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114th Congress    }                                  {   Rept. 114-512
                        HOUSE OF REPRESENTATIVES
 2d Session       }                                  {          Part 1

======================================================================



 
 STRENGTHENING ACCESS TO VALUABLE EDUCATION AND RETIREMENT SUPPORT ACT 
                                OF 2015

                                _______
                                

 April 20, 2016.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Brady of Texas, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 4294]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 4294) to amend the Internal Revenue Code of 1986 to 
ensure that retirement investors receive advice in their best 
interests, and for other purposes, having considered the same, 
report favorably thereon with an amendment and recommend that 
the bill as amended do pass.

                                CONTENTS

                                                                   Page
  I. SUMMARY AND BACKGROUND...........................................6
          A. Purpose and Summary.................................     6
          B. Background and Need for Legislation.................     6
          C. Legislative History.................................     7
 II. EXPLANATION OF THE BILL..........................................7
          A. Rules Relating to the Provision of Investment Advice 
              (secs. 2-3 of the bill and sec. 4975 of the Code)..     7
III. VOTES OF THE COMMITTEE..........................................21
 IV. BUDGET EFFECTS OF THE BILL......................................22
          A. Committee Estimate of Budgetary Effects.............    22
          B. Statement Regarding New Budget Authority and Tax 
              Expenditures Budget Authority......................    22
          C. Cost Estimate Prepared by the Congressional Budget 
              Office.............................................    22
  V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE......23
          A. Committee Oversight Findings and Recommendations....    23
          B. Statement of General Performance Goals and 
              Objectives.........................................    23
          C. Information Relating to Unfunded Mandates...........    23
          D. Applicability of House Rule XXI 5(b)................    24
          E. Tax Complexity Analysis.............................    24
          F. Congressional Earmarks, Limited Tax Benefits, and 
              Limited Tariff Benefits............................    24
          G. Duplication of Federal Programs.....................    24
          H. Disclosure of Directed Rule Makings.................    25
 VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED...........25
          A. Text of Existing Law Amended or Repealed by the 
              Bill, as Reported..................................    25
          B. Changes in Existing Law Proposed by the Bill, as 
              Reported...........................................    45
VII. DISSENTING VIEWS................................................71

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Strengthening Access to Valuable 
Education and Retirement Support Act of 2015'' or the ``SAVERS Act of 
2015''.

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 4975 of the Internal 
        Revenue Code of 1986, or
          (2) breach the best interest standard for the provision of 
        investment advice,
are subject to liability under the Internal Revenue Code of 1986.

SEC. 3. RULES RELATING TO THE PROVISION OF INVESTMENT ADVICE.

  (a) Amendments to the Internal Revenue Code of 1986.--
          (1) Exemption for investment advice which is best interest 
        recommendation.--Section 4975(d) of the Internal Revenue Code 
        of 1986 is amended by striking ``or'' at the end of paragraph 
        (22), by striking the period at the end of paragraph (23) and 
        inserting ``, or'', and by inserting after paragraph (23) the 
        following:
          ``(24) provision of investment advice by a fiduciary to a 
        plan, plan participant, or beneficiary with respect to the 
        plan, which is a best interest recommendation or a transaction 
        connected to such advice.''.
          (2) Investment advice; best interest recommendation.--Section 
        4975(e) of such Code is amended by adding at the end the 
        following:
          ``(10) Investment advice.--
                  ``(A) In general.--For purposes of this section, the 
                term `investment advice' means a recommendation that--
                          ``(i) relates to--
                                  ``(I) 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;
                                  ``(II) 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
                                  ``(III) 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--
                                  ``(I) a written acknowledgment that 
                                the person is a fiduciary with respect 
                                to the provision of such 
                                recommendation; or
                                  ``(II) 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, plan participant, or 
                                beneficiary that such recommendation is 
                                individualized to the plan, plan 
                                participant, or beneficiary and such 
                                plan, plan participant, or beneficiary 
                                intends to materially rely on such 
                                recommendation in making investment or 
                                management decisions with respect to 
                                any moneys or other property of such 
                                plan.
                  ``(B) Disclaimer of a mutual agreement, arrangement, 
                or understanding.--For purposes of subparagraph 
                (A)(ii)(II), 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.
                  ``(C) When recommendation treated as made pursuant to 
                a mutual agreement, arrangement, or understanding.--For 
                purposes of subparagraph (A)(ii)(II), information shall 
                not be treated as a recommendation made pursuant to a 
                mutual agreement, arrangement, or understanding, and 
                such information shall contain the disclaimer required 
                by subparagraph (B), if--
                          ``(i) Seller's exception.--The information 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 as a fiduciary to the plan or 
                        under the obligations of a best interest 
                        recommendation.
                          ``(ii) Swap and security-based swap 
                        transaction.--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--
                                  ``(I) 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
                                  ``(II) prior to entering into 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, plan 
                                participants, or plan beneficiaries.
                          ``(iii) Employees of a plan sponsor.--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) Platform providers selection and 
                        monitoring assistance.--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 (within the meaning of this 
                        paragraph) or under the obligations of a best 
                        interest recommendation and the information 
                        consists solely of--
                                  ``(I) making available to the plan, 
                                plan participants, or plan 
                                beneficiaries, without regard to the 
                                individualized needs of the plan, plan 
                                participants, or plan beneficiaries, 
                                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
                                  ``(II) in connection with a platform 
                                or similar mechanism described in 
                                subclause (I)--
                                          ``(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) Valuation.--The information consists 
                        solely of valuation information.
                          ``(vi) Financial education.--The information 
                        consists solely of--
                                  ``(I) 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,
                                  ``(II) information provided to 
                                participants or beneficiaries regarding 
                                the factors to consider in deciding 
                                whether to elect to receive a 
                                distribution from a plan and whether to 
                                roll over such distribution to a plan, 
                                so long as any examples of different 
                                distribution alternatives are 
                                accompanied by all material facts and 
                                assumptions on which the examples are 
                                based, or
                                  ``(III) any additional information 
                                treated as education by the Secretary.
          ``(11) Best interest recommendation.--For purposes of this 
        subsection--
                  ``(A) In general.--The term `best interest 
                recommendation' means a recommendation--
                          ``(i) for which no more than reasonable 
                        compensation is paid (as determined under 
                        subsection (d)(2)),
                          ``(ii) provided by a person acting with the 
                        care, skill, prudence, and diligence under the 
                        circumstances then prevailing that a prudent 
                        person would exercise based on--
                                  ``(I) the information obtained 
                                through the reasonable diligence of the 
                                person regarding factors such as the 
                                advice recipient's age, and
                                  ``(II) any other information that the 
                                advice recipient discloses to the 
                                person in connection with receiving 
                                such recommendation, and
                          ``(iii) where the person places the interests 
                        of the plan or advice recipient above its own.
                  ``(B) Investment options; variable compensation.--A 
                best interest recommendation may include a 
                recommendation that--
                          ``(i) is based on a limited range of 
                        investment options (which may consist, in whole 
                        or in part, of proprietary products), but only 
                        if any 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.', or
                          ``(ii) may result in variable compensation to 
                        the person providing the recommendation (or any 
                        affiliate of such person), but only if the 
                        receipt of such compensation shall be clearly 
                        disclosed to the advice recipient prior to any 
                        transaction based on the investment advice.
                  ``(C) Clear disclosure of variable compensation.--For 
                purposes of this paragraph, 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 clause 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).
                  ``(D) Definition of affiliate.--For purposes of this 
                paragraph, the term `affiliate' has the meaning given 
                in subsection (f)(8)(J)(ii).
                  ``(E) Correction of certain errors and omissions.--A 
                recommendation shall not fail to be a best interest 
                recommendation solely because a person who, acting in 
                good faith and with reasonable diligence, makes an 
                error or omission in disclosing the information 
                specified in subparagraph (B), if 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.
                  ``(F) Special rule.--Any notice provided pursuant to 
                a requirement under subparagraph (B)(i) or subparagraph 
                (C)(i) 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.''.
          (3) Failures relating to best interest recommendation.--
                  (A) Correction.--Section 4975(f)(5) of such Code is 
                amended--
                          (i) by striking ``(5) Correction.--The 
                        terms'' and inserting:
          ``(5) Correction.--
                  ``(A) In general.--Except as provided in subparagraph 
                (B), the terms'', and
                          (ii) by adding at the end the following:
                  ``(B) Determination of `correction' and `correct' 
                with respect to best interest advice recommendations.--
                In the case of a prohibited transaction arising by the 
                failure of investment advice to be a best interest 
                recommendation, the terms `correction' and `correct' 
                mean the payment to, or reimbursement of, actual 
                damages of the plan, plan participants, or plan 
                beneficiaries resulting directly from the plan's, plan 
                participant's, or plan beneficiary's reliance on such 
                investment advice, if any, that have not otherwise been 
                paid or reimbursed to the plan, plan participants, or 
                plan beneficiaries, including payments and 
                reimbursements made pursuant to subparagraph (A) if 
                such amount is greater than the amount determined under 
                subparagraph (A).''.
                  (B) Amount involved for purposes of excise tax.--The 
                first sentence of section 4975(f)(4) of such Code is 
                amended by striking ``excess compensation.'' and 
                inserting ``excess compensation, and in the case of a 
                prohibited transaction arising by the failure of 
                investment advice to be a best interest recommendation, 
                the amount involved shall be the amount paid to the 
                person providing the advice (or its affiliate, as 
                defined in paragraph (8)(J)(ii)) that has not been paid 
                or reimbursed to the plan, plan participants, or plan 
                beneficiaries, including payments and reimbursements 
                made pursuant to paragraph (5).''.
  (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 section 3(21) of the Employee 
        Retirement Security Act of 1974 and section 4975(e)(3) of the 
        Internal Revenue Code of 1986 (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 section 3(21) of the Employee 
        Retirement Income Security Act of 1974 and section 4975(e)(3) 
        of the Internal Revenue Code of 1986 that is 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 is 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.

                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    The bill, H.R. 4294, as reported by the Committee on Ways 
and Means, amends the prohibited transaction rules applicable 
to tax-favored savings arrangements to require those providing 
investment advice to act in the best interests of their clients 
by providing a definition of investment advice that results in 
fiduciary status and to provide a prohibited transaction 
exemption for advice that is a best interest recommendation 
(within the meaning of the bill). Thus, under the bill, a 
fiduciary that provides advice that is impermissible or that 
breaches the best interest standard is subject to liability 
under the Internal Revenue Code of 1986.

                 B. Background and Need for Legislation

    Private-sector employer-sponsored retirement plans and 
individual retirement arrangements (IRAs) are valuable tools 
used by millions of Americans to help save for retirement. The 
existing regulations defining when those rendering investment 
advice are treated as fiduciaries were issued in 1975. At that 
time, about 45 million Americans participated in private-sector 
employer-sponsored plans (33 million in defined benefit plans; 
12 million in defined contribution plans), the assets of which 
were generally managed by investment professionals. In 2013, 
about 130 million Americans participated in private-sector 
employer-sponsored plans (39 million in defined benefit plans; 
92 million in defined contribution plans), with total assets of 
about $8.1 trillion ($3.1 trillion in defined benefit plans; $5 
trillion in defined contribution plans). Defined contribution 
plan participants commonly direct the investment of their 
accounts. Since the creation of IRAs in 1974, the total number 
of Americans with IRAs has grown to about 57 million as of 
2013, and the total value of assets held in IRAs in 2013 was 
about $7 trillion. In light of the changes and growth that have 
occurred in the retirement savings area, the 1975 regulations 
are now outdated.
    The Committee believes that those providing investment 
advice to retirement plans and participants (and also other 
tax-favored savings arrangements) should generally be treated 
as fiduciaries and required to act in the best interests of 
plans and plan participants and beneficiaries. The Committee, 
therefore, believes that the current law definition regarding 
when those providing such investment advice are treated as 
fiduciaries should be expanded. At the same time, the Committee 
also believes that plans and plan participants should have 
access to retirement services and products. This is 
particularly the case for small businesses sponsoring 
retirement plans and low- and middle-income Americans.

                         C. Legislative History


Background

    H.R. 4294 was introduced on December 18, 2015, and was 
referred to the Committee on Ways and Means, and to the 
Committee on Education and the Workforce.

Committee action

    The Committee on Ways and Means marked up H.R. 4294, the 
``Strengthening Access to Valuable Education and Retirement 
Support Act of 2015'' or the ``SAVERS Act of 2015,'' on 
February 3, 2016, and ordered the bill, as amended, favorably 
reported (with a quorum being present).

Committee hearings

    On September 30, 2015, the Subcommittee on Oversight of the 
Committee on Ways and Means held a public hearing on the 
Department of Labor's proposed rule dealing with the provision 
of investment advice that results in fiduciary status and 
proposed prohibited transaction exemptions.
    On October 1, 2009, the Committee on Ways and Means held a 
public hearing on the importance of Americans saving for 
retirement having access to investment advice.

                      II. EXPLANATION OF THE BILL


 A. Rules Relating to the Provision of Investment Advice (Secs. 2-3 of 
                  the Bill and Sec. 4975 of the Code)


                              PRESENT LAW

Tax-favored savings arrangements

            Tax-favored retirement savings
    The Internal Revenue Code of 1986 (``Code'')\1\ provides 
two general vehicles for tax-favored retirement savings: 
employer-sponsored retirement plans and individual IRAs.\2\ 
Various requirements must be met for tax-favored treatment to 
apply. Retirement plans of private employers also are generally 
subject to the Employee Retirement Income Security Act of 1974 
(``ERISA''), over which the Department of Labor (``DOL'') has 
jurisdiction.\3\
---------------------------------------------------------------------------
    \1\All section references herein are to the Code unless otherwise 
indicated.
    \2\Sections 219, 408 and 408A provide rules for IRAs.
    \3\ERISA generally does not apply to church plans or plans of 
governmental employers.
---------------------------------------------------------------------------
    The most common type of tax-favored employer-sponsored plan 
is a qualified retirement plan, which may be a defined 
contribution plan or a defined benefit plan.\4\ Under a defined 
contribution plan, benefits are based on a separate account for 
each participant, to which are allocated contributions, 
earnings and losses.\5\ Defined contribution plans commonly 
allow participants to direct the investment of their accounts, 
usually by choosing among investment options offered under the 
plan. Under a defined benefit plan, benefits are determined 
under a plan formula, and benefits under a defined benefit plan 
are funded by the general assets of the trust established under 
the plan, which are invested by plan fiduciaries; individual 
accounts are not maintained for employees participating in the 
plan.\6\
---------------------------------------------------------------------------
    \4\Sec. 401(a). A qualified annuity plan under section 403(a) is 
similar to a qualified retirement plan (and subject to similar 
requirements) except that plan assets consist of annuity contracts, 
rather than investments held in a trust or custodial account. 
References herein to a qualified retirement plan include a qualified 
annuity plan.
    \5\Defined contribution plan is defined at section 414(i).
    \6\As defined in section 414(j), a defined benefit plan is any plan 
that is not a defined contribution plan.
---------------------------------------------------------------------------
    A ``section 401(k) plan'' is a qualified defined 
contribution plan that includes a feature (a ``qualified cash 
or deferred arrangement'') under which an employee may elect to 
have contributions (elective deferrals) made to the plan, 
rather than receive the same amount in cash.\7\ A ``section 
403(b) plan'' is generally similar to a section 401(k) plan, 
but may be maintained only by a tax-exempt charitable 
organization or a public school.\8\
---------------------------------------------------------------------------
    \7\Section 401(k) provides rules for qualified cash or deferred 
arrangements.
    \8\Section 403(b) provides rules for these plans. Another type of 
tax-favored employer-sponsored plan is a State or local government 
eligible deferred compensation plan under section 457(b), which is 
similar to a qualified cash or deferred arrangement under section 
401(k).
---------------------------------------------------------------------------
    Some employer-sponsored plans are funded through 
contributions by the employer to an IRA established for each 
employee. Specifically, an employer may maintain a simplified 
employee pension (``SEP'') plan and certain small employers may 
maintain a SIMPLE IRA plan.\9\
---------------------------------------------------------------------------
    \9\Sec. 408(k) and (p).
---------------------------------------------------------------------------
    A distribution from an employer-sponsored retirement plan 
or IRA is includible in income except to the extent it consists 
of a return of basis or an excludible distribution from a Roth 
arrangement.\10\ In most cases, however, a distribution may be 
rolled over on a nontaxable basis to another such plan or an 
IRA, either by a direct rollover or by contributing the 
distribution to the other plan or IRA within 60 days of 
receiving the distribution.\11\
---------------------------------------------------------------------------
    \10\Sections 402A and 408A provide rules for Roth arrangements.
    \11\Secs. 402(c), 403(a)(4), 403(b)(8), 408(d)(3), 408A(e) and 
457(e)(16).
---------------------------------------------------------------------------
            Health savings accounts and Archer MSAs
    An individual with a high deductible health plan (and, 
subject to exceptions, no other health plan) generally may make 
contributions to a health savings account (``HSA'').\12\ In 
some cases, such an individual may contribute to an Archer MSA 
(that is, medical savings account).\13\ Subject to limits, an 
individual's HSA and Archer MSA contributions are deductible in 
determining adjusted gross income and are excludable from an 
employee's income and wages if made by an employer. HSA and 
Archer MSA distributions used for qualified medical expenses 
are not includible in gross income. Distributions may also be 
rolled over to another HSA or Archer MSA.
---------------------------------------------------------------------------
    \12\Section 223 provides rules for HSAs.
    \13\Section 220 provides rules for Archer MSAs.
---------------------------------------------------------------------------
            Coverdell education savings accounts
    A Coverdell education savings account (``Coverdell ESA'') 
is an account created exclusively for the purpose of paying 
qualified education expenses of a designated beneficiary.\14\ 
Subject to income limits, annual after-tax contributions up to 
$2,000 may be made until a designated beneficiary reaches age 
18. Earnings on contributions to a Coverdell ESA generally are 
includible in income when withdrawn; however, distributions are 
excludable from income up to the beneficiary's qualified 
education expenses for the year. Amounts in a Coverdell ESA may 
be rolled over to another Coverdell ESA for the same 
beneficiary or certain family members. In general, the balance 
in a Coverdell ESA is deemed distributed within 30 days after 
the date that the beneficiary reaches age 30.
---------------------------------------------------------------------------
    \14\Section 530 provides rules for Coverdell ESAs.
---------------------------------------------------------------------------

