I
107TH CONGRESS
2D SESSION
H. R. 3762
To amend title I of the Employee Retirement Income Security Act of 1974
and the Internal Revenue Code of 1986 to provide additional protections
to participants and beneficiaries in individual account plans from exces-
sive investment in employer securities and to promote the provision
of retirement investment advice to workers managing their retirement
income assets, and to amend the Securities Exchange Act of 1934 to
prohibit insider trades during any suspension of the ability of plan
participants or beneficiaries to direct investment away from equity securi-
ties of the plan sponsor.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 14, 2002
Mr. BOEHNER (for himself, Mr. SAM JOHNSON of Texas, Mr. OXLEY, Mr.
FLETCHER, Mr. PETRI, Mrs. ROUKEMA, Mr. MCKEON, Mr. CASTLE, Mr.
UPTON, Mr. TANCREDO, Mrs. BIGGERT, Mr. KELLER, Mr. CULBERSON,
Mr. CALVERT, Mr. KING, Mr. LATOURETTE, Mr. HILL, Mr. REHBERG,
Mr. BOOZMAN, and Mr. WILSON of South Carolina) introduced the fol-
lowing bill; which was referred to the Committee on Education and the
Workforce, and in addition to the Committees on Ways and Means, and
Financial Services, for a period to be subsequently 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 and the Internal Revenue Code of
1986 to provide additional protections to participants
and beneficiaries in individual account plans from exces-
sive investment in employer securities and to promote
the provision of retirement investment advice to workers
managing their retirement income assets, and to amend
the Securities Exchange Act of 1934 to prohibit insider
trades during any suspension of the ability of plan par-
ticipants or beneficiaries to direct investment away from
equity securities of the plan sponsor.
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 ‘‘Pension Security Act
of 2002’’.
SEC. 2. IMPROVED DISCLOSURE OF PENSION BENEFIT IN-
FORMATION 
BY 
INDIVIDUAL 
ACCOUNT
PLANS.
(a) PENSION BENEFIT STATEMENTS REQUIRED ON
PERIODIC BASIS.—
(1) IN
GENERAL.—Subsection (a) of section
105 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1025) is amended by insert-
ing ‘‘and, in the case of an applicable individual ac-
count plan, shall furnish at least quarterly to each
plan participant (and to each beneficiary with a
right to direct investments),’’ after ‘‘who so requests
in writing,’’.
(2) INFORMATION REQUIRED FROM INDIVIDUAL
ACCOUNT
PLANS.—Section 105 of such Act (29
U.S.C. 1025) is amended by adding at the end the
following new subsection:
‘‘(e)(1) The quarterly statements required under sub-
section (a) shall include (together with the information re-
quired in subsection (a)) the following:
‘‘(A) the value of investments allocated to the
individual account, including the value of any assets
held in the form of employer securities, without re-
gard to whether such securities were contributed by
the plan sponsor or acquired at the direction of the
plan or of the participant or beneficiary, and an ex-
planation of any limitations or restrictions on the
right of the participant or beneficiary to direct an
investment; and
‘‘(B) an explanation, written in a manner cal-
culated to be understood by the average plan partici-
pant, of the importance, for the long-term retire-
ment security of participants and beneficiaries, of a
well-balanced and diversified investment portfolio,
including a discussion of the risk of holding substan-
tial portions of a portfolio in the security of any one
entity, such as employer securities.’’.
(3) DEFINITION
OF
APPLICABLE
INDIVIDUAL
ACCOUNT PLAN.—Section 3 of such Act (29 U.S.C.
1002) is amended by adding at the end the following
new subsection:
‘‘(42) The term ‘applicable individual account plan’
means any individual account plan, except that such term
does not include an employee stock ownership plan (within
the meaning of section 4975(e)(7) of the Internal Revenue
Code of 1986) unless there are any contributions to such
plan (or earnings thereunder) held within such plan that
are subject to subsection (k)(3) or (m)(2) of section 401
of the Internal Revenue Code of 1986.’’.
