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 ‘‘Retirement Security
Advice Act of 2001’’.
SEC. 2. 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
of the information required to be provided in the no-
tification.
‘‘(3) EXEMPTION CONDITIONED ON CONTINUED
AVAILABILITY OF REQUIRED INFORMATION ON RE-
QUEST
FOR
YEAR.—The requirements of para-
graph (1)(A) shall be deemed not to have been met
in connection with the initial or any subsequent pro-
vision of advice described in paragraph (1) to the
plan, participant, or beneficiary if, at any time dur-
ing the provision of advisory services to the plan,
participant, or beneficiary, the fiduciary adviser fails
to maintain the information described in clauses (i)
through (iv) of subparagraph (A) in currently accu-
rate form and in the manner described in paragraph
(2) or fails—
‘‘(A) to provide, without charge, such cur-
rently accurate information to the recipient of
the advice no less than annually,
‘‘(B) to make such currently accurate in-
formation available, upon request and without
charge, to the recipient of the advice, or
‘‘(C) in the event of a material change to
the information described in clauses (i) through
(iv) of paragraph (1)(A), to provide, without
charge, such currently accurate information to
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,