AMENDMENTS TO EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974.—Section 408(b) of 
such Act (29 U.S.C. 1108(b)), as amended by sec-
tion 601, is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(15)(A) Any transaction involving the pur-
chase or sale of securities, or other property (as de-
termined by the Secretary), between a plan and a 
party in interest (other than a fiduciary described in 
section 3(21)(A)) with respect to a plan if—
‘‘(i) the transaction involves a block trade, 
‘‘(ii) at the time of the transaction, the in-
terest of the plan (together with the interests of 
any other plans maintained by the same plan 
sponsor), does not exceed 10 percent of the ag-
gregate size of the block trade, 
‘‘(iii) the terms of the transaction, includ-
ing the price, are at least as favorable to the 
plan as an arm’s length transaction, and 
‘‘(iv) the compensation associated with the 
purchase and sale is not greater than the com-
pensation associated with an arm’s length 
transaction with an unrelated party. 
‘‘(B) For purposes of this paragraph, the term 
‘block trade’ means any trade of at least 10,000
515
shares or with a market value of at least $200,000 
which will be allocated across two or more unrelated 
client accounts of a fiduciary.’’. 
(2) AMENDMENTS
TO
INTERNAL
REVENUE 
CODE OF 1986.—
(A) IN GENERAL.—Subsection (d) of sec-
tion 4975 of the Internal Revenue Code of 1986 
(relating to exemptions), as amended by section 
601, is amended by striking ‘‘or’’ at the end of 
paragraph (16), by striking the period at the 
end of paragraph (17) and inserting ‘‘, or’’, and 
by adding at the end the following new para-
graph: 
‘‘(18) any transaction involving the purchase or 
sale of securities, or other property (as determined 
by the Secretary of Labor), between a plan and a 
party in interest (other than a fiduciary described in 
subsection (e)(3)(B)) with respect to a plan if—
‘‘(A) the transaction involves a block trade, 
‘‘(B) at the time of the transaction, the in-
terest of the plan (together with the interests of 
any other plans maintained by the same plan 
sponsor), does not exceed 10 percent of the ag-
gregate size of the block trade,
516
‘‘(C) the terms of the transaction, includ-
ing the price, are at least as favorable to the 
plan as an arm’s length transaction, and 
‘‘(D) the compensation associated with the 
purchase and sale is not greater than the com-
pensation associated with an arm’s length 
transaction with an unrelated party.’’. 
(B) SPECIAL RULE RELATING TO BLOCK 
TRADE.—Subsection (f) of section 4975 of such 
Code (relating to other definitions and special 
rules), as amended by section 601, is amended 
by adding at the end the following new para-
graph: 
‘‘(9) BLOCK TRADE.—The term ‘block trade’ 
means any trade of at least 10,000 shares or with 
a market value of at least $200,000 which will be al-
located across two or more unrelated client accounts 
of a fiduciary.’’. 
(b) BONDING RELIEF.—Section 412(a) of such Act 
(29 U.S.C. 1112(a)) is amended—
(1) by redesignating paragraph (2) as para-
graph (3), 
(2) by striking ‘‘and’’ at the end of paragraph 
(1), and
517
(3) by inserting after paragraph (1) the fol-
lowing new paragraph: 
‘‘(2) no bond shall be required of any entity 
which is registered as a broker or a dealer under 
section 15(b) of the Securities Exchange Act of 
1934 (15 U.S.C. 78o(b)) if the broker or dealer is 
subject to the fidelity bond requirements of a self-
regulatory organization (within the meaning of sec-
tion 3(a)(26) of such Act (15 U.S.C. 78c(a)(26)).’’. 
(c) EXEMPTION FOR ELECTRONIC COMMUNICATION 
NETWORK.—
(1) AMENDMENTS TO EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974.—Section 408(b) of 
such Act, as amended by subsection (a), is amended 
by adding at the end the following: 
‘‘(16) Any transaction involving the purchase or 
sale of securities, or other property (as determined 
by the Secretary), between a plan and a party in in-
terest if—
‘‘(A) the transaction is executed through 
an electronic communication network, alter-
native trading system, or similar execution sys-
tem or trading venue subject to regulation and 
oversight by—
518
‘‘(i) the applicable Federal regulating 
entity, or 
‘‘(ii) such foreign regulatory entity as 
the Secretary may determine by regulation, 
‘‘(B) either—
‘‘(i) the transaction is effected pursu-
ant to rules designed to match purchases 
and sales at the best price available 
through the execution system in accord-
ance with applicable rules of the Securities 
and Exchange Commission or other rel-
evant governmental authority, or 
‘‘(ii) neither the execution system nor 
the parties to the transaction take into ac-
count the identity of the parties in the exe-
cution of trades, 
‘‘(C) the price and compensation associ-
ated with the purchase and sale are not greater 
than the price and compensation associated 
with an arm’s length transaction with an unre-
lated party, 
‘‘(D) if the party in interest has an owner-
ship interest in the system or venue described 
in subparagraph (A), the system or venue has 
been authorized by the plan sponsor or other
519
independent fiduciary for transactions described 
in this paragraph, and 
‘‘(E) not less than 30 days prior to the ini-
tial transaction described in this paragraph exe-
cuted through any system or venue described in 
subparagraph (A), a plan fiduciary is provided 
written or electronic notice of the execution of 
such transaction through such system or 
venue.’’. 
