[14026]
October 4, 2001
TO: PENSION COMMITTEE No. 67-01
INVESTMENT ADVICE AD HOC COMMITTEE No. 5-01
RE: HOUSE COMMITTEE APPROVES INVESTMENT ADVICE LEGISLATION
Yesterday, the House Committee on Education and the Workforce favorably reported
H.R. 2269, the “Retirement Security Advice Act of 2001,” by a vote of 29 to 17. Four Democrats
joined 25 Republicans in voting in favor of the bill. H.R. 2269, introduced by Committee
Chairman John Boehner (R-OH), would provide a statutory exemption from ERISA’s prohibited
transaction rules for the provision of investment advice by plan service providers.
As you are aware, the House Subcommittee on Employer-Employee Relations had
approved H.R. 2269 in August of this year.1 The version of H.R. 2269 approved by the full
Committee differs in several respects from prior versions of the bill. These modifications,
intended to address concerns expressed by the Department of Labor and Democratic members
of the Committee,2 would:
• limit the plans to which “fiduciary advisers” may offer advice to those that provide for
participant direction of investments;
• clarify that an “employee, agent, or registered representative” of an entity qualified to
provide investment advice must satisfy the requirements of applicable insurance,
banking, and securities laws relating to the provision of advice;
• clarify that the disclosure required under the statutory exemption must be written in a
manner calculated to be understood by the average plan participant and be sufficiently
accurate and comprehensive to reasonably apprise participants and beneficiaries of the
information required to be provided;
1 See Institute Memorandum to Pension Committee No. 52-01 and Investment Advice Ad Hoc Committee 4-01, dated
August 3, 2001. For a description of the legislation as approved by the Subcommittee, see Institute Memorandum to
Pension Committee No. 40-01 and Investment Advice Ad Hoc Committee 2-01, dated June 25, 2001.
2 During the Committee meeting, Representative Rob Andrews (D-NJ) offered a substitute proposal, which was
defeated by a vote along party lines. That proposal would have, among other things, required fiduciary advisers to
arrange for an “alternative” adviser to be offered to plan participants in order to qualify under the statutory
exemption.
2
• provide that in the case of the initial provision of investment advice, the required
disclosures must be provided at a time “reasonably contemporaneous” with the
provision of such advice; and
• require investment advisers to acknowledge in writing that they are acting as a fiduciary
of the plan in connection with the provision of the advice.
We will keep you informed of further developments.
Thomas T. Kim
Assistant Counsel
Attachment (in .pdf format)