part 4—fiduciary responsibility
§1101. Coverage
(a) Scope of coverage
This part shall apply to any employee benefit plan described in
(1) a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees; or
(2) any agreement described in
(b) Securities or policies deemed to be included in plan assets
For purposes of this part:
(1) In the case of a plan which invests in any security issued by an investment company registered under the Investment Company Act of 1940 [
(2) In the case of a plan to which a guaranteed benefit policy is issued by an insurer, the assets of such plan shall be deemed to include such policy, but shall not, solely by reason of the issuance of such policy, be deemed to include any assets of such insurer. For purposes of this paragraph:
(A) The term "insurer" means an insurance company, insurance service, or insurance organization, qualified to do business in a State.
(B) The term "guaranteed benefit policy" means an insurance policy or contract to the extent that such policy or contract provides for benefits the amount of which is guaranteed by the insurer. Such term includes any surplus in a separate account, but excludes any other portion of a separate account.
(c) Clarification of application of ERISA to insurance company general accounts
(1)(A) Not later than June 30, 1997, the Secretary shall issue proposed regulations to provide guidance for the purpose of determining, in cases where an insurer issues 1 or more policies to or for the benefit of an employee benefit plan (and such policies are supported by assets of such insurer's general account), which assets held by the insurer (other than plan assets held in its separate accounts) constitute assets of the plan for purposes of this part and
(B) The proposed regulations under subparagraph (A) shall be subject to public notice and comment until September 30, 1997.
(C) The Secretary shall issue final regulations providing the guidance described in subparagraph (A) not later than December 31, 1997.
(D) Such regulations shall only apply with respect to policies which are issued by an insurer on or before December 31, 1998, to or for the benefit of an employee benefit plan which is supported by assets of such insurer's general account. With respect to policies issued on or before December 31, 1998, such regulations shall take effect at the end of the 18-month period following the date on which such regulations become final.
(2) The Secretary shall ensure that the regulations issued under paragraph (1)—
(A) are administratively feasible, and
(B) protect the interests and rights of the plan and of its participants and beneficiaries (including meeting the requirements of paragraph (3)).
(3) The regulations prescribed by the Secretary pursuant to paragraph (1) shall require, in connection with any policy issued by an insurer to or for the benefit of an employee benefit plan to the extent that the policy is not a guaranteed benefit policy (as defined in subsection (b)(2)(B))—
(A) that a plan fiduciary totally independent of the insurer authorize the purchase of such policy (unless such purchase is a transaction exempt under
(B) that the insurer describe (in such form and manner as shall be prescribed in such regulations), in annual reports and in policies issued to the policyholder after the date on which such regulations are issued in final form pursuant to paragraph (1)(C)—
(i) a description of the method by which any income and expenses of the insurer's general account are allocated to the policy during the term of the policy and upon the termination of the policy, and
(ii) for each report, the actual return to the plan under the policy and such other financial information as the Secretary may deem appropriate for the period covered by each such annual report,
(C) that the insurer disclose to the plan fiduciary the extent to which alternative arrangements supported by assets of separate accounts of the insurer (which generally hold plan assets) are available, whether there is a right under the policy to transfer funds to a separate account and the terms governing any such right, and the extent to which support by assets of the insurer's general account and support by assets of separate accounts of the insurer might pose differing risks to the plan, and
(D) that the insurer manage those assets of the insurer which are assets of such insurer's general account (irrespective of whether any such assets are plan assets) with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, taking into account all obligations supported by such enterprise.
(4) Compliance by the insurer with all requirements of the regulations issued by the Secretary pursuant to paragraph (1) shall be deemed compliance by such insurer with
(5)(A) Subject to subparagraph (B), any regulations issued under paragraph (1) shall not take effect before the date on which such regulations become final.
(B) No person shall be subject to liability under this part or
(i) as otherwise provided by the Secretary in regulations intended to prevent avoidance of the regulations issued under paragraph (1), or
(ii) as provided in an action brought by the Secretary pursuant to paragraph (2) or (5) of
The Secretary shall bring a cause of action described in clause (ii) if a participant, beneficiary, or fiduciary demonstrates to the satisfaction of the Secretary that a breach described in clause (ii) has occurred.
(6) Nothing in this subsection shall preclude the application of any Federal criminal law.
(7) For purposes of this subsection, the term "policy" includes a contract.
(
Editorial Notes
References in Text
The Investment Company Act of 1940, referred to in subsec. (b)(1), is title I of act Aug. 22, 1940, ch. 686,
Amendments
1996—Subsec. (c).
1989—Subsec. (a)(2).
Statutory Notes and Related Subsidiaries
Effective Date of 1996 Amendment
"(1)
"(2)
Effective Date of 1989 Amendment
Amendment by
Plan Amendments Not Required Until January 1, 1998
For provisions directing that if any amendments made by subtitle D [§§1401–1465] of title I of
§1102. Establishment of plan
(a) Named fiduciaries
(1) Every employee benefit plan shall be established and maintained pursuant to a written instrument. Such instrument shall provide for one or more named fiduciaries who jointly or severally shall have authority to control and manage the operation and administration of the plan.
(2) For purposes of this subchapter, the term "named fiduciary" means a fiduciary who is named in the plan instrument, or who, pursuant to a procedure specified in the plan, is identified as a fiduciary (A) by a person who is an employer or employee organization with respect to the plan or (B) by such an employer and such an employee organization acting jointly.
(b) Requisite features of plan
Every employee benefit plan shall—
(1) provide a procedure for establishing and carrying out a funding policy and method consistent with the objectives of the plan and the requirements of this subchapter,
(2) describe any procedure under the plan for the allocation of responsibilities for the operation and administration of the plan (including any procedure described in
(3) provide a procedure for amending such plan, and for identifying the persons who have authority to amend the plan, and
(4) specify the basis on which payments are made to and from the plan.
(c) Optional features of plan
Any employee benefit plan may provide—
(1) that any person or group of persons may serve in more than one fiduciary capacity with respect to the plan (including service both as trustee and administrator);
(2) that a named fiduciary, or a fiduciary designated by a named fiduciary pursuant to a plan procedure described in
(3) that a person who is a named fiduciary with respect to control or management of the assets of the plan may appoint an investment manager or managers to manage (including the power to acquire and dispose of) any assets of a plan.
(
§1103. Establishment of trust
(a) Benefit plan assets to be held in trust; authority of trustees
Except as provided in subsection (b), all assets of an employee benefit plan shall be held in trust by one or more trustees. Such trustee or trustees shall be either named in the trust instrument or in the plan instrument described in
(1) the plan expressly provides that the trustee or trustees are subject to the direction of a named fiduciary who is not a trustee, in which case the trustees shall be subject to proper directions of such fiduciary which are made in accordance with the terms of the plan and which are not contrary to this chapter, or
(2) authority to manage, acquire, or dispose of assets of the plan is delegated to one or more investment managers pursuant to
(b) Exceptions
The requirements of subsection (a) of this section shall not apply—
(1) to any assets of a plan which consist of insurance contracts or policies issued by an insurance company qualified to do business in a State;
(2) to any assets of such an insurance company or any assets of a plan which are held by such an insurance company;
(3) to a plan—
(A) some or all of the participants of which are employees described in
(B) which consists of one or more individual retirement accounts described in
to the extent that such plan's assets are held in one or more custodial accounts which qualify under
(4) to a plan which the Secretary exempts from the requirement of subsection (a) and which is not subject to any of the following provisions of this chapter—
(A) part 2 of this subtitle,
(B) part 3 of this subtitle, or
(C) subchapter III of this chapter; or
(5) to a contract established and maintained under
(6) Any plan, fund or program under which an employer, all of whose stock is directly or indirectly owned by employees, former employees or their beneficiaries, proposes through an unfunded arrangement to compensate retired employees for benefits which were forfeited by such employees under a pension plan maintained by a former employer prior to the date such pension plan became subject to this chapter.
(c) Assets of plan not to inure to benefit of employer; allowable purposes of holding plan assets
(1) Except as provided in paragraph (2), (3), or (4) 1 or subsection (d), or under
(2)(A) In the case of a contribution, or a payment of withdrawal liability under part 1 of subtitle E of subchapter III—
(i) if such contribution or payment is made by an employer to a plan (other than a multiemployer plan) by a mistake of fact, paragraph (1) shall not prohibit the return of such contribution to the employer within one year after the payment of the contribution, and
(ii) if such contribution or payment is made by an employer to a multiemployer plan by a mistake of fact or law (other than a mistake relating to whether the plan is described in
(B) If a contribution is conditioned on initial qualification of the plan under
(C) If a contribution is conditioned upon the deductibility of the contribution under
(3) In the case of a withdrawal liability payment which has been determined to be an overpayment, paragraph (1) shall not prohibit the return of such payment to the employer within 6 months after the date of such determination.
(d) Termination of plan
(1) Upon termination of a pension plan to which
(2) The assets of a welfare plan which terminates shall be distributed in accordance with the terms of the plan, except as otherwise provided in regulations of the Secretary.
(
Editorial Notes
References in Text
This chapter, referred to in subsecs. (a)(1) and (b)(4), (6), was in the original "this Act", meaning
Paragraph (2), (3), or (4), referred to in subsec. (c)(1), probably should be a reference only to par. (2) or (3) of subsec. (c), as par. (3) was struck out, and par. (4) was redesignated as (3), by
Amendments
2022—Subsec. (c)(1).
2015—Subsec. (c)(1).
2012—Subsec. (c)(1).
2006—Subsec. (c)(1).
2004—Subsec. (c)(1).
1999—Subsec. (c)(1).
1994—Subsec. (c)(1).
1990—Subsec. (c)(1).
1989—Subsecs. (b)(3), (5), (c)(2)(A)(ii), (C).
Subsec. (b)(3).
Subsec. (c)(2)(A).
Subsec. (c)(3), (4).
1987—Subsec. (c)(2)(B).
Subsec. (c)(3).
1980—Subsec. (a)(1).
Subsec. (b)(6).
Subsec. (c)(1).
Subsec. (c)(2)(A).
Subsec. (c)(4).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
Amendment by
Effective Date of 2006 Amendment
Amendment by
Effective Date of 1999 Amendment
Amendment by
Effective Date of 1990 Amendment
Amendment by
Effective Date of 1989 Amendment
Amendment by section 7881(k) of
Amendment by section 7891(a)(1) of
Section 7894(e)(1)(B) of
Amendment by section 7894(e)(3) of
Effective Date of 1980 Amendment
Amendment by
Amendment by section 410(a) of
Regulations
Secretary authorized, effective Sept. 2, 1974, to promulgate regulations wherever provisions of this part call for the promulgation of regulations, see
Applicability of Amendments by Subtitles A and B of Title I of Pub. L. 109–280
For special rules on applicability of amendments by subtitles A (§§101–108) and B (§§111–116) of title I of
1 See References in Text note below.
§1104. Fiduciary duties
(a) Prudent man standard of care
(1) Subject to sections 1103(c) and (d), 1342, and 1344 of this title, a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and—
(A) for the exclusive purpose of:
(i) providing benefits to participants and their beneficiaries; and
(ii) defraying reasonable expenses of administering the plan;
(B) with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims;
(C) by diversifying the investments of the plan so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; and
(D) in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of this subchapter and subchapter III.
