[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3446 Introduced in House (IH)]







107th CONGRESS
  1st Session
                                H. R. 3446

 To amend the Internal Revenue Code of 1986 to improve the retirement 
                     security of American families.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           December 11, 2001

Mr. Andrews (for himself, Mr. George Miller of California, Mr. Kildee, 
Mr. Owens, Mr. Payne, Mrs. Mink of Hawaii, Mr. Scott, Ms. Woolsey, Ms. 
Rivers, Mr. Hinojosa, Mr. Tierney, Mr. Kind, Ms. Sanchez, Mr. Ford, Mr. 
    Kucinich, Mr. Holt, Ms. Solis, and Ms. McCollum) introduced the 
 following bill; which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to improve the retirement 
                     security of American families.

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

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Retirement 
Enhancement Revenue Act of 2001''.
    (b) Table of Contents.--The table of contents is as follows:

Sec. 1. Short title and table of contents.
                 TITLE I--PUBLIC EMPLOYEE PENSION PLANS

Sec. 101. New qualification requirements for public employee pension 
                            plans.
                     TITLE II--PENSION IMPROVEMENTS

Sec. 201. Automatic enrollment of all employees in 401(k) plans.
Sec. 202. Improvements in simplified employee pensions.
Sec. 203. Pension integration rules.
Sec. 204. Increase to age 75 for beginning mandatory distributions.
Sec. 205. Restrictions on exclusion of unionized employees from 
                            participation in 401(k) plans.
Sec. 206. Removal of $5,000 limit on plans subject to automatic 
                            rollover upon mandatory distribution.
           TITLE III--TAX CREDITS TO PROMOTE PENSION COVERAGE

Sec. 301. Refundable credit to certain individuals for elective 
                            deferrals and IRA contributions.
Sec. 302. Credit for qualified pension plan contributions of small 
                            employers.
Sec. 303. Notice.
                    TITLE IV--ADDITIONAL AMENDMENTS

Sec. 401. Statutory exemption from prohibited transaction rules for 
                            emergent transactions.
Sec. 402. Loans from retirement plans for health insurance and job 
                            training expenses.
Sec. 403. Missing participants.
Sec. 404. Income averaging of corrected civil service annuity benefit 
                            payments.
Sec. 405. Prohibited transaction exemption for the provision of 
                            investment advice.
                      TITLE V--GENERAL PROVISIONS

Sec. 501. General effective date.
Sec. 502. Plan amendments.

                 TITLE I--PUBLIC EMPLOYEE PENSION PLANS

SEC. 101. NEW QUALIFICATION REQUIREMENTS FOR PUBLIC EMPLOYEE PENSION 
              PLANS.

    (a) In General.--Subsection (a) of section 401 of the Internal 
Revenue Code of 1986 (relating to requirements for qualification) is 
amended by inserting after paragraph (34) the following new paragraph:
            ``(35) Public employee pension plans.--A trust forming a 
        part of a public employee pension plan (as defined in section 
        420C(a)(9)) shall not constitute a qualified trust under this 
        section unless the requirements of subpart F of this part are 
        met in connection with such plan.''
    (b) Requirements.--Part I of subchapter D of chapter 1 of such Code 
(relating to pension, profit-sharing, stock bonus plans, etc.) is 
amended by inserting after subpart E the following new subpart:

               ``Subpart F--Public Employee Pension Plans

                              ``Sec. 420A. Reporting and disclosure 
                                        requirements.
                              ``Sec. 420B. Review by qualified review 
                                        boards of changes in employer 
                                        contributions.
                              ``Sec. 420C. Definitions and coverage.

``SEC. 420A. REPORTING AND DISCLOSURE REQUIREMENTS.

    ``(a) In General.--A public employee pension plan does not meet the 
requirements of section 401(a)(35) unless the terms of the plan include 
the requirements of this section.
    ``(b) Required Disclosures.--The plan shall provide that, within 
210 days after the close of each plan year, the administrator of the 
plan shall furnish to each participant, and to each beneficiary 
receiving benefits under the plan--
            ``(1) a statement of the assets and liabilities of the plan 
        aggregated by categories and valued at their current value, and 
        the same data displayed in comparative form for the end of the 
        previous plan year,
            ``(2) a statement of receipts and disbursements during the 
        preceding 12-month period aggregated by general sources and 
        applications,
            ``(3) a report containing--
                    ``(A) a description of all investments and assets 
                of the plan, including their value,
                    ``(B) the names and positions of all of the 
                trustees of the plan, and the time remaining before the 
                expiration of their term,
                    ``(C) a description of the method of trustee 
                selection,
                    ``(D) a description of any changes in investment 
                policy of the plan during the fiscal year,
                    ``(E) an evaluation of the long-term solvency of 
                the plan, including the number of participants and 
                beneficiaries and a summary of their benefits, and a 
                projection of the amount of benefits expected to be 
                paid for the fifth, tenth, and fifteenth plan year 
                following the date of the publication of the report, 
                and
                    ``(F) the percentage which the current value of the 
                assets of the plan is of the current liability under 
                the plan, and
            ``(4) any other material as is necessary to fairly 
        summarize the latest annual report.
Such information shall be written and calculated to be understood by 
the average plan participant, and shall be sufficiently accurate and 
comprehensive to reasonably apprise such participants and beneficiaries 
of their rights and obligations under the plan.
    ``(c) Availability of Plan Documents for Examination.--The plan 
shall provide that the administrator shall make copies of the plan 
description and the latest annual report and the bargaining agreement, 
trust agreement, contract, or other instruments under which the plan 
was established or is operated available for examination by any plan 
participant or beneficiary in the principal office of the administrator 
and in such other places as may be necessary to make available all 
pertinent information to all participants (including such places as the 
Secretary may prescribe by regulations).
    ``(d) Availability of Information Upon Request.--The plan shall 
provide that the administrator shall, upon written request of any 
participant or beneficiary, furnish a copy of the latest annual report, 
any terminal report, the bargaining agreement, trust agreement, 
contract, or other instruments under which the plan is established or 
operated. The administrator may make a reasonable charge to cover the 
cost of furnishing such complete copies. The Secretary may by 
regulation prescribe the maximum amount which will constitute a 
reasonable charge under the preceding sentence.

``SEC. 420B. REVIEW BY QUALIFIED REVIEW BOARDS OF CHANGES IN EMPLOYER 
              CONTRIBUTIONS.

    ``(a) In General.--A public employee pension plan does not meet the 
requirements of section 401(a)(35) unless, under the plan, changes in 
employer contributions are subject to review by a qualified review 
board established for the plan as provided in this section. For 
purposes of this section, the term `qualified review board' means a 
board--
            ``(1) whose membership is determined under the law of the 
        principal State in accordance with subsection (b), and
            ``(2) whose powers are determined under the law of the 
        principal State in accordance with subsection (c).
    ``(b) Membership.--
            ``(1) In general.--The membership of a qualified review 
        board established for a plan shall consist of 3 members 
        selected from among individuals who, by means of their 
        education and experience, have demonstrated expertise in the 
        area of pension fund management, as follows:
                    ``(A) one member is appointed by the Governor of 
                the State,
                    ``(B) one member is selected by the participants in 
                the plan, by means of an election held in such form and 
                manner as shall be prescribed in regulations of the 
                Secretary, and
                    ``(C) one member is selected jointly by the 
                Governor and by a representative of participants in the 
                plan (from a certified list of pension experts 
                established in accordance with paragraph (2)).
        Each member of the board shall have 1 vote. Members of the 
        board shall serve for such equivalent terms as shall be 
        prescribed under the law of the principal State.
            ``(2) Certified list of experts.--The Governor of the State 
        shall, for purposes of paragraph (1)(C), establish and maintain 
        with respect to each public employee pension plan (for which 
        such State is the principal State) a certified list of pension 
        experts meeting the requirements for membership on the 
        qualified review board. Individuals may be included on such 
        list only by agreement between the Governor of the State and a 
        representative elected by participants in the plan, entered 
        into by means of collective bargaining in such form and manner 
        as shall be prescribed in regulations of the Secretary.
    ``(c) Powers.--The board shall be treated as a qualified review 
board for purposes of this section with respect to any public employee 
pension plan (for which such State is the principal State) only if the 
powers of such board under the law of the principal State include 
review by the board, for approval or disapproval by the board, of any 
change in the terms of such plan, as a necessary prerequisite for such 
change to take effect, if--
            ``(1) such change would have the effect of changing levels 
        of employer contributions to the plan, and
            ``(2) such review is requested, in such form and manner as 
        shall be prescribed in regulations of the Secretary, by--
                    ``(A) at least one-third of the total number of 
                trustees of any trust fund forming a part of the plan, 
                or
                    ``(B) the head of any employee organization 
                representing at least 20 percent of the total number of 
                active participants in the plan.
The board may be treated as a qualified review board for purposes of 
this section only if, under the law of the principal State, any such 
change submitted to such review by the board may take effect only upon 
approval of the change by the board.

