[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3669 Introduced in House (IH)]







107th CONGRESS
  2d Session
                                H. R. 3669

  To amend the Internal Revenue Code of 1986 to empower employees to 
 control their retirement savings accounts through new diversification 
    rights, new disclosure requirements, and new tax incentives for 
                         retirement education.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            February 4, 2002

Mr. Portman (for himself and Mr. Cardin) introduced the following bill; 
which was referred to the Committee on Ways and Means, and in addition 
  to the Committee on Education and the Workforce, 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 the Internal Revenue Code of 1986 to empower employees to 
 control their retirement savings accounts through new diversification 
    rights, new disclosure requirements, and new tax incentives for 
                         retirement education.

    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 ``Employee Retirement Savings Bill of 
Rights''.

SEC. 2. EXCISE TAX ON FAILURE OF PENSION PLANS TO PROVIDE NOTICE OF 
              GENERALLY ACCEPTED INVESTMENT PRINCIPLES.

    (a) In General.--Chapter 43 of the Internal Revenue Code of 1986 
(relating to qualified pension, etc., plans) is amended by adding at 
the end the following new section:

``SEC. 4980G. FAILURE OF APPLICABLE PLANS TO PROVIDE NOTICE OF 
              GENERALLY ACCEPTED INVESTMENT PRINCIPLES.

    ``(a) Imposition of Tax.--There is hereby imposed a tax on the 
failure of any applicable pension plan to meet the requirements of 
subsection (e) with respect to any applicable individual.
    ``(b) Amount of Tax.--The amount of the tax imposed by subsection 
(a) on any failure with respect to any applicable individual shall be 
$100.
    ``(c) Limitations on Amount of Tax.--
            ``(1) Tax not to apply to failures corrected within 30 
        days.--No tax shall be imposed by subsection (a) on any failure 
        if--
                    ``(A) any person subject to liability for the tax 
                under subsection (d) exercised reasonable diligence to 
                meet the requirements of subsection (e), and
                    ``(B) such person provides the notice described in 
                subsection (e) during the 30-day period beginning on 
                the first date such person knew, or exercising 
                reasonable diligence should have known, that such 
                failure existed.
            ``(2) Overall limitation for unintentional failures.--
                    ``(A) In general.--If the person subject to 
                liability for tax under subsection (d) exercised 
                reasonable diligence to meet the requirements of 
                subsection (e) and paragraph (1) is not otherwise 
                applicable, the tax imposed by subsection (a) for 
                failures during the taxable year of the employer (or, 
                in the case of a multiemployer plan, the taxable year 
                of the trust forming part of the plan) shall not exceed 
                $500,000. For purposes of the preceding sentence, all 
                multiemployer plans of which the same trust forms a 
                part shall be treated as 1 plan.
                    ``(B) Taxable years in the case of certain 
                controlled groups.--For purposes of this paragraph, if 
                all persons who are treated as a single employer for 
                purposes of this section do not have the same taxable 
                year, the taxable years taken into account shall be 
determined under principles similar to the principles of section 1561.
            ``(3) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that the payment of such tax would 
        be excessive or otherwise inequitable relative to the failure 
        involved.
    ``(d) Liability for Tax.--The following shall be liable for the tax 
imposed by subsection (a):
            ``(1) In the case of a plan other than a multiemployer 
        plan, the employer.
            ``(2) In the case of a multiemployer plan, the plan.
    ``(e) Notice of Generally Accepted Investment Principles.--
            ``(1) In general.--The plan administrator of an applicable 
        pension plan shall provide notice of generally accepted 
        investment principles, including principles of risk management 
        and diversification, to each applicable individual.
            ``(2) Notice.--The notice required by paragraph (1) shall 
        be written in a manner calculated to be understood by the 
        average plan participant and shall provide sufficient 
        information (as determined in accordance with rules or other 
        guidance adopted by the Secretary) to allow applicable 
        individuals to understand generally accepted investment 
        principles, including principles of risk management and 
        diversification.
            ``(3) Timing of notice.--The notice required by paragraph 
        (1) shall be provided upon enrollment of the applicable 
        individual in such plan and at least once per plan year 
        thereafter.
            ``(4) Form and manner of notice.--The notice required by 
        paragraph (1) shall be in writing, except that such notice may 
        be in electronic or other form to the extent that such form is 
        reasonably accessible to the applicable individual.
    ``(f) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Applicable individual.--The term `applicable 
        individual' means--
                    ``(A) any participant in the applicable pension 
                plan,
                    ``(B) any beneficiary who is an alternate payee 
                (within the meaning of section 414(p)(8)) under an 
                applicable qualified domestic relations order (within 
                the meaning of section 414(p)(1)(A)), and
                    ``(C) any beneficiary of a deceased participant or 
                alternate payee,
        who has an accrued benefit under the plan and who is entitled 
        to direct the investment (or hypothetical investment) of some 
        or all of such accrued benefit.
            ``(2) Applicable pension plan.--The term `applicable 
        pension plan' means--
                    ``(A) a plan described in section 219(g)(5)(A) 
                (other than in clause (iii) thereof), and
                    ``(B) an eligible deferred compensation plan (as 
                defined in section 457(b)) of an eligible employer 
                described in section 457(e)(1)(A),
        which permits any participant to direct the investment of some 
        or all of his account in the plan or under which the accrued 
        benefit of any participant depends in whole or in part on 
        hypothetical investments directed by the participant.''.
    (b) Clerical Amendment.--The table of sections for chapter 43 of 
such Code is amended by adding at the end the following new item:

