[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4293 Reported in House (RH)]
<DOC>
Union Calendar No. 391
114th CONGRESS
2d Session
H. R. 4293
[Report No. 114-511]
To amend the Employee Retirement Income Security Act of 1974 to ensure
that retirement investors receive advice in their best interests, and
for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
December 18, 2015
Mr. Roe of Tennessee (for himself, Mr. Neal, Mr. Roskam, Mr. Larson of
Connecticut, Mr. Carter of Georgia, and Mr. David Scott of Georgia)
introduced the following bill; which was referred to the Committee on
Education and the Workforce
April 20, 2016
Additional sponsors: Ms. Michelle Lujan Grisham of New Mexico, Mr.
Reed, Mr. Young of Indiana, Mr. Byrne, Mr. Boustany, Mr. Wilson of
South Carolina, Mr. Clay, Mr. Holding, Mr. Renacci, Ms. Jenkins of
Kansas, Mrs. Walorski, Mr. MacArthur, Mr. Paulsen, Mr. Ashford, Mr.
Zinke, Mr. Duncan of Tennessee, Mr. Thompson of Pennsylvania, Mr.
Gibbs, Mr. Guthrie, Mr. Bishop of Michigan, Mr. Tiberi, Mr. Meehan, Mr.
Nunes, Mr. Reichert, Mr. Allen, Mr. Barletta, Mr. Marchant, Mr. Olson,
Mr. Cramer, Mr. Latta, Mr. Amodei, Mr. Gohmert, and Mr. Sessions
April 20, 2016
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed
[Strike out all after the enacting clause and insert the part printed
in italic]
[For text of introduced bill, see copy of bill as introduced on
December 18, 2015]
_______________________________________________________________________
A BILL
To amend the Employee Retirement Income Security Act of 1974 to ensure
that retirement investors receive advice in their best interests, and
for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Affordable Retirement Advice
Protection Act''.
SEC. 2. PURPOSE.
The purpose of this Act is to provide that advisors who--
(1) provide advice that is impermissible under the
prohibited transaction provisions under section 406 of the
Employee Retirement Income Security Act of 1974, or
(2) breach the best interest standard for the provision of
investment advice,
are subject to liability under the Employee Retirement Income Security
Act of 1974.
SEC. 3. RULES RELATING TO THE PROVISION OF INVESTMENT ADVICE.
(a) Amendments to the Employee Retirement Income Security Act of
1974.--
(1) Definition of investment advice.--Section 3(21) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1002(21)) is amended by adding at the end the following:
``(C)(i) For purposes of clause (ii) of subparagraph (A), the term
`investment advice' means a recommendation that--
``(I) relates to--
``(aa) the advisability of acquiring, holding,
disposing, or exchanging any moneys or other property
of a plan by the plan, plan participants, or plan
beneficiaries, including any recommendation whether to
take a distribution of benefits from such plan or any
recommendation relating to the investment of any moneys
or other property of such plan to be distributed from
such plan;
``(bb) the management of moneys or other property
of such plan, including recommendations relating to the
management of moneys or other property to be
distributed from such plan; or
``(cc) the advisability of retaining or ceasing to
retain a person who would receive a fee or other
compensation for providing any of the types of advice
described in this subclause; and
``(II) is rendered pursuant to--
``(aa) a written acknowledgment of the obligation
of the advisor to comply with section 404 with respect
to the provision of such recommendation; or
``(bb) a mutual agreement, arrangement, or
understanding, which may include limitations on scope,
timing, and responsibility to provide ongoing
monitoring or advice services, between the person
making such recommendation and the plan that such
recommendation is individualized to the plan and such
plan intends to materially rely on such recommendation
in making investment or management decisions with
respect to any moneys or other property of such plan.
``(ii) For purposes of clause (i)(II)(bb), any disclaimer of a
mutual agreement, arrangement, or understanding shall only state the
following: `This information is not individualized to you, and you are
not intended to materially rely on this information in making
investment or management decisions.'. Such disclaimer shall not be
effective unless such disclaimer is in writing and is communicated in a
clear and prominent manner and an objective person would reasonably
conclude that, based on all the facts and circumstances, there was not
a mutual agreement, arrangement, or understanding.
