H. R. 4—170
‘‘(m) NOTICE OF RIGHT TO DIVEST.—Not later than 30 days 
before the first date on which an applicable individual of an 
applicable individual account plan is eligible to exercise the right 
under section 204(j) to direct the proceeds from the divestment 
of employer securities with respect to any type of contribution, 
the administrator shall provide to such individual a notice—
‘‘(1) setting forth such right under such section, and 
‘‘(2) describing the importance of diversifying the invest-
ment of retirement account assets. 
The notice required by this subsection shall be written in a manner 
calculated to be understood by the average plan participant and 
may be delivered in written, electronic, or other appropriate form 
to the extent that such form is reasonably accessible to the 
recipient.’’. 
(b) PENALTIES.—Section 502(c)(7) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1132(c)(7)) is amended 
by striking ‘‘section 101(i)’’ and inserting ‘‘subsection (i) or (m) 
of section 101’’. 
(c) MODEL NOTICE.—The Secretary of the Treasury shall, within 
180 days after the date of the enactment of this subsection, prescribe 
a model notice for purposes of satisfying the requirements of the 
amendments made by this section. 
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by this section 
shall apply to plan years beginning after December 31, 2006. 
(2) TRANSITION RULE.—If notice under section 101(m) of 
the Employee Retirement Income Security Act of 1974 (as added 
by this section) would otherwise be required to be provided 
before the 90th day after the date of the enactment of this 
Act, such notice shall not be required to be provided until 
such 90th day. 
SEC. 508. PERIODIC PENSION BENEFIT STATEMENTS. 
(a) AMENDMENTS OF ERISA.—
(1) IN GENERAL.—Section 105(a) of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C. 1025(a)) is 
amended to read as follows: 
‘‘(a) REQUIREMENTS TO PROVIDE PENSION BENEFIT STATE-
MENTS.—
‘‘(1) REQUIREMENTS.—
‘‘(A) INDIVIDUAL ACCOUNT PLAN.—The administrator of 
an individual account plan (other than a one-participant 
retirement plan described in section 101(i)(8)(B)) shall fur-
nish a pension benefit statement—
‘‘(i) at least once each calendar quarter to a partici-
pant or beneficiary who has the right to direct the 
investment of assets in his or her account under the 
plan, 
‘‘(ii) at least once each calendar year to a partici-
pant or beneficiary who has his or her own account 
under the plan but does not have the right to direct 
the investment of assets in that account, and 
‘‘(iii) upon written request to a plan beneficiary 
not described in clause (i) or (ii).
H. R. 4—171
‘‘(B) DEFINED BENEFIT PLAN.—The administrator of a 
defined benefit plan (other than a one-participant retire-
ment plan described in section 101(i)(8)(B)) shall furnish 
a pension benefit statement—
‘‘(i) at least once every 3 years to each participant 
with a nonforfeitable accrued benefit and who is 
employed by the employer maintaining the plan at 
the time the statement is to be furnished, and 
‘‘(ii) to a participant or beneficiary of the plan 
upon written request. 
Information furnished under clause (i) to a participant 
may be based on reasonable estimates determined under 
regulations prescribed by the Secretary, in consultation 
with the Pension Benefit Guaranty Corporation. 
‘‘(2) STATEMENTS.—
‘‘(A) IN GENERAL.—A pension benefit statement under 
paragraph (1)—
‘‘(i) shall indicate, on the basis of the latest avail-
able information—
‘‘(I) the total benefits accrued, and 
‘‘(II) the nonforfeitable pension benefits, if any, 
which have accrued, or the earliest date on which 
benefits will become nonforfeitable, 
‘‘(ii) shall include an explanation of any permitted 
disparity under section 401(l) of the Internal Revenue 
Code of 1986 or any floor-offset arrangement that may 
be applied in determining any accrued benefits 
described in clause (i), 
‘‘(iii) shall be written in a manner calculated to 
be understood by the average plan participant, and 
‘‘(iv) may be delivered in written, electronic, or 
other appropriate form to the extent such form is 
reasonably accessible to the participant or beneficiary. 
‘‘(B) ADDITIONAL INFORMATION.—In the case of an indi-
vidual account plan, any pension benefit statement under 
clause (i) or (ii) of paragraph (1)(A) shall include—
‘‘(i) the value of each investment to which assets 
in the individual account have been allocated, deter-
mined as of the most recent valuation date under the 
plan, including the value of any assets held in the 
form of employer securities, without regard to whether 
such securities were contributed by the plan sponsor 
or acquired at the direction of the plan or of the partici-
pant or beneficiary, and 
‘‘(ii) in the case of a pension benefit statement 
under paragraph (1)(A)(i)—
‘‘(I) an explanation of any limitations or 
restrictions on any right of the participant or bene-
ficiary under the plan to direct an investment, 
‘‘(II) an explanation, written in a manner cal-
culated to be understood by the average plan 
participant, of the importance, for the long-term 
retirement security of participants and bene-
ficiaries, of a well-balanced and diversified invest-
ment portfolio, including a statement of the risk 
that holding more than 20 percent of a portfolio
H. R. 4—172
in the security of one entity (such as employer 
securities) may not be adequately diversified, and 
‘‘(III) a notice directing the participant or bene-
ficiary to the Internet website of the Department 
of Labor for sources of information on individual 
investing and diversification. 
‘‘(C) 
ALTERNATIVE
NOTICE.—The 
requirements 
of 
subparagraph (A)(i)(II) are met if, at least annually and 
in accordance with requirements of the Secretary, the 
plan—
‘‘(i) updates the information described in such 
paragraph which is provided in the pension benefit 
statement, or 
‘‘(ii) provides in a separate statement such informa-
tion as is necessary to enable a participant or bene-
ficiary to determine their nonforfeitable vested bene-
fits. 
‘‘(3) DEFINED BENEFIT PLANS.—
‘‘(A) ALTERNATIVE NOTICE.—In the case of a defined 
benefit plan, the requirements of paragraph (1)(B)(i) shall 
be treated as met with respect to a participant if at least 
once each year the administrator provides to the participant 
notice of the availability of the pension benefit statement 
and the ways in which the participant may obtain such 
statement. Such notice may be delivered in written, elec-
tronic, or other appropriate form to the extent such form 
is reasonably accessible to the participant. 
‘‘(B) YEARS IN WHICH NO BENEFITS ACCRUE.—The Sec-
retary may provide that years in which no employee or 
former employee benefits (within the meaning of section 
410(b) of the Internal Revenue Code of 1986) under the 
plan need not be taken into account in determining the 
3-year period under paragraph (1)(B)(i).’’. 