                               ``Sec. 4980G. Failure of applicable 
                                        plans to provide notice of 
                                        generally accepted investment 
                                        principles.''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        take effect 60 days after the adoption of rules or other 
        guidance to carry out the amendments made by this section, 
        which shall include a model notice of generally accepted 
        investment principles, including principles of risk management 
        and diversification.
            (2) Model investment principles.--For purposes of paragraph 
        (1), not later than 120 days after the date of the enactment of 
        this Act, the Secretary of the Treasury, in consultation with 
        the Secretary of Labor, shall issue rules or other guidance and 
        a model notice which meets the requirements of section 4980G of 
        the Internal Revenue Code of 1986 (as added by this section).

SEC. 3. EXCISE TAX ON FAILURE OF PENSION PLANS TO PROVIDE NOTICE OF 
              TRANSACTION RESTRICTION PERIODS.

    (a) In General.--Chapter 43 of the Internal Revenue Code of 1986 
(relating to qualified pension, etc., plans) is amended by adding at 
the end the following new section:

``SEC. 4980H. FAILURE OF APPLICABLE PLANS TO PROVIDE NOTICE OF 
              TRANSACTION RESTRICTION PERIODS.

    ``(a) Imposition of Tax.--There is hereby imposed a tax on the 
failure of any applicable pension plan to meet the requirements of 
subsection (e) with respect to any applicable individual.
    ``(b) Amount of Tax.--The amount of the tax imposed by subsection 
(a) on any failure with respect to any applicable individual shall be 
$100.
    ``(c) Limitations on Amount of Tax.--
            ``(1) Tax not to apply to failures corrected as soon as 
        reasonably practicable.--No tax shall be imposed by subsection 
        (a) on any failure if--
                    ``(A) any person subject to liability for the tax 
                under subsection (d) exercised reasonable diligence to 
                meet the requirements of subsection (e), and
                    ``(B) such person provides the notice described in 
                subsection (e) as soon as reasonably practicable after 
                the first date such person knew, or exercising 
                reasonable diligence should have known, that such 
                failure existed.
            ``(2) Overall limitation for unintentional failures.--
                    ``(A) In general.--If the person subject to 
                liability for tax under subsection (d) exercised 
                reasonable diligence to meet the requirements of 
                subsection (e) and paragraph (1) is not otherwise 
                applicable, the tax imposed by subsection (a) for 
                failures during the taxable year of the employer (or, 
                in the case of a multiemployer plan, the taxable year 
                of the trust forming part of the plan) shall not exceed 
                $500,000. For purposes of the preceding sentence, all 
                multiemployer plans of which the same trust forms a 
                part shall be treated as 1 plan.
                    ``(B) Taxable years in the case of certain 
                controlled groups.--For purposes of this paragraph, if 
                all persons who are treated as a single employer for 
                purposes of this section do not have the same taxable 
                year, the taxable years taken into account shall be 
                determined under principles similar to the principles 
                of section 1561.
            ``(3) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that the payment of such tax would 
be excessive or otherwise inequitable relative to the failure involved.
    ``(d) Liability for Tax.--The following shall be liable for the tax 
imposed by subsection (a):
            ``(1) In the case of a plan other than a multiemployer 
        plan, the employer.
            ``(2) In the case of a multiemployer plan, the plan.
    ``(e) Notice of Transaction Restriction Period.--
            ``(1) In general.--The plan administrator of an applicable 
        pension plan shall provide notice of any transaction 
        restriction period to each applicable individual to whom the 
        transaction restriction period applies (and to each employee 
        organization representing such applicable individuals).
            ``(2) Notice.--The notice required by paragraph (1) shall 
        be written in a manner calculated to be understood by the 
        average plan participant and shall provide sufficient 
        information (as determined in accordance with rules or other 
        guidance adopted by the Secretary) to allow applicable 
        individuals to understand the timing and effect of such 
        transaction restriction period.
            ``(3) Timing of notice.--
                    ``(A) In general.--Except as provided in 
                subparagraphs (B) and (C), the notice required by 
                paragraph (1) shall be provided not later than 21 days 
                before the beginning of the transaction restriction 
                period.
                    ``(B) Disposition of stock or assets.--In the case 
                of a transaction restriction period in connection with 
