After the initial three-year period, the Secretary may prescribe an annual rate based upon experience, and unless Congress objects within 90 days, the new premium shall become effective.

The Secretary is required to consult with appropriate private and government agencies on matters relating to the assessment and premium rates before prescribing rates.

PAYMENT OF INSURANCE

Section 404.-This section requires that plans must notify the Secretary of intent to terminate, and failing to do so will make such persons personally liable for any losses incurred by the Pension Benefit Insurance Fund in connection with plan termination.

The insurance to be paid shall be the difference between the plan's assets and unfunded vested benefits owed at the time of plan termination.

In addition, the Secretary is required to prescribe procedures under which funds of terminated plans shall be liquidated and paid out to cover vested benefits of participants. In implementing this authority, the Secretary may transfer terminated funds under his supervision or purchase annuities from qualified insurance carriers for participants or take such other action as may be appropriate. Persons who terminate a plan with intent to circumvent the Act or the WPPDA shall be personally liable for losses.

RECOVERY

Section 405.-This section provides that, where employers in terminated plans are not insolvent, they or their successors-in-interest may be liable for reimbursement of a portion of insurance benefits paid. The liability of the employer is to pay 100% of the unfunded vested liabilities and in no event shall it exceed 50% of the employer's net worth.

The Secretary shall make arrangements with employers on equitable terms for the reimbursement of insurance paid.

The amount or amounts of any unpaid liability owed by an employer shall constitute a lien in favor of the government, but junior to any lien for unpaid taxes owed to the government.

PENSION BENEFIT INSURANCE FUND

Section 406.-This section establishes within the Labor Department a fund for the deposit of premiums, assessments, etc., made under the Act and for payment of such claims thereunder.

TITLE V.-DISCLOSURE AND FIDUCIARY STANDARDS

The new Disclosure and Fiduciary Requirements of this Act are accomplished by amendment to the Welfare and Pension Plans Disclosure Act. (WPPDA).

DISCLOSURE

Section 501.-This section requires that annual reports filed are required to be accompanied by a certificate designating the Secretary as agent for service of process in any action arising under this Act.

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Section 502.-This section amends Section 3 of the Welfare and Pension Plans Disclosure Act by adding new paragraphs containing revised definitions of terms such as "relative," "administrator," "employee benefit plan," "employee benefit fund," "separate account, "adequate consideration," "nonforfeitable pension benefit,' "covered service," and various other terms which are intended to reconcile definitions contained in the Act with the new amendments. The definition of "employee welfare benefit plan" is expanded to include all benefit arrangements described or permitted by Section 302 of the TaftHartley Act, such as vacation funds, scholarship, child care funds, etc. Section 503.-This section amends Sec. 4(a) of the Welfare and Pension Plans Disclosure Act by making editorial changes required by the terms of the current Act in order that the definitions of the WPPDA will be reconciled with those of the current amendments. Section 504.-This section amends Sec. 5(b) of the WPPDA by permitting the Secretary to require the filing of a special terminal report in the event that there are monies or other assets remaining in the plan. Additionally, it is amended to grant the Secretary the right to exempt from the reporting and disclosure requirements of the Act a certain class of employee benefit plans if the same does not serve the purposes of the Act.

Section 505.-This section amends Sec. 6 of the WPPDA and requires plan descriptions under this Act to be comprehensive and written in a language and manner calculated to be understood by the average participant. In addition, the prior filing requirements are revised to authorize plan amendments to be filed in accordance with regulations prescribed by the Secretary. Heretofore, plan amendments had to be filed within 60 days after they were effective.

Section 506.-This section provides for two significant changes to the WPPDA. The first is a new requirement that the annual financial report must include an opinion of the plan's financial condition by an independent accountant based upon the results of an annual audit. Second, plans must include in their reports more detailed financial information, particularly in connection with party-in-interest transactions, and more detailed actuarial information relating to the plan's funding method and its overall financial soundness.

Section 507.-This section broadens the WPPDA requirements by requiring administrators to furnish reports to employees or to make available (whichever is more practicable) to every participant upon his enrollment in the plan a summary of the plan's important provisions written in a manner calculated to be understood by the average participant. (This requirement covers major amendments as well). This summary should include an explanation of a participant's rights and obligations under the plan and the circumstances which may disqualify him from benefits, as well as the requirements of WPPDA. Administrators are also required to furnish or make available to participants every three years a revised, up-to-date summary of the plan's important provisions (including major amendments).

Additionally, the plan administrator must furnish to participants and beneficiaries, upon request, copies of the plan description, annual report, or bargaining agreement, trust agreement, contract, or instrument under which the plan is established and operated. The plan administrator may make a reasonable charge to cover the costs of such copies.

Plan administrators are also required to furnish participants with notices of any vesting or funding variance the plan has received under other provisions of the Act.

Section 508.-This section amends Section 9(d) of the WPPDA to permit the Secretary to make necessary inquiries to determine violations provided that plans cannot be investigated more than once annually without reasonable cause. This provision eliminates the requirement of certification previously required to examine reports and records of a plan. The annual audit required by the Act dispenses with the need for such certification.

