485 
provisions of this subsection and of subsection 
(b)(14) have been met. A transaction prohibited 
under section 406 shall not be considered to have oc-
curred solely because the records are lost or de-
stroyed prior to the end of the 6-year period due to 
circumstances beyond the control of the fiduciary 
adviser. 
‘‘(10) EXEMPTION
FOR
PLAN
SPONSOR
AND 
CERTAIN 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 eligible invest-
ment advice arrangement between the plan 
sponsor or other fiduciary and the fidu-
ciary adviser for the provision by the fidu-
ciary adviser of investment advice referred 
to in such section, 
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ccoleman on PROD1PC71 with BILLS
486 
‘‘(ii) the terms of the eligible invest-
ment advice arrangement require compli-
ance by the fiduciary adviser with the re-
quirements of this subsection, and 
‘‘(iii) the terms of the eligible invest-
ment advice 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 eligible invest-
ment advice arrangement for the provision of 
investment 
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. 
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ccoleman on PROD1PC71 with BILLS
487 
‘‘(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). 
‘‘(11) 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 re-
ferred to in section 3(21)(A)(ii) by the person 
to the participant or beneficiary of the plan 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) or a 
savings association (as defined in section 
3(b)(1) of the Federal Deposit Insurance 
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ccoleman on PROD1PC71 with BILLS
488 
Act (12 U.S.C. 1813(b)(1)), but only if the 
advice is provided through a trust depart-
ment of the bank or similar financial insti-
tution or savings association which is sub-
ject to periodic examination and review by 
Federal or State banking authorities, 
‘‘(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 
clauses (i) through (v) who satisfies the re-
quirements of applicable insurance, bank-
ing, and securities laws relating to the pro-
vision of the advice. 
For purposes of this part, a person who devel-
ops the computer model described in paragraph 
(3)(B) or markets the investment advice pro-
gram or computer model shall be treated as a 
person who is a fiduciary of the plan by reason 
of the provision of investment advice referred to 
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ccoleman on PROD1PC71 with BILLS
489 
in section 3(21)(A)(ii) to the participant or ben-
eficiary and shall be treated as a fiduciary ad-
viser for purposes of this subsection and sub-
section (b)(14), except that the Secretary may 
prescribe rules under which only 1 fiduciary ad-
viser may elect to be treated as a fiduciary with 
respect to the plan. 
‘‘(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).’’. 
(3) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply with respect to advice 
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ccoleman on PROD1PC71 with BILLS
490 
referred to in section 3(21)(A)(ii) of the Employee 
Retirement Income Security Act of 1974 provided 
after December 31, 2006. 
(b) AMENDMENTS TO 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 exemption 
from tax on prohibited transactions) is amended— 
(A) in paragraph (15), by striking ‘‘or’’ at 
the end; 
(B) in paragraph (16), by striking the pe-
riod at the end and inserting ‘‘;or’’; and 
(C) by adding at the end the following new 
paragraph: 
‘‘(17) Any transaction in connection with the 
provision of investment advice described in sub-
section (e)(3)(B) to a participant or beneficiary in a 
plan and that permits such participant or bene-
ficiary to direct the investment of plan assets in an 
individual account, if— 
‘‘(A) the transaction is— 
‘‘(i) the provision of the investment 
advice to the participant or beneficiary of 
the plan with respect to a security or other 
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ccoleman on PROD1PC71 with BILLS
491 
property available as an investment under 
the plan, 
‘‘(ii) the acquisition, holding, or sale 
of a security or other property available as 
an investment under the plan pursuant to 
the investment advice, or 
‘‘(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 an acquisition, holding, 
or sale of a security or other property 
available as an investment under the plan 
pursuant to the investment advice; and 
‘‘(B) the requirements of subsection (f)(8) 
are met.’’. 
(2) REQUIREMENTS.—Subsection (f) of such 
section 4975 (relating to other definitions and spe-
cial rules) is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(8) PROVISION
OF
INVESTMENT
ADVICE
TO 
PARTICIPANT AND BENEFICIARIES.— 
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ccoleman on PROD1PC71 with BILLS
492 
‘‘(A) IN GENERAL.—The prohibitions pro-
vided in subsection (c) shall not apply to trans-
actions described in subsection (b)(14) if the in-
vestment advice provided by a fiduciary adviser 
is provided under an eligible investment advice 
arrangement. 