(2) In the case of an eligible individual account plan (as defined in
(b) Indicia of ownership of assets outside jurisdiction of district courts
Except as authorized by the Secretary by regulations, no fiduciary may maintain the indicia of ownership of any assets of a plan outside the jurisdiction of the district courts of the United States.
(c) Control over assets by participant or beneficiary
(1)(A) In the case of a pension plan which provides for individual accounts and permits a participant or beneficiary to exercise control over the assets in his account, if a participant or beneficiary exercises control over the assets in his account (as determined under regulations of the Secretary)—
(i) such participant or beneficiary shall not be deemed to be a fiduciary by reason of such exercise, and
(ii) no person who is otherwise a fiduciary shall be liable under this part for any loss, or by reason of any breach, which results from such participant's or beneficiary's exercise of control, except that this clause shall not apply in connection with such participant or beneficiary for any blackout period during which the ability of such participant or beneficiary to direct the investment of the assets in his or her account is suspended by a plan sponsor or fiduciary.
(B) If a person referred to in subparagraph (A)(ii) meets the requirements of this subchapter in connection with authorizing and implementing the blackout period, any person who is otherwise a fiduciary shall not be liable under this subchapter for any loss occurring during such period.
(C) For purposes of this paragraph, the term "blackout period" has the meaning given such term by
(2) In the case of a simple retirement account established pursuant to a qualified salary reduction arrangement under
(A) an affirmative election among investment options with respect to the initial investment of any contribution,
(B) a rollover to any other simple retirement account or individual retirement plan, or
(C) one year after the simple retirement account is established.
No reports, other than those required under
(3) In the case of a pension plan which makes a transfer to an individual retirement account or annuity of a designated trustee or issuer under
(A) the earlier of—
(i) a rollover of all or a portion of the amount to another individual retirement account or annuity; or
(ii) one year after the transfer is made; or
(B) a transfer that is made in a manner consistent with guidance provided by the Secretary.
(4)(A) In any case in which a qualified change in investment options occurs in connection with an individual account plan, a participant or beneficiary shall not be treated for purposes of paragraph (1) as not exercising control over the assets in his account in connection with such change if the requirements of subparagraph (C) are met in connection with such change.
(B) For purposes of subparagraph (A), the term "qualified change in investment options" means, in connection with an individual account plan, a change in the investment options offered to the participant or beneficiary under the terms of the plan, under which—
(i) the account of the participant or beneficiary is reallocated among one or more remaining or new investment options which are offered in lieu of one or more investment options offered immediately prior to the effective date of the change, and
(ii) the stated characteristics of the remaining or new investment options provided under clause (i), including characteristics relating to risk and rate of return, are, as of immediately after the change, reasonably similar to those of the existing investment options as of immediately before the change.
(C) The requirements of this subparagraph are met in connection with a qualified change in investment options if—
(i) at least 30 days and no more than 60 days prior to the effective date of the change, the plan administrator furnishes written notice of the change to the participants and beneficiaries, including information comparing the existing and new investment options and an explanation that, in the absence of affirmative investment instructions from the participant or beneficiary to the contrary, the account of the participant or beneficiary will be invested in the manner described in subparagraph (B),
(ii) the participant or beneficiary has not provided to the plan administrator, in advance of the effective date of the change, affirmative investment instructions contrary to the change, and
(iii) the investments under the plan of the participant or beneficiary as in effect immediately prior to the effective date of the change were the product of the exercise by such participant or beneficiary of control over the assets of the account within the meaning of paragraph (1).
(5)
(A)
(B)
(i)
(I) receives, within a reasonable period of time before each plan year, a notice explaining the employee's right under the plan to designate how contributions and earnings will be invested and explaining how, in the absence of any investment election by the participant or beneficiary, such contributions and earnings will be invested, and
(II) has a reasonable period of time after receipt of such notice and before the beginning of the plan year to make such designation.
(ii)
(d) Plan terminations
(1) If, in connection with the termination of a pension plan which is a single-employer plan, there is an election to establish or maintain a qualified replacement plan, or to increase benefits, as provided under
(A) In the case of a fiduciary of the terminated plan, any requirement—
(i) under
(ii) under
(B) In the case of a fiduciary of a qualified replacement plan, any requirement—
(i) under
(ii) under
(iii) under
(2) For purposes of this subsection—
(A) any term used in this subsection which is also used in
(B) any reference in this subsection to title 26 shall be a reference to title 26 as in effect immediately after the enactment of the Omnibus Budget Reconciliation Act of 1990.
(e) Safe harbor for annuity selection
(1) In general
With respect to the selection of an insurer for a guaranteed retirement income contract, the requirements of subsection (a)(1)(B) will be deemed to be satisfied if a fiduciary—
(A) engages in an objective, thorough, and analytical search for the purpose of identifying insurers from which to purchase such contracts;
(B) with respect to each insurer identified under subparagraph (A)—
(i) considers the financial capability of such insurer to satisfy its obligations under the guaranteed retirement income contract; and
(ii) considers the cost (including fees and commissions) of the guaranteed retirement income contract offered by the insurer in relation to the benefits and product features of the contract and administrative services to be provided under such contract; and
(C) on the basis of such consideration, concludes that—
(i) at the time of the selection, the insurer is financially capable of satisfying its obligations under the guaranteed retirement income contract; and
(ii) the relative cost of the selected guaranteed retirement income contract as described in subparagraph (B)(ii) is reasonable.
(2) Financial capability of the insurer
A fiduciary will be deemed to satisfy the requirements of paragraphs (1)(B)(i) and (1)(C)(i) if—
(A) the fiduciary obtains written representations from the insurer that—
(i) the insurer is licensed to offer guaranteed retirement income contracts;
(ii) the insurer, at the time of selection and for each of the immediately preceding 7 plan years—
(I) operates under a certificate of authority from the insurance commissioner of its domiciliary State which has not been revoked or suspended;
(II) has filed audited financial statements in accordance with the laws of its domiciliary State under applicable statutory accounting principles;
(III) maintains (and has maintained) reserves which satisfies all the statutory requirements of all States where the insurer does business; and
(IV) is not operating under an order of supervision, rehabilitation, or liquidation;
(iii) the insurer undergoes, at least every 5 years, a financial examination (within the meaning of the law of its domiciliary State) by the insurance commissioner of the domiciliary State (or representative, designee, or other party approved by such commissioner); and
(iv) the insurer will notify the fiduciary of any change in circumstances occurring after the provision of the representations in clauses (i), (ii), and (iii) which would preclude the insurer from making such representations at the time of issuance of the guaranteed retirement income contract; and
(B) after receiving such representations and as of the time of selection, the fiduciary has not received any notice described in subparagraph (A)(iv) and is in possession of no other information which would cause the fiduciary to question the representations provided.
(3) No requirement to select lowest cost
Nothing in this subsection shall be construed to require a fiduciary to select the lowest cost contract. A fiduciary may consider the value of a contract, including features and benefits of the contract and attributes of the insurer (including, without limitation, the insurer's financial strength) in conjunction with the cost of the contract.
(4) Time of selection
(A) In general
For purposes of this subsection, the time of selection is—
(i) the time that the insurer and the contract are selected for distribution of benefits to a specific participant or beneficiary; or
(ii) if the fiduciary periodically reviews the continuing appropriateness of the conclusion described in paragraph (1)(C) with respect to a selected insurer, taking into account the considerations described in such paragraph, the time that the insurer and the contract are selected to provide benefits at future dates to participants or beneficiaries under the plan.
Nothing in the preceding sentence shall be construed to require the fiduciary to review the appropriateness of a selection after the purchase of a contract for a participant or beneficiary.
(B) Periodic review
A fiduciary will be deemed to have conducted the periodic review described in subparagraph (A)(ii) if the fiduciary obtains the written representations described in clauses (i), (ii), and (iii) of paragraph (2)(A) from the insurer on an annual basis, unless the fiduciary receives any notice described in paragraph (2)(A)(iv) or otherwise becomes aware of facts that would cause the fiduciary to question such representations.
(5) Limited liability
A fiduciary which satisfies the requirements of this subsection shall not be liable following the distribution of any benefit, or the investment by or on behalf of a participant or beneficiary pursuant to the selected guaranteed retirement income contract, for any losses that may result to the participant or beneficiary due to an insurer's inability to satisfy its financial obligations under the terms of such contract.
(6) Definitions
For purposes of this subsection—
(A) Insurer
The term "insurer" means an insurance company, insurance service, or insurance organization, including affiliates of such companies.
(B) Guaranteed retirement income contract
The term "guaranteed retirement income contract" means an annuity contract for a fixed term or a contract (or provision or feature thereof) which provides guaranteed benefits annually (or more frequently) for at least the remainder of the life of the participant or the joint lives of the participant and the participant's designated beneficiary as part of an individual account plan.
(
Amendment of Subsection (c)
"(6)
See 2022 Amendment note below.
Editorial Notes
References in Text
The enactment of the Omnibus Budget Reconciliation Act of 1990, referred to in subsec. (d)(2)(B), is the enactment of
Amendments
2022—Subsec. (c)(6).
2019—Subsec. (e).
2008—Subsec. (c)(5).
2006—Subsec. (c)(1).
Subsec. (c)(4).
Subsec. (c)(5).
2002—Subsec. (c)(3)(A).
Subsec. (c)(3)(B).
2001—Subsec. (c)(3).
1996—Subsec. (c).
1990—Subsec. (a)(1)(D).
Subsec. (d).
1980—Subsec. (a)(1)(D).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
Amendment by
Effective Date of 2008 Amendment
Amendment by
Effective Date of 2006 Amendment
"(1)
"(2)
"(A) the later of—
"(i) December 31, 2008, or
"(ii) the date on which the last of such collective bargaining agreements terminates (determined without regard to any extension thereof after such date of enactment), or
"(B) December 31, 2009."
"(1)
"(2)
Effective Date of 2002 Amendment
Amendment by
Effective Date of 2001 Amendment
Amendment by
Effective Date of 1996 Amendment
Amendment by
Effective Date of 1990 Amendment
Amendment by
Effective Date of 1980 Amendment
Amendment by
Regulations
"(a)
"(1) is not subject to the safest available annuity standard under Interpretive Bulletin 95–1 (29 CFR 2509.95–1), and
"(2) is subject to all otherwise applicable fiduciary standards.
"(b)
Secretary authorized, effective Sept. 2, 1974, to promulgate regulations wherever provisions of this part call for the promulgation of regulations, see
Performance Benchmarks for Asset Allocation Funds
"(1) the blend is reasonably representative of the asset class holdings of the designated investment alternative;
"(2) for purposes of determining the blend's returns for 1-, 5-, and 10-calendar-year periods (or for the life of the alternative, if shorter), the blend is modified at least once per year if needed to reflect changes in the asset class holdings of the designated investment alternative;
"(3) the blend is furnished to participants and beneficiaries in a manner that is reasonably calculated to be understood by the average plan participant; and
"(4) each securities market index that is used for an associated asset class would separately satisfy the requirements of such regulation for such asset class."
Plan Amendments Not Required Until January 1, 1998
For provisions directing that if any amendments made by subtitle D [§§1401–1465] of title I of
§1105. Liability for breach of co-fiduciary
(a) Circumstances giving rise to liability
In addition to any liability which he may have under any other provisions of this part, a fiduciary with respect to a plan shall be liable for a breach of fiduciary responsibility of another fiduciary with respect to the same plan in the following circumstances:
(1) if he participates knowingly in, or knowingly undertakes to conceal, an act or omission of such other fiduciary, knowing such act or omission is a breach;
(2) if, by his failure to comply with
(3) if he has knowledge of a breach by such other fiduciary, unless he makes reasonable efforts under the circumstances to remedy the breach.
