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Text of the Pension Audit Improvement Act of 1995

This bill was introduced on December 20, 1995, in a previous session of Congress, but was not enacted. The text of the bill below is as of Dec 20, 1995 (Introduced).

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S 1490 IS

104th CONGRESS

1st Session

S. 1490

To amend title I of the Employee Retirement Income Security Act of 1974 to improve enforcement of such title and benefit security for participants by adding certain provisions with respect to the auditing of employee benefit plans, and for other purposes.

IN THE SENATE OF THE UNITED STATES

December 20, 1995

Mr. SIMON (for himself, Mr. JEFFORDS Mr. LEAHY, and Mrs. BOXER) introduced the following bill; which was read twice and referred to the Committee on Labor and Human Resources


A BILL

To amend title I of the Employee Retirement Income Security Act of 1974 to improve enforcement of such title and benefit security for participants by adding certain provisions with respect to the auditing of employee benefit plans, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ‘Pension Audit Improvement Act of 1995’.

SEC. 2. REPEAL OF LIMITED SCOPE AUDIT.

    (a) IN GENERAL- Section 103(a)(3) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1023(a)(3)) is amended by striking subparagraph (C) and by redesignating subparagraph (D) as subparagraph (C).

    (b) CONFORMING AMENDMENTS-

      (1) Section 103(a)(3)(A) of such Act (29 U.S.C. 1023(a)(3)(A)) is amended by striking ‘Except as provided in subparagraph (C), the’ and inserting ‘The’.

      (2) Section 104(a)(5)(A) of such Act (29 U.S.C. 1024(a)(5)(A)) is amended by striking ‘section 103(a)(3)(D)’ and inserting ‘section 103(a)(3)(C)’.

    (c) EFFECTIVE DATE- The amendments made by this section shall apply with respect to opinions required under section 103(a)(3)(A) of the Employee Retirement Income Security Act of 1974 for plan years beginning on or after January 1 of the calendar year following the date of the enactment of this Act.

SEC. 3. REPORTING AND ENFORCEMENT REQUIREMENTS FOR EMPLOYEE BENEFIT PLANS.

    (a) IN GENERAL- Part 1 of subtitle B of title I of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1021 et seq.) is amended--

      (1) by redesignating section 111 as section 112, and

      (2) by inserting after section 110 the following new section:

‘DIRECT REPORTING OF CERTAIN EVENTS

    ‘SEC. 111. (a) REQUIRED NOTIFICATIONS-

      ‘(1) NOTIFICATIONS BY PLAN ADMINISTRATOR- The administrator of an employee benefit plan shall, within 5 business days after the administrator first has reason to believe (or after the administrator is notified under paragraph (2)) that an irregularity may have occurred with respect to the plan--

        ‘(A) notify the Secretary of the irregularity in writing; and

        ‘(B) furnish a copy of such notification to the accountant who is currently engaged under section 103(a)(3)(A).

      ‘(2) NOTIFICATIONS BY ACCOUNTANT-

        ‘(A) IN GENERAL- An accountant engaged by the administrator of an employee benefit plan under section 103(a)(3)(A) shall, within 5 business days after the accountant first has reason to believe in connection with such engagement that an irregularity may have occurred with respect to the plan--

          ‘(i) notify the plan administrator of the irregularity in writing, or

          ‘(ii) if the accountant has reason to believe that the irregularity may have involved an individual who is the plan administrator or who is a senior official of the plan administrator, notify the Secretary of the irregularity in writing.

        ‘(B) NOTIFICATION UPON FAILURE OF PLAN ADMINISTRATOR TO NOTIFY- If an accountant who has provided notification to the plan administrator pursuant to subparagraph (A)(i) does not receive a copy of the administrator’s notification to the Secretary required under paragraph (1)(B) within the 5-business day period specified therein, the accountant shall furnish to the Secretary a copy of the accountant’s notification made to the plan administrator on the next business day following such period.

      ‘(3) IRREGULARITY DEFINED-

        ‘(A) For purposes of this subsection, the term ‘irregularity’ means--

          ‘(i) a theft, embezzlement, or a violation of section 664 of title 18, United States Code (relating to theft or embezzlement from an employee benefit plan);

          ‘(ii) an extortion or a violation of section 1951 of such title 18 (relating to interference with commerce by threats or violence);

          ‘(iii) a bribery, a kickback, or a violation of section 1954 of such title 18 (relating to offer, acceptance, or solicitation to influence operations of an employee benefit plan);

          ‘(iv) a violation of section 411, 501, or 511 of this title (relating to criminal violations); or

          ‘(v) any intentional misstatement or omission of an amount or disclosure in a financial statement, accounting record, or supporting document undertaken to mislead.

        ‘(B) The term ‘irregularity’ shall not include any act or omission described in this paragraph involving less than $1,000 unless there is reason to believe that the act or omission may bear on the integrity of plan management.