Prohibited transaction rules

            In general
    The Code prohibits certain transactions (``prohibited 
transaction'') between a qualified retirement plan and a 
disqualified person.\15\ The prohibited transaction rules under 
the Code apply also to IRAs, Archer MSAs, HSAs, and Coverdell 
ESAs.\16\
---------------------------------------------------------------------------
    \15\Sec. 4975. The prohibited transaction rules under the Code 
generally do not apply to governmental plans or church plans. However, 
under section 503, the trust holding assets of a governmental or church 
plan may lose its tax-exempt status in the case of a prohibited 
transaction listed in section 503(b). The prohibited transaction rules 
under the Code also do not apply to section 403(b) plans. However, the 
prohibited transaction rules under ERISA may apply to a section 403(b) 
plan unless it is a governmental plan or church plan exempt from ERISA 
or is described in 29 C.F.R. section 2510.3-2(f).
    \16\These are included in the definition of ``plan'' under section 
4975(e)(1).
---------------------------------------------------------------------------
    Prohibited transactions include the following transactions, 
whether direct or indirect, between a plan and a disqualified 
person: (1) the sale or exchange or leasing of property, (2) 
the lending of money or other extension of credit, (3) the 
furnishing of goods, services or facilities, (4) the transfer 
to, or use by or for the benefit of, the income or assets of 
the plan, (5) in the case of a fiduciary, an act dealing with 
the plan's income or assets in the fiduciary's own interest or 
for the fiduciary's own account, and (6) the receipt by a 
fiduciary of any consideration for the fiduciary's own personal 
account from any party dealing with the plan in connection with 
a transaction involving the income or assets of the plan.\17\
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    \17\Sec. 4975(c)(1).
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    A disqualified person is a fiduciary of the plan, a person 
providing services to the plan, an employer with employees 
covered by the plan, an employee organization or an employee 
organization any of whose members are covered by the plan, and 
also includes certain owners, officers, directors, highly 
compensated employees, family members, and related 
entities.\18\ A fiduciary means any person who (1) exercises 
any discretionary authority or discretionary control respecting 
management of the plan or exercises any authority or control 
respecting management or disposition of the plan's assets, (2) 
renders investment advice for a fee or other compensation, 
direct or indirect, with respect to any moneys or other 
property of the plan, or has any authority or responsibility to 
do so, or (3) has any discretionary authority or discretionary 
responsibility in the administration of the plan.\19\
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    \18\Sec. 4975(e)(2).
    \19\Sec. 4975(e)(3). Fiduciary also includes any named fiduciary 
under ERISA section 405(c)(1)(B).
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    Certain transactions are statutorily exempt from prohibited 
transaction treatment, for example, certain loans to plan 
participants and arrangements with a disqualified person for 
legal, accounting or other services necessary for the 
establishment or operation of a plan if no more than reasonable 
compensation is paid for the services.\20\ In addition, an 
administrative exemption may be granted, on either an 
individual or class basis, subject to a finding that the 
exemption is administratively feasible, in the interests of the 
plan and of its participants and beneficiaries, and protective 
of the rights of participants and beneficiaries of the 
plan.\21\ Before an administrative exemption is granted, notice 
must be provided to interested persons, notice must be 
published in the Federal Register of the pendency of the 
exemption, and interested persons must be given an opportunity 
to provide comments.
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    \20\Sec. 4975(d)(1) and (d)(2).
    \21\Sec. 4975(c)(2).
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            Excise tax on prohibited transactions\22\
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    \22\Under ERISA sections 409 and 502(a)(2), in the case of a breach 
of fiduciary responsibility with respect to an employer-sponsored plan, 
including a prohibited transaction, a civil suit may be brought by DOL, 
a plan participant or beneficiary, or another fiduciary. However, a 
cause of action under ERISA is not available with respect to a plan not 
subject to ERISA, such as an IRA, HSA, Archer MSA, or Coverdell ESA. 
The Code does not provide a private cause of action in the case of a 
prohibited transaction, either with respect to an employer-sponsored 
plan or an IRA, HSA, Archer MSA, or Coverdell ESA.
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    If a prohibited transaction occurs, the disqualified person 
who participated in the transaction is generally subject to a 
two-tiered excise tax.\23\ The first tier tax is 15 percent of 
the amount involved in the transaction. The second tier tax, 
imposed if the prohibited transaction is not corrected within a 
certain period, is 100 percent of the amount involved.
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    \23\In the case of an IRA, HSA, Archer MSA or Coverdell ESA, the 
sanction for some prohibited transactions is the loss of tax-favored 
status, rather than an excise tax. See section 408(e)(2), also cross-
referenced in sections 220(e)(2), 223(e)(2) and 530(e).
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    For purposes of the excise tax, the amount involved with 
respect to a prohibited transaction is generally the greater of 
(1) the amount of money and the fair market value of the other 
property given or (2) the amount of money and the fair market 
value of the other property received.\24\ For purposes of the 
excise tax, ``correction'' and ``correct'' mean, with respect 
to a prohibited transaction, undoing the transaction to the 
extent possible, but in any case placing the plan in a 
financial position not worse than that in which it would be if 
the disqualified person were acting under the highest fiduciary 
standards.
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    \24\In the case of certain transactions for services for which more 
than reasonable compensation is paid, the amount involved is only the 
excess compensation.
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            Jurisdiction over the prohibited transaction rules
    Jurisdiction over the Code provisions governing qualified 
retirement plans and similar ERISA provisions is divided 
between the Department of the Treasury (``Treasury'') and DOL 
by Executive Order, referred to as Reorganization Plan No. 4 of 
1978 (``Reorganization Plan'').\25\ As part of this division, 
with certain exceptions, Treasury authority was transferred to 
DOL with respect to regulations, rulings, opinions, and 
exemptions under the prohibited transaction provisions of the 
Code.\26\ As a result, DOL regulations and other guidance 
relating to prohibited transactions apply for Code purposes, as 
well as for ERISA purposes, and DOL has the authority to grant 
individual and class exemptions applicable under the Code, 
including with respect to IRAs, HSAs, Archer MSAs, and 
Coverdell ESAs. However, DOL has no enforcement authority with 
respect to these accounts that are not covered under ERISA. 
Treasury has exclusive enforcement authority with respect to 
these accounts.
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    \25\43 Fed. Reg. 47713, October 17, 1978.
    \26\Secs. 102 and 105 of the Reorganization Plan. Rules for 
coordination concerning certain fiduciary actions are provided under 
section 103 of the Reorganization Plan. In addition, under section 3003 
of ERISA, Treasury and DOL are directed to consult with each other from 
time to time with respect to the prohibited transaction rules and 
exemptions.
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Rules relating to investment advice

            Fiduciary status
    As described above, a fiduciary includes a person who 
renders investment advice for a fee or other compensation, 
direct or indirect, with respect to any moneys or other 
property of the plan, or has any authority or responsibility to 
do so.
    Existing DOL regulations, issued in 1975, provide that a 
person is deemed to be rendering ``investment advice'' to an 
employee benefit plan for this purpose only if:
           the person renders advice to the plan as to 
        the value of securities or other property, or makes 
        recommendation as to the advisability of investing in, 
        purchasing, or selling securities or other property; 
        and
           the person either directly or indirectly 
        (for example, through or together with any affiliate) 
        (1) has discretionary authority or control, whether or 
        not pursuant to agreement, arrangement or 
        understanding, with respect to purchasing or selling 
        securities or other property for the plan, or (2) 
        renders any advice as described above on a regular 
        basis to the plan pursuant to a mutual agreement, 
        arrangement or understanding, written or otherwise, 
        between the person and the plan or a fiduciary with 
        respect to the plan, that the person's services will 
        serve as a primary basis for investment decisions with 
        respect to plan assets, and that the person will render 
        individualized investment advice to the plan based on 
        the particular needs of the plan regarding matters such 
        as, among other things, investment policies or 
        strategy, overall portfolio composition, or 
        diversification of plan investments.\27\
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    \27\29 C.F.R. sec. 2510.3-21(c).
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    The regulations further provide that a person who is a 
fiduciary with respect to a plan by reason of rendering 
investment advice (as described above) for a fee or other 
compensation, direct or indirect, with respect to any moneys or 
other property of the plan, or having any authority or 
responsibility to do so, is not deemed to be a fiduciary 
regarding any assets of the plan with respect to which the 
person does not have any discretionary authority, discretionary 
control or discretionary responsibility, does not exercise any 
authority or control, does not render investment advice (as 
described above) for a fee or other compensation, and does not 
have any authority or responsibility to render such investment 
advice. However, this rule does not exempt the person from 
ERISA liability attributable to a breach of responsibility by a 
co-fiduciary or exclude the person from the definition of the 
term party in interest\28\ based on providing services to the 
plan with respect to any assets of the plan.
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    \28\Party in interest is the term under ERISA that corresponds to 
disqualified person under the Code and it is defined in a similar 
manner.
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    In addition to the regulations, other guidance issued by 
DOL, Interpretive Bulletin 96-1, provides that the furnishing 
of mere investment education to a participant or beneficiary in 
a participant-directed individual account plan does not 
constitute the rendering of investment advice.\29\ For this 
purpose, investment education includes the following categories 
of information and materials (described more fully in 
Interpretive Bulletin 96-1): plan information, general 
financial and investment information, asset allocation models, 
and interactive investment materials. Interpretive Bulletin 96-
1 notes that the information and materials described in the 
four categories merely represent examples of the type of 
information and materials that may be furnished to participants 
and beneficiaries without such information and materials 
constituting investment advice, and there may be many other 
examples of information, materials, and educational services 
that, if furnished to participants and beneficiaries, would not 
constitute investment advice. Accordingly, Interpretive 
Bulletin 96-1 provides that no inferences should be drawn from 
the description of the four categories with respect to whether 
the furnishing of any information, materials or educational 
services not described therein may constitute investment 
advice.
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    \29\29 C.F.R. sec. 2905.96-1. This treatment applies irrespective 
of who provides the information (for example, the plan sponsor, 
fiduciary or service provider), the frequency with which the 
information is shared, the form in which the information and materials 
are provided (for example, on an individual or group basis, in writing 
or orally, or via video or computer software), or whether an identified 
category of information and materials is furnished alone or in 
combination with other identified categories of information and 
materials.
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            Statutory exemptions relating to investment advice
    If certain requirements are met, specific transactions 
relating to investment advice are exempt from prohibited 
transaction treatment if the advice is provided by a fiduciary 
advisor through an eligible investment advice arrangement.\30\ 
The exemptions apply to (1) the provision of investment advice 
to a plan participant or beneficiary with respect to a security 
or other property available as an investment under the plan, 
(2) an investment transaction (that is, a sale, acquisition, or 
holding of a security or other property) pursuant to the 
advice, and (3) the direct or indirect receipt of fees or other 
compensation in connection with the provision of the advice or 
an investment transaction pursuant to the advice.
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    \30\Sec. 4975(d)(17) and (f)(8). These exemptions and parallel 
exemptions under ERISA section 408(b)(14) and (g) were established by 
section 601 of the Pension Protection Act of 2006, Pub. L. No. 109-280.
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    For purposes of the exemptions, an eligible investment 
advice arrangement is generally an arrangement that either (1) 
provides that any fees (including any commission or 
compensation) received by the fiduciary adviser for investment 
advice or with respect to an investment transaction with 
respect to plan assets do not vary depending on the basis of 
any investment option selected (sometimes referred to as ``fee-
leveling''), or (2) uses a computer model under an investment 
advice program that meets specified requirements in connection 
with the provision of investment advice to a participant or 
beneficiary.\31\ The arrangement must be expressly authorized 
by a plan fiduciary other than (1) the person offering the 
investment advice program, (2) any person providing investment 
options under the plan, or (3) any affiliate of (1) or (2).\32\ 
In addition, the fiduciary adviser must provide disclosures 
applicable under securities laws; any investment transaction 
must occur solely at the direction of the investment advice 
recipient; the compensation received by the fiduciary adviser 
and affiliates in connection with the investment transaction 
must be reasonable; and the terms of the investment transaction 
must be at least as favorable to the plan as an arm's length 
transaction would be.
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    \31\Various requirements with respect to notices and disclosure, 
recordkeeping and audits must also be met.
    \32\Affiliate for this purpose means an affiliated person as 
defined under section 2(a)(3) of the Investment Company Act of 1940.
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            DOL proposed regulations and ``BIC'' exemption
    On April 20, 2015, DOL proposed regulations that would 
replace the current regulations relating to investment advice 
with a new standard as to whether a person is a fiduciary based 
on rendering investment advice, generally to be applicable 
eight months after final regulations are published.\33\ Under 
the proposed regulations, a person is a fiduciary based on 
rendering investment advice if the person:
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    \33\Definition of the Term ``Fiduciary''; Conflict of Interest 
Rule-Retirement Investment Advice, 80 Fed. Reg. 21928, April 20, 2015. 
The proposed regulations would apply for purposes of ERISA and the 
prohibited transaction rules of the Code.
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           provides to a plan, a plan fiduciary, an 
        IRA,\34\ or an IRA owner certain types of 
        recommendations or statements (as described below) that 
        constitute investment advice with respect to plan or 
        IRA assets in exchange for a fee or other compensation, 
        and
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    \34\IRA is defined in the proposed guidance to include HSAs, Archer 
MSAs, and Coverdell ESAs, as well as IRAs. In Part IV.E of the preamble 
to the proposed regulations, DOL requests comments as to whether it is 
appropriate to cover individual accounts other than IRAs and treat them 
in a manner similar to IRAs. 80 Fed. Reg. at 21947.
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           either directly or indirectly (such as 
        through an affiliate), (1) represents or acknowledges 
        that it is acting as a fiduciary with respect to the 
        investment advice, or (2) renders the advice pursuant 
        to a written or verbal agreement, arrangement or 
        understanding that the advice is individualized to, or 
        that the advice is specifically directed to, the advice 
        recipient for consideration in making investment or 
        management decisions with respect to securities or 
        other property of the plan or IRA.
    Under the proposed regulations, investment advice includes:
           a recommendation as to the advisability of 
        acquiring, holding, disposing of or exchanging 
        securities or other property, including a 
        recommendation to take a distribution of benefits or a 
        recommendation as to the investment of securities or 
        other property to be rolled over or otherwise 
        distributed from the plan or IRA;\35\
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    \35\DOL Advisory Opinion 2005-23A (December 7, 2005) addresses the 
question of whether a recommendation that a participant in a pension 
plan roll over his or her account balance to an IRA to take advantage 
of investment options not available under the plan constitutes 
investment advice with respect to plan assets. The advisory opinion 
expresses the view that, with respect to a person who is not otherwise 
a plan fiduciary, merely advising a plan participant to take an 
otherwise permissible plan distribution, even when the advice is 
combined with a recommendation as to how the distribution should be 
invested, does not constitute investment advice within the meaning of 
the existing DOL investment advice regulations defining when a person 
is a fiduciary by virtue of providing investment advice with respect to 
employee benefit plan assets. The advisory opinion provides that DOL 
does not view a recommendation to take a distribution as advice or a 
recommendation concerning a particular investment (that is, purchasing 
or selling securities or other property) as contemplated by the 
regulations and that any investment recommendation regarding the 
proceeds of a distribution would be advice with respect to funds that 
are no longer plan assets. Part IV.A(1) of the preamble to the proposed 
regulations notes that the proposed regulations, if finalized, would 
supersede Advisory Opinion 2005-23A. 80 Fed. Reg. at 21939.
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           a recommendation as to the management of 
        securities or other property, including recommendations 
        as to the management of securities or other property to 
        be rolled over or otherwise distributed from the plan 
        or IRA;
           an appraisal, fairness opinion, or similar 
        statement, whether verbal or written, concerning the 
        value of securities or other property if provided in 
        connection with a specific transaction or transactions 
        involving the acquisition, disposition, or exchange, of 
        such securities or other property by the plan or IRA; 
        and
           a recommendation of a person who is also 
        going to receive a fee or other compensation for 
        providing any of the types of advice described above.
    Subject to specified requirements for each exception, the 
proposed regulations provide exceptions (referred to as 
``carve-outs'') for (1) certain counterparties in transactions 
with an employee benefit plan (referred to as the ``seller's 
carve-out''); (2) swap and security-based swap transactions 
with an employee benefit plan; (3) employees of an employee 
benefit plan sponsor; (4) platform providers to employee 
benefit plans; (5) persons providing selection and monitoring 
assistance to employee benefit plans; (6) financial reports and 
valuations (including to an IRA or IRA owner); and (7) 
investment education (including to an IRA or IRA owner), under 
standards somewhat different from the standards in the existing 
DOL guidance. However, an exception does not apply if the 
person represents or acknowledges that it is acting as a 
fiduciary with respect to the advice. In conjunction with the 
proposed regulations, DOL has proposed two new prohibited 
transaction class exemptions, including a ``best interest 
contract'' (or ``BIC'') exemption,\36\ as well as proposing 
changes to various existing class exemptions.
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    \36\Proposed Best Interest Contract Exemption, 80 Fed. Reg. 21960, 
April 20, 2015. This class exemption is proposed to become applicable 
at the same time as the 2015 proposed fiduciary regulations, eight 
months after publication of final regulations.
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    The proposed BIC class exemption generally applies to 
compensation received by an investment adviser or related party 
in connection with a transaction (that is, a purchase, sale or 
holding of assets) resulting from investment advice provided to 
``retirement investors,'' meaning plan participants or 
beneficiaries who direct the investment of the assets in their 
accounts, IRA owners who make investment decisions with respect 
to their IRAs, and a plan sponsor (or employee, officer, or 
director thereof) of a plan with fewer than 100 participants 
where the plan does not provide for participant-directed 
investments and the plan sponsor acts as a fiduciary who has 
authority to make plan investment decisions. Under the proposed 
exemption, investment advice is in the best interest of a 
retirement investor when the adviser and financial institution 
providing the advice act with the care, skill, prudence, and 
diligence under the circumstances then prevailing that a 
prudent person would exercise based on the investment 
objectives, risk tolerance, financial circumstances, and needs 
of the retirement investor, without regard to the financial or 
other interests of the adviser, financial institution or any 
affiliate, related entity, or other party.\37\
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    \37\The preamble to the proposed exemption states, ``Under this 
standard, the Adviser and Financial Institution must put the interests 
of the Retirement Investor ahead of the financial interests of the 
Adviser, Financial Institution or their Affiliates, Related Entities or 
any other party.'' 80 C.F.R. at 21970.
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    Assets subject to the proposed BIC class exemption include 
the following: bank deposits; certificates of deposit (CDs); 
shares or interests in mutual funds; bank collective funds; 
insurance company separate accounts; exchange-traded REITs 
(Real Estate Investment Trusts); exchange-traded funds; 
corporate bonds offered pursuant to a registration statement 
under the Securities Act of 1933; agency debt securities and 
U.S. Treasury securities; insurance and annuity contracts, 
guaranteed investment contracts, and exchange-traded equity 
securities. In order for the proposed exemption to apply, 
specific requirements must be met relating to the investment 
advice contract (described below), impartial conduct with 
respect to the advice, range of investment options, cost and 
fee disclosures to retirement investors, disclosures to DOL and 
recordkeeping.
    The proposed BIC class exemption requires that, before 
making any recommendations on investment transactions, the 
adviser and financial institution enter into a written contract 
with the retirement investor as follows:
           the contract affirmatively states that the 
        adviser and financial institution are fiduciaries under 
        the ERISA or the Code, or both, with respect to any 
        investment recommendation to the retirement investor;
           under the contract, the adviser and 
        financial institution specifically agree to adhere to 
        certain impartial conduct standards, which include 
        providing investment advice that is in the best 
        interest of the retirement investor, not recommending 
        investment in an asset if they (or affiliates) will 
        receive more than reasonable compensation in relation 
        to the total services they provide to the retirement 
        investor with respect to the investment, and not 
        providing any statements about an asset, fees, material 
        conflict of interest, and any other matter related to 
        the retirement investor's investment decision that are 
        misleading;
           under the contract, the adviser and 
        financial institution provide certain warranties and 
        make certain disclosures related to fees and conflicts 
        of interest; and
           the contract must not have exculpatory 
        provisions disclaiming or otherwise limiting liability 
        of the adviser or financial institution for a violation 
        of the contract's terms, or a provision under which a 
        plan, IRA, or retirement investor waives or qualifies 
        its right to bring or participate in a class action or 
        other representative action in court in a dispute with 
        the adviser or financial institution.\38\
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    \38\As described in DOL's background discussion of the proposed 
exemption, the contract terms to which advisors and financial 
institutions must agree in order to qualify for the proposed BIC class 
exemption potentially create a cause of action that may be used by 
retirement investors to enforce these contract terms. 80 Fed. Reg. at 
21972-21973. For example, an IRA owner could have a contract claim if 
the adviser recommends an investment product that is not in the IRA 
owner's best interest, even though, as noted above, the Code does not 
create such a cause of action for an IRA owner. As noted above, a cause 
of action under ERISA also is not available with respect to a plan not 
subject to ERISA, such as an IRA.
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                           REASONS FOR CHANGE

    Impartial investment advice plays an important role in 
helping workers to save for retirement. The Committee is 
concerned that existing regulations may not apply a fiduciary 
standard of care with respect to investment advice in all 
appropriate circumstances. On the other hand, proposed rules 
issued by the Department of Labor would restrict access to 
investment advice. For example, the Committee is concerned that 
the Department of Labor's proposed rules, particularly the 
proposed best interest contract exemption, purport to 
effectively delegate to the plaintiffs trial bar the Department 
of Treasury's authority to enforce the fiduciary rules with 
respect to IRAs, by making the creation of a private right of 
action a prerequisite to providing investment advice. The 
Committee seeks to assure that fiduciary status applies when 
appropriate and to require fiduciaries that provide investment 
advice to act in the best interests of their clients, while not 
imposing administrative requirements so burdensome as to limit 
the availability of advice.

