tribution (as defined in section 408A(e)) to
a Roth IRA.
‘‘(B) TESTING PERIOD.—For purposes of
subparagraph (A), the testing period, with re-
spect to a taxable year, is the period which
includes—
‘‘(i) such taxable year,
‘‘(ii) the preceding taxable year, and
‘‘(iii) the period after such taxable
year and before the due date (without ex-
tensions) for filing the return of tax for
such taxable year.
‘‘(C) EXCEPTED
DISTRIBUTIONS.—There
shall not be taken into account under subpara-
graph (A)—
‘‘(i) any distribution referred to in
section 
72(p), 
401(k)(8), 
401(m)(6),
402(g)(2), 404(k), or 408(d)(4),
‘‘(ii) any distribution to which section
408A(d)(3) applies, and
‘‘(iii) any distribution before January
1, 2002.
‘‘(D) TREATMENT OF DISTRIBUTIONS RE-
CEIVED BY SPOUSE OF INDIVIDUAL.—For pur-
poses of determining whether an individual is
an eligible individual for any taxable year, any
distribution received by the spouse of such indi-
vidual shall be treated as received by such indi-
vidual if such individual and spouse file a joint
return for such taxable year and for the taxable
year during which the spouse receives the dis-
tribution.
‘‘(d) QUALIFIED RETIREMENT SAVINGS CONTRIBU-
TIONS.—For purposes of this section, the term ‘qualified
retirement savings contributions’ means the sum of—
‘‘(1) the amount of the qualified retirement
contributions (as defined in section 219(e)) made by
the eligible individual,
‘‘(2) the amount of—
‘‘(A) any elective deferrals (as defined in
section 402(g)(3)) of such individual, and
‘‘(B) any elective deferral of compensation
by such individual under an eligible deferred
compensation plan (as defined in section
457(b)) of an eligible employer described in sec-
tion 457(e)(1)(A), and
‘‘(3) the amount of voluntary employee con-
tributions by such individual to any qualified retire-
ment plan (as defined in section 4974(c)).
‘‘(e) ADJUSTED GROSS INCOME.—For purposes of
this section, adjusted gross income shall be determined
without regard to sections 911, 931, and 933.
‘‘(f) INVESTMENT
IN
THE CONTRACT.—Notwith-
standing any other provision of law, a qualified retirement
savings contribution shall not fail to be included in deter-
mining the investment in the contract for purposes of sec-
tion 72 by reason of the credit under this section.
‘‘(g) TRANSITIONAL RULES.—In the case of taxable
years beginning before January 1, 2008—
‘‘(1) CONTRIBUTION
LIMIT.—Subsection (a)
shall be applied by substituting for ‘$2,000’—
‘‘(A) $600 in the case of taxable years be-
ginning in 2002, 2003, or 2004, and
‘‘(B) $1,000 in the case of taxable years
beginning in 2005, 2006, or 2007.
‘‘(2) APPLICABLE PERCENTAGE.—The applica-
ble percentage shall be determined under the fol-
lowing table (in lieu of the table in subsection (b)):
Adjusted Gross Income
Applica-
ble per-
centage
Joint return
Head of a household
All other cases
Over
Not over
Over
Not over
Over
Not over
$0
$20,000
$0
$15,000
$0
$10,000
20,000
25,000
15,000
18,750
10,000
12,500
25,000
30,000
18,750
22,500
12,500
15,000
30,000
35,000
22,500
26,250
15,000
17,500
35,000
40,000
26,250
30,000
17,500
20,000
40,000
30,000
20,000
0.’’
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 1324(b) of title
31, United States Code, is amended by inserting be-
fore the period ‘‘, or from section 35 of such Code’’.
(2) The table of sections for subpart C of part
IV of subchapter A of chapter 1 of such Code is
amended by striking the last item and inserting the
following new items:
‘‘Sec. 35. Elective deferrals and IRA contributions by certain indi-
viduals.
