377
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 adviser in 
connection with the provision of in-
vestment advice by the fiduciary ad-
viser, 
‘‘(V) that the adviser is acting as 
a fiduciary of the plan in connection 
with the provision of the advice, and 
‘‘(VI) that a recipient of the ad-
vice may separately arrange for the 
provision of advice by another adviser, 
that could have no material affiliation 
with and receive no fees or other com-
pensation in connection with the secu-
rity or other property, 
‘‘(ii) the fiduciary adviser provides ap-
propriate disclosure, in connection with the
378
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.
379
‘‘(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-
380
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)(19) 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
381
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)(19)—
382
‘‘(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) or a savings association (as de-
fined 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 insti-
tution or savings association which is 
subject to periodic examination and 
review by Federal or State banking 
authorities,
383
‘‘(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) 
through (V) who satisfies the require-
ments of applicable insurance, bank-
ing, and securities laws relating to the 
provision of the advice. 
‘‘(ii) AFFILIATE.—The term ‘affiliate’ 
of another entity means an affiliated per-
son 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
REPRESENTA-
TIVE.—The term ‘registered representa-
tive’ of another entity means a person de-
384
scribed in section 3(a)(18) of the Securi-
ties Exchange Act of 1934 (15 U.S.C. 
78c(a)(18)) (substituting the entity for the 
broker or dealer referred to in such sec-
tion) or a person described in section 
202(a)(17) of the Investment Advisers Act 
of 1940 (15 U.S.C. 80b–2(a)(17)) (sub-
stituting the entity for the investment ad-
viser referred to in such section).’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to advice referred to 
in section 4975(c)(3)(B) of the Internal Revenue Code of 
1986 provided on or after January 1, 2006. 
TITLE VII—BENEFIT ACCRUAL 
STANDARDS 
SEC. 701. BENEFIT ACCRUAL STANDARDS. 
(a) AMENDMENTS TO THE EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974.—
(1) RULES RELATING TO REDUCTION IN RATE 
OF BENEFIT ACCRUAL.—Section 204(b)(1)(H) of the 
Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1054(b)(1)(H)) is amended by adding at 
the end the following new clauses: 
‘‘(vii)(I) A plan shall not be treated as failing to meet 
the requirements of clause (i) if a participant’s entire ac-
385
crued benefit, as determined as of any date under the for-
mula for determining benefits as set forth in the text of 
the plan documents, would be equal to or greater than 
that of any similarly situated, younger individual. 
‘‘(II) For purposes of this clause, an individual is 
similarly situated to a participant if such individual is 
identical to such participant in every respect (including pe-
riod of service, compensation, position, date of hire, work 
history, and any other respect) except for age. 
‘‘(III) In determining the entire accrued benefit for 
purposes of this clause, the subsidized portion of any early 
retirement benefit (including any early retirement subsidy 
that is fully or partially included or reflected in an employ-
ee’s opening balance or other transition benefits) shall be 
disregarded. 
‘‘(IV) In determining the entire accrued benefit for 
purposes of this clause, such benefit may be calculated as 
the present value of accrued benefits projected to normal 
retirement age, as an account balance, or as the current 
value of the accumulated percentage of the employee’s 
final average compensation. 
‘‘(viii) A plan shall not be treated as failing to meet 
the requirements of this subparagraph solely because the 
plan provides allowable offsets against those benefits 
under the plan which are attributable to employer con-
386
tributions, based on benefits which are provided under 
title II of the Social Security Act, under the Railroad Re-
tirement Act of 1974, under another plan described in sec-
tion 401(a) of the Internal Revenue Code of 1986 main-
tained by the same employer, under any retirement pro-
gram for officers or employees of the Federal Government 
or of the government of any State or political subdivision 
thereof, or under such other arrangements as the Sec-
retary of the Treasury may provide. For purposes of this 
clause, allowable offsets based on such benefits consist of 
offsets equal to all or part of the actual benefit payment 
amounts, reasonable projections or estimations of such 
benefit payment amounts, or actuarial equivalents of such 
actual benefit payment amounts, projections, or esti-
mations (determined on the basis of reasonable actuarial 
assumptions). 
‘‘(ix) A plan shall not be treated as failing to meet 
the requirements of this subparagraph solely because the 
plan provides a disparity in contributions or benefits with 
respect to which the requirements of section 401(l) of the 
Internal Revenue Code of 1986 are met. 
‘‘(x)(I) A plan shall not be treated as failing to meet 
the requirements of this subparagraph solely because the 
plan provides for indexing of accrued benefits under the 
plan.
387
‘‘(II) Except in the case of any benefit provided in 
the form of a variable annuity, subclause (I) shall not 
apply with respect to any indexing which results in an ac-
crued benefit less than the accrued benefit determined 
without regard to such indexing. 
‘‘(III) For purposes of this clause, the term ‘indexing’ 
means, in connection with an accrued benefit, the periodic 
adjustment of the accrued benefit by means of the applica-
tion of a recognized investment index or methodology.’’. 
(2) DETERMINATIONS OF ACCRUED BENEFIT AS 
BALANCE OF BENEFIT ACCOUNT.—Section 203 of 
such Act (29 U.S.C. 1053) is amended by adding at 
the end the following new subsection: 
‘‘(f)(1) A defined benefit plan under which the ac-
crued benefit payable under the plan upon distribution (or 
any portion thereof) is expressed as the balance of a hypo-
thetical account maintained for the participant shall not 
be treated as failing to meet the requirements of sub-
section (a)(2), section 204(c) (but only in the case of a 
plan which does not provide for employee contributions), 
or section 205(g) solely because of the amount actually 
made available for such distribution under the terms of 
the plan, in any case in which the applicable interest rate 
that would be used under the terms of the plan to project
388
the amount of the participant’s account balance to normal 
retirement age is not greater than a market rate of return. 
‘‘(2) The Secretary of the Treasury may provide by 
regulation for rules governing the calculation of a market 
rate of return for purposes of paragraph (1) and for per-
missible methods of crediting interest to the account (in-
cluding fixed or variable interest rates) resulting in effec-
tive rates of return meeting the requirements of paragraph 
(1).’’. 
(b) AMENDMENTS
TO
THE INTERNAL REVENUE 
CODE OF 1986.—
(1) RULES RELATING TO REDUCTION IN RATE 
OF BENEFIT ACCRUAL.—Subparagraph (H) of sec-
tion 411(b)(1) of the Internal Revenue Code of 1986 
is amended by adding at the end the following new 
clauses: 
‘‘(vi) COMPARISON TO SIMILARLY SIT-
UATED YOUNGER INDIVIDUAL.—
‘‘(I) IN GENERAL.—A plan shall 
not be treated as failing to meet the 
requirements of clause (i) if a partici-
pant’s entire accrued benefit, as deter-
mined as of any date under the for-
mula for determining benefits as set 
forth in the text of the plan docu-