(b) Assets held by two or more trustees
(1) Except as otherwise provided in subsection (d) and in section 1103(a)(1) and (2) of this title, if the assets of a plan are held by two or more trustees—
(A) each shall use reasonable care to prevent a co-trustee from committing a breach; and
(B) they shall jointly manage and control the assets of the plan, except that nothing in this subparagraph (B) shall preclude any agreement, authorized by the trust instrument, allocating specific responsibilities, obligations, or duties among trustees, in which event a trustee to whom certain responsibilities, obligations, or duties have not been allocated shall not be liable by reason of this subparagraph (B) either individually or as a trustee for any loss resulting to the plan arising from the acts or omissions on the part of another trustee to whom such responsibilities, obligations, or duties have been allocated.
(2) Nothing in this subsection shall limit any liability that a fiduciary may have under subsection (a) or any other provision of this part.
(3)(A) In the case of a plan the assets of which are held in more than one trust, a trustee shall not be liable under paragraph (1) except with respect to an act or omission of a trustee of a trust of which he is a trustee.
(B) No trustee shall be liable under this subsection for following instructions referred to in
(c) Allocation of fiduciary responsibility; designated persons to carry out fiduciary responsibilities
(1) The instrument under which a plan is maintained may expressly provide for procedures (A) for allocating fiduciary responsibilities (other than trustee responsibilities) among named fiduciaries, and (B) for named fiduciaries to designate persons other than named fiduciaries to carry out fiduciary responsibilities (other than trustee responsibilities) under the plan.
(2) If a plan expressly provides for a procedure described in paragraph (1), and pursuant to such procedure any fiduciary responsibility of a named fiduciary is allocated to any person, or a person is designated to carry out any such responsibility, then such named fiduciary shall not be liable for an act or omission of such person in carrying out such responsibility except to the extent that—
(A) the named fiduciary violated
(i) with respect to such allocation or designation,
(ii) with respect to the establishment or implementation of the procedure under paragraph (1), or
(iii) in continuing the allocation or designation; or
(B) the named fiduciary would otherwise be liable in accordance with subsection (a).
(3) For purposes of this subsection, the term "trustee responsibility" means any responsibility provided in the plan's trust instrument (if any) to manage or control the assets of the plan, other than a power under the trust instrument of a named fiduciary to appoint an investment manager in accordance with
(d) Investment managers
(1) If an investment manager or managers have been appointed under
(2) Nothing in this subsection shall relieve any trustee of any liability under this part for any act of such trustee.
(
§1106. Prohibited transactions
(a) Transactions between plan and party in interest
Except as provided in
(1) A fiduciary with respect to a plan shall not cause the plan to engage in a transaction, if he knows or should know that such transaction constitutes a direct or indirect—
(A) sale or exchange, or leasing, of any property between the plan and a party in interest;
(B) lending of money or other extension of credit between the plan and a party in interest;
(C) furnishing of goods, services, or facilities between the plan and a party in interest;
(D) transfer to, or use by or for the benefit of a party in interest, of any assets of the plan; or
(E) acquisition, on behalf of the plan, of any employer security or employer real property in violation of
(2) No fiduciary who has authority or discretion to control or manage the assets of a plan shall permit the plan to hold any employer security or employer real property if he knows or should know that holding such security or real property violates
(b) Transactions between plan and fiduciary
A fiduciary with respect to a plan shall not—
(1) deal with the assets of the plan in his own interest or for his own account,
(2) in his individual or in any other capacity act in any transaction involving the plan on behalf of a party (or represent a party) whose interests are adverse to the interests of the plan or the interests of its participants or beneficiaries, or
(3) receive any consideration for his own personal account from any party dealing with such plan in connection with a transaction involving the assets of the plan.
(c) Transfer of real or personal property to plan by party in interest
A transfer of real or personal property by a party in interest to a plan shall be treated as a sale or exchange if the property is subject to a mortgage or similar lien which the plan assumes or if it is subject to a mortgage or similar lien which a party-in-interest placed on the property within the 10-year period ending on the date of the transfer.
(
§1107. Limitation with respect to acquisition and holding of employer securities and employer real property by certain plans
(a) Percentage limitation
Except as otherwise provided in this section and
(1) A plan may not acquire or hold—
(A) any employer security which is not a qualifying employer security, or
(B) any employer real property which is not qualifying employer real property.
(2) A plan may not acquire any qualifying employer security or qualifying employer real property, if immediately after such acquisition the aggregate fair market value of employer securities and employer real property held by the plan exceeds 10 percent of the fair market value of the assets of the plan.
(3)(A) After December 31, 1984, a plan may not hold any qualifying employer securities or qualifying employer real property (or both) to the extent that the aggregate fair market value of such securities and property determined on December 31, 1984, exceeds 10 percent of the greater of—
(i) the fair market value of the assets of the plan, determined on December 31, 1984, or
(ii) the fair market value of the assets of the plan determined on January 1, 1975.
(B) Subparagraph (A) of this paragraph shall not apply to any plan which on any date after December 31, 1974; and before January 1, 1985, did not hold employer securities or employer real property (or both) the aggregate fair market value of which determined on such date exceeded 10 percent of the greater of 1
(i) the fair market value of the assets of the plan, determined on such date, or
(ii) the fair market value of the assets of the plan determined on January 1, 1975.
(4)(A) After December 31, 1979, a plan may not hold any employer securities or employer real property in excess of the amount specified in regulations under subparagraph (B). This subparagraph shall not apply to a plan after the earliest date after December 31, 1974, on which it complies with such regulations.
(B) Not later than December 31, 1976, the Secretary shall prescribe regulations which shall have the effect of requiring that a plan divest itself of 50 percent of the holdings of employer securities and employer real property which the plan would be required to divest before January 1, 1985, under paragraph (2) or subsection (c) (whichever is applicable).
(b) Exception
(1) Subsection (a) of this section shall not apply to any acquisition or holding of qualifying employer securities or qualifying employer real property by an eligible individual account plan.
(2)(A) If this paragraph applies to an eligible individual account plan, the portion of such plan which consists of applicable elective deferrals (and earnings allocable thereto) shall be treated as a separate plan—
(i) which is not an eligible individual account plan, and
(ii) to which the requirements of this section apply.
(B)(i) This paragraph shall apply to any eligible individual account plan if any portion of the plan's applicable elective deferrals (or earnings allocable thereto) are required to be invested in qualifying employer securities or qualifying employer real property or both—
(I) pursuant to the terms of the plan, or
(II) at the direction of a person other than the participant on whose behalf such elective deferrals are made to the plan (or a beneficiary).
(ii) This paragraph shall not apply to an individual account plan for a plan year if, on the last day of the preceding plan year, the fair market value of the assets of all individual account plans maintained by the employer equals not more than 10 percent of the fair market value of the assets of all pension plans (other than multiemployer plans) maintained by the employer.
(iii) This paragraph shall not apply to an individual account plan that is an employee stock ownership plan as defined in
(iv) This paragraph shall not apply to an individual account plan if, pursuant to the terms of the plan, the portion of any employee's applicable elective deferrals which is required to be invested in qualifying employer securities and qualifying employer real property for any year may not exceed 1 percent of the employee's compensation which is taken into account under the plan in determining the maximum amount of the employee's applicable elective deferrals for such year.
(C) For purposes of this paragraph, the term "applicable elective deferral" means any elective deferral (as defined in
(3)
(A) For exemption from diversification requirements for holding of qualifying employer securities and qualifying employer real property by eligible individual account plans, see
(B) For exemption from prohibited transactions for certain acquisitions of qualifying employer securities and qualifying employer real property which are not in violation of 10 percent limitation, see
(C) For transitional rules respecting securities or real property subject to binding contracts in effect on June 30, 1974, see
(D) For diversification requirements for qualifying employer securities held in certain individual account plans, see
(c) Election
(1) A plan which makes the election, under paragraph (3) shall be treated as satisfying the requirement of subsection (a)(3) if and only if employer securities held on any date after December 31, 1974 and before January 1, 1985 have a fair market value, determined as of December 31, 1974, not in excess of 10 percent of the lesser of—
(A) the fair market value of the assets of the plan determined on such date (disregarding any portion of the fair market value of employer securities which is attributable to appreciation of such securities after December 31, 1974) but not less than the fair market value of plan assets on January 1, 1975, or
(B) an amount equal to the sum of (i) the total amount of the contributions to the plan received after December 31, 1974, and prior to such date, plus (ii) the fair market value of the assets of the plan, determined on January 1, 1975.
(2) For purposes of this subsection, in the case of an employer security held by a plan after January 1, 1975, the ownership of which is derived from ownership of employer securities held by the plan on January 1, 1975, or from the exercise of rights derived from such ownership, the value of such security held after January 1, 1975, shall be based on the value as of January 1, 1975, of the security from which ownership was derived. The Secretary shall prescribe regulations to carry out this paragraph.
(3) An election under this paragraph may not be made after December 31, 1975. Such an election shall be made in accordance with regulations prescribed by the Secretary, and shall be irrevocable. A plan may make an election under this paragraph only if on January 1, 1975, the plan holds no employer real property. After such election and before January 1, 1985 the plan may not acquire any employer real property.
(d) Definitions
For purposes of this section—
(1) The term "employer security" means a security issued by an employer of employees covered by the plan, or by an affiliate of such employer. A contract to which
(2) The term "employer real property" means real property (and related personal property) which is leased to an employer of employees covered by the plan, or to an affiliate of such employer. For purposes of determining the time at which a plan acquires employer real property for purposes of this section, such property shall be deemed to be acquired by the plan on the date on which the plan acquires the property or on the date on which the lease to the employer (or affiliate) is entered into, whichever is later.
(3)(A) The term "eligible individual account plan" means an individual account plan which is (i) a profit-sharing, stock bonus, thrift, or savings plan; (ii) an employee stock ownership plan; or (iii) a money purchase plan which was in existence on September 2, 1974, and which on such date invested primarily in qualifying employer securities. Such term excludes an individual retirement account or annuity described in
(B) Notwithstanding subparagraph (A), a plan shall be treated as an eligible individual account plan with respect to the acquisition or holding of qualifying employer real property or qualifying employer securities only if such plan explicitly provides for acquisition and holding of qualifying employer securities or qualifying employer real property (as the case may be). In the case of a plan in existence on September 2, 1974, this subparagraph shall not take effect until January 1, 1976.
(C) The term "eligible individual account plan" does not include any individual account plan the benefits of which are taken into account in determining the benefits payable to a participant under any defined benefit plan.
(4) The term "qualifying employer real property" means parcels of employer real property—
(A) if a substantial number of the parcels are dispersed geographically;
(B) if each parcel of real property and the improvements thereon are suitable (or adaptable without excessive cost) for more than one use;
(C) even if all of such real property is leased to one lessee (which may be an employer, or an affiliate of an employer); and
(D) if the acquisition and retention of such property comply with the provisions of this part (other than
(5) The term "qualifying employer security" means an employer security which is—
(A) stock,
(B) a marketable obligation (as defined in subsection (e)), or
(C) an interest in a publicly traded partnership (as defined in
After December 17, 1987, in the case of a plan other than an eligible individual account plan, an employer security described in subparagraph (A) or (C) shall be considered a qualifying employer security only if such employer security satisfies the requirements of subsection (f)(1).