``(iii) For purposes of clause (i)(II)(bb), information shall not
be considered to be a recommendation made pursuant to a mutual
agreement, arrangement, or understanding, and such information shall
contain the disclaimer required by clause (ii), if--
``(I) it is provided in conjunction with full and fair
disclosure in writing to a plan, plan participant, or
beneficiary that the person providing the information is doing
so in its marketing or sales capacity, including any
information regarding the terms and conditions of the
engagement of the person providing the information, and that
the person is not intending to provide investment advice within
the meaning of this subparagraph or to otherwise act within and
under the obligations of the best interest standard as
described in this subparagraph;
``(II) the person providing the information is a
counterparty or service provider to the plan in connection with
any transaction based on the information (including a service
arrangement, sale, purchase, loan, bilateral contract, swap (as
defined in section 1a of the Commodity Exchange Act (7 U.S.C.
1a)), or security-based swap (as defined in section 3(a) of the
Securities Exchange Act (15 U.S.C. 78c(a)))), but only if--
``(aa) the plan is represented, in connection with
such transaction, by a plan fiduciary that is
independent of the person providing the information,
and, except in the case of a swap or security-based
swap, independent of the plan sponsor; and
``(bb) prior to such transaction, the independent
plan fiduciary represents in writing to the person
providing the information that it is aware that the
person has a financial interest in the transaction and
that it has determined that the person is not intending
to provide investment advice within the meaning of this
subparagraph or to otherwise act as a fiduciary to the
plan subject to section 404;
``(III) the person providing the information is an employee
of any sponsoring employer or employee organization who
provides the information to the plan for no fee or other
compensation other than the employee's normal compensation;
``(IV) the person providing the information discloses in
writing to the plan fiduciary that the person is not
undertaking to provide investment advice as a fiduciary to the
plan subject to section 404 and the information consists solely
of--
``(aa) making available to the plan, without regard
to the individualized needs of the plan, securities or
other property through a platform or similar mechanism
from which a plan fiduciary may select or monitor
investment alternatives, including qualified default
investment alternatives, into which plan participants
or beneficiaries may direct the investment of assets
held in, or contributed to, their individual accounts;
or
``(bb) in connection with a platform or similar
mechanism described in item (aa)--
``(AA) identifying investment alternatives
that meet objective criteria specified by the
plan, such as criteria concerning expense
ratios, fund sizes, types of asset, or credit
quality; or
``(BB) providing objective financial data
and comparisons with independent benchmarks to
the plan;
``(V) the information consists solely of valuation
information; or
``(VI) the information consists solely of--
``(aa) information described in Department of Labor
Interpretive Bulletin 96-1 (29 C.F.R. 2509.96-1, as in
effect on January 1, 2015), regardless of whether such
education is provided to a plan or plan fiduciary or a
participant or beneficiary;
``(bb) information provided to participants or
beneficiaries regarding the factors to consider in
deciding whether to elect to receive a distribution
from a plan or an individual retirement plan (as
defined in section 7701(a)(37) of the Internal Revenue
Code of 1986) and whether to roll over such
distribution to a plan or an individual retirement plan
(as defined in section 7701(a)(37) of the Internal
Revenue Code of 1986), so long as any examples of
different distribution alternatives are accompanied by
all material facts and assumptions on which the
examples are based; or
``(cc) any additional information treated as
education by the Secretary.''.
(2) Exemption relating to investment advice.--Section
408(b) of the Employee Retirement Income Security Act of 1974
is amended by adding at the end the following:
``(21)(A) Any transaction, including a contract for
service, between a person providing investment advice described
in section 3(21)(A)(ii) and the advice recipient in connection
with such investment advice, and any transaction consisting of
the provision of such investment advice, if the following
conditions are satisfied:
``(i) No more than reasonable compensation is paid
(as determined under section 408(b)(2)) for such
investment advice.
``(ii) If the investment advice is based on a
limited range of investment options (which may consist,
in whole or in part, of proprietary products), such
limitations shall be clearly disclosed to the advice
recipient prior to any transaction based on the
investment advice in the form of a notice that only
states the following: `This recommendation is based on
a limited range of investment options, and the same or
similar investments may be available at a different
cost (greater or lesser) from other sources.'.
