I 
111TH CONGRESS 
1ST SESSION H. R. 2779 
To amend the Internal Revenue Code of 1986 to provide transparency with 
respect to fees and expenses charged to participant-directed defined con-
tribution plans, and to improve participant communication. 
IN THE HOUSE OF REPRESENTATIVES 
JUNE 9, 2009 
Mr. NEAL of Massachusetts (for himself, Mr. POMEROY, Mr. LARSON of Con-
necticut, Mr. CROWLEY, and Ms. SCHWARTZ) introduced the following 
bill; which was referred to the Committee on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to provide 
transparency with respect to fees and expenses charged 
to participant-directed defined contribution plans, and 
to improve participant communication. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Defined Contribution 
Plan Fee Transparency Act of 2009’’. 
SEC. 2. DISCLOSURE TO PARTICIPANTS. 
(a) IN GENERAL.—Chapter 43 of the Internal Rev-
enue Code of 1986 (relating to qualified pension, etc. 
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plans) is amended by adding at the end the following new 
section: 
‘‘SEC. 4980H. FAILURE TO PROVIDE NOTICE TO PARTICI-
PANTS OF PLAN FEE INFORMATION. 
‘‘(a) IMPOSITION OF TAX.—There is hereby imposed 
a tax on the failure of any plan administrator of an appli-
cable defined contribution plan to meet the requirements 
of subsection (e) with respect to any participant or bene-
ficiary. 
‘‘(b) AMOUNT OF TAX.— 
‘‘(1) IN GENERAL.—The amount of the tax im-
posed by subsection (a) on any failure with respect 
to any participant or beneficiary shall be $100 for 
each day in the noncompliance period. 
‘‘(2) NONCOMPLIANCE PERIOD.—For purposes 
of paragraph (1), the noncompliance period with re-
spect to a failure is the period beginning on the date 
the plan administrator failed to provide notice to 
participants and beneficiaries in accordance with 
subsection (e) and ending on the date the notice to 
which the failure relates is provided or the failure is 
otherwise corrected. 
‘‘(3) SEPARATE TREATMENT OF VIOLATIONS.— 
For purposes of paragraph (1), each violation with 
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respect to any single participant or beneficiary shall 
be treated as a separate violation. 
‘‘(c) LIMITATIONS ON AMOUNT OF TAX.— 
‘‘(1) 
AGGREGATE
LIMITATION.—The 
total 
amount of tax imposed by this section with respect 
to any plan for any plan year shall not exceed an 
amount equal to the lesser of— 
‘‘(A) 10 percent of the assets of the plan, 
determined as of the first day of such plan 
year, and 
‘‘(B) $500,000. 
‘‘(2) TAX NOT TO APPLY TO FAILURES COR-
RECTED WITHIN 90 DAYS.—No tax shall be imposed 
by subsection (a) on any failure if— 
‘‘(A) any person subject to liability for the 
tax under subsection (a) exercised reasonable 
diligence to meet the requirements of subsection 
(e), and 
‘‘(B) such person provides the notice de-
scribed in subsection (e) during the 90-day pe-
riod beginning on the date such person knew, or 
exercising reasonable diligence would have 
known, that such failure existed. 
‘‘(3) RELIANCE.—To the extent any of the in-
formation required to be disclosed by a plan admin-
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‘‘(1) IN GENERAL.—The requirements of this 
subsection are met if the plan administrator of an 
applicable defined contribution plan meets the re-
quirements of paragraphs (2), (3), (4), and (5). 
‘‘(2) NOTICE OF INVESTMENT INFORMATION.— 
‘‘(A) IN GENERAL.—A plan administrator 
meets the requirements of this paragraph if 
each employee eligible to participate is, a rea-
sonable time before the initial investment of any 
contribution made on behalf of such employee 
and at least annually thereafter, given an expla-
nation of the plan’s fees and expenses, the key 
characteristics of the plan’s designated invest-
ment alternatives, and an explanation of the 
manner for making elections among designated 
investment alternatives. 
‘‘(B) 
REQUIREMENTS.—An 
explanation 
shall only be treated as satisfying the expla-
nation requirement of subparagraph (A) if such 
explanation provides a description, to the extent 
applicable, of the following: 
‘‘(i) The designated investment alter-
natives available to a participant under the 
plan, the method for a participant to make 
investment elections, and an explanation of 
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any specified limitations on such elections 
under the documents and instruments gov-
erning the plan, including any restrictions 
on transfer to or from an investment alter-
native. 