Section 509.-This section amends Section 14 of the WPPDA to restructure the Advisory Council on Employee Welfare and Pension Benefit Plans so that it will serve as an advisory council for both the WPPDA and the Retirement Income Security for Employees Act. The Advisory Council is expanded from its present number of 13 members to 21 members. New permanent categories of membership are added to include the fields of actuarial counseling, investment counseling, and accounting. Five representatives of management have also been added. The period of advisory council meetings is changed from its requirement of twice a year to meetings of at least four times a year.

FIDUCIARY STANDARDS

Section 510.-This section adds new Section 15 to the WPPDA which establishes fiduciary standards for employee pension and welfare plans.

In general, this section requires plans to be established pursuant to a written document and requires plan funds to be treated as a trust for the exclusive purpose of (1) providing benefits to participants and their beneficiaries and (2) paying reasonable administrative expenses, and (3) assets remaining after satisfaction of all rights, attributable to employee contributions, shall be distributed equitably on basis of the rate of employee contributions.

This section also requires a fiduciary (i.e., a person who is responsible for handling plan funds) to act as a prudent man in a similar situation and other like conditions would act. The fiduciary must adhere to trust principles established by the Act, and to trust terms which are consistent with the Act and is prohibited from receiving any consideration from any party dealing with such fund, in connection. with fund transactions. However, transactions which are otherwise prohibited may be permitted by the Secretary if he finds that the participants' interests would be served by such action. A fiduciary is prohibited from investing, or maintaining investment of more than 10 percent of a pension fund's assets in securities of the employer.

In general, fiduciaries may be reasonably compensated and entitled to receive benefits which belong to them by reason of being participants in the plan and may also make certain loans to participants or beneficiaries or make reasonable arrangements with parties-in-interest for office space or other services, including providing more than one type of service to fiduciaries or other parties-in-interest which are customarily furnished.

Any fiduciary who breaches his trust is personally liable for losses resulting from such breach, and co-fiduciaries are jointly and sev

erally liable except that a co-fiduciary may avoid liability by objecting promptly to any action which may constitute a breach of trust. Exculpatory clauses in trust agreements are prohibited; however, fiduciaries are permitted to allocate specific responsibilities among themselves, and, thereby, subject to disapproval by the Secretary, delineate the responsibility of each fiduciary.

The bill further prohibits any individual who has been convicted of certain specified crimes from serving as an administrator, officer, trustee, employee, or consultant of, or with respect to a plan, for five years following his conviction or release from imprisonment, unless the Secretary determines that a waiver is justified.

The bill also requires all investments and deposits of plan funds to be made in the name of the fund or its nominee and prohibits employees of either the employer or an employee organization from receiving commissions, or brokerage fees with respect to plan investments; and provides for a transitional period as determined by the Secretary for a plan to dispose of conflict-in-interest investments.

Every plan, in accordance with regulations of the Secretary, is required to provide adequate notice in writing to a participant whose benefit claim has been denied, setting forth the specific reason for the denial in understandable language and providing reasonable review procedures with respect to any denial of benefits. The bill also requires that where a plan offers the option of survivorship benefits to a participant, he can only lose such option if he waives it in writing.

TITLE VI.-ENFORCEMENT

Sec. 601.-This section empowers the Secretary to petition the federal courts to compel a pension or profit-sharing-retirement plan to comply with the Act or effect recoveries of moneys which may be due under the Act.

Sections 602, 603, 604, and 605.-These sections provide that when the Secretary has reason to believe that a pension, profit-sharing, retirement plan, or other employee benefit p an is violating the Act or the plan's governing documents, he may seek relief in the federal courts to compel the return of assets to the fund, to require payments to be made, to require the removal of a fiduciary, and to obtain other appropriate relief. Plan participants also may seek relief in federal and state courts against violations committed by a fiduciary, including his removal from office. They may also seek relief to recover benefits required to be paid under the plan in the same courts. The Secretary has the right to remove an action pending in a state court to the federal courts for relief provided under this Act.

Sections 607 and 608.-These sections provide that administrators and fiduciaries have the right to obtain judicial review of the actions of the Secretary. The bill provides a statute of limitations of five years for actions arising under the Act.

Section 609.-This section provides that this Act supersedes state laws covering the same matters. However, the Act does not exempt or relieve any person from complying with any state law regulating insurance, banking, and related matters, and does not remove state jurisdiction over plans not subject to the Act. State courts are not prevented from asserting jurisdiction in compelling the accounting of

a fiduciary or requiring clarification of the plan. The Secretary or a plan participant may remove such a case from the state to the federal court if it involves the applicability of the Act.

Section 610.-This section makes it unlawful for any person to discharge, fine, suspend, expel, discipline or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of the plan or the Act or the Welfare and Pensions Plans Disclosure Act or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan or the Act or the WPPDA.

Section 611.-This section makes it a criminal offense for any person to use fraud, force, or violence or threats thereof to restrain, coerce, intimidate or attempt to restrain, coerce, intimidate any participant or beneficiary for the purpose of interfering with or preventing the exercise of any right to which he is or may become entitled under the plan, the Act or the WPPDA.

TITLE VII.-EFFECTIVE DATES

Section 701.-This section provides that the registration, administration, disclosure, government procurement, fiduciary, and enforcement provisions of the Act become effective upon enactment.

The vesting and funding provisions of the Act shall become effective three years after enactment of the Act, and portability and insurance provisions one year after enactment.