``(iii) If the investment advice may result in
variable compensation to the person providing the
investment advice (or any affiliate of such person),
the receipt of such compensation shall be clearly
disclosed to the advice recipient prior to any
transaction based on the investment advice. For
purposes of this subparagraph, clear disclosure of
variable compensation shall include, in a manner
calculated to be understood by the average individual,
each of the following:
``(I) A notice that states only the
following: `This recommendation may result in
varying amounts of fees or other compensation
to the person providing the recommendation (or
its affiliate), and the same or similar
investments may be available at a different
cost (greater or lesser) from other sources.'.
Any regulations or administrative guidance
implementing this subclause may not require
this notice to be updated more than annually.
``(II) A description of any fee or other
compensation that is directly or indirectly
payable to the person (or its affiliate) by the
advice recipient with respect to such
transaction (expressed as an amount, formula,
percentage of assets, per capita charge, or
estimate or range of such compensation).
``(III) A description of the types and
ranges of any compensation that may be directly
or indirectly payable to the person (or its
affiliate) by any third party in connection
with such transaction (expressed as an amount,
formula, percentage of assets, per capita
charge, or estimate or range of such
compensation).
``(IV) Upon request of the advice
recipient, a disclosure of the specific amounts
of compensation described in clause (iii) that
the person will receive in connection with the
particular transaction (expressed as an amount,
formula, percentage of assets, per capita
charge, or estimate of such compensation).
``(B) No recommendation will fail to satisfy the conditions
described in clauses (i) through (iii) of subparagraph (A)
solely because the person, acting in good faith and with
reasonable diligence, makes an error or omission in disclosing
the information specified in such clauses, provided that the
person discloses the correct information to the advice
recipient as soon as practicable, but not later than 30 days
from the date on which the person knows of such error or
omission.
``(C) Any notice provided pursuant to a requirement under
clause (ii) or clause (iii)(I) of subparagraph (A) shall have
no effect on any other notice otherwise required without regard
to this title, and shall be provided in addition to, and not in
lieu of, any other such notice.
``(D) For purposes of this paragraph, the term `affiliate'
has the meaning given in subsection (g)(11)(B).''.
(b) Effective Date.--
(1) Modification of certain rules, and rules and
administrative positions promulgated before enactment but not
effective on january 1, 2015, prohibited.--The Department of
Labor is prohibited from amending any rules or administrative
positions promulgated under, or applicable for purposes of,
section 3(21) of the Employee Retirement Income Security Act of
1974 (including Department of Labor Interpretive Bulletin 96-1
(29 C.F.R. 2509.96-1) and Department of Labor Advisory Opinion
2005-23A), and no such rule or administrative position
promulgated by the Department of Labor prior to the date of the
enactment of this Act but not effective on January 1, 2015, may
become effective unless a bill or joint resolution referred to
in paragraph (3) is enacted as described in such paragraph not
later than 60 days after the date of the enactment of this Act.
(2) General effective date of amendments.--Except as
provided in paragraph (3), the amendments made by subsection
(a) of this section shall take effect on the 61st day after the
date of the enactment of this Act and shall apply with respect
to information provided or recommendations made on or after 2
years after the date of the enactment of this Act.
(3) Exception.--If a bill or joint resolution is enacted
prior to the 61st day after the date of the enactment of this
Act that specifically approves any rules or administrative
positions promulgated under, or applicable for purposes of,
section 3(21) of the Employee Retirement Income Security Act of
1974 that are not in effect on January 1, 2015, the amendments
made by subsection (a) of this section shall not take effect.
(c) Grandfathered Transactions and Services.--The amendments made
by subsection (a) shall not apply to any service or transaction
rendered, entered into, or for which a person has been compensated
prior to the date on which the amendments made by subsection (a) of
this Act become effective under subsection (b)(2).
(d) Transition.--If the amendments made by subsection (a) of this
section take effect, then nothing in this section shall be construed to
prohibit the issuance of guidance to carry out such amendments so long
as such guidance is necessary to implement such amendments. Until such
time as regulations or other guidance are issued to carry out such
amendments, a plan or a fiduciary shall be treated as meeting the
requirements of such amendments if the plan or fiduciary, as the case
may be, complies with a reasonable good faith interpretation of such
amendments.
Union Calendar No. 391
114th CONGRESS
2d Session
H. R. 4293
[Report No. 114-511]
_______________________________________________________________________
A BILL
To amend the Employee Retirement Income Security Act of 1974 to ensure
that retirement investors receive advice in their best interests, and
for other purposes.
_______________________________________________________________________
April 20, 2016
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed