(1) EXEMPTION FROM PROHIBITED TRANSACTIONS- Section 408(b) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1108(b)) is amended by adding at the end the following new paragraph:

`(14) Any transaction in connection with the provision of investment advice described in section 3(21)(A)(ii) to a participant or beneficiary of an individual account plan that permits such participant or beneficiary to direct the investment of assets in their individual account, if--

`(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.'.

(2) REQUIREMENTS- Section 408 of such Act is amended further by adding at the end the following new subsection:

`(g) Provision of Investment Advice to Participant and Beneficiaries-

`(1) IN GENERAL- The prohibitions provided in section 406 shall not apply to transactions described in subsection (b)(14) if the investment advice provided by a fiduciary adviser is provided under an eligible investment advice arrangement.

`(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)(B)(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.