(6) The term "employee stock ownership plan" means an individual account plan—
(A) which is a stock bonus plan which is qualified, or a stock bonus plan and money purchase plan both of which are qualified, under
(B) which meets such other requirements as the Secretary of the Treasury may prescribe by regulation.
(7) A corporation is an affiliate of an employer if it is a member of any controlled group of corporations (as defined in
(8) The Secretary may prescribe regulations specifying the extent to which conversions, splits, the exercise of rights, and similar transactions are not treated as acquisitions.
(9) For purposes of this section, an arrangement which consists of a defined benefit plan and an individual account plan shall be treated as 1 plan if the benefits of such individual account plan are taken into account in determining the benefits payable under such defined benefit plan.
(e) Marketable obligations
For purposes of subsection (d)(5), the term "marketable obligation" means a bond, debenture, note, or certificate, or other evidence of indebtedness (hereinafter in this subsection referred to as "obligation") if—
(1) such obligation is acquired—
(A) on the market, either (i) at the price of the obligation prevailing on a national securities exchange which is registered with the Securities and Exchange Commission, or (ii) if the obligation is not traded on such a national securities exchange, at a price not less favorable to the plan than the offering price for the obligation as established by current bid and asked prices quoted by persons independent of the issuer;
(B) from an underwriter, at a price (i) not in excess of the public offering price for the obligation as set forth in a prospectus or offering circular filed with the Securities and Exchange Commission, and (ii) at which a substantial portion of the same issue is acquired by persons independent of the issuer; or
(C) directly from the issuer, at a price not less favorable to the plan than the price paid currently for a substantial portion of the same issue by persons independent of the issuer;
(2) immediately following acquisition of such obligation—
(A) not more than 25 percent of the aggregate amount of obligations issued in such issue and outstanding at the time of acquisition is held by the plan, and
(B) at least 50 percent of the aggregate amount referred to in subparagraph (A) is held by persons independent of the issuer; and
(3) immediately following acquisition of the obligation, not more than 25 percent of the assets of the plan is invested in obligations of the employer or an affiliate of the employer.
(f) Maximum percentage of stock held by plan; time of holding or acquisition; necessity of legally binding contract
(1) Stock satisfies the requirements of this paragraph if, immediately following the acquisition of such stock—
(A) no more than 25 percent of the aggregate amount of stock of the same class issued and outstanding at the time of acquisition is held by the plan, and
(B) at least 50 percent of the aggregate amount referred to in subparagraph (A) is held by persons independent of the issuer.
(2) Until January 1, 1993, a plan shall not be treated as violating subsection (a) solely by holding stock which fails to satisfy the requirements of paragraph (1) if such stock—
(A) has been so held since December 17, 1987, or
(B) was acquired after December 17, 1987, pursuant to a legally binding contract in effect on December 17, 1987, and has been so held at all times after the acquisition.
(
Editorial Notes
References in Text
Section 10211(c)(2)(A) of the Revenue Act of 1987 (
Amendments
2006—Subsec. (b)(3)(D).
1997—Subsec. (b)(2), (3).
1990—Subsec. (d)(5).
1989—Subsec. (d)(3)(A), (6)(A), (7).
Subsec. (d)(3)(C).
Subsec. (d)(6)(A).
Subsec. (d)(9).
Subsec. (f)(1).
Subsec. (f)(3).
1987—Subsec. (d)(3)(C).
Subsec. (d)(5).
Subsec. (d)(9).
Subsec. (f).
Statutory Notes and Related Subsidiaries
Effective Date of 2006 Amendment
Amendment by
Effective Date of 1997 Amendment
"(1)
"(2)
[
Effective Date of 1990 Amendment
Effective Date of 1989 Amendment
Amendment by section 7881(l)(1)–(4) of
Amendment by section 7891(a)(1) of
Amendment by section 7894(e)(2) of
Effective Date of 1987 Amendment
Regulations
Secretary authorized, effective Sept. 2, 1974, to promulgate regulations wherever provisions of this part call for the promulgation of regulations, see
1 So in original. Probably should be followed by a dash.
§1108. Exemptions from prohibited transactions
(a) Grant of exemptions
The Secretary shall establish an exemption procedure for purposes of this subsection. Pursuant to such procedure, he may grant a conditional or unconditional exemption of any fiduciary or transaction, or class of fiduciaries or transactions, from all or part of the restrictions imposed by
(1) administratively feasible,
(2) in the interests of the plan and of its participants and beneficiaries, and
(3) protective of the rights of participants and beneficiaries of such plan.
Before granting an exemption under this subsection from
(b) Enumeration of transactions exempted from section 1106 prohibitions
The prohibitions provided in
(1) Any loans made by the plan to parties in interest who are participants or beneficiaries of the plan if such loans (A) are available to all such participants and beneficiaries on a reasonably equivalent basis, (B) are not made available to highly compensated employees (within the meaning of
(2)(A) Contracting or making reasonable arrangements with a party in interest for office space, or legal, accounting, or other services necessary for the establishment or operation of the plan, if no more than reasonable compensation is paid therefor.
(B)(i) No contract or arrangement for services between a covered plan and a covered service provider, and no extension or renewal of such a contract or arrangement, is reasonable within the meaning of this paragraph unless the requirements of this clause 1 are met.
(ii)(I) For purposes of this subparagraph:
(aa) The term "covered plan" means a group health plan as defined section 2 1191b(a) of this title.
(bb) The term "covered service provider" means a service provider that enters into a contract or arrangement with the covered plan and reasonably expects $1,000 (or such amount as the Secretary may establish in regulations to account for inflation since December 27, 2020, as appropriate) or more in compensation, direct or indirect, to be received in connection with providing one or more of the following services, pursuant to the contract or arrangement, regardless of whether such services will be performed, or such compensation received, by the covered service provider, an affiliate, or a subcontractor:
(AA) Brokerage services, for which the covered service provider, an affiliate, or a subcontractor reasonably expects to receive indirect compensation or direct compensation described in item (dd), provided to a covered plan with respect to selection of insurance products (including vision and dental), recordkeeping services, medical management vendor, benefits administration (including vision and dental), stop-loss insurance, pharmacy benefit management services, wellness services, transparency tools and vendors, group purchasing organization preferred vendor panels, disease management vendors and products, compliance services, employee assistance programs, or third party administration services.
(BB) Consulting, for which the covered service provider, an affiliate, or a subcontractor reasonably expects to receive indirect compensation or direct compensation described in item (dd), related to the development or implementation of plan design, insurance or insurance product selection (including vision and dental), recordkeeping, medical management, benefits administration selection (including vision and dental), stop-loss insurance, pharmacy benefit management services, wellness design and management services, transparency tools, group purchasing organization agreements and services, participation in and services from preferred vendor panels, disease management, compliance services, employee assistance programs, or third party administration services.
(cc) The term "affiliate", with respect to a covered service provider, means an entity that directly or indirectly (through one or more intermediaries) controls, is controlled by, or is under common control with, such provider, or is an officer, director, or employee of, or partner in, such provider.
(dd)(AA) The term "compensation" means anything of monetary value, but does not include non-monetary compensation valued at $250 (or such amount as the Secretary may establish in regulations to account for inflation since December 27, 2020, as appropriate) or less, in the aggregate, during the term of the contract or arrangement.
(BB) The term "direct compensation" means compensation received directly from a covered plan.
(CC) The term "indirect compensation" means compensation received from any source other than the covered plan, the plan sponsor, the covered service provider, or an affiliate. Compensation received from a subcontractor is indirect compensation, unless it is received in connection with services performed under a contract or arrangement with a subcontractor.
(ee) The term "responsible plan fiduciary" means a fiduciary with authority to cause the covered plan to enter into, or extend or renew, the contract or arrangement.
(ff) The term "subcontractor" means any person or entity (or an affiliate of such person or entity) that is not an affiliate of the covered service provider and that, pursuant to a contract or arrangement with the covered service provider or an affiliate, reasonably expects to receive $1,000 (or such amount as the Secretary may establish in regulations to account for inflation since December 27, 2020, as appropriate) or more in compensation for performing one or more services described in item (bb) under a contract or arrangement with the covered plan.
(II) For purposes of this subparagraph, a description of compensation or cost may be expressed as a monetary amount, formula, or a per capita charge for each enrollee or, if the compensation or cost cannot reasonably be expressed in such terms, by any other reasonable method, including a disclosure that additional compensation may be earned but may not be calculated at the time of contract if such a disclosure includes a description of the circumstances under which the additional compensation may be earned and a reasonable and good faith estimate if the covered service provider cannot otherwise readily describe compensation or cost and explains the methodology and assumptions used to prepare such estimate. Any such description shall contain sufficient information to permit evaluation of the reasonableness of the compensation or cost.
(III) No person or entity is a "covered service provider" within the meaning of subclause (I)(bb) solely on the basis of providing services as an affiliate or a subcontractor that is performing one or more of the services described in subitem (AA) or (BB) of such subclause under the contract or arrangement with the covered plan.
(iii) A covered service provider shall disclose to a responsible plan fiduciary, in writing, the following:
(I) A description of the services to be provided to the covered plan pursuant to the contract or arrangement.
(II) If applicable, a statement that the covered service provider, an affiliate, or a subcontractor will provide, or reasonably expects to provide, services pursuant to the contract or arrangement directly to the covered plan as a fiduciary (within the meaning of
(III) A description of all direct compensation, either in the aggregate or by service, that the covered service provider, an affiliate, or a subcontractor reasonably expects to receive in connection with the services described in subclause (I).
(IV)(aa) A description of all indirect compensation that the covered service provider, an affiliate, or a subcontractor reasonably expects to receive in connection with the services described in subclause (I)—
(AA) including compensation from a vendor to a brokerage firm based on a structure of incentives not solely related to the contract with the covered plan; and
(BB) not including compensation received by an employee from an employer on account of work performed by the employee.
(bb) A description of the arrangement between the payer and the covered service provider, an affiliate, or a subcontractor, as applicable, pursuant to which such indirect compensation is paid.
(cc) Identification of the services for which the indirect compensation will be received, if applicable.
(dd) Identification of the payer of the indirect compensation.
(V) A description of any compensation that will be paid among the covered service provider, an affiliate, or a subcontractor, in connection with the services described in subclause (I) if such compensation is set on a transaction basis (such as commissions, finder's fees, or other similar incentive compensation based on business placed or retained), including identification of the services for which such compensation will be paid and identification of the payers and recipients of such compensation (including the status of a payer or recipient as an affiliate or a subcontractor), regardless of whether such compensation also is disclosed pursuant to subclause (III) or (IV).
(VI) A description of any compensation that the covered service provider, an affiliate, or a subcontractor reasonably expects to receive in connection with termination of the contract or arrangement, and how any prepaid amounts will be calculated and refunded upon such termination.
(iv) A covered service provider shall disclose to a responsible plan fiduciary, in writing a description of the manner in which the compensation described in clause (iii), as applicable, will be received.