‘‘(B) ELIGIBLE INVESTMENT ADVICE AR-
RANGEMENT.—For purposes of this paragraph, 
the term ‘eligible investment advice arrange-
ment’ means an arrangement— 
‘‘(i) which either— 
‘‘(I) provides that any fees (in-
cluding any commission or other com-
pensation) received by the fiduciary 
adviser for investment advice or with 
respect to the sale, holding, or acqui-
sition of any security or other prop-
erty for purposes of investment of 
plan assets do not vary depending on 
the basis of any investment option se-
lected, or 
‘‘(II) uses a computer model 
under an investment advice program 
meeting the requirements of subpara-
graph (C) in connection with the pro-
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ccoleman on PROD1PC71 with BILLS
493 
vision of investment advice by a fidu-
ciary adviser to a participant or bene-
ficiary, and 
‘‘(ii) with respect to which the re-
quirements of subparagraphs (D), (E), 
(F), (G), (H), and (I) are met. 
‘‘(C) 
INVESTMENT
ADVICE
PROGRAM 
USING COMPUTER MODEL.— 
‘‘(i) IN GENERAL.—An investment ad-
vice program meets the requirements of 
this subparagraph if the requirements of 
clauses (ii), (iii), and (iv) are met. 
‘‘(ii) COMPUTER
MODEL.—The re-
quirements of this clause are met if the in-
vestment advice provided under the invest-
ment advice program is provided pursuant 
to a computer model that— 
‘‘(I) applies generally accepted 
investment theories that take into ac-
count the historic returns of different 
asset classes over defined periods of 
time, 
‘‘(II) utilizes relevant information 
about the participant, which may in-
clude age, life expectancy, retirement 
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ccoleman on PROD1PC71 with BILLS
494 
age, risk tolerance, other assets or 
sources of income, and preferences as 
to certain types of investments, 
‘‘(III) utilizes prescribed objective 
criteria to provide asset allocation 
portfolios comprised of investment op-
tions available under the plan, 
‘‘(IV) operates in a manner that 
is not biased in favor of investments 
offered by the fiduciary adviser or a 
person with a material affiliation or 
contractual relationship with the fidu-
ciary adviser, and 
‘‘(V) takes into account all in-
vestment options under the plan in 
specifying how a participant’s account 
balance should be invested and is not 
inappropriately weighted with respect 
to any investment option. 
‘‘(iii) CERTIFICATION.— 
‘‘(I) IN GENERAL.—The require-
ments of this clause are met with re-
spect to any investment advice pro-
gram if an eligible investment expert 
certifies, prior to the utilization of the 
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ccoleman on PROD1PC71 with BILLS
495 
computer model and in accordance 
with rules prescribed by the Secretary 
of Labor, that the computer model 
meets the requirements of clause (ii). 
‘‘(II) RENEWAL
OF
CERTIFI-
CATIONS.—If, as determined under 
regulations prescribed by the Sec-
retary of Labor, there are material 
modifications to a computer model, 
the requirements of this clause are 
met only if a certification described in 
subclause (I) is obtained with respect 
to the computer model as so modified. 
‘‘(III) 
ELIGIBLE
INVESTMENT 
EXPERT.—The term ‘eligible invest-
ment expert’ means any person which 
meets such requirements as the Sec-
retary of Labor may provide and 
which does not bear any material af-
filiation or contractual relationship 
with any investment adviser or a re-
lated person thereof (or any employee, 
agent, or registered representative of 
the investment adviser or related per-
son). 
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ccoleman on PROD1PC71 with BILLS
496 
‘‘(iv) EXCLUSIVITY OF RECOMMENDA-
TION.—The requirements of this clause are 
met with respect to any investment advice 
program if— 
‘‘(I) the only investment advice 
provided under the program is the ad-
vice generated by the computer model 
described in clause (ii), and 
‘‘(II) any transaction described in 
subsection (b)(14)(B)(ii) occurs solely 
at the direction of the participant or 
beneficiary. 
Nothing in the preceding sentence shall 
preclude the participant or beneficiary 
from requesting investment advice other 
than that described in clause (i), but only 
if such request has not been solicited by 
any person connected with carrying out the 
arrangement. 
‘‘(D) EXPRESS AUTHORIZATION BY SEPA-
RATE
FIDUCIARY.—The requirements of this 
subparagraph are met with respect to an ar-
rangement if the arrangement is expressly au-
thorized by a plan fiduciary other than the per-
son offering the investment advice program, any 
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ccoleman on PROD1PC71 with BILLS
497 
person providing investment options under the 
plan, or any affiliate of either. 
