JCT Summarizes SAVERS Act Substitute Amendment

The Chairman's amendment in the nature of a substitute modifies H.R. 4294 by making the changes described below. The Chairman's amendment also makes minor technical changes to the statutory language.

Definition of investment advice

The Chairman's amendment revises the language that must be used in any disclaimer of a mutual agreement, arrangement, or understanding with respect to a recommendation for purposes of whether the recommendation constitutes investment advice. As revised, any disclaimer must only state, "This information is not individualized to you, and you are not intended to materially rely on this information in making investment or management decisions."

Exemptions relating to investment advice

The Chairman's amendment combines the two exemptions provided under the proposal by revising the best interest recommendation exemption and deleting the exemption for certain fee arrangements. As revised, the exemption with respect to investment advice that is a best interest recommendation applies to the provision of the investment advice or a transaction connected to the advice.

The Chairman's amendment continues to allow a best interest recommendation to include a recommendation based on a limited range of investment options, which may consist, in whole or in part, of proprietary products, but only if any limitations are clearly disclosed to the advice recipient before any transaction based on the recommendation. Under the Chairman's amendment, any limitations must be disclosed in the form of a notice that states only the following: "This recommendation is based on a limited range of investment options, and the same or similar investments may be available at a different cost (greater or lesser) from other sources."

The Chairman's amendment also continues to allow a best interest recommendation to result in variable compensation to the adviser (or an affiliate), but only if the receipt of the compensation is clearly disclosed before any transaction. For this purpose, clear disclosure of variable compensation, must include, in a manner calculated to be understood by the average individual, each of the following:

Under the Chairman's Amendment, in the case of a prohibited transaction arising by the failure of investment advice to be a best interest recommendation, "correction" and "correct" mean the payment to, or reimbursement of, actual damages of the plan, plan participants, or plan beneficiaries resulting directly from the plan's, plan participant's, or plan beneficiary's reliance on the investment advice, if any, that have not otherwise been paid or reimbursed to the plan, plan participants, or plan beneficiaries, including payments and reimbursements made pursuant to the general correction rule under present law (that is, undoing the transaction to the extent possible, but in any case placing the plan in a financial position not worse than that in which it would be if the disqualified person were acting under the highest fiduciary standards) if such amount is greater than the amount determined under the present-law correction rule.

Effective date

The Chairman's Amendment revises the standard for compliance with the amendments made by the proposal until regulations or other guidance is issued. Under the Chairman's Amendment, until the issuance of regulations or other guidance, a plan or a fiduciary will be treated as meeting the requirements of the amendments if the plan or fiduciary, as applicable, complies with a reasonable good faith interpretation of the amendments.