I
105TH CONGRESS
1ST SESSION
H. R. 2290
To amend title I of the Employee Retirement Income Security Act of 1974
to improve enforcement under such Act.
IN THE HOUSE OF REPRESENTATIVES
JULY 29, 1997
Mr. SHAYS (for himself and Mr. PAYNE) introduced the following bill; which
was referred to the Committee on Education and the Workforce, and in
addition to the Committee on Ways and Means, for a period to be subse-
quently determined by the Speaker, in each case for consideration of such
provisions as fall within the jurisdiction of the committee concerned
A BILL
To amend title I of the Employee Retirement Income Secu-
rity Act of 1974 to improve enforcement under such
Act.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Security and Enforcement Compliance for Retirement
under ERISA’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Repeal of limited scope audit.
Sec. 3. Reporting and enforcement requirements for employee benefit plans.
Sec. 4. Additional requirements for qualified public accountants.
Sec. 5. Clarification of fiduciary penalties.
Sec. 6. Inspector General study.
SEC. 2. REPEAL OF LIMITED SCOPE AUDIT.
(a) IN GENERAL.—Section 103(a)(3) of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1023(a)(3)) is amended by amending subpara-
graph (C) to read as follows:
‘‘(C) An accountant who is offering an opinion under
this section shall, to the extent consistent with generally
accepted auditing standards, rely on the work of any inde-
pendent public accountant of an entity that holds assets
or processes transactions of the employee benefit plan.’’
(b) 
CONFORMING
AMENDMENT.—Section
103(a)(3)(A) of such Act (29 U.S.C. 1023(a)(3)(A)) is
amended by striking ‘‘Except as provided in subparagraph
(C), the’’ and inserting ‘‘The’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to opinions required
under section 103(a)(3)(A) of the Employee Retirement
Income Security Act of 1974 for plan years beginning on
or after January 1 of the calendar year following the date
of the enactment of this Act.
SEC. 3. REPORTING AND ENFORCEMENT REQUIREMENTS
FOR EMPLOYEE BENEFIT PLANS.
(a) IN GENERAL.—Part 1 of subtitle B of title I of
the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1021 et seq.) is amended—
(1) by redesignating section 111 as section 112,
and
(2) inserting after section 110 the following
new section:
‘‘DIRECT REPORTING OF CERTAIN EVENTS
‘‘SEC. 111. (a) REQUIRED NOTIFICATIONS.—
‘‘(1) 
NOTIFICATIONS
BY
PLAN
ADMINIS-
TRATOR.—Within 5 business days after an adminis-
trator of an employee benefit plan determines that
there is evidence (or after the administrator is noti-
fied under paragraph (2)) that an irregularity may
have occurred with respect to the plan, the adminis-
trator shall—
‘‘(A) notify the Secretary of the irregular-
ity in writing; and
‘‘(B) furnish a copy of such notification to
the accountant who is currently engaged under
section 103(a)(3)(A).
‘‘(2) NOTIFICATIONS BY ACCOUNTANT.—
‘‘(A) IN
GENERAL.— Within 5 business
days after an accountant engaged by the ad-
ministrator of an employee benefit plan under
section 103(a)(3)(A) determines in connection
with such engagement that there is evidence
that an irregularity may have occurred with re-
spect to the plan, the accountant shall—
‘‘(i) notify the plan administrator of
the irregularity in writing, or
‘‘(ii) if the accountant determines that
there is evidence that the irregularity may
have involved an individual who is the plan
administrator or who is a senior official of
the plan administrator, notify the Sec-
retary of the irregularity in writing.
‘‘(B) NOTIFICATION
UPON
FAILURE
OF
PLAN ADMINISTRATOR TO NOTIFY.—If an ac-
countant who has provided notification to the
plan administrator pursuant to subparagraph
(A)(i) does not receive a copy of the administra-
tor’s notification to the Secretary required in
paragraph (1) within the 5-business day period
specified therein, the accountant shall furnish
to the Secretary a copy of the accountant’s no-
tification made to the plan administrator on the
next business day following such period.