(b) CIVIL PENALTIES FOR FAILURE TO PROVIDE
QUARTERLY BENEFIT STATEMENTS.—Section 502 of
such Act (29 U.S.C. 1132) is amended—
(1) in subsection (a)(6), by striking ‘‘(5), or
(6)’’ and inserting ‘‘(5), (6), or (7)’’;
(2) by redesignating paragraph (7) of sub-
section (c) as paragraph (8); and
(3) by inserting after paragraph (6) of sub-
section (c) the following new paragraph:
‘‘(7) The Secretary may assess a civil penalty against
any plan administrator of up to $1,000 a day from the
date of such plan administrator’s failure or refusal to pro-
vide participants or beneficiaries with a benefit statement
on at least a quarterly basis in accordance with section
105(a).’’.
SEC. 3. PROTECTION FROM SUSPENSIONS, LIMITATIONS,
OR RESTRICTIONS ON ABILITY OF PARTICI-
PANT OR BENEFICIARY TO DIRECT OR DI-
VERSIFY PLAN ASSETS.
(a) IN GENERAL.—Section 101 of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 1021)
is amended—
(1) by redesignating the second subsection (h)
as subsection (j); and
(2) by inserting after the first subsection (h)
the following new subsection:
‘‘(i) NOTICE OF SUSPENSION, LIMITATION, OR RE-
STRICTION ON ABILITY OF PARTICIPANT OR BENEFICIARY
TO DIRECT INVESTMENTS
IN INDIVIDUAL ACCOUNT
PLAN.—
‘‘(1) IN GENERAL.—In the case of an applicable
individual account plan, the administrator shall no-
tify participants and beneficiaries of any action that
would have the affect of suspending, limiting, or re-
stricting the ability of participants or beneficiaries to
direct or diversify assets credited to their accounts.
‘‘(2) NOTICE REQUIREMENTS.—
‘‘(A) IN GENERAL.—The notices described
in paragraph (1) shall—
‘‘(i) be written in a manner calculated
to be understood by the average plan par-
ticipant and shall include the reasons for
the suspension, limitation, or restriction,
an identification of the investments af-
fected, and the expected period of the sus-
pension, limitation, or restriction, and
‘‘(ii) be furnished at least 30 days in
advance of the action suspending, limiting,
or restricting the ability of the participants
or beneficiaries to direct or diversify as-
sets.
‘‘(B) EXCEPTION TO 30-DAY NOTICE RE-
QUIREMENT.—In any case in which—
‘‘(i) a fiduciary of the plan deter-
mines, in writing, that a deferral of the
suspension, limitation, or restriction would
violate the requirements of subparagraph
(A) or (B) of section 404(a)(1), or
‘‘(ii) the inability to provide the 30-
day advance notice is due to circumstances
beyond the reasonable control of the plan
administrator,
subparagraph (A)(ii) shall not apply, and the
notice shall be furnished as soon as reasonably
possible under the circumstances.
‘‘(3) CHANGES IN EXPECTED PERIOD OF SUS-
PENSION, LIMITATION, OR
RESTRICTION.—If, fol-
lowing the furnishing of the notice pursuant to this
subsection, there is a change in the expected period
of the suspension, limitation, or restriction on the
right of a participant or beneficiary to direct or di-
versify assets, the administrator shall provide af-
fected participants and beneficiaries advance notice
of the change. Such notice shall meet the require-
ments of paragraph (2)(A)(i) in relation to the ex-
tended suspension, limitation, or restriction.’’.
(b) CIVIL PENALTIES FOR FAILURE TO PROVIDE
NOTICE.—Section 502 of such Act (as amended by section
2(b)) is amended further—
(1) in subsection (a)(6), by striking ‘‘(6), or
(7)’’ and inserting ‘‘(6), (7), or (8)’’;
(2) by redesignating paragraph (8) of sub-
section (c) as paragraph (9); and
(3) by inserting after paragraph (7) of sub-
section (c) the following new paragraph:
‘‘(8) The Secretary may assess a civil penalty against
any person of up to $100 a day from the date of the per-
son’s failure or refusal to provide notice to participants
and beneficiaries in accordance with section 101(i). For
purposes of this paragraph, each violation with respect to
any single participant or beneficiary, shall be treated as
a separate violation.’’.