‘‘Sec. 36. Overpayments of tax.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
SEC. 302. CREDIT FOR QUALIFIED PENSION PLAN CON-
TRIBUTIONS OF SMALL EMPLOYERS.
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to business related credits) is amended by
adding at the end the following new section:
‘‘SEC. 45G. SMALL EMPLOYER PENSION PLAN CONTRIBU-
TIONS.
‘‘(a) GENERAL RULE.—For purposes of section 38,
in the case of an eligible employer, the small employer pen-
sion plan contribution credit determined under this section
for any taxable year is an amount equal to 50 percent
of the amount which would (but for subsection (f)(1)) be
allowed as a deduction under section 404 for such taxable
year for qualified employer contributions made to any
qualified retirement plan on behalf of any nonhighly com-
pensated employee.
‘‘(b) CREDIT LIMITED TO 3 Years.—The credit allow-
able by this section shall be allowed only with respect to
the period of 3 taxable years beginning with the taxable
year in which the qualified retirement plan becomes effec-
tive.
‘‘(c) QUALIFIED EMPLOYER CONTRIBUTION.—For
purposes of this section—
‘‘(1) DEFINED CONTRIBUTION PLANS.—In the
case of a defined contribution plan, the term ‘quali-
fied employer contribution’ means the amount of
nonelective and matching contributions to the plan
made by the employer on behalf of any nonhighly
compensated employee to the extent such amount
does not exceed 3 percent of such employee’s com-
pensation from the employer for the year.
‘‘(2) DEFINED BENEFIT PLANS.—In the case of
a defined benefit plan, the term ‘qualified employer
contribution’ means the amount of employer con-
tributions to the plan made on behalf of any non-
highly compensated employee to the extent that the
accrued benefit of such employee derived from such
contributions for the year do not exceed the equiva-
lent (as determined under regulations prescribed by
the Secretary and without regard to contributions
and benefits under the Social Security Act) of 3 per-
cent of such employee’s compensation from the em-
ployer for the year.
‘‘(d) QUALIFIED RETIREMENT PLAN.—
‘‘(1) IN GENERAL.—The term ‘qualified retire-
ment plan’ means any plan described in section
401(a) which includes a trust exempt from tax
under section 501(a) if the plan meets—
‘‘(A) the contribution requirements of
paragraph (2),
‘‘(B) the vesting requirements of para-
graph (3), and
‘‘(C) the distributions requirements of
paragraph (4).
‘‘(2) CONTRIBUTION REQUIREMENTS.—
‘‘(A) IN GENERAL.—The requirements of
this paragraph are met if, under the plan—
‘‘(i) the employer is required to make
nonelective contributions of at least 1 per-
cent of compensation (or the equivalent
thereof in the case of a defined benefit
plan) for each nonhighly compensated em-
ployee who is eligible to participate in the
plan, and
‘‘(ii) except in the case of a defined
benefit plan, allocations of nonelective em-
ployer contributions are either in equal dol-
lar amounts for all employees covered by
the plan or bear a uniform relationship to
the total compensation, or the basic or reg-
ular rate of compensation, of the employ-
ees covered by the plan.
‘‘(B) COMPENSATION
LIMITATION.—The
compensation taken into account under sub-
paragraph (A) for any year shall not exceed the
limitation in effect for such year under section
401(a)(17).
‘‘(3) VESTING
REQUIREMENTS.—The require-
ments of this paragraph are met if the plan satisfies
the requirements of subparagraph (A) or (B).
‘‘(A) 3-YEAR
VESTING.—A plan satisfies
the requirements of this subparagraph if an em-
ployee who has completed at least 3 years of
service has a nonforfeitable right to 100 percent
of the employee’s accrued benefit derived from
employer contributions.