                the disposition of substantially all of the stock of a 
                subsidiary of a person or in connection with the 
                disposition of substantially all of the assets which 
                are used by such person in a trade or business of such 
                person--
                            ``(i) the person disposing of such stock or 
                        assets shall be treated as failing to meet the 
                        requirements of this section unless, not later 
                        than 21 days before such disposition, the 
                        person provides notice required by paragraph 
                        (1) of the possibility of a transaction 
                        restriction period in connection with such 
                        disposition, and
                            ``(ii) the person who acquires such stock 
                        or assets need not provide a notice under this 
                        section if the transaction restriction period 
                        in connection with such disposition begins 
                        within 21 days after such disposition.
                Clause (i) shall not apply to the person disposing of 
                such stock or assets if such person has a substantial 
                basis to believe that there will be no transaction 
                restriction period in connection with the disposition 
                of such stock or assets.
                    ``(C) Exception for unforeseeable events.--In the 
                case of a transaction restriction period resulting from 
                the occurrence of an unforeseeable event, such notice 
                shall be provided as soon as reasonably practicable 
                after the occurrence of such event.
            ``(4) Form and manner of notice.--The notice required by 
        paragraph (1) shall be in writing, except that such notice may 
        be in electronic or other form to the extent that such form is 
        reasonably accessible to the applicable individual.
    ``(f) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Applicable individual.--The term `applicable 
        individual' means--
                    ``(A) any participant in the applicable pension 
                plan, and
                    ``(B) any beneficiary who is an alternate payee 
                (within the meaning of section 414(p)(8)) under an 
                applicable qualified domestic relations order (within 
                the meaning of section 414(p)(1)(A)), and
                    ``(C) any beneficiary of a deceased participant or 
                alternate payee.
            ``(2) Applicable pension plan.--The term `applicable 
        pension plan' means--
                    ``(A) a plan described in clause (i), (ii), or (iv) 
                of section 219(g)(5)(A), and
                    ``(B) an eligible deferred compensation plan (as 
                defined in section 457(b)) of an eligible employer 
                described in section 457(e)(1)(A),
        which maintains accounts for participants under the plan or 
        under which the accrued benefit of any participant depends in 
        whole or in part on hypothetical investments directed by the 
        participant.
            ``(3) Transaction restriction period.--
                    ``(A) In general.--The term `transaction 
                restriction period' means a temporary or indefinite 
                period of at least 3 consecutive business days during 
                which rights of 1 or more applicable individuals to 
                direct investments in the applicable pension plan, 
                obtain loans from such plan, or obtain distributions 
                from such plan are substantially reduced (other than by 
                reason of the application of securities laws).
                    ``(B) Special rule for employer securities.--For 
                purposes of subparagraph (A), rights shall be treated 
                as substantially reduced with respect to directing 
                investments out of employer securities if rights in 
                effect are significantly restricted for at least 3 
                consecutive business days.
                    ``(C) Business day.--For purposes of this 
                paragraph, under rules prescribed by the Secretary, a 
                day shall not be treated as a business day to the 
                extent that 1 or more established securities markets 
                for trading securities are not open.
                    ``(D) Regulations.--The Secretary shall prescribe 
                regulations which provide for such other circumstances 
                under which such rights are substantially reduced.
            ``(4) Employer securities.--The term `employer securities' 
        shall have the meaning given such term by section 407(d)(1) of 
        the Employee Retirement Income Security Act of 1974.''.
    (b) Clerical Amendment.--The table of sections for chapter 43 of 
such Code is amended by adding at the end the following new item:

                               ``Sec. 4980H. Failure of applicable 
                                        plans to provide notice of 
                                        transaction restriction 
                                        periods.''.