(2) AMENDMENTS
TO
INTERNAL
REVENUE 
CODE OF 1986.—Subsection (d) of section 4975 of 
the Internal Revenue Code of 1986 (relating to ex-
emptions), as amended by subsection (a), is amend-
ed by striking ‘‘or’’ at the end of paragraph (17), by 
striking the period at the end of paragraph (18) and 
inserting ‘‘, or’’, and by adding at the end the fol-
lowing new paragraph: 
‘‘(19) any transaction involving the purchase or 
sale of securities, or other property (as determined 
by the Secretary of Labor), between a plan and a 
party in interest if—
‘‘(A) the transaction is executed through 
an electronic communication network, alter-
native trading system, or similar execution sys-
520
tem or trading venue subject to regulation and 
oversight by—
‘‘(i) the applicable Federal regulating 
entity, or 
‘‘(ii) such foreign regulatory entity as 
the Secretary of Labor may determine by 
regulation, 
‘‘(B) either—
‘‘(i) the transaction is effected pursu-
ant to rules designed to match purchases 
and sales at the best price available 
through the execution system in accord-
ance with applicable rules of the Securities 
and Exchange Commission or other rel-
evant governmental authority, or 
‘‘(ii) neither the execution system nor 
the parties to the transaction take into ac-
count the identity of the parties in the exe-
cution of trades, 
‘‘(C) the price and compensation associ-
ated with the purchase and sale are not greater 
than the price and compensation associated 
with an arm’s length transaction with an unre-
lated party,
521
‘‘(D) if the party in interest has an owner-
ship interest in the system or venue described 
in subparagraph (A), the system or venue has 
been authorized by the plan sponsor or other 
independent fiduciary for transactions described 
in this paragraph, and 
‘‘(E) not less than 30 days prior to the ini-
tial transaction described in this paragraph exe-
cuted through any system or venue described in 
subparagraph (A), a plan fiduciary is provided 
written or electronic notice of the execution of 
such transaction through such system or 
venue.’’. 
(d) EXEMPTION FOR SERVICE PROVIDERS.—
(1) AMENDMENTS TO EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974.—Section 408(b) of 
such Act (29 U.S.C. 1106), as amended by sub-
section (c), is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(17)(A) Transactions described in subpara-
graphs (A), (B), and (D) of section 406(a)(1) be-
tween a plan and a person that is a party in interest 
other than a fiduciary (or an affiliate) who has or 
exercises any discretionary authority or control with 
respect to the investment of the plan assets involved
522
in the transaction or renders investment advice 
(within the meaning of section 3(21)(A)(ii)) with re-
spect to those assets, solely by reason of providing 
services to the plan or solely by reason of a relation-
ship to such a service provider described in subpara-
graph (F), (G), (H), or (I) of section 3(14), or both, 
but only if in connection with such transaction the 
plan receives no less, nor pays no more, than ade-
quate consideration. 
‘‘(B) For purposes of this paragraph, the term 
‘adequate consideration’ means—
‘‘(i) in the case of a security for which 
there is a generally recognized market—
‘‘(I) the price of the security pre-
vailing on a national securities ex-
change which is registered under sec-
tion 6 of the Securities Exchange Act 
of 1934, taking into account factors 
such as the size of the transaction and 
marketability of the security, or 
‘‘(II) if the security is not traded 
on such a national securities ex-
change, a price not less favorable to 
the plan than the offering price for 
the security as established by the cur-
523
rent bid and asked prices quoted by 
persons independent of the issuer and 
of the party in interest, taking into 
account factors such as the size of the 
transaction and marketability of the 
security, and 
‘‘(ii) in the case of an asset other than 
a security for which there is a generally 
recognized market, the fair market value of 
the asset as determined in good faith by a 
fiduciary or fiduciaries in accordance with 
regulations prescribed by the Secretary.’’. 