‘‘(ii) With respect to each designated 
investment alternative— 
‘‘(I) a general description of the 
alternative’s investment objectives and 
principal investment strategies, prin-
cipal risk and return characteristics, 
and the name of the alternative’s in-
vestment manager, 
‘‘(II) whether the alternative is 
actively managed or passively man-
aged in relation to an index and the 
difference between active management 
and passive management, 
‘‘(III) whether the alternative is 
designed to be a comprehensive, 
stand-alone investment for retirement 
that provides varying degrees of long- 
term appreciation and capital preser-
vation through a mix of equity and 
fixed income exposures, 
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‘‘(IV) rates of return for the in-
vestment alternative over the imme-
diately preceding 1-, 5-, and 10-year 
periods (determined on either a cal-
endar or plan year basis), 
‘‘(V) the name and returns of an 
appropriate 
broad-based 
securities 
market index over the preceding 1-, 
5-, and 10-year periods, which is not 
administered by the service provider 
or an affiliate thereof unless the index 
is widely recognized and used, and 
‘‘(VI) fees and expenses in con-
nection with purchases or sales of in-
terests in the investment alternative, 
such as sales loads, sales charges, de-
ferred sales charges, redemption fees, 
surrender charges, exchange fees and 
other similar fees and expenses. 
‘‘(iii) The annual total operating ex-
penses for each designated investment al-
ternative and, if applicable, a statement 
that the fees and expenses of the invest-
ment alternatives pay for services other 
than investment management. 
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‘‘(iv) Annual fees and expenses for ad-
ministration and recordkeeping which are 
deducted from (or reduce the income of) 
participants’ or beneficiaries’ accounts and 
which are not reflected in clause (iii), in-
cluding a statement of the method used to 
allocate fees and expenses described in this 
clause to participants’ and beneficiaries’ 
accounts. 
‘‘(v) The existence of fees and ex-
penses associated with participant-initiated 
transactions or services which may be de-
ducted from participants’ or beneficiaries’ 
accounts other than fees and expenses de-
scribed in clause (ii)(VI) and the method 
that participants and beneficiaries may uti-
lize to obtain additional information re-
garding such fees and expenses. 
‘‘(vi) Fees and expenses which may be 
deducted 
from 
participants’ 
or 
bene-
ficiaries’ accounts and which are not re-
flected in clauses (iii), (iv), or (v). 
‘‘(vii) A statement of where, and the 
manner in which, additional alternative- 
specific and generally available investment 
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information may be obtained (such as an 
Internet Web site address). 
‘‘(viii) A statement explaining that in-
vestment alternatives should be selected 
not only on the basis of the level of fees 
charged by each alternative but also on the 
basis of consideration of other key factors, 
including the alternative’s investment ob-
jective, level of risk, historic rates of return 
and the participant’s personal investment 
objective. 
‘‘(3) NOTICE OF ACCOUNT CHARGES.— 
‘‘(A) IN GENERAL.—A plan administrator 
meets the requirements of this paragraph if 
each participant and beneficiary is, at least 
once each calendar quarter, given an expla-
nation describing the investment alternatives in 
which the participant’s or beneficiary’s account 
is invested as of the last day of the preceding 
quarter and the key characteristics of such in-
vestment alternatives. 
‘‘(B) 
REQUIREMENTS.—An 
explanation 
shall only be treated as satisfying the expla-
nation requirement of subparagraph (A) if such 
explanation provides a description, to the extent 
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applicable, of the following for the preceding 
quarter: 
‘‘(i) As of the last day of the quarter, 
the different asset classes that the partici-
pant’s or beneficiary’s account is invested 
in and the percentage of the account allo-
cated to each asset class. 
‘‘(ii) The total administration and rec-
ordkeeping fees and expenses described in 
paragraph (2)(B)(iv) which were deducted 
from the participant’s or beneficiary’s ac-
count during the quarter. 
‘‘(iii) The total fees and expenses for 
participant-initiated transactions or serv-
ices described in paragraph (2)(B)(v) 
which were deducted from the participant’s 
or beneficiary’s account during the quar-
ter. 