``SEC. 420C. DEFINITIONS AND COVERAGE.

    ``(a) Definitions.--For purposes of this subpart--
            ``(1) Administrator.--The term `administrator' means--
                    ``(A) the board of trustees, retirement board, or 
                similar person with administrative responsibilities in 
                connection with a plan, or any other person 
                specifically so designated in connection with any 
                requirement of this subpart by the terms of the 
                instrument or instruments under which the plan is 
                operated, including but not limited to the law of any 
                State or of any political subdivision of any State, or
                    ``(B) in any case in which there is no person 
                described in subparagraph (A) in connection with the 
                plan, the plan sponsor.
            ``(2) Beneficiary.--The term `beneficiary' means a person 
        designated by a participant, or by the terms of a public 
        employee pension plan, who is or may become entitled to a 
        benefit thereunder.
            ``(3) Current liability.--The term `current liability' has 
        the meaning provided in section 302(d)(7) of the Employee 
        Retirement Income Security Act of 1974.
            ``(4) Employee.--The term `employee' means any individual 
        employed by an employer, employer representative, or other 
        person required to make employer contributions under the plan.
            ``(5) Employee organization.--The term `employee 
        organization' means any labor union or any organization of any 
        kind, or any agency or employee representation committee, 
        association, group, or plan, in which employees participate and 
        which exists for the purpose, in whole or in part, of dealing 
        with employers or employer representatives concerning a public 
        employee pension plan or other matters incidental to employment 
        relationships; or any employees' beneficiary association 
        organized for the purpose, in whole or in part, of establishing 
        such a plan.
            ``(6) Employer.--The term `employer' means--
                    ``(A) the government of any State or of any 
                political subdivision of a State,
                    ``(B) any agency or instrumentality of a government 
                referred to in subparagraph (A), or
                    ``(C) any agency or instrumentality of two or more 
                governments referred to in subparagraph (A).
            ``(7) Employer contribution.--The term `employer 
        contribution' means any contribution to a public employee 
        pension plan other than a contribution made by a participant in 
        the plan.
            ``(8) Employer representative.--The term `employer 
        representative' means--
                    ``(A) any group or association consisting, in whole 
                or in part, of employers acting, in connection with a 
                public employee pension plan, for an employer, or
                    ``(B) any person acting, in connection with a 
                public employee pension plan, indirectly in the 
                interest of an employer or of a group or association 
                described in subparagraph (A).
            ``(9) Public employee pension plan.--The terms `public 
        employee pension plan' and `plan' mean any plan, fund, or 
        program which was heretofore or is hereafter established or 
        maintained, in whole or in part, by an employer, an employer 
        representative, or an employee organization, or by a 
        combination thereof, to the extent that by its express terms or 
        as a result of surrounding circumstances such plan, fund, or 
        program--
                    ``(A) provides retirement income to employees, or
                    ``(B) results in a deferral of income by employees 
                for periods extending to the termination of covered 
                employment or beyond,
        regardless of the method of calculating the contributions made 
        to the plan, the method of calculating the benefits under the 
        plan, or the method of distributing benefits from the plan.
            ``(10) Principal state.--The term `principal State' means, 
        for any plan year with respect to a public employee pension 
        plan, the State in which, as of the beginning of such plan 
        year, the largest percentage of the participants of the plan 
        employed in any single State is employed.
            ``(11) Governor.--The term `Governor' means, in connection 
        with a public employee pension plan, the Governor (or 
        equivalent official) of the principal State.
            ``(12) Participant.--The term `participant' means any 
        individual who is or may become eligible to receive a benefit 
        of any type from a public employee pension plan or whose 
        beneficiaries may be eligible to receive any such benefit.
            ``(13) Person.--The term `person' means a State, a 
        political subdivision of a State, any agency or instrumentality 
        of a State or a political subdivision of a State, an 
        individual, a partnership, a joint venture, a corporation, a 
        mutual company, a joint-stock company, a trust, an estate, an 
        unincorporated organization, an association, or an employee 
        organization.
            ``(14) Plan sponsor.--The term `plan sponsor' means--
                    ``(A) in the case of a plan established or 
                maintained solely for employees of a single employer, 
                such employer,
                    ``(B) in the case of a plan established or 
                maintained by an employee organization, the employee 
                organization, or
                    ``(C) in the case of a plan established or 
                maintained by two or more employers or jointly by one 
                or more employers and one or more employee 
                organizations, the association, committee, board of 
                trustees, or other similar group of representatives of 
                the parties who establish or maintain the plan.
            ``(15) Plan year.--The term `plan year' means, with respect 
        to a plan, the calendar, policy, or fiscal year on which the 
        records of the plan are kept.
            ``(16) State.--The term `State' means any State of the 
        United States, the District of Columbia, the Commonwealth of 
        Puerto Rico, the Virgin Islands, American Samoa, and Guam.
    ``(b) Coverage.--
            ``(1) In general.--Except as provided in paragraph (2), 
        this subpart shall apply to any public employee pension plan.
            ``(2) Exceptions from coverage.--The provisions of this 
        subpart shall not apply to--
                    ``(A) any employee benefit plan described in 
                section 4(a) of the Employee Retirement Income Security 
                Act of 1974 (29 U.S.C. 1003(a)), which is not exempt 
                under section 4(b)(1) of such Act (29 U.S.C. 
                1003(b)(1)),
                    ``(B) any plan which is unfunded and is maintained 
                by an employer or employer representative primarily for 
                the purpose of providing deferred compensation for a 
                select group of management or highly compensated 
                employees,
                    ``(C) any arrangement which would be a severance 
                pay arrangement, as defined in regulations of the 
                Secretary of Labor under section 3(2)(B)(i) of the 
                Employee Retirement Income Security Act of 1974 (29 
                U.S.C. 1002(2)(B)(i)), if the employer were an employer 
                within the meaning of section 3(5) of such Act (29 
                U.S.C. 1002(5)),
                    ``(D) any agreement to the extent it is a coverage 
                agreement entered into pursuant to section 218 of the 
                Social Security Act (42 U.S.C. 418),
                    ``(E) any individual retirement account or any 
                individual retirement annuity within the meaning of 
                section 408, or a retirement bond within the meaning of 
                section 409,
                    ``(F) any plan described in section 401(d),
                    ``(G) any individual account plan consisting of an 
                annuity contract described in section 403(b),
                    ``(H) any eligible State deferred compensation 
                plan, as defined in section 457(b), or
                    ``(I) any plan maintained solely for the purpose of 
                complying with applicable workers' compensation laws or 
                disability insurance laws.''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to plan years beginning on or after January 1, 2002.

                     TITLE II--PENSION IMPROVEMENTS

SEC. 201. AUTOMATIC ENROLLMENT OF ALL EMPLOYEES IN 401(K) PLANS.