    ‘(b) NOTIFICATION UPON TERMINATION OF ENGAGEMENT OF ACCOUNTANT-

      ‘(1) NOTIFICATION BY PLAN ADMINISTRATOR- Within 5 business days after the termination of an engagement for auditing services under section 103(a)(3)(A) with respect to an employee benefit plan, the administrator of such plan shall--

        ‘(A) notify the Secretary in writing of such termination, giving the reasons for such termination, and

        ‘(B) furnish the accountant whose engagement was terminated with a copy of the notification sent to the Secretary.

      ‘(2) NOTIFICATION BY ACCOUNTANT- If the accountant referred to in paragraph (1)(B) has not received a copy of the administrator’s notification to the Secretary as required under paragraph (1)(B), or if the accountant disagrees with the reasons given in the notification of termination of the engagement for auditing services, the accountant shall notify the Secretary in writing of the termination, giving the reasons for the termination, within 10 business days after the termination of the engagement.

    ‘(c) DETERMINATION OF PERIODS REQUIRED FOR NOTIFICATION- In determining whether a notification required under this section with respect to any act or omission has been made within the required number of business days--

      ‘(1) the day on which such act or omission begins shall not be included; and

      ‘(2) Saturdays, Sundays, and legal holidays shall not be included.

    For purposes of this subsection, the term ‘legal holiday’ means any Federal legal holiday and any other day appointed as a holiday by the State in which the person responsible for making the notification principally conducts his business.

    ‘(d) IMMUNITY FOR GOOD FAITH NOTIFICATION- Except as provided in this Act, no accountant shall be liable to any person for any finding, conclusion, or statement made in any notification made pursuant to subsection (a)(2) or (b)(2), or pursuant to any regulations issued thereunder, if such finding, conclusion, or statement is made in good faith.’

    (b) CIVIL PENALTY-

      (1) IN GENERAL- Section 502(c) of such Act (29 U.S.C. 1132(c)) is amended by adding at the end the following new paragraph:

      ‘(5)(A) The Secretary may assess a civil penalty of up to $100,000 against any administrator who fails to provide the Secretary with any notification as required under section 111.

      ‘(B) The Secretary may assess a civil penalty of up to $100,000 against any accountant who knowingly and willfully fails to provide the Secretary with any notification as required under section 111.’

      (2) CONFORMING AMENDMENT- Section 502(a)(6) of such Act (29 U.S.C. 1132(a)(6)) is amended by striking ‘subsection (c)(2) or (i) or (l)’ and inserting ‘paragraph (2), (4), or (5) of subsection (c) or subsection (i) or (l)’.

    (c) CLERICAL AMENDMENTS-

      (1) Section 514(d) of such Act (29 U.S.C. 114(d)) is amended by striking ‘111’ and inserting ‘112’.

      (2) The table of contents in section 1 of such Act is amended by striking the item relating to section 111 and inserting the following new items:

      ‘Sec. 111. Direct reporting of certain events.

      ‘Sec. 112. Repeal and effective date.’

    (d) EFFECTIVE DATE- The amendments made by this section shall apply with respect to any irregularity or termination of engagement described in such amendments only if the 5-day period described in such amendments in connection with such irregularity or termination commences on or after the date of the enactment of this Act.

SEC. 4. ADDITIONAL REQUIREMENTS FOR QUALIFIED PUBLIC ACCOUNTANTS.

    (a) IN GENERAL- Section 103(a)(3)(C) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1023(a)(3)(C)), as redesignated by section 2, is amended--

      (1) by inserting ‘(i)’ after ‘(C)’;

      (2) by inserting ‘, with respect to any engagement of an accountant under subparagraph (A)’ after ‘means’;

      (3) by redesignating clauses (i), (ii), and (iii) as subclauses (I), (II), and (III), respectively;

      (4) by striking the period at the end of subclause (III) (as so redesignated) and inserting a comma;

      (5) by adding after subclause (III) (as so redesignated), and flush with clause (i), the following:

          ‘but only if such person meets the requirements of clauses (ii) and (iii) with respect to such engagement.’; and

      (6) by adding at the end the following new clauses:

          ‘(ii) A person meets the requirements of this clause with respect to an engagement of such person as an accountant under subparagraph (A) if such person--

            ‘(I) has in operation an appropriate internal quality control system;

            ‘(II) has undergone a qualified external quality control review of the person’s accounting and auditing practices, including such practices relevant to employee benefit plans (if any), during the 3-year period immediately preceding such engagement; and

            ‘(III) has completed, within the 2-year period immediately preceding such engagement, at least 80 hours of continuing education or training which contributes to the accountant’s professional proficiency, at least 20 hours of which have been completed during the 1-year period immediately preceding the engagement, and at least 16 hours of which relate to employee benefit plan matters.

          ‘(iii) A person meets the requirements of this clause with respect to an engagement of such person as an accountant under subparagraph (A) if such person meets such additional requirements and qualifications of regulations which the Secretary deems necessary to ensure the quality of plan audits.

          ‘(iv) For purposes of clause (ii)(II), an external quality control review shall be treated as qualified with respect to a person referred to in clause (ii) if--

            ‘(I) such review is performed in accordance with the requirements of external quality control review programs of recognized auditing standard-setting bodies, as determined under regulations of the Secretary, and

            ‘(II) in the case of any such person who has, during the peer review period, conducted one or more previous audits of employee benefit plans, such review includes the review of an appropriate number (determined as provided in such regulations, but in no case less than one) of plan audits in relation to the scale of such person’s auditing practice.