‘‘(iv) The total other fees and ex-
penses described in paragraph (2)(B)(vi) 
which were deducted from the participant’s 
or beneficiary’s account during the quar-
ter. 
‘‘(v) With respect to each investment 
alternative in which the participant or ben-
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eficiary was invested as of the last day of 
the quarter, the following: 
‘‘(I) The percentage of the par-
ticipant’s or beneficiary’s account that 
is invested in such alternative. 
‘‘(II) Whether the investment al-
ternative is actively or passively man-
aged. 
‘‘(III) A general statement of the 
investment alternative’s principal risk 
and return characteristics. 
‘‘(IV) Total annual operating ex-
penses for the investment alternative. 
‘‘(vi) Fees and expenses in connection 
with purchases or sales of interests in in-
vestment alternatives which have been de-
ducted from the participant’s or bene-
ficiary’s account during the quarter. 
‘‘(vii) The statement described in 
paragraph (2)(B)(viii). 
‘‘(viii) A statement regarding how a 
participant or beneficiary may access the 
information required to be disclosed under 
paragraph (2). 
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‘‘(4) SERVICE PROVIDER DISCLOSURE.—The re-
quirements of this paragraph are met if the plan ad-
ministrator provides to participants and beneficiaries 
a copy of any statement received pursuant to section 
4980I within 30 days after receipt of a written re-
quest for such statement. 
‘‘(5) 
NOTICE
OF
INVESTMENT
MENU 
CHANGES.—The requirements of this paragraph are 
met if, in advance of any change in the investment 
alternatives available under the plan, the plan ad-
ministrator provides the notice described in para-
graph (2) to affected participants and beneficiaries 
with respect to the change in investment alter-
natives. 
‘‘(6) FORM OF FEE DISCLOSURE.—Fees and ex-
penses may be expressed as a dollar amount or as 
a percentage of assets (or a combination thereof). If 
fees and expenses are expressed (in part or in whole) 
as a percentage of assets, the disclosure shall include 
a generic example that illustrates how a charge that 
is expressed as a percentage of assets is assessed in 
dollars on an account balance. 
‘‘(7) CERTAIN ESTIMATES PERMITTED.—A plan 
administrator shall not be treated as failing to sat-
isfy the requirements of paragraphs (2), (3), and (4) 
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solely because the plan administrator uses estimates 
of expenses and fees, or allocates fees and expenses 
among different fee classifications, in a manner that 
is reasonable and in good faith. For purposes of 
paragraph (3), an estimate shall be considered to be 
reasonable and in good faith if such estimate is 
based on fees and expenses as of the last day of the 
plan year immediately preceding the date the notice 
is provided or any subsequent date preceding the 
date the notice is provided. Nothing in this para-
graph shall be construed to require a plan adminis-
trator to use the same estimation methodology for 
every investment alternative. 
‘‘(8) COMBINATION WITH OTHER NOTICES.—A 
plan shall not be treated as failing to satisfy the re-
quirements of paragraphs (2), (3), and (4) solely be-
cause the information is provided in combination 
with other plan communications or in more than one 
plan communication provided contemporaneously. 
‘‘(9) MODEL STATEMENT.—The Secretary shall 
prescribe model statements that may be used for 
purposes of satisfying the requirements of para-
graphs (2), (3), and (4). 
‘‘(10) 
ANNUAL
COMPLIANCE
FOR
SMALL 
PLANS.—A plan that has fewer than 100 partici-
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pants and beneficiaries as of the first day of the 
plan year may provide the notice described in para-
graph (3) on an annual rather than a quarterly 
basis. 
‘‘(11) CALENDAR
YEAR
TREATED
AS
PLAN 
YEAR.—The Secretary shall allow a plan adminis-
trator to treat the calendar year as the plan year for 
purposes of paragraph (3). 
‘‘(12) PLAIN
LANGUAGE.—Explanations and 
notices under this subsection shall be provided in a 
manner which is easily understandable by the typical 
plan participant. 
