[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4748 Introduced in House (IH)]







106th CONGRESS
  2d Session
                                H. R. 4748

To amend title I of the Employee Retirement Income Security Act of 1974 
and the Internal Revenue Code of 1986 to modernize such title and such 
     Code to take into account the evolution of employer-sponsored 
 retirement plans, to increase the availability of critical retirement 
plan services, including investment advisory services, to participants, 
beneficiaries, and plan fiduciaries, and to harmonize the requirements 
     of such title and such Code with other Federal and State laws.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             June 26, 2000

 Mr. Boehner introduced the following bill; which was referred to the 
   Committee on Education and the Workforce, and in addition to the 
Committee on Ways and Means, for a period to be subsequently determined 
 by the Speaker, in each case for consideration of such provisions as 
        fall within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
To amend title I of the Employee Retirement Income Security Act of 1974 
and the Internal Revenue Code of 1986 to modernize such title and such 
     Code to take into account the evolution of employer-sponsored 
 retirement plans, to increase the availability of critical retirement 
plan services, including investment advisory services, to participants, 
beneficiaries, and plan fiduciaries, and to harmonize the requirements 
     of such title and such Code with other Federal and State laws.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Comprehensive ERISA Modernization 
Act of 2000''.

SEC. 2. PROHIBITED TRANSACTION EXEMPTION FOR ARM'S LENGTH TRANSACTIONS.

    (a) Amendments to the Employee Retirement Income Security Act of 
1974.--
            (1) In general.--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 of the type described in 
        subparagraph (A), (B), (C), or (D) of section 406(a)(1) or in 
        406(b) (other than a transaction described in paragraph (15)) 
        which meets the arm's length transaction requirements of 
        subsection (g).
            (2) Arm's length transaction requirements.--Section 408 of 
        such Act is amended further by adding at the end the following 
        new subsection:
    ``(g)(1) The arm's length transaction requirements of this 
subsection are met by a transaction described in subparagraph (A), (B), 
(C), or (D) of section 406(a)(1) if--
            ``(A) such transaction is entered into pursuant to a 
        written contract or arrangement which includes the material 
        terms and conditions of such transaction or transactions of the 
        type of such transaction,
            ``(B) such transaction is in the interest of the plan and 
        its participants and beneficiaries, and
            ``(C) the terms and conditions of such transaction, 
        including any direct or indirect compensation, are at least as 
        favorable to the plan as an arm's length transaction would be.
    ``(2) The arm's length transaction requirements of this subsection 
are met by a transaction described in section 406(b) if--
            ``(A) such transaction meets the requirements of paragraph 
        (1), and
            ``(B) prior to the commencement of such transaction--
                    ``(i) written disclosure of potential conflicts of 
                interest associated with the transaction (or 
                contemplated transactions of the type thereof), 
                including the receipt of direct or indirect 
                compensation, has been provided to a fiduciary of the 
                plan, and
                    ``(ii) the transaction (or contemplated 
                transactions of the type thereof) have been provided 
                for in the terms of the plan or of a written contract 
                with a fiduciary described in clause (i) that is 
                independent of the person entering into the transaction 
                and any of its affiliates.
    ``(3) In any case in which a fiduciary causes a plan to enter into 
a transaction with such fiduciary or an affiliate thereof, the arm's 
length transaction requirements of this subsection are met only if--
            ``(A) such transaction meets the requirements of paragraphs 
        (1) and (2),
            ``(B) such fiduciary or affiliate is engaged in the 
        business of entering into transactions of such type with the 
        general public, and
            ``(C) such transaction is entered into under substantially 
        the same terms and conditions as those under which such 
        transactions with the general public are entered into.''.
    (b) Amendments to the Internal Revenue Code of 1986.--
            (1) In general.--Subsection (d) of section 4975 of the 
        Internal Revenue Code of 1986 (relating to exemptions from tax 
        on prohibited transactions) is amended--
                    (A) in paragraph (14), by striking ``or'' at the 
                end;
                    (B) in paragraph (15), by striking the period at 
                the end and inserting ``; or''; and
                    (C) by adding at the end the following new 
                paragraph:
            ``(16) Any transaction of the type described in subsection 
        (c)(1) (other than a transaction described in paragraph (17)) 
        which meets the arm's length transaction requirements of 
        subsection (f)(7).''.
            (2) Arm's length transaction requirements.--Subsection (f) 
        of such section 4975 (relating to other definitions and special 
        rules) is amended by adding at the end the following new 
        paragraph:
            ``(7) Arm's length transaction requirements.--
                    ``(A) Transactions with disqualified persons.--The 
                arm's length transaction requirements of this 
                subsection are met by a transaction described in 
                subparagraph (A), (B), (C), or (D) of subsection (c)(1) 
                if--
                            ``(i) such transaction is entered into 
                        pursuant to a written contract or arrangement 
                        which includes the material terms and 
                        conditions of such transaction or transactions 
of the type of such transaction,
                            ``(ii) such transaction is in the interest 
                        of the plan and its participants and 
                        beneficiaries, and
                            ``(iii) the terms and conditions of such 
                        transaction, including any direct or indirect 
                        compensation, are at least as favorable to the 
                        plan as an arm's length transaction would be.
                    ``(B) Transactions with a fiduciary or its 
                affiliate.--The arm's length transaction requirements 
                of this subsection are met by a transaction described 
                in subparagraph (E) or (F) of subsection (c)(1) if--
                            ``(i) such transaction meets the 
                        requirements of subparagraph (A), and
                            ``(ii) prior to the commencement of such 
                        transaction--
                                    ``(I) written disclosure of 
                                potential conflicts of interest 
                                associated with the transaction (or 
                                contemplated transactions of the type 
                                thereof), including the receipt of 
                                direct or indirect compensation, has 
                                been provided to a fiduciary of the 
                                plan, and
                                    ``(II) the transaction (or 
                                contemplated transactions of the type 
                                thereof) have been provided for in the 
                                terms of the plan or of a written 
                                contract with a fiduciary described in 
                                subclause (I) that is independent of 
                                the person entering into the 
                                transaction and any of its affiliates.
                    ``(C) Transactions with the fiduciary causing the 
                transactions.--In any case in which a fiduciary causes 
                a plan to enter into a transaction with such fiduciary 
                or an affiliate thereof, the arm's length transaction 
                requirements of this subjection are met only if--
                            ``(i) such transaction meets the 
                        requirements of subparagraphs (A) and (B),
                            ``(ii) such fiduciary or affiliate is 
                        engaged in the business of entering into 
                        transactions of such type with the general 
                        public, and
                            ``(iii) such transaction is entered into 
                        under substantially the same terms and 
                        conditions as those under which such 
                        transactions with the general public are 
                        entered into.''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to transactions entered into on or after January 1, 
2001.