(c) INAPPLICABILITY OF RELIEF FROM FIDUCIARY
LIABILITY DURING SUSPENSION OF ABILITY OF PARTICI-
PANT OR BENEFICIARY TO DIRECT INVESTMENTS.—Sec-
tion 404(c)(1) of such Act (29 U.S.C. 1104(c)(1)) is
amended—
(1) in subparagraph (B), by inserting before
the period the following: ‘‘, except that this subpara-
graph shall not apply for any period during which
the ability of a participant or beneficiary to direct
the investment of assets in his or her individual ac-
count is suspended by a plan sponsor or fiduciary’’;
and
(2) by adding at the end the following:
‘‘Any limitation or restriction that may govern the fre-
quency of transfers between investment vehicles shall not
be treated as a suspension referred to in subparagraph
(B) to the extent such limitation or restriction is disclosed
to participants or beneficiaries through the summary plan
description or materials describing specific investment al-
ternatives under the plan.’’.
SEC. 4. LIMITATIONS ON RESTRICTIONS OF INVESTMENTS
IN EMPLOYER SECURITIES.
(a) AMENDMENTS TO THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974.—Section 204 of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1107) is amended—
(1) by redesignating subsection (j) as sub-
section (k); and
(2) by inserting after subsection (i) the fol-
lowing new subsection:
‘‘(j)(1) An applicable individual account plan may not
acquire or hold any employer securities with respect to
which there is any restriction on divestment by a partici-
pant or beneficiary on or after the date on which the par-
ticipant has completed 3 years of participation (as defined
in subsection (b)(4)) under the plan or (if the plan so pro-
vides) 3 years of service (as defined in section 203(b)(2))
with the employer.
‘‘(2) For purposes of paragraph (1), the term ‘restric-
tion on divestment’ includes—
‘‘(A) any failure to offer at least 3 diversified
investment options in which a participant or bene-
ficiary may direct the proceeds from the divestment
of employer securities, and
‘‘(B) any restriction on the ability of a partici-
pant or beneficiary to choose from all otherwise
available investment options in which such proceeds
may be so directed.’’.
(b) AMENDMENTS
TO
THE INTERNAL REVENUE
CODE OF 1986.—
(1) IN
GENERAL.—Subsection (a) of section
401 of the Internal Revenue Code of 1986 (relating
to requirements for qualification) is amended by in-
serting after paragraph (34) the following new para-
graph:
‘‘(35) LIMITATIONS ON RESTRICTIONS UNDER
APPLICABLE DEFINED CONTRIBUTION PLANS ON IN-
VESTMENTS IN EMPLOYER SECURITIES.—
‘‘(A) IN
GENERAL.—A trust forming a
part of an applicable defined contribution plan
shall not constitute a qualified trust under this
subsection if the plan acquires or holds any em-
ployer securities with respect to which there is
any restriction on divestment by a participant
or beneficiary on or after the date on which the
participant has completed 3 years of participa-
tion (as defined in section 411(b)(4)) under the
plan or (if the plan so provides) 3 years of serv-
ice (as defined in section 411(a)(5)) with the
employer.
‘‘(B) DEFINITIONS.—For purposes of sub-
paragraph (A)—
‘‘(i) APPLICABLE DEFINED CONTRIBU-
TION PLAN.—The term ‘applicable defined
contribution plan’ means any defined con-
tribution plan, except that such term does
not include an employee stock ownership
plan (as defined in section 4975(e)(7)) un-
less there are any contributions to such
plan (or earnings thereunder) held within
such plan that are subject to subsections
(k)(3) or (m)(2).