‘‘(13) REGULATIONS.—The 
Secretary 
shall 
issue regulations that permit plan administrators— 
‘‘(A) in appropriate circumstances to pro-
vide the notice described in paragraph (2) after 
the initial contribution made on a participant’s 
behalf in the case of a plan that provides for 
automatic enrollment or immediate eligibility, 
and 
‘‘(B) in appropriate circumstances to pro-
vide the notice described in paragraph (4) after 
the investment menu change is effective. 
‘‘(f) DEFINITIONS.— 
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‘‘(1) APPLICABLE
DEFINED
CONTRIBUTION 
PLAN.—The term ‘applicable defined contribution 
plan’ means the portion of any defined contribution 
plan which— 
‘‘(A) permits a participant or beneficiary 
to exercise control over assets in his or her ac-
count, and 
‘‘(B) is described in clauses (iii) through 
(vi) of section 402(c)(8)(B). 
‘‘(2) PLAN ADMINISTRATOR.—The term ‘plan 
administrator’ has the meaning given such term by 
section 414(g). 
‘‘(g) REGULATORY AUTHORITY.—The Secretary shall 
issue regulations for purposes of this section, including 
regulations which— 
‘‘(1) identify and establish separate rules, if 
necessary, for any investment options that provide a 
guaranteed rate of return and do not identify spe-
cific fees, and 
‘‘(2) provide guidelines, and a safe harbor, for 
the selection of an appropriate broad-based securi-
ties market index for purposes of paragraph 
(2)(B)(ii)(V) for a designated investment alter-
native.’’. 
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(b) CLERICAL AMENDMENT.—The table of sections 
for chapter 43 of such Code is amended by adding at the 
end the following new item: 
‘‘Sec. 4980H. Failure to provide notice to participants of plan fee informa-
tion.’’. 
SEC. 3. DISCLOSURE BETWEEN SERVICE PROVIDERS AND 
PLANS. 
(a) IN GENERAL.—Chapter 43 of the Internal Rev-
enue Code of 1986 (relating to qualified pension, etc. 
plans), as amended by section 2, is amended by adding 
at the end the following new section: 
‘‘SEC. 4980I. FAILURE TO PROVIDE NOTICE OF PLAN FEE 
INFORMATION TO PLAN ADMINISTRATORS. 
‘‘(a) IMPOSITION OF TAX.—There is hereby imposed 
a tax on any service provider that fails to meet the require-
ments of subsection (d) with respect to any applicable de-
fined contribution plan. 
‘‘(b) AMOUNT OF TAX.— 
‘‘(1) IN GENERAL.—The amount of the tax im-
posed by subsection (a) on any failure with respect 
to any applicable defined contribution plan shall be 
$1,000 for each day in the noncompliance period. 
‘‘(2) NONCOMPLIANCE PERIOD.—For purposes 
of paragraph (1), the noncompliance period with re-
spect to a failure is the period beginning on the date 
the service provider failed to meet the requirements 
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of subsection (d) and ending on the date such re-
quirements to which the failure relates are met or 
the failure is otherwise corrected. 
‘‘(3) SEPARATE TREATMENT OF VIOLATIONS.— 
For purposes of paragraph (1), each violation with 
respect to any applicable defined contribution plan 
shall be treated as a separate violation. 
‘‘(c) LIMITATIONS.— 
‘‘(1) 
AGGREGATE
LIMITATION.—The 
total 
amount of tax imposed by this section on any service 
provider for any failure with respect to any applica-
ble defined contribution plan shall not exceed an 
amount equal to the lesser of— 
‘‘(A) 10 percent of the assets of the plan, 
determined as of the first day of such plan 
year, and 
‘‘(B) $1,000,000. 
‘‘(2) TAX NOT TO APPLY TO FAILURES COR-
RECTED WITHIN 90 DAYS.—No tax shall be imposed 
by subsection (a) on any failure if— 
‘‘(A) the service provider subject to liability 
for the tax under subsection (a) exercised rea-
sonable diligence to meet the requirements of 
subsection (d), and 
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‘‘(B) such service provider provides the no-
tice described in subsection (d) during the 90- 
day period beginning on the date such person 
knew, or exercising reasonable diligence would 
have known, that such failure existed. 