          The Secretary shall issue the regulations under subclause (I) no later than December 31, 1997.’

    (b) EFFECTIVE DATES-

      (1) IN GENERAL- Except as provided in paragraph (2), the amendments made by this section shall apply with respect to plan years beginning on or after the date which is 3 years after the date of the enactment of this Act.

      (2) RESTRICTIONS ON CONDUCTING EXAMINATIONS- Clause (iii) of section 103(a)(3)(C) of the Employee Retirement Income Security Act of 1974 (as added by subsection (a)(6)) shall take effect on the date of enactment of this Act.

SEC. 5. CLARIFICATION OF FIDUCIARY PENALTIES.

    (a) MODIFICATION OF PROHIBITION OF ASSIGNMENT OR ALIENATION-

      (1) AMENDMENT TO ERISA- Section 206(d) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1056(d)) is amended by adding the following new paragraph:

      ‘(4) Paragraph (1) shall not apply to any offset of a participant’s accrued benefit in an employee pension benefit plan against an amount that the

participant is ordered or required to pay to the plan--

        ‘(A) under a judgment of conviction for a crime involving such plan, or

        ‘(B) under a civil judgment (including a consent order or decree) entered--

          ‘(i) by a court in an action brought under section 502(a) of this title, or

          ‘(ii) pursuant to a settlement agreement between the Secretary and the participant in connection with a violation (or alleged violation) of part 4 of this title by a fiduciary or any other person,

        if the judgment, order, decree, or settlement agreement expressly provides for the offset of all or part of the amount ordered or required to be paid to the plan against the participant’s accrued benefit in the plan.’

      (2) AMENDMENT TO 1986 CODE- Section 401(a)(13) of the Internal Revenue Code of 1986 is made by adding at the end the following new subparagraph:

        ‘(C) SPECIAL RULE FOR CERTAIN JUDGMENTS AND SETTLEMENTS- Subparagraph (A) shall not apply to any offset of a participant’s accrued benefit in an employee pension benefit plan against an amount that the participant is ordered or required to pay to the plan--

          ‘(i) under a judgment of conviction for a crime involving such plan, or

          ‘(ii) under a civil judgment (including a consent order or decree) entered--

            ‘(I) by a court in an action brought under section 502(a) of the Employee Retirement Income Security Act of 1974, or

            ‘(II) pursuant to a settlement agreement between the Secretary of Labor and the participant in connection with a violation (or alleged violation) of part 4 of title I of such Act by a fiduciary or any other person,

        if the judgment, order, decree or settlement agreement expressly provides for the offset of all or part of the amount ordered or required to be paid to the plan against the participant’s accrued benefit in the plan.’

      (3) EFFECTIVE DATE- The amendments made by this subsection shall take effect on the date of enactment of this Act.

    (b) Civil Penalties for Breach of Fiduciary Responsibility-

      (1) IMPOSITION AND AMOUNT OF PENALTY MADE DISCRETIONARY- Section 502(l)(1) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1132(l)(1)) is amended--

        (A) by striking ‘shall’ and inserting ‘may’, and

        (B) by striking ‘equal to’ and inserting ‘not greater than’.

      (2) APPLICABLE RECOVERY AMOUNT- Section 502(l)(2) of such Act (29 U.S.C. 1132(l)(2)) is amended to read as follows:

      ‘(2) For purposes of paragraph (1), the term ‘applicable recovery amount’ means any amount which is recovered from (or on behalf of) any fiduciary or other person with respect to a breach or violation described in paragraph (1) on or after the 30th day following receipt by such fiduciary or other person of written notice from the Secretary of the violation, whether paid voluntarily or by order of a court in a judicial proceeding instituted by the Secretary under subsection (a)(2) or (a)(5). The Secretary may, in the Secretary’s sole discretion, extend the 30-day period described in the preceding sentence.’

      (3) OTHER RULES- Section 502(l) of such Act (29 U.S.C. 1132(l)) is amended by adding at the end the following new paragraphs:

      ‘(5) A person shall be jointly and severally liable for the penalty described in paragraph (1) to the same extent that such person is jointly and severally liable for the applicable recovery amount on which the penalty is based.

      ‘(6) No penalty shall be assessed under this subsection unless the person against whom the penalty is assessed is given notice and opportunity for a hearing with respect to the violation and applicable recovery amount.’

      (4) EFFECTIVE DATES-

        (A) IN GENERAL- The amendments made by this subsection shall apply to any breach of fiduciary responsibility or other violation of part 4 of title I of the Employment Retirement Income Security Act of 1974 occurring on or after the date of enactment of this Act.

        (B) TRANSITION RULE- In applying the amendment made by paragraph (2) (relating to applicable recovery amount), a breach or other violation occurring before the date of the enactment of this Act which continues after the 180th day after such date (and which may have been discontinued at any time during its existence) shall be treated as having occurred after such date of enactment.