Retirement Choice Protection Act of 2015

“(7) Best interest recommendation rule for advice fiduciaries to iras and non-erisa plans

“(A) Best interest prohibited transaction—For purposes of this section and with respect to plans not subject to section 404 of title I, subtitle B of the Employee Retirement Income Security Act of 1974 (relating to fiduciary obligations), the term prohibited transaction includes the receipt of any consideration for his own personal account by any disqualified person who is a fiduciary by reason of providing investment advice (within the meaning of section 4975(e)(3)(B)) from the plan or any party in connection with a transaction involving the investment of income or assets of the plan resulting from the recommendation of such person, unless such investment advice constitutes a best interest recommendation. This paragraph shall not apply to any transaction unless such transaction is described in subparagraph (E) or (F) of subsection (c)(1) (without regard to any exemption from the prohibitions of subsection (c)).

“(B) Best interest recommendation

“(i) For purposes of this paragraph, the term best interest recommendation means a recommendation 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 the information obtained through the reasonable diligence of the person regarding factors such as the advice recipient’s age, and any other information that the advice recipient discloses to the person in connection with receiving such recommendation, where the person does not subordinate the interests of the plan or advice recipient, as applicable, to its own.

“(ii) Best interest recommendations may include, without limitation, recommendations that—

“(I) are based on a limited range of products, providers or offerings (including recommendations that include, or are limited only to, proprietary products and providers), where such limits are clearly disclosed to the advice recipient at any time prior to a transaction based on the recommendation, or

“(II) may result in variable compensation to the person (or its affiliate), such as transaction, services, placement, or other types of compensation that differ by product or service, where the receipt of such compensation is clearly disclosed to the advice recipient.

“(iii) For purposes of this paragraph, clear disclosure of variable compensation means notification at any time prior to a transaction based on the person’s recommendation, in a manner calculated to be understood by the average individual, of the following information, which can be provided in one or more statements or documents:

“(I) The person (or its affiliate) may receive varying amounts of fees or other compensation or consideration with respect to recommended transactions.

“(II) The amount of any fee or other compensation or consideration that is directly payable to the person (or its affiliate) from the plan or advice recipient with respect to recommended transactions, provided that any such amount may be expressed in terms of a monetary amount, formula, percentage of assets, per capita charge, or estimate or range of such compensation or consideration.

“(III) A description of the types and ranges of indirect compensation that may be paid to the person (or its affiliate) by any third party in connection with recommended transactions, provided that any such ranges may be expressed in terms of a monetary amount, formula, percentage of assets, per capita charge, or estimate of such compensation or consideration.

“(IV) Upon the advice recipient’s request prior to the transaction, a disclosure of the specific amounts of compensation described in subclause (II) or (III) that the person will receive in connection with the particular transaction, provided that any such amounts may be expressed in terms of a monetary amount, formula, percentage of assets, per capita charge, or estimate of such compensation or consideration.

“(C) Correction—For purposes of this section and notwithstanding subsection (f)(5) to the contrary, the terms correction and correct mean, with respect to this prohibited transaction only, the payment to, or reimbursement of, actual damages of the plan resulting directly from the plan’s reliance on such investment advice, if any, that have not otherwise been paid or reimbursed to the plan, including payments and reimbursements made pursuant to subsection (f)(5). Any such damages shall be determined in a manner consistent with the damages that would be payable with respect to such prohibited transaction under the Employee Retirement Income Security Act of 1974.

“(D) Calculation of amount involved—For purposes of this section and notwithstanding subsection (f)(4) to the contrary, the term amount involved means, with respect to this prohibited transaction only, the amount of such consideration received by the disqualified person with respect to the transaction that has not otherwise been paid or reimbursed to the plan, including payments and reimbursements made pursuant to subsection (f)(5).”

“(d) Exemptions—Except as provided in subsection (f)(6), the prohibitions provided in subsection (c)(1) shall not apply to—”

“(B) renders investment advice for a fee or other compensation, direct or indirect, with respect to moneys or other property of such plan, or has any authority or responsibility to do so. Investment advice means a recommendation—

“(i) as to the advisability of acquiring, holding, disposing, or exchanging securities or other investment 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;

“(ii) 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

“(iii) of a person who is also going to receive a fee or other compensation for providing any of the types of advice described in clause (i) or (ii);”

“(D) The extent of a fiduciary’s obligations as such can be defined and limited pursuant to a mutual agreement, arrangement, or understanding between the person and the party engaging the person as a fiduciary to the plan. Such limitations can include limits on scope, timing, and responsibility to provide ongoing monitoring or advice services.