(v)(I) A covered service provider shall disclose the information required under clauses (iii) and (iv) to the responsible plan fiduciary not later than the date that is reasonably in advance of the date on which the contract or arrangement is entered into, and extended or renewed.
(II) A covered service provider shall disclose any change to the information required under clause (iii) and (iv) as soon as practicable, but not later than 60 days from the date on which the covered service provider is informed of such change, unless such disclosure is precluded due to extraordinary circumstances beyond the covered service provider's control, in which case the information shall be disclosed as soon as practicable.
(vi)(I) Upon the written request of the responsible plan fiduciary or covered plan administrator, a covered service provider shall furnish any other information relating to the compensation received in connection with the contract or arrangement that is required for the covered plan to comply with the reporting and disclosure requirements under this chapter.
(II) The covered service provider shall disclose the information required under clause (iii)(I) reasonably in advance of the date upon which such responsible plan fiduciary or covered plan administrator states that it is required to comply with the applicable reporting or disclosure requirement, unless such disclosure is precluded due to extraordinary circumstances beyond the covered service provider's control, in which case the information shall be disclosed as soon as practicable.
(vii) No contract or arrangement will fail to be reasonable under this subparagraph solely because the covered service provider, acting in good faith and with reasonable diligence, makes an error or omission in disclosing the information required pursuant to clause (iii) (or a change to such information disclosed pursuant to clause (v)(II)) or clause (vi), provided that the covered service provider discloses the correct information to the responsible plan fiduciary as soon as practicable, but not later than 30 days from the date on which the covered service provider knows of such error or omission.
(viii)(I) Pursuant to subsection (a), subparagraphs (C) and (D) of
(aa) The responsible plan fiduciary did not know that the covered service provider failed or would fail to make required disclosures and reasonably believed that the covered service provider disclosed the information required to be disclosed.
(bb) The responsible plan fiduciary, upon discovering that the covered service provider failed to disclose the required information, requests in writing that the covered service provider furnish such information.
(cc) If the covered service provider fails to comply with a written request described in subclause (II) within 90 days of the request, the responsible plan fiduciary notifies the Secretary of the covered service provider's failure, in accordance with subclauses (II) and (III).
(II) A notice described in subclause (I)(cc) shall contain—
(aa) the name of the covered plan;
(bb) the plan number used for the annual report on the covered plan;
(cc) the plan sponsor's name, address, and employer identification number;
(dd) the name, address, and telephone number of the responsible plan fiduciary;
(ee) the name, address, phone number, and, if known, employer identification number of the covered service provider;
(ff) a description of the services provided to the covered plan;
(gg) a description of the information that the covered service provider failed to disclose;
(hh) the date on which such information was requested in writing from the covered service provider; and
(ii) a statement as to whether the covered service provider continues to provide services to the plan.
(III) A notice described in subclause (I)(cc) shall be filed with the Department not later than 30 days following the earlier of—
(aa) The covered service provider's refusal to furnish the information requested by the written request described in subclause (I)(bb); or
(bb) 90 days after the written request referred to in subclause (I)(cc) is made.
(IV) If the covered service provider fails to comply with the written request under subclause (I)(bb) within 90 days of such request, the responsible plan fiduciary shall determine whether to terminate or continue the contract or arrangement under
(ix) Nothing in this subparagraph shall be construed to supersede any provision of State law that governs disclosures by parties that provide the services described in this section, except to the extent that such law prevents the application of a requirement of this section.
(3) A loan to an employee stock ownership plan (as defined in
(A) such loan is primarily for the benefit of participants and beneficiaries of the plan, and
(B) such loan is at an interest rate which is not in excess of a reasonable rate.
If the plan gives collateral to a party in interest for such loan, such collateral may consist only of qualifying employer securities (as defined in
(4) The investment of all or part of a plan's assets in deposits which bear a reasonable interest rate in a bank or similar financial institution supervised by the United States or a State, if such bank or other institution is a fiduciary of such plan and if—
(A) the plan covers only employees of such bank or other institution and employees of affiliates of such bank or other institution, or
(B) such investment is expressly authorized by a provision of the plan or by a fiduciary (other than such bank or institution or affiliate thereof) who is expressly empowered by the plan to so instruct the trustee with respect to such investment.
(5) Any contract for life insurance, health insurance, or annuities with one or more insurers which are qualified to do business in a State, if the plan pays no more than adequate consideration, and if each such insurer or insurers is—
(A) the employer maintaining the plan, or
(B) a party in interest which is wholly owned (directly or indirectly) by the employer maintaining the plan, or by any person which is a party in interest with respect to the plan, but only if the total premiums and annuity considerations written by such insurers for life insurance, health insurance, or annuities for all plans (and their employers) with respect to which such insurers are parties in interest (not including premiums or annuity considerations written by the employer maintaining the plan) do not exceed 5 percent of the total premiums and annuity considerations written for all lines of insurance in that year by such insurers (not including premiums or annuity considerations written by the employer maintaining the plan).
(6) The providing of any ancillary service by a bank or similar financial institution supervised by the United States or a State, if such bank or other institution is a fiduciary of such plan, and if—
(A) such bank or similar financial institution has adopted adequate internal safeguards which assure that the providing of such ancillary service is consistent with sound banking and financial practice, as determined by Federal or State supervisory authority, and
(B) the extent to which such ancillary service is provided is subject to specific guidelines issued by such bank or similar financial institution (as determined by the Secretary after consultation with Federal and State supervisory authority), and adherence to such guidelines would reasonably preclude such bank or similar financial institution from providing such ancillary service (i) in an excessive or unreasonable manner, and (ii) in a manner that would be inconsistent with the best interests of participants and beneficiaries of employee benefit plans.
Such ancillary services shall not be provided at more than reasonable compensation.
(7) The exercise of a privilege to convert securities, to the extent provided in regulations of the Secretary, but only if the plan receives no less than adequate consideration pursuant to such conversion.
(8) Any transaction between a plan and (i) a common or collective trust fund or pooled investment fund maintained by a party in interest which is a bank or trust company supervised by a State or Federal agency or (ii) a pooled investment fund of an insurance company qualified to do business in a State, if—
(A) the transaction is a sale or purchase of an interest in the fund,
(B) the bank, trust company, or insurance company receives not more than reasonable compensation, and
(C) such transaction is expressly permitted by the instrument under which the plan is maintained, or by a fiduciary (other than the bank, trust company, or insurance company, or an affiliate thereof) who has authority to manage and control the assets of the plan.
(9) The making by a fiduciary of a distribution of the assets of the plan in accordance with the terms of the plan if such assets are distributed in the same manner as provided under
(10) Any transaction required or permitted under part 1 of subtitle E of subchapter III.
(11) A merger of multiemployer plans, or the transfer of assets or liabilities between multiemployer plans, determined by the Pension Benefit Guaranty Corporation to meet the requirements of
(12) The sale by a plan to a party in interest on or after December 18, 1987, of any stock, if—
(A) the requirements of paragraphs (1) and (2) of subsection (e) are met with respect to such stock,
(B) on the later of the date on which the stock was acquired by the plan, or January 1, 1975, such stock constituted a qualifying employer security (as defined in
(C) such stock does not constitute a qualifying employer security (as defined in
(13) Any transfer made before January 1, 2033, of excess pension assets from a defined benefit plan to a retiree health account in a qualified transfer permitted under
(14) Any transaction in connection with the provision of investment advice described in
(A) the transaction is—
(i) the provision of the investment advice to the participant or beneficiary of the plan with respect to a security or other property available as an investment under the plan,
(ii) the acquisition, holding, or sale of a security or other property available as an investment under the plan pursuant to the investment advice, or
(iii) the direct or indirect receipt of fees or other compensation by the fiduciary adviser or an affiliate thereof (or any employee, agent, or registered representative of the fiduciary adviser or affiliate) in connection with the provision of the advice or in connection with an acquisition, holding, or sale of a security or other property available as an investment under the plan pursuant to the investment advice; and
(B) the requirements of subsection (g) are met.
(15)(A) Any transaction involving the purchase or sale of securities, or other property (as determined by the Secretary), between a plan and a party in interest (other than a fiduciary described in
(i) the transaction involves a block trade,
(ii) at the time of the transaction, the interest of the plan (together with the interests of any other plans maintained by the same plan sponsor), does not exceed 10 percent of the aggregate size of the block trade,
(iii) the terms of the transaction, including the price, are at least as favorable to the plan as an arm's length 3 transaction, and
(iv) the compensation associated with the purchase and sale is not greater than the compensation associated with an arm's length 3 transaction with an unrelated party.
(B) For purposes of this paragraph, the term "block trade" means any trade of at least 10,000 shares or with a market value of at least $200,000 which will be allocated across two or more unrelated client accounts of a fiduciary.
(16) Any transaction involving the purchase or sale of securities, or other property (as determined by the Secretary), between a plan and a party in interest if—
(A) the transaction is executed through an electronic communication network, alternative trading system, or similar execution system or trading venue subject to regulation and oversight by—
(i) the applicable Federal regulating entity, or
(ii) such foreign regulatory entity as the Secretary may determine by regulation,
(B) either—
(i) the transaction is effected pursuant to rules designed to match purchases and sales at the best price available through the execution system in accordance with applicable rules of the Securities and Exchange Commission or other relevant governmental authority, or
(ii) neither the execution system nor the parties to the transaction take into account the identity of the parties in the execution of trades,
(C) the price and compensation associated with the purchase and sale are not greater than the price and compensation associated with an arm's length 3 transaction with an unrelated party,
(D) if the party in interest has an ownership interest in the system or venue described in subparagraph (A), the system or venue has been authorized by the plan sponsor or other independent fiduciary for transactions described in this paragraph, and
(E) not less than 30 days prior to the initial transaction described in this paragraph executed through any system or venue described in subparagraph (A), a plan fiduciary is provided written or electronic notice of the execution of such transaction through such system or venue.
(17)(A) Transactions described in subparagraphs (A), (B), and (D) of
(B) For purposes of this paragraph, the term "adequate consideration" means—
(i) in the case of a security for which there is a generally recognized market—
(I) the price of the security prevailing on a national securities exchange which is registered under section 6 of the Securities Exchange Act of 1934 [
(II) if the security is not traded on such a national securities exchange, a price not less favorable to the plan than the offering price for the security as established by the current bid and asked prices quoted by persons independent of the issuer and of the party in interest, taking into account factors such as the size of the transaction and marketability of the security, and
(ii) in the case of an asset other than a security for which there is a generally recognized market, the fair market value of the asset as determined in good faith by a fiduciary or fiduciaries in accordance with regulations prescribed by the Secretary.
(18)
(A) the transaction is in connection with the purchase, holding, or sale of securities or other investment assets (other than a foreign exchange transaction unrelated to any other investment in securities or other investment assets),
(B) at the time the foreign exchange transaction is entered into, the terms of the transaction are not less favorable to the plan than the terms generally available in comparable arm's length 3 foreign exchange transactions between unrelated parties, or the terms afforded by the bank or broker-dealer (or any affiliate of either) in comparable arm's-length foreign exchange transactions involving unrelated parties,
(C) the exchange rate used by such bank or broker-dealer (or affiliate) for a particular foreign exchange transaction does not deviate by more than 3 percent from the interbank bid and asked rates for transactions of comparable size and maturity at the time of the transaction as displayed on an independent service that reports rates of exchange in the foreign currency market for such currency, and
(D) the bank or broker-dealer (or any affiliate of either) does not have investment discretion, or provide investment advice, with respect to the transaction.