                        EXPLANATION OF PROVISION

In general

    The provision specifies that its purpose is to provide that 
advisors who (1) provide advice that is impermissible under the 
prohibited transaction provisions of the Code, or (2) breach 
the best interest standard for the provision of investment 
advice, are subject to liability under the Code.
    The provision adds a statutory definition of investment 
advice to the prohibited transaction rules under the Code.\39\ 
In addition, subject to specified requirements, the provision 
adds a new statutory exemption for the provision of investment 
advice by a fiduciary to a plan, plan participant, or 
beneficiary with respect to the plan, referred to as a ``best 
interest recommendation,'' or a transaction connected to the 
advice.
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    \39\The provision supersedes both existing DOL regulations and the 
proposed regulations and exemptions issued by DOL in April 2015, as 
described in Present Law.
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Definition of investment advice

            General rule
    A person providing investment advice, as defined under the 
provision, for a fee or other compensation, direct or indirect, 
with respect to any moneys or other property of the plan, or 
having any authority or responsibility to do so, is generally 
treated as a fiduciary with respect to the plan (and thus is a 
disqualified person with respect to the plan).
    Specifically, under the provision, a recommendation that 
relates to any of the following may be investment advice (if 
rendered under the conditions described below):
           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 the plan or any 
        recommendation relating to the investment of any moneys 
        or other property of the plan to be distributed from 
        the plan;
           the management of moneys or other property 
        of the plan, including recommendations relating to the 
        management of moneys or other property to be 
        distributed from the plan; or
           the advisability of retaining or ceasing to 
        retain a person who would receive a fee or other 
        compensation for providing any of these types of 
        advice.
    A rollover is always done in connection with a 
distribution. Thus, recommendations relating to moneys or other 
property to be distributed from a plan include recommendations 
relating to rollovers of such moneys or other property.
    In order for a recommendation to be investment advice, it 
must be rendered pursuant to either of the following:
           a written acknowledgment that the person is 
        a fiduciary with respect to the provision of the 
        recommendation; or
           a mutual agreement, arrangement, or 
        understanding, which may include limitations as to the 
        scope, timing, and responsibility to provide ongoing 
        monitoring or advice services, between the person 
        making the recommendation and the plan, plan 
        participant, or beneficiary that (1) the recommendation 
        is individualized to the plan, plan participant, or 
        beneficiary and (2) the plan, plan participant, or 
        beneficiary intends to materially rely on the 
        recommendation in making investment or management 
        decisions with respect to any moneys or other property 
        of the plan.
            Disclaimer of a mutual agreement, arrangement, or 
                    understanding
    Under the provision, any disclaimer of a mutual agreement, 
arrangement, or understanding with respect to a recommendation 
must 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.'' Further, this disclaimer is not effective unless 
it 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.
            Information not treated as investment advice
    Under the provision, information provided in the 
circumstances described below is not treated as a 
recommendation made pursuant to a mutual agreement, 
arrangement, or understanding for purposes of the definition of 
investment advice. The information in these circumstances shall 
contain the disclaimer described above.
    Seller's exception. The information 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 
(as defined under the provision) or to otherwise act as a 
fiduciary to the plan or to act under the obligations of a best 
interest recommendation (described below).
    Swap and security-based swap transaction. 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,\40\ or security-based 
swap\41\). In addition, the plan is represented, in connection 
with the 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. Further, prior to entering into the 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 (as defined under the provision) or to 
otherwise act as a fiduciary to the plan, plan participants, or 
plan beneficiaries.
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    \40\A swap for this purpose is defined in section 1a of the 
Commodity Exchange Act (7 U.S.C. sec. 1a).
    \41\A security-based swap for this purpose is defined in section 
3(a) of the Securities Exchange Act (15 U.S.C. sec. 78c(a)).
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    Employees of a plan sponsor. 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.
    Platform providers selection and monitoring assistance. 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 or under the obligations of a 
best interest recommendation. In addition, the information 
provided consists solely of either of the following:
           making available to the plan, plan 
        participants, or plan beneficiaries, without regard to 
        the individualized needs of the plan, plan 
        participants, or plan beneficiaries, 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
           in connection with a platform or similar 
        mechanism described above, either (1) 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 (2) providing objective financial data and 
        comparisons with independent benchmarks to the plan.
    Valuation. The information consists solely of valuation 
information.
    Financial education. The information consists solely of the 
following:
           information described in DOL Interpretive 
        Bulletin 96-1 as in effect on January 1, 2015, 
        regardless of whether the education is provided to a 
        plan or plan fiduciary or a participant or beneficiary;
           information provided to participants or 
        beneficiaries regarding the factors to consider in 
        deciding whether to elect to receive a distribution 
        from a plan and whether to roll over the distribution 
        to a plan, so long as any examples of different 
        distribution alternatives are accompanied by all 
        material facts and assumptions on which the examples 
        are based; or
           any additional information treated as 
        education by the Secretary of the Treasury.\42\
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    \42\However, under the Reorganization Plan, discussed above, the 
Secretary of Labor is granted interpretive authority over this 
provision.
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Best interest recommendation exemption

    The provision includes a prohibited transaction exemption 
for the provision of investment advice by a fiduciary to a 
plan, plan participant, or beneficiary with respect to the 
plan, or a transaction connected to the advice, in the case of 
a ``best interest recommendation.''
    As defined under the provision, a best interest 
recommendation is a recommendation:
           for which no more than reasonable 
        compensation is paid;\43\
---------------------------------------------------------------------------
    \43\Reasonable compensation for this purpose is determined as under 
the present-law prohibited transaction exemption for an arrangement 
with a disqualified person for services necessary for the establishment 
or operation of a plan if no more than reasonable compensation is paid 
therefor. Sec. 4975(d)(2).
---------------------------------------------------------------------------
           provided by a person (referred to herein as 
        the ``adviser'') acting with the care, skill, prudence, 
        and diligence under the circumstances then prevailing 
        that a prudent person would exercise based on the 
        information obtained through the adviser's reasonable 
        diligence regarding factors such as the advice 
        recipient's age and any other information that the 
        advice recipient discloses to the adviser in connection 
        with receiving the recommendation; and
           where the adviser places the interests of 
        the plan or advice recipient above its own.
    A best interest recommendation may include a recommendation 
that is based on a limited range of investment options, which 
may consist, in whole or in part, of proprietary products, but 
only if any limitations are clearly disclosed to the advice 
recipient before any transaction based on the investment advice 
in the form of a notice that states only 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.''
    A best interest recommendation may also include a 
recommendation that may result in variable compensation to the 
adviser (or any affiliate\44\ of the adviser), but only if the 
receipt of the compensation is clearly disclosed to the advice 
recipient before any transaction based on the investment 
advice. For this purpose, clear disclosure of variable 
compensation must include, in a manner calculated to be 
understood by the average individual, each of the following:
---------------------------------------------------------------------------
    \44\Under the provision, affiliate is defined as under the present-
law exemption relating to investment advice, that is, an affiliated 
person as defined under section 2(a)(3) of the Investment Company Act 
of 1940.
---------------------------------------------------------------------------
          (1) 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.''\45\
---------------------------------------------------------------------------
    \45\Any regulations or other administrative guidance implementing 
this requirement may not require this notice to be updated more 
frequently than annually with respect to a particular recommendation 
that constitutes investment advice, regardless of whether multiple 
transactions are based on the advice. However, a new notice would be 
required with respect to any new recommendation that constitutes 
investment advice.
---------------------------------------------------------------------------
          (2) A description of any fee or other compensation 
        that is directly or indirectly payable to the adviser 
        (or its affiliate) by the advice recipient with respect 
        to the transaction (expressed as an amount, formula, 
        percentage of assets, per capita charge, or estimate or 
        range of the compensation).
          (3) A description of the types and ranges of any 
        compensation that may be directly or indirectly payable 
        to the adviser (or its affiliate) by any third party in 
        connection with the transaction (expressed as an 
        amount, formula, percentage of assets, per capita 
        charge, or estimate or range of the compensation).
          (4) On request of the advice recipient, a disclosure 
        of the specific amounts of compensation described in 
        (3) that the adviser will receive in connection with 
        the particular transaction (expressed as an amount, 
        formula, percentage of assets, per capita charge, or 
        estimate of the compensation).
    A notice with respect to limitations on the range of 
investment options on which a recommendation is based or with 
respect to variable compensation shall have no effect on any 
other notice otherwise required without regard to the Code and 
shall be provided in addition to, and not in lieu of, any other 
such notice.
    Under the provision, a recommendation will not fail to be a 
best interest recommendation solely because a person who, 
acting in good faith and with reasonable diligence, makes an 
error or omission in disclosing the information specified above 
if 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 the error or 
omission.
    The provision includes special rules relating to the amount 
involved and correction with respect to a prohibited 
transaction arising by the failure of investment advice to be a 
best interest recommendation. In that case, the amount involved 
is the amount paid to the person providing the advice (or its 
affiliate) that has not been paid or reimbursed to the plan, 
plan participants, or plan beneficiaries, including payments 
and reimbursements made pursuant to a correction (as described 
in the following sentence). In addition, ``correction'' and 
``correct'' in this case mean the payment to, or reimbursement 
of, actual damages of the plan, plan participants, or plan 
beneficiaries resulting directly from the plan's, plan 
participant's, or plan beneficiary's reliance on the investment 
advice, if any, that have not otherwise been paid or reimbursed 
to the plan, plan participants, or plan beneficiaries, 
including payments and reimbursements made pursuant to the 
general correction rule under present law (that is, undoing the 
transaction to the extent possible, but in any case placing the 
plan in a financial position not worse than that in which it 
would be if the disqualified person were acting under the 
highest fiduciary standards) if such amount is greater than the 
amount determined under the present-law correction rule.

                             EFFECTIVE DATE

    The amendments made by the provision generally are 
effective on the 61st day after the date of enactment of the 
provision and apply with respect to information provided or 
recommendations made on or after two years after the date of 
enactment. However, if, before the 61st day after the date of 
enactment, a bill or joint resolution is enacted that 
specifically approves any rules or administrative positions 
that are promulgated under the Code and ERISA statutory 
definitions of fiduciary\46\ and are not in effect on January 
1, 2015, the amendments made by the provision will not take 
effect. In addition, the amendments made by the provision do 
not apply to any service or transaction rendered, entered into, 
or for which a person has been compensated before the date on 
which the amendments generally become effective.
---------------------------------------------------------------------------
    \46\Sec. 4975(e)(3) and ERISA sec. 3(21).
---------------------------------------------------------------------------
    DOL is prohibited from amending any rules or administrative 
positions promulgated under the Code and ERISA statutory 
definitions of fiduciary (including DOL Interpretive Bulletin 
96-1 and Advisory Opinion 2005-23A, discussed in Present Law), 
and no rule or administrative position promulgated by DOL 
before the date of enactment of the provision but not effective 
on January 1, 2015, may become effective unless a bill or joint 
resolution as described above is enacted not later than 60 days 
after the date of enactment of the provision. If the amendments 
made by the provision take effect, nothing in the provision is 
to be construed to prohibit the issuance of guidance to carry 
out the amendments so long as the guidance is necessary to 
implement the amendments. Until the time when regulations or 
other guidance is issued to carry out the amendments, a plan or 
a fiduciary will be treated as meeting the requirements of the 
amendments if the plan or fiduciary, as applicable, complies 
with a reasonable good faith interpretation of the amendments.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the vote of the Committee on Ways and Means in its 
consideration of H.R. 4294, the ``Strengthening Access to 
Valuable Education and Retirement Support Act of 2015'' or the 
``SAVERS Act of 2015,'' on February 3, 2016.
    The Chairman's amendment in the nature of a substitute was 
adopted by a voice vote (with a quorum being present).
    The bill, H.R. 4294, was ordered favorably reported to the 
House of Representatives as amended by a roll call vote of 26 
yeas to 12 nays (with a quorum being present). The vote was as 
follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Johnson....................        X   ........  .........  Mr. Rangel.......  ........        X   .........
Mr. Nunes......................        X   ........  .........  Mr. McDermott....  ........        X   .........
Mr. Tiberi.....................        X   ........  .........  Mr. Lewis........  ........        X   .........
Mr. Reichert...................        X   ........  .........  Mr. Neal.........        X   ........  .........
Mr. Boustany...................  ........  ........  .........  Mr. Becerra......  ........        X   .........
Mr. Roskam.....................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Price......................        X   ........  .........  Mr. Thompson.....        X   ........  .........
Mr. Buchanan...................        X   ........  .........  Mr. Larson.......        X   ........  .........
Mr. Smith (NE).................        X   ........  .........  Mr. Blumenauer...  ........        X   .........
Ms. Jenkins....................        X   ........  .........  Mr. Kind.........  ........        X   .........
Mr. Paulsen....................        X   ........  .........  Mr. Pascrell.....  ........        X   .........
Mr. Marchant...................        X   ........  .........  Mr. Crowley......  ........        X   .........
Ms. Black......................        X   ........  .........  Mr. Davis........  ........        X   .........
Mr. Reed.......................        X   ........  .........  Ms. Sanchez......  ........        X   .........
Mr. Young......................        X   ........  .........
Mr. Kelly......................        X   ........  .........
Mr. Renacci....................        X   ........  .........
Mr. Meehan.....................        X   ........  .........
Ms. Noem.......................        X   ........  .........
Mr. Holding....................        X   ........  .........
Mr. Smith (MO).................        X   ........  .........
Mr. Dold.......................        X   ........  .........
Mr. Rice.......................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

                     IV. BUDGET EFFECTS OF THE BILL


               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the bill, H.R. 4294, as 
reported.
    The bill, as reported, is estimated to have a negligible 
effect on Federal fiscal year budget receipts for the period 
2016-2026.
    Pursuant to clause 8 of rule XIII of the Rules of the House 
of Representatives, the following statement is made by the 
Joint Committee on Taxation with respect to the provisions of 
the bill amending the Internal Revenue Code of 1986: The gross 
budgetary effect (before incorporating macroeconomic effects) 
in any fiscal year is less than 0.25 percent of the current 
projected gross domestic product of the United States for that 
fiscal year; therefore, the bill is not ``major legislation'' 
for purposes of requiring that the estimate include the 
budgetary effects of changes in economic output, employment, 
capital stock and other macroeconomic variables.

B. Statement Regarding New Budget Authority and Tax Expenditures Budget 
                               Authority

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
bill involves no new or increased budget authority. The 
Committee further states that there are no new or increased tax 
expenditures.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the CBO, the following statement by CBO is 
provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, February 10, 2016.
Hon. Kevin Brady,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 4294, the 
Strengthening Access to Valuable Education and Retirement 
Support Act of 2015.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Peter 
Huether.
            Sincerely,
                                                        Keith Hall.
    Enclosure.

H.R. 4294--Strengthening Access to Valuable Education and Retirement 
        Support Act of 2015

    H.R. 4294, the Strengthening Access to Valuable Education 
and Retirement Support Act of 2015, amends the section of the 
Internal Revenue Code that prohibits self-dealing transactions 
by fiduciaries of certain tax-favored plans, including 
employer-sponsored retirement plans, individual retirement 
accounts and health savings accounts. The bill would add a 
definition of investment advice to that section of the Internal 
Revenue Code. The bill would also add a new statutory exemption 
related to investment advice that a fiduciary can provide to 
these tax-favored plans, plan participants, or beneficiaries. 
Among other provisions, H.R. 4294 would change requirements 
regarding disclosure of potential compensation accruing to the 
fiduciary or an affiliate.
    The staff of the Joint Committee on Taxation (JCT) 
estimates that the bill would have a negligible effect on 
revenues for the period between 2016 and 2026. Enacting the 
bill would not affect direct spending. Because enacting H.R. 
4294 would affect revenues, pay-as-you-go procedures apply.
    CBO and JCT estimate that enacting H.R. 4294 would not 
increase net direct spending or on-budget deficits by more than 
$5 billion in any of the four consecutive 10-year periods 
beginning in 2027.
    JCT has determined that the bill contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act.
    The CBO staff contact for this estimate is Peter Huether. 
The estimate was approved by David Weiner, Assistant Director 
for Tax Analysis.

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE


          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives (relating to oversight findings), 
the Committee advises that it was as a result of the 
Committee's review of the provisions of H.R. 4294 that the 
Committee concluded that it is appropriate to report the bill, 
as amended, favorably to the House of Representatives with the 
recommendation that the bill do pass.

        B. Statement of General Performance Goals and Objectives

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
bill contains no measure that authorizes funding, so no 
statement of general performance goals and objectives for which 
any measure authorizes funding is required.

              C. Information Relating to Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

                D. Applicability of House Rule XXI 5(b)

    Rule XXI 5(b) of the Rules of the House of Representatives 
provides, in part, that ``A bill or joint resolution, 
amendment, or conference report carrying a Federal income tax 
rate increase may not be considered as passed or agreed to 
unless so determined by a vote of not less than three-fifths of 
the Members voting, a quorum being present.'' The Committee has 
carefully reviewed the bill, and states that the bill does not 
involve any Federal income tax rate increases within the 
meaning of the rule.

                       E. Tax Complexity Analysis

    Section 4022(b) of the Internal Revenue Service 
Restructuring and Reform Act of 1998 (``IRS Reform Act'') 
requires the staff of the Joint Committee on Taxation (in 
consultation with the Internal Revenue Service and the Treasury 
Department) to provide a tax complexity analysis. The 
complexity analysis is required for all legislation reported by 
the Senate Committee on Finance, the House Committee on Ways 
and Means, or any committee of conference if the legislation 
includes a provision that directly or indirectly amends the 
Internal Revenue Code of 1986 and has widespread applicability 
to individuals or small businesses.
    Pursuant to clause 3(h)(1) of rule XIII of the Rules of the 
House of Representatives, the staff of the Joint Committee on 
Taxation has determined that a complexity analysis is not 
required under section 4022(b) of the IRS Reform Act because 
the bill contains no provisions that amend the Internal Revenue 
Code of 1986 and that have ``widespread applicability'' to 
individuals or small businesses, within the meaning of the 
rule.