“(E) A person shall not be deemed to be a fiduciary on account of section 4975(e)(3)(B) if such person meets one or more of the following:

“(i) Counterparties and services providers—In such person’s capacity as a counterparty, service provider, or representative thereof, the person provides advice to a plan fiduciary who is independent of such person and who is independent of the plan sponsor, with respect to an arm’s-length service arrangement, sale, purchase, loan, or bilateral contract between the plan and person, each a “transaction” for purposes of this subclause, if, prior to entering into the transaction, the plan fiduciary represents that it understands that the person has a financial interest in the matter, and that the person is not undertaking to provide impartial financial advice or to give advice as a fiduciary (within the meaning of this paragraph); provided such person has not acknowledged in writing that it is acting as a fiduciary (within the meaning of this paragraph) with respect to the transaction.

“(ii) Swap transactions—The person is a counterparty, service provider or representative thereof in connection with a swap or security-based swap, as defined in section 1(a) of the Commodity Exchange Act (7 U.S.C. 1(a)) and section 3(a) of the Securities Exchange Act (15 U.S.C. 78c(a)), if: the plan is represented by a fiduciary independent of the person; the person is a swap clearing firm or other service provider in relation to a swap, swap dealer, security-based swap dealer, major swap participant, or major security-based swap participant; the person (if a swap dealer, security-based swap dealer, clearing firm, or other similar service provider) is not acting as an advisor to the plan (within the meaning of section 4s(h) of the Commodity Exchange Act or section 15F(h) of the Securities Exchange Act of 1934) in connection with the transaction; and in advance of providing any recommendations with respect to the transaction, the person obtains a written representation from the independent plan fiduciary, that the fiduciary will not rely on recommendations provided by the person.

“(iii) Employees—In his or her capacity as an employee of any employer or employee organization sponsoring the plan or an affiliate of such plan sponsor, the person provides the advice (directly or indirectly) to the plan, plan fiduciary, participant, or beneficiary, and he or she receives no fee or other compensation, direct or indirect, in connection with the advice beyond the employee’s normal compensation for work performed for the employer or employee organization or an affiliate. In such cases, such an employee is not rendering investment advice for a fee or other compensation. No inference is intended with respect to whether any other person shall be treated as rendering investment advice for a fee or other compensation.

“(iv) Platform providers—The person merely markets and makes available to a plan (including its participants, beneficiaries, and fiduciaries (which includes an owner of an individual retirement plan (as defined in section 7701(a)(37)))), without regard to the individualized needs of the plan, its participants, or beneficiaries, securities or other property through a platform or similar mechanism (which may consist of or include one or more annuity contracts) 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, if the person discloses in writing to the plan fiduciary that the person is not undertaking to provide impartial investment advice or to give advice as a fiduciary (within the meaning of this paragraph) when establishing or maintaining the platform.

“(v) Selection and monitoring assistance—The person merely identifies investment alternatives that meet objective criteria specified by the plan fiduciary (including an owner of an individual retirement plan (as defined in section 7701(a)(37))), participant, or beneficiary (e.g., stated parameters concerning expense ratios, size of fund, type of asset, or credit quality); or merely provides objective financial data and comparisons with independent benchmarks to the plan fiduciary, participant or beneficiary.

“(vi) Financial reports and valuations—The person provides or reports valuation information, but does not represent in writing that it is undertaking to provide such valuation information as a fiduciary (within the meaning of this subsection).

“(vii) Education—The person provides the information—

“(I) described in Department of Labor Interpretive Bulletin 96–1 (29 C.F.R. 2509.96–1, as in effect on January 1, 2015);

“(II) described in Department of Labor Interpretive Bulletin 96–1 (29 C.F.R. 2509.96–1, as in effect on January 1, 2015) but for the fact that such education is provided to a plan or plan fiduciary;

“(III) described in Department of Labor Interpretive Bulletin 96–1 (29 C.F.R. 2509.96–1, as in effect on January 1, 2015) but for the fact that such education is provided to an owner of an individual retirement plan (as defined in section 7701(a)(37));

“(IV) to participants and beneficiaries regarding the factors to consider in deciding whether to elect to receive a distribution from a plan or an individual retirement plan (as defined in section 7701(a)(37)) and whether to roll over such distribution to a plan or an individual retirement plan (as defined in section 7701(a)(37)); such education can include examples of different distribution and rollover alternatives, so long as all material facts and assumptions on which the examples are based accompany the examples; or

“(V) any additional information treated as education by the Secretary of Labor.”