(19)
(A) the transaction is a purchase or sale, for no consideration other than cash payment against prompt delivery of a security for which market quotations are readily available,
(B) the transaction is effected at the independent current market price of the security (within the meaning of section 270.17a–7(b) of title 17, Code of Federal Regulations),
(C) no brokerage commission, fee (except for customary transfer fees, the fact of which is disclosed pursuant to subparagraph (D)), or other remuneration is paid in connection with the transaction,
(D) a fiduciary (other than the investment manager engaging in the cross-trades or any affiliate) for each plan participating in the transaction authorizes in advance of any cross-trades (in a document that is separate from any other written agreement of the parties) the investment manager to engage in cross trades at the investment manager's discretion, after such fiduciary has received disclosure regarding the conditions under which cross trades may take place (but only if such disclosure is separate from any other agreement or disclosure involving the asset management relationship), including the written policies and procedures of the investment manager described in subparagraph (H),
(E) each plan participating in the transaction has assets of at least $100,000,000, except that if the assets of a plan are invested in a master trust containing the assets of plans maintained by employers in the same controlled group (as defined in
(F) the investment manager provides to the plan fiduciary who authorized cross trading under subparagraph (D) a quarterly report detailing all cross trades executed by the investment manager in which the plan participated during such quarter, including the following information, as applicable: (i) the identity of each security bought or sold; (ii) the number of shares or units traded; (iii) the parties involved in the cross-trade; and (iv) trade price and the method used to establish the trade price,
(G) the investment manager does not base its fee schedule on the plan's consent to cross trading, and no other service (other than the investment opportunities and cost savings available through a cross trade) is conditioned on the plan's consent to cross trading,
(H) the investment manager has adopted, and cross-trades are effected in accordance with, written cross-trading policies and procedures that are fair and equitable to all accounts participating in the cross-trading program, and that include a description of the manager's pricing policies and procedures, and the manager's policies and procedures for allocating cross trades in an objective manner among accounts participating in the cross-trading program, and
(I) the investment manager has designated an individual responsible for periodically reviewing such purchases and sales to ensure compliance with the written policies and procedures described in subparagraph (H), and following such review, the individual shall issue an annual written report no later than 90 days following the period to which it relates signed under penalty of perjury to the plan fiduciary who authorized cross trading under subparagraph (D) describing the steps performed during the course of the review, the level of compliance, and any specific instances of non-compliance.
The written report under subparagraph (I) shall also notify the plan fiduciary of the plan's right to terminate participation in the investment manager's cross-trading program at any time.
(20)(A) Except as provided in subparagraphs (B) and (C), a transaction described in
(B) Subparagraph (A) does not apply to any transaction between a plan and a plan sponsor or its affiliates that involves the acquisition or sale of an employer security (as defined in
(C) In the case of any fiduciary or other party in interest (or any other person knowingly participating in such transaction), subparagraph (A) does not apply to any transaction if, at the time the transaction occurs, such fiduciary or party in interest (or other person) knew (or reasonably should have known) that the transaction would (without regard to this paragraph) constitute a violation of
(D) For purposes of this paragraph, the term "correction period" means, in connection with a fiduciary or party in interest (or other person knowingly participating in the transaction), the 14-day period beginning on the date on which such fiduciary or party in interest (or other person) discovers, or reasonably should have discovered, that the transaction would (without regard to this paragraph) constitute a violation of
(E) For purposes of this paragraph—
(i) The term "security" has the meaning given such term by
(ii) The term "commodity" has the meaning given such term by
(iii) The term "correct" means, with respect to a transaction—
(I) to undo the transaction to the extent possible and in any case to make good to the plan or affected account any losses resulting from the transaction, and
(II) to restore to the plan or affected account any profits made through the use of assets of the plan.
(21) The provision of a de minimis financial incentive described in section 401(k)(4)(A) or
(c) Fiduciary benefits and compensation not prohibited by section 1106
Nothing in
(1) receiving any benefit to which he may be entitled as a participant or beneficiary in the plan, so long as the benefit is computed and paid on a basis which is consistent with the terms of the plan as applied to all other participants and beneficiaries;
(2) receiving any reasonable compensation for services rendered, or for the reimbursement of expenses properly and actually incurred, in the performance of his duties with the plan; except that no person so serving who already receives full time pay from an employer or an association of employers, whose employees are participants in the plan, or from an employee organization whose members are participants in such plan shall receive compensation from such plan, except for reimbursement of expenses properly and actually incurred; or
(3) serving as a fiduciary in addition to being an officer, employee, agent, or other representative of a party in interest.
(d) Owner-employees; family members; shareholder employees
(1)
(A) lends any part of the corpus or income of the plan to,
(B) pays any compensation for personal services rendered to the plan to, or
(C) acquires for the plan any property from, or sells any property to,
any person who is with respect to the plan an owner-employee (as defined in
(2)(A) For purposes of paragraph (1), the following shall be treated as owner-employees:
(i) A shareholder-employee.
(ii) A participant or beneficiary of an individual retirement plan (as defined in
(iii) An employer or association of employees which establishes such an individual retirement plan under section 408(c) of such title.
(B) Paragraph (1)(C) shall not apply to a transaction which consists of a sale of employer securities to an employee stock ownership plan (as defined in
(C) For purposes of paragraph (1)(A), the term "owner-employee" shall only include a person described in clause (ii) or (iii) of subparagraph (A).
(3) For purposes of paragraph (2), the term "shareholder-employee" means an employee or officer of an S corporation (as defined in section 1361(a)(1) of such title) who owns (or is considered as owning within the meaning of section 318(a)(1) of such title) more than 5 percent of the outstanding stock of the corporation on any day during the taxable year of such corporation.
(e) Acquisition or sale by plan of qualifying employer securities; acquisition, sale, or lease by plan of qualifying employer real property
(1) if such acquisition, sale, or lease is for adequate consideration (or in the case of a marketable obligation, at a price not less favorable to the plan than the price determined under
(2) if no commission is charged with respect thereto, and
(3) if—
(A) the plan is an eligible individual account plan (as defined in
(B) in the case of an acquisition or lease of qualifying employer real property by a plan which is not an eligible individual account plan, or of an acquisition of qualifying employer securities by such a plan, the lease or acquisition is not prohibited by
(f) Applicability of statutory prohibitions to mergers or transfers
(g) Provision of investment advice to participant and beneficiaries
(1) In general
The prohibitions provided in
(2) Eligible investment advice arrangement
For purposes of this subsection, the term "eligible investment advice arrangement" means an arrangement—
(A) which either—
(i) provides that any fees (including any commission or other compensation) received by the fiduciary adviser for investment advice or with respect to the sale, holding, or acquisition of any security or other property for purposes of investment of plan assets do not vary depending on the basis of any investment option selected, or
(ii) uses a computer model under an investment advice program meeting the requirements of paragraph (3) in connection with the provision of investment advice by a fiduciary adviser to a participant or beneficiary, and
(B) with respect to which the requirements of paragraph (4), (5), (6), (7), (8), and (9) are met.
(3) Investment advice program using computer model
(A) In general
An investment advice program meets the requirements of this paragraph if the requirements of subparagraphs (B), (C), and (D) are met.
(B) Computer model
The requirements of this subparagraph are met if the investment advice provided under the investment advice program is provided pursuant to a computer model that—
(i) applies generally accepted investment theories that take into account the historic returns of different asset classes over defined periods of time,
(ii) utilizes relevant information about the participant, which may include age, life expectancy, retirement age, risk tolerance, other assets or sources of income, and preferences as to certain types of investments,
(iii) utilizes prescribed objective criteria to provide asset allocation portfolios comprised of investment options available under the plan,
(iv) operates in a manner that is not biased in favor of investments offered by the fiduciary adviser or a person with a material affiliation or contractual relationship with the fiduciary adviser, and
(v) takes into account all investment options under the plan in specifying how a participant's account balance should be invested and is not inappropriately weighted with respect to any investment option.
(C) Certification
(i) In general
The requirements of this subparagraph are met with respect to any investment advice program if an eligible investment expert certifies, prior to the utilization of the computer model and in accordance with rules prescribed by the Secretary, that the computer model meets the requirements of subparagraph (B).
(ii) Renewal of certifications
If, as determined under regulations prescribed by the Secretary, there are material modifications to a computer model, the requirements of this subparagraph are met only if a certification described in clause (i) is obtained with respect to the computer model as so modified.
(iii) Eligible investment expert
The term "eligible investment expert" means any person—
(I) which meets such requirements as the Secretary may provide, and
(II) does not bear any material affiliation or contractual relationship with any investment adviser or a related person thereof (or any employee, agent, or registered representative of the investment adviser or related person).
(D) Exclusivity of recommendation
The requirements of this subparagraph are met with respect to any investment advice program if—
(i) the only investment advice provided under the program is the advice generated by the computer model described in subparagraph (B), and
(ii) any transaction described in subsection (b)(14)(A)(ii) occurs solely at the direction of the participant or beneficiary.
Nothing in the preceding sentence shall preclude the participant or beneficiary from requesting investment advice other than that described in subparagraph (A), but only if such request has not been solicited by any person connected with carrying out the arrangement.
(4) Express authorization by separate fiduciary
The requirements of this paragraph are met with respect to an arrangement if the arrangement is expressly authorized by a plan fiduciary other than the person offering the investment advice program, any person providing investment options under the plan, or any affiliate of either.
(5) Annual audit
The requirements of this paragraph are met if an independent auditor, who has appropriate technical training or experience and proficiency and so represents in writing—
(A) conducts an annual audit of the arrangement for compliance with the requirements of this subsection, and
(B) following completion of the annual audit, issues a written report to the fiduciary who authorized use of the arrangement which presents its specific findings regarding compliance of the arrangement with the requirements of this subsection.
For purposes of this paragraph, an auditor is considered independent if it is not related to the person offering the arrangement to the plan and is not related to any person providing investment options under the plan.
(6) Disclosure
The requirements of this paragraph are met if—
(A) the fiduciary adviser provides to a participant or a beneficiary before the initial provision of the investment advice with regard to any security or other property offered as an investment option, a written notification (which may consist of notification by means of electronic communication)—
(i) of the role of any party that has a material affiliation or contractual relationship with the fiduciary adviser in the development of the investment advice program and in the selection of investment options available under the plan,
(ii) of the past performance and historical rates of return of the investment options available under the plan,
(iii) of all fees or other compensation relating to the advice that the fiduciary adviser or any affiliate thereof is to receive (including compensation provided by any third party) in connection with the provision of the advice or in connection with the sale, acquisition, or holding of the security or other property,
(iv) of any material affiliation or contractual relationship of the fiduciary adviser or affiliates thereof in the security or other property,
(v) 4 the manner, and under what circumstances, any participant or beneficiary information provided under the arrangement will be used or disclosed,
(vi) of the types of services provided by the fiduciary adviser in connection with the provision of investment advice by the fiduciary adviser,
(vii) that the adviser is acting as a fiduciary of the plan in connection with the provision of the advice, and
(viii) that a recipient of the advice may separately arrange for the provision of advice by another adviser, that could have no material affiliation with and receive no fees or other compensation in connection with the security or other property, and
(B) at all times during the provision of advisory services to the participant or beneficiary, the fiduciary adviser—
(i) maintains the information described in subparagraph (A) in accurate form and in the manner described in paragraph (8),
(ii) provides, without charge, accurate information to the recipient of the advice no less frequently than annually,
(iii) provides, without charge, accurate information to the recipient of the advice upon request of the recipient, and
(iv) provides, without charge, accurate information to the recipient of the advice concerning any material change to the information required to be provided to the recipient of the advice at a time reasonably contemporaneous to the change in information.