‘‘(B) 5-YEAR
GRADED
VESTING.—A plan
satisfies the requirements of this subparagraph
if an employee has a nonforfeitable right to a
percentage of the employee’s accrued benefit de-
rived from employer contributions determined
under the following table:
The nonforfeitable
‘‘Years of service:
percentage is:
1 ...............................................................................................
2 ...............................................................................................
3 ...............................................................................................
4 ...............................................................................................
5 ...............................................................................................
100.
‘‘(4) DISTRIBUTION REQUIREMENTS.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the requirements of this
paragraph are met if, under the plan—
‘‘(i) in the case of a profit-sharing or
stock bonus plan, amounts are distribut-
able 
only 
as 
provided 
in 
section
401(k)(2)(B), and
‘‘(ii) in the case of a pension plan,
amounts are distributable subject to the
limitations applicable to other distributions
from the plan.
‘‘(B) DISTRIBUTIONS
WITHIN
YEARS
AFTER SEPARATION, ETC.—In no event shall a
plan meet the requirements of this paragraph
unless, under the plan, amounts distributed—
‘‘(i) after separation from service or
severance from employment, and
‘‘(ii) within 5 years after the date of
the earliest employer contribution to the
plan,
may be distributed only in a direct trustee-to-
trustee transfer to a plan having the same dis-
tribution restrictions as the distributing plan.
‘‘(e) OTHER DEFINITIONS.—For purposes of this
section—
‘‘(1) ELIGIBLE EMPLOYER.—The term ‘eligible
employer’ has the meaning given such term by sec-
tion 408(p)(2)(C)(i).
‘‘(2) 
NONHIGHLY
COMPENSATED
EMPLOY-
EES.—The term ‘highly compensated employee’ has
the meaning given such term by section 414(q) (de-
termined without regard to section 414(q)(1)(B)(ii)).
‘‘(f) SPECIAL RULES.—
‘‘(1) DISALLOWANCE OF DEDUCTION.—No de-
duction shall be allowed for that portion of the quali-
fied employer contributions paid or incurred for the
taxable year which is equal to the credit determined
under subsection (a).
‘‘(2) ELECTION NOT TO CLAIM CREDIT.—This
section shall not apply to a taxpayer for any taxable
year if such taxpayer elects to have this section not
apply for such taxable year.
‘‘(g) RECAPTURE OF CREDIT ON FORFEITED CON-
TRIBUTIONS.—If any accrued benefit which is forfeitable
by reason of subsection (d)(3) is forfeited, the employer’s
tax imposed by this chapter for the taxable year in which
the forfeiture occurs shall be increased by 35 percent of
the employer contributions from which such benefit is de-
rived to the extent such contributions were taken into ac-
count in determining the credit under this section.
‘‘(h) REGULATIONS.—The Secretary shall prescribe
such regulations as may be appropriate to carry out the
purposes of this section, including regulations to prevent
the abuse of the purposes of this section through the use
of multiple plans.
‘‘(i) TERMINATION.—This section shall not apply to
any plan established after December 31, 2009.’’.
(b) CREDIT ALLOWED AS PART OF GENERAL BUSI-
NESS CREDIT.—Section 38(b) of such Code (defining cur-
rent year business credit) is amended by striking ‘‘plus’’
at the end of paragraph (13), by striking the period at
the end of paragraph (14) and inserting ‘‘, plus’’, and by
adding at the end the following new paragraph:
‘‘(16) in the case of an eligible employer (as de-
fined in section 45G(e)), the small employer pension
plan contribution credit determined under section
45G(a).’’
(c) CONFORMING AMENDMENTS.—
(1) Section 39(d) of such Code is amended by
adding at the end the following new paragraph:
‘‘(11) NO
CARRYBACK
OF
SMALL
EMPLOYER
PENSION PLAN CONTRIBUTION CREDIT BEFORE JAN-
UARY 1, 2002.—No portion of the unused business
credit for any taxable year which is attributable to
the small employer pension plan contribution credit
determined under section 45G may be carried back
to a taxable year beginning before January 1,
2002.’’