‘‘(3) IRREGULARITY DEFINED.—
‘‘(A) For purposes of this subsection, the
term ‘irregularity’ means—
‘‘(i) a theft, embezzlement, or a viola-
tion of section 664 of title 18, United
States Code (relating to theft or embezzle-
ment from an employee benefit plan);
‘‘(ii) an extortion or a violation of sec-
tion 1951 of title 18, United States Code
(relating to interference with commerce by
threats or violence);
‘‘(iii) a bribery, a kickback, or a viola-
tion of section 1954 of title 18, United
States Code (relating to offer, acceptance,
or solicitation to influence operations of an
employee benefit plan);
‘‘(iv) a violation of section 1027 of
title 18, United States Code (relating to
false statements and concealment of facts
in relation to employee benefit plan
records); or
‘‘(v) a violation of section 411, 501, or
511 of this title (relating to criminal viola-
tions).
‘‘(B) The term ‘irregularity’ does not in-
clude any act or omission described in this
paragraph involving less than $1,000 unless
there is reason to believe that the act or omis-
sion may bear on the integrity of plan manage-
ment.
‘‘(b) NOTIFICATION UPON TERMINATION
OF EN-
GAGEMENT OF ACCOUNTANT.—
‘‘(1) 
NOTIFICATION
BY
PLAN
ADMINIS-
TRATOR.—Within 5 business days after the termi-
nation of an engagement of an accountant under
section 103(a)(3)(A) with respect to an employee
benefit plan, the administrator of such plan shall—
‘‘(A) notify the Secretary in writing of
such termination, giving the reasons for such
termination, and
‘‘(B) furnish the accountant whose engage-
ment was terminated with a copy of the notifi-
cation sent to the Secretary.
‘‘(2) NOTIFICATION BY ACCOUNTANT.—If the
accountant referred to in paragraph (1)(B) has not
received a copy of the administrator’s notification to
the Secretary as required under paragraph (1)(B),
or if the accountant disagrees with the reasons given
in the notification of termination of the engagement
for auditing services, the accountant shall notify the
Secretary in writing of the termination, giving the
reasons for the termination, within 10 business days
after the termination of the engagement.
‘‘(c) DETERMINATION OF PERIODS REQUIRED FOR
NOTIFICATION.—In determining whether a notification re-
quired under this section with respect to any act or omis-
sion has been made within the required number of busi-
ness days—
‘‘(1) the day on which such act or omission be-
gins shall not be included; and
‘‘(2) Saturdays, Sundays, and legal holidays
shall not be included.
For purposes of this subsection, the term ‘legal holiday’
means any Federal legal holiday and any other day ap-
pointed as a holiday by the State in which the person re-
sponsible for making the notification principally conducts
business.
‘‘(d) IMMUNITY FOR GOOD FAITH NOTIFICATION.—
No accountant or plan administrator shall be liable to any
person for any finding, conclusion, or statement made in
any notification made pursuant to subsection (a)(2) or
(b)(2), or pursuant to any regulations issued under those
subsections, if the finding, conclusion, or statement is
made in good faith.’’.
(b) CIVIL PENALTY.—
(1) IN GENERAL.—Section 502(c) of such Act
(29 U.S.C. 1132(c)) is amended by inserting after
paragraph (6) the following new paragraph:
‘‘(7)(A) The Secretary may assess a civil penalty of
up to $50,000 against any administrator who fails to pro-
vide the Secretary with any notification as required under
section 111.
‘‘(B) The Secretary may assess a civil penalty of up
to $50,000 against any accountant who knowingly and
willfully fails to provide the Secretary with any notification
as required under section 111.’’.
(2) 
CONFORMING
AMENDMENT.—Section
502(a)(6) (29 U.S.C. 1132(a)(6)) is amended by
striking ‘‘or (5)’’ and inserting ‘‘(5), or (7)’’.
(c) CLERICAL AMENDMENTS.—
(1) Section 514(d) (29 U.S.C. 114(d)) is
amended by striking ‘‘111’’ and inserting ‘‘112’’.
(2) The table of contents in section 1 is amend-
ed by striking the item relating to section 111 and
inserting the following new items:
‘‘Sec. 111. Direct reporting of certain events.