    (a) In General.--Subparagraph (A) of section 401(m)(11) of the 
Internal Revenue Code of 1986 (relating to additional alternative 
method of satisfying nondiscrimination tests) is amended by striking 
``and'' at the end of clause (ii), by striking the period at the end of 
clause (iii) and inserting ``, and'', and by inserting after clause 
(iii) the following new clause:
                            ``(iv) meets the requirements of 
                        subparagraph (C).''.
    (b) Minimum Coverage Requirements.--Paragraph (11) of section 
401(m) of such Code is amended by adding at the end the following new 
subparagraph:
                    ``(C) Minimum coverage requirements.--The 
                requirements of this subparagraph are met if--
                            ``(i) the plan meets the requirements of 
                        section 410(b), or
                            ``(ii) the plan is offered to all eligible 
                        employees.
                For purposes of clause (ii) a plan shall be treated as 
                offered to an eligible employee if, under the plan, 
                employer contributions are made on the employee's 
                behalf under the plan, unless, pursuant to an election 
                by the employee, payments are made to the employee 
                directly in cash in lieu of such employer 
                contributions.''.

SEC. 202. IMPROVEMENTS IN SIMPLIFIED EMPLOYEE PENSIONS.

    (a) Participation Requirements.--Paragraph (2) of section 408(k) of 
the Internal Revenue Code of 1986 (relating to participation 
requirements) is amended--
            (1) in subparagraph (A), by adding ``and'' at the end, and
            (2) by striking subparagraphs (B) and (C) and inserting the 
        following:
                    ``(B) has completed at least 3 years of service (as 
                defined in section 411(a)(5)) for the employer.''.
    (b) Nondiscrimination Rules.--Subparagraph (C) of section 408(k)(3) 
of such Code (requiring contribution to bear uniform relationship to 
total compensation) is amended--
            (1) in the heading, by striking ``must bear uniform 
        relationship to total compensation'' and inserting ``must be 
        uniform'', and
            (2) by inserting after ``unless contributions thereto'' the 
        following: ``are uniform for all employees maintaining a 
        simplified employee pension or''.
    (c) Consent to Participation Not Required.--Paragraph (2) of 
section 408(k) of such Code (relating to participation requirements) is 
amended by adding at the end the following new flush sentence: ``An 
employer may establish and maintain a simplified employee pension for 
an employee without the employee's consent.''.
    (d) Separate Treatment of Contributions to Simplified Employee 
Pensions.--Subsection (h) of section 404 of such Code is amended by 
striking paragraphs (2) and (3) and inserting the following new 
paragraph:
            ``(2) Limitation based on combination of plans 
        inapplicable.--Contributions to a simplified employee pension 
        shall not be taken into account for purposes of subsection 
        (a)(7).''.
    (e) Joint and Survivor Annuity Requirements.--Section 408(k) of 
such Code is amended--
            (1) by redesignating paragraph (9) as paragraph (10), and
            (2) by inserting after paragraph (8) the following new 
        paragraph:
            ``(9) Joint and survivor annuity requirements.--
        Requirements similar to the requirements of section 401(a)(11) 
        shall apply with respect to annuities purchased with amounts 
        distributed from simplified employee pensions.''.
    (f) Annual Reporting Requirements for Simplified Employee 
Pensions.--Paragraph (1) of section 408(l) of such Code (relating to 
simplified employer reports) is amended to read as follows:
            ``(1) In general.--The Secretary shall require by 
        regulations that an employer who makes a contribution on behalf 
        of an employee to a simplified employee pension shall provide 
        simplified annual reports. The reports required by this 
        subsection shall be filed in such manner, and information with 
        respect to such contributions shall be furnished to the 
        employee in such manner, as may be required by regulations, 
        except that such reports shall include information sufficient 
        to allow the employee to determine that the simplified employee 
        pension is in compliance with the requirements of this 
        section.''.
    (g) Deductibility of Contributions to Simplified Employee Pensions 
in Connection With Domestic Service.--
            (1) In general.--Section 404 of such Code (relating to 
        deductions for contributions of an employer to an employee's 
        trust or annuity plan and compensation under a deferred-payment 
        plan) is amended by adding at the end the following new 
        subsection:
    ``(n) Deductibility of Contributions to Simplified Employee 
Pensions in Connection With Domestic Service.--
            ``(1) In general.--Solely for purposes of subsection (a), 
        contributions by an employer to a simplified employee pension 
        of an employee in connection with service constituting domestic 
        service employment shall be treated as if such contributions 
        would otherwise be deductible under section 162 but for 
        subsection (a).
            ``(2) Domestic service employment.--For purposes of 
        paragraph (1), the term `domestic service employment' means 
        domestic service in a private home of the employer (within the 
        meaning of the last sentence of section 3510(c)) in any case in 
        which taxes are imposed by chapter 21 or 23 on remuneration 
        paid for such service.''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply to taxable years beginning after December 31, 2001.

SEC. 203. PENSION INTEGRATION RULES.

    (a) Applicability of New Integration Rules Extended to All Existing 
Accrued Benefits.--Notwithstanding subsection (c)(1) of section 1111 of 
the Tax Reform Act of 1986 (relating to effective date of application 
of nondiscrimination rules to integrated plans) (100 Stat. 2440), 
effective for plan years beginning after the date of the enactment of 
this Act, the amendments made by subsection (a) of such section 1111 
shall also apply to benefits attributable to plan years beginning on or 
before December 31, 1988.
    (b) Integration Disallowed for Simplified Employee Pensions.--
            (1) In general.--Subparagraph (D) of section 408(k)(3) of 
        the Internal Revenue Code of 1986 (relating to permitted 
        disparity under rules limiting discrimination under simplified 
        employee pensions) is repealed.
            (2) Conforming amendment.--Subparagraph (C) of such section 
        408(k)(3) is amended by striking ``and except as provided in 
        subparagraph (D),''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply with respect to taxable years beginning on or after 
        January 1, 2002.
    (c) Eventual Repeal of Integration Rules.--Effective for plan years 
beginning on or after January 1, 2003--
            (1) subparagraphs (C) and (D) of section 401(a)(5) of the 
        Internal Revenue Code of 1986 (relating to pension integration 
        exceptions under nondiscrimination requirements for 
        qualification) are repealed, and subparagraphs (E), (F), and 
        (G) of such section 401(a)(5) are redesignated as subparagraphs 
        (C), (D), and (E), respectively, and
            (2) subsection (l) of section 401 of such Code (relating to 
        permitted disparity in plan contributions or benefits) is 
        repealed.

SEC. 204. INCREASE TO AGE 75 FOR BEGINNING MANDATORY DISTRIBUTIONS.

    (a) Qualified Pension Plans.--Subparagraph (C) of section 401(a)(9) 
of the Internal Revenue Code of 1986 (relating to required 
distributions) is amended by striking ``age 70\1/2\'' each place it 
appears and inserting ``the applicable age''.
    (b) Applicable Age.--Subparagraph (C) of section 401(a)(9) of such 
Code is amended by adding at the end the following new clause:
                            ``(v) Applicable age.--
                                    ``(I) In general.--For purposes of 
                                this clause, the term applicable age 
                                shall be determined in accordance with 
                                the following table:

                                                             Applicable
``Calendar Year:                                                   Age:
    2002..........................................                  71 
    2003..........................................                  72 
    2004..........................................                  73 
    2005..........................................                  74 
    2006 and each calendar year thereafter........                  75.
                                    ``(II) Election to use age of 
                                spouse.--For purposes of this 
                                subparagraph, an employee who files a 
                                joint return for a taxable year may 
                                elect to substitute the age of the 
                                employee's spouse for his age.''.
    (c) Individual Retirement Accounts.--Paragraph (1) of section 
219(d) of such Code is amended--
            (1) by striking ``age 70\1/2\'' in the text and inserting 
        ``the applicable age (as defined in section 401(a)(9)(C)(v))'', 
        and
            (2) by striking ``age 70\1/2\'' in the heading and 
        inserting ``the applicable age''.
    (d) Roth IRA's.--Paragraph (4) of section 408A(c) of such Code is 
amended--
            (1) by striking ``age 70\1/2\'' in the text and inserting 
        ``the applicable age (as defined in section 401(a)(9)(C)(v))'', 
        and
            (2) by striking ``age 70\1/2\'' in the heading and 
        inserting ``the applicable age''.