(2) CONFORMING AMENDMENTS.—
(A) Section 105 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1025) is amended by 
striking subsection (d). 
(B) Section 105(b) of such Act (29 U.S.C. 1025(b)) is 
amended to read as follows: 
‘‘(b) LIMITATION ON NUMBER OF STATEMENTS.—In no case shall 
a participant or beneficiary of a plan be entitled to more than 
1 statement described in subparagraph (A)(iii) or (B)(ii) of subsection 
(a)(1), whichever is applicable, in any 12-month period.’’. 
(C) Section 502(c)(1) of such Act (29 U.S.C. 1132(c)(1)) 
is amended by striking ‘‘or section 101(f)’’ and inserting 
‘‘section 101(f), or section 105(a)’’. 
(b) MODEL STATEMENTS.—
(1) IN GENERAL.—The Secretary of Labor shall, within 1 
year after the date of the enactment of this section, develop 
1 or more model benefit statements that are written in a 
manner calculated to be understood by the average plan partici-
pant and that may be used by plan administrators in complying 
with the requirements of section 105 of the Employee Retire-
ment Income Security Act of 1974. 
(2) INTERIM FINAL RULES.—The Secretary of Labor may 
promulgate any interim final rules as the Secretary determines 
appropriate to carry out the provisions of this subsection.
H. R. 4—173
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by this section 
shall apply to plan years beginning after December 31, 2006. 
(2) SPECIAL
RULE
FOR
COLLECTIVELY
BARGAINED
AGREE-
MENTS.—In the case of a plan maintained pursuant to 1 or 
more collective bargaining agreements between employee rep-
resentatives 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 covered 
by, any such agreement by substituting for ‘‘December 31, 
2006’’ the earlier of—
(A) the later of—
(i) December 31, 2007, or 
(ii) the date on which the last of such collective 
bargaining agreements terminates (determined without 
regard to any extension thereof after such date of 
enactment), or 
(B) December 31, 2008. 
SEC. 509. NOTICE TO PARTICIPANTS OR BENEFICIARIES OF BLACKOUT 
PERIODS. 
(a) IN GENERAL.—Section 101(i)(8)(B) of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C. 1021(i)(8)(B)) is 
amended by striking clauses (i) through (iv), by redesignating clause 
(v) as clause (ii), and by inserting before clause (ii), as so redesig-
nated, the following new clause: 
‘‘(i) on the first day of the plan year—
‘‘(I) covered only one individual (or the indi-
vidual and the individual’s spouse) and the indi-
vidual (or the individual and the individual’s 
spouse) owned 100 percent of the plan sponsor 
(whether or not incorporated), or 
‘‘(II) covered only one or more partners (or 
partners and their spouses) in the plan sponsor, 
and’’. 
(b) EFFECTIVE DATE.—The amendments made by this sub-
section shall take effect as if included in the provisions of section 
306 of Public Law 107–204 (116 Stat. 745 et seq.). 
TITLE VI—INVESTMENT ADVICE, PRO-
HIBITED TRANSACTIONS, AND FIDU-
CIARY RULES 
Subtitle A—Investment Advice 
SEC. 601. PROHIBITED TRANSACTION EXEMPTION FOR PROVISION OF 
INVESTMENT ADVICE. 
(a) AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECU-
RITY ACT OF 1974.—
(1) EXEMPTION FROM PROHIBITED TRANSACTIONS.—Section 
408(b) of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1108(b)) is amended by adding at the end 
the following new paragraph:
H. R. 4—174
‘‘(14) Any transaction in connection with the provision of 
investment advice described in section 3(21)(A)(ii) to a partici-
pant or beneficiary of an individual account plan that permits 
such participant or beneficiary to direct the investment of assets 
in their individual account, if—
‘‘(A) the transaction is—
‘‘(i) the provision of the investment advice to the 
participant or beneficiary of the plan with respect to 
a security or other property available as an investment 
under the plan, 
‘‘(ii) the acquisition, holding, or sale of a security 
or other property available as an investment under 
the plan pursuant to the investment advice, or 
‘‘(iii) the direct or indirect receipt of fees or other 
compensation by the fiduciary adviser or an affiliate 
thereof (or any employee, agent, or registered rep-
resentative of the fiduciary adviser or affiliate) in 
connection with the provision of the advice or in 
connection with an acquisition, holding, or sale of a 
security or other property available as an investment 
under the plan pursuant to the investment advice; 
and 
‘‘(B) the requirements of subsection (g) are met.’’. 
(2) REQUIREMENTS.—Section 408 of such Act is amended 
further by adding at the end the following new subsection: 
‘‘(g) PROVISION OF INVESTMENT ADVICE TO PARTICIPANT AND 
BENEFICIARIES.—
‘‘(1) IN GENERAL.—The prohibitions provided in section 406 
shall not apply to transactions described in subsection (b)(14) 
if the investment advice provided by a fiduciary adviser is 
provided under an eligible investment advice arrangement. 
‘‘(2) ELIGIBLE INVESTMENT ADVICE ARRANGEMENT.—For pur-
poses of this subsection, the term ‘eligible investment advice 
arrangement’ means an arrangement—
‘‘(A) which either—
‘‘(i) provides that any fees (including any commis-
sion or other compensation) received by the fiduciary 
adviser for investment advice or with respect to the 
sale, holding, or acquisition of any security or other 
property for purposes of investment of plan assets do 
not vary depending on the basis of any investment 
option selected, or 
‘‘(ii) uses a computer model under an investment 
advice program meeting the requirements of paragraph 
(3) in connection with the provision of investment 
advice by a fiduciary adviser to a participant or bene-
ficiary, and 
‘‘(B) with respect to which the requirements of para-
graph (4), (5), (6), (7), (8), and (9) are met. 
‘‘(3) INVESTMENT
ADVICE
PROGRAM
USING
COMPUTER 
MODEL.—
‘‘(A) IN
GENERAL.—An investment advice program 
meets the requirements of this paragraph if the require-
ments of subparagraphs (B), (C), and (D) are met. 