0    (c) Effective Date.--
            (1) Employer securities.--
                    (A) Guidance.--Not later than 60 days after the 
                date of the enactment of this Act, the Secretary of the 
                Treasury, in consultation with the Secretary of Labor, 
                shall issue guidance in carrying out section 4980H of 
                the Internal Revenue Code of 1986 (as added by this 
                section) with respect to the reduction of rights 
                relating to the direction of investments out of 
                employer securities.
                    (B) Effective date.--The amendments made by this 
                section shall apply with respect to transaction 
                restriction periods resulting from the reduction of 
                rights relating to the direction of investments out of 
                employer securities beginning after 60 days after the 
                date of the issuance of guidance under subparagraph 
                (A).
            (2) Other circumstances.--In the case of transaction 
        restriction periods not referred to in paragraph (1), the 
        amendments made by this section shall apply to such periods 
beginning after 120 days after the date of the issuance of regulations 
referred to in section 4980H(f)(3)(C) of such Code.

SEC. 4. DIVERSIFICATION REQUIREMENTS FOR DEFINED CONTRIBUTION PLANS 
              THAT HOLD EMPLOYER SECURITIES.

    (a) In General.--Subsection (a) of section 401 of the Internal 
Revenue Code of 1986 (relating to requirements for qualification) is 
amended by adding at the end the following new paragraph:
            ``(35) Diversification requirements for defined 
        contribution plans that hold employer securities.--
                    ``(A) In general.--In the case of a defined 
                contribution plan described in this subsection that 
                includes a trust which is exempt from tax under section 
                501(a) and which holds employer securities that are 
                readily tradable on an established securities market, 
                such trust shall not constitute a qualified trust under 
                this section unless such plan meets the requirements of 
                subparagraphs (B), (C), and (D).
                    ``(B) Elective deferrals invested in employer 
                securities.--
                            ``(i) In general.--In the case of the 
                        portion of the account attributable to elective 
                        deferrals which is invested in employer 
                        securities, a plan meets the requirements of 
                        this subparagraph if each applicable individual 
                        in such plan may elect to direct the plan to 
                        divest up to the applicable percentage of such 
                        securities in the individual's account and to 
                        reinvest an equivalent amount in other 
                        investment options which meet the requirements 
                        of subparagraph (E). The preceding sentence 
                        shall apply to the extent that the amount 
                        attributable to such applicable percentage 
                        exceeds the amount to which a prior election 
                        under this subparagraph or paragraph (28) 
                        applies.
                            ``(ii) Applicable individual.--For purposes 
                        of this subparagraph, the term `applicable 
                        individual' means--
                                    ``(I) any participant in the plan,
                                    ``(II) any beneficiary who is an 
                                alternate payee (within the meaning of 
                                section 414(p)(8)) under an applicable 
                                qualified domestic relations order 
                                (within the meaning of section 
                                414(p)(1)(A)), and
                                    ``(III) any beneficiary of a 
                                deceased participant or alternate 
                                payee.
                    ``(C) Matching contributions.--
                            ``(i) In general.--In the case of the 
                        portion of the account attributable to matching 
                        contributions which is invested in employer 
                        securities, a plan meets the requirements of 
                        this subparagraph if each qualified participant 
                        in the plan may elect to direct the plan to 
                        divest up to the applicable percentage of such 
                        securities in the participant's account and to 
                        reinvest an equivalent amount in other 
                        investment options which meet the requirements 
                        of subparagraph (E). The preceding sentence 
                        shall apply to the extent that the amount 
                        attributable to such applicable percentage 
                        exceeds the amount to which a prior election 
                        under this subparagraph or paragraph (28) 
                        applies.
                            ``(ii) Matching contributions defined.--For 
                        purposes of this subparagraph, the term 
                        `matching contributions' shall have the meaning 
given such term in subsection (m)(4).
                            ``(iii) Qualified participant.--For 
                        purposes of this subparagraph, the term 
                        `qualified participant' means--
                                    ``(I) any participant in the plan 
                                who has completed at least 3 years of 
                                service (as determined under section 
                                411(a)) under the plan,
                                    ``(II) any beneficiary who, with 
                                respect to a participant who met the 
                                service requirement in subclause (I), 
                                is an alternate payee (within the 
                                meaning of section 414(p)(8)) under an 
                                applicable qualified domestic relations 
                                order (within the meaning of section 