SEC. 205. RESTRICTIONS ON EXCLUSION OF UNIONIZED EMPLOYEES FROM 
              PARTICIPATION IN 401(K) PLANS.

    Paragraph (4) of section 401(k) of the Internal Revenue Code of 
1986 (relating to other requirements) is amended by adding at the end 
the following new subparagraph:
                    ``(D) Benefits subject of bargaining.--A cash or 
                deferred arrangement of any employer shall not be 
                treated as a qualified cash or deferred arrangement if 
                any employee of such employer--
                            ``(i) who is described in section 
                        410(b)(3)(A), and
                            ``(ii) who is not eligible to benefit under 
                        the arrangement,
                is not otherwise covered under an employee pension 
                benefit plan (as defined in section 3(2)(A) of the 
                Employee Retirement Income Security Act of 1974) which 
                is maintained for employees of such employer pursuant 
                to an agreement which the Secretary of Labor finds to 
                be a collective bargaining agreement between employee 
                representatives and one or more employers and which is 
                qualified under section 401(a).''.

SEC. 206. REMOVAL OF $5,000 LIMIT ON PLANS SUBJECT TO AUTOMATIC 
              ROLLOVER UPON MANDATORY DISTRIBUTION.

    Section 401(a)(31)(B) of the Internal Revenue Code of 1986 
(relating to certain mandatory distributions) is amended--
            (1) in clause (i), by striking ``In case of a trust which 
        is part of an eligible plan, such trust'' and inserting ``A 
        trust'',
            (2) in clause (i)(I), by striking ``in excess of $1,000'', 
        and
            (3) by striking clause (ii) and inserting the following new 
        clause:
                            ``(ii) Distribution described.--A 
                        distribution from a plan is described in this 
                        clause if such distribution is an immediate 
                        distribution of the entire nonforfeitable 
                        accrued benefit of the participant and is in 
                        excess of $1,000.''.

           TITLE III--TAX CREDITS TO PROMOTE PENSION COVERAGE

SEC. 301. REFUNDABLE CREDIT TO CERTAIN INDIVIDUALS FOR ELECTIVE 
              DEFERRALS AND IRA CONTRIBUTIONS.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to refundable credits) 
is amended by redesignating section 35 as section 36 and by inserting 
after section 34 the following new section:

``SEC. 35. ELECTIVE DEFERRALS AND IRA CONTRIBUTIONS BY CERTAIN 
              INDIVIDUALS.

    ``(a) Allowance of Credit.--In the case of an eligible individual, 
there shall be allowed as a credit against the tax imposed by this 
subtitle for the taxable year an amount equal to the applicable 
percentage of so much of the qualified retirement savings contributions 
of the eligible individual for the taxable year as do not exceed 
$2,000.
    ``(b) Applicable Percentage.--For purposes of this section, the 
applicable percentage is the percentage determined in accordance with 
the following table:


------------------------------------------------------------------------
                    Adjusted Gross Income
-------------------------------------------------------------
    Joint return           Head of a        All other cases   Applicable
---------------------      household     -------------------- percentage
                     --------------------
   Over     Not over    Over    Not over    Over    Not over
------------------------------------------------------------------------
$0         $25,000    $0        $18,750   $0        $12,500          50
 25,000     35,000     18,750    26,250    12,500    17,500          45
 35,000     45,000     26,250    33,750    17,500    22,500          35
 45,000     55,000     33,750    41,250    22,500    27,500          25
 55,000     75,000     41,250    56,250    27,500    37,500          15
 75,000    .........   56,250   ........   37,500   ........          0
------------------------------------------------------------------------

    ``(c) Eligible Individual.--For purposes of this section--
            ``(1) In general.--The term `eligible individual' means any 
        individual if--
                    ``(A) such individual has attained the age of 18 as 
                of the close of the taxable year, and
                    ``(B) the compensation (as defined in section 
                219(f)(1)) includible in the gross income of the 
                individual (or, in the case of a joint return, of the 
                taxpayer) for such taxable year is at least $5,000.
            ``(2) Dependents and full-time students not eligible.--The 
        term `eligible individual' shall not include--
                    ``(A) any individual with respect to whom a 
                deduction under section 151 is allowable to another 
                taxpayer for a taxable year beginning in the calendar 
                year in which such individual's taxable year begins, 
                and
                    ``(B) any individual who is a student (as defined 
                in section 151(c)(4)).
            ``(3) Individuals receiving certain retirement 
        distributions not eligible.--
                    ``(A) In general.--The term `eligible individual' 
                shall not include, with respect to a taxable year, any 
                individual who received during the testing period--
                            ``(i) any distribution from a qualified 
                        retirement plan (as defined in section 
                        4974(c)), or from an eligible deferred 
                        compensation plan (as defined in section 
                        457(b)), which is includible in gross income, 
                        or
                            ``(ii) any distribution from a Roth IRA 
                        which is not a qualified rollover contribution 
                        (as defined in section 408A(e)) to a Roth IRA.
                    ``(B) Testing period.--For purposes of subparagraph 
                (A), the testing period, with respect to a taxable 
                year, is the period which includes--
                            ``(i) such taxable year,
                            ``(ii) the preceding taxable year, and
                            ``(iii) the period after such taxable year 
                        and before the due date (without extensions) 
                        for filing the return of tax for such taxable 
                        year.
                    ``(C) Excepted distributions.--There shall not be 
                taken into account under subparagraph (A)--
                            ``(i) any distribution referred to in 
                        section 72(p), 401(k)(8), 401(m)(6), 402(g)(2), 
                        404(k), or 408(d)(4),
                            ``(ii) any distribution to which section 
                        408A(d)(3) applies, and
                            ``(iii) any distribution before January 1, 
                        2002.
                    ``(D) Treatment of distributions received by spouse 
                of individual.--For purposes of determining whether an 
                individual is an eligible individual for any taxable 
                year, any distribution received by the spouse of such 
                individual shall be treated as received by such 
                individual if such individual and spouse file a joint 
                return for such taxable year and for the taxable year 
                during which the spouse receives the distribution.
    ``(d) Qualified Retirement Savings Contributions.--For purposes of 
this section, the term `qualified retirement savings contributions' 
means the sum of--
            ``(1) the amount of the qualified retirement contributions 
        (as defined in section 219(e)) made by the eligible individual,
            ``(2) the amount of--
                    ``(A) any elective deferrals (as defined in section 
                402(g)(3)) of such individual, and
                    ``(B) any elective deferral of compensation by such 
                individual under an eligible deferred compensation plan 
                (as defined in section 457(b)) of an eligible employer 
                described in section 457(e)(1)(A), and
            ``(3) the amount of voluntary employee contributions by 
        such individual to any qualified retirement plan (as defined in 
        section 4974(c)).
    ``(e) Adjusted Gross Income.--For purposes of this section, 
adjusted gross income shall be determined without regard to sections 
911, 931, and 933.
    ``(f) Investment in the Contract.--Notwithstanding any other 
provision of law, a qualified retirement savings contribution shall not 
fail to be included in determining the investment in the contract for 
purposes of section 72 by reason of the credit under this section.
    ``(g) Transitional Rules.--In the case of taxable years beginning 
before January 1, 2008--
            ``(1) Contribution limit.--Subsection (a) shall be applied 
        by substituting for `$2,000'--
                    ``(A) $600 in the case of taxable years beginning 
                in 2002, 2003, or 2004, and
                    ``(B) $1,000 in the case of taxable years beginning 
                in 2005, 2006, or 2007.
            ``(2) Applicable percentage.--The applicable percentage 
        shall be determined under the following table (in lieu of the 
        table in subsection (b)):


------------------------------------------------------------------------
                    Adjusted Gross Income
-------------------------------------------------------------
    Joint return           Head of a        All other cases   Applicable
---------------------      household     -------------------- percentage
                     --------------------
   Over     Not over    Over    Not over    Over    Not over
------------------------------------------------------------------------
$0         $20,000    $0        $15,000   $0        $10,000          50
 20,000     25,000     15,000    18,750    10,000    12,500          45
 25,000     30,000     18,750    22,500    12,500    15,000          35
 30,000     35,000     22,500    26,250    15,000    17,500          25
 35,000     40,000     26,250    30,000    17,500    20,000          15
 40,000    .........   30,000   ........   20,000   ........       0.''
------------------------------------------------------------------------

      
    (b) Conforming Amendments.--
            (1) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting before the period ``, or 
        from section 35 of such Code''.
            (2) The table of sections for subpart C of part IV of 
        subchapter A of chapter 1 of such Code is amended by striking 
        the last item and inserting the following new items:

                              ``Sec. 35. Elective deferrals and IRA 
                                        contributions by certain 
                                        individuals.
                              ``Sec. 36. Overpayments of tax.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2001.