SEC. 3. PROHIBITED TRANSACTION EXEMPTION FOR THE PROVISION OF 
              INVESTMENT ADVICE.

    (a) Amendments to the Employee Retirement Income Security Act of 
1974.--
            (1) In general.--Section 408(b) of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1108(b)) (as amended by 
        section 2) is amended further by adding at the end the 
        following new paragraph:
            ``(15) If the requirements of subsection (h) are met--
                    ``(A) the provision of investment advice referred 
                to in section 3(21)(A)(ii) provided by a fiduciary 
                adviser (as defined in subsection (h)(4)(A)) to an 
                employee benefit plan or to a participant or 
                beneficiary of an employee benefit plan,
                    ``(B) the sale, acquisition, or holding of 
                securities or other property (including any extension 
                of credit associated with the sale, acquisition, or 
                holding of securities or other property) pursuant to 
                such investment advice, and
                    ``(C) 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 such 
                investment advice.''.
            (2) Requirements.--Section 408 of such Act (as amended by 
        section 2) is amended further by adding at the end the 
        following new subsection:
    ``(h)(1) The requirements of this subsection are met in connection 
with the provision of advice referred to in section 3(21)(A)(ii), 
provided to an employee benefit plan or a participant or beneficiary of 
an employee benefit plan by a fiduciary adviser with respect to such 
plan, in connection with any sale or acquisition of a security or other 
property for purposes of investment of amounts held by such plan, if--
            ``(A) in the case of the initial provision of such advice 
        by such fiduciary adviser to such plan, participant, or 
        beneficiary, the fiduciary adviser provides to the plan, 
        participant, or beneficiary, at the time of or before the 
        initial provision of such advice, a description, in writing or 
        by means of electronic communication, of--
                    ``(i) all fees or other compensation relating to 
                such 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 
                such advice or in connection with such acquisition or 
                sale,
                    ``(ii) any material affiliation or contractual 
                relationship of the fiduciary adviser or affiliates 
                thereof in such security or other property,
                    ``(iii) any limitation placed on the scope of the 
                investment advice to be provided by the fiduciary 
                adviser with respect to any such sale or acquisition, 
                and
                    ``(iv) the types of services offered by the 
                fiduciary advisor in connection with the provision of 
                investment advice by the fiduciary adviser,
            ``(B) in the case of the initial or any subsequent 
        provision of such advice to such plan, participant, or 
        beneficiary, the fiduciary adviser, throughout the 1-year 
        period following the provision of such advice, maintains the 
        information described in clauses (i) through (iv) of 
        subparagraph (A) in currently accurate form for availability, 
        upon request and without charge, to the recipient of such 
        advice,
            ``(C) the fiduciary adviser provides appropriate 
        disclosure, in connection with any such acquisition or sale, in 
        accordance with all applicable securities laws,
            ``(D) such acquisition or sale occurs solely at the 
        discretion of the recipient of such advice,
            ``(E) the compensation received by the fiduciary adviser 
        and affiliates thereof in connection with such acquisition or 
        sale is reasonable, and
            ``(F) the terms of such acquisition or sale are at least as 
        favorable to such plan as an arm's length transaction would be.
    ``(2) A fiduciary adviser referred to in paragraph (1) who has 
provided advice referred to in such paragraph shall, for a period of 
not less than 6 years after the provision of such advice, maintain any 
records necessary for determining whether the requirements of the 
preceding provisions of this subsection and of subsection (b)(15) have 
been met. A prohibited transaction provided in section 406 shall not be 
considered to have occurred solely because the records are lost or 
destroyed prior to the end of the 6-year period due to circumstances 
beyond the control of the fiduciary adviser.
    ``(3)(A) Subject to subparagraph (B), a plan sponsor or other 
person who is a fiduciary 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 section 3(21)(A)(ii), if--
            ``(i) such advice is provided by a fiduciary adviser 
        pursuant to an arrangement between such plan sponsor or other 
        fiduciary and such fiduciary adviser for the provision by such 
        fiduciary adviser of investment advice referred to in such 
        section, and
            ``(ii) the terms of such arrangement require compliance by 
