EXEMPTION FOR CERTAIN AUTOMATIC PORTABILITY TRANSACTIONS.

SEC. 120. EXEMPTION FOR CERTAIN AUTOMATIC PORTABILITY TRANSACTIONS.(a) In General.—Section 4975(d), as amended by the preceding provisions of this Act, is further amended by striking “or” at the end of paragraph (23), by striking the period at the end of paragraph (24) and inserting “, or”, and by adding at the end the following new paragraph:“(25) the receipt of fees and compensation by the automatic portability provider for services provided in connection with an automatic portability transaction.” . (b) Other Definitions and Special Rules.—Section 4975(f) is amended by adding at the end the following new paragraph:“(12) Rules relating to automatic portability transactions.—“(A) In general.—For purposes of subsection (d)(25)—“(i) Automatic portability transaction.—An automatic portability transaction is a transfer of assets made—“(I) from an individual retirement plan which is established on behalf of an individual and to which amounts were transferred under section 401(a)(31)(B)(i), “(II) to an employer-sponsored retirement plan described in clause (iii), (iv), (v), or (vi) of section 402(c)(8)(B) (other than a defined benefit plan) in which such individual is an active participant, and “(III) after such individual has been given advance notice of the transfer and has not affirmatively opted out of such transfer. “(ii) Automatic portability provider.—An automatic portability provider is a person, other than an individual, who executes transfers described in clause (i).136 STAT. 5304 “(B) Conditions for automatic portability transactions.—Subsection (d)(25) shall not apply to an automatic portability transaction unless the following requirements are satisfied:“(i) Acknowledgment of fiduciary status.—An automatic portability provider shall acknowledge in writing, at such time and format as specified by the Secretary of Labor, that the provider is a fiduciary with respect to the individual retirement plan described in subparagraph (A)(i)(I). “(ii) Fees.—The fees and compensation received, directly or indirectly, by the automatic portability provider for services provided in connection with the automatic portability transaction (including any increase in such fees or compensation and any fees or compensation in connection with, but received before, the transaction)—“(I) shall not exceed reasonable compensation, and “(II) shall be fully disclosed to and approved in writing in advance of the transaction by a plan fiduciary of the plan described in subparagraph (A)(i)(II) which is independent of the automatic portability provider. An automatic portability provider shall not receive any fees or compensation in connection with an automatic portability transaction involving a plan which is sponsored or maintained by the automatic portability provider. “(iii) Data usage.—The automatic portability provider shall not market or sell data relating to the individual retirement plan described in subparagraph (A)(i)(I) or to the participants of the plan described in subparagraph (A)(i)(II). “(iv) Open participation.—The automatic portability provider shall offer automatic portability transactions on the same terms to any plan described in subparagraph (A)(i)(II). “(v) Pre-transaction notice.—At least 60 days in advance of an automatic portability transaction, the automatic portability provider shall provide notice to the individual on whose behalf the individual retirement plan described in subparagraph (A)(i)(I) is established which includes—“(I) a description of the automatic portability transaction and a complete and accurate statement of all fees which will be charged and all compensation which will be received in connection with the transaction, “(II) a clear and prominent description of the individual’s right to affirmatively elect not to participate in the transaction as well as the other available distribution options, the deadline by which the individual must make an election, the procedures for such an election, and a telephone number for the automatic portability provider that the individual may call to make such election,136 STAT. 5305 “(III) a description of the individual’s right to designate a beneficiary and the procedures to do so, and “(IV) such other disclosures as the Secretary of Labor may require by regulation. “(vi) Post-transaction notice.—Not later than 3 business days after an automatic portability transaction, the automatic portability provider shall provide notice to the individual on whose behalf the individual retirement plan described in subparagraph (A)(i)(I) is established of—“(I) the actions taken by the automatic portability provider with respect to the individual’s account, “(II) all relevant information regarding the location and amount of any transferred assets, “(III) a statement of fees charged against the account by the automatic portability provider or its affiliates in connection with the transfer, “(IV) a telephone number at which the individual can contact the automatic portability provider, and “(V) such other disclosures as the Secretary of Labor may require by regulation. “(vii) Notice requirements.—The notices required under clauses (v) and (vi) shall be written in a manner calculated to be understood by the average person and shall not include inaccurate or misleading statements. “(viii) Frequency of searches.—The automatic portability provider shall query on at least a monthly basis whether any individual with an individual retirement plan described in subparagraph (A)(i)(I) has an account in a plan described in subparagraph (A)(i)(II). “(ix) Timeliness of execution.—After liquidating the assets of an individual retirement plan described in subparagraph (A)(i)(I) to cash, an automatic portability provider shall transfer the account balance of such plan as soon as practicable to the plan described in subparagraph (A)(i)(II). “(x) Limitation on exercise of discretion.—The automatic portability provider shall neither have nor exercise discretion to affect the timing or amount of the transfer pursuant to an automatic portability transaction other than to deduct the appropriate fees as described in clause (ii). “(xi) Record retention and audits.—“(I) In general.—An automatic portability provider shall, for not less than 6 years after the automatic portability transaction has occurred, maintain the records sufficient to demonstrate the terms of this subparagraph have been met. The automatic portability provider shall make such records available to any authorized employee of the Department of the Treasury or the Department of Labor within 30 calendar days of the date of a written request for such records.136 STAT. 5306 “(II) Audits.—An automatic portability provider shall conduct an annual audit, in accordance with regulations promulgated by the Secretary of Labor, of automatic portability transactions occurring during the calendar year to demonstrate compliance with this paragraph and any regulations thereunder and identify any instances of noncompliance therewith, and shall submit such audit annually to the Secretary of Labor, in such form and manner as specified by such Secretary. “(xii) Website.