“(24) with respect to transactions described in section 4975(c)(1) (A)–(F), any transaction or service in connection with the provision of investment advice described in section 4975(e)(3)(B) if the conditions under subparagraphs (A), (B), and (C) are satisfied:

“(A) The provision of investment advice with respect to the transaction is subject to subsection (c)(7) or section 404 of title I, subtitle B of the Employee Retirement Income Security Act of 1974 (relating to fiduciary obligations).

“(B) The conditions of section 4975(d)(2) are satisfied when otherwise applicable.

“(C) With respect to plans subject to section 404 of title I, subtitle B of the Employee Retirement Income Security Act of 1974, the investment advice may include recommendations that—

“(i) are based on a limited range of products, providers, or offerings (including recommendations that include, or are limited only to, proprietary products and providers), where such limits are clearly disclosed to the advice recipient at any time prior to a transaction based on the recommendation, or

“(ii) may result in variable compensation to the person (or its affiliate), such as transaction, services, placement, or other types of compensation that differ by product or service, where the receipt of such compensation is clearly disclosed to the advice recipient.

“(D) For purposes of this paragraph, clear disclosure of variable compensation means notification at any time prior to a transaction based on the person’s recommendation, in a manner calculated to be understood by the average individual, of the following information, which can be provided in one or more statements or documents:

“(i) The person (or its affiliate) may receive varying amounts of fees or other compensation or consideration with respect to recommended transactions.

“(ii) The amount of any fee or other compensation or consideration that is directly payable to the person (or its affiliate) from the plan or advice recipient with respect to recommended transactions, provided that any such amount may be expressed in terms of a monetary amount, formula, percentage of assets, per capita charge, or estimate or range of such compensation or consideration.

“(iii) A description of the types and ranges of indirect compensation that may be paid to the person (or its affiliate) by any third party in connection with the recommended transaction, provided that any such range may be expressed in terms of a monetary amount, formula, percentage of assets, per capita charge or estimate of such compensation or consideration.

“(iv) Upon the advice recipient’s request prior to the transaction, a disclosure of the specific amounts of compensation described in clause (ii) or (iii) that the person will receive in connection with the particular transaction, provided that any such amounts may be expressed in terms of a monetary amount, formula, percentage of assets, per capita charge, or estimate of such compensation or consideration.”

“(ii) renders investment advice for a fee or other compensation, direct or indirect, with respect to moneys or other property of such plan, or has any authority or responsibility to do so. Investment advice means a recommendation—

“(I) as to the advisability of acquiring, holding, disposing, or exchanging securities or other investment 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;

“(II) 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

“(III) of a person who is also going to receive a fee or other compensation for providing any of the types of advice described in subclause (I) or (II);”

“(C) The extent of a fiduciary’s obligations as such can be defined and limited pursuant to a mutual agreement, arrangement, or understanding between the person and the party engaging the person as a fiduciary to the plan. Such limitations can include limits on scope, timing, and responsibility to provide ongoing monitoring or advice services.

“(D) A person shall not be deemed to be a fiduciary on account of subparagraph (A)(ii) if such person meets one or more of the following:

“(i) Counterparties and services providers—In such person’s capacity as a counterparty, service provider, or representative thereof, the person provides advice to a plan fiduciary who is independent of such person and who is independent of the plan sponsor, with respect to an arm’s-length service arrangement, sale, purchase, loan, or bilateral contract between the plan and person, each a “transaction” for purposes of this clause if, prior to entering into the transaction, the plan fiduciary represents that it understands that the person has a financial interest in the matter, and that the person is not undertaking to provide impartial financial advice or to give advice as a fiduciary (within the meaning of this subsection); provided such person has not acknowledged in writing that it is acting as a fiduciary (within the meaning of this subsection) with respect to the transaction.

“(ii) Swap transactions—The person is a counterparty, service provider or representative thereof in connection with a swap or security-based swap, as defined in section 1(a) of the Commodity Exchange Act (7 U.S.C. 1(a)) and section 3(a) of the Securities Exchange Act (15 U.S.C. 78c(a)), if: the plan is represented by a fiduciary independent of the person; the person is a swap clearing firm or other service provider in relation to a swap, swap dealer, security-based swap dealer, major swap participant, or major security-based swap participant; the person (if a swap dealer, security-based swap dealer, clearing firm, or other similar service provider) is not acting as an advisor to the plan (within the meaning of section 4s(h) of the Commodity Exchange Act or section 15F(h) of the Securities Exchange Act of 1934) in connection with the transaction; and in advance of providing any recommendations with respect to the transaction, the person obtains a written representation from the independent plan fiduciary, that the fiduciary will not rely on recommendations provided by the person.