(2) Subsection (c) of section 196 of such Code
is amended by striking ‘‘and’’ at the end of para-
graph (9), by striking the period at the end of para-
graph (10) and inserting ‘‘, and’’, and by adding at
the end the following new paragraph:
‘‘(11) the small employer pension plan contribu-
tion credit determined under section 45G(a).’’
(3) The table of sections for subpart D of part
IV of subchapter A of chapter 1 of such Code is
amended by adding at the end the following new
item:
‘‘Sec. 45G. Small employer pension plan contributions.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to contributions paid or incurred
in taxable years beginning after December 31, 2001.
SEC. 303. NOTICE.
The Secretary of the Treasury shall establish an on-
going program, in coordination with employers, under
which the Secretary shall ensure that employees and other
affected individuals remain fully and effectively notified of
the availability of tax credits under sections 35, 45E, and
45G of the Internal Revenue Code of 1986.
TITLE IV—ADDITIONAL
AMENDMENTS
SEC. 401. STATUTORY EXEMPTION FROM PROHIBITED
TRANSACTION 
RULES 
FOR 
EMERGENT
TRANSACTIONS.
(a) IN GENERAL.—Section 4975 of the Internal Rev-
enue Code of 1986 (relating to tax on prohibited trans-
actions) is amended—
(1) by redesignating subsections (h) and (i) as
subsections (i) and (j), respectively, and
(2) by inserting after subsection (g) the fol-
lowing new subsection:
‘‘(h) STATUTORY EXEMPTION FROM PROHIBITED
TRANSACTION RULES FOR EMERGENT TRANSACTIONS.—
‘‘(1) IN
GENERAL.—Pursuant to regulations
issued by the Secretary of Labor, a transaction be-
tween a plan and an eligible person constituting the
purchase or sale of a financial product which is in
violation of a restriction imposed by subsection
(c)(1) may be exempted under section 408(a) of the
Employee Retirement Income Security Act of 1974
from treatment as a violation of such restriction if—
‘‘(A) prior to engaging in the transaction,
the plan acquires from the eligible person a
qualifying guarantee, consisting of a letter of
credit or other form of written guarantee,
issued by a bank or similar financial institution
(other than the eligible person requesting the
exemption or an affiliate) regulated and super-
vised by, and subject to periodic examination
by, an agency of a State or of the Federal Gov-
ernment, in a stated amount equal, as of the
close of business on the day preceding the
transaction, to not less than 100 percent of the
amount of plan assets involved in the trans-
action, plus interest on that amount at a rate
determined by the parties to the transaction, or
in the absence of such determination, an inter-
est rate equal to the underpayment rate defined
in section 6621(a)(2),
‘‘(B) the eligible person receives in such
transaction not more than reasonable com-
pensation,
‘‘(C) such transaction is expressly ap-
proved by an independent fiduciary who has in-
vestment authority with respect to the plan as-
sets involved in the transaction,
‘‘(D) within 60 days after the transaction,
the eligible person submits to the Secretary an
application for an exemption under subsection
(a) from such restriction,
‘‘(E) immediately after the acquisition of
the financial product—
‘‘(i) the fair market value of such fi-
nancial product does not exceed 1 percent
of the fair market value of the assets of
the plan, and
‘‘(ii) the aggregate fair market value
of all outstanding financial products ac-
quired by the plan from the eligible person
pursuant to this subsection does not exceed
5 percent of the fair market value of the
assets of the plan,
‘‘(F) the Secretary determines not to grant
the exemption, and
‘‘(G) the transaction is reversed within 60
days after the date of the Secretary’s deter-
mination.