  F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
                                Benefits

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                   G. Duplication of Federal Programs

    In compliance with Sec. 3(g)(2) of H. Res. 5 (114th 
Congress), the Committee states that no provision of the bill 
establishes or reauthorizes: (1) a program of the Federal 
Government known to be duplicative of another Federal program, 
(2) a program included in any report from the Government 
Accountability Office to Congress pursuant to section 21 of 
Public Law 111-139, or (3) a program related to a program 
identified in the most recent Catalog of Federal Domestic 
Assistance, published pursuant to the Federal Program 
Information Act (Public Law 95-220, as amended by Public Law 
98-169).

                 H. Disclosure of Directed Rule Makings

    In compliance with Sec. 3(i) of H. Res. 5 (114th Congress), 
the following statement is made concerning directed rule 
makings: The Committee estimates that the bill requires no 
directed rule makings within the meaning of such section.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED


  A. Text of Existing Law Amended or Repealed by the Bill, as Reported

    In compliance with clause 3(e)(1)(A) of rule XIII of the 
Rules of the House of Representatives, the text of each section 
proposed to be amended or repealed by the bill, as reported, is 
shown below:

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e)(1)(A) of rule XIII of the 
Rules of the House of Representatives, the text of each section 
proposed to be amended or repealed by the bill, as reported, is 
shown below:

                     INTERNAL REVENUE CODE OF 1986




           *       *       *       *       *       *       *
Subtitle D--Miscellaneous Excise Taxes

           *       *       *       *       *       *       *


CHAPTER 43--QUALIFIED PENSION, ETC., PLANS

           *       *       *       *       *       *       *


SEC. 4975. TAX ON PROHIBITED TRANSACTIONS.