(2) AMENDMENT TO INTERNAL REVENUE CODE 
OF 1986.—
(A) IN GENERAL.—Subsection (d) of sec-
tion 4975 of the Internal Revenue Code of 1986 
(relating to exemptions), as amended by sub-
section (c), is amended by striking ‘‘or’’ at the 
end of paragraph (18), by striking the period at 
the end of paragraph (19) and inserting ‘‘, or’’, 
and by adding at the end the following new 
paragraph: 
‘‘(20) transactions described in subparagraphs 
(A), (B), and (D) of subsection (c)(1) between a 
plan and a person that is a party in interest other
524
than a fiduciary (or an affiliate) who has or exer-
cises any discretionary authority or control with re-
spect to the investment of the plan assets involved 
in the transaction or renders investment advice 
(within the meaning of subsection (e)(3)(B)) with 
respect to those assets, solely by reason of providing 
services to the plan or solely by reason of a relation-
ship to such a service provider described in subpara-
graph (F), (G), (H), or (I) of subsection (e)(2), or 
both, but only if in connection with such transaction 
the plan receives no less, nor pays no more, than 
adequate consideration.’’. 
(B) SPECIAL RULE RELATING TO SERVICE 
PROVIDERS.—Subsection (f) of section 4975 of 
such Code (relating to other definitions and 
special rules), as amended by subsection (a), is 
amended by adding at the end the following 
new paragraph: 
‘‘(10) ADEQUATE CONSIDERATION.—The term 
‘adequate consideration’ means—
‘‘(A) in the case of a security for which 
there is a generally recognized market—
‘‘(i) the price of the security pre-
vailing on a national securities exchange 
which is registered under section 6 of the
525
Securities Exchange Act of 1934, taking 
into account factors such as the size of the 
transaction and marketability of the secu-
rity, or 
‘‘(ii) if the security is not traded on 
such a national securities exchange, a price 
not less favorable to the plan than the of-
fering price for the security as established 
by the current bid and asked prices quoted 
by persons independent of the issuer and 
of the party in interest, taking into ac-
count factors such as the size of the trans-
action and marketability of the security, 
and 
‘‘(B) in the case of an asset other than a 
security for which there is a generally recog-
nized market, the fair market value of the asset 
as determined in good faith by a fiduciary or fi-
duciaries in accordance with regulations pre-
scribed by the Secretary of Labor.’’. 
(e) RELIEF
FOR
FOREIGN
EXCHANGE
TRANS-
ACTIONS.—
(1) AMENDMENTS TO EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974.—Section 408(b) of 
such Act (29 U.S.C. 1108(b)), as amended by sub-
526
section (d), is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(18) FOREIGN
EXCHANGE
TRANSACTIONS.—
Any foreign exchange transactions, between a bank 
or broker-dealer (or any affiliate of either), and a 
plan (as defined in section 3(3)) with respect to 
which such bank or broker-dealer (or affiliate) is a 
trustee, custodian, fiduciary, or other party in inter-
est, if—
‘‘(A) the transaction is in connection with 
the purchase, holding, or sale of securities or 
other investment assets (other than a foreign 
exchange transaction unrelated to any other in-
vestment in securities or other investment as-
sets), 
‘‘(B) at the time the foreign exchange 
transaction is entered into, the terms of the 
transaction are not less favorable to the plan 
than the terms generally available in com-
parable arm’s length foreign exchange trans-
actions between unrelated parties, or the terms 
afforded by the bank or broker-dealer (or any 
affiliate of either) in comparable arm’s-length 
foreign exchange transactions involving unre-
lated parties,
527
‘‘(C) the exchange rate used by such bank 
or broker-dealer (or affiliate) for a particular 
foreign exchange transaction does not deviate 
by more or less than 3 percent from the inter-
bank bid and asked rates for transactions of 
comparable size and maturity at the time of the 
transaction as displayed on an independent 
service that reports rates of exchange in the 
foreign currency market for such currency, and 
‘‘(D) the bank or broker-dealer (or any af-
filiate of either) does not have investment dis-
cretion, or provide investment advice, with re-
spect to the transaction.’’. 