‘‘(ii) 
RESTRICTION
ON
DIVEST-
MENT.—The term ‘restriction on divest-
ment’ includes—
‘‘(I) any failure to offer at least
3 diversified investment options in
which a participant or beneficiary may
direct the proceeds from the divest-
ment of employer securities, and
‘‘(II) any restriction on the abil-
ity of a participant or beneficiary to
choose from all otherwise available in-
vestment options in which such pro-
ceeds may be so directed.’’.
(2) 
CONFORMING
AMENDMENT.—Section
401(a)(28)(B) of such Code (relating to diversifica-
tion of investments) is amended by adding at the
end the following new clause:
‘‘(v) EXCEPTION.—This subparagraph
shall not apply to an applicable defined
contribution plan (as defined in paragraph
(35)(B)(i)).’’.
SEC. 5. PROHIBITED TRANSACTION EXEMPTION FOR THE
PROVISION OF INVESTMENT ADVICE.
(a) AMENDMENTS TO THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974.—
(1) EXEMPTION
FROM
PROHIBITED
TRANS-
ACTIONS.—Section 408(b) of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C.
1108(b)) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(14)(A) Any transaction described in subpara-
graph (B) in connection with the provision of invest-
ment advice described in section 3(21)(A)(ii), in any
case in which—
‘‘(i) the investment of assets of the plan is
subject to the direction of plan participants or
beneficiaries,
‘‘(ii) the advice is provided to the plan or
a participant or beneficiary of the plan by a fi-
duciary adviser in connection with any sale, ac-
quisition, or holding of a security or other prop-
erty for purposes of investment of plan assets,
and
‘‘(iii) the requirements of subsection (g)
are met in connection with the provision of the
advice.
‘‘(B) The transactions described in this sub-
paragraph are the following:
‘‘(i) the provision of the advice to the plan,
participant, or beneficiary;
‘‘(ii) the sale, acquisition, or holding of a
security or other property (including any lend-
ing of money or other extension of credit associ-
ated with the sale, acquisition, or holding of a
security or other property) pursuant to the ad-
vice; and
‘‘(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 representative of the fiduciary ad-
viser or affiliate) in connection with the provi-
sion of the advice or in connection with a sale,
acquisition, or holding of a security or other
property pursuant to the advice.’’.
(2) REQUIREMENTS.—Section 408 of such Act
is amended further by adding at the end the fol-
lowing new subsection:
‘‘(g) REQUIREMENTS RELATING TO PROVISION OF
INVESTMENT ADVICE BY FIDUCIARY ADVISERS.—
‘‘(1) IN GENERAL.—The requirements of this
subsection are met in connection with the provision
of 
investment 
advice 
referred 
to 
in 
section
3(21)(A)(ii), provided to an employee benefit plan or
a participant or beneficiary of an employee benefit
plan by a fiduciary adviser with respect to the plan
in connection with any sale, acquisition, or holding
of a security or other property for purposes of in-
vestment of amounts held by the plan, if—
‘‘(A) in the case of the initial provision of
the advice with regard to the security or other
property by the fiduciary adviser to the plan,
participant, or beneficiary, the fiduciary adviser
provides to the recipient of the advice, at a time
reasonably contemporaneous with the initial
provision of the advice, a written notification
(which may consist of notification by means of
electronic communication)—
‘‘(i) of all fees or other compensation
relating to the advice that the fiduciary ad-
viser or any affiliate thereof is to receive
(including compensation provided by any
third party) in connection with the provi-
sion of the advice or in connection with the
sale, acquisition, or holding of the security
or other property,
‘‘(ii) of any material affiliation or con-
tractual relationship of the fiduciary ad-
viser or affiliates thereof in the security or
other property,
‘‘(iii) of any limitation placed on the
scope of the investment advice to be pro-
vided by the fiduciary adviser with respect
to any such sale, acquisition, or holding of
a security or other property,
‘‘(iv) of the types of services provided
by the fiduciary advisor in connection with
the provision of investment advice by the
fiduciary adviser, and
‘‘(v) that the adviser is acting as a fi-
duciary of the plan in connection with the
provision of the advice,
‘‘(B) the fiduciary adviser provides appro-
priate disclosure, in connection with the sale,
acquisition, or holding of the security or other
property, in accordance with all applicable secu-
rities laws,
‘‘(C) the sale, acquisition, or holding oc-
curs solely at the direction of the recipient of
the advice,
‘‘(D) the compensation received by the fi-
duciary adviser and affiliates thereof in connec-
tion with the sale, acquisition, or holding of the
security or other property is reasonable, and
‘‘(E) 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.