SEC. 302. CREDIT FOR QUALIFIED PENSION PLAN CONTRIBUTIONS OF SMALL 
              EMPLOYERS.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business related 
credits) is amended by adding at the end the following new section:

``SEC. 45G. SMALL EMPLOYER PENSION PLAN CONTRIBUTIONS.

    ``(a) General Rule.--For purposes of section 38, in the case of an 
eligible employer, the small employer pension plan contribution credit 
determined under this section for any taxable year is an amount equal 
to 50 percent of the amount which would (but for subsection (f)(1)) be 
allowed as a deduction under section 404 for such taxable year for 
qualified employer contributions made to any qualified retirement plan 
on behalf of any nonhighly compensated employee.
    ``(b) Credit Limited to 3 Years.--The credit allowable by this 
section shall be allowed only with respect to the period of 3 taxable 
years beginning with the taxable year in which the qualified retirement 
plan becomes effective.
    ``(c) Qualified Employer Contribution.--For purposes of this 
section--
            ``(1) Defined contribution plans.--In the case of a defined 
        contribution plan, the term `qualified employer contribution' 
        means the amount of nonelective and matching contributions to 
        the plan made by the employer on behalf of any nonhighly 
        compensated employee to the extent such amount does not exceed 
        3 percent of such employee's compensation from the employer for 
        the year.
            ``(2) Defined benefit plans.--In the case of a defined 
        benefit plan, the term `qualified employer contribution' means 
        the amount of employer contributions to the plan made on behalf 
        of any nonhighly compensated employee to the extent that the 
        accrued benefit of such employee derived from such 
        contributions for the year do not exceed the equivalent (as 
        determined under regulations prescribed by the Secretary and 
        without regard to contributions and benefits under the Social 
        Security Act) of 3 percent of such employee's compensation from 
        the employer for the year.
    ``(d) Qualified Retirement Plan.--
            ``(1) In general.--The term `qualified retirement plan' 
        means any plan described in section 401(a) which includes a 
        trust exempt from tax under section 501(a) if the plan meets--
                    ``(A) the contribution requirements of paragraph 
                (2),
                    ``(B) the vesting requirements of paragraph (3), 
                and
                    ``(C) the distributions requirements of paragraph 
                (4).
            ``(2) Contribution requirements.--
                    ``(A) In general.--The requirements of this 
                paragraph are met if, under the plan--
                            ``(i) the employer is required to make 
                        nonelective contributions of at least 1 percent 
                        of compensation (or the equivalent thereof in 
                        the case of a defined benefit plan) for each 
                        nonhighly compensated employee who is eligible 
                        to participate in the plan, and
                            ``(ii) except in the case of a defined 
                        benefit plan, allocations of nonelective 
                        employer contributions are either in equal 
                        dollar amounts for all employees covered by the 
                        plan or bear a uniform relationship to the 
                        total compensation, or the basic or regular 
                        rate of compensation, of the employees covered 
                        by the plan.
                    ``(B) Compensation limitation.--The compensation 
                taken into account under subparagraph (A) for any year 
                shall not exceed the limitation in effect for such year 
                under section 401(a)(17).
            ``(3) Vesting requirements.--The requirements of this 
        paragraph are met if the plan satisfies the requirements of 
        subparagraph (A) or (B).
                    ``(A) 3-year vesting.--A plan satisfies the 
                requirements of this subparagraph if an employee who 
                has completed at least 3 years of service has a 
                nonforfeitable right to 100 percent of the employee's 
                accrued benefit derived from employer contributions.
                    ``(B) 5-year graded vesting.--A plan satisfies the 
                requirements of this subparagraph if an employee has a 
                nonforfeitable right to a percentage of the employee's 
                accrued benefit derived from employer contributions 
                determined under the following table:

                                                     The nonforfeitable
``Years of service:                                      percentage is:
    1.............................................                  20 
    2.............................................                  40 
    3.............................................                  60 
    4.............................................                  80 
    5.............................................                100. 
            ``(4) Distribution requirements.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the requirements of this paragraph 
                are met if, under the plan--
                            ``(i) in the case of a profit-sharing or 
                        stock bonus plan, amounts are distributable 
                        only as provided in section 401(k)(2)(B), and
                            ``(ii) in the case of a pension plan, 
                        amounts are distributable subject to the 
                        limitations applicable to other distributions 
                        from the plan.
                    ``(B) Distributions within 5 years after 
                separation, etc.--In no event shall a plan meet the 
                requirements of this paragraph unless, under the plan, 
                amounts distributed--
                            ``(i) after separation from service or 
                        severance from employment, and
                            ``(ii) within 5 years after the date of the 
                        earliest employer contribution to the plan,
                may be distributed only in a direct trustee-to-trustee 
                transfer to a plan having the same distribution 
                restrictions as the distributing plan.
    ``(e) Other Definitions.--For purposes of this section--
            ``(1) Eligible employer.--The term `eligible employer' has 
        the meaning given such term by section 408(p)(2)(C)(i).
            ``(2) Nonhighly compensated employees.--The term `highly 
        compensated employee' has the meaning given such term by 
        section 414(q) (determined without regard to section 
        414(q)(1)(B)(ii)).
    ``(f) Special Rules.--
            ``(1) Disallowance of deduction.--No deduction shall be 
        allowed for that portion of the qualified employer 
        contributions paid or incurred for the taxable year which is 
        equal to the credit determined under subsection (a).
            ``(2) Election not to claim credit.--This section shall not 
        apply to a taxpayer for any taxable year if such taxpayer 
elects to have this section not apply for such taxable year.
    ``(g) Recapture of Credit on Forfeited Contributions.--If any 
accrued benefit which is forfeitable by reason of subsection (d)(3) is 
forfeited, the employer's tax imposed by this chapter for the taxable 
year in which the forfeiture occurs shall be increased by 35 percent of 
the employer contributions from which such benefit is derived to the 
extent such contributions were taken into account in determining the 
credit under this section.
    ``(h) Regulations.--The Secretary shall prescribe such regulations 
as may be appropriate to carry out the purposes of this section, 
including regulations to prevent the abuse of the purposes of this 
section through the use of multiple plans.
    ``(i) Termination.--This section shall not apply to any plan 
established after December 31, 2009.''.
    (b) Credit Allowed as Part of General Business Credit.--Section 
38(b) of such Code (defining current year business credit) is amended 
by striking ``plus'' at the end of paragraph (13), by striking the 
period at the end of paragraph (14) and inserting ``, plus'', and by 
adding at the end the following new paragraph:
            ``(16) in the case of an eligible employer (as defined in 
        section 45G(e)), the small employer pension plan contribution 
        credit determined under section 45G(a).''
    (c) Conforming Amendments.--
            (1) Section 39(d) of such Code is amended by adding at the 
        end the following new paragraph:
            ``(11) No carryback of small employer pension plan 
        contribution credit before january 1, 2002.--No portion of the 
        unused business credit for any taxable year which is 
        attributable to the small employer pension plan contribution 
        credit determined under section 45G may be carried back to a 
        taxable year beginning before January 1, 2002.''
            (2) Subsection (c) of section 196 of such Code is amended 
        by striking ``and'' at the end of paragraph (9), by striking 
        the period at the end of paragraph (10) and inserting ``, 
        and'', and by adding at the end the following new paragraph:
            ``(11) the small employer pension plan contribution credit 
        determined under section 45G(a).''
            (3) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1 of such Code is amended by adding at 
        the end the following new item:

                              ``Sec. 45G. Small employer pension plan 
                                        contributions.''
    (d) Effective Date.--The amendments made by this section shall 
apply to contributions paid or incurred in taxable years beginning 
after December 31, 2001.