(2) AMENDMENT TO INTERNAL REVENUE CODE 
OF 1986.—Subsection (d) of section 4975 of the In-
ternal Revenue Code of 1986 (relating to exemp-
tions), as amended by subsection (d), is amended by 
striking ‘‘or’’ at the end of paragraph (19), by strik-
ing the period at the end of paragraph (20) and in-
serting ‘‘, or’’, and by adding at the end the fol-
lowing new paragraph: 
‘‘(21) any foreign exchange transactions, be-
tween a bank or broker-dealer (or any affiliate of ei-
ther) and a plan (as defined in this section) with re-
spect to which such bank or broker-dealer (or affil-
528
iate) is a trustee, custodian, fiduciary, or other party 
in interest person, if—
‘‘(A) the transaction is in connection with 
the purchase, holding, or sale of securities or 
other investment assets (other than a foreign 
exchange transaction unrelated to any other in-
vestment in securities or other investment as-
sets), 
‘‘(B) at the time the foreign exchange 
transaction is entered into, the terms of the 
transaction are not less favorable to the plan 
than the terms generally available in com-
parable arm’s length foreign exchange trans-
actions between unrelated parties, or the terms 
afforded by the bank or broker-dealer (or any 
affiliate of either) in comparable arm’s-length 
foreign exchange transactions involving unre-
lated parties, 
‘‘(C) the exchange rate used by such bank 
or broker-dealer (or affiliate) for a particular 
foreign exchange transaction does not deviate 
by more or less than 3 percent from the inter-
bank bid and asked rates for transactions of 
comparable size and maturity at the time of the 
transaction as displayed on an independent
529
service that reports rates of exchange in the 
foreign currency market for such currency, and 
‘‘(D) the bank or broker-dealer (or any af-
filiate of either) does not have investment dis-
cretion, or provide investment advice, with re-
spect to the transaction.’’. 
(f) DEFINITION OF PLAN ASSET VEHICLE.—Section 
3 of such Act (29 U.S.C. 1002) is amended by adding 
at the end the following new paragraph: 
‘‘(42) the term ‘plan assets’ means plan assets as de-
fined by such regulations as the Secretary may prescribe, 
except that under such regulations the assets of any entity 
shall not be treated as plan assets if, immediately after 
the most recent acquisition of any equity interest in the 
entity, less than 25 percent of the total value of each class 
of equity interest in the entity is held by benefit plan in-
vestors. For purposes of determinations pursuant to this 
paragraph, the value of any equity interest held by a per-
son (other than such a benefit plan investor) who has dis-
cretionary authority or control with respect to the assets 
of the entity or any person who provides investment advice 
for a fee (direct or indirect) with respect to such assets, 
or any affiliate of such a person, shall be disregarded for 
purposes of calculating the 25 percent threshold. An entity 
shall be considered to hold plan assets only to the extent
530
of the percentage of the equity interest held by benefit 
plan investors. For purposes of this paragraph, the term 
‘benefit plan investor’ means an employee benefit plan 
subject to part 4, any plan to which section 4975 of the 
Internal Revenue Code of 1986 applies, and any entity 
whose underlying assets include plan assets by reason of 
a plan’s investment in such entity.’’. 
(g) EXEMPTION FOR CROSS TRADING.—
(1) AMENDMENTS TO EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974.—Section 408(b) of 
such Act (29 U.S.C. 1108(b)), as amended by sub-
section (e), is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(19) CROSS
TRADING.—Any transaction de-
scribed in sections 406(a)(1)(A) and 406(b)(2) in-
volving the purchase and sale of a security between 
a plan and any other account managed by the same 
investment manager, if—
‘‘(A) the transaction is a purchase or sale, 
for no consideration other than cash payment 
against prompt delivery of a security for which 
market quotations are readily available, 
‘‘(B) the transaction is effected at the 
independent current market price of the secu-
531
rity (within the meaning of section 270.17a–
7(b) of title 17, Code of Federal Regulations), 
‘‘(C) no brokerage commission, fee (except 
for customary transfer fees, the fact of which is 
disclosed pursuant to subparagraph (D)), or 
other remuneration is paid in connection with 
the transaction, 
‘‘(D) a fiduciary (other than the invest-
ment manager engaging in the cross-trades or 
any affiliate) for each plan participating in the 
transaction authorizes in advance of any cross-
trades (in a document that is separate from any 
other written agreement of the parties) the in-
vestment manager to engage in cross trades at 
the investment manager’s discretion, after such 
fiduciary has received disclosure regarding the 
conditions under which cross trades may take 
place (but only if such disclosure is separate 
from any other agreement or disclosure involv-
ing the asset management relationship), includ-
ing the written policies and procedures of the 
investment manager described in subparagraph 
(H), 
‘‘(E) each plan participating in the trans-
action has assets of at least $100,000,000, ex-
532
cept that if the assets of a plan are invested in 
a master trust containing the assets of plans 
maintained by employers in the same controlled 
group (as defined in section 407(d)(7)), the 
master 
trust 
has 
assets 
of 
at 
least 
$100,000,000, 
‘‘(F) the investment manager provides to 
the plan fiduciary who authorized cross trading 
under subparagraph (D) a quarterly report de-
tailing all cross trades executed by the invest-
ment manager in which the plan participated 
during such quarter, including the following in-
formation, as applicable: (i) the identity of each 
security bought or sold; (ii) the number of 