        the fiduciary adviser with the requirements of this subsection.
    ``(B) 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 
arrangement for the provision of advice referred to in section 
3(21)(A)(ii). Such plan sponsor or other person who is a fiduciary has 
no duty under this part to monitor the specific investment advice given 
by the fiduciary adviser to any particular recipient of such advice.
    ``(C) 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 section 3(21)(A)(ii).
    ``(4) For purposes of this subsection and subsection (b)(15)--
            ``(A) 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 by such person to the plan or to 
        a participant or beneficiary and who is--
                    ``(i) registered as an investment adviser under the 
                Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et 
                seq.) or under the laws of the State in which the 
                fiduciary maintains its principal office and place of 
                business,
                    ``(ii) a bank or similar financial institution 
                referred to in section 408(b)(4),
                    ``(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 (15 U.S.C. 
                78a et seq.),
                    ``(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 any of clauses 
                (i) through (v).
            ``(B) The term `affiliate' means an affiliated person, as 
        defined in section 2(a)(3) of the Investment Company Act of 
        1940 (15 U.S.C 80a-2(a)(3)).
            ``(C) The term `registered representative' means a person 
        described in section 3(a)(18) of the Securities Exchange Act of 
        1934 (15 U.S.C. 78c(a)(18)) or section 202(a)(17) of the 
        Investment Advisers Act of 1940 (15 U.S.C 80b-2(a)(17)).''.
    (b) Amendments to the Internal Revenue Code of 1986.--
            (1) In general.--Subsection (d) of section 4975 of the 
        Internal Revenue Code of 1986 (relating to exemptions from tax 
        on prohibited transactions) (as amended by section 2) is 
        amended further--
                    (A) in paragraph (15), by striking ``or'' at the 
                end;
                    (B) in paragraph (16), by striking the period at 
                the end and inserting ``; or''; and
                    (C) by adding at the end the following new 
                paragraph:
            ``(17) If the requirements of subsection (f)(8) are met--
                    ``(A) the provision of investment advice referred 
                to in subsection (e)(3)(B) provided by a fiduciary 
                adviser (as defined in subsection (f)(8)(C)(i)) to a 
                plan or to a participant or beneficiary of a plan,
                    ``(B) the sale, acquisition, or holding of 
                securities or other property (including any extension 
                of credit associated with the sale, acquisition, or 
                holding of securities or other property) pursuant to 
                such investment advice, and
                    ``(C) 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 such 
                investment advice.''.
            (2) Requirements.--Subsection (f) of such section 4975 
        (relating to other definitions and special rules) (as amended 
        by section 2) is amended further by adding at the end the 
        following new paragraph:
            ``(8) Requirements for exemption for investment advice 
        provided by fiduciary advisers.--
                    ``(A) In general.--The requirements of this 
                paragraph are met in connection with the provision of 
                advice referred to in subsection (e)(3)(B), provided to 
                a plan or a participant or beneficiary of a plan by a 
                fiduciary adviser with respect to such plan, in 
                connection with any sale or acquisition of a security 
                or other property for purposes of investment of amounts 
                held by such plan, if--
                            ``(i) in the case of the initial provision 
                        of such advice by such fiduciary adviser to 
                        such plan, participant, or beneficiary, the 
                        fiduciary adviser provides to the plan, 
                        participant, or beneficiary, at the time of or 
                        before the initial provision of such advice 
                        such advice, a description, in writing or by 
                        means of electronic communication, of--
                                    ``(I) all fees or other 
                                compensation relating to such 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 such advice or in 
                                connection with such acquisition or 
                                sale,
                                    ``(II) any material affiliation or 
                                contractual relationship of the 
                                fiduciary adviser or affiliates thereof 
                                in such security or other property,
                                    ``(III) any limitation placed on 
                                the scope of the investment advice to 