“(iii) Employees—In his or her capacity as an employee of any employer or employee organization sponsoring the plan or an affiliate of such plan sponsor, the person provides the advice (directly or indirectly) to the plan, plan fiduciary, participant, or beneficiary, and he or she receives no fee or other compensation, direct or indirect, in connection with the advice beyond the employee’s normal compensation for work performed for the employer or employee organization or an affiliate. In such cases, such an employee is not rendering investment advice for a fee or other compensation. No inference is intended with respect to whether any other person shall be treated as rendering investment advice for a fee or other compensation.

“(iv) Platform providers—The person merely markets and makes available to a plan (including its participants, beneficiaries, and fiduciaries), without regard to the individualized needs of the plan, its participants, or beneficiaries, securities or other property through a platform or similar mechanism (which may consist of or include one or more annuity contracts) 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, if the person discloses in writing to the plan fiduciary that the person is not undertaking to provide impartial investment advice or to give advice as a fiduciary (within the meaning of this subsection) when establishing or maintaining the platform.

“(v) Selection and monitoring assistance—The person merely identifies investment alternatives that meet objective criteria specified by the plan fiduciary, participant, or beneficiary (e.g., stated parameters concerning expense ratios, size of fund, type of asset, or credit quality); or merely provides objective financial data and comparisons with independent benchmarks to the plan fiduciary, participant or beneficiary.

“(vi) Financial reports and valuations—The person provides or reports valuation information, but does not represent in writing that it is undertaking to provide such valuation information as a fiduciary (within the meaning of this subsection).

“(vii) Education—The person provides the information—

“(I) described in Department of Labor Interpretive Bulletin 96–1 (29 C.F.R. 2509.96–1, as in effect on January 1, 2015);

“(II) described in Department of Labor Interpretive Bulletin 96–1 (29 C.F.R. 2509.96–1, as in effect on January 1, 2015) but for the fact that such education is provided to a plan or plan fiduciary;

“(III) to participants and beneficiaries regarding the factors to consider in deciding whether to elect to receive a distribution from a plan or an individual retirement plan (as defined in section 7701(a)(37) of the Internal Revenue Code of 1986) and whether to roll over such distribution to a plan or an individual retirement plan (as defined in section 7701(a)(37) of the Internal Revenue Code of 1986); such education can include examples of different distribution and rollover alternatives, so long as all material facts and assumptions on which the examples are based accompany the examples; or

“(IV) any additional information treated as education by the Secretary.”

“(21) with respect to transactions described in sections 406(a) and 406(b), any transaction or service in connection with the provision of investment advice described in section 3(21)(A)(ii) if the conditions under subparagraphs (A), (B), and (C) are satisfied:

“(A) The provision of investment advice with respect to the transaction is subject to section 404.

“(B) The conditions of section 408(b)(2) are satisfied when otherwise applicable.

“(C) The investment advice may include recommendations that—

“(i) are based on a limited range of products, providers, or offerings (including recommendations that include, or are limited only to, proprietary products and providers), where such limits are clearly disclosed to the advice recipient at any time prior to a transaction based on the recommendation, or

“(ii) may result in variable compensation to the person (or its affiliate), such as transaction, services, placement, or other types of compensation that differ by product or service, where the receipt of such compensation is clearly disclosed to the advice recipient.

“(D) For purposes of this paragraph, clear disclosure of variable compensation means notification at any time prior to a transaction based on the person’s recommendation, in a manner calculated to be understood by the average individual, of the following information, which can be provided in one or more statements or documents:

“(i) The person (or its affiliate) may receive varying amounts of fees or other compensation or consideration with respect to recommended transactions.

“(ii) The amount of any fee or other compensation or consideration that is directly payable to the person (or its affiliate) from the plan or advice recipient with respect to recommended transactions, provided that any such amount may be expressed in terms of a monetary amount, formula, percentage of assets, per capita charge, or estimate or range of such compensation or consideration.

“(iii) A description of the types and ranges of indirect compensation that may be paid to the person (or its affiliate) by any third party in connection with the recommended transaction, provided that any such ranges may be expressed in terms of a monetary amount, formula, percentage of assets, per capita charge or estimate of such compensation or consideration.

“(iv) Upon the advice recipient’s request prior to the transaction, a disclosure of the specific amounts of compensation described in clauses (ii) and (iii) that the person will receive in connection with the particular transaction, provided that any such amounts may be expressed in terms of a monetary amount, formula, percentage of assets, per capita charge, or estimate of such compensation or consideration.”