shares or units traded, (iii) the parties involved 
in the cross-trade; and (iv) trade price and the 
method used to establish the trade price, 
‘‘(G) the investment manager does not 
base its fee schedule on the plan‘s consent to 
cross trading, and no other service (other than 
the investment opportunities and cost savings 
available through a cross trade) is conditioned 
on the plan’s consent to cross trading, 
‘‘(H) the investment manager has adopted, 
and cross-trades are effected in accordance
533
with, written cross-trading policies and proce-
dures that are fair and equitable to all accounts 
participating in the cross-trading program, and 
that include a description of the manager’s 
pricing policies and procedures, and the man-
ager’s policies and procedures for allocating 
cross trades in an objective manner among ac-
counts participating in the cross-trading pro-
gram, and 
‘‘(I) the investment manager has des-
ignated an individual responsible for periodi-
cally reviewing such purchases and sales to en-
sure compliance with the written policies and 
procedures described in subparagraph (H), and 
following such review, the individual shall issue 
an annual written report no later than 90 days 
following the period to which it relates signed 
under penalty of perjury to the plan fiduciary 
who authorized cross trading under subpara-
graph (D) describing the steps performed dur-
ing the course of the review, the level of compli-
ance, and any specific instances of non-compli-
ance. 
The written report under subparagraph (I) shall also 
notify the plan fiduciary of the plan’s right to termi-
534
nate participation in the investment manager’s 
cross-trading program at any time.’’. 
(2) AMENDMENTS
OF
INTERNAL
REVENUE 
CODE OF 1986.—Subsection (d) of section 4975 of 
the Internal Revenue Code of 1986 (relating to ex-
emptions), as amended by subsection (e), is amended 
by striking ‘‘or’’ at the end of paragraph (20), by 
striking the period at the end of paragraph (21) and 
inserting ‘‘, or’’, and by adding at the end the fol-
lowing new paragraph: 
‘‘(22) any transaction described in subsection 
(c)(1)(A) involving the purchase and sale of a secu-
rity between a plan and any other account managed 
by the same investment manager, if—
‘‘(A) the transaction is a purchase or sale, 
for no consideration other than cash payment 
against prompt delivery of a security for which 
market quotations are readily available, 
‘‘(B) the transaction is effected at the 
independent current market price of the secu-
rity (within the meaning of section 270.17a–
7(b) of title 17, Code of Federal Regulations), 
‘‘(C) no brokerage commission, fee (except 
for customary transfer fees, the fact of which is 
disclosed pursuant to subparagraph (D)), or
535
other remuneration is paid in connection with 
the transaction, 
‘‘(D) a fiduciary (other than the invest-
ment manager engaging in the cross-trades or 
any affiliate) for each plan participating in the 
transaction authorizes in advance of any cross-
trades (in a document that is separate from any 
other written agreement of the parties) the in-
vestment manager to engage in cross trades at 
the investment manager’s discretion, after such 
fiduciary has received disclosure regarding the 
conditions under which cross trades may take 
place (but only if such disclosure is separate 
from any other agreement or disclosure involv-
ing the asset management relationship), includ-
ing the written policies and procedures of the 
investment manager described in subparagraph 
(H), 
‘‘(E) each plan participating in the trans-
action has assets of at least $100,000,000, ex-
cept that if the assets of a plan are invested in 
a master trust containing the assets of plans 
maintained by employers in the same controlled 
group (as defined in section 407(d)(7) of the 
Employee Retirement Income Security Act of
536
1974), the master trust has assets of at least 
$100,000,000, 
‘‘(F) the investment manager provides to 
the plan fiduciary who authorized cross trading 
under subparagraph (D) a quarterly report de-
tailing all cross trades executed by the invest-
ment manager in which the plan participated 
during such quarter, including the following in-
formation, as applicable: (i) the identity of each 
security bought or sold; (ii) the number of 
shares or units traded, (iii) the parties involved 
in the cross-trade; and (iv) trade price and the 
method used to establish the trade price, 
‘‘(G) the investment manager does not 
base its fee schedule on the plan‘s consent to 
cross trading, and no other service (other than 
the investment opportunities and cost savings 
available through a cross trade) is conditioned 
on the plan’s consent to cross trading, 
‘‘(H) the investment manager has adopted, 
and cross-trades are effected in accordance 
with, written cross-trading policies and proce-
dures that are fair and equitable to all accounts 
participating in the cross-trading program, and 
that include a description of the manager’s
537
pricing policies and procedures, and the man-
ager’s policies and procedures for allocating 
cross trades in an objective manner among ac-
counts participating in the cross-trading pro-
gram, and 
‘‘(I) the investment manager has des-
ignated an individual responsible for periodi-
cally reviewing such purchases and sales to en-
sure compliance with the written policies and 
procedures described in subparagraph (H), and 
following such review, the individual shall issue 
an annual written report no later than 90 days 
following the period to which it relates signed 
under penalty of perjury to the plan fiduciary 
who authorized cross trading under subpara-
graph (D) describing the steps performed dur-
ing the course of the review, the level of compli-
ance, and any specific instances of non-compli-
ance. 