                                414(p)(1)(A)), and
                                    ``(III) any beneficiary of a 
                                deceased participant who met the 
                                service requirement in subclause (I) or 
                                alternate payee described in subclause 
                                (II).
                    ``(D) Other employer contributions.--
                            ``(i) In general.--In the case of the 
                        portion of the account attributable to employer 
                        contributions (other than matching 
                        contributions and elective deferrals) which is 
                        invested in employer securities, a plan meets 
                        the requirements of this subparagraph if each 
                        qualified participant in the plan may elect to 
                        direct the plan to divest up to the applicable 
                        percentage of such securities in the 
                        participant's account and to reinvest an 
                        equivalent amount in other investment options 
                        which meet the requirements of subparagraph 
                        (E). The preceding sentence shall apply to the 
                        extent that the amount attributable to such 
                        applicable percentage exceeds the amount to 
                        which a prior election under this subparagraph 
                        or paragraph (28) applies.
                            ``(ii) Qualified participant.--For purposes 
                        of this subparagraph, the term `qualified 
                        participant' shall have the meaning of such 
                        term under subparagraph (C), except that clause 
                        (iii)(I) thereof shall be applied by 
                        substituting `5 years of service' for `3 years 
                        of service'.
                    ``(E) Investment options.--The requirements of this 
                subparagraph are met if the plan offers not less than 3 
investment options (not inconsistent with regulations prescribed by the 
Secretary) other than employer securities.
                    ``(F) Other definitions and rules.--For purposes of 
                this paragraph--
                            ``(i) Employer securities.--The term 
                        `employer securities' shall have the meaning 
                        given such term by section 407(d)(1) of the 
                        Employee Retirement Income Security Act of 
                        1974.
                            ``(ii) Elective deferrals.--For purposes of 
                        this subparagraph, the term `elective 
                        deferrals' means an employer contribution 
                        described in section 402(g)(3)(A) and any 
                        employee contribution.
                            ``(iii) Election.--Elections under this 
                        paragraph shall be not less frequently than 
                        quarterly.
                            ``(iv) Employee stock ownership plan.--The 
                        term `employee stock ownership plan' shall have 
                        the same meaning given to such term by section 
                        4975(e)(7).
                            ``(v) Applicable percentage.--
                                    ``(I) Elective deferrals treated as 
                                separate plan not individual account 
                                plan.--In the case of elective 
                                deferrals (and any earnings allocable 
                                thereto) held within a plan treated as 
                                a separate plan as of the date of the 
                                enactment of this paragraph under 
                                section 407(b)(2) of the Employee 
                                Retirement Income Security Act of 1974, 
                                for purposes of subparagraph (B) the 
                                applicable percentage shall be 100 
                                percent.
                                    ``(II) Elective deferrals treated 
                                as individual account plan.--In the 
                                case of elective deferrals (and any 
                                earnings allocable thereto) not held 
                                within a plan treated as a separate 
                                plan as of the date of the enactment of 
                                this paragraph under section 407(b)(2) 
                                of the Employee Retirement Income 
                                Security Act of 1974, for purposes of 
                                subparagraph (B) the applicable 
                                percentage shall be as follows:

``Plan years beginning in:          Applicable percentage:
    2003...........................
                                        The greater of the percentage 
                                                determined under 
                                                paragraph (28) or 20 
                                                percent.
    2004...........................
                                        The greater of the percentage 
                                                determined under 
                                                paragraph (28) or 40 
                                                percent.
    2005...........................
                                        60 percent.
    2006...........................
                                        80 percent.
    2007 or thereafter.............
                                        100 percent.
                                    ``(III) Matching and other employer 
                                contributions not held within an 
                                esop.--In the case of matching and 
                                other employer contributions (other 
                                than elective deferrals) not held 
                                within an employee stock ownership 
                                plan, for purposes of subparagraphs (C) 
                                and (D), the applicable percentage 
                                shall be as follows:

``Plan years beginning in:          Applicable percentage:
    2003...........................
                                        20 percent.
    2004...........................
                                        40 percent.
    2005...........................
                                        60 percent.
    2006...........................
                                        80 percent.
    2007 or thereafter.............
                                        100 percent.
                                    ``(IV) Matching and other employer 
                                contributions held within an esop.--In 
                                the case of matching and other employer 
                                contributions (other than elective 
                                deferrals) held within an employee 
                                stock ownership plan, for purposes of 
                                subparagraphs (C) and (D) the 
                                applicable percentage shall be as 
                                follows:

``Plan years beginning in:          Applicable percentage:
    2003...........................
                                        The greater of the percentage 
                                                determined under 
                                                paragraph (28) or 20 
                                                percent.
    2004...........................
                                        The greater of the percentage 
                                                determined under 
                                                paragraph (28) or 40 
                                                percent.
    2005...........................
                                        60 percent.
    2006...........................
                                        80 percent.
    2007 or thereafter.............
                                        100 percent.
                                    ``(V) Special rule for determining 
                                percentages under paragraph (28).--For 
                                purposes of references in this clause 
                                to a percentage determined under 
                                paragraph (28), such percentages shall 
                                be determined as if paragraph (28) 
                                applied to a plan described in this 
                                clause.''.
    (b) Conforming Amendments.--
            (1) Section 401(a)(28) of such Code is amended by adding at 
        the end the following new subparagraph:
                    ``(D) Application.--This paragraph shall not apply 
                with respect to employer securities which are readily 
                tradable on an established securities market.''.
            (2) Section 409(h)(7) of such Code is amended by inserting 
        at the end ``or subparagraph (B), (C), or (D) of section 
        401(a)(35)''.
            (3) Section 4975(e)(7) of such Code is amended by adding at 
        the end the following new sentence: ``A plan shall not fail to 
        be treated as an employee stock ownership plan merely because 
        the plan meets the requirements of section 401(a)(35) (or 
        provides greater diversification rights) or because 
        participants in such plan exercise diversification rights under 
        such section (or greater diversification rights available under 
        the plan).''.
            (4) Section 4980(c)(3)(A) of such Code is amended by 
        striking ``if--'' and all that follows and inserting ``if the 
        requirements of subparagraphs (B), (C), and (D) are met.''.
            (5) Section 407 of the Employee Retirement Income Security 
        Act of 1974 (29 U.S.C. 1107) is amended by adding at the end 
        the following new subsection:
    ``(g) Notwithstanding section 408(e) or any other provision of this 
title, an individual account plan may not include provisions that do 
not meet the requirements of section 401(a)(35)(B) of the Internal 
Revenue Code of 1986.''.
    (c) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to plan years 
        beginning after December 31, 2002.
            (2) Exception.--The amendments made by this section shall 
        not apply to employer securities held by an employee stock 
        ownership plan which are not subject to section 401(a)(28) of 
        the Internal Revenue Code of 1986 by reason of section 
        1175(a)(2) of the Tax Reform Act of 1986 (100 Stat. 2519).

SEC. 5. TREATMENT OF QUALIFIED RETIREMENT PLANNING SERVICES.

    (a) In General.--Subsection (m) of section 132 of the Internal 
Revenue Code of 1986 (defining qualified retirement services) is 
amended by adding at the end the following new paragraph:
            ``(4) No constructive receipt.--No amount shall be included 
        in the gross income of any employee solely because the employee 
        may choose between any qualified retirement planning services 
        and compensation which would otherwise be includible in the 
        gross income of such employee. The preceding sentence shall 
        apply to highly compensated employees only if the choice 
        described in such sentence is available on substantially the 
        same terms to each member of the group of employees normally 
        provided education and information regarding the employer's 
        qualified employer plan.''.
    (b) Conforming Amendments.--
            (1) Section 403(b)(3)(B) of such Code is amended by 
        inserting ``132(m)(4),'' after ``132(f)(4),''.
            (2) Section 414(s)(2) of such Code is amended by inserting 
        ``132(m)(4),'' after ``132(f)(4),''.
            (3) Section 415(c)(3)(D)(ii) of such Code is amended by 
        inserting ``132(m)(4),'' after ``132(f)(4),''.
    (c) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 2002.
                                 <all>