                                be provided by the fiduciary adviser 
                                with respect to any such sale or 
                                acquisition, and
                                    ``(IV) the types of services 
                                offered by the fiduciary advisor in 
                                connection with the provision of 
                                investment advice by the fiduciary 
                                adviser,
                            ``(ii) in the case of the initial or any 
                        subsequent provision of such advice to such 
                        plan, participant, or beneficiary, the 
                        fiduciary adviser, throughout the 1-year period 
                        following the provision of such advice, 
                        maintains the information described in 
                        subclauses (I) through (IV) of clause (i) in 
                        currently accurate form for availability, upon 
                        request and without charge, to the recipient of 
                        such advice,
                            ``(iii) the fiduciary adviser provides 
                        appropriate disclosure, in connection with any 
                        such acquisition or sale, in accordance with 
                        all applicable securities laws,
                            ``(iv) such acquisition or sale occurs 
                        solely at the discretion of the recipient of 
                        such advice,
                            ``(v) the compensation received by the 
                        fiduciary adviser and affiliates thereof in 
                        connection with such acquisition or sale is 
                        reasonable, and
                            ``(vi) the terms of such acquisition or 
                        sale are at least as favorable to such plan as 
                        an arm's length transaction would be.
                    ``(B) Maintenance of records.--A fiduciary adviser 
                referred to in subparagraph (A) who has provided advice 
                referred to in such subparagraph shall, for a period of 
                not less than 6 years after the provision of such 
                advice, maintain any records necessary for determining 
                whether the requirements of the preceding provisions of 
                this subsection and of subsection (d)(17) have been 
                met. A prohibited transaction described in subsection 
                (c)(1) shall not be considered to have occurred solely 
                because the records are lost or destroyed prior to the 
                end of the 6-year period due to circumstances beyond 
                the control of the fiduciary adviser.
                    ``(C) Definitions.--For purposes of this paragraph 
                and subsection (d)(17)--
                            ``(i) 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 
                        by such person to the plan or to a participant 
                        or beneficiary and who is--
                                    ``(I) registered as an investment 
                                adviser under the Investment Advisers 
                                Act of 1940 (15 U.S.C. 80b-1 et seq.) 
                                or under the laws of the State in which 
                                the fiduciary maintains its principal 
                                office and place of business,
                                    ``(II) a bank or similar financial 
                                institution referred to in subsection 
                                (d)(4),
                                    ``(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 (15 U.S.C. 78a et 
                                seq.),
                                    ``(V) an affiliate of a person 
                                described in any of subclauses (I) 
                                through (IV), or
                                    ``(VI) an employee, agent, or 
                                registered representative of a person 
                                described in any of subclauses (I) 
                                through (V).
                            ``(ii) Affiliate.--The term `affiliate' 
                        means an affiliated person, as defined in 
                        section 2(a)(3) of the Investment Company Act 
                        of 1940 (15 U.S.C 80a-2(a)(3)).
                            ``(iii) Registered representative.--The 
                        term `registered representative' means a person 
                        described in section 3(a)(18) of the Securities 
                        Exchange Act of 1934 (15 U.S.C. 78c(a)(18)) or 
                        section 202(a)(17) of the Investment Advisers 
                        Act of 1940 (15 U.S.C 80b-2(a)(17)).''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to advice referred to in section 3(21)(A)(ii) of the 
Employee Retirement Income Security Act of 1974 or section 
4975(e)(3)(B) of the Internal Revenue Code of 1986 provided on or after 
January 1, 2001.