‘‘(B) COMPUTER
MODEL.—The requirements of this 
subparagraph are met if the investment advice provided
H. R. 4—175
under the investment advice program is provided pursuant 
to a computer model that—
‘‘(i) applies generally accepted investment theories 
that take into account the historic returns of different 
asset classes over defined periods of time, 
‘‘(ii) utilizes relevant information about the partici-
pant, which may include age, life expectancy, retire-
ment age, risk tolerance, other assets or sources of 
income, and preferences as to certain types of invest-
ments, 
‘‘(iii) utilizes prescribed objective criteria to provide 
asset allocation portfolios comprised of investment 
options available under the plan, 
‘‘(iv) operates in a manner that is not biased in 
favor of investments offered by the fiduciary adviser 
or a person with a material affiliation or contractual 
relationship with the fiduciary adviser, and 
‘‘(v) takes into account all investment options 
under the plan in specifying how a participant’s 
account balance should be invested and is not inappro-
priately weighted with respect to any investment 
option. 
‘‘(C) CERTIFICATION.—
‘‘(i) IN
GENERAL.—The requirements of this 
subparagraph are met with respect to any investment 
advice program if an eligible investment expert cer-
tifies, prior to the utilization of the computer model 
and in accordance with rules prescribed by the Sec-
retary, that the computer model meets the require-
ments of subparagraph (B). 
‘‘(ii) RENEWAL
OF
CERTIFICATIONS.—If, as deter-
mined under regulations prescribed by the Secretary, 
there are material modifications to a computer model, 
the requirements of this subparagraph are met only 
if a certification described in clause (i) is obtained 
with respect to the computer model as so modified. 
‘‘(iii) ELIGIBLE
INVESTMENT
EXPERT.—The term 
‘eligible investment expert’ means any person—
‘‘(I) which meets such requirements as the 
Secretary may provide, and 
‘‘(II) does not bear any material affiliation or 
contractual relationship with any investment 
adviser or a related person thereof (or any 
employee, agent, or registered representative of 
the investment adviser or related person). 
‘‘(D) EXCLUSIVITY OF RECOMMENDATION.—The require-
ments of this subparagraph are met with respect to any 
investment advice program if—
‘‘(i) the only investment advice provided under the 
program is the advice generated by the computer model 
described in subparagraph (B), and 
‘‘(ii) any transaction described in subsection 
(b)(14)(B)(ii) occurs solely at the direction of the partici-
pant or beneficiary. 
Nothing in the preceding sentence shall preclude the 
participant or beneficiary from requesting investment 
advice other than that described in subparagraph (A), but
H. R. 4—176
only if such request has not been solicited by any person 
connected with carrying out the arrangement. 
‘‘(4) EXPRESS AUTHORIZATION BY SEPARATE FIDUCIARY.—The 
requirements of this paragraph are met with respect to an 
arrangement if the arrangement is expressly authorized by 
a plan fiduciary other than the person offering the investment 
advice program, any person providing investment options under 
the plan, or any affiliate of either. 
‘‘(5) ANNUAL AUDIT.—The requirements of this paragraph 
are met if an independent auditor, who has appropriate tech-
nical training or experience and proficiency and so represents 
in writing—
‘‘(A) conducts an annual audit of the arrangement for 
compliance with the requirements of this subsection, and 
‘‘(B) following completion of the annual audit, issues 
a written report to the fiduciary who authorized use of 
the arrangement which presents its specific findings 
regarding compliance of the arrangement with the require-
ments of this subsection. 
For purposes of this paragraph, an auditor is considered inde-
pendent if it is not related to the person offering the arrange-
ment to the plan and is not related to any person providing 
investment options under the plan. 
‘‘(6) DISCLOSURE.—The requirements of this paragraph are 
met if—
‘‘(A) the fiduciary adviser provides to a participant 
or a beneficiary before the initial provision of the invest-
ment advice with regard to any security or other property 
offered as an investment option, a written notification 
(which may consist of notification by means of electronic 
communication)—
‘‘(i) of the role of any party that has a material 
affiliation or contractual relationship with the financial 
adviser in the development of the investment advice 
program and in the selection of investment options 
available under the plan, 
‘‘(ii) of the past performance and historical rates 
of return of the investment options available under 
the plan, 
‘‘(iii) of all fees or other compensation relating 
to the advice that the fiduciary adviser or any affiliate 
thereof is to receive (including compensation provided 
by any third party) in connection with the provision 
of the advice or in connection with the sale, acquisition, 
or holding of the security or other property, 
‘‘(iv) of any material affiliation or contractual rela-
tionship of the fiduciary adviser or affiliates thereof 
in the security or other property, 
‘‘(v) the manner, and under what circumstances, 
any participant or beneficiary information provided 
under the arrangement will be used or disclosed, 
‘‘(vi) of the types of services provided by the fidu-
ciary adviser in connection with the provision of invest-
ment advice by the fiduciary adviser, 
‘‘(vii) that the adviser is acting as a fiduciary of 
the plan in connection with the provision of the advice, 
and
H. R. 4—177
‘‘(viii) that a recipient of the advice may separately 
arrange for the provision of advice by another adviser, 
that could have no material affiliation with and receive 
no fees or other compensation in connection with the 
security or other property, and 
‘‘(B) at all times during the provision of advisory serv-
ices to the participant or beneficiary, the fiduciary 
adviser—
‘‘(i) 
maintains 
the 
information 
described 
in 
subparagraph (A) in accurate form and in the manner 
described in paragraph (8), 
‘‘(ii) provides, without charge, accurate information 
to the recipient of the advice no less frequently than 
annually, 
‘‘(iii) provides, without charge, accurate informa-
tion to the recipient of the advice upon request of 
the recipient, and 
‘‘(iv) provides, without charge, accurate informa-
tion to the recipient of the advice concerning any mate-
rial change to the information required to be provided 
to the recipient of the advice at a time reasonably 
contemporaneous to the change in information. 
‘‘(7) OTHER CONDITIONS.—The requirements of this para-
graph are met if—
‘‘(A) the fiduciary adviser provides appropriate disclo-
sure, in connection with the sale, acquisition, or holding 
of the security or other property, in accordance with all 
applicable securities laws, 
‘‘(B) the sale, acquisition, or holding occurs solely at 
the direction of the recipient of the advice, 
‘‘(C) the compensation received by the fiduciary adviser 
and affiliates thereof in connection with the sale, acquisi-
tion, or holding of the security or other property is reason-
able, and 
‘‘(D) the terms of the sale, acquisition, or holding of 
the security or other property are at least as favorable 
to the plan as an arm’s length transaction would be. 
‘‘(8) STANDARDS FOR PRESENTATION OF INFORMATION.—
‘‘(A) IN GENERAL.—The requirements of this paragraph 
are met if the notification required to be provided to partici-
pants and beneficiaries under paragraph (6)(A) is written 
in a clear and conspicuous manner and in a manner cal-
culated to be understood by the average plan participant 
and is sufficiently accurate and comprehensive to reason-
ably apprise such participants and beneficiaries of the 
information required to be provided in the notification. 