—The automatic portability provider shall maintain a website which contains—“(I) a list of recordkeepers for each plan described in subparagraph (A)(i)(II) with respect to which the provider carries out automatic portability transactions, and “(II) a list of all fees described in clause (ii)(II) paid to the provider.” . (c) Regulatory Authority.—Not later than 12 months after the date of the enactment of this Act, the Secretary of Labor shall issue such guidance as may be necessary to carry out the purposes of the amendments made by this section, including regulations or other guidance which—(1) require an automatic portability provider to provide a notice to individuals on whose behalf the individual retirement plan described in paragraph (12)(A)(i)(I) of section 4975(f) of the Internal Revenue Code of 1986, as added by this section, is established in advance of the notices specified in paragraph (12)(B)(v) of such section, as so added, (2) require an automatic portability provider to disclose to plans described in paragraph (12)(A)(i)(II) of section 4975(f) of the Internal Revenue Code of 1986, as added by this section, information required to be provided by a covered service provider pursuant to section 2550.408b–2(c) of title 29, Code of Federal Regulations, (3) require a plan described in such paragraph (12)(A)(i)(II), as so added, to fully disclose fees related to an automatic portability transaction in its summary plan description or summary of material modifications, as relevant, (4) require a plan described in such paragraph, as so added, to invest amounts received on behalf of a participant pursuant to an automatic portability transaction in the participant’s current investment election under the plan or, if no election is made or permitted, in the plan’s qualified default investment alternative (within the meaning of section 2550.404c–5 of title 29, Code of Federal Regulations) or another investment selected by a fiduciary with respect to such plan, (5) prohibit or restrict the receipt or payment of third party compensation (other than a direct fee paid by a plan sponsor which is in lieu of a fee imposed on an individual retirement plan owner) by an automatic portability provider in connection with an automatic portability transaction, (6) prohibit exculpatory provisions in an automatic portability provider’s contracts or communications with individuals disclaiming or limiting its liability in the event that an automatic portability transaction results in an improper transfer,136 STAT. 5307 (7) require an automatic portability provider to take actions necessary to reasonably ensure that participant and beneficiary data is current and accurate, (8) limit the use of data related to automatic portability transactions for any purpose other than the execution of such transactions or locating missing participants, except as permitted by the Secretary of Labor, (9) provide for corrections procedures in the event an auditor determines the automatic portability provider was not in compliance with this provision and related regulations as specified in paragraph (12)(B)(ix)(II) of section 4975(f) of such Code, as so added, including deadlines, supplemental audits, and corrective actions which may include a temporary prohibition from relying on the exemption provided by paragraph (25) of section 4975(d) of such Code, as added by this section, (10) ensure that the appropriate participants and beneficiaries, in fact, receive all the required notices and disclosures, and (11) make clear that the exemption provided by paragraph (25) of section 4975(d) of such Code, as added by this section, applies solely to the automatic portability transactions described therein, and, to the extent the Secretary deems necessary or advisable, specify how the application of the exemption relates to or coordinates with the application of other statutory provisions, regulations, administrative guidance, or exemptions. Any term used in this subsection which is used in paragraph (12) of section 4975(f) of such Code, as added by this section, has the same meaning as when used in such paragraph. (d) Report to Congress.—(1) In general.—Not later than 2 years after the date of the first audit report received by the Secretary of Labor from any automatic portability provider, and every 3 years thereafter, the Secretary of Labor shall report to the Committees on Health, Education, Labor and Pensions and Finance of the Senate and the Committees on Education and Labor and Ways and Means of the House of Representatives on—(A) the effectiveness of automatic portability transactions under the exemption provided by paragraph (25) of section 4975(d) of the Internal Revenue Code of 1986, as added by this section, detailing—(i) the number of automatic cash outs from qualified plans to individual retirement plans described in section 4975(f)(12)(A)(i)(I) of such Code, (ii) the number of completed automatic portability transactions to employer-sponsored retirement plans described in section 4975(f)(12)(A)(i)(II) of such Code, (iii) the number of individual retirement plans described in section 4975(f)(12)(A)(i)(I) of such Code which have been transferred to designated beneficiaries, (iv) the number of individual retirement plans described in section 4975(f)(12)(A)(i)(I) of such Code for which the automatic portability provider is searching for next of kin due to a deceased account holder without a designated beneficiary, and136 STAT. 5308 (v) the number of accounts that were reduced to a zero balance while in the automatic portability provider’s custody; (B) a summary of any consumer complaints submitted to the Employee Benefits Security Administration regarding automatic portability transactions; (C) a summary of compliance issues found in the annual audit described in section 4975(f)(12)(B)(xiii)(II) of such Code, if any, and their corrections; (D) a summary of the fees individuals are charged in connection with automatic portability transactions, including whether those fees have increased since the last report; (E) recommendations of any necessary statutory changes to this exemption to improve the effectiveness of automatic portability transactions, including repeal of this provision in the event of a pattern of noncompliance; and (F) any other information the Secretary of Labor deems important. The report required by this subsection shall be made publicly available. (2) Report on notices relating to automatic transfers.—Not later than 2 years after the date of the enactment of this Act, the Secretary of Treasury shall report to the Committee on Finance of the Senate and the Committee on Ways and Means on the adequacy of the notices relating to transfers under section 401(a)(31)(B)(i) of the Internal Revenue Code of 1986. (e) Effective Date.—The amendments made by this section shall apply to transactions occurring on or after the date which is 12 months after the date of the enactment of this Act.