‘‘(2) For purposes of this subsection—
‘‘(A) a guarantee referred to in paragraph
(1) is ‘qualifying’ if such guarantee is irrev-
ocable and, under the terms of the guarantee—
‘‘(i) if the Secretary grants the ex-
emption, the guarantee may expire without
any payments made to the plan, and
‘‘(ii) if the Secretary determines not
to grant the exemption, the plan has the
unconditional right to apply the amounts
under the guarantee to any losses suffered
and to the payment of interest determined
under paragraph (1), and
‘‘(B) the term ‘eligible person’ means a
person that—
‘‘(i) consists of—
‘‘(I) a bank as defined in section
202(a)(2) of the Investment Advisers
Act of 1940,
‘‘(II) an investment adviser reg-
istered under the Investment Advisers
Act of 1940,
‘‘(III) an insurance company
which is qualified to do business in
more than one State, or
‘‘(IV) a broker-dealer registered
under the Securities Exchange Act of
1934,
‘‘(ii) has shareholders’ or partners’ eq-
uity in excess of $1,000,000, and
‘‘(iii) is not described in section 411
of the Employee Retirement Income Secu-
rity Act of 1974.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to transactions occur-
ring after December 31, 2001.
SEC. 402. LOANS FROM RETIREMENT PLANS FOR HEALTH
INSURANCE AND JOB TRAINING EXPENSES.
(a) QUALIFICATION REQUIREMENT
FOR PENSION
PLANS.—Paragraph (13) of section 401(a) of the Internal
Revenue Code of 1986 (relating to assignment and alien-
ation) is amended by adding at the end the following new
subparagraph:
‘‘(E) LOANS
FROM
RETIREMENT
PLANS
FOR HEALTH INSURANCE AND JOB TRAINING
EXPENSES.—Notwithstanding 
subparagraph
(A), a trust shall not constitute a qualified
trust under this section unless the plan of
which such trust is a part provides that a par-
ticipant or beneficiary who is involuntarily sepa-
rated from employment may, on the date of
such separation, obtain a loan from the plan
the proceeds of which are to be used within 6
months after the date of such loan—
‘‘(i) for payments for insurance which
constitutes medical care for the taxpayer
and the taxpayer’s spouse and dependents,
or
‘‘(ii) for job training expenses.’’.
(b) PROHIBITED TRANSACTION EXEMPTION.—Sec-
tion 4975(d) of such Code (relating to exemptions from
tax on prohibited transactions) is amended by striking
‘‘or’’ at the end of paragraph (14), by striking the period
at the end of paragraph (15) and inserting ‘‘; or’’, and
by inserting after paragraph (15) the following new para-
graph:
‘‘(16) any loan—
‘‘(A) from an individual retirement plan
for the payment of health insurance premiums
or job training expenses that is a qualified loan
(as defined in section 408 of the Employee Re-
tirement Income Security Act of 1974), or
‘‘(B) made by the plan to a disqualified
person who is a participant or beneficiary of the
plan if such loan—
‘‘(i) is for the payment of health in-
surance premiums or job training ex-
penses, and
‘‘(ii) meets the requirements of sec-
tion 401(a)(13)(E).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to loans made after the effective
date specified in section 501.
SEC. 403. MISSING PARTICIPANTS.
(a) IN GENERAL.—Section 401(a)(34) of the Internal
Revenue Code of 1986 (relating to benefits of missing par-
ticipants on plan termination) is amended by striking
‘‘title IV’’ and inserting ‘‘section 4050’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to distributions made after 1 year
after the date of the enactment of this Act.
SEC. 404. INCOME AVERAGING OF CORRECTED CIVIL SERV-
ICE ANNUITY BENEFIT PAYMENTS.
(a) IN GENERAL.—Part I of subchapter Q of chapter
1 of the Internal Revenue Code of 1986 (relating to in-
come averaging) is amended by inserting after section
1301 the following new section:
‘‘SEC. 1302. AVERAGING OF CORRECTED CIVIL SERVICE AN-
NUITY BENEFIT PAYMENTS.