‘‘(2) STANDARDS FOR PRESENTATION OF IN-
FORMATION.—The notification required to be pro-
vided to participants and beneficiaries under para-
graph (1)(A) shall be written in a clear and con-
spicuous manner and in a manner calculated to be
understood by the average plan participant and shall
be sufficiently accurate and comprehensive to rea-
sonably apprise such participants and beneficiaries
the recipient of the advice at a time reasonably
contemporaneous to the material change in in-
formation.
‘‘(4) MAINTENANCE FOR 6 YEARS OF EVIDENCE
OF COMPLIANCE.—A fiduciary adviser referred to in
paragraph (1) who has provided advice referred to in
such paragraph shall, for a period of not less than
6 years after the provision of the advice, maintain
any records necessary for determining whether the
requirements of the preceding provisions of this sub-
section and of subsection (b)(14) have been met. A
transaction 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 con-
trol of the fiduciary adviser.
‘‘(5) EXEMPTION FOR PLAN SPONSOR AND CER-
TAIN OTHER FIDUCIARIES.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (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 re-
quirements of this part solely by reason of the
provision of investment advice referred to in
section 3(21)(A)(ii) (or solely by reason of con-
tracting for or otherwise arranging for the pro-
vision of the advice), if—
‘‘(i) the advice is provided by a fidu-
ciary adviser pursuant to an arrangement
between the plan sponsor or other fidu-
ciary and the fiduciary adviser for the pro-
vision by the fiduciary adviser of invest-
ment advice referred to in such section,
‘‘(ii) the terms of the arrangement re-
quire compliance by the fiduciary adviser
with the requirements of this subsection,
and
‘‘(iii) the terms of the arrangement
include a written acknowledgment by the
fiduciary adviser that the fiduciary adviser
is a fiduciary of the plan with respect to
the provision of the advice.
‘‘(B) CONTINUED DUTY OF PRUDENT SE-
LECTION 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 arrangement for
the provision of 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 recipi-
ent of the advice.
‘‘(C) AVAILABILITY OF PLAN ASSETS FOR
PAYMENT FOR ADVICE.—Nothing in this part
shall be construed to preclude the use of plan
assets to pay for reasonable expenses in pro-
viding investment advice referred to in section
3(21)(A)(ii).
‘‘(6) DEFINITIONS.—For purposes of this sub-
section and subsection (b)(14)—
‘‘(A) FIDUCIARY ADVISER.—The term ‘fi-
duciary adviser’ means, with respect to a plan,
a person who is a fiduciary of the plan by rea-
son of the provision of investment advice by the
person to the plan or to a participant or bene-
ficiary and who is—
‘‘(i) registered as an investment ad-
viser 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 insti-
tution referred to in section 408(b)(4),
‘‘(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
representative of a person described in any
of clauses (i) through (v) who satisfies the
requirements 
of 
applicable 
insurance,
banking, and securities laws relating to the
provision of the advice.
‘‘(B) AFFILIATE.—The term ‘affiliate’ of
another entity means an affiliated person of the
entity (as defined in section 2(a)(3) of the In-
vestment Company Act of 1940 (15 U.S.C.
80a–2(a)(3))).
‘‘(C) 
REGISTERED
REPRESENTATIVE.—
The term ‘registered 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).’’.