  (a) Initial Taxes on Disqualified Person.--There is hereby 
imposed a tax on each prohibited transaction. The rate of tax 
shall be equal to 15 percent of the amount involved with 
respect to the prohibited transaction for each year (or part 
thereof) in the taxable period. The tax imposed by this 
subsection shall be paid by any disqualified person who 
participates in the prohibited transaction (other than a 
fiduciary acting only as such).
  (b) Additional Taxes on Disqualified Person.--In any case in 
which an initial tax is imposed by subsection (a) on a 
prohibited transaction and the transaction is not corrected 
within the taxable period, there is hereby imposed a tax equal 
to 100 percent of the amount involved. The tax imposed by this 
subsection shall be paid by any disqualified person who 
participated in the prohibited transaction (other than a 
fiduciary acting only as such).
  (c) Prohibited Transaction.--
          (1) General rule.--For purposes of this section, the 
        term ``prohibited transaction'' means any direct or 
        indirect--
                  (A) sale or exchange, or leasing, of any 
                property between a plan and a disqualified 
                person;
                  (B) lending of money or other extension of 
                credit between a plan and a disqualified 
                person;
                  (C) furnishing of goods, services, or 
                facilities between a plan and a disqualified 
                person;
                  (D) transfer to, or use by or for the benefit 
                of, a disqualified person of the income or 
                assets of a plan;
                  (E) act by a disqualified person who is a 
                fiduciary whereby he deals with the income or 
                assets of a plan in his own interests or for 
                his own account; or
                  (F) receipt of any consideration for his own 
                personal account by any disqualified person who 
                is a fiduciary from any party dealing with the 
                plan in connection with a transaction involving 
                the income or assets of the plan.
          (2) Special exemption.--The Secretary shall establish 
        an exemption procedure for purposes of this subsection. 
        Pursuant to such procedure, he may grant a conditional 
        or unconditional exemption of any disqualified person 
        or transaction, orders of disqualified persons or 
        transactions, from all or part of the restrictions 
        imposed by paragraph (1) of this subsection. Action 
        under this subparagraph may be taken only after 
        consultation and coordination with the Secretary of 
        Labor. The Secretary may not grant an exemption under 
        this paragraph unless he finds that such exemption is--
                  (A) administratively feasible,
                  (B) in the interests of the plan and of its 
                participants and beneficiaries, and
                  (C) protective of the rights of participants 
                and beneficiaries of the plan.
        Before granting an exemption under this paragraph, the 
        Secretary shall require adequate notice to be given to 
        interested persons and shall publish notice in the 
        Federal Register of the pendency of such exemption and 
        shall afford interested persons an opportunity to 
        present views. No exemption may be granted under this 
        paragraph with respect to a transaction described in 
        subparagraph (E) or (F) of paragraph (1) unless the 
        Secretary affords an opportunity for a hearing and 
        makes a determination on the record with respect to the 
        findings required under subparagraphs (A), (B), and (C) 
        of this paragraph, except that in lieu of such hearing 
        the Secretary may accept any record made by the 
        Secretary of Labor with respect to an application for 
        exemption under section 408(a) of title I of the 
        Employee Retirement Income Security Act of 1974.
          (3) Special rule for individual retirement 
        accounts.--An individual for whose benefit an 
        individual retirement account is established and his 
        beneficiaries shall be exempt from the tax imposed by 
        this section with respect to any transaction concerning 
        such account (which would otherwise be taxable under 
        this section) if, with respect to such transaction, the 
        account ceases to be an individual retirement account 
        by reason of the application of section 408(e)(2)(A) or 
        if section 408(e)(4) applies to such account.
          (4) Special rule for Archer MSAs.--An individual for 
        whose benefit an Archer MSA (within the meaning of 
        section 220(d)) is established shall be exempt from the 
        tax imposed by this section with respect to any 
        transaction concerning such account (which would 
        otherwise be taxable under this section) if section 
        220(e)(2) applies to such transaction.
          (5) Special rule for Coverdell education savings 
        accounts.--An individual for whose benefit a Coverdell 
        education savings account is established and any 
        contributor to such account shall be exempt from the 
        tax imposed by this section with respect to any 
        transaction concerning such account (which would 
        otherwise be taxable under this section) if section 
        530(d) applies with respect to such transaction.
          (6) Special rule for health savings accounts.--An 
        individual for whose benefit a health savings account 
        (within the meaning of section 223(d)) is established 
        shall be exempt from the tax imposed by this section 
        with respect to any transaction concerning such account 
        (which would otherwise be taxable under this section) 
        if, with respect to such transaction, the account 
        ceases to be a health savings account by reason of the 
        application of section 223(e)(2) to such account.
  (d) Exemptions.--Except as provided in subsection (f)(6), the 
prohibitions provided in subsection (c) shall not apply to--
          (1) any loan made by the plan to a disqualified 
        person who is a participant or beneficiary of the plan 
        if such loan--
                  (A) is available to all such participants or 
                beneficiaries on a reasonably equivalent basis,
                  (B) is not made available to highly 
                compensated employees (within the meaning of 
                section 414(q)) in an amount greater than the 
                amount made available to other employees,
                  (C) is made in accordance with specific 
                provisions regarding such loans set forth in 
                the plan,
                  (D) bears a reasonable rate of interest, and
                  (E) is adequately secured;
          (2) any contract, or reasonable arrangement, made 
        with a disqualified person for office space, or legal, 
        accounting, or other services necessary for the 
        establishment or operation of the plan, if no more than 
        reasonable compensation is paid therefor;
          (3) any loan to an leveraged employee stock ownership 
        plan (as defined in subsection (e)(7)), if--
                  (A) such loan is primarily for the benefit of 
                participants and beneficiaries of the plan, and
                  (B) such loan is at a reasonable rate of 
                interest, and any collateral which is given to 
                a disqualified person by the plan consists only 
                of qualifying employer securities (as defined 
                in subsection (e)(8));
          (4) the investment of all or part of a plan's assets 
        in deposits which bear a reasonable interest rate in a 
        bank or similar financial institution supervised by the 
        United States or a State, if such bank or other 
        institution is a fiduciary of such plan and if--
                  (A) the plan covers only employees of such 
                bank or other institution and employees of 
                affiliates of such bank or other institution, 
                or
                  (B) such investment is expressly authorized 
                by a provision of the plan or by a fiduciary 
                (other than such bank or institution or 
                affiliates thereof) who is expressly empowered 
                by the plan to so instruct the trustee with 
                respect to such investment;
          (5) any contract for life insurance, health 
        insurance, or annuities with one or more insurers which 
        are qualified to do business in a State if the plan 
        pays no more than adequate consideration, and if each 
        such insurer or insurers is--
                  (A) the employer maintaining the plan, or
                  (B) a disqualified person which is wholly 
                owned (directly or indirectly) by the employer 
                establishing the plan, or by any person which 
                is a disqualified person with respect to the 
                plan, but only if the total premiums and 
                annuity considerations written by such insurers 
                for life insurance, health insurance, or 
                annuities for all plans (and their employers) 
                with respect to which such insurers are 
                disqualified persons (not including premiums or 
                annuity considerations written by the employer 
                maintaining the plan) do not exceed 5 percent 
                of the total premiums and annuity 
                considerations written for all lines of 
                insurance in that year by such insurers (not 
                including premiums or annuity considerations 
                written by the employer maintaining the plan);
          (6) the provision of any ancillary service by a bank 
        or similar financial institution supervised by the 
        United States or a State, if such service is provided 
        at not more than reasonable compensation, if such bank 
        or other institution is a fiduciary of such plan, and 
        if--
                  (A) such bank or similar financial 
                institution has adopted adequate internal 
                safeguards which assure that the provision of 
                such ancillary service is consistent with sound 
                banking and financial practice, as determined 
                by Federal or State supervisory authority, and
                  (B) the extent to which such ancillary 
                service is provided is subject to specific 
                guidelines issued by such bank or similar 
                financial institution (as determined by the 
                Secretary after consultation with Federal and 
                State supervisory authority), and under such 
                guidelines the bank or similar financial 
                institution does not provide such ancillary 
                service--
                          (i) in an excessive or unreasonable 
                        manner, and
                          (ii) in a manner that would be 
                        inconsistent with the best interests of 
                        participants and beneficiaries of 
                        employee benefit plans;
          (7) the exercise of a privilege to convert 
        securities, to the extent provided in regulations of 
        the Secretary but only if the plan receives no less 
        than adequate consideration pursuant to such 
        conversion;
          (8) any transaction between a plan and a common or 
        collective trust fund or pooled investment fund 
        maintained by a disqualified person which is a bank or 
        trust company supervised by a State or Federal agency 
        or between a plan and a pooled investment fund of an 
        insurance company qualified to do business in a State 
        if--
                  (A) the transaction is a sale or purchase of 
                an interest in the fund,
                  (B) the bank, trust company, or insurance 
                company receives not more than a reasonable 
                compensation, and
                  (C) such transaction is expressly permitted 
                by the instrument under which the plan is 
                maintained, or by a fiduciary (other than the 
                bank, trust company, or insurance company, or 
                an affiliate thereof) who has authority to 
                manage and control the assets of the plan;
          (9) receipt by a disqualified person of any benefit 
        to which he may be entitled as a participant or 
        beneficiary in the plan, so long as the benefit is 
        computed and paid on a basis which is consistent with 
        the terms of the plan as applied to all other 
        participants and beneficiaries;
          (10) receipt by a disqualified person of any 
        reasonable compensation for services rendered, or for 
        the reimbursement of expenses properly and actually 
        incurred, in the performance of his duties with the 
        plan, but no person so serving who already receives 
        full-time pay from an employer or an association of 
        employers, whose employees are participants in the plan 
        or from an employee organization whose members are 
        participants in such plan shall receive compensation 
        from such fund, except for reimbursement of expenses 
        properly and actually incurred;
          (11) service by a disqualified person as a fiduciary 
        in addition to being an officer, employee, agent, or 
        other representative of a disqualified person;
          (12) the making by a fiduciary of a distribution of 
        the assets of the trust in accordance with the terms of 
        the plan if such assets are distributed in the same 
        manner as provided under section 4044 of title IV of 
        the Employee Retirement Income Security Act of 1974 
        (relating to allocation of assets);
          (13) any transaction which is exempt from section 406 
        of such Act by reason of section 408(e) of such Act (or 
        which would be so exempt if such section 406 applied to 
        such transaction) or which is exempt from section 406 
        of such Act by reason of section 408(b)(12) of such 
        Act;
          (14) any transaction required or permitted under part 
        1 of subtitle E of title IV or section 4223 of the 
        Employee Retirement Income Security Act of 1974, but 
        this paragraph shall not apply with respect to the 
        application of subsection (c)(1) (E) or (F);
          (15) a merger of multiemployer plans, or the transfer 
        of assets or liabilities between multiemployer plans, 
        determined by the Pension Benefit Guaranty Corporation 
        to meet the requirements of section 4231 of such Act, 
        but this paragraph shall not apply with respect to the 
        application of subsection (c)(1) (E) or (F);
          (16) a sale of stock held by a trust which 
        constitutes an individual retirement account under 
        section 408(a) to the individual for whose benefit such 
        account is established if--
                  (A) such stock is in a bank (as defined in 
                section 581) or a depository institution 
                holding company (as defined in section 3(w)(1) 
                of the Federal Deposit Insurance Act (12 U.S.C. 
                1813(w)(1)),
                  (B) such stock is held by such trust as of 
                the date of the enactment of this paragraph,
                  (C) such sale is pursuant to an election 
                under section 1362(a) by such bank or company,
                  (D) such sale is for fair market value at the 
                time of sale (as established by an independent 
                appraiser) and the terms of the sale are 
                otherwise at least as favorable to such trust 
                as the terms that would apply on a sale to an 
                unrelated party,
                  (E) such trust does not pay any commissions, 
                costs, or other expenses in connection with the 
                sale, and
                  (F) the stock is sold in a single transaction 
                for cash not later than 120 days after the S 
                corporation election is made;
          (17) Any transaction in connection with the provision 
        of investment advice described in subsection (e)(3)(B) 
        to a participant or beneficiary in a plan that permits 
        such participant or beneficiary 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 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 employee, agent, or 
                        registered representative of the 
                        fiduciary adviser or affiliate) in 
                        connection 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,
          (18) any transaction involving the purchase or sale 
        of securities, or other property (as determined by the 
        Secretary of Labor), between a plan and a disqualified 
        person (other than a fiduciary described in subsection 
        (e)(3)) with respect to a plan if--
                  (A) the transaction involves a block trade,
                  (B) at the time of the transaction, the 
                interest of the plan (together with the 
                interests of any other plans maintained by the 
                same plan sponsor), does not exceed 10 percent 
                of the aggregate size of the block trade,
                  (C) the terms of the transaction, including 
                the price, are at least as favorable to the 
                plan as an arm's length transaction, and
                  (D) the compensation associated with the 
                purchase and sale is not greater than the 
                compensation associated with an arm's length 
                transaction with an unrelated party,
          (19) any transaction involving the purchase or sale 
        of securities, or other property (as determined by the 
        Secretary of Labor), between a plan and a disqualified 
        person if--
                  (A) the transaction is executed through an 
                electronic communication network, alternative 
                trading system, or similar execution system or 
                trading venue subject to regulation and 
                oversight by--
                          (i) the applicable Federal regulating 
                        entity, or
                          (ii) such foreign regulatory entity 
                        as the Secretary of Labor may determine 
                        by regulation,
                  (B) either--
                          (i) the transaction is effected 
                        pursuant to rules designed to match 
                        purchases and sales at the best price 
                        available through the execution system 
                        in accordance with applicable rules of 
                        the Securities and Exchange Commission 
                        or other relevant governmental 
                        authority, or
                          (ii) neither the execution system nor 
                        the parties to the transaction take 
                        into account the identity of the 
                        parties in the execution of trades,
                  (C) the price and compensation associated 
                with the purchase and sale are not greater than 
                the price and compensation associated with an 
                arm's length transaction with an unrelated 
                party,
                  (D) if the disqualified person has an 
                ownership interest in the system or venue 
                described in subparagraph (A), the system or 
                venue has been authorized by the plan sponsor 
                or other independent fiduciary for transactions 
                described in this paragraph, and
                  (E) not less than 30 days prior to the 
                initial transaction described in this paragraph 
                executed through any system or venue described 
                in subparagraph (A), a plan fiduciary is 
                provided written or electronic notice of the 
                execution of such transaction through such 
                system or venue,
          (20) transactions described in subparagraphs (A), 
        (B), and (D) of subsection (c)(1) between a plan and a 
        person that is a disqualified person other than a 
        fiduciary (or an affiliate) who has or exercises any 
        discretionary authority or control with respect to the 
        investment of the plan assets involved in the 
        transaction or renders investment advice (within the 
        meaning of subsection (e)(3)(B)) with respect to those 
        assets, solely by reason of providing services to the 
        plan or solely by reason of a relationship to such a 
        service provider described in subparagraph (F), (G), 
        (H), or (I) of subsection (e)(2), or both, but only if 
        in connection with such transaction the plan receives 
        no less, nor pays no more, than adequate consideration,
          (21) any foreign exchange transactions, between a 
        bank or broker-dealer (or any affiliate of either) and 
        a plan (as defined in this section) with respect to 
        which such bank or broker-dealer (or affiliate) is a 
        trustee, custodian, fiduciary, or other disqualified 
        person person, if--
                  (A) the transaction is in connection with the 
                purchase, holding, or sale of securities or 
                other investment assets (other than a foreign 
                exchange transaction unrelated to any other 
                investment in securities or other investment 
                assets),
                  (B) at the time the foreign exchange 
                transaction is entered into, the terms of the 
                transaction are not less favorable to the plan 
                than the terms generally available in 
                comparable arm's length foreign exchange 
                transactions between unrelated parties, or the 
                terms afforded by the bank or broker-dealer (or 
                any affiliate of either) in comparable arm's-
                length foreign exchange transactions involving 
                unrelated parties,
                  (C) the exchange rate used by such bank or 
                broker-dealer (or affiliate) for a particular 
                foreign exchange transaction does not deviate 
                by more than 3 percent from the interbank bid 
                and asked rates for transactions of comparable 
                size and maturity at the time of the 
                transaction as displayed on an independent 
                service that reports rates of exchange in the 
                foreign currency market for such currency, and
                  (D) the bank or broker-dealer (or any 
                affiliate of either) does not have investment 
                discretion, or provide investment advice, with 
                respect to the transaction,
          (22) any transaction described in subsection 
        (c)(1)(A) involving the purchase and sale of a security 
        between a plan and any other account managed by the 
        same investment manager, if--
                  (A) the transaction is a purchase or sale, 
                for no consideration other than cash payment 
                against prompt delivery of a security for which 
                market quotations are readily available,
                  (B) the transaction is effected at the 
                independent current market price of the 
                security (within the meaning of section 
                270.17a-7(b) of title 17, Code of Federal 
                Regulations),
                  (C) no brokerage commission, fee (except for 
                customary transfer fees, the fact of which is 
                disclosed pursuant to subparagraph (D)), or 
                other remuneration is paid in connection with 
                the transaction,
                  (D) a fiduciary (other than the investment 
                manager engaging in the cross-trades or any 
                affiliate) for each plan participating in the 
                transaction authorizes in advance of any cross-
                trades (in a document that is separate from any 
                other written agreement of the parties) the 
                investment manager to engage in cross trades at 
                the investment manager's discretion, after such 
                fiduciary has received disclosure regarding the 
                conditions under which cross trades may take 
                place (but only if such disclosure is separate 
                from any other agreement or disclosure 
                involving the asset management relationship), 
                including the written policies and procedures 
                of the investment manager described in 
                subparagraph (H),
                  (E) each plan participating in the 
                transaction has assets of at least 
                $100,000,000, except that if the assets of a 
                plan are invested in a master trust containing 
                the assets of plans maintained by employers in 
                the same controlled group (as defined in 
                section 407(d)(7) of the Employee Retirement 
                Income Security Act of 1974), the master trust 
                has assets of at least $100,000,000,
                  (F) the investment manager provides to the 
                plan fiduciary who authorized cross trading 
                under subparagraph (D) a quarterly report 
                detailing all cross trades executed by the 
                investment manager in which the plan 
                participated during such quarter, including the 
                following information, as applicable: (i) the 
                identity of each security bought or sold; (ii) 
                the number of shares or units traded; (iii) the 
                parties involved in the cross-trade; and (iv) 
                trade price and the method used to establish 
                the trade price,
                  (G) the investment manager does not base its 
                fee schedule on the plan's consent to cross 
                trading, and no other service (other than the 
                investment opportunities and cost savings 
                available through a cross trade) is conditioned 
                on the plan's consent to cross trading,
                  (H) the investment manager has adopted, and 
                cross-trades are effected in accordance with, 
                written cross-trading policies and procedures 
                that are fair and equitable to all accounts 
                participating in the cross-trading program, and 
                that include a description of the manager's 
                pricing policies and procedures, and the 
                manager's policies and procedures for 
                allocating cross trades in an objective manner 
                among accounts participating in the cross-
                trading program, and
                  (I) the investment manager has designated an 
                individual responsible for periodically 
                reviewing such purchases and sales to ensure 
                compliance with the written policies and 
                procedures described in subparagraph (H), and 
                following such review, the individual shall 
                issue an annual written report no later than 90 
                days following the period to which it relates 
                signed under penalty of perjury to the plan 
                fiduciary who authorized cross trading under 
                subparagraph (D) describing the steps performed 
                during the course of the review, the level of 
                compliance, and any specific instances of non-
                compliance.
        The written report shall also notify the plan fiduciary 
        of the plan's right to terminate participation in the 
        investment manager's cross-trading program at any time, 
        or
          (23) except as provided in subsection (f)(11), a 
        transaction described in subparagraph (A), (B), (C), or 
        (D) of subsection (c)(1) in connection with the 
        acquisition, holding, or disposition of any security or 
        commodity, if the transaction is corrected before the 
        end of the correction period.
  (e) Definitions.--
          (1) Plan.--For purposes of this section, the term 
        ``plan'' means--
                  (A) a trust described in section 401(a) which 
                forms a part of a plan, or a plan described in 
                section 403(a), which trust or plan is exempt 
                from tax under section 501(a),
                  (B) an individual retirement account 
                described in section 408(a),
                  (C) an individual retirement annuity 
                described in section 408(b),
                  (D) an Archer MSA described in section 
                220(d),
                  (E) a health savings account described in 
                section 223(d),
                  (F) a Coverdell education savings account 
                described in section 530, or
                  (G) a trust, plan, account, or annuity which, 
                at any time, has been determined by the 
                Secretary to be described in any preceding 
                subparagraph of this paragraph.
          (2) Disqualified person.--For purposes of this 
        section, the term ``disqualified person'' means a 
        person who is--
                  (A) a fiduciary;
                  (B) a person providing services to the plan;
                  (C) an employer any of whose employees are 
                covered by the plan;
                  (D) an employee organization any of whose 
                members are covered by the plan;
                  (E) an owner, direct or indirect, of 50 
                percent or more of--
                          (i) the combined voting power of all 
                        classes of stock entitled to vote or 
                        the total value of shares of all 
                        classes of stock of a corporation,
                          (ii) the capital interest or the 
                        profits interest of a partnership, or
                          (iii) the beneficial interest of a 
                        trust or unincorporated enterprise,
                which is an employer or an employee 
                organization described in subparagraph (C) or 
                (D);
                  (F) a member of the family (as defined in 
                paragraph (6)) of any individual described in 
                subparagraph (A), (B), (C), or (E);
                  (G) a corporation, partnership, or trust or 
                estate of which (or in which) 50 percent or 
                more of--
                          (i) the combined voting power of all 
                        classes of stock entitled to vote or 
                        the total value of shares of all 
                        classes of stock of such corporation,
                          (ii) the capital interest or profits 
                        interest of such partnership, or
                          (iii) the beneficial interest of such 
                        trust or estate, is owned directly or 
                        indirectly, or held by persons 
                        described in subparagraph (A), (B), 
                        (C), (D), or (E);
                  (H) an officer, director (or an individual 
                having powers or responsibilities similar to 
                those of officers or directors), a 10 percent 
                or more shareholder, or a highly compensated 
                employee (earning 10 percent or more of the 
                yearly wages of an employer) of a person 
                described in subparagraph (C), (D), (E), or 
                (G); or
                  (I) a 10 percent or more (in capital or 
                profits) partner or joint venturer of a person 
                described in subparagraph (C), (D), (E), or 
                (G).
        The Secretary, after consultation and coordination with 
        the Secretary of Labor or his delegate, may by 
        regulation prescribe a percentage lower than 50 percent 
        for subparagraphs (E) and (G) and lower than 10 percent 
        for subparagraphs (H) and (I).
          (3) Fiduciary.--For purposes of this section, the 
        term ``fiduciary'' means any person who--
                  (A) exercises any discretionary authority or 
                discretionary control respecting management of 
                such plan or exercises any authority or control 
                respecting management or disposition of its 
                assets,
                  (B) renders investment advice for a fee or 
                other compensation, direct or indirect, with 
                respect to any moneys or other property of such 
                plan, or has any authority or responsibility to 
                do so, or
                  (C) has any discretionary authority or 
                discretionary responsibility in the 
                administration of such plan.
        Such term includes any person designated under section 
        405(c)(1)(B) of the Employee Retirement Income Security 
        Act of 1974.
          (4) Stockholdings.--For purposes of paragraphs 
        (2)(E)(i) and (G)(i) there shall be taken into account 
        indirect stockholdings which would be taken into 
        account under section 267(c), except that, for purposes 
        of this paragraph, section 267(c)(4) shall be treated 
        as providing that the members of the family of an 
        individual are the members within the meaning of 
        paragraph (6).
          (5) Partnerships; trusts.--For purposes of paragraphs 
        (2)(E)(ii) and (iii), (G)(ii) and (iii), and (I) the 
        ownership of profits or beneficial interests shall be 
        determined in accordance with the rules for 
        constructive ownership of stock provided in section 
        267(c) (other than paragraph (3) thereof), except that 
        section 267(c)(4) shall be treated as providing that 
        the members of the family of an individual are the 
        members within the meaning of paragraph (6).
          (6) Member of family.--For purposes of paragraph 
        (2)(F), the family of any individual shall include his 
        spouse, ancestor, lineal descendant, and any spouse of 
        a lineal descendant.
          (7) Employee stock ownership plan.--The term 
        ``employee stock ownership plan'' means a defined 
        contribution plan--
                  (A) which is a stock bonus plan which is 
                qualified, or a stock bonus and a money 
                purchase plan both of which are qualified under 
                section 401(a), and which are designed to 
                invest primarily in qualifying employer 
                securities; and
                  (B) which is otherwise defined in regulations 
                prescribed by the Secretary.
        A plan shall not be treated as an employee stock 
        ownership plan unless it meets the requirements of 
        section 409(h), section 409(o), and, if applicable, 
        section 409(n), section 409(p), and section 664(g) and, 
        if the employer has a registration-type class of 
        securities (as defined in section 409(e)(4)), it meets 
        the requirements of section 409(e).
          (8) Qualifying employer security.--The term 
        ``qualifying employer security'' means any employer 
        security within the meaning of section 409(l). If any 
        moneys or other property of a plan are invested in 
        shares of an investment company registered under the 
        Investment Company Act of 1940, the investment shall 
        not cause that investment company or that investment 
        company's investment adviser or principal underwriter 
        to be treated as a fiduciary or a disqualified person 
        for purposes of this section, except when an investment 
        company or its investment adviser or principal 
        underwriter acts in connection with a plan covering 
        employees of the investment company, its investment 
        adviser, or its principal underwriter.
          (9) Section made applicable to withdrawal liability 
        payment funds.--For purposes of this section--
                  (A) In general.--The term ``plan'' includes a 
                trust described in section 501(c)(22).
                  (B) Disqualified person.--In the case of any 
                trust to which this section applies by reason 
                of subparagraph (A), the term ``disqualified 
                person'' includes any person who is a 
                disqualified person with respect to any plan to 
                which such trust is permitted to make payments 
                under section 4223 of the Employee Retirement 
                Income Security Act of 1974.
  (f) Other Definitions and Special Rules.--For purposes of 
this section--
          (1) Joint and several liability.--If more than one 
        person is liable under subsection (a) or (b) with 
        respect to any one prohibited transaction, all such 
        persons shall be jointly and severally liable under 
        such subsection with respect to such transaction.
          (2) Taxable period.--The term ``taxable period'' 
        means, with respect to any prohibited transaction, the 
        period beginning with the date on which the prohibited 
        transaction occurs and ending on the earliest of--
                  (A) the date of mailing a notice of 
                deficiency with respect to the tax imposed by 
                subsection (a) under section 6212,
                  (B) the date on which the tax imposed by 
                subsection (a) is assessed, or
                  (C) the date on which correction of the 
                prohibited transaction is completed.
          (3) Sale or exchange; encumbered property.--A 
        transfer or real or personal property by a disqualified 
        person to a plan shall be treated as a sale or exchange 
        if the property is subject to a mortgage or similar 
        lien which the plan assumes or if it is subject to a 
        mortgage or similar lien which a disqualified person 
        placed on the property within the 10-year period ending 
        on the date of the transfer.
          (4) Amount involved.--The term ``amount involved'' 
        means, with respect to a prohibited transaction, the 
        greater of the amount of money and the fair market 
        value of the other property given or the amount of 
        money and the fair market value of the other property 
        received; except that, in the case of services 
        described in paragraphs (2) and (10) of subsection (d) 
        the amount involved shall be only the excess 
        compensation. For purposes of the preceding sentence, 
        the fair market value--
                  (A) in the case of the tax imposed by 
                subsection (a), shall be determined as of the 
                date on which the prohibited transaction 
                occurs; and
                  (B) in the case of the tax imposed by 
                subsection (b), shall be the highest fair 
                market value during the taxable period.
          (5) Correction.--The terms ``correction'' and 
        ``correct'' mean, with respect to a prohibited 
        transaction, undoing the transaction to the extent 
        possible, but in any case placing the plan in a 
        financial position not worse than that in which it 
        would be if the disqualified person were acting under 
        the highest fiduciary standards.
          (6) Exemptions not to apply to certain 
        transactions.--
                  (A) In general.--In the case of a trust 
                described in section 401(a) which is part of a 
                plan providing contributions or benefits for 
                employees some or all of whom are owner-
                employees (as defined in section 401(c)(3)), 
                the exemptions provided by subsection (d) 
                (other than paragraphs (9) and (12)) shall not 
                apply to a transaction in which the plan 
                directly or indirectly--
                          (i) lends any part of the corpus or 
                        income of the plan to,
                          (ii) pays any compensation for 
                        personal services rendered to the plan 
                        to, or
                          (iii) acquires for the plan any 
                        property from, or sells any property 
                        to,
                any such owner-employee, a member of the family 
                (as defined in section 267(c)(4)) of any such 
                owner-employee, or any corporation in which any 
                such owner-employee owns, directly or 
                indirectly, 50 percent or more of the total 
                combined voting power of all classes of stock 
                entitled to vote or 50 percent or more of the 
                total value of shares of all classes of stock 
                of the corporation.
                  (B) Special rules for shareholder-employees, 
                etc.
                          (i) In general.--For purposes of 
                        subparagraph (A), the following shall 
                        be treated as owner-employees:
                                  (I) A shareholder-employee.
                                  (II) A participant or 
                                beneficiary of an individual 
                                retirement plan (as defined in 
                                section 7701(a)(37)).
                                  (III) An employer or 
                                association of employees which 
                                establishes such an individual 
                                retirement plan under section 
                                408(c).
                          (ii) Exception for certain 
                        transactions involving shareholder-
                        employees.--Subparagraph (A)(iii) shall 
                        not apply to a transaction which 
                        consists of a sale of employer 
                        securities to an employee stock 
                        ownership plan (as defined in 
                        subsection (e)(7)) by a shareholder- 
                        employee, a member of the family (as 
                        defined in section 267(c)(4)) of such 
                        shareholder-employee, or a corporation 
                        in which such a shareholder-employee 
                        owns stock representing a 50 percent or 
                        greater interest described in 
                        subparagraph (A).
                          (iii) Loan exception.--For purposes 
                        of subparagraph (A)(i), the term 
                        ``owner-employee'' shall only include a 
                        person described in subclause (II) or 
                        (III) of clause (i).
                  (C) Shareholder-employee.--For purposes of 
                subparagraph (B), the term ``shareholder-
                employee'' means an employee or officer of an S 
                corporation who owns (or is considered as 
                owning within the meaning of section 318(a)(1)) 
                more than 5 percent of the outstanding stock of 
                the corporation on any day during the taxable 
                year of such corporation.
          (7) S corporation repayment of loans for qualifying 
        employer securities.--A plan shall not be treated as 
        violating the requirements of section 401 or 409 or 
        subsection (e)(7), or as engaging in a prohibited 
        transaction for purposes of subsection (d)(3), merely 
        by reason of any distribution (as described in section 
        1368(a)) with respect to S corporation stock that 
        constitutes qualifying employer securities, which in 
        accordance with the plan provisions is used to make 
        payments on a loan described in subsection (d)(3) the 
        proceeds of which were used to acquire such qualifying 
        employer securities (whether or not allocated to 
        participants). The preceding sentence shall not apply 
        in the case of a distribution which is paid with 
        respect to any employer security which is allocated to 
        a participant unless the plan provides that employer 
        securities with a fair market value of not less than 
        the amount of such distribution are allocated to such 
        participant for the year which (but for the preceding 
        sentence) such distribution would have been allocated 
        to such participant.
          (8) Provision of investment advice to participant and 
        beneficiaries.--
                  (A) In general.--The prohibitions provided in 
                subsection (c) shall not apply to transactions 
                described in subsection (d)(17) if the 
                investment advice provided by a fiduciary 
                adviser is provided under an eligible 
                investment advice arrangement.
                  (B) Eligible investment advice arrangement.--
                For purposes of this paragraph, the term 
                ``eligible investment advice arrangement'' 
                means an arrangement--
                          (i) which either--
                                  (I) provides that any fees 
                                (including any commission or 
                                other compensation) received by 
                                the fiduciary adviser for 
                                investment advice or with 
                                respect to the sale, holding, 
                                or acquisition of any security 
                                or other property for purposes 
                                of investment of plan assets do 
                                not vary depending on the basis 
                                of any investment option 
                                selected, or
                                  (II) uses a computer model 
                                under an investment advice 
                                program meeting the 
                                requirements of subparagraph 
                                (C) in connection with the 
                                provision of investment advice 
                                by a fiduciary adviser to a 
                                participant or beneficiary, and
                          (ii) with respect to which the 
                        requirements of subparagraphs (D), (E), 
                        (F), (G), (H), and (I) are met.
                  (C) Investment advice program using computer 
                model.--
                          (i) In general.--An investment advice 
                        program meets the requirements of this 
                        subparagraph if the requirements of 
                        clauses (ii), (iii), and (iv) are met.
                          (ii) Computer model.--The 
                        requirements of this clause are met if 
                        the investment advice provided under 
                        the investment advice program is 
                        provided pursuant to a computer model 
                        that--
                                  (I) applies generally 
                                accepted investment theories 
                                that take into account the 
                                historic returns of different 
                                asset classes over defined 
                                periods of time,
                                  (II) utilizes relevant 
                                information about the 
                                participant, which may include 
                                age, life expectancy, 
                                retirement 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 options 
                                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 fiduciary adviser, and
                                  (V) takes into account all 
                                investment 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 
                                requirements of this clause are 
                                met with respect to any 
                                investment advice program if an 
                                eligible investment expert 
                                certifies, prior to the 
                                utilization of the 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 
                                certifications.--If, as 
                                determined under regulations 
                                prescribed by the Secretary 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 
                                investment expert'' means any 
                                person which meets such 
                                requirements as the Secretary 
                                of Labor may provide and which 
                                does not bear any material 
                                affiliation or contractual 
                                relationship with any 
                                investment adviser or a related 
                                person thereof (or any 
                                employee, agent, or registered 
                                representative of the 
                                investment adviser or related 
                                person).
                          (iv) Exclusivity of recommendation.--
                        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 advice generated 
                                by the computer model described 
                                in clause (ii), and
                                  (II) any transaction 
                                described in subsection 
                                (d)(17)(A)(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 separate 
                fiduciary.--The requirements of this 
                subparagraph are met with respect to an 
                arrangement if the arrangement is expressly 
                authorized by a plan fiduciary other than the 
                person offering the investment advice program, 
                any 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 
                        independent auditor, who has 
                        appropriate technical 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 requirements 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 subparagraph (G) as relates to 
                        such subparagraphs) of subsection 
                        (e)(1), in lieu of the requirements of 
                        clause (i), audits of the arrangement 
                        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 related to the person offering 
                        the arrangement 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 initial provision of the investment 
                        advice with regard to any security or 
                        other property offered as an investment 
                        option, a written notification (which 
                        may consist of notification by means of 
                        electronic communication)--
                                  (I) of the role of any party 
                                that has a material affiliation 
                                or contractual relationship 
                                with the fiduciary adviser, in 
                                the development of the 
                                investment advice program and 
                                in the selection 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 
                                compensation relating to the 
                                advice that the fiduciary 
                                adviser or any affiliate 
                                thereof is to receive 
                                (including compensation 
                                provided by any third party) in 
                                connection with the provision 
                                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 fiduciary 
                                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,
                                  (VI) of the types of services 
                                provided by the fiduciary 
                                adviser in connection with the 
                                provision of investment advice 
                                by the fiduciary adviser,
                                  (VII) that the adviser is 
                                acting as a fiduciary of the 
                                plan in connection 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 compensation in 
                                connection with the security 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 of the advice no 
                                less frequently than annually,
                                  (III) provides, without 
                                charge, accurate information to 
                                the recipient of the advice 
                                upon request of the recipient, 
                                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 advice at a time reasonably 
                                contemporaneous to the change 
                                in information.
                  (G) Other conditions.--The requirements of 
                this subparagraph are met if--
                          (i) the fiduciary adviser provides 
                        appropriate 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 recipient of the advice,
                          (iii) 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
                          (iv) 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.
                  (H) Standards for presentation of 
                information.--
                          (i) In general.--The requirements of 
                        this subparagraph are met if the 
                        notification required to be provided to 
                        participants and beneficiaries under 
                        subparagraph (F)(i) is written in a 
                        clear and conspicuous manner and in a 
                        manner calculated to be understood by 
                        the average plan participant and is 
                        sufficiently accurate and comprehensive 
                        to reasonably apprise 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 
                        form for the disclosure of fees and 
                        other compensation required in 
                        subparagraph (F)(i)(III) which meets 
                        the requirements of clause (i).
                  (I) Maintenance for 6 years of evidence of 
                compliance.--The requirements of this 
                subparagraph are met if a fiduciary adviser who 
                has provided advice referred to in subparagraph 
                (A) maintains, for a period of not less than 6 
                years after the provision of the advice, any 
                records necessary for determining whether the 
                requirements of the preceding provisions of 
                this paragraph and of subsection (d)(17) have 
                been met. A transaction prohibited under 
                subsection (c) 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.
                  (J) Definitions.--For purposes of this 
                paragraph and subsection (d)(17)--
                          (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 investment advice referred 
                        to in subsection (e)(3)(B) by the 
                        person to a participant or beneficiary 
                        of the plan 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 principal office and place 
                                of business,
                                  (II) a bank or similar 
                                financial institution referred 
                                to in subsection (d)(4) or a 
                                savings association (as defined 
                                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 
                                institution or savings 
                                association which is subject 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 subclauses 
                                (I) through (IV), or
                                  (VI) an employee, agent, or 
                                registered representative of a 
                                person described in subclauses 
                                (I) through (V) who satisfies 
                                the requirements of applicable 
                                insurance, banking, and 
                                securities laws relating to the 
                                provision of the advice.
                        For purposes of this title, a person 
                        who develops the computer model 
                        described in subparagraph (C)(ii) or 
                        markets the investment advice program 
                        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 in 
                        subsection (e)(3)(B) to a participant 
                        or beneficiary and shall be treated as 
                        a fiduciary adviser for purposes of 
                        this paragraph and subsection (d)(17), 
                        except that the Secretary of Labor may 
                        prescribe rules under which only 1 
                        fiduciary adviser may elect to be 
                        treated as a fiduciary with respect to 
                        the plan.
                          (ii) Affiliate.--The term 
                        ``affiliate'' of another entity means 
                        an affiliated person 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 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).
          (9) Block trade.--The term ``block trade'' means any 
        trade of at least 10,000 shares or with a market value 
        of at least $200,000 which will be allocated across two 
        or more unrelated client accounts of a fiduciary.
          (10) Adequate consideration.--The term ``adequate 
        consideration'' means--
                  (A) in the case of a security for which there 
                is a generally recognized market--
                          (i) the price of the security 
                        prevailing on a national securities 
                        exchange which is registered under 
                        section 6 of the Securities Exchange 
                        Act of 1934, taking into account 
                        factors such as the size of the 
                        transaction and marketability of the 
                        security, or
                          (ii) if the security is not traded on 
                        such a national securities exchange, a 
                        price not less favorable to the plan 
                        than the offering price for the 
                        security as established by the current 
                        bid and asked prices quoted by persons 
                        independent of the issuer and of the 
                        party in interest, taking into account 
                        factors such as the size of the 
                        transaction and marketability of the 
                        security, and
                  (B) in the case of an asset other than a 
                security for which there is a generally 
                recognized market, the fair market value of the 
                asset as determined in good faith by a 
                fiduciary or fiduciaries in accordance with 
                regulations prescribed by the Secretary of 
                Labor.
          (11) Correction period.--
                  (A) In general.--For purposes of subsection 
                (d)(23), the term ``correction period'' means 
                the 14-day period beginning on the date on 
                which the disqualified person discovers, or 
                reasonably should have discovered, that the 
                transaction would (without regard to this 
                paragraph and subsection (d)(23)) constitute a 
                prohibited transaction.
                  (B) Exceptions.--
                          (i) Employer securities.--Subsection 
                        (d)(23) does not apply to any 
                        transaction between a plan and a plan 
                        sponsor or its affiliates that involves 
                        the acquisition or sale of an employer 
                        security (as defined in section 
                        407(d)(1) of the Employee Retirement 
                        Income Security Act of 1974) or the 
                        acquisition, sale, or lease of employer 
                        real property (as defined in section 
                        407(d)(2) of such Act).
                          (ii) Knowing prohibited 
                        transaction.--In the case of any 
                        disqualified person, subsection (d)(23) 
                        does not apply to a transaction if, at 
                        the time the transaction is entered 
                        into, the disqualified person knew (or 
                        reasonably should have known) that the 
                        transaction would (without regard to 
                        this paragraph) constitute a prohibited 
                        transaction.
                  (C) Abatement of tax where there is a 
                correction.--If a transaction is not treated as 
                a prohibited transaction by reason of 
                subsection (d)(23), then no tax under 
                subsections (a) and (b) shall be assessed with 
                respect to such transaction, and if assessed 
                the assessment shall be abated, and if 
                collected shall be credited or refunded as an 
                overpayment.
                  (D) Definitions.--For purposes of this 
                paragraph and subsection (d)(23)--
                          (i) Security.--The term ``security'' 
                        has the meaning given such term by 
                        section 475(c)(2) (without regard to 
                        subparagraph (F)(iii) and the last 
                        sentence thereof).
                          (ii) Commodity.--The term 
                        ``commodity'' has the meaning given 
                        such term by section 475(e)(2) (without 
                        regard to subparagraph (D)(iii) 
                        thereof).
                          (iii) Correct.--The term ``correct'' 
                        means, with respect to a transaction--
                                  (I) to undo the transaction 
                                to the extent possible and in 
                                any case to make good to the 
                                plan or affected account any 
                                losses resulting from the 
                                transaction, and
                                  (II) to restore to the plan 
                                or affected account any profits 
                                made through the use of assets 
                                of the plan.
  (g) Application of Section.--This section shall not apply--
          (1) in the case of a plan to which a guaranteed 
        benefit policy (as defined in section 401(b)(2)(B) of 
        the Employee Retirement Income Security Act of 1974) is 
        issued, to any assets of the insurance company, 
        insurance service, or insurance organization merely 
        because of its issuance of such policy;
          (2) to a governmental plan (within the meaning of 
        section 414(d)); or
          (3) to a church plan (within the meaning of section 
        414(e)) with respect to which the election provided by 
        section 410(d) has not been made.
In the case of a plan which invests in any security issued by 
an investment company registered under the Investment Company 
Act of 1940, the assets of such plan shall be deemed to include 
such security but shall not, by reason of such investment, be 
deemed to include any assets of such company.
  (h) Notification of Secretary of Labor.--Before sending a 
notice of deficiency with respect to the tax imposed by 
subsection (a) or (b), the Secretary shall notify the Secretary 
of Labor and provide him a reasonable opportunity to obtain a 
correction of the prohibited transaction or to comment on the 
imposition of such tax.
  (i) Cross Reference.--For provisions concerning coordination 
procedures between Secretary of Labor and Secretary of the 
Treasury with respect to application of tax imposed by this 
section and for authority to waive imposition of the tax 
imposed by subsection (b), see section 3003 of the Employee 
Retirement Income Security Act of 1974.