‘‘(a) IN GENERAL.—Unless the taxpayer elects not
to have this section apply for a taxable year, any corrected
civil service annuity benefit payment includable in gross
income for such taxable year (without regard to this sec-
tion) shall be so included ratably over the 5-taxable year
period beginning with such taxable year.
‘‘(b) CORRECTED CIVIL SERVICE ANNUITY BENEFIT
PAYMENT.—For purposes of subsection (a), the term ‘cor-
rected civil service annuity benefit payment’ means with
respect to an individual the sum of—
‘‘(1) the lump sum payment awarded by reason
of a court order, or decision of the Merit Systems
Protection Board, under which the individual is enti-
tled to receive an amount equal to all or any part
of an annuity not paid to the individual as a result
of an erroneous application or interpretation of sub-
chapter III of chapter 83 or chapter 84 of title 5,
United States Code, or any other provision of law
(or any rule or regulation relating thereto), plus
‘‘(2) interest on the amount described in para-
graph (1) awarded under section 7704 of title 5,
United States Code.
‘‘(c) ANNUITY.—For purposes of subsection (b), the
term ‘annuity’ has the meaning given to such term by sec-
tion 7704(c) of title 5, United States Code.
‘‘(d) FINALITY OF ELECTION.—An election under
subsection (a) with respect to a corrected civil service an-
nuity benefit payment for a taxable year may not be
changed after the due date of the return for such taxable
year.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for part I of subchapter Q of chapter 1 of such Code is
amended by inserting after the item relating to section
1301 the following new item:
‘‘Sec. 1302. Averaging of corrected civil service annuity benefit
payments.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to payments received after Decem-
ber 31, 2001.
SEC. 405. PROHIBITED TRANSACTION EXEMPTION FOR THE
PROVISION OF INVESTMENT ADVICE.
(a) PROHIBITED TRANSACTION EXEMPTION.—Sub-
section (d) of section 4975 of the Internal Revenue Code
of 1986 (relating to exemptions from tax on prohibited
transactions) is amended—
(1) in paragraph (14), by striking ‘‘or’’ at the
end,
(2) in paragraph (15), by striking the period at
the end and inserting ‘‘; or’’, and
(3) 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 plan provides for individual ac-
counts and permits a participant or beneficiary
to exercise control over assets in his or her ac-
count,
‘‘(B) the advice is qualified investment ad-
vice provided to a participant or beneficiary of
the plan by a fiduciary adviser in connection
with any sale, acquisition, or holding of a secu-
rity or other property for purposes of invest-
ment of plan assets, and
‘‘(C) 
the 
requirements 
of 
subsection
(f)(7)(B) are met in connection with each in-
stance of the provision of the advice.’’.
(b) TRANSACTIONS ALLOWED
AND RELATED RE-
QUIREMENTS.—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) INVESTMENT ADVICE PROVIDED BY FIDU-
CIARY ADVISERS.—
‘‘(A) ALLOWABLE
TRANSACTIONS.—The
transactions referred to in subsection (d)(16),
in connection with the provision of investment
advice by a fiduciary adviser, are the following:
‘‘(i) the provision of the advice to the
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.
‘‘(B) REQUIREMENTS
FOR
EXEMPTION
FROM
PROHIBITED
TRANSACTIONS
WITH
RE-
SPECT
TO
PROVISION
OF
INVESTMENT
AD-
VICE.—The requirements of this subparagraph
(referred to in subsection (d)(16)(C)) are met
in connection with the provision of qualified in-
vestment advice provided to a participant or
beneficiary of an employee benefit plan by a fi-
duciary adviser with respect to the plan in con-
nection with any sale, acquisition, or holding of
a security or other property for purposes of in-
vestment of amounts held by the plan, if the re-
quirements of the following clauses are met:
‘‘(i) WRITTEN
DISCLOSURES.—At a
time contemporaneous with the provision
of the advice in connection with the sale,
acquisition, or holding of the security or
other property, the fiduciary adviser shall
provide to the recipient of the advice a
clear and conspicuous notification, written
in a manner to be reasonably understood
by the average plan participant pursuant
to regulations which shall be prescribed by
the Secretary (including mathematical ex-
amples), of the following:
‘‘(I) INTERESTS
HELD
BY
THE
FIDUCIARY ADVISER.—Any interest of
the fiduciary adviser in, or any affili-
ation or contractual relationship of
the fiduciary adviser (or affiliates
thereof) with any third party having
an interest in, the security or other
property.