(b) AMENDMENTS
TO
THE INTERNAL REVENUE
CODE OF 1986.—
(1) EXEMPTION
FROM
PROHIBITED
TRANS-
ACTIONS.—Subsection (d) of section 4975 of the In-
ternal Revenue Code of 1986 (relating to exemptions
from tax on prohibited transactions) is amended—
(A) in paragraph (14), by striking ‘‘or’’ at
the end;
(B) in paragraph (15), by striking the pe-
riod at the end and inserting ‘‘; or’’; and
(C) by adding at the end the following new
paragraph:
‘‘(16) any transaction described in subsection
(f)(7)(A) in connection with the provision of invest-
ment advice described in subsection (e)(3)(B), in
any case in which—
‘‘(A) the investment of assets of the plan
is subject to the direction of plan participants
or beneficiaries,
‘‘(B) the advice is provided to the plan or
a participant or beneficiary of the plan by a fi-
duciary adviser in connection with any sale, ac-
quisition, or holding of a security or other prop-
erty for purposes of investment of plan assets,
and
‘‘(C) 
the 
requirements 
of 
subsection
(f)(7)(B) are met in connection with the provi-
sion of the advice.’’.
(2) ALLOWED
TRANSACTIONS
AND
REQUIRE-
MENTS.—Subsection (f) of such section 4975 (relat-
ing to other definitions and special rules) is amended
by adding at the end the following new paragraph:
‘‘(7) PROVISIONS
RELATING
TO
INVESTMENT
ADVICE PROVIDED BY FIDUCIARY ADVISERS.—
‘‘(A) TRANSACTIONS ALLOWABLE IN CON-
NECTION WITH INVESTMENT ADVICE PROVIDED
BY FIDUCIARY ADVISERS.—The transactions re-
ferred to in subsection (d)(16), in connection
with the provision of investment advice by a fi-
duciary adviser, are the following:
‘‘(i) the provision of the advice to the
plan, participant, or beneficiary;
‘‘(ii) the sale, acquisition, or holding
of a security or other property (including
any lending of money or other extension of
credit associated with the sale, acquisition,
or holding of a security or other property)
pursuant to the advice; and
‘‘(iii) the direct or indirect receipt of
fees or other compensation by the fiduciary
adviser or an affiliate thereof (or any em-
ployee, agent, or registered representative
of the fiduciary adviser or affiliate) in con-
nection with the provision of the advice or
in connection with a sale, acquisition, or
holding of a security or other property pur-
suant to the advice.
‘‘(B) REQUIREMENTS RELATING TO PROVI-
SION OF INVESTMENT ADVICE BY FIDUCIARY
ADVISERS.—The requirements of this subpara-
graph (referred to in subsection (d)(16)(C)) are
met in connection with the provision of invest-
ment advice referred to in subsection (e)(3)(B),
provided to a plan or a participant or bene-
ficiary of a plan by a fiduciary adviser with re-
spect to the plan in connection with any sale,
acquisition, or holding of a security or other
property for purposes of investment of amounts
held by the plan, if—
‘‘(i) in the case of the initial provision
of the advice with regard to the security or
other property by the fiduciary adviser to
the plan, participant, or beneficiary, the fi-
duciary adviser provides to the recipient of
the advice, at a time reasonably contem-
poraneous with the initial provision of the
advice, a written notification (which may
consist of notification by means of elec-
tronic communication)—
‘‘(I) of all fees or other com-
pensation relating to the advice that
the fiduciary adviser or any affiliate
thereof is to receive (including com-
pensation provided by any third
party) in connection with the provi-
sion of the advice or in connection
with the sale, acquisition, or holding
of the security or other property,
‘‘(II) of any material affiliation
or contractual relationship of the fidu-
ciary adviser or affiliates thereof in
the security or other property,
‘‘(III) of any limitation placed on
the scope of the investment advice to
be provided by the fiduciary adviser
with respect to any such sale, acquisi-
tion, or holding of a security or other
property,
‘‘(IV) of the types of services
provided by the fiduciary advisor in
connection with the provision of in-
vestment advice by the fiduciary ad-
viser, and
‘‘(V) that the adviser is acting as
a fiduciary of the plan in connection
with the provision of the advice,
‘‘(ii) the fiduciary adviser provides ap-
propriate disclosure, in connection with the
sale, acquisition, or holding of the security
or other property, in accordance with all
applicable securities laws,
‘‘(iii) the sale, acquisition, or holding
occurs solely at the direction of the recipi-
ent of the advice,
‘‘(iv) 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
‘‘(v) 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.