‘‘(B) MODEL FORM FOR DISCLOSURE OF FEES AND OTHER 
COMPENSATION.—The Secretary shall issue a model form 
for the disclosure of fees and other compensation required 
in paragraph (6)(A)(iii) which meets the requirements of 
subparagraph (A). 
‘‘(9) MAINTENANCE FOR 6 YEARS OF EVIDENCE OF COMPLI-
ANCE.—The requirements of this paragraph are met if a fidu-
ciary adviser who has provided advice referred to in paragraph 
(1) maintains, for a period of not less than 6 years after the 
provision of the advice, any records necessary for determining 
whether the requirements of the preceding provisions of this
H. R. 4—178
subsection and of subsection (b)(14) have been met. A trans-
action prohibited under section 406 shall not be considered 
to have occurred solely because the records are lost or destroyed 
prior to the end of the 6-year period due to circumstances 
beyond the control of the fiduciary adviser. 
‘‘(10) EXEMPTION FOR PLAN SPONSOR AND CERTAIN OTHER 
FIDUCIARIES.—
‘‘(A) IN GENERAL.—Subject to subparagraph (B), a plan 
sponsor or other person who is a fiduciary (other than 
a fiduciary adviser) shall not be treated as failing to meet 
the requirements of this part solely by reason of the provi-
sion of investment advice referred to in section 3(21)(A)(ii) 
(or solely by reason of contracting for or otherwise 
arranging for the provision of the advice), if—
‘‘(i) the advice is provided by a fiduciary adviser 
pursuant to an eligible investment advice arrangement 
between the plan sponsor or other fiduciary and the 
fiduciary adviser for the provision by the fiduciary 
adviser of investment advice referred to in such section, 
‘‘(ii) the terms of the eligible investment advice 
arrangement require compliance by the fiduciary 
adviser with the requirements of this subsection, and 
‘‘(iii) the terms of the eligible investment advice 
arrangement include a written acknowledgment by the 
fiduciary adviser that the fiduciary adviser is a fidu-
ciary of the plan with respect to the provision of the 
advice. 
‘‘(B) CONTINUED
DUTY
OF
PRUDENT
SELECTION
OF 
ADVISER AND PERIODIC REVIEW.—Nothing in subparagraph 
(A) shall be construed to exempt a plan sponsor or other 
person who is a fiduciary from any requirement of this 
part for the prudent selection and periodic review of a 
fiduciary adviser with whom the plan sponsor or other 
person enters into an eligible investment advice arrange-
ment for the provision of investment advice referred to 
in section 3(21)(A)(ii). The plan sponsor or other person 
who is a fiduciary has no duty under this part to monitor 
the specific investment advice given by the fiduciary 
adviser to any particular recipient of the advice. 
‘‘(C) AVAILABILITY OF PLAN ASSETS FOR PAYMENT FOR 
ADVICE.—Nothing in this part shall be construed to pre-
clude the use of plan assets to pay for reasonable expenses 
in providing investment advice referred to in section 
3(21)(A)(ii). 
‘‘(11) DEFINITIONS.—For purposes of this subsection and 
subsection (b)(14)—
‘‘(A) FIDUCIARY ADVISER.—The term ‘fiduciary adviser’ 
means, with respect to a plan, a person who is a fiduciary 
of the plan by reason of the provision of investment advice 
referred to in section 3(21)(A)(ii) by the person to the 
participant or beneficiary of the plan and who is—
‘‘(i) registered as an investment adviser under the 
Investment Advisers Act of 1940 (15 U.S.C. 80b–1 et 
seq.) or under the laws of the State in which the 
fiduciary maintains its principal office and place of 
business,
H. R. 4—179
‘‘(ii) a bank or similar financial institution referred 
to in section 408(b)(4) or a savings association (as 
defined in section 3(b)(1) of the Federal Deposit Insur-
ance Act (12 U.S.C. 1813(b)(1)), but only if the advice 
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, 
‘‘(iii) an insurance company qualified to do business 
under the laws of a State, 
‘‘(iv) a person registered as a broker or dealer 
under the Securities Exchange Act of 1934 (15 U.S.C. 
78a et seq.), 
‘‘(v) an affiliate of a person described in any of 
clauses (i) through (iv), or 
‘‘(vi) an employee, agent, or registered representa-
tive of a person described in clauses (i) through (v) 
who satisfies the requirements of applicable insurance, 
banking, and securities laws relating to the provision 
of the advice. 
For purposes of this part, a person who develops the com-
puter model described in paragraph (3)(B) or markets the 
investment advice program or computer model shall be 
treated as a person who is a fiduciary of the plan by 
reason of the provision of investment advice referred to 
in section 3(21)(A)(ii) to the participant or beneficiary and 
shall be treated as a fiduciary adviser for purposes of 
this subsection and subsection (b)(14), except that the Sec-
retary may prescribe rules under which only 1 fiduciary 
adviser may elect to be treated as a fiduciary with respect 
to the plan. 
‘‘(B) AFFILIATE.—The term ‘affiliate’ of another entity 
means an affiliated person of the entity (as defined in 
section 2(a)(3) of the Investment Company Act of 1940 
(15 U.S.C. 80a–2(a)(3))). 
‘‘(C) REGISTERED
REPRESENTATIVE.—The term ‘reg-
istered representative’ of another entity means a person 
described in section 3(a)(18) of the Securities Exchange 
Act of 1934 (15 U.S.C. 78c(a)(18)) (substituting the entity 
for the broker or dealer referred to in such section) or 
a person described in section 202(a)(17) of the Investment 
Advisers Act of 1940 (15 U.S.C. 80b-2(a)(17)) (substituting 
the entity for the investment adviser referred to in such 
section).’’. 
(3) EFFECTIVE DATE.—The amendments made by this sub-
section shall apply with respect to advice referred to in section 
3(21)(A)(ii) of the Employee Retirement Income Security Act 
of 1974 provided after December 31, 2006. 