‘‘(3) RELIANCE.—To the extent any of the in-
formation required to be disclosed by a service pro-
vider under this section is given to the service pro-
vider by a person that is not an affiliate of the serv-
ice provider, the service provider may rely on the 
completeness and accuracy of such information un-
less the service provider— 
‘‘(A) knows, or has reason to know, that 
the information is inaccurate or incomplete, or 
‘‘(B) has notice of facts or information 
that would prompt a reasonable service provider 
to inquire into the accuracy or completeness of 
the information. 
‘‘(4) WAIVER BY SECRETARY.—In the case of a 
failure which is due to reasonable cause and not to 
willful neglect, the Secretary may waive part or all 
of the tax imposed by subsection (a) to the extent 
that the payment of such tax would be excessive or 
otherwise inequitable relative to the failure involved. 
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‘‘(5) SMALL SERVICE PROVIDERS.—This section 
shall apply with respect to any service provider for 
a plan year only if the total fees and compensation 
received directly or indirectly by the service provider, 
its affiliates and any subcontractor of the service 
provider in connection with the services arrangement 
is reasonably expected to equal or exceed $5,000. 
‘‘(6) LIMITATION ON SCOPE.—Nothing in this 
section shall be construed to require any service pro-
vider to provide any services with respect to any par-
ticular plan. 
‘‘(d) NOTICE OF FEES AND EXPENSES.— 
‘‘(1) IN GENERAL.—The requirements of this 
subsection are met if the service provider meets the 
requirements of paragraphs (2) and (3). 
‘‘(2) INITIAL DISCLOSURE.—A service provider 
meets the requirements of this paragraph if the serv-
ice provider, prior to entering into (or materially 
modifying) a contract with a plan for the provision 
of plan services, provides the plan administrator 
with the following, in writing: 
‘‘(A) An estimate of— 
‘‘(i) the total fees and expenses ex-
pected to be paid by the plan under the 
contract, including itemization of the fol-
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lowing components in the case of a con-
tract that provides for both investment 
management and administration and rec-
ordkeeping, 
‘‘(ii) the annual fees and expenses at-
tributable to investment management, and 
‘‘(iii) the annual fees and expenses at-
tributable to plan administration and rec-
ordkeeping. 
‘‘(B) A detailed and itemized list of the 
services to be provided by the service provider, 
its affiliates, and any subcontractors under the 
contract. 
‘‘(C) A schedule of fees and expenses asso-
ciated with participant-initiated transactions or 
services which may be deducted from partici-
pants’ or beneficiaries’ accounts. 
‘‘(D) A statement of whether the service 
provider reasonably expects to remit fees and 
expenses expected to be paid by the plan under 
the contract, including commissions, finders 
fees, sales loads and charges, to one or more 
third-party service providers or intermediaries 
and, if so, a statement of the amount expected 
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to be paid to each such third party and the 
identity of each such third party. 
‘‘(E) A statement of whether the service 
provider expects to receive compensation from a 
source other than the plan or plan sponsor in 
connection with the services provided to the 
plan and, if so, a statement of the amount ex-
pected to be received from each such source and 
the identity of each such source. 
‘‘(F) A statement of whether the service 
provider (or any affiliate thereof) may benefit 
from the offering of its own proprietary invest-
ment products or those of third parties. 
‘‘(G) To the extent applicable, a statement 
that the investment options available to the 
plan may be offered at different price levels to 
parties other than the plan. 
‘‘(3) PERIODIC
DISCLOSURE.—A service pro-
vider meets the requirements of this paragraph if 
the service provider, by the due date for filing the 
section 6058 annual return for the plan year (deter-
mined without regard to extensions), provides a writ-
ten statement of the following: 
‘‘(A) Fees and expenses paid by the plan 
to the service provider under the arrangement 
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during the plan year, including itemization of 
the components described in subparagraphs (A) 
and (D) of paragraph (2). 
‘‘(B) The amount of any compensation re-
ceived by the service provider during the plan 
year from each source other than the plan or 
plan sponsor in connection with the services 
provided to the plan by the service provider and 
the identity of each such source. 
‘‘(4) FORM OF FEE DISCLOSURE.—Fees and ex-
penses may be expressed as a dollar amount or as 
a percentage of assets (or a combination thereof). 