The written report shall also notify the plan fidu-
ciary of the plan’s right to terminate participation in 
the investment manager’s cross-trading program at 
any time.’’. 
(3) REGULATIONS.—No later than 180 days 
after the date of the enactment of this Act, the Sec-
538
retary of Labor, after consultation with the Securi-
ties and Exchange Commission, shall issue regula-
tions regarding the content of policies and proce-
dures required to be adopted by an investment man-
ager under section 408(b)(19) of the Employee Re-
tirement Income Security Act of 1974. 
(h) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to transactions occurring after the date 
of the enactment of this Act. 
(2) BONDING RULE.—The amendments made 
by subsection (b) shall apply to plan years beginning 
after such date. 
SEC. 612. CORRECTION PERIOD FOR CERTAIN TRANS-
ACTIONS INVOLVING SECURITIES AND COM-
MODITIES. 
(a) AMENDMENT OF EMPLOYEE RETIREMENT IN-
COME SECURITY ACT OF 1974.—Section 408(b) of the 
Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1108(b)), as amended by sections 601 and 611, 
is further amended by adding at the end the following new 
paragraph: 
‘‘(20)(A) Except as provided in subparagraphs 
(B) and (C), a transaction described in section
539
406(a) in connection with the acquisition, holding, 
or disposition of any security or commodity, if the 
transaction is corrected before the end of the correc-
tion period. 
‘‘(B) Subparagraph (A) does not apply to any 
transaction between a plan and a plan sponsor or its 
affiliates that involves the acquisition or sale of an 
employer security (as defined in section 407(d)(1)) 
or the acquisition, sale, or lease of employer real 
property (as defined in section 407(d)(2)). 
‘‘(C) In the case of any fiduciary or other party 
in interest (or any other person knowingly partici-
pating in such transaction), subparagraph (A) does 
not apply to any transaction if, at the time the 
transaction occurs, such fiduciary or party in inter-
est (or other person) knew (or reasonably should 
have known) that the transaction would (without re-
gard to this paragraph) constitute a violation of sec-
tion 406(a). 
‘‘(D) For purposes of this paragraph, the term 
‘correction period’ means, in connection with a fidu-
ciary or party in interest (or other person knowingly 
participating in the transaction), the 14-day period 
beginning on the date on which such fiduciary or 
party in interest (or other person) discovers, or rea-
540
sonably should have discovered, that the transaction 
would (without regard to this paragraph) constitute 
a violation of section 406(a). 
‘‘(E) For purposes of this paragraph—
‘‘(i) The term ‘security’ has the meaning 
given such term by section 475(c)(2) of the In-
ternal Revenue Code of 1986 (without regard to 
subparagraph (F)(iii) and the last sentence 
thereof). 
‘‘(ii) The term ‘commodity’ has the mean-
ing given such term by section 475(e)(2) of 
such Code (without regard to subparagraph 
(D)(iii) thereof). 
‘‘(iii) The term ‘correct’ means, with re-
spect to a transaction—
‘‘(I) to undo the transaction to the ex-
tent possible and in any case to make good 
to the plan or affected account any losses 
resulting from the transaction, and 
‘‘(II) to restore to the plan or affected 
account any profits made through the use 
of assets of the plan.’’. 