‘‘(C) STANDARDS FOR PRESENTATION OF
INFORMATION.—The notification required to be
provided to participants and beneficiaries under
subparagraph (B)(i) shall be written in a clear
and conspicuous manner and in a manner cal-
culated to be understood by the average plan
participant and shall be sufficiently accurate
and comprehensive to reasonably apprise such
participants and beneficiaries of the information
required to be provided in the notification.
‘‘(D) EXEMPTION CONDITIONED ON MAK-
ING REQUIRED INFORMATION AVAILABLE ANNU-
ALLY, ON REQUEST, AND IN THE EVENT OF MA-
TERIAL
CHANGE.—The requirements of sub-
paragraph (B)(i) shall be deemed not to have
been met in connection with the initial or any
subsequent provision of advice described in sub-
paragraph (B) to the plan, participant, or bene-
ficiary if, at any time during the provision of
advisory services to the plan, participant, or
beneficiary, the fiduciary adviser fails to main-
tain the information described in subclauses (I)
through (IV) of subparagraph (B)(i) in cur-
rently accurate form and in the manner re-
quired by subparagraph (C), or fails—
‘‘(i) to provide, without charge, such
currently accurate information to the re-
cipient of the advice no less than annually,
‘‘(ii) to make such currently accurate
information available, upon request and
without charge, to the recipient of the ad-
vice, or
‘‘(iii) in the event of a material
change to the information described in
subclauses (I) through (IV) of subpara-
graph (B)(i), to provide, without charge,
such currently accurate information to the
recipient of the advice at a time reasonably
contemporaneous to the material change in
information.
‘‘(E) MAINTENANCE FOR 6 YEARS OF EVI-
DENCE OF COMPLIANCE.—A fiduciary adviser
referred to in subparagraph (B) who has pro-
vided advice referred to in such subparagraph
shall, for a period of not less than 6 years after
the provision of the advice, maintain any
records necessary for determining whether the
requirements of the preceding provisions of this
paragraph and of subsection (d)(16) have been
met. A transaction prohibited under subsection
(c)(1) 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 cir-
cumstances beyond the control of the fiduciary
adviser.
‘‘(F) EXEMPTION FOR PLAN SPONSOR AND
CERTAIN OTHER FIDUCIARIES.—A plan sponsor
or other person who is a fiduciary (other than
a fiduciary adviser) shall not be treated as fail-
ing to meet the requirements of this section
solely by reason of the provision of investment
advice referred to in subsection (e)(3)(B) (or
solely by reason of contracting for or otherwise
arranging for the provision of the advice), if—
‘‘(i) the advice is provided by a fidu-
ciary adviser pursuant to an arrangement
between the plan sponsor or other fidu-
ciary and the fiduciary adviser for the pro-
vision by the fiduciary adviser of invest-
ment advice referred to in such section,
‘‘(ii) the terms of the arrangement re-
quire compliance by the fiduciary adviser
with the requirements of this paragraph,
‘‘(iii) the terms of the arrangement
include a written acknowledgment by the
fiduciary adviser that the fiduciary adviser
is a fiduciary of the plan with respect to
the provision of the advice, and
‘‘(iv) the requirements of part 4 of
subtitle B of title I of the Employee Re-
tirement Income Security Act of 1974 are
met in connection with the provision of
such advice.
‘‘(G) DEFINITIONS.—For purposes of this
paragraph and subsection (d)(16)—
‘‘(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 invest-
ment advice by the person to the plan or
to a participant or beneficiary 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 prin-
cipal office and place of business,
‘‘(II) a bank or similar financial
institution referred to in subsection
(d)(4),
‘‘(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 de-
scribed in any of subclauses (I)
through (IV), or
‘‘(VI) an employee, agent, or reg-
istered representative of a person de-
scribed in any of subclauses (I)