‘‘(E) AUDITS.— 
‘‘(i) IN GENERAL.—The requirements 
of this subparagraph are met if an inde-
pendent auditor, who has appropriate tech-
nical training or experience and proficiency 
and so represents in writing— 
‘‘(I) conducts an annual audit of 
the arrangement for compliance with 
the requirements of this paragraph, 
and 
‘‘(II) following completion of the 
annual audit, issues a written report 
to the fiduciary who authorized use of 
the arrangement which presents its 
specific findings regarding compliance 
of the arrangement with the require-
ments of this paragraph. 
‘‘(ii) SPECIAL RULE FOR INDIVIDUAL 
RETIREMENT AND SIMILAR PLANS.—In the 
case of a plan described in subparagraphs 
(B) through (F) (and so much of subpara-
graph (G) as relates to such subpara-
graphs) of subsection (e)(1), in lieu of the 
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ccoleman on PROD1PC71 with BILLS
498 
requirements of clause (i), audits of the ar-
rangement shall be conducted at such 
times and in such manner as the Secretary 
of Labor may prescribe. 
‘‘(iii) INDEPENDENT
AUDITOR.—For 
purposes of this subparagraph, an auditor 
is considered independent if it is not re-
lated to the person offering the arrange-
ment to the plan and is not related to any 
person providing investment options under 
the plan. 
‘‘(F) DISCLOSURE.—The requirements of 
this subparagraph are met if— 
‘‘(i) the fiduciary adviser provides to a 
participant or a beneficiary before the ini-
tial provision of the investment advice with 
regard to any security or other property of-
fered as an investment option, a written 
notification (which may consist of notifica-
tion by means of electronic communica-
tion)— 
‘‘(I) of the role of any party that 
has a material affiliation or contrac-
tual relationship with the financial ad-
viser in the development of the invest-
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ccoleman on PROD1PC71 with BILLS
499 
ment advice program and in the selec-
tion of investment options available 
under the plan, 
‘‘(II) of the past performance 
and historical rates of return of the 
investment options available under the 
plan, 
‘‘(III) 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, 
‘‘(IV) of any material affiliation 
or contractual relationship of the fidu-
ciary adviser or affiliates thereof in 
the security or other property, 
‘‘(V) the manner, and under 
what circumstances, any participant 
or beneficiary information provided 
under the arrangement will be used or 
disclosed, 
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ccoleman on PROD1PC71 with BILLS
500 
‘‘(VI) of the types of services 
provided by the fiduciary adviser in 
connection with the provision of in-
vestment advice by the fiduciary ad-
viser, 
‘‘(VII) that the adviser is acting 
as a fiduciary of the plan in connec-
tion with the provision of the advice, 
and 
‘‘(VIII) that a recipient of the 
advice 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, and 
‘‘(ii) at all times during the provision 
of advisory services to the participant or 
beneficiary, the fiduciary adviser— 
‘‘(I) maintains the information 
described in clause (i) in accurate 
form and in the manner described in 
subparagraph (H), 
‘‘(II) provides, without charge, 
accurate information to the recipient 
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ccoleman on PROD1PC71 with BILLS
501 
of the advice no less frequently than 
annually, 
‘‘(III) provides, without charge, 
accurate information to the recipient 
of the advice upon request of the re-
cipient, and 
‘‘(IV) provides, without charge, 
accurate information to the recipient 
of the advice concerning any material 
change to the information required to 
be provided to the recipient of the ad-
vice at a time reasonably contempora-
neous to the change in information. 
‘‘(G) OTHER
CONDITIONS.—The require-
ments of this subparagraph are met if— 
‘‘(i) 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, 
‘‘(ii) the sale, acquisition, or holding 
occurs solely at the direction of the recipi-
ent of the advice, 
‘‘(iii) the compensation received by the 
fiduciary adviser and affiliates thereof in 
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502 
connection with the sale, acquisition, or 
holding of the security or other property is 
reasonable, and 
‘‘(iv) the terms of the sale, acquisi-
tion, or holding of the security or other 
property are at least as favorable to the 
plan as an arm’s length transaction would 
be. 
‘‘(H) STANDARDS FOR PRESENTATION OF 
INFORMATION.— 
‘‘(i) IN GENERAL.—The requirements 
of this subparagraph are met if the notifi-
cation required to be provided to partici-
pants and beneficiaries under subpara-
graph (F)(i) is written in a clear and con-
spicuous manner and in a manner cal-
culated to be understood by the average 
plan participant and is sufficiently accu-
rate and comprehensive to reasonably ap-
prise such participants and beneficiaries of 
the information required to be provided in 
the notification. 
‘‘(ii) MODEL FORM FOR DISCLOSURE 
OF
FEES
AND
OTHER
COMPENSATION.— 
The Secretary of Labor shall issue a model 
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