(b) AMENDMENT OF INTERNAL REVENUE CODE OF 
1986.—
541
(1) IN
GENERAL.—Subsection (d) of section 
4975 of the Internal Revenue Code of 1986 (relating 
to exemptions), as amended by sections 601 and 
611, is amended by striking ‘‘or’’ at the end of para-
graph (21), by striking the period at the end of 
paragraph (22) and inserting ‘‘, or’’, and by adding 
at the end the following new paragraph: 
‘‘(23) except as provided in subsection (f)(11), 
a transaction described in subparagraph (A), (B), 
(C), or (D) of subsection (c)(1) in connection with 
the acquisition, holding, or disposition of any secu-
rity or commodity, if the transaction is corrected be-
fore the end of the correction period.’’. 
(2) SPECIAL RULES RELATING TO CORRECTION 
PERIOD.—Subsection (f) of section 4975 of such 
Code (relating to other definitions and special rules), 
as amended by sections 601 and 611, is amended by 
adding at the end the following new paragraph: 
‘‘(11) CORRECTION PERIOD.—
‘‘(A) IN GENERAL.—For purposes of sub-
section (d)(23), the term ‘correction period’ 
means the 14-day period beginning on the date 
on which the disqualified person discovers, or 
reasonably should have discovered, that the 
transaction would (without regard to this para-
542
graph and subsection (d)(23)) constitute a pro-
hibited transaction. 
‘‘(B) EXCEPTIONS.—
‘‘(i) EMPLOYER
SECURITIES.—Sub-
section (d)(23) does not apply to any 
transaction between a plan and a plan 
sponsor or its affiliates that involves the 
acquisition or sale of an employer security 
(as defined in section 407(d)(1)) or the ac-
quisition, sale, or lease of employer real 
property (as defined in section 407(d)(2)). 
‘‘(ii) KNOWING
PROHIBITED
TRANS-
ACTION.—In the case of any disqualified 
person, subsection (d)(23) does not apply 
to a transaction if, at the time the trans-
action is entered into, the disqualified per-
son knew (or reasonably should have 
known) that the transaction would (with-
out regard to this paragraph) constitute a 
prohibited transaction. 
‘‘(C) ABATEMENT OF TAX WHERE THERE 
IS
A
CORRECTION.—If a transaction is not 
treated as a prohibited transaction by reason of 
subsection (d)(23), then no tax under sub-
section (a) and (b) shall be assessed with re-
543
spect to such transaction, and if assessed the 
assessment shall be abated, and if collected 
shall be credited or refunded as an overpay-
ment. 
‘‘(D) DEFINITIONS.—For purposes of this 
paragraph and subsection (d)(23)—
‘‘(i) SECURITY.—The term ‘security’ 
has the meaning given such term by sec-
tion 475(c)(2) (without regard to subpara-
graph (F)(iii) and the last sentence there-
of). 
‘‘(ii) COMMODITY.—The term ‘com-
modity’ has the meaning given such term 
by section 475(e)(2) (without regard to 
subparagraph (D)(iii) thereof). 
‘‘(iii) CORRECT.—The term ‘correct’ 
means, with respect to a transaction—
‘‘(I) to undo the transaction to 
the extent possible and in any case to 
make good to the plan or affected ac-
count any losses resulting from the 
transaction, and 
‘‘(II) to restore to the plan or af-
fected account any profits made
544
through the use of assets of the 
plan.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to any transaction which the fidu-
ciary or disqualified person discovers, or reasonably should 
have discovered, after the date of the enactment of this 
Act constitutes a prohibited transaction. 
Subtitle C—Fiduciary and Other 
Rules 
SEC. 621. INAPPLICABILITY OF RELIEF FROM FIDUCIARY 
LIABILITY DURING SUSPENSION OF ABILITY 
OF PARTICIPANT OR BENEFICIARY TO DI-
RECT INVESTMENTS. 
(a) IN GENERAL.—Section 404(c) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 
1104(c)) is amended—
(1) in paragraph (1)—
(A) by redesignating subparagraphs (A) 
and (B) as clauses (i) and (ii), respectively, and 
by inserting ‘‘(A)’’ after ‘‘(c)(1)’’, 
(B) in subparagraph (A)(ii) (as redesig-
nated by paragraph (1)), by inserting before the 
period the following: ‘‘, except that this clause 
shall not apply in connection with such partici-
pant or beneficiary for any blackout period dur-
545
ing which the ability of such participant or ben-
eficiary to direct the investment of the assets in 
his or her account is suspended by a plan spon-
sor or fiduciary’’, and 
(C) by adding at the end the following new 
subparagraphs: 
‘‘(B) If a person referred to in subparagraph (A)(ii) 
meets the requirements of this title in connection with au-
thorizing and implementing the blackout period, any per-
son who is otherwise a fiduciary shall not be liable under 
this title for any loss occurring during such period. 