(b) AMENDMENTS TO INTERNAL REVENUE CODE OF 1986.—
(1) EXEMPTION
FROM
PROHIBITED
TRANSACTIONS.—Sub-
section (d) of section 4975 of the Internal Revenue Code of 
1986 (relating to exemption from tax on prohibited transactions) 
is amended—
(A) in paragraph (15), by striking ‘‘or’’ at the end; 
(B) in paragraph (16), by striking the period at the 
end and inserting ‘‘;or’’; and 
(C) by adding at the end the following new paragraph:
H. R. 4—180
‘‘(17) Any transaction in connection with the provision of 
investment advice described in subsection (e)(3)(B) to a partici-
pant or beneficiary in a plan and that permits such participant 
or beneficiary to direct the investment of plan assets in an 
individual account, if—
‘‘(A) the transaction is—
‘‘(i) the provision of the investment advice to the 
participant or beneficiary of the plan with respect to 
a security or other property available as an investment 
under the plan, 
‘‘(ii) the acquisition, holding, or sale of a security 
or other property available as an investment under 
the plan pursuant to the investment advice, or 
‘‘(iii) the direct or indirect receipt of fees or other 
compensation by the fiduciary adviser or an affiliate 
thereof (or any employee, agent, or registered rep-
resentative of the fiduciary adviser or affiliate) in 
connection with the provision of the advice or in 
connection with an acquisition, holding, or sale of a 
security or other property available as an investment 
under the plan pursuant to the investment advice; 
and 
‘‘(B) the requirements of subsection (f)(8) are met.’’. 
(2) REQUIREMENTS.—Subsection (f) of such section 4975 
(relating to other definitions and special rules) is amended 
by adding at the end the following new paragraph: 
‘‘(8) PROVISION OF INVESTMENT ADVICE TO PARTICIPANT AND 
BENEFICIARIES.— I24
‘‘(A) IN
GENERAL.—The prohibitions 
provided in subsection (c) shall not apply to transactions 
described in subsection (b)(14) if the investment advice provided 
by a fiduciary adviser is provided under an eligible investment 
advice arrangement. 
‘‘(B) ELIGIBLE INVESTMENT ADVICE ARRANGEMENT.—For 
purposes of this paragraph, the term ‘eligible investment 
advice arrangement’ means an arrangement—
‘‘(i) which either—
‘‘(I) provides that any fees (including any 
commission or other compensation) received by the 
fiduciary adviser for investment advice or with 
respect to the sale, holding, or acquisition of any 
security or other property for purposes of invest-
ment of plan assets do not vary depending on 
the basis of any investment option selected, or 
‘‘(II) uses a computer model under an invest-
ment advice program meeting the requirements 
of subparagraph (C) in connection with the provi-
sion of investment advice by a fiduciary adviser 
to a participant or beneficiary, and 
‘‘(ii) with respect to which the requirements of 
subparagraphs (D), (E), (F), (G), (H), and (I) are met. 
‘‘(C) INVESTMENT ADVICE PROGRAM USING COMPUTER 
MODEL.—
‘‘(i) IN GENERAL.—An investment advice program 
meets the requirements of this subparagraph if the 
requirements of clauses (ii), (iii), and (iv) are met. 
‘‘(ii) COMPUTER MODEL.—The requirements of this 
clause are met if the investment advice provided under
H. R. 4—181
the investment advice program is provided pursuant 
to a computer model that—
‘‘(I) applies generally accepted investment 
theories that take into account the historic returns 
of different asset classes over defined periods of 
time, 
‘‘(II) utilizes relevant information about the 
participant, which may include age, life expect-
ancy, retirement age, risk tolerance, other assets 
or sources of income, and preferences as to certain 
types of investments, 
‘‘(III) utilizes prescribed objective criteria to 
provide asset allocation portfolios comprised of 
investment options available under the plan, 
‘‘(IV) operates in a manner that is not biased 
in favor of investments offered by the fiduciary 
adviser or a person with a material affiliation or 
contractual relationship with the fiduciary adviser, 
and 
‘‘(V) takes into account all investment options 
under the plan in specifying how a participant’s 
account balance should be invested and is not 
inappropriately weighted with respect to any 
investment option. 
‘‘(iii) CERTIFICATION.—
‘‘(I) IN
GENERAL.—The requirements of this 
clause are met with respect to any investment 
advice program if an eligible investment expert 
certifies, prior to the utilization of the computer 
model and in accordance with rules prescribed by 
the Secretary of Labor, that the computer model 
meets the requirements of clause (ii). 
‘‘(II) RENEWAL
OF
CERTIFICATIONS.—If, as 
determined under regulations prescribed by the 
Secretary of Labor, there are material modifica-
tions to a computer model, the requirements of 
this clause are met only if a certification described 
in subclause (I) is obtained with respect to the 
computer model as so modified. 
‘‘(III) ELIGIBLE
INVESTMENT
EXPERT.—The 
term ‘eligible investment expert’ means any person 
which meets such requirements as the Secretary 
of Labor may provide and which does not bear 
any material affiliation or contractual relationship 
with any investment adviser or a related person 
thereof (or any employee, agent, or registered rep-
resentative of the investment adviser or related 
person). 
‘‘(iv) 
EXCLUSIVITY
OF
RECOMMENDATION.—The 
requirements of this clause are met with respect to 
any investment advice program if—
‘‘(I) the only investment advice provided under 
the program is the advice generated by the com-
puter model described in clause (ii), and 
‘‘(II) any transaction described in subsection 
(b)(14)(B)(ii) occurs solely at the direction of the 
participant or beneficiary.
H. R. 4—182
Nothing in the preceding sentence shall preclude the 
participant or beneficiary from requesting investment 
advice other than that described in clause (i), but only 
if such request has not been solicited by any person 
connected with carrying out the arrangement. 
‘‘(D) EXPRESS
AUTHORIZATION
BY
SEPARATE
FIDU-
CIARY.—The requirements of this subparagraph are met 
with respect to an arrangement if the arrangement is 
expressly authorized by a plan fiduciary other than the 
person offering the investment advice program, any person 
providing investment options under the plan, or any affil-
iate of either. 
‘‘(E) AUDITS.—
‘‘(i) IN
GENERAL.—The requirements of this 
subparagraph are met if an independent auditor, who 
has appropriate technical training or experience and 
proficiency and so represents in writing—
‘‘(I) conducts an annual audit of the arrange-
ment for compliance with the requirements of this 
paragraph, and 
‘‘(II) following completion of the annual audit, 
issues a written report to the fiduciary who author-
ized use of the arrangement which presents its 
specific findings regarding compliance of the 
arrangement with the requirements of this para-
graph. 
‘‘(ii) SPECIAL
RULE
FOR
INDIVIDUAL
RETIREMENT 
AND SIMILAR PLANS.—In the case of a plan described 
in subparagraphs (B) through (F) (and so much of 
subparagraph (G) as relates to such subparagraphs) 
of subsection (e)(1), in lieu of the requirements of clause 
(i), audits of the arrangement shall be conducted at 
such times and in such manner as the Secretary of 
Labor may prescribe. 