‘‘(5) 
CERTAIN
ESTIMATES
PERMITTED.—A 
service provider shall not be treated as failing to sat-
isfy the requirements of this subsection solely be-
cause— 
‘‘(A) the service provider that does not 
separately price services attributable to the 
components described in subparagraph (A) of 
paragraph (2) allocates fees and expenses 
among such components in a manner that is 
reasonable and in good faith, 
‘‘(B) the service provider uses estimates of 
expenses, fees and compensation if the service 
provider discloses the basis for such estimates if 
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such estimates are made in a manner that is 
reasonable and in good faith, or 
‘‘(C) the service provider discloses amounts 
under subparagraphs (D) and (E) of paragraph 
(2) only to the extent that such amounts are 
expected to exceed $5,000 for the plan year. 
‘‘(6) 
ALTERNATIVE
METHOD
OF
COMPLI-
ANCE.—A service provider shall not be treated as 
failing to satisfy the requirements of paragraph (2) 
if disclosure is made on the basis of calendar years. 
‘‘(7) PLAIN LANGUAGE.—Disclosures under this 
subsection shall be presesnted in a format which is 
easily understandable by the typical plan adminis-
trator. 
‘‘(8) REGULATORY AUTHORITY.—The Secretary 
shall issue regulations to carry out this subsection, 
including regulations addressing the appropriate 
classification of fees and expenses under subpara-
graph (A) of paragraph (2). Such regulations shall 
include safe harbor methods for the allocation of ex-
penses under subparagraph (A) of paragraph (2) 
under which service providers will be treated as hav-
ing reasonably allocated fees and expenses but such 
safe harbor methods shall not be the exclusive meth-
ods for the allocation of expenses. 
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‘‘(e) DEFINITIONS.—For purposes of this section— 
‘‘(1) APPLICABLE
DEFINED
CONTRIBUTION 
PLAN.—The term ‘applicable defined contribution 
plan’ means any defined contribution plan described 
in clauses (iii) through (vi) of section 402(c)(8)(B). 
‘‘(2) SERVICE
PROVIDER.—The term ‘service 
provider’ means any person providing services to a 
plan under a contract. For this purpose, all corpora-
tions that provide services to a plan and are mem-
bers of a controlled group of corporations within the 
meaning of section 1563(a) (determined without re-
gard to subsections (a)(4) and (e)(3)(C) thereof) 
shall be treated as a single service provider.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for chapter 43 of such Code, as so amended, is amended 
by adding at the end the following new item: 
‘‘Sec. 4980I. Failure to provide notice of plan fee information to plan adminis-
trators.’’. 
SEC. 4. METHOD OF PROVIDING REQUIRED NOTICES AND 
DISCLOSURES. 
(a) DIRECTIVE TO TREASURY.—The Secretary of the 
Treasury shall issue final regulations no later than 6 
months after the date of enactment of this Act under 
which an applicable notice shall be treated as provided in 
writing or in written form if— 
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(1) the applicable notice is posted on a secure 
Internet Web site that is accessible to the partici-
pant or beneficiary, 
(2) a notice of the availability of such applicable 
notice is provided in writing or in a manner that sat-
isfies Treasury regulation section 1.401(a)–21 at the 
same time that the applicable notice is otherwise re-
quired, and 
(3) the notice of availability advises the recipi-
ent that he or she may request and receive the appli-
cable notice in writing on paper at no charge and, 
upon request, the applicable notice is provided in 
writing on paper to the recipient at no charge. 
(b) APPLICABLE NOTICE.—The term ‘‘applicable no-
tice’’ includes any notice, report, statement, or other docu-
ment required to be provided to a recipient under the fol-
lowing types of retirement plans: a qualified retirement 
plan under section 401(a) or 403(a) of the Internal Rev-
enue Code of 1986; a section 403(b) plan under such 
Code; a simplified employee pension (SEP) under section 
408(k) of such Code; a simple retirement plan under sec-
tion 408(p) of such Code; and an eligible governmental 
plan under section 457(b) of such Code. 
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SEC. 5. EFFECTIVE DATE. 
(a) IN GENERAL.—The amendments made by this 
Act shall apply to plan years beginning after one year 
after the date of the enactment of this Act. 
(b) FINAL REGULATIONS.—The Secretary of the 
Treasury shall issue final regulations to carry out the 
amendments made by this Act not later than December 
31, 2010. 
Æ 
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