(7) Other conditions
The requirements of this paragraph are met if—
(A) the fiduciary adviser provides appropriate disclosure, in connection with the sale, acquisition, or holding of the security or other property, in accordance with all applicable securities laws,
(B) the sale, acquisition, or holding occurs solely at the direction of the recipient of the advice,
(C) the compensation received by the fiduciary adviser and affiliates thereof in connection with the sale, acquisition, or holding of the security or other property is reasonable, and
(D) the terms of the sale, acquisition, or holding of the security or other property are at least as favorable to the plan as an arm's length 3 transaction would be.
(8) Standards for presentation of information
(A) In general
The requirements of this paragraph are met if the notification required to be provided to participants and beneficiaries under paragraph (6)(A) is written in a clear and conspicuous manner and in a manner calculated to be understood by the average plan participant and is sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of the information required to be provided in the notification.
(B) Model form for disclosure of fees and other compensation
The Secretary shall issue a model form for the disclosure of fees and other compensation required in paragraph (6)(A)(iii) which meets the requirements of subparagraph (A).
(9) Maintenance for 6 years of evidence of compliance
The requirements of this paragraph are met if a fiduciary adviser who has provided advice referred to in paragraph (1) maintains, for a period of not less than 6 years after the provision of the advice, any records necessary for determining whether the requirements of the preceding provisions of this subsection and of subsection (b)(14) have been met. A transaction prohibited under
(10) Exemption for plan sponsor and certain other fiduciaries
(A) In general
Subject to subparagraph (B), a plan sponsor or other person who is a fiduciary (other than a fiduciary adviser) shall not be treated as failing to meet the requirements of this part solely by reason of the provision of investment advice referred to in
(i) the advice is provided by a fiduciary adviser pursuant to an eligible investment advice arrangement between the plan sponsor or other fiduciary and the fiduciary adviser for the provision by the fiduciary adviser of investment advice referred to in such section,
(ii) the terms of the eligible investment advice arrangement require compliance by the fiduciary adviser with the requirements of this subsection, and
(iii) the terms of the eligible investment advice arrangement include a written acknowledgment by the fiduciary adviser that the fiduciary adviser is a fiduciary of the plan with respect to the provision of the advice.
(B) Continued duty of prudent selection of adviser and periodic review
Nothing in subparagraph (A) shall be construed to exempt a plan sponsor or other person who is a fiduciary from any requirement of this part for the prudent selection and periodic review of a fiduciary adviser with whom the plan sponsor or other person enters into an eligible investment advice arrangement for the provision of investment advice referred to in
(C) Availability of plan assets for payment for advice
Nothing in this part shall be construed to preclude the use of plan assets to pay for reasonable expenses in providing investment advice referred to in
(11) Definitions
For purposes of this subsection and subsection (b)(14)—
(A) Fiduciary adviser
The term "fiduciary adviser" means, with respect to a plan, a person who is a fiduciary of the plan by reason of the provision of investment advice referred to in
(i) registered as an investment adviser under the Investment Advisers Act of 1940 (
(ii) a bank or similar financial institution referred to in subsection (b)(4) or a savings association (as defined in
(iii) an insurance company qualified to do business under the laws of a State,
(iv) a person registered as a broker or dealer under the Securities Exchange Act of 1934 (
(v) an affiliate of a person described in any of clauses (i) through (iv), or
(vi) an employee, agent, or registered representative of a person described in clauses (i) through (v) who satisfies the requirements of applicable insurance, banking, and securities laws relating to the provision of the advice.
For purposes of this part, a person who develops the computer model described in paragraph (3)(B) or markets the investment advice program or computer model shall be treated as a person who is a fiduciary of the plan by reason of the provision of investment advice referred to in
(B) Affiliate
The term "affiliate" of another entity means an affiliated person of the entity (as defined in
(C) Registered representative
The term "registered representative" of another entity means a person described in section 3(a)(18) of the Securities Exchange Act of 1934 (
(h) Provision of pharmacy benefit services
(1) In general
Provided that all of the conditions described in paragraph (2) are met, the restrictions imposed by subsections (a), (b)(1), and (b)(2) of
(A) the offering of pharmacy benefit services to a group health plan that is sponsored by an entity described in
(B) the purchase of pharmacy benefit services by plan participants and beneficiaries of a group health plan that is sponsored by an entity described in
(C) the operation or implementation of pharmacy benefit services by an entity described in
in any arrangement where such entity described in
(2) Conditions
The conditions described in this paragraph are the following:
(A) The terms of the arrangement are at least as favorable to the group health plan as such group health plan could obtain in a similar arm's length arrangement with an unrelated third party.
(B) At least 50 percent of the providers participating in the pharmacy benefit services offered by the arrangement are unrelated to the contributing employers or any other party in interest with respect to the group health plan.
(C) The group health plan retains an independent fiduciary who will be responsible for monitoring the group health plan's consultants, contractors, subcontractors, and other service providers for purposes of pharmacy benefit services described in paragraph (1) offered by such entity or any of its related organizations or subsidiaries and monitors the transactions of such entity and any of its related organizations or subsidiaries to ensure that all conditions of this exemption are satisfied during each plan year.
(D) Any decisions regarding the provision of pharmacy benefit services described in paragraph (1) are made by the group health plan's independent fiduciary, based on objective standards developed by the independent fiduciary in reliance on information provided by the arrangement.
(E) The independent fiduciary of the group health plan provides an annual report to the Secretary and the congressional committees of jurisdiction attesting that the conditions described in subparagraphs (C) and (D) have been met for the applicable plan year, together with a statement that use of the arrangement's services are in the best interest of the participants and beneficiaries in the aggregate for that plan year compared to other similar arrangements the group health plan could have obtained in transactions with an unrelated third party.
(F) The arrangement is not designed to benefit any party in interest with respect to the group health plan.
(3) Violations
In the event an entity described in
(4) Rule of construction
Nothing in this subsection shall be construed to modify any obligation of a group health plan otherwise set forth in this chapter.
(5) Group health plan
In this subsection, the term "group health plan" has the meaning given such term in
(
Editorial Notes
References in Text
This chapter, referred to in subsecs. (a), (b)(2)(B)(vi)(I), and (h)(3), (4), was in the original "this Act", meaning
The Investment Advisers Act of 1940, referred to in subsec. (g)(11)(A)(i), is title II of act Aug. 22, 1940, ch. 686,
The Securities Exchange Act of 1934, referred to in subsec. (g)(11)(A)(iv), is act June 6, 1934, ch. 404,
Amendments
2022—Subsec. (b)(13).
Subsec. (b)(21).
2020—Subsec. (b)(2).
2019—Subsec. (h).
2015—Subsec. (b)(13).
2012—Subsec. (b)(13).
2008—Subsec. (b)(18)(C).
Subsec. (g)(3)(D)(ii).
Subsec. (g)(6)(A)(i).
Subsec. (g)(11)(A).
2006—Subsec. (b)(13).
Subsec. (b)(14).
Subsec. (b)(15) to (19).
Subsec. (b)(20).
Subsec. (g).
2004—Subsec. (b)(13).
2001—Subsec. (d)(2)(C).
1999—Subsec. (b)(13).
1997—Subsec. (d).
1996—Subsec. (b)(1).
1994—Subsec. (b)(13).
1990—Subsec. (b)(13).
1989—Subsec. (b)(12).
Subsec. (d).
1986—Subsec. (b)(1)(B).
Subsec. (d).
1982—Subsec. (d).
1980—Subsec. (b)(10), (11).
Subsec. (f).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
Amendment by section 113(d) of
Amendment by section 606(b)(3) of
Effective Date of 2020 Amendment
Effective Date of 2008 Amendment
Amendment by
Effective Date of 2006 Amendment
Amendment by section 108(a)(11) of
Amendment by section 611(a)(1), (c)(1), (d)(1), (e)(1), (g)(1) of
Amendment by section 612(a) of
Effective Date of 2001 Amendment
Amendment by
Effective Date of 1999 Amendment
Amendment by
Effective Date of 1997 Amendment
Amendment by
Effective Date of 1996 Amendment
Amendment by
Effective Date of 1990 Amendment
Amendment by
Effective Date of 1989 Amendment
Amendment by section 7881(l)(5) of
Amendment by section 7891(a) of
Section 7894(e)(4)(B) of
Effective Date of 1986 Amendment
Amendment by section 1114(b)(15)(B) of
Section 1898(i)(2) of
Effective Date of 1982 Amendment
Amendment by
Effective Date of 1980 Amendment
Amendment by
Regulations
Secretary of the Treasury or his delegate to issue before Feb. 1, 1988, final regulations to carry out amendments made by section 1114 of
Secretary authorized, effective Sept. 2, 1974, to promulgate regulations wherever provisions of this part call for the promulgation of regulations, see
Applicability of Existing Regulations
Transition Rule
Applicability of Amendments by Pub. L. 116–94
With respect to a group health plan subject to subsec. (h) of this section and
Applicability of Amendments by Subtitles A and B of Title I of Pub. L. 109–280
For special rules on applicability of amendments by subtitles A (§§101–108) and B (§§111–116) of title I of
Coordination of 2006 Amendment With Existing Exemptions
Any exemption under subsec. (b) of this section provided by amendment by section 601(a)(1), (2) of
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
1 So in original. Probably should be "this subparagraph".
2 So in original. Probably should be preceded by "in".
3 So in original. Probably should be "arm's-length".
4 So in original. The word "of" probably should appear.
§1109. Liability for breach of fiduciary duty
(a) Any person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this subchapter shall be personally liable to make good to such plan any losses to the plan resulting from each such breach, and to restore to such plan any profits of such fiduciary which have been made through use of assets of the plan by the fiduciary, and shall be subject to such other equitable or remedial relief as the court may deem appropriate, including removal of such fiduciary. A fiduciary may also be removed for a violation of
(b) No fiduciary shall be liable with respect to a breach of fiduciary duty under this subchapter if such breach was committed before he became a fiduciary or after he ceased to be a fiduciary.
(
§1110. Exculpatory provisions; insurance
(a) Except as provided in
(b) Nothing in this subpart 1 shall preclude—
(1) a plan from purchasing insurance for its fiduciaries or for itself to cover liability or losses occurring by reason of the act or omission of a fiduciary, if such insurance permits recourse by the insurer against the fiduciary in the case of a breach of a fiduciary obligation by such fiduciary;
(2) a fiduciary from purchasing insurance to cover liability under this part from and for his own account; or
(3) an employer or an employee organization from purchasing insurance to cover potential liability of one or more persons who serve in a fiduciary capacity with regard to an employee benefit plan.
