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”.
Strengthening Access to Valuable Education and Retirement Support Act of 2015
A BILL
To amend the Internal Revenue Code of 1986 to ensure that retirement investors receive advice in their best interests, and for other purposes.
Sec. 2 Purpose
The purpose of this Act is to provide that advisors who—
provide advice that is impermissible under the prohibited transaction provisions under section 4975 of the Internal Revenue Code of 1986, or
breach the best interest standard for the provision of investment advice,
Sec. 3 Rules relating to the provision of investment advice
Amendments to the Internal Revenue Code of 1986—
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.”
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.”
Failures relating to best interest recommendation—
Correction— Section 4975(f)(5) of such Code is amended—
by striking “(5) Correction.—The terms” and inserting:
“(5) Correction
“(A) In general—Except as provided in subparagraph (B), the terms”
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).”
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).”.
Effective date—
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.
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.
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.
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).
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.