‘‘(II) RELATED
FEES
OR
COM-
PENSATION
IN
CONNECTION
WITH
THE PROVISION OF THE ADVICE.—All
fees or other compensation relating to
the advice (including fees or other
compensation itemized with respect to
each security or other property with
respect to which the advice is pro-
vided) that the fiduciary adviser (or
any affiliate thereof) is to receive (in-
cluding compensation provided by any
third party) in connection with the
provision of the advice or in connec-
tion with the sale, acquisition, or hold-
ing of the security or other property.
‘‘(III) ONGOING FEES OR COM-
PENSATION
IN
CONNECTION
WITH
THE
SECURITY
OR
PROPERTY
IN-
VOLVED.—All fees or other compensa-
tion that the fiduciary adviser (or any
affiliate thereof) is to receive, on an
ongoing basis, in connection with any
security or other property with respect
to which the fiduciary adviser gives
the advice.
‘‘(IV) APPLICABLE LIMITATIONS
ON
SCOPE
OF
ADVICE.—Any limita-
tion placed (in accordance with the re-
quirements of this subsection) on the
scope of the advice to be provided by
the fiduciary adviser with respect to
the sale, acquisition, or holding of the
security or other property.
‘‘(V) TYPES OF SERVICES GEN-
ERALLY
OFFERED.—The types of
services offered by the fiduciary ad-
viser in connection with the provision
of qualified investment advice by the
fiduciary adviser.
‘‘(VI) FIDUCIARY
STATUS
OF
THE FIDUCIARY ADVISER.—That the
fiduciary advisor is a fiduciary of the
plan.
‘‘(ii) DISCLOSURE BY FIDUCIARY AD-
VISER IN ACCORDANCE WITH APPLICABLE
SECURITIES LAWS.—The fiduciary adviser
shall provide appropriate disclosure, in
connection with the sale, acquisition, or
holding of the security or other property,
in accordance with all applicable securities
laws.
‘‘(iii) TRANSACTION OCCURRING SOLE-
LY AT DIRECTION OF RECIPIENT OF AD-
VICE.—The sale, acquisition, or holding of
the security or other property shall occur
solely at the direction of the recipient of
the advice.
‘‘(iv) REASONABLE COMPENSATION.—
The compensation received by the fiduciary
adviser and affiliates thereof in connection
with the sale, acquisition, or holding of the
security or other property shall be reason-
able.
‘‘(v) ARM’S LENGTH TRANSACTION.—
The terms of the sale, acquisition, or hold-
ing of the security or other property shall
be at least as favorable to the plan as an
arm’s length transaction would be.
‘‘(C) CONTINUED AVAILABILITY OF INFOR-
MATION FOR AT LEAST 1 YEAR.—The require-
ments of subparagraph (B)(i) shall be deemed
not to have been met in connection with the ini-
tial or any subsequent provision of advice de-
scribed in subparagraph (B) if, at any time
during the 1-year period following the provision
of the advice, the fiduciary adviser fails to
maintain the information described in sub-
clauses (I) through (IV) of subparagraph (B)(i)
in currently accurate form or to make the infor-
mation available, upon request and without
charge, to the recipient of the advice.
‘‘(D) EVIDENCE
OF
COMPLIANCE
MAIN-
TAINED FOR AT LEAST 6 YEARS.—A fiduciary
adviser referred to in subparagraph (B) who
has provided advice referred to in such subpara-
graph 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 sub-
section (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 circumstances beyond the control of the
fiduciary adviser.