SEC. 303. NOTICE.

    The Secretary of the Treasury shall establish an ongoing program, 
in coordination with employers, under which the Secretary shall ensure 
that employees and other affected individuals remain fully and 
effectively notified of the availability of tax credits under sections 
35, 45E, and 45G of the Internal Revenue Code of 1986.

                    TITLE IV--ADDITIONAL AMENDMENTS

SEC. 401. STATUTORY EXEMPTION FROM PROHIBITED TRANSACTION RULES FOR 
              EMERGENT TRANSACTIONS.

    (a) In General.--Section 4975 of the Internal Revenue Code of 1986 
(relating to tax on prohibited transactions) is amended--
            (1) by redesignating subsections (h) and (i) as subsections 
        (i) and (j), respectively, and
            (2) by inserting after subsection (g) the following new 
        subsection:
    ``(h) Statutory Exemption From Prohibited Transaction Rules for 
Emergent Transactions.--
            ``(1) In general.--Pursuant to regulations issued by the 
        Secretary of Labor, a transaction between a plan and an 
        eligible person constituting the purchase or sale of a 
        financial product which is in violation of a restriction 
        imposed by subsection (c)(1) may be exempted under section 
        408(a) of the Employee Retirement Income Security Act of 1974 
        from treatment as a violation of such restriction if--
                    ``(A) prior to engaging in the transaction, the 
                plan acquires from the eligible person a qualifying 
                guarantee, consisting of a letter of credit or other 
                form of written guarantee, issued by a bank or similar 
                financial institution (other than the eligible person 
                requesting the exemption or an affiliate) regulated and 
                supervised by, and subject to periodic examination by, 
                an agency of a State or of the Federal Government, in a 
                stated amount equal, as of the close of business on the 
                day preceding the transaction, to not less than 100 
                percent of the amount of plan assets involved in the 
                transaction, plus interest on that amount at a rate 
                determined by the parties to the transaction, or in the 
                absence of such determination, an interest rate equal 
                to the underpayment rate defined in section 6621(a)(2),
                    ``(B) the eligible person receives in such 
                transaction not more than reasonable compensation,
                    ``(C) such transaction is expressly approved by an 
                independent fiduciary who has investment authority with 
                respect to the plan assets involved in the transaction,
                    ``(D) within 60 days after the transaction, the 
                eligible person submits to the Secretary an application 
                for an exemption under subsection (a) from such 
                restriction,
                    ``(E) immediately after the acquisition of the 
                financial product--
                            ``(i) the fair market value of such 
                        financial product does not exceed 1 percent of 
                        the fair market value of the assets of the 
                        plan, and
                            ``(ii) the aggregate fair market value of 
                        all outstanding financial products acquired by 
                        the plan from the eligible person pursuant to 
                        this subsection does not exceed 5 percent of 
                        the fair market value of the assets of the 
                        plan,
                    ``(F) the Secretary determines not to grant the 
                exemption, and
                    ``(G) the transaction is reversed within 60 days 
                after the date of the Secretary's determination.
            ``(2) For purposes of this subsection--
                    ``(A) a guarantee referred to in paragraph (1) is 
                `qualifying' if such guarantee is irrevocable and, 
                under the terms of the guarantee--
                            ``(i) if the Secretary grants the 
                        exemption, the guarantee may expire without any 
                        payments made to the plan, and
                            ``(ii) if the Secretary determines not to 
                        grant the exemption, the plan has the 
                        unconditional right to apply the amounts under 
                        the guarantee to any losses suffered and to the 
                        payment of interest determined under paragraph 
                        (1), and
                    ``(B) the term `eligible person' means a person 
                that--
                            ``(i) consists of--
                                    ``(I) a bank as defined in section 
                                202(a)(2) of the Investment Advisers 
                                Act of 1940,
                                    ``(II) an investment adviser 
                                registered under the Investment 
                                Advisers Act of 1940,
                                    ``(III) an insurance company which 
                                is qualified to do business in more 
                                than one State, or
                                    ``(IV) a broker-dealer registered 
                                under the Securities Exchange Act of 
                                1934,
                            ``(ii) has shareholders' or partners' 
                        equity in excess of $1,000,000, and
                            ``(iii) is not described in section 411 of 
                        the Employee Retirement Income Security Act of 
                        1974.''.
    (b) Effective Date.--The amendments made by this section shall 
apply with respect to transactions occurring after December 31, 2001.

SEC. 402. LOANS FROM RETIREMENT PLANS FOR HEALTH INSURANCE AND JOB 
              TRAINING EXPENSES.

    (a) Qualification Requirement for Pension Plans.--Paragraph (13) of 
section 401(a) of the Internal Revenue Code of 1986 (relating to 
assignment and alienation) is amended by adding at the end the 
following new subparagraph:
                    ``(E) Loans from retirement plans for health 
                insurance and job training expenses.--Notwithstanding 
                subparagraph (A), a trust shall not constitute a 
                qualified trust under this section unless the plan of 
                which such trust is a part provides that a participant 
                or beneficiary who is involuntarily separated from 
                employment may, on the date of such separation, obtain 
                a loan from the plan the proceeds of which are to be 
                used within 6 months after the date of such loan--
                            ``(i) for payments for insurance which 
                        constitutes medical care for the taxpayer and 
                        the taxpayer's spouse and dependents, or
                            ``(ii) for job training expenses.''.
    (b) Prohibited Transaction Exemption.--Section 4975(d) of such Code 
(relating to exemptions from tax on prohibited transactions) is amended 
by striking ``or'' at the end of paragraph (14), by striking the period 
at the end of paragraph (15) and inserting ``; or'', and by inserting 
after paragraph (15) the following new paragraph:
            ``(16) any loan--
                    ``(A) from an individual retirement plan for the 
                payment of health insurance premiums or job training 
                expenses that is a qualified loan (as defined in 
                section 408 of the Employee Retirement Income Security 
                Act of 1974), or
                    ``(B) made by the plan to a disqualified person who 
                is a participant or beneficiary of the plan if such 
                loan--
                            ``(i) is for the payment of health 
                        insurance premiums or job training expenses, 
                        and
                            ``(ii) meets the requirements of section 
                        401(a)(13)(E).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to loans made after the effective date specified in section 501.

SEC. 403. MISSING PARTICIPANTS.

    (a) In General.--Section 401(a)(34) of the Internal Revenue Code of 
1986 (relating to benefits of missing participants on plan termination) 
is amended by striking ``title IV'' and inserting ``section 4050''.
    (b) Effective Date.--The amendment made by this section shall apply 
to distributions made after 1 year after the date of the enactment of 
this Act.

SEC. 404. INCOME AVERAGING OF CORRECTED CIVIL SERVICE ANNUITY BENEFIT 
              PAYMENTS.

    (a) In General.--Part I of subchapter Q of chapter 1 of the 
Internal Revenue Code of 1986 (relating to income averaging) is amended 
by inserting after section 1301 the following new section:

``SEC. 1302. AVERAGING OF CORRECTED CIVIL SERVICE ANNUITY BENEFIT 
              PAYMENTS.