‘‘(C) For purposes of this paragraph, the term ‘black-
out period’ has the meaning given such term by section 
101(i)(7).’’; and 
(2) by adding at the end the following: 
‘‘(4)(A) In any case in which a qualified change 
in investment options occurs in connection with an 
individual account plan, a participant or beneficiary 
shall not be treated for purposes of paragraph (1) 
as not exercising control over the assets in his ac-
count in connection with such change if the require-
ments of subparagraph (C) are met in connection 
with such change. 
‘‘(B) For purposes of subparagraph (A), the 
term ‘qualified change in investment options’ means,
546
in connection with an individual account plan, a 
change in the investment options offered to the par-
ticipant or beneficiary under the terms of the plan, 
under which—
‘‘(i) the account of the participant or bene-
ficiary is reallocated among one or more re-
maining or new investment options which are 
offered in lieu of one or more investment op-
tions offered immediately prior to the effective 
date of the change, and 
‘‘(ii) the stated characteristics of the re-
maining or new investment options provided 
under clause (i), including characteristics relat-
ing to risk and rate of return, are, as of imme-
diately after the change, reasonably similar to 
those of the existing investment options as of 
immediately before the change. 
‘‘(C) The requirements of this subparagraph 
are met in connection with a qualified change in in-
vestment options if—
‘‘(i) at least 30 days and no more than 60 
days prior to the effective date of the change, 
the plan administrator furnishes written notice 
of the change to the participants and bene-
ficiaries, including information comparing the
547
existing and new investment options and an ex-
planation that, in the absence of affirmative in-
vestment instructions from the participant or 
beneficiary to the contrary, the account of the 
participant or beneficiary will be invested in the 
manner described in subparagraph (B), 
‘‘(ii) the participant or beneficiary has not 
provided to the plan administrator, in advance 
of the effective date of the change, affirmative 
investment instructions contrary to the change, 
and 
‘‘(iii) the investments under the plan of the 
participant or beneficiary as in effect imme-
diately prior to the effective date of the change 
were the product of the exercise by such partici-
pant or beneficiary of control over the assets of 
the account within the meaning of paragraph 
(1).’’. 
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by 
this section shall apply to plan years beginning after 
December 31, 2007. 
(2) SPECIAL
RULE
FOR
COLLECTIVELY
BAR-
GAINED AGREEMENTS.—In the case of a plan main-
tained pursuant to 1 or more collective bargaining
548
agreements between employee representatives and 1 
or more employers ratified on or before the date of 
the enactment of this Act, paragraph (1) shall be 
applied to benefits pursuant to, and individuals cov-
ered by, any such agreement by substituting for 
‘‘December 31, 2007’’ the earlier of—
(A) the later of—
(i) December 31, 2008, or 
(ii) the date on which the last of such 
collective bargaining agreements termi-
nates (determined without regard to any 
extension thereof after such date of enact-
ment), or 
(B) December 31, 2009. 
SEC. 622. INCREASE IN MAXIMUM BOND AMOUNT. 
(a) IN GENERAL.—Section 412(a) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 
1112), as amended by section 611(b), is amended by add-
ing at the end the following: ‘‘In the case of a plan that 
holds employer securities (within the meaning of section 
407(d)(1)), this subsection shall be applied by substituting 
‘$1,000,000’ for ‘$500,000’ each place it appears.’’
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to plan years beginning after De-
cember 31, 2007.
549
SEC. 623. INCREASE IN PENALTIES FOR COERCIVE INTER-
FERENCE WITH EXERCISE OF ERISA RIGHTS. 
(a) IN GENERAL.—Section 511 of the Employment 
Retirement Income Security Act of 1974 (29 U.S.C. 1141) 
is amended—
(1) by striking ‘‘$10,000’’ and inserting 
‘‘$100,000’’, and 
(2) by striking ‘‘one year’’ and inserting ‘‘10 
years’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to violations occurring on and after 
the date of the enactment of this Act. 
SEC. 624. TREATMENT OF INVESTMENT OF ASSETS BY PLAN 
WHERE PARTICIPANT FAILS TO EXERCISE IN-
VESTMENT ELECTION. 
(a) IN GENERAL.—Section 404(c) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 
1104(c)), as amended by section 622, is amended by add-
ing at the end the following new paragraph: 
‘‘(5) 
DEFAULT
INVESTMENT
ARRANGE-
MENTS.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), a participant in an individual ac-
count plan meeting the notice requirements of 
subparagraph (B) shall be treated as exercising 
control over the assets in the account with re-