           *       *       *       *       *       *       *


      B. Changes in Existing Law Proposed by the Bill, as Reported

    In compliance with clause 3(e)(1)(B) of rule XIII of the 
Rules of the House of Representatives, changes in existing law 
proposed by the bill, as reported, are shown as follows 
(existing law proposed to be omitted is enclosed in black 
brackets, new matter is printed in italic, existing law in 
which no change is proposed is shown in roman):

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e)(1)(B) of rule XIII of the 
Rules of the House of Representatives, changes in existing law 
made by the bill, as reported, are shown as follows (existing 
law proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, and existing law in which no 
change is proposed is shown in roman):

                     INTERNAL REVENUE CODE OF 1986




           *       *       *       *       *       *       *
                 Subtitle D--Miscellaneous Excise Taxes

CHAPTER 43--QUALIFIED PENSION, ETC., PLANS

           *       *       *       *       *       *       *


SEC. 4975. TAX ON PROHIBITED TRANSACTIONS.

  (a) Initial Taxes on Disqualified Person.--There is hereby 
imposed a tax on each prohibited transaction. The rate of tax 
shall be equal to 15 percent of the amount involved with 
respect to the prohibited transaction for each year (or part 
thereof) in the taxable period. The tax imposed by this 
subsection shall be paid by any disqualified person who 
participates in the prohibited transaction (other than a 
fiduciary acting only as such).
  (b) Additional Taxes on Disqualified Person.--In any case in 
which an initial tax is imposed by subsection (a) on a 
prohibited transaction and the transaction is not corrected 
within the taxable period, there is hereby imposed a tax equal 
to 100 percent of the amount involved. The tax imposed by this 
subsection shall be paid by any disqualified person who 
participated in the prohibited transaction (other than a 
fiduciary acting only as such).
  (c) Prohibited Transaction.--
          (1) General rule.--For purposes of this section, the 
        term ``prohibited transaction'' means any direct or 
        indirect--
                  (A) sale or exchange, or leasing, of any 
                property between a plan and a disqualified 
                person;
                  (B) lending of money or other extension of 
                credit between a plan and a disqualified 
                person;
                  (C) furnishing of goods, services, or 
                facilities between a plan and a disqualified 
                person;
                  (D) transfer to, or use by or for the benefit 
                of, a disqualified person of the income or 
                assets of a plan;
                  (E) act by a disqualified person who is a 
                fiduciary whereby he deals with the income or 
                assets of a plan in his own interests or for 
                his own account; or
                  (F) receipt of any consideration for his own 
                personal account by any disqualified person who 
                is a fiduciary from any party dealing with the 
                plan in connection with a transaction involving 
                the income or assets of the plan.
          (2) Special exemption.--The Secretary shall establish 
        an exemption procedure for purposes of this subsection. 
        Pursuant to such procedure, he may grant a conditional 
        or unconditional exemption of any disqualified person 
        or transaction, orders of disqualified persons or 
        transactions, from all or part of the restrictions 
        imposed by paragraph (1) of this subsection. Action 
        under this subparagraph may be taken only after 
        consultation and coordination with the Secretary of 
        Labor. The Secretary may not grant an exemption under 
        this paragraph unless he finds that such exemption is--
                  (A) administratively feasible,
                  (B) in the interests of the plan and of its 
                participants and beneficiaries, and
                  (C) protective of the rights of participants 
                and beneficiaries of the plan.
        Before granting an exemption under this paragraph, the 
        Secretary shall require adequate notice to be given to 
        interested persons and shall publish notice in the 
        Federal Register of the pendency of such exemption and 
        shall afford interested persons an opportunity to 
        present views. No exemption may be granted under this 
        paragraph with respect to a transaction described in 
        subparagraph (E) or (F) of paragraph (1) unless the 
        Secretary affords an opportunity for a hearing and 
        makes a determination on the record with respect to the 
        findings required under subparagraphs (A), (B), and (C) 
        of this paragraph, except that in lieu of such hearing 
        the Secretary may accept any record made by the 
        Secretary of Labor with respect to an application for 
        exemption under section 408(a) of title I of the 
        Employee Retirement Income Security Act of 1974.
          (3) Special rule for individual retirement 
        accounts.--An individual for whose benefit an 
        individual retirement account is established and his 
        beneficiaries shall be exempt from the tax imposed by 
        this section with respect to any transaction concerning 
        such account (which would otherwise be taxable under 
        this section) if, with respect to such transaction, the 
        account ceases to be an individual retirement account 
        by reason of the application of section 408(e)(2)(A) or 
        if section 408(e)(4) applies to such account.
          (4) Special rule for Archer MSAs.--An individual for 
        whose benefit an Archer MSA (within the meaning of 
        section 220(d)) is established shall be exempt from the 
        tax imposed by this section with respect to any 
        transaction concerning such account (which would 
        otherwise be taxable under this section) if section 
        220(e)(2) applies to such transaction.
          (5) Special rule for Coverdell education savings 
        accounts.--An individual for whose benefit a Coverdell 
        education savings account is established and any 
        contributor to such account shall be exempt from the 
        tax imposed by this section with respect to any 
        transaction concerning such account (which would 
        otherwise be taxable under this section) if section 
        530(d) applies with respect to such transaction.
          (6) Special rule for health savings accounts.--An 
        individual for whose benefit a health savings account 
        (within the meaning of section 223(d)) is established 
        shall be exempt from the tax imposed by this section 
        with respect to any transaction concerning such account 
        (which would otherwise be taxable under this section) 
        if, with respect to such transaction, the account 
        ceases to be a health savings account by reason of the 
        application of section 223(e)(2) to such account.
  (d) Exemptions.--Except as provided in subsection (f)(6), the 
prohibitions provided in subsection (c) shall not apply to--
          (1) any loan made by the plan to a disqualified 
        person who is a participant or beneficiary of the plan 
        if such loan--
                  (A) is available to all such participants or 
                beneficiaries on a reasonably equivalent basis,
                  (B) is not made available to highly 
                compensated employees (within the meaning of 
                section 414(q)) in an amount greater than the 
                amount made available to other employees,
                  (C) is made in accordance with specific 
                provisions regarding such loans set forth in 
                the plan,
                  (D) bears a reasonable rate of interest, and
                  (E) is adequately secured;
          (2) any contract, or reasonable arrangement, made 
        with a disqualified person for office space, or legal, 
        accounting, or other services necessary for the 
        establishment or operation of the plan, if no more than 
        reasonable compensation is paid therefor;
          (3) any loan to an leveraged employee stock ownership 
        plan (as defined in subsection (e)(7)), if--
                  (A) such loan is primarily for the benefit of 
                participants and beneficiaries of the plan, and
                  (B) such loan is at a reasonable rate of 
                interest, and any collateral which is given to 
                a disqualified person by the plan consists only 
                of qualifying employer securities (as defined 
                in subsection (e)(8));
          (4) the investment of all or part of a plan's assets 
        in deposits which bear a reasonable interest rate in a 
        bank or similar financial institution supervised by the 
        United States or a State, if such bank or other 
        institution is a fiduciary of such plan and if--
                  (A) the plan covers only employees of such 
                bank or other institution and employees of 
                affiliates of such bank or other institution, 
                or
                  (B) such investment is expressly authorized 
                by a provision of the plan or by a fiduciary 
                (other than such bank or institution or 
                affiliates thereof) who is expressly empowered 
                by the plan to so instruct the trustee with 
                respect to such investment;
          (5) any contract for life insurance, health 
        insurance, or annuities with one or more insurers which 
        are qualified to do business in a State if the plan 
        pays no more than adequate consideration, and if each 
        such insurer or insurers is--
                  (A) the employer maintaining the plan, or
                  (B) a disqualified person which is wholly 
                owned (directly or indirectly) by the employer 
                establishing the plan, or by any person which 
                is a disqualified person with respect to the 
                plan, but only if the total premiums and 
                annuity considerations written by such insurers 
                for life insurance, health insurance, or 
                annuities for all plans (and their employers) 
                with respect to which such insurers are 
                disqualified persons (not including premiums or 
                annuity considerations written by the employer 
                maintaining the plan) do not exceed 5 percent 
                of the total premiums and annuity 
                considerations written for all lines of 
                insurance in that year by such insurers (not 
                including premiums or annuity considerations 
                written by the employer maintaining the plan);
          (6) the provision of any ancillary service by a bank 
        or similar financial institution supervised by the 
        United States or a State, if such service is provided 
        at not more than reasonable compensation, if such bank 
        or other institution is a fiduciary of such plan, and 
        if--
                  (A) such bank or similar financial 
                institution has adopted adequate internal 
                safeguards which assure that the provision of 
                such ancillary service is consistent with sound 
                banking and financial practice, as determined 
                by Federal or State supervisory authority, and
                  (B) the extent to which such ancillary 
                service is provided is subject to specific 
                guidelines issued by such bank or similar 
                financial institution (as determined by the 
                Secretary after consultation with Federal and 
                State supervisory authority), and under such 
                guidelines the bank or similar financial 
                institution does not provide such ancillary 
                service--
                          (i) in an excessive or unreasonable 
                        manner, and
                          (ii) in a manner that would be 
                        inconsistent with the best interests of 
                        participants and beneficiaries of 
                        employee benefit plans;
          (7) the exercise of a privilege to convert 
        securities, to the extent provided in regulations of 
        the Secretary but only if the plan receives no less 
        than adequate consideration pursuant to such 
        conversion;
          (8) any transaction between a plan and a common or 
        collective trust fund or pooled investment fund 
        maintained by a disqualified person which is a bank or 
        trust company supervised by a State or Federal agency 
        or between a plan and a pooled investment fund of an 
        insurance company qualified to do business in a State 
        if--
                  (A) the transaction is a sale or purchase of 
                an interest in the fund,
                  (B) the bank, trust company, or insurance 
                company receives not more than a reasonable 
                compensation, and
                  (C) such transaction is expressly permitted 
                by the instrument under which the plan is 
                maintained, or by a fiduciary (other than the 
                bank, trust company, or insurance company, or 
                an affiliate thereof) who has authority to 
                manage and control the assets of the plan;
          (9) receipt by a disqualified person of any benefit 
        to which he may be entitled as a participant or 
        beneficiary in the plan, so long as the benefit is 
        computed and paid on a basis which is consistent with 
        the terms of the plan as applied to all other 
        participants and beneficiaries;
          (10) receipt by a disqualified person of any 
        reasonable compensation for services rendered, or for 
        the reimbursement of expenses properly and actually 
        incurred, in the performance of his duties with the 
        plan, but no person so serving who already receives 
        full-time pay from an employer or an association of 
        employers, whose employees are participants in the plan 
        or from an employee organization whose members are 
        participants in such plan shall receive compensation 
        from such fund, except for reimbursement of expenses 
        properly and actually incurred;
          (11) service by a disqualified person as a fiduciary 
        in addition to being an officer, employee, agent, or 
        other representative of a disqualified person;
          (12) the making by a fiduciary of a distribution of 
        the assets of the trust in accordance with the terms of 
        the plan if such assets are distributed in the same 
        manner as provided under section 4044 of title IV of 
        the Employee Retirement Income Security Act of 1974 
        (relating to allocation of assets);
          (13) any transaction which is exempt from section 406 
        of such Act by reason of section 408(e) of such Act (or 
        which would be so exempt if such section 406 applied to 
        such transaction) or which is exempt from section 406 
        of such Act by reason of section 408(b)(12) of such 
        Act;
          (14) any transaction required or permitted under part 
        1 of subtitle E of title IV or section 4223 of the 
        Employee Retirement Income Security Act of 1974, but 
        this paragraph shall not apply with respect to the 
        application of subsection (c)(1) (E) or (F);
          (15) a merger of multiemployer plans, or the transfer 
        of assets or liabilities between multiemployer plans, 
        determined by the Pension Benefit Guaranty Corporation 
        to meet the requirements of section 4231 of such Act, 
        but this paragraph shall not apply with respect to the 
        application of subsection (c)(1) (E) or (F);
          (16) a sale of stock held by a trust which 
        constitutes an individual retirement account under 
        section 408(a) to the individual for whose benefit such 
        account is established if--
                  (A) such stock is in a bank (as defined in 
                section 581) or a depository institution 
                holding company (as defined in section 3(w)(1) 
                of the Federal Deposit Insurance Act (12 U.S.C. 
                1813(w)(1)),
                  (B) such stock is held by such trust as of 
                the date of the enactment of this paragraph,
                  (C) such sale is pursuant to an election 
                under section 1362(a) by such bank or company,
                  (D) such sale is for fair market value at the 
                time of sale (as established by an independent 
                appraiser) and the terms of the sale are 
                otherwise at least as favorable to such trust 
                as the terms that would apply on a sale to an 
                unrelated party,
                  (E) such trust does not pay any commissions, 
                costs, or other expenses in connection with the 
                sale, and
                  (F) the stock is sold in a single transaction 
                for cash not later than 120 days after the S 
                corporation election is made;
          (17) Any transaction in connection with the provision 
        of investment advice described in subsection (e)(3)(B) 
        to a participant or beneficiary in a plan that permits 
        such participant or beneficiary 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 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 employee, agent, or 
                        registered representative of the 
                        fiduciary adviser or affiliate) in 
                        connection 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,
          (18) any transaction involving the purchase or sale 
        of securities, or other property (as determined by the 
        Secretary of Labor), between a plan and a disqualified 
        person (other than a fiduciary described in subsection 
        (e)(3)) with respect to a plan if--
                  (A) the transaction involves a block trade,
                  (B) at the time of the transaction, the 
                interest of the plan (together with the 
                interests of any other plans maintained by the 
                same plan sponsor), does not exceed 10 percent 
                of the aggregate size of the block trade,
                  (C) the terms of the transaction, including 
                the price, are at least as favorable to the 
                plan as an arm's length transaction, and
                  (D) the compensation associated with the 
                purchase and sale is not greater than the 
                compensation associated with an arm's length 
                transaction with an unrelated party,
          (19) any transaction involving the purchase or sale 
        of securities, or other property (as determined by the 
        Secretary of Labor), between a plan and a disqualified 
        person if--
                  (A) the transaction is executed through an 
                electronic communication network, alternative 
                trading system, or similar execution system or 
                trading venue subject to regulation and 
                oversight by--
                          (i) the applicable Federal regulating 
                        entity, or
                          (ii) such foreign regulatory entity 
                        as the Secretary of Labor may determine 
                        by regulation,
                  (B) either--
                          (i) the transaction is effected 
                        pursuant to rules designed to match 
                        purchases and sales at the best price 
                        available through the execution system 
                        in accordance with applicable rules of 
                        the Securities and Exchange Commission 
                        or other relevant governmental 
                        authority, or
                          (ii) neither the execution system nor 
                        the parties to the transaction take 
                        into account the identity of the 
                        parties in the execution of trades,
                  (C) the price and compensation associated 
                with the purchase and sale are not greater than 
                the price and compensation associated with an 
                arm's length transaction with an unrelated 
                party,
                  (D) if the disqualified person has an 
                ownership interest in the system or venue 
                described in subparagraph (A), the system or 
                venue has been authorized by the plan sponsor 
                or other independent fiduciary for transactions 
                described in this paragraph, and
                  (E) not less than 30 days prior to the 
                initial transaction described in this paragraph 
                executed through any system or venue described 
                in subparagraph (A), a plan fiduciary is 
                provided written or electronic notice of the 
                execution of such transaction through such 
                system or venue,
          (20) transactions described in subparagraphs (A), 
        (B), and (D) of subsection (c)(1) between a plan and a 
        person that is a disqualified person other than a 
        fiduciary (or an affiliate) who has or exercises any 
        discretionary authority or control with respect to the 
        investment of the plan assets involved in the 
        transaction or renders investment advice (within the 
        meaning of subsection (e)(3)(B)) with respect to those 
        assets, solely by reason of providing services to the 
        plan or solely by reason of a relationship to such a 
        service provider described in subparagraph (F), (G), 
        (H), or (I) of subsection (e)(2), or both, but only if 
        in connection with such transaction the plan receives 
        no less, nor pays no more, than adequate consideration,
          (21) any foreign exchange transactions, between a 
        bank or broker-dealer (or any affiliate of either) and 
        a plan (as defined in this section) with respect to 
        which such bank or broker-dealer (or affiliate) is a 
        trustee, custodian, fiduciary, or other disqualified 
        person person, if--
                  (A) the transaction is in connection with the 
                purchase, holding, or sale of securities or 
                other investment assets (other than a foreign 
                exchange transaction unrelated to any other 
                investment in securities or other investment 
                assets),
                  (B) at the time the foreign exchange 
                transaction is entered into, the terms of the 
                transaction are not less favorable to the plan 
                than the terms generally available in 
                comparable arm's length foreign exchange 
                transactions between unrelated parties, or the 
                terms afforded by the bank or broker-dealer (or 
                any affiliate of either) in comparable arm's-
                length foreign exchange transactions involving 
                unrelated parties,
                  (C) the exchange rate used by such bank or 
                broker-dealer (or affiliate) for a particular 
                foreign exchange transaction does not deviate 
                by more than 3 percent from the interbank bid 
                and asked rates for transactions of comparable 
                size and maturity at the time of the 
                transaction as displayed on an independent 
                service that reports rates of exchange in the 
                foreign currency market for such currency, and
                  (D) the bank or broker-dealer (or any 
                affiliate of either) does not have investment 
                discretion, or provide investment advice, with 
                respect to the transaction,
          (22) any transaction described in subsection 
        (c)(1)(A) involving the purchase and sale of a security 
        between a plan and any other account managed by the 
        same investment manager, if--
                  (A) the transaction is a purchase or sale, 
                for no consideration other than cash payment 
                against prompt delivery of a security for which 
                market quotations are readily available,
                  (B) the transaction is effected at the 
                independent current market price of the 
                security (within the meaning of section 
                270.17a-7(b) of title 17, Code of Federal 
                Regulations),
                  (C) no brokerage commission, fee (except for 
                customary transfer fees, the fact of which is 
                disclosed pursuant to subparagraph (D)), or 
                other remuneration is paid in connection with 
                the transaction,
                  (D) a fiduciary (other than the investment 
                manager engaging in the cross-trades or any 
                affiliate) for each plan participating in the 
                transaction authorizes in advance of any cross-
                trades (in a document that is separate from any 
                other written agreement of the parties) the 
                investment manager to engage in cross trades at 
                the investment manager's discretion, after such 
                fiduciary has received disclosure regarding the 
                conditions under which cross trades may take 
                place (but only if such disclosure is separate 
                from any other agreement or disclosure 
                involving the asset management relationship), 
                including the written policies and procedures 
                of the investment manager described in 
                subparagraph (H),
                  (E) each plan participating in the 
                transaction has assets of at least 
                $100,000,000, except that if the assets of a 
                plan are invested in a master trust containing 
                the assets of plans maintained by employers in 
                the same controlled group (as defined in 
                section 407(d)(7) of the Employee Retirement 
                Income Security Act of 1974), the master trust 
                has assets of at least $100,000,000,
                  (F) the investment manager provides to the 
                plan fiduciary who authorized cross trading 
                under subparagraph (D) a quarterly report 
                detailing all cross trades executed by the 
                investment manager in which the plan 
                participated during such quarter, including the 
                following information, as applicable: (i) the 
                identity of each security bought or sold; (ii) 
                the number of shares or units traded; (iii) the 
                parties involved in the cross-trade; and (iv) 
                trade price and the method used to establish 
                the trade price,
                  (G) the investment manager does not base its 
                fee schedule on the plan's consent to cross 
                trading, and no other service (other than the 
                investment opportunities and cost savings 
                available through a cross trade) is conditioned 
                on the plan's consent to cross trading,
                  (H) the investment manager has adopted, and 
                cross-trades are effected in accordance with, 
                written cross-trading policies and procedures 
                that are fair and equitable to all accounts 
                participating in the cross-trading program, and 
                that include a description of the manager's 
                pricing policies and procedures, and the 
                manager's policies and procedures for 
                allocating cross trades in an objective manner 
                among accounts participating in the cross-
                trading program, and
                  (I) the investment manager has designated an 
                individual responsible for periodically 
                reviewing such purchases and sales to ensure 
                compliance with the written policies and 
                procedures described in subparagraph (H), and 
                following such review, the individual shall 
                issue an annual written report no later than 90 
                days following the period to which it relates 
                signed under penalty of perjury to the plan 
                fiduciary who authorized cross trading under 
                subparagraph (D) describing the steps performed 
                during the course of the review, the level of 
                compliance, and any specific instances of non-
                compliance.
        The written report shall also notify the plan fiduciary 
        of the plan's right to terminate participation in the 
        investment manager's cross-trading program at any time, 
        [or]
          (23) except as provided in subsection (f)(11), a 
        transaction described in subparagraph (A), (B), (C), or 
        (D) of subsection (c)(1) in connection with the 
        acquisition, holding, or disposition of any security or 
        commodity, if the transaction is corrected before the 
        end of the correction period[.], or
          (24) provision of investment advice by a fiduciary to 
        a plan, plan participant, or beneficiary with respect 
        to the plan, which is a best interest recommendation or 
        a transaction connected to such advice.
  (e) Definitions.--
          (1) Plan.--For purposes of this section, the term 
        ``plan'' means--
                  (A) a trust described in section 401(a) which 
                forms a part of a plan, or a plan described in 
                section 403(a), which trust or plan is exempt 
                from tax under section 501(a),
                  (B) an individual retirement account 
                described in section 408(a),
                  (C) an individual retirement annuity 
                described in section 408(b),
                  (D) an Archer MSA described in section 
                220(d),
                  (E) a health savings account described in 
                section 223(d),
                  (F) a Coverdell education savings account 
                described in section 530, or
                  (G) a trust, plan, account, or annuity which, 
                at any time, has been determined by the 
                Secretary to be described in any preceding 
                subparagraph of this paragraph.
          (2) Disqualified person.--For purposes of this 
        section, the term ``disqualified person'' means a 
        person who is--
                  (A) a fiduciary;
                  (B) a person providing services to the plan;
                  (C) an employer any of whose employees are 
                covered by the plan;
                  (D) an employee organization any of whose 
                members are covered by the plan;
                  (E) an owner, direct or indirect, of 50 
                percent or more of--
                          (i) the combined voting power of all 
                        classes of stock entitled to vote or 
                        the total value of shares of all 
                        classes of stock of a corporation,
                          (ii) the capital interest or the 
                        profits interest of a partnership, or
                          (iii) the beneficial interest of a 
                        trust or unincorporated enterprise,
                which is an employer or an employee 
                organization described in subparagraph (C) or 
                (D);
                  (F) a member of the family (as defined in 
                paragraph (6)) of any individual described in 
                subparagraph (A), (B), (C), or (E);
                  (G) a corporation, partnership, or trust or 
                estate of which (or in which) 50 percent or 
                more of--
                          (i) the combined voting power of all 
                        classes of stock entitled to vote or 
                        the total value of shares of all 
                        classes of stock of such corporation,
                          (ii) the capital interest or profits 
                        interest of such partnership, or
                          (iii) the beneficial interest of such 
                        trust or estate, is owned directly or 
                        indirectly, or held by persons 
                        described in subparagraph (A), (B), 
                        (C), (D), or (E);
                  (H) an officer, director (or an individual 
                having powers or responsibilities similar to 
                those of officers or directors), a 10 percent 
                or more shareholder, or a highly compensated 
                employee (earning 10 percent or more of the 
                yearly wages of an employer) of a person 
                described in subparagraph (C), (D), (E), or 
                (G); or
                  (I) a 10 percent or more (in capital or 
                profits) partner or joint venturer of a person 
                described in subparagraph (C), (D), (E), or 
                (G).
        The Secretary, after consultation and coordination with 
        the Secretary of Labor or his delegate, may by 
        regulation prescribe a percentage lower than 50 percent 
        for subparagraphs (E) and (G) and lower than 10 percent 
        for subparagraphs (H) and (I).
          (3) Fiduciary.--For purposes of this section, the 
        term ``fiduciary'' means any person who--
                  (A) exercises any discretionary authority or 
                discretionary control respecting management of 
                such plan or exercises any authority or control 
                respecting management or disposition of its 
                assets,
                  (B) renders investment advice for a fee or 
                other compensation, direct or indirect, with 
                respect to any moneys or other property of such 
                plan, or has any authority or responsibility to 
                do so, or
                  (C) has any discretionary authority or 
                discretionary responsibility in the 
                administration of such plan.
        Such term includes any person designated under section 
        405(c)(1)(B) of the Employee Retirement Income Security 
        Act of 1974.
          (4) Stockholdings.--For purposes of paragraphs 
        (2)(E)(i) and (G)(i) there shall be taken into account 
        indirect stockholdings which would be taken into 
        account under section 267(c), except that, for purposes 
        of this paragraph, section 267(c)(4) shall be treated 
        as providing that the members of the family of an 
        individual are the members within the meaning of 
        paragraph (6).
          (5) Partnerships; trusts.--For purposes of paragraphs 
        (2)(E)(ii) and (iii), (G)(ii) and (iii), and (I) the 
        ownership of profits or beneficial interests shall be 
        determined in accordance with the rules for 
        constructive ownership of stock provided in section 
        267(c) (other than paragraph (3) thereof), except that 
        section 267(c)(4) shall be treated as providing that 
        the members of the family of an individual are the 
        members within the meaning of paragraph (6).
          (6) Member of family.--For purposes of paragraph 
        (2)(F), the family of any individual shall include his 
        spouse, ancestor, lineal descendant, and any spouse of 
        a lineal descendant.
          (7) Employee stock ownership plan.--The term 
        ``employee stock ownership plan'' means a defined 
        contribution plan--
                  (A) which is a stock bonus plan which is 
                qualified, or a stock bonus and a money 
                purchase plan both of which are qualified under 
                section 401(a), and which are designed to 
                invest primarily in qualifying employer 
                securities; and
                  (B) which is otherwise defined in regulations 
                prescribed by the Secretary.
        A plan shall not be treated as an employee stock 
        ownership plan unless it meets the requirements of 
        section 409(h), section 409(o), and, if applicable, 
        section 409(n), section 409(p), and section 664(g) and, 
        if the employer has a registration-type class of 
        securities (as defined in section 409(e)(4)), it meets 
        the requirements of section 409(e).
          (8) Qualifying employer security.--The term 
        ``qualifying employer security'' means any employer 
        security within the meaning of section 409(l). If any 
        moneys or other property of a plan are invested in 
        shares of an investment company registered under the 
        Investment Company Act of 1940, the investment shall 
        not cause that investment company or that investment 
        company's investment adviser or principal underwriter 
        to be treated as a fiduciary or a disqualified person 
        for purposes of this section, except when an investment 
        company or its investment adviser or principal 
        underwriter acts in connection with a plan covering 
        employees of the investment company, its investment 
        adviser, or its principal underwriter.
          (9) Section made applicable to withdrawal liability 
        payment funds.--For purposes of this section--
                  (A) In general.--The term ``plan'' includes a 
                trust described in section 501(c)(22).
                  (B) Disqualified person.--In the case of any 
                trust to which this section applies by reason 
                of subparagraph (A), the term ``disqualified 
                person'' includes any person who is a 
                disqualified person with respect to any plan to 
                which such trust is permitted to make payments 
                under section 4223 of the Employee Retirement 
                Income Security Act of 1974.
          (10) Investment advice.--
                  (A) In general.--For purposes of this 
                section, the term ``investment advice'' means a 
                recommendation that--
                          (i) relates to--
                                  (I) 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;