‘‘(iii) INDEPENDENT AUDITOR.—For purposes of this 
subparagraph, an auditor is considered independent 
if it is not related to the person offering the arrange-
ment to the plan and is not related to any person 
providing investment options under the plan. 
‘‘(F) DISCLOSURE.—The requirements of this subpara-
graph are met if—
‘‘(i) the fiduciary adviser provides to a participant 
or a beneficiary before the initial provision of the 
investment advice with regard to any security or other 
property offered as an investment option, a written 
notification (which may consist of notification by means 
of electronic communication)—
‘‘(I) of the role of any party that has a material 
affiliation or contractual relationship with the 
financial adviser in the development of the invest-
ment advice program and in the selection of invest-
ment options available under the plan, 
‘‘(II) of the past performance and historical 
rates of return of the investment options available 
under the plan, 
‘‘(III) of all fees or other compensation relating 
to the advice that the fiduciary adviser or any
H. R. 4—183
affiliate thereof is to receive (including compensa-
tion provided by any third party) in connection 
with the provision of the advice or in connection 
with the sale, acquisition, or holding of the security 
or other property, 
‘‘(IV) of any material affiliation or contractual 
relationship of the fiduciary adviser or affiliates 
thereof in the security or other property, 
‘‘(V) the manner, and under what cir-
cumstances, 
any 
participant 
or 
beneficiary 
information provided under the arrangement will 
be used or disclosed, 
‘‘(VI) of the types of services provided by the 
fiduciary adviser in connection with the provision 
of investment advice by the fiduciary adviser, 
‘‘(VII) that the adviser is acting as a fiduciary 
of the plan in connection with the provision of 
the advice, and 
‘‘(VIII) that a recipient of the advice may sepa-
rately arrange for the provision of advice by 
another adviser, that could have no material affili-
ation with and receive no fees or other compensa-
tion in connection with the security or other prop-
erty, and 
‘‘(ii) at all times during the provision of advisory 
services to the participant or beneficiary, the fiduciary 
adviser—
‘‘(I) maintains the information described in 
clause (i) in accurate form and in the manner 
described in subparagraph (H), 
‘‘(II) 
provides, 
without 
charge, 
accurate 
information to the recipient of the advice no less 
frequently than annually, 
‘‘(III) 
provides, 
without 
charge, 
accurate 
information to the recipient of the advice upon 
request of the recipient, and 
‘‘(IV) 
provides, 
without 
charge, 
accurate 
information to the recipient of the advice con-
cerning any material change to the information 
required to be provided to the recipient of the 
advice at a time reasonably contemporaneous to 
the change in information. 
‘‘(G) OTHER
CONDITIONS.—The requirements of this 
subparagraph are met if—
‘‘(i) the fiduciary adviser provides appropriate 
disclosure, in connection with the sale, acquisition, or 
holding of the security or other property, in accordance 
with all applicable securities laws, 
‘‘(ii) the sale, acquisition, or holding occurs solely 
at the direction of the recipient of the advice, 
‘‘(iii) the compensation received by the fiduciary 
adviser and affiliates thereof in connection with the 
sale, acquisition, or holding of the security or other 
property is reasonable, and
H. R. 4—184
‘‘(iv) the terms of the sale, acquisition, or holding 
of the security or other property are at least as favor-
able to the plan as an arm’s length transaction would 
be. 
‘‘(H) STANDARDS FOR PRESENTATION OF INFORMATION.—
‘‘(i) IN
GENERAL.—The requirements of this 
subparagraph are met if the notification required to 
be provided to participants and beneficiaries under 
subparagraph (F)(i) is written in a clear and con-
spicuous manner and in a manner calculated to be 
understood by the average plan participant and is suffi-
ciently accurate and comprehensive to reasonably 
apprise such participants and beneficiaries of the 
information required to be provided in the notification. 
‘‘(ii) MODEL FORM FOR DISCLOSURE OF FEES AND 
OTHER COMPENSATION.—The Secretary of Labor shall 
issue a model form for the disclosure of fees and other 
compensation required in subparagraph (F)(i)(III) 
which meets the requirements of clause (i). 
‘‘(I) MAINTENANCE FOR 6 YEARS OF EVIDENCE OF COMPLI-
ANCE.—The requirements of this subparagraph are met 
if a fiduciary adviser who has provided advice referred 
to in subparagraph (A) maintains, for a period of not less 
than 6 years after the provision of the advice, any records 
necessary for determining whether the requirements of 
the preceding provisions of this paragraph and of subsection 
(d)(17) have been met. A transaction prohibited under sec-
tion 406 shall not be considered to have occurred solely 
because the records are lost or destroyed prior to the end 
of the 6-year period due to circumstances beyond the control 
of the fiduciary adviser. 
‘‘(J) DEFINITIONS.—For purposes of this paragraph and 
subsection (d)(17)—
‘‘(i) FIDUCIARY
ADVISER.—The term ‘fiduciary 
adviser’ means, with respect to a plan, a person who 
is a fiduciary of the plan by reason of the provision 
of investment advice by the person to the participant 
or beneficiary of the plan and who is—
‘‘(I) registered as an investment adviser under 
the Investment Advisers Act of 1940 (15 U.S.C. 
80b–1 et seq.) or under the laws of the State 
in which the fiduciary maintains its principal office 
and place of business, 
‘‘(II) a bank or similar financial institution 
referred to in section 408(b)(4) or a savings associa-
tion (as defined in section 3(b)(1) of the Federal 
Deposit Insurance Act (12 U.S.C. 1813(b)(1)), but 
only if the advice is provided through a trust 
department of the bank or similar financial institu-
tion or savings association which is subject to peri-
odic examination and review by Federal or State 
banking authorities, 
‘‘(III) an insurance company qualified to do 
business under the laws of a State, 
‘‘(IV) a person registered as a broker or dealer 
under the Securities Exchange Act of 1934 (15 
U.S.C. 78a et seq.),
H. R. 4—185
‘‘(V) an affiliate of a person described in any 
of subclauses (I) through (IV), or 
‘‘(VI) an employee, agent, or registered rep-
resentative of a person described in subclauses 
(I) through (V) who satisfies the requirements of 
applicable insurance, banking, and securities laws 
relating to the provision of the advice. 