    ``(a) In General.--Unless the taxpayer elects not to have this 
section apply for a taxable year, any corrected civil service annuity 
benefit payment includable in gross income for such taxable year 
(without regard to this section) shall be so included ratably over the 
5-taxable year period beginning with such taxable year.
    ``(b) Corrected Civil Service Annuity Benefit Payment.--For 
purposes of subsection (a), the term `corrected civil service annuity 
benefit payment' means with respect to an individual the sum of--
            ``(1) the lump sum payment awarded by reason of a court 
        order, or decision of the Merit Systems Protection Board, under 
        which the individual is entitled to receive an amount equal to 
        all or any part of an annuity not paid to the individual as a 
        result of an erroneous application or interpretation of 
        subchapter III of chapter 83 or chapter 84 of title 5, United 
States Code, or any other provision of law (or any rule or regulation 
relating thereto), plus
            ``(2) interest on the amount described in paragraph (1) 
        awarded under section 7704 of title 5, United States Code.
    ``(c) Annuity.--For purposes of subsection (b), the term `annuity' 
has the meaning given to such term by section 7704(c) of title 5, 
United States Code.
    ``(d) Finality of Election.--An election under subsection (a) with 
respect to a corrected civil service annuity benefit payment for a 
taxable year may not be changed after the due date of the return for 
such taxable year.''.
    (b) Clerical Amendment.--The table of sections for part I of 
subchapter Q of chapter 1 of such Code is amended by inserting after 
the item relating to section 1301 the following new item:

                              ``Sec. 1302. Averaging of corrected civil 
                                        service annuity benefit 
                                        payments.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to payments received after December 31, 2001.

SEC. 405. PROHIBITED TRANSACTION EXEMPTION FOR THE PROVISION OF 
              INVESTMENT ADVICE.