SEC. 4. DEFINITION OF PARTY IN INTEREST.

    (a) Amendments to the Employee Retirement Income Security Act of 
1974.--Section 3(14) of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1002(14)) is amended--
            (1) by striking subparagraphs (A) and (B) and inserting the 
        following:
            ``(A) a person who is an administrator, officer, counsel, 
        or employee of the plan;
            ``(B) in connection with a transaction described in section 
        406(a), a fiduciary not otherwise described in subparagraph (A) 
        who personally directed or actively participated in the plan's 
        entry into such transaction;'';
            (2) in subparagraph (G), by adding ``or'' at the end;
            (3) by striking subparagraphs (H) and (I) and inserting the 
        following:
            ``(H) an officer or director (or an individual having 
        powers or responsibilities similar to those of officers and 
        directors) of a person described in subparagraph (C), (D), (E), 
        or (G), or of the employee benefit plan.''; and
            (4) in the matter following subparagraph (I) (as in effect 
        before the amendments made by this subsection), by striking 
        ``and lower than 10 percent for subparagraph (H) or (I)''.
    (b) Amendments to the Internal Revenue Code of 1986.--Paragraph (2) 
of section 4975(e) of the Internal Revenue Code of 1986 (relating to 
disqualified person) is amended--
            (1) by striking subparagraphs (A) and (B) and inserting the 
        following:
                    ``(A) a person who is an administrator, officer, 
                counsel, or employee of the plan;
                    ``(B) in connection with a transaction described in 
                subparagraph (A), (B), (C), or (D) of subsection 
                (c)(1), a fiduciary not otherwise described in 
                subparagraph (A) of this paragraph who personally 
                directed or actively participated in the plan's entry 
                into such transaction;'';
            (2) in subparagraph (G), by adding ``or'' at the end;
            (3) by striking subparagraphs (H) and (I) and inserting the 
        following:
                    ``(H) an officer or director (or an individual 
                having powers or responsibilities similar to those of 
                officers and directors) of a person described in 
                subparagraph (C), (D), (E), or (G), or of the plan.''; 
                and
            (4) in the matter following subparagraph (I) (as in effect 
        before the amendments made by this subsection), by striking 
        ``and lower than 10 percent for subparagraph (H) or (I)''.
    (b) Effective Date.--The amendments made by this section shall 
apply with respect to transactions, acts, or omissions occurring on or 
after January 1, 2001.

SEC. 5. STANDARDS FOR ISSUING EXEMPTIVE RELIEF.