For purposes of this title, a person who develops the 
computer model described in subparagraph (C)(ii) or 
markets the investment advice program or computer 
model shall be treated as a person who is a fiduciary 
of the plan by reason of the provision of investment 
advice referred to in subsection (e)(3)(B) to the partici-
pant or beneficiary and shall be treated as a fiduciary 
adviser for purposes of this paragraph and subsection 
(d)(17), except that the Secretary of Labor may pre-
scribe rules under which only 1 fiduciary adviser may 
elect to be treated as a fiduciary with respect to the 
plan. 
‘‘(ii) AFFILIATE.—The term ‘affiliate’ of another 
entity means an affiliated person of the entity (as 
defined in section 2(a)(3) of the Investment Company 
Act of 1940 (15 U.S.C. 80a–2(a)(3))). 
‘‘(iii) REGISTERED REPRESENTATIVE.—The term ‘reg-
istered representative’ of another entity means a per-
son described in section 3(a)(18) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78c(a)(18)) (sub-
stituting the entity for the broker or dealer referred 
to in such section) or a person described in section 
202(a)(17) of the Investment Advisers Act of 1940 (15 
U.S.C. 80b-2(a)(17)) (substituting the entity for the 
investment adviser referred to in such section).’’. 
(3) DETERMINATION OF FEASIBILITY OF APPLICATION OF COM-
PUTER MODEL INVESTMENT ADVICE PROGRAMS FOR INDIVIDUAL 
RETIREMENT AND SIMILAR PLANS.—
(A) SOLICITATION OF INFORMATION.—As soon as prac-
ticable after the date of the enactment of this Act, the 
Secretary of Labor, in consultation with the Secretary of 
the Treasury, shall—
(i) solicit information as to the feasibility of the 
application of computer model investment advice pro-
grams for plans described in subparagraphs (B) 
through (F) (and so much of subparagraph (G) as 
relates to such subparagraphs) of section 4975(e)(1) 
of the Internal Revenue Code of 1986, including solic-
iting information from—
(I) at least the top 50 trustees of such plans, 
determined on the basis of assets held by such 
trustees, and 
(II) other persons offering computer model 
investment advice programs based on nonpropri-
etary products, and 
(ii) shall on the basis of such information make 
the determination under subparagraph (B). 
The information solicited by the Secretary of Labor under 
clause (i) from persons described in subclauses (I) and 
(II) of clause (i) shall include information on computer
H. R. 4—186
modeling capabilities of such persons with respect to the 
current year and preceding year, including such capabilities 
for investment accounts maintained by such persons. 
(B) DETERMINATION OF FEASIBILITY.—The Secretary of 
Labor, in consultation with the Secretary of the Treasury, 
shall, on the basis of information received under subpara-
graph (A), determine whether there is any computer model 
investment advice program which may be utilized by a 
plan described in subparagraph (A)(i) to provide investment 
advice to the account beneficiary of the plan which—
(i) utilizes relevant information about the account 
beneficiary, which may include age, life expectancy, 
retirement age, risk tolerance, other assets or sources 
of income, and preferences as to certain types of invest-
ments, 
(ii) takes into account the full range of invest-
ments, including equities and bonds, in determining 
the options for the investment portfolio of the account 
beneficiary, and 
(iii) allows the account beneficiary, in directing 
the investment of assets, sufficient flexibility in 
obtaining advice to evaluate and select investment 
options. 
The Secretary of Labor shall report the results of such 
determination to the committees of Congress referred to 
in subparagraph (D)(ii) not later than December 31, 2007. 
(C) APPLICATION
OF
COMPUTER
MODEL
INVESTMENT 
ADVICE PROGRAM.—
(i) CERTIFICATION REQUIRED FOR USE OF COMPUTER 
MODEL.—
(I) RESTRICTION ON USE.—Subclause (II) of sec-
tion 4975(f)(8)(B)(i) of the Internal Revenue Code 
of 1986 shall not apply to a plan described in 
subparagraph (A)(i). 
(II) RESTRICTION
LIFTED
IF
MODEL
CER-
TIFIED.—If the Secretary of Labor determines 
under subparagraph (B) or (D) that there is a 
computer 
model 
investment 
advice 
program 
described in subparagraph (B), subclause (I) shall 
cease to apply as of the date of such determination. 
(ii) CLASS EXEMPTION IF NO INITIAL CERTIFICATION 
BY SECRETARY.—If the Secretary of Labor determines 
under subparagraph (B) that there is no computer 
model 
investment 
advice 
program 
described 
in 
subparagraph (B), the Secretary of Labor shall grant 
a class exemption from treatment as a prohibited trans-
action under section 4975(c) of the Internal Revenue 
Code of 1986 to any transaction described in section 
4975(d)(17)(A) of such Code with respect to plans 
described in subparagraph (A)(i), subject to such condi-
tions as set forth in such exemption as are in the 
interests of the plan and its account beneficiary and 
protective of the rights of the account beneficiary and 
as are necessary to—
H. R. 4—187
(I) ensure the requirements of sections 
4975(d)(17) and 4975(f)(8) (other than subpara-
graph (C) thereof) of the Internal Revenue Code 
of 1986 are met, and 
(II) ensure the investment advice provided 
under the investment advice program utilizes pre-
scribed objective criteria to provide asset allocation 
portfolios comprised of securities or other property 
available as investments under the plan. 
If the Secretary of Labor solicits any information under 
subparagraph (A) from a person and such person does 
not provide such information within 60 days after the 
solicitation, then, unless such failure was due to 
reasonable cause and not wilful neglect, such person 
shall not be entitled to utilize the class exemption 
under this clause. 
(D) SUBSEQUENT DETERMINATION.—
(i) IN GENERAL.—If the Secretary of Labor initially 
makes a determination described in subparagraph 
(C)(ii), the Secretary may subsequently determine that 
there is a computer model investment advice program 
described in subparagraph (B). If the Secretary makes 
such subsequent 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 subse-
quent determination, or 
(II) the date which is 3 years after the first 
date on which such exemption took effect. 
(ii) REQUESTS FOR DETERMINATION.—Any person 
may request the Secretary of Labor to make a deter-
mination under this subparagraph with respect to any 
computer model investment advice program, 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 Rep-
resentatives and the Committee on Finance and the 
Committee on Health, Education, Labor, and Pensions 
of the Senate of such determination and the reasons 
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 subsection 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 exemp-
tion under section 408(b) of the Employee Retirement Income Secu-
rity Act of 1974 and section 4975(d) of the Internal Revenue Code 
of 1986 provided by the amendments made by this section shall
H. R. 4—188
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.—
(1) AMENDMENTS TO EMPLOYEE RETIREMENT INCOME SECU-
RITY
ACT
OF
1974.—Section 408(b) of such Act (29 U.S.C. 