    (a) Prohibited Transaction Exemption.--Subsection (d) of section 
4975 of the Internal Revenue Code of 1986 (relating to exemptions from 
tax on prohibited transactions) is amended--
            (1) in paragraph (14), by striking ``or'' at the end,
            (2) in paragraph (15), by striking the period at the end 
        and inserting ``; or'', and
            (3) by adding at the end the following new paragraph:
            ``(16) any transaction described in subsection (f)(7)(A) in 
        connection with the provision of investment advice described in 
        subsection (e)(3)(B), in any case in which--
                    ``(A) the plan provides for individual accounts and 
                permits a participant or beneficiary to exercise 
                control over assets in his or her account,
                    ``(B) the advice is qualified investment advice 
                provided to a participant or beneficiary of the plan by 
                a fiduciary adviser in connection with any sale, 
                acquisition, or holding of a security or other property 
                for purposes of investment of plan assets, and
                    ``(C) the requirements of subsection (f)(7)(B) are 
                met in connection with each instance of the provision 
                of the advice.''.
    (b) Transactions Allowed and Related 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) Investment advice provided by fiduciary advisers.--
                    ``(A) Allowable transactions.--The transactions 
                referred to in subsection (d)(16), in connection with 
                the provision of investment advice by a fiduciary 
                adviser, are the following:
                            ``(i) the provision of the advice to the 
                        participant or beneficiary,
                            ``(ii) the sale, acquisition, or holding of 
                        a security or other property (including any 
                        lending of money or other extension of credit 
                        associated with the sale, acquisition, or 
                        holding of a security or other property) 
                        pursuant to the advice, and
                            ``(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.
                    ``(B) Requirements for exemption from prohibited 
                transactions with respect to provision of investment 
                advice.--The requirements of this subparagraph 
                (referred to in subsection (d)(16)(C)) are met in 
                connection with the provision of qualified investment 
                advice provided to a participant or beneficiary of an 
                employee benefit plan by a fiduciary adviser with 
                respect to the plan in connection with any sale, 
                acquisition, or holding of a security or other property 
                for purposes of investment of amounts held by the plan, 
                if the requirements of the following clauses are met:
                            ``(i) Written disclosures.--At a time 
                        contemporaneous with the provision of the 
                        advice in connection with the sale, 
                        acquisition, or holding of the security or 
                        other property, the fiduciary adviser shall 
                        provide to the recipient of the advice a clear 
                        and conspicuous notification, written in a 
                        manner to be reasonably understood by the 
                        average plan participant pursuant to 
                        regulations which shall be prescribed by the 
                        Secretary (including mathematical examples), of 
                        the following:
                                    ``(I) Interests held by the 
                                fiduciary adviser.--Any interest of the 
                                fiduciary adviser in, or any 
                                affiliation or contractual relationship 
                                of the fiduciary adviser (or affiliates 
                                thereof) with any third party having an 
                                interest in, the security or other 
                                property.
                                    ``(II) Related fees or compensation 
                                in connection with the provision of the 
                                advice.--All fees or other compensation 
                                relating to the advice (including fees 
                                or other compensation itemized with 
                                respect to each security or other 
                                property with respect to which the 
                                advice is provided) 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.
                                    ``(III) Ongoing fees or 
                                compensation in connection with the 
                                security or property involved.--All 
                                fees or other compensation that the 
                                fiduciary adviser (or any affiliate 
                                thereof) is to receive, on an ongoing 
                                basis, in connection with any security 
                                or other property with respect to which 
                                the fiduciary adviser gives the advice.
                                    ``(IV) Applicable limitations on 
                                scope of advice.--Any limitation placed 
                                (in accordance with the requirements of 
                                this subsection) on the scope of the 
                                advice to be provided by the fiduciary 
                                adviser with respect to the sale, 
                                acquisition, or holding of the security 
                                or other property.
                                    ``(V) Types of services generally 
                                offered.--The types of services offered 
                                by the fiduciary adviser in connection 
                                with the provision of qualified 
                                investment advice by the fiduciary 
                                adviser.
                                    ``(VI) Fiduciary status of the 
                                fiduciary adviser.--That the fiduciary 
                                advisor is a fiduciary of the plan.
                            ``(ii) Disclosure by fiduciary adviser in 
                        accordance with applicable securities laws.--
                        The fiduciary adviser shall provide appropriate 
                        disclosure, in connection with the sale, 
                        acquisition, or holding of the security or 
                        other property, in accordance with all 
                        applicable securities laws.
                            ``(iii) Transaction occurring solely at 
                        direction of recipient of advice.--The sale, 
                        acquisition, or holding of the security or 
                        other property shall occur solely at the 
                        direction of the recipient of the advice.
                            ``(iv) Reasonable compensation.--The 
                        compensation received by the fiduciary adviser 
                        and affiliates thereof in connection with the 
                        sale, acquisition, or holding of the security 
                        or other property shall be reasonable.
                            ``(v) Arm's length transaction.--The terms 
                        of the sale, acquisition, or holding of the 
                        security or other property shall be at least as 
                        favorable to the plan as an arm's length 
                        transaction would be.
                    ``(C) Continued availability of information for at 
                least 1 year.--The requirements of subparagraph (B)(i) 
                shall be deemed not to have been met in connection with 
                the initial or any subsequent provision of advice 
                described in subparagraph (B) if, at any time during 
                the 1-year period following the provision of the 
                advice, the fiduciary adviser fails to maintain the 
                information described in subclauses (I) through (IV) of 
                subparagraph (B)(i) in currently accurate form or to 
                make the information available, upon request and 
                without charge, to the recipient of the advice.
                    ``(D) Evidence of compliance maintained for at 
                least 6 years.--A fiduciary adviser referred to in 
                subparagraph (B) who has provided advice referred to in 
                such subparagraph shall, for a period of not less than 
                6 years after the provision of the advice, maintain any 
                records necessary for determining whether the 
                requirements of the preceding provisions of this 
                paragraph and of subsection (d)(16) have been met. A 
                transaction prohibited under 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.
                    ``(E) Model disclosure forms.--The Secretary shall 
                prescribe regulations setting forth model disclosure 
                forms to assist fiduciary advisers in complying with 
                the disclosure requirements of under this paragraph.
                    ``(F) Annual reviews by the Secretary.--The 
                Secretary shall conduct annual reviews of randomly 
                selected fiduciary advisers providing qualified 
                investment advice to participants and beneficiaries. In 
                the case of each review, the Secretary shall review the 
                following:
                            ``(i) Compliance by advice computer models 
                        with generally accepted investment management 
                        principles.--The extent to which advice 
                        computer models employed by the fiduciary 
                        adviser comply with generally accepted 
                        investment management principles.
                            ``(ii) Compliance with disclosure 
                        requirements.--The extent to which disclosures 
                        provided by the fiduciary adviser have complied 
                        with the requirements of this subsection.
                            ``(iii) Extent of violations.--The extent 
                        to which any violations of fiduciary duties 
                        have occurred in connection with the provision 
                        of the advice.
                            ``(iv) Extent of reported complaints.--The 
                        extent to which complaints to relevant agencies 
                        have been made in connection with the provision 
                        of the advice.
                Any proprietary information obtained by the Secretary 
                shall be treated as confidential.
                    ``(G) Duty of conflicted fiduciary adviser to 
                provide for alternative independent advice.--
                            ``(i) In general.--In connection with any 
                        qualified investment advice provided by a 
                        fiduciary adviser to a participant or 
                        beneficiary regarding any security or other 
                        property, if the fiduciary adviser--
                                    ``(I) has an interest in the 
                                security or other property, or
                                    ``(II) has an affiliation or 
                                contractual relationship with any 
third party that has an interest in the security or other property,
                        the requirements of subparagraph (B) shall be 
                        treated as not met in connection with the 
                        advice unless the fiduciary adviser has 
                        arranged, as an alternative to the advice that 
                        would otherwise be provided by the fiduciary 
                        advisor, for qualified investment advice with 
                        respect to the security or other property 
                        provided by at least one alternative investment 
                        adviser meeting the requirements of clause 
                        (ii).
                            ``(ii) Independence and qualifications of 
                        alternative investment adviser.--Any 
                        alternative investment adviser whose qualified 
                        investment advice is arranged for by a 
                        fiduciary adviser pursuant to clause (i)--
                                    ``(I) shall have no material 
                                interest in, and no material 
                                affiliation or contractual relationship 
                                with any third party having a material 
                                interest in, the security or other 
                                property with respect to which the 
                                investment adviser is providing the 
                                advice, and
                                    ``(II) shall meet the requirements 
                                of a fiduciary adviser under 
                                subparagraph (H)(i), except that an 
                                alternative investment adviser may not 
                                be a fiduciary of the plan other than 
                                in connection with the provision of the 
                                advice.
                            ``(iii) Scope and fees of alternative 
                        investment advice.--Any qualified investment 
                        advice provided pursuant to this subparagraph 
                        by an alternative investment adviser shall be 
                        of the same type and scope, and provided under 
                        the same terms and conditions (including no 
                        additional charge to the participant or 
                        beneficiary), as apply with respect to the 
                        qualified investment advice to be provided by 
                        the fiduciary adviser.
                    ``(H) Fiduciary adviser defined.--For purposes of 
                this paragraph and subsection (d)(16)--
                            ``(i) In general.--The term `fiduciary 
                        adviser' means, with respect to a plan, a 
                        person who--
                                    ``(I) is a fiduciary of the plan by 
                                reason of the provision of qualified 
                                investment advice by such person to a 
                                participant or beneficiary,
                                    ``(II) meets the qualifications of 
                                clause (ii), and
                                    ``(III) meets the additional 
                                requirements of clause (iii).
                            ``(ii) Qualifications.--A person meets the 
                        qualifications of this clause if such person--
                                    ``(I) is registered as an 
                                investment adviser under the Investment 
                                Advisers Act of 1940 (15 U.S.C. 80b-1 
                                et seq.),
                                    ``(II) if not registered as an 
                                investment adviser under such Act by 
                                reason of section 203A(a)(1) of such 
                                Act (15 U.S.C. 80b-3a(a)(1)), is 
                                registered under the laws of the State 
                                in which the fiduciary maintains its 
                                principal office and place of business, 
                                and, at the time the fiduciary last 
                                filed the registration form most 
                                recently filed by the fiduciary with 
                                such State in order to maintain the 
                                fiduciary's registration under the laws 
                                of such State, also filed a copy of 
                                such form with the Secretary,
                                    ``(III) is registered as a broker 
                                or dealer under the Securities Exchange 
                                Act of 1934 (15 U.S.C. 78a et seq.),
                                    ``(IV) is a bank or similar 
                                financial institution referred to in 
                                subsection (d)(4),
                                    ``(V) is an insurance company 
                                qualified to do business under the laws 
                                of a State, or
                                    ``(VI) is any other comparable 
                                entity which satisfies such criteria as 
                                the Secretary determines appropriate.
                            ``(iii) Additional requirements with 
                        respect to certain employees or other agents of 
                        certain advisers.--A person meets the 
                        additional requirements of this clause if every 
                        individual who is employed (or otherwise 
                        compensated) by such person and whose scope of 
                        duties includes the provision of 
qualified investment advice on behalf of such person to any participant 
or beneficiary is--
                                    ``(I) a registered representative 
                                of such person,
                                    ``(II) an individual described in 
                                subclause (I), (II), or (III) of clause 
                                (ii), or
                                    ``(III) such other comparable 
                                qualified individual as may be 
                                designated in regulations of the 
                                Secretary.
                    ``(I) Additional definitions.--For purposes of this 
                paragraph and subsection (d)(16)--
                            ``(i) Qualified investment advice.--The 
                        term `qualified investment advice' means, in 
                        connection with a participant or beneficiary, 
                        investment advice referred to in subsection 
                        (e)(3)(B) which--
                                    ``(I) consists of an individualized 
                                recommendation to the participant or 
                                beneficiary with respect to the 
                                purchase, sale, or retention of 
                                securities or other property for the 
                                individual account of the participant 
                                or beneficiary, in accordance with 
                                generally accepted investment 
                                management principles, and
                                    ``(II) takes into account all 
                                investment options under the plan.
                            ``(ii) Affiliate.--The term `affiliate' of 
                        another entity means an affiliated person of 
                        such entity (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' of another 
                        entity means a person described in section 
                        3(a)(18) of the Securities Exchange Act of 1934 
                        (15 U.S.C. 78c(a)(18)) (substituting such 
                        entity for the broker or dealer referred to in 
                        such section) or a person described in section 
                        202(a)(17) of the Investment Advisers Act of 
                        1940 (15 U.S.C. 80b-2(a)(17)) (substituting 
                        such entity for the investment adviser referred 
                        to in such section).''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to advice referred to in section 4975(e)(3)(B) of 
the Internal Revenue Code of 1986 provided on or after January 1, 2002.

                      TITLE V--GENERAL PROVISIONS

SEC. 501. GENERAL EFFECTIVE DATE.

    (a) In General.--Except as otherwise provided in this Act, and 
subject to subsection (b), the amendments made by this Act shall apply 
with respect to plan years beginning on or after January 1, 2002.
    (b) Special Rule for Collectively Bargained Plans.--In the case of 
a plan maintained pursuant to 1 or more collective bargaining 
agreements between employee representatives and 1 or more employers 
ratified on or before the date of the enactment of this Act, subsection 
(a) shall be applied to benefits pursuant to, and individuals covered 
by, any such agreement by substituting for ``January 1, 2002'' the date 
of the commencement of the first plan year beginning on or after the 
earlier of--
            (1) the later of--
                    (A) January 1, 2003, or
                    (B) the date on which the last of such collective 
                bargaining agreements terminates (determined without 
                regard to any extension thereof after the date of the 
                enactment of this Act), or
            (2) January 1, 2004.

SEC. 502. PLAN AMENDMENTS.

    If any amendment made by this Act requires an amendment to any 
plan, such plan amendment shall not be required to be made before the 
first plan year beginning on or after January 1, 2004, if--
            (1) during the period after such amendment made by this Act 
        takes effect and before such first plan year, the plan is 
        operated in accordance with the requirements of such amendment 
        made by this Act, and
            (2) such plan amendment applies retroactively to the period 
        after such amendment made by this Act takes effect and such 
        first plan year.
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