                                  (II) 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
                                  (III) 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--
                                  (I) a written acknowledgment 
                                that the person is a fiduciary 
                                with respect to the provision 
                                of such recommendation; or
                                  (II) 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, plan participant, or 
                                beneficiary that such 
                                recommendation is 
                                individualized to the plan, 
                                plan participant, or 
                                beneficiary and such plan, plan 
                                participant, or beneficiary 
                                intends to materially rely on 
                                such recommendation in making 
                                investment or management 
                                decisions with respect to any 
                                moneys or other property of 
                                such plan.
                  (B) Disclaimer of a mutual agreement, 
                arrangement, or understanding.--For purposes of 
                subparagraph (A)(ii)(II), 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.
                  (C) When recommendation treated as made 
                pursuant to a mutual agreement, arrangement, or 
                understanding.--For purposes of subparagraph 
                (A)(ii)(II), information shall not be treated 
                as a recommendation made pursuant to a mutual 
                agreement, arrangement, or understanding, and 
                such information shall contain the disclaimer 
                required by subparagraph (B), if--
                          (i) Seller's exception.--The 
                        information 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 as a fiduciary to the 
                        plan or under the obligations of a best 
                        interest recommendation.
                          (ii) Swap and security-based swap 
                        transaction.--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--
                                  (I) 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
                                  (II) prior to entering into 
                                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, 
                                plan participants, or plan 
                                beneficiaries.
                          (iii) Employees of a plan sponsor.--
                        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) Platform providers selection and 
                        monitoring assistance.--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 
                        (within the meaning of this paragraph) 
                        or under the obligations of a best 
                        interest recommendation and the 
                        information consists solely of--
                                  (I) making available to the 
                                plan, plan participants, or 
                                plan beneficiaries, without 
                                regard to the individualized 
                                needs of the plan, plan 
                                participants, or plan 
                                beneficiaries, 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
                                  (II) in connection with a 
                                platform or similar mechanism 
                                described in subclause (I)--
                                          (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) Valuation.--The information 
                        consists solely of valuation 
                        information.
                          (vi) Financial education.--The 
                        information consists solely of--
                                  (I) 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,
                                  (II) information provided to 
                                participants or beneficiaries 
                                regarding the factors to 
                                consider in deciding whether to 
                                elect to receive a distribution 
                                from a plan and whether to roll 
                                over such distribution to a 
                                plan, so long as any examples 
                                of different distribution 
                                alternatives are accompanied by 
                                all material facts and 
                                assumptions on which the 
                                examples are based, or
                                  (III) any additional 
                                information treated as 
                                education by the Secretary.
          (11) Best interest recommendation.--For purposes of 
        this subsection--
                  (A) In general.--The term ``best interest 
                recommendation'' means a recommendation--
                          (i) for which no more than reasonable 
                        compensation is paid (as determined 
                        under subsection (d)(2)),
                          (ii) provided by a person acting with 
                        the care, skill, prudence, and 
                        diligence under the circumstances then 
                        prevailing that a prudent person would 
                        exercise based on--
                                  (I) the information obtained 
                                through the reasonable 
                                diligence of the person 
                                regarding factors such as the 
                                advice recipient's age, and
                                  (II) any other information 
                                that the advice recipient 
                                discloses to the person in 
                                connection with receiving such 
                                recommendation, and
                          (iii) where the person places the 
                        interests of the plan or advice 
                        recipient above its own.
                  (B) Investment options; variable 
                compensation.--A best interest recommendation 
                may include a recommendation that--
                          (i) is based on a limited range of 
                        investment options (which may consist, 
                        in whole or in part, of proprietary 
                        products), but only if any 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.'', or
                          (ii) may result in variable 
                        compensation to the person providing 
                        the recommendation (or any affiliate of 
                        such person), but only if the receipt 
                        of such compensation shall be clearly 
                        disclosed to the advice recipient prior 
                        to any transaction based on the 
                        investment advice.
                  (C) Clear disclosure of variable 
                compensation.--For purposes of this paragraph, 
                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 clause 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).
                  (D) Definition of affiliate.--For purposes of 
                this paragraph, the term ``affiliate'' has the 
                meaning given in subsection (f)(8)(J)(ii).
                  (E) Correction of certain errors and 
                omissions.--A recommendation shall not fail to 
                be a best interest recommendation solely 
                because a person who, acting in good faith and 
                with reasonable diligence, makes an error or 
                omission in disclosing the information 
                specified in subparagraph (B), if 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.
                  (F) Special rule.--Any notice provided 
                pursuant to a requirement under subparagraph 
                (B)(i) or subparagraph (C)(i) 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.
  (f) Other Definitions and Special Rules.--For purposes of 
this section--
          (1) Joint and several liability.--If more than one 
        person is liable under subsection (a) or (b) with 
        respect to any one prohibited transaction, all such 
        persons shall be jointly and severally liable under 
        such subsection with respect to such transaction.
          (2) Taxable period.--The term ``taxable period'' 
        means, with respect to any prohibited transaction, the 
        period beginning with the date on which the prohibited 
        transaction occurs and ending on the earliest of--
                  (A) the date of mailing a notice of 
                deficiency with respect to the tax imposed by 
                subsection (a) under section 6212,
                  (B) the date on which the tax imposed by 
                subsection (a) is assessed, or
                  (C) the date on which correction of the 
                prohibited transaction is completed.
          (3) Sale or exchange; encumbered property.--A 
        transfer or real or personal property by a disqualified 
        person to a plan shall be treated as a sale or exchange 
        if the property is subject to a mortgage or similar 
        lien which the plan assumes or if it is subject to a 
        mortgage or similar lien which a disqualified person 
        placed on the property within the 10-year period ending 
        on the date of the transfer.
          (4) Amount involved.--The term ``amount involved'' 
        means, with respect to a prohibited transaction, the 
        greater of the amount of money and the fair market 
        value of the other property given or the amount of 
        money and the fair market value of the other property 
        received; except that, in the case of services 
        described in paragraphs (2) and (10) of subsection (d) 
        the amount involved shall be only the [excess 
        compensation.] excess compensation, and in the case of 
        a prohibited transaction arising by the failure of 
        investment advice to be a best interest recommendation, 
        the amount involved shall be the amount paid to the 
        person providing the advice (or its affiliate, as 
        defined in paragraph (8)(J)(ii)) that has not been paid 
        or reimbursed to the plan, plan participants, or plan 
        beneficiaries, including payments and reimbursements 
        made pursuant to paragraph (5). For purposes of the 
        preceding sentence, the fair market value--
                  (A) in the case of the tax imposed by 
                subsection (a), shall be determined as of the 
                date on which the prohibited transaction 
                occurs; and
                  (B) in the case of the tax imposed by 
                subsection (b), shall be the highest fair 
                market value during the taxable period.
          [(5) Correction.--The terms]
          (5) Correction._
                  (A) In general._Except as provided in 
                subparagraph (B), the terms ``correction'' and 
                ``correct'' mean, with respect to a prohibited 
                transaction, undoing the transaction to the 
                extent possible, but in any case placing the 
                plan in a financial position not worse than 
                that in which it would be if the disqualified 
                person were acting under the highest fiduciary 
                standards.
                  (B) Determination of ``correction'' and 
                ``correct'' with respect to best interest 
                advice recommendations.--In the case of a 
                prohibited transaction arising by the failure 
                of investment advice to be a best interest 
                recommendation, the terms ``correction'' and 
                ``correct'' mean the payment to, or 
                reimbursement of, actual damages of the plan, 
                plan participants, or plan beneficiaries 
                resulting directly from the plan's, plan 
                participant's, or plan beneficiary's reliance 
                on such investment advice, if any, that have 
                not otherwise been paid or reimbursed to the 
                plan, plan participants, or plan beneficiaries, 
                including payments and reimbursements made 
                pursuant to subparagraph (A) if such amount is 
                greater than the amount determined under 
                subparagraph (A).
          (6) Exemptions not to apply to certain 
        transactions.--
                  (A) In general.--In the case of a trust 
                described in section 401(a) which is part of a 
                plan providing contributions or benefits for 
                employees some or all of whom are owner-
                employees (as defined in section 401(c)(3)), 
                the exemptions provided by subsection (d) 
                (other than paragraphs (9) and (12)) shall not 
                apply to a transaction in which the plan 
                directly or indirectly--
                          (i) lends any part of the corpus or 
                        income of the plan to,
                          (ii) pays any compensation for 
                        personal services rendered to the plan 
                        to, or
                          (iii) acquires for the plan any 
                        property from, or sells any property 
                        to,
                any such owner-employee, a member of the family 
                (as defined in section 267(c)(4)) of any such 
                owner-employee, or any corporation in which any 
                such owner-employee owns, directly or 
                indirectly, 50 percent or more of the total 
                combined voting power of all classes of stock 
                entitled to vote or 50 percent or more of the 
                total value of shares of all classes of stock 
                of the corporation.
                  (B) Special rules for shareholder-employees, 
                etc.
                          (i) In general.--For purposes of 
                        subparagraph (A), the following shall 
                        be treated as owner-employees:
                                  (I) A shareholder-employee.
                                  (II) A participant or 
                                beneficiary of an individual 
                                retirement plan (as defined in 
                                section 7701(a)(37)).
                                  (III) An employer or 
                                association of employees which 
                                establishes such an individual 
                                retirement plan under section 
                                408(c).
                          (ii) Exception for certain 
                        transactions involving shareholder-
                        employees.--Subparagraph (A)(iii) shall 
                        not apply to a transaction which 
                        consists of a sale of employer 
                        securities to an employee stock 
                        ownership plan (as defined in 
                        subsection (e)(7)) by a shareholder- 
                        employee, a member of the family (as 
                        defined in section 267(c)(4)) of such 
                        shareholder-employee, or a corporation 
                        in which such a shareholder-employee 
                        owns stock representing a 50 percent or 
                        greater interest described in 
                        subparagraph (A).
                          (iii) Loan exception.--For purposes 
                        of subparagraph (A)(i), the term 
                        ``owner-employee'' shall only include a 
                        person described in subclause (II) or 
                        (III) of clause (i).
                  (C) Shareholder-employee.--For purposes of 
                subparagraph (B), the term ``shareholder-
                employee'' means an employee or officer of an S 
                corporation who owns (or is considered as 
                owning within the meaning of section 318(a)(1)) 
                more than 5 percent of the outstanding stock of 
                the corporation on any day during the taxable 
                year of such corporation.
          (7) S corporation repayment of loans for qualifying 
        employer securities.--A plan shall not be treated as 
        violating the requirements of section 401 or 409 or 
        subsection (e)(7), or as engaging in a prohibited 
        transaction for purposes of subsection (d)(3), merely 
        by reason of any distribution (as described in section 
        1368(a)) with respect to S corporation stock that 
        constitutes qualifying employer securities, which in 
        accordance with the plan provisions is used to make 
        payments on a loan described in subsection (d)(3) the 
        proceeds of which were used to acquire such qualifying 
        employer securities (whether or not allocated to 
        participants). The preceding sentence shall not apply 
        in the case of a distribution which is paid with 
        respect to any employer security which is allocated to 
        a participant unless the plan provides that employer 
        securities with a fair market value of not less than 
        the amount of such distribution are allocated to such 
        participant for the year which (but for the preceding 
        sentence) such distribution would have been allocated 
        to such participant.
          (8) Provision of investment advice to participant and 
        beneficiaries.--
                  (A) In general.--The prohibitions provided in 
                subsection (c) shall not apply to transactions 
                described in subsection (d)(17) if the 
                investment advice provided by a fiduciary 
                adviser is provided under an eligible 
                investment advice arrangement.
                  (B) Eligible investment advice arrangement.--
                For purposes of this paragraph, the term 
                ``eligible investment advice arrangement'' 
                means an arrangement--
                          (i) which either--
                                  (I) provides that any fees 
                                (including any commission or 
                                other compensation) received by 
                                the fiduciary adviser for 
                                investment advice or with 
                                respect to the sale, holding, 
                                or acquisition of any security 
                                or other property for purposes 
                                of investment of plan assets do 
                                not vary depending on the basis 
                                of any investment option 
                                selected, or
                                  (II) uses a computer model 
                                under an investment advice 
                                program meeting the 
                                requirements of subparagraph 
                                (C) in connection with the 
                                provision of investment advice 
                                by a fiduciary adviser to a 
                                participant or beneficiary, and
                          (ii) with respect to which the 
                        requirements of subparagraphs (D), (E), 
                        (F), (G), (H), and (I) are met.
                  (C) Investment advice program using computer 
                model.--
                          (i) In general.--An investment advice 
                        program meets the requirements of this 
                        subparagraph if the requirements of 
                        clauses (ii), (iii), and (iv) are met.
                          (ii) Computer model.--The 
                        requirements of this clause are met if 
                        the investment advice provided under 
                        the investment advice program is 
                        provided pursuant to a computer model 
                        that--
                                  (I) applies generally 
                                accepted investment theories 
                                that take into account the 
                                historic returns of different 
                                asset classes over defined 
                                periods of time,
                                  (II) utilizes relevant 
                                information about the 
                                participant, which may include 
                                age, life expectancy, 
                                retirement 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 options 
                                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 fiduciary adviser, and
                                  (V) takes into account all 
                                investment 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 
                                requirements of this clause are 
                                met with respect to any 
                                investment advice program if an 
                                eligible investment expert 
                                certifies, prior to the 
                                utilization of the 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 
                                certifications.--If, as 
                                determined under regulations 
                                prescribed by the Secretary 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 
                                investment expert'' means any 
                                person which meets such 
                                requirements as the Secretary 
                                of Labor may provide and which 
                                does not bear any material 
                                affiliation or contractual 
                                relationship with any 
                                investment adviser or a related 
                                person thereof (or any 
                                employee, agent, or registered 
                                representative of the 
                                investment adviser or related 
                                person).
                          (iv) Exclusivity of recommendation.--
                        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 advice generated 
                                by the computer model described 
                                in clause (ii), and
                                  (II) any transaction 
                                described in subsection 
                                (d)(17)(A)(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 separate 
                fiduciary.--The requirements of this 
                subparagraph are met with respect to an 
                arrangement if the arrangement is expressly 
                authorized by a plan fiduciary other than the 
                person offering the investment advice program, 
                any 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 
                        independent auditor, who has 
                        appropriate technical 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 requirements 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 subparagraph (G) as relates to 
                        such subparagraphs) of subsection 
                        (e)(1), in lieu of the requirements of 
                        clause (i), audits of the arrangement 
                        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 related to the person offering 
                        the arrangement 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 initial provision of the investment 
                        advice with regard to any security or 
                        other property offered as an investment 
                        option, a written notification (which 
                        may consist of notification by means of 
                        electronic communication)--
                                  (I) of the role of any party 
                                that has a material affiliation 
                                or contractual relationship 
                                with the fiduciary adviser, in 
                                the development of the 
                                investment advice program and 
                                in the selection 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 
                                compensation relating to the 
                                advice that the fiduciary 
                                adviser or any affiliate 
                                thereof is to receive 
                                (including compensation 
                                provided by any third party) in 
                                connection with the provision 
                                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 fiduciary 
                                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,
                                  (VI) of the types of services 
                                provided by the fiduciary 
                                adviser in connection with the 
                                provision of investment advice 
                                by the fiduciary adviser,
                                  (VII) that the adviser is 
                                acting as a fiduciary of the 
                                plan in connection 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 compensation in 
                                connection with the security 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 of the advice no 
                                less frequently than annually,
                                  (III) provides, without 
                                charge, accurate information to 
                                the recipient of the advice 
                                upon request of the recipient, 
                                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 advice at a time reasonably 
                                contemporaneous to the change 
                                in information.
                  (G) Other conditions.--The requirements of 
                this subparagraph are met if--
                          (i) the fiduciary adviser provides 
                        appropriate 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 recipient of the advice,
                          (iii) 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
                          (iv) 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.
                  (H) Standards for presentation of 
                information.--
                          (i) In general.--The requirements of 
                        this subparagraph are met if the 
                        notification required to be provided to 
                        participants and beneficiaries under 
                        subparagraph (F)(i) is written in a 
                        clear and conspicuous manner and in a 
                        manner calculated to be understood by 
                        the average plan participant and is 
                        sufficiently accurate and comprehensive 
                        to reasonably apprise 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 
                        form for the disclosure of fees and 
                        other compensation required in 
                        subparagraph (F)(i)(III) which meets 
                        the requirements of clause (i).
                  (I) Maintenance for 6 years of evidence of 
                compliance.--The requirements of this 
                subparagraph are met if a fiduciary adviser who 
                has provided advice referred to in subparagraph 
                (A) maintains, for a period of not less than 6 
                years after the provision of the advice, any 
                records necessary for determining whether the 
                requirements of the preceding provisions of 
                this paragraph and of subsection (d)(17) have 
                been met. A transaction prohibited under 
                subsection (c) 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.
                  (J) Definitions.--For purposes of this 
                paragraph and subsection (d)(17)--
                          (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 investment advice referred 
                        to in subsection (e)(3)(B) by the 
                        person to a participant or beneficiary 
                        of the plan 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 principal office and place 
                                of business,
                                  (II) a bank or similar 
                                financial institution referred 
                                to in subsection (d)(4) or a 
                                savings association (as defined 
                                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 
                                institution or savings 
                                association which is subject 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 subclauses 
                                (I) through (IV), or
                                  (VI) an employee, agent, or 
                                registered representative of a 
                                person described in subclauses 
                                (I) through (V) who satisfies 
                                the requirements of applicable 
                                insurance, banking, and 
                                securities laws relating to the 
                                provision of the advice.
                        For purposes of this title, a person 
                        who develops the computer model 
                        described in subparagraph (C)(ii) or 
                        markets the investment advice program 
                        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 in 
                        subsection (e)(3)(B) to a participant 
                        or beneficiary and shall be treated as 
                        a fiduciary adviser for purposes of 
                        this paragraph and subsection (d)(17), 
                        except that the Secretary of Labor may 
                        prescribe rules under which only 1 
                        fiduciary adviser may elect to be 
                        treated as a fiduciary with respect to 
                        the plan.
                          (ii) Affiliate.--The term 
                        ``affiliate'' of another entity means 
                        an affiliated person 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 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).
          (9) Block trade.--The term ``block trade'' means any 
        trade of at least 10,000 shares or with a market value 
        of at least $200,000 which will be allocated across two 
        or more unrelated client accounts of a fiduciary.
          (10) Adequate consideration.--The term ``adequate 
        consideration'' means--
                  (A) in the case of a security for which there 
                is a generally recognized market--
                          (i) the price of the security 
                        prevailing on a national securities 
                        exchange which is registered under 
                        section 6 of the Securities Exchange 
                        Act of 1934, taking into account 
                        factors such as the size of the 
                        transaction and marketability of the 
                        security, or
                          (ii) if the security is not traded on 
                        such a national securities exchange, a 
                        price not less favorable to the plan 
                        than the offering price for the 
                        security as established by the current 
                        bid and asked prices quoted by persons 
                        independent of the issuer and of the 
                        party in interest, taking into account 
                        factors such as the size of the 
                        transaction and marketability of the 
                        security, and
                  (B) in the case of an asset other than a 
                security for which there is a generally 
                recognized market, the fair market value of the 
                asset as determined in good faith by a 
                fiduciary or fiduciaries in accordance with 
                regulations prescribed by the Secretary of 
                Labor.
          (11) Correction period.--
                  (A) In general.--For purposes of subsection 
                (d)(23), the term ``correction period'' means 
                the 14-day period beginning on the date on 
                which the disqualified person discovers, or 
                reasonably should have discovered, that the 
                transaction would (without regard to this 
                paragraph and subsection (d)(23)) constitute a 
                prohibited transaction.
                  (B) Exceptions.--
                          (i) Employer securities.--Subsection 
                        (d)(23) does not apply to any 
                        transaction between a plan and a plan 
                        sponsor or its affiliates that involves 
                        the acquisition or sale of an employer 
                        security (as defined in section 
                        407(d)(1) of the Employee Retirement 
                        Income Security Act of 1974) or the 
                        acquisition, sale, or lease of employer 
                        real property (as defined in section 
                        407(d)(2) of such Act).
                          (ii) Knowing prohibited 
                        transaction.--In the case of any 
                        disqualified person, subsection (d)(23) 
                        does not apply to a transaction if, at 
                        the time the transaction is entered 
                        into, the disqualified person knew (or 
                        reasonably should have known) that the 
                        transaction would (without regard to 
                        this paragraph) constitute a prohibited 
                        transaction.
                  (C) Abatement of tax where there is a 
                correction.--If a transaction is not treated as 
                a prohibited transaction by reason of 
                subsection (d)(23), then no tax under 
                subsections (a) and (b) shall be assessed with 
                respect to such transaction, and if assessed 
                the assessment shall be abated, and if 
                collected shall be credited or refunded as an 
                overpayment.
                  (D) Definitions.--For purposes of this 
                paragraph and subsection (d)(23)--
                          (i) Security.--The term ``security'' 
                        has the meaning given such term by 
                        section 475(c)(2) (without regard to 
                        subparagraph (F)(iii) and the last 
                        sentence thereof).
                          (ii) Commodity.--The term 
                        ``commodity'' has the meaning given 
                        such term by section 475(e)(2) (without 
                        regard to subparagraph (D)(iii) 
                        thereof).
                          (iii) Correct.--The term ``correct'' 
                        means, with respect to a transaction--
                                  (I) to undo the transaction 
                                to the extent possible and in 
                                any case to make good to the 
                                plan or affected account any 
                                losses resulting from the 
                                transaction, and
                                  (II) to restore to the plan 
                                or affected account any profits 
                                made through the use of assets 
                                of the plan.
  (g) Application of Section.--This section shall not apply--
          (1) in the case of a plan to which a guaranteed 
        benefit policy (as defined in section 401(b)(2)(B) of 
        the Employee Retirement Income Security Act of 1974) is 
        issued, to any assets of the insurance company, 
        insurance service, or insurance organization merely 
        because of its issuance of such policy;
          (2) to a governmental plan (within the meaning of 
        section 414(d)); or
          (3) to a church plan (within the meaning of section 
        414(e)) with respect to which the election provided by 
        section 410(d) has not been made.
In the case of a plan which invests in any security issued by 
an investment company registered under the Investment Company 
Act of 1940, the assets of such plan shall be deemed to include 
such security but shall not, by reason of such investment, be 
deemed to include any assets of such company.
  (h) Notification of Secretary of Labor.--Before sending a 
notice of deficiency with respect to the tax imposed by 
subsection (a) or (b), the Secretary shall notify the Secretary 
of Labor and provide him a reasonable opportunity to obtain a 
correction of the prohibited transaction or to comment on the 
imposition of such tax.
  (i) Cross Reference.--For provisions concerning coordination 
procedures between Secretary of Labor and Secretary of the 
Treasury with respect to application of tax imposed by this 
section and for authority to waive imposition of the tax 
imposed by subsection (b), see section 3003 of the Employee 
Retirement Income Security Act of 1974.