‘‘Sec. 112. Repeal and effective date.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to any irregularity or
termination of engagement described in the amendments
only if the 5-day period described in the amendments in
connection with the irregularity or termination commences
at least 90 days after the date of the enactment of this
Act.
SEC. 4. ADDITIONAL REQUIREMENTS FOR QUALIFIED PUB-
LIC ACCOUNTANTS.
(a) IN GENERAL.—Section 103(a)(3)(D) of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1023(a)(3)(D)) is amended—
(1) by inserting ‘‘(i)’’ after ‘‘(D)’’;
(2) by inserting ‘‘, with respect to any engage-
ment of an accountant under subparagraph (A)’’
after ‘‘means’’;
(3) by redesignating clauses (i), (ii), and (iii) as
subclauses (I), (II), and (III), respectively;
(4) by striking the period at the end of sub-
clause (III) (as so redesignated) and inserting a
comma;
(5) by adding after and below subclause (III)
(as so redesignated), the following: ‘‘but only if such
person meets the requirements of clauses (ii) and
(iii), with respect to such engagement.’’; and
(6) by adding at the end the following new
clauses:
‘‘(ii) A person meets the requirements of
this clause with respect to an engagement of
the person as an accountant under subpara-
graph (A) if the person—
‘‘(I) has in operation an appropriate
internal quality control system;
‘‘(II) has undergone a qualified exter-
nal quality control review of the person’s
accounting and auditing practices, includ-
ing such practices relevant to employee
benefit plans (if any), during the 3-year
period immediately preceding such engage-
ment; and
‘‘(III) has completed, within the 2 cal-
endar years immediately preceding such
engagement, such continuing education or
training as the Secretary in regulations de-
termines is necessary to maintain profes-
sional proficiency in connection with em-
ployee benefit plans.
‘‘(iii) A person meets the requirements of
this clause with respect to an engagement of
the person as an accountant under subpara-
graph (A) if the person meets such additional
requirements and qualifications of regulations
which the Secretary deems necessary to ensure
the quality of plan audits.
‘‘(iv) For purposes of clause (ii)(II), an ex-
ternal quality control review shall be treated as
qualified with respect to a person referred to in
clause (ii) if—
‘‘(I) such review is performed in ac-
cordance with the requirements of external
quality control review programs of recog-
nized auditing standard setting bodies, as
determined in regulations of the Secretary,
and
‘‘(II) in the case of any such person
who has, during the peer review period,
conducted 1 or more previous audits of
employee benefit plans, such review in-
cludes the review of an appropriate number
(determined as provided in such regula-
tions, but in no case less than 1) of plan
audits in relation to the scale of the per-
son’s auditing practice.
(b) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
apply with respect to plan years beginning on or
after the date which is 3 years after the date of the
enactment of this Act.
(2) RESTRICTIONS ON CONDUCTING EXAMINA-
TIONS.—Clause (iii) of section 103(a)(1)(D) of the
Employee Retirement Income Security Act of 1974
(as added by subsection (a)(6)) takes effect on the
date of enactment of this Act.
(3) REGULATIONS.—The Secretary shall issue
regulations under this section no later than Decem-
ber 31, 1998.
SEC. 5. CLARIFICATION OF FIDUCIARY PENALTIES.
(a) MODIFICATION OF PROHIBITION OF ASSIGNMENT
OR ALIENATION.—
(1) AMENDMENT TO ERISA.—Section 206(d) of
the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1056(d)) is amended by adding at
the end the following new paragraphs:
‘‘(4) Paragraph (1) shall not apply to any offset of
a participant’s accrued benefit in an employee pension
benefit plan against an amount that the participant is or-
dered or required to pay to the plan if—
‘‘(A) the order or requirement to pay arises—
‘‘(i) under a judgment of conviction for a
crime involving such plan,
‘‘(ii) under a civil judgment (including a
consent order or decree) entered by a court in
an action brought in connection with a violation
standards and procedures would be appropriate, the study
shall include recommended standards and procedures.
(c) REPORT.—Not later than 1 year after the date
of the enactment of this Act, the Inspector General shall
submit a report on the results of the study conducted pur-
suant to this section to each house of Congress and the
Secretary of Labor.
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