    (a) In General.--Section 408(a) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1108(a)) is amended--
            (1) by striking the third sentence;
            (2) by adding ``and'' at the end of paragraph (1), by 
        striking paragraph (2), and by redesignating paragraph (3) as 
        paragraph (2); and
            (3) in the matter following paragraph (3) (as in effect 
        before the amendments made by this subsection)--
                    (A) by striking ``Before granting'' and inserting 
                the following:
``The issuance of an exemption by the Secretary from any restriction 
under section 406 or 407(a) does not exempt a fiduciary who enters into 
a transaction subject to such exemption from the fiduciary duties of 
section 404 with respect to the plan or any other provision of this Act 
with respect to the plan. In any case in which the Secretary deems it 
appropriate, before granting'';
                    (B) by striking ``shall'' each place it appears and 
                inserting ``may'';
                    (C) by inserting ``or provide such other notice as 
                the Secretary deems appropriate'' after ``pendency of 
                the exemption'';
                    (D) by striking ``paragraphs (1), (2), and (3)'' 
                and inserting ``paragraphs (1) and (2)''; and
                    (E) by adding at the end the following new 
                sentence: ``The Secretary may not grant an exemption 
                under this section unless the Secretary finds that the 
                conditions or requirements set forth in the exemption 
                are necessary additions to the existing Federal and 
                State laws and regulations and the protections they 
                afford to address concerns unique to employee benefit 
                plans.''.
    (b) Effective Date.--The amendments made by this section shall 
apply with respect to transactions occurring on or after January 1, 
2001.

SEC. 6. REGULATIONS RELATING TO DEFINITION OF PLAN ASSETS.

    (a) In General.--Section 401 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1101) is amended by adding at the end 
the following new subsection:
    ``(d)(1)(A) Not later than March 31, 2001, the Secretary shall 
issue proposed regulations (including proposed amendments to existing 
regulations) to provide additional guidance for the purpose of 
determining when the assets of an entity in which an employee benefit 
plan has invested will constitute assets of the plan for purposes of 
this part.
    ``(B) The proposed regulations issued pursuant to subparagraph (A) 
shall be subject to public notice and comment until June 30, 2001.
    ``(C) The Secretary shall issue final regulations providing the 
guidance described in subparagraph (A) not later than September 30, 
2001.
    ``(D) Except as otherwise determined by the Secretary, such 
regulations shall apply only to investments in an entity made by an 
employee benefit plan after September 30, 2001. No inference shall be 
drawn from the preceding sentence with respect to the interpretation of 
any existing regulations prior to such effective date.
    ``(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 provide--
            ``(A) that an entity in whose assets investment by an 
        employee benefit plan is not significant will not be treated as 
        holding the plan assets of such plan;
            ``(B) that participation by an employee benefit plan will 
        not be treated as significant unless such plan owns 25 percent 
        or more of any class of interests in the entity;
            ``(C) that, for purposes of determining whether investment 
        by an employee benefit plan in an entity is significant, 
        interests in the entity which are owned by other entities that 
        are deemed to hold assets of employee benefit plans shall be 
        treated as held by such plans only to the extent proportionate 
        to the interests in such entities that are owned by such plans;
            ``(D) that an entity that has made no investments, or that 
        has made only short-term investments pending long-term 
        commitment, shall be permitted to qualify for the exception (as 
        in effect under existing regulations) from plan asset status as 
        a `venture capital operating company' on a tentative basis for 
        purposes of accepting capital contributions of employee benefit 
        plans for a period not to exceed 30 days prior to the entity's 
        first investment that would permit it to qualify as a `venture 
        capital operating company' pursuant to such exception;
            ``(E) that a startup or other early stage company is 
        eligible to qualify as an `operating company' for purposes of 
        the definition of a `venture capital operating company' under 
        the exception described in subparagraph (D); and
            ``(F) that an entity which, for a prior period, has not 
        qualified or has failed to qualify for the exception described 
        in subparagraph (D) may nevertheless qualify for such exception 
        prospectively if it satisfies the requirements for the 
        exception on a prospective basis.
    ``(4) For purposes of this subsection--
            ``(A) The term `existing regulations' means the regulations 
        issued under this section which were in effect immediately 
        before the date of the enactment of this subsection.
            ``(B) Any reference to an employee benefit plan includes a 
        reference to any employee benefit plan to which the existing 
        regulations apply.''.
    (b) Conforming Amendment.--Subsection (f) of section 4975 of the 
Internal Revenue Code of 1986 (relating to other definitions and 
special rules) (as amended by the preceding provisions of this Act) is 
amended further by adding at the end the following new paragraph:
            ``(9) Regulations relating to definition of plan assets.--
        Section 401(d) of the Employee Retirement Income Security Act 
        of 1974 shall apply with respect to regulations issued under 
        this section. For purposes of this paragraph, references in 
        such section 401(d) to employee benefit plans shall be deemed 
        to include references to plans referred to in this section.''.
                                 <all>