‘‘(E) MODEL
DISCLOSURE
FORMS.—The
Secretary shall prescribe regulations setting
forth model disclosure forms to assist fiduciary
advisers in complying with the disclosure re-
quirements of under this paragraph.
‘‘(F) ANNUAL
REVIEWS
BY
THE
SEC-
RETARY.—The Secretary shall conduct annual
reviews of randomly selected fiduciary advisers
providing qualified investment advice to partici-
pants and beneficiaries. In the case of each re-
view, the Secretary shall review the following:
‘‘(i) COMPLIANCE
BY
ADVICE
COM-
PUTER MODELS WITH GENERALLY ACCEPT-
ED
INVESTMENT
MANAGEMENT
PRIN-
CIPLES.—The extent to which advice com-
puter models employed by the fiduciary ad-
viser comply with generally accepted in-
vestment management principles.
‘‘(ii) COMPLIANCE WITH DISCLOSURE
REQUIREMENTS.—The extent to which dis-
closures provided by the fiduciary adviser
have complied with the requirements of
this subsection.
‘‘(iii) EXTENT OF VIOLATIONS.—The
extent to which any violations of fiduciary
duties have occurred in connection with the
provision of the advice.
‘‘(iv) EXTENT
OF
REPORTED
COM-
PLAINTS.—The extent to which complaints
to relevant agencies have been made in
connection with the provision of the advice.
Any proprietary information obtained by the
Secretary shall be treated as confidential.
‘‘(G) DUTY
OF
CONFLICTED
FIDUCIARY
ADVISER TO PROVIDE FOR ALTERNATIVE INDE-
PENDENT ADVICE.—
‘‘(i) IN GENERAL.—In connection with
any qualified investment advice provided
by a fiduciary adviser to a participant or
beneficiary regarding any security or other
property, if the fiduciary adviser—
‘‘(I) has an interest in the secu-
rity or other property, or
‘‘(II) has an affiliation or con-
tractual relationship with any third
party that has an interest in the secu-
rity or other property,
the requirements of subparagraph (B)
shall be treated as not met in connection
with the advice unless the fiduciary adviser
has arranged, as an alternative to the ad-
vice that would otherwise be provided by
the fiduciary advisor, for qualified invest-
ment advice with respect to the security or
other property provided by at least one al-
ternative investment adviser meeting the
requirements of clause (ii).
‘‘(ii) INDEPENDENCE AND QUALIFICA-
TIONS OF ALTERNATIVE INVESTMENT AD-
VISER.—Any alternative investment adviser
whose qualified investment advice is ar-
ranged for by a fiduciary adviser pursuant
to clause (i)—
‘‘(I) shall have no material inter-
est in, and no material affiliation or
contractual relationship with any third
party having a material interest in,
the security or other property with re-
spect to which the investment adviser
is providing the advice, and
‘‘(II) shall meet the requirements
of a fiduciary adviser under subpara-
graph (H)(i), except that an alter-
native investment adviser may not be
a fiduciary of the plan other than in
connection with the provision of the
advice.
‘‘(iii) SCOPE
AND
FEES
OF
ALTER-
NATIVE INVESTMENT ADVICE.—Any quali-
fied investment advice provided pursuant
to this subparagraph by an alternative in-
vestment adviser shall be of the same type
and scope, and provided under the same
terms and conditions (including no addi-
tional charge to the participant or bene-
ficiary), as apply with respect to the quali-
fied investment advice to be provided by
the fiduciary adviser.
‘‘(H) FIDUCIARY ADVISER DEFINED.—For
purposes of this paragraph and subsection
(d)(16)—
‘‘(i) IN
GENERAL.—The term ‘fidu-
ciary adviser’ means, with respect to a
plan, a person who—