           *       *       *       *       *       *       *


                         VII. DISSENTING VIEWS

    The majority should not have held this markup at this time. 
This bill is an attempted end-run around the executive branch 
rule-making process.
    What this bill would do is amend the statutory rules that 
determine when investment advice given by an advisor to an IRA 
owner, retirement plan sponsor, or retirement plan participant 
gives rise to fiduciary status.
    This issue is an important one. Plan participants and IRA 
owners are often not experienced investors. They rely on advice 
that is given to them by investment professionals. Ensuring 
that this advice is impartial and free from conflicts of 
interest is critical.
    The Administration first issued proposed regulations on 
this issue six years ago in 2010. They received many comments 
from consumer and industry groups and decided to redraft the 
proposal. That new proposal--issued last year--prompted more 
than 3,000 individual comment letters, and was the subject of 
petitions that generated hundreds of thousands of signatures. 
The Administration has stated that it has taken these comments 
and the numerous consultations on all sides of this issue into 
account when they prepared a final draft of the rule, which is 
now being considered by the Office of Management and the 
Budget.
    This markup should not have been held until the final rule 
is issued, and Congress and consumer and industry groups have 
had adequate time to review it.
    This bill also sets a harmful precedent. It is a precedent 
that Republicans want as part of their effort to pass the REINS 
Act (H.R. 427), a bill that passed the House last summer on a 
largely party line vote that would effectively bring executive 
branch rule-making to a standstill by requiring an affirmative 
``yes'' vote from both chambers of Congress before a final rule 
may become effective. H.R. 4294 includes a similar requirement 
for the soon-to-be-released final rule.
                                       Sandy Levin,
                                            Ranking Member,
                                       Committee on Ways and Means.