(
1 So in original. This part does not contain subparts.
§1111. Persons prohibited from holding certain positions
(a) Conviction or imprisonment
No person who has been convicted of, or has been imprisoned as a result of his conviction of, robbery, bribery, extortion, embezzlement, fraud, grand larceny, burglary, arson, a felony violation of Federal or State law involving substances defined in
(1) as an administrator, fiduciary, officer, trustee, custodian, counsel, agent, employee, or representative in any capacity of any employee benefit plan,
(2) as a consultant or adviser to an employee benefit plan, including but not limited to any entity whose activities are in whole or substantial part devoted to providing goods or services to any employee benefit plan, or
(3) in any capacity that involves decisionmaking authority or custody or control of the moneys, funds, assets, or property of any employee benefit plan,
during or for the period of thirteen years after such conviction or after the end of such imprisonment, whichever is later, unless the sentencing court on the motion of the person convicted sets a lesser period of at least three years after such conviction or after the end of such imprisonment, whichever is later, or unless prior to the end of such period, in the case of a person so convicted or imprisoned (A) his citizenship rights, having been revoked as a result of such conviction, have been fully restored, or (B) if the offense is a Federal offense, the sentencing judge or, if the offense is a State or local offense, the United States district court for the district in which the offense was committed, pursuant to sentencing guidelines and policy statements under
(b) Penalty
Any person who intentionally violates this section shall be fined not more than $10,000 or imprisoned for not more than five years, or both.
(c) Definitions
For the purpose of this section—
(1) A person shall be deemed to have been "convicted" and under the disability of "conviction" from the date of the judgment of the trial court, regardless of whether that judgment remains under appeal.
(2) The term "consultant" means any person who, for compensation, advises, or represents an employee benefit plan or who provides other assistance to such plan, concerning the establishment or operation of such plan.
(3) A period of parole or supervised release shall not be considered as part of a period of imprisonment.
(d) Salary of person barred from employee benefit plan office during appeal of conviction
Whenever any person—
(1) by operation of this section, has been barred from office or other position in an employee benefit plan as a result of a conviction, and
(2) has filed an appeal of that conviction,
any salary which would be otherwise due such person by virtue of such office or position, shall be placed in escrow by the individual or organization responsible for payment of such salary. Payment of such salary into escrow shall continue for the duration of the appeal or for the period of time during which such salary would be otherwise due, whichever period is shorter. Upon the final reversal of such person's conviction on appeal, the amounts in escrow shall be paid to such person. Upon the final sustaining of that person's conviction on appeal, the amounts in escrow shall be returned to the individual or organization responsible for payments of those amounts. Upon final reversal of such person's conviction, such person shall no longer be barred by this statute 2 from assuming any position from which such person was previously barred.
(
Editorial Notes
References in Text
This chapter, referred to in subsec. (a), was in the original "this Act", meaning
The Labor-Management Reporting and Disclosure Act of 1959, referred to in subsec. (a), is
Amendments
1987—Subsec. (a).
1984—Subsec. (a).
Subsec. (b).
Subsec. (c)(1).
Subsec. (c)(3).
Subsec. (d).
Statutory Notes and Related Subsidiaries
Effective Date of 1987 Amendment
Amendment by
Effective Date of 1984 Amendment
Amendments by sections 229 and 230 of
Amendment by section 802 of
1 So in original. Probably should be "of".
2 So in original. Probably should be "section".
§1112. Bonding
(a) Requisite bonding of plan officials
Every fiduciary of an employee benefit plan and every person who handles funds or other property of such a plan (hereafter in this section referred to as "plan official") shall be bonded as provided in this section; except that—
(1) where such plan is one under which the only assets from which benefits are paid are the general assets of a union or of an employer, the administrator, officers, and employees of such plan shall be exempt from the bonding requirements of this section,
(2) no bond shall be required of any entity which is registered as a broker or a dealer under
(3) no bond shall be required of a fiduciary (or of any director, officer, or employee of such fiduciary) if such fiduciary—
(A) is a corporation organized and doing business under the laws of the United States or of any State;
(B) is authorized under such laws to exercise trust powers or to conduct an insurance business;
(C) is subject to supervision or examination by Federal or State authority; and
(D) has at all times a combined capital and surplus in excess of such a minimum amount as may be established by regulations issued by the Secretary, which amount shall be at least $1,000,000. Paragraph (2) shall apply to a bank or other financial institution which is authorized to exercise trust powers and the deposits of which are not insured by the Federal Deposit Insurance Corporation, only if such bank or institution meets bonding or similar requirements under State law which the Secretary determines are at least equivalent to those imposed on banks by Federal law.
The amount of such bond shall be fixed at the beginning of each fiscal year of the plan. Such amount shall be not less than 10 per centum of the amount of funds handled. In no case shall such bond be less than $1,000 nor more than $500,000, except that the Secretary, after due notice and opportunity for hearing to all interested parties, and after consideration of the record, may prescribe an amount in excess of $500,000, subject to the 10 per centum limitation of the preceding sentence. For purposes of fixing the amount of such bond, the amount of funds handled shall be determined by the funds handled by the person, group, or class to be covered by such bond and by their predecessor or predecessors, if any, during the preceding reporting year, or if the plan has no preceding reporting year, the amount of funds to be handled during the current reporting year by such person, group, or class, estimated as provided in regulations of the Secretary. Such bond shall provide protection to the plan against loss by reason of acts of fraud or dishonesty on the part of the plan official, directly or through connivance with others. Any bond shall have as surety thereon a corporate surety company which is an acceptable surety on Federal bonds under authority granted by the Secretary of the Treasury pursuant to
(b) Unlawful acts
It shall be unlawful for any plan official to whom subsection (a) applies, to receive, handle, disburse, or otherwise exercise custody or control of any of the funds or other property of any employee benefit plan, without being bonded as required by subsection (a) and it shall be unlawful for any plan official of such plan, or any other person having authority to direct the performance of such functions, to permit such functions, or any of them, to be performed by any plan official, with respect to whom the requirements of subsection (a) have not been met.
(c) Conflict of interest prohibited in procuring bonds
It shall be unlawful for any person to procure any bond required by subsection (a) from any surety or other company or through any agent or broker in whose business operations such plan or any party in interest in such plan has any control or significant financial interest, direct or indirect.
(d) Exclusiveness of statutory basis for bonding requirement for persons handling funds or other property of employee benefit plans
Nothing in any other provision of law shall require any person, required to be bonded as provided in subsection (a) because he handles funds or other property of an employee benefit plan, to be bonded insofar as the handling by such person of the funds or other property of such plan is concerned.
(e) Regulations
The Secretary shall prescribe such regulations as may be necessary to carry out the provisions of this section including exempting a plan from the requirements of this section where he finds that (1) other bonding arrangements or (2) the overall financial condition of the plan would be adequate to protect the interests of the beneficiaries and participants. When, in the opinion of the Secretary, the administrator of a plan offers adequate evidence of the financial responsibility of the plan, or that other bonding arrangements would provide adequate protection of the beneficiaries and participants, he may exempt such plan from the requirements of this section.
(
Editorial Notes
Codification
In subsec. (a), "
Amendments
2019—Subsec. (a).
2006—Subsec. (a).
Subsec. (a)(2), (3).
Statutory Notes and Related Subsidiaries
Effective Date of 2019 Amendment
Amendment by
Effective Date of 2006 Amendment
Amendment by section 611(b) of
Regulations
Secretary authorized, effective Sept. 2, 1974, to promulgate regulations wherever provisions of this part call for the promulgation of regulations, see
1 So in original. The period probably should be ", and".
§1113. Limitation of actions
No action may be commenced under this subchapter with respect to a fiduciary's breach of any responsibility, duty, or obligation under this part, or with respect to a violation of this part, after the earlier of—
(1) six years after (A) the date of the last action which constituted a part of the breach or violation, or (B) in the case of an omission the latest date on which the fiduciary could have cured the breach or violation, or
(2) three years after the earliest date on which the plaintiff had actual knowledge of the breach or violation;
except that in the case of fraud or concealment, such action may be commenced not later than six years after the date of discovery of such breach or violation.
(
Editorial Notes
Amendments
1989—
Par. (2).
1987—Subsec. (a)(2).
Statutory Notes and Related Subsidiaries
Effective Date of 1989 Amendment
Amendment by section 7881(j)(4) of
Amendment by section 7894(e)(5) of
Effective Date of 1987 Amendment
Amendment by
§1114. Effective date
(a) Except as provided in subsections (b), (c), and (d), this part shall take effect on January 1, 1975.
(b)(1) The provisions of this part authorizing the Secretary to promulgate regulations shall take effect on September 2, 1974.
(2) Upon application of a plan, the Secretary may postpone until not later than January 1, 1976, the applicability of any provision of sections 1102, 1103 (other than 1103(c)), 1105 (other than 1105(a) and (d)), and 1110(a) of this title, as it applies to any plan in existence on September 2, 1974, if he determines such postponement is (A) necessary to amend the instrument establishing the plan under which the plan is maintained and (B) not adverse to the interest of participants and beneficiaries.
(3) This part shall take effect on September 2, 1974, with respect to a plan which terminates after June 30, 1974, and before January 1, 1975, and to which at the time of termination
(c)
(1) until June 30, 1984, to a loan of money or other extension of credit between a plan and a party in interest under a binding contract in effect on July 1, 1974 (or pursuant to renewals of such a contract), if such loan or other extension of credit remains at least as favorable to the plan as an arm's-length transaction with an unrelated party would be, and if the execution of the contract, the making of the loan, or the extension of credit was not, at the time of such execution, making, or extension, a prohibited transaction (within the meaning of
(2) until June 30, 1984, to a lease or joint use of property involving the plan and a party in interest pursuant to a binding contract in effect on July 1, 1974 (or pursuant to renewals of such a contract), if such lease or joint use remains at least as favorable to the plan as an arm's-length transaction with an unrelated party would be and if the execution of the contract was not, at the time of such execution, a prohibited transaction (within the meaning of
(3) until June 30, 1984, to the sale, exchange or other disposition of property described in paragraph (2) between a plan and a party in interest if—
(A) in the case of a sale, exchange, or other disposition of the property by the plan to the party in interest, the plan receives an amount which is not less than the fair market value of the property at the time of such disposition; and
(B) in the case of the acquisition of the property by the plan, the plan pays an amount which is not in excess of the fair market value of the property at the time of such acquisition;
(4) until June 30, 1977, to the provision of services, to which paragraphs (1), (2), and (3) do not apply between a plan and a party in interest—
(A) under a binding contract in effect on July 1, 1974 (or pursuant to renewals of such contract), or
(B) if the party in interest ordinarily and customarily furnished such services on June 30, 1974, if such provision of services remains at least as favorable to the plan as an arm's-length transaction with an unrelated party would be and if such provision of services was not, at the time of such provision, a prohibited transaction (within the meaning of
(5) the sale, exchange, or other disposition of property which is owned by a plan on June 30, 1974, and all times thereafter, to a party in interest, if such plan is required to dispose of such property in order to comply with the provisions of
(d) Any election, or failure to elect, by a disqualified person under section 2003(c)(1)(B) of this Act shall be treated for purposes of this part (but not for purposes of
(e) The preceding provisions of this section shall not apply with respect to amendments made to this part in provisions enacted after September 2, 1974.
(
Editorial Notes
References in Text
Section 2003(c)(1)(B) of this Act, referred to in subsec. (d), is section 2003(c)(1)(B) of
Amendments
1989—Subsec. (c)(2).
Subsec. (e).
Statutory Notes and Related Subsidiaries
Effective Date of 1989 Amendment
Amendment by