1108(b)), as amended by section 601, is amended by adding 
at the end the following new paragraph: 
‘‘(15)(A) Any transaction involving the purchase or sale 
of securities, or other property (as determined 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 interest of 
the plan (together with the interests of any other plans 
maintained by the same plan sponsor), does not exceed 
10 percent of the aggregate size of the block trade, 
‘‘(iii) the terms of the transaction, including 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 compensation 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 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 section 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 paragraph: 
‘‘(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 interest of 
the plan (together with the interests of any other plans 
maintained by the same plan sponsor), does not exceed 
10 percent of the aggregate size of the block trade, 
‘‘(C) the terms of the transaction, including 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 compensation associated 
with an arm’s length transaction with an unrelated party.’’. 
(B) SPECIAL RULE RELATING TO BLOCK TRADE.—Sub-
section (f) of section 4975 of such Code (relating to other
H. R. 4—189
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 allocated 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 paragraph (3), 
(2) by striking ‘‘and’’ at the end of paragraph (1), and 
(3) by inserting after paragraph (1) the following new para-
graph: 
‘‘(2) no bond shall be required of any entity which is reg-
istered 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 section 
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 SECU-
RITY ACT OF 1974.—Section 408(b) of such Act, as amended 
by subsection (a), is amended by adding at the end the fol-
lowing: 
‘‘(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 interest if—
‘‘(A) the transaction is executed through an electronic 
communication network, alternative trading system, or 
similar execution system or trading venue subject to regula-
tion and oversight by—
‘‘(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 pursuant 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 relevant governmental 
authority, or 
‘‘(ii) neither the execution system nor the parties 
to the transaction take into account the identity of 
the parties in the execution of trades, 
‘‘(C) the price and compensation associated with the 
purchase and sale are not greater than the price and com-
pensation associated with an arm’s length transaction with 
an unrelated party, 
‘‘(D) if the party in interest has an ownership 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 initial trans-
action described in this paragraph executed through any 
system or venue described in subparagraph (A), a plan 
fiduciary is provided written or electronic notice of the
H. R. 4—190
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 exemptions), as amended by subsection 
(a), is amended 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 following 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, alternative trading system, or 
similar execution system or trading venue subject to regula-
tion 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 pursuant 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 relevant governmental 
authority, or 
‘‘(ii) neither the execution system nor the parties 
to the transaction take into account the identity of 
the parties in the execution of trades, 
‘‘(C) the price and compensation associated with the 
purchase and sale are not greater than the price and com-
pensation associated with an arm’s length transaction with 
an unrelated party, 
‘‘(D) if the party in interest has an ownership 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 initial trans-
action described in this paragraph executed 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 SECU-
RITY ACT OF 1974.—Section 408(b) of such Act (29 U.S.C. 1106), 
as amended by subsection (c), is amended by adding at the 
end the following new paragraph: 
‘‘(17)(A) Transactions described in subparagraphs (A), (B), 
and (D) of section 406(a)(1) between 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 
in the transaction or renders investment advice (within the 
meaning of section 3(21)(A)(ii)) with respect to those assets, 
solely by reason of providing services to the plan or solely 
by reason of a relationship to such a service provider described
H. R. 4—191
in subparagraph (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 adequate 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 prevailing on a 
national securities exchange which is registered 
under section 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 exchange, a price not less favor-
able to the plan than the offering 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 
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 section 4975 of 
the Internal Revenue Code of 1986 (relating to exemptions), 
as amended by subsection (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 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 
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 relationship to such a service provider described 
in subparagraph (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 consider-
ation.’’. 
(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 sub-
section (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 prevailing on a 
national securities exchange which is registered under
H. R. 4—192
section 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 exchange, a price not less favorable to the 
plan than the offering price for the security as estab-
lished by the current 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 secu-
rity, and 
‘‘(B) 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 of Labor.’’. 
(e) RELIEF FOR FOREIGN EXCHANGE TRANSACTIONS.—
(1) AMENDMENTS TO EMPLOYEE RETIREMENT INCOME SECU-
RITY
ACT
OF
1974.—Section 408(b) of such Act (29 U.S.C. 
1108(b)), as amended by subsection (d), is amended by adding 
at the end the following 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 interest, 
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 investment in securities or other investment 
assets), 
‘‘(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 comparable arm’s length foreign exchange transactions 
between unrelated parties, or the terms afforded by the 
bank or broker-dealer (or any affiliate of either) in com-
parable 
arm’s-length 
foreign 
exchange 
transactions 
involving unrelated parties, 
‘‘(C) the exchange rate used by such bank or broker-
dealer (or affiliate) for a particular foreign exchange trans-
action does not deviate by more or less than 3 percent 
from the interbank bid and asked rates for transactions 
of comparable size and maturity at the time of the trans-
action 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 affiliate of 
either) does not have investment discretion, or provide 
investment advice, with respect to the transaction.’’. 
(2) AMENDMENT TO INTERNAL REVENUE CODE OF 1986.—
Subsection (d) of section 4975 of the Internal Revenue Code 
of 1986 (relating to exemptions), as amended by subsection 
(d), is amended by striking ‘‘or’’ at the end of paragraph (19), 
by striking the period at the end of paragraph (20) and inserting 
‘‘, or’’, and by adding at the end the following new paragraph:
H. R. 4—193
‘‘(21) any foreign exchange transactions, between a bank 
or broker-dealer (or any affiliate of either) and a plan (as 
defined in this section) with respect to which such bank or 
broker-dealer (or affiliate) 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 investment in securities or other investment 
assets), 
‘‘(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 comparable arm’s length foreign exchange transactions 
between unrelated parties, or the terms afforded by the 
bank or broker-dealer (or any affiliate of either) in com-
parable 
arm’s-length 
foreign 
exchange 
transactions 
involving unrelated parties, 
‘‘(C) the exchange rate used by such bank or broker-
dealer (or affiliate) for a particular foreign exchange trans-
action does not deviate by more or less than 3 percent 
from the interbank bid and asked rates for transactions 
of comparable size and maturity at the time of the trans-
action 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 affiliate of 
either) does not have investment discretion, or provide 
investment advice, with respect 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 defined 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 investors. For purposes of determinations pursuant 
to this paragraph, the value of any equity interest held by a person 
(other than such a benefit plan investor) who has discretionary 
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 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 SECU-
RITY
ACT
OF
1974.—Section 408(b) of such Act (29 U.S.C. 
1108(b)), as amended by subsection (e), is amended by adding 
at the end the following new paragraph: