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






                                                 Union Calendar No. 232
107th CONGRESS
  2d Session
                                H. R. 3669

                      [Report No. 107-382, Part I]

  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

                             March 20, 2002

    Reported from the Committee on Ways and Means with an amendment
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]

                             March 20, 2002

Referral to the Committee on Education and the Workforce extended for a 
               period ending not later than April 9, 2002

                             April 9, 2002

 Additional sponsors: Mr. Blunt, Mr. Pomeroy, Mr. Brady of Texas, Mr. 
      Frost, Mr. Bereuter, Mr. Lucas of Kentucky, Mr. Forbes, Mr. 
      Frelinghuysen, Mr. Latham, Mr. Jones of North Carolina, Mr. 
   Abercrombie, Ms. Hart, Mr. Oxley, Mr. Kennedy of Minnesota, Mrs. 
 Roukema, Mr. Nussle, Mr. Weldon of Florida, Mr. Walsh, Mr. Moore, and 
                                Mr. Horn

                             April 9, 2002

 The Committee on Education and the Workforce discharged; committed to 
the Committee of the Whole House on the State of the Union and ordered 
                             to be printed
    [For text of introduced bill, see copy of bill as introduced on 
                           February 4, 2002]

_______________________________________________________________________

                                 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; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Employee 
Retirement Savings Bill of Rights''.
    (b) Table of Contents.--

Sec. 1. Short title; table of contents.

             TITLE I--DEFINED CONTRIBUTION PLAN PROTECTIONS

Sec. 101. Excise tax on failure of pension plans to provide investment 
                            education notices to participants.
Sec. 102. Excise tax on failure of pension plans to provide notice of 
                            transaction restriction periods.
Sec. 103. Diversification requirements for defined contribution plans 
                            that hold employer securities.
Sec. 104. Treatment of qualified retirement planning services.
Sec. 105. Special rules.

          TITLE II--OTHER TAX PROVISIONS RELATING TO PENSIONS

Sec. 201. Amendments to Retirement Protection Act of 1994.
Sec. 202. Reporting simplification.
Sec. 203. Improvement of Employee Plans Compliance Resolution System.
Sec. 204. Flexibility in nondiscrimination, coverage, and line of 
                            business rules.
Sec. 205. Extension to all governmental plans of moratorium on 
                            application of certain nondiscrimination 
                            rules applicable to State and local plans.
Sec. 206. Notice and consent period regarding distributions.
Sec. 207. Reduced PBGC premium for new plans of small employers.
Sec. 208. Reduction of additional PBGC premium for new and small plans.
Sec. 209. Authorization for PBGC to pay interest on premium overpayment 
                            refunds.
Sec. 210. Substantial owner benefits in terminated plans.
Sec. 211. Studies.
Sec. 212. Interest rate range for additional funding requirements.
Sec. 213. Provisions relating to plan amendments.

                        TITLE III--STOCK OPTIONS

Sec. 301. Exclusion of incentive stock options and employee stock 
                            purchase plan stock options from wages.

          TITLE IV--SOCIAL SECURITY AND MEDICARE HELD HARMLESS

Sec. 401. Protection of Social Security and Medicare.

             TITLE I--DEFINED CONTRIBUTION PLAN PROTECTIONS

SEC. 101. EXCISE TAX ON FAILURE OF PENSION PLANS TO PROVIDE INVESTMENT 
              EDUCATION NOTICES TO PARTICIPANTS.

    (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 INVESTMENT 
              EDUCATION NOTICES TO PARTICIPANTS.

    ``(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), 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 Regarding Investment Education.--
            ``(1) In general.--The plan administrator of an applicable 
        pension plan shall provide to each applicable individual an 
        investment education notice described in paragraph (2) at the 
        time of the enrollment of the applicable individual in the plan 
        and not less often than quarterly thereafter.
            ``(2) Investment education notice.--An investment education 
        notice is described in this paragraph if such notice contains--
                    ``(A) an explanation, for the long-term retirement 
                security of participants and beneficiaries, of 
                generally accepted investment principles, including 
                principles of risk management and diversification, and
                    ``(B) a discussion of the risk of holding 
                substantial portions of a portfolio in the security of 
                any one entity, such as employer securities.
            ``(3) Understandability.--Each 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 guidance provided 
        by the Secretary) to allow recipients to understand such 
        notice.
            ``(4) Form and manner of notices.--The notices required by 
        this subsection shall be in writing, except that such notices 
        may be in electronic or other form to the extent that such form 
        is reasonably accessible to the applicable individual.
    ``(f) Definitions.--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 a 
                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 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. Such term 
        shall not include a one-participant retirement plan.
            ``(3) One-participant retirement plan defined.--The term 
        `one-participant retirement plan' means a retirement plan 
        that--
                    ``(A) on the first day of the plan year--
                            ``(i) covered only the employer (and the 
                        employer's spouse) and the employer owned the 
                        entire business (whether or not incorporated), 
                        or
                            ``(ii) covered only one or more partners 
                        (and their spouses) in a business partnership 
                        (including partners in an S or C corporation),
                    ``(B) meets the minimum coverage requirements of 
                section 410(b) without being combined with any other 
                plan of the business that covers the employees of the 
                business,
                    ``(C) does not provide benefits to anyone except 
                the employer (and the employer's spouse) or the 
                partners (and their spouses),
                    ``(D) does not cover a business that is a member of 
                an affiliated service group, a controlled group of 
                corporations, or a group of businesses under common 
                control, and
                    ``(E) does not cover a business that leases 
                employees.''.
    (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 investment 
                                        education notices to 
                                        participants.''.
    (c) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply with respect to plan years beginning after December 31, 
        2002.
            (2) Model investment principles.--Not later than the 
        earlier of January 1, 2003, or 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 guidance 
        and model notices which meet the requirements of section 4980G 
        of the Internal Revenue Code of 1986 (as added by this 
        section).

SEC. 102. 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 and at least 1 business day before the 
                beginning of the transaction restriction period.
            ``(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), 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 written 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) Understandability.--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 guidance provided 
        by the Secretary) to allow recipients 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 at least 30 days before 
                the beginning of the transaction restriction period.
                    ``(B) Disposition of stock or assets.--
                            ``(i) In general.--If, in connection with 
                        the major corporate disposition by a 
                        corporation maintaining an applicable pension 
                        plan, there is the possibility of a transaction 
                        restriction period--
                                    ``(I) the notice required by 
                                paragraph (1) shall be provided at 
                                least 30 days before the date of such 
                                disposition, and
                                    ``(II) no other notice shall be 
                                required by paragraph (1) with respect 
                                to such period if notice is provided 
                                pursuant to subclause (I) and such 
                                period begins not more than 30 days 
                                after the date of such disposition.
                        Subclause (I) shall not apply if the plan 
                        administrator has a substantial basis to 
                        believe that there will be no transaction 
                        restriction period in connection with the 
                        disposition.
                            ``(ii) Major corporate disposition.--For 
                        purposes of clause (i), the term `major 
                        corporate disposition' means, with respect to a 
                        corporation--
                                    ``(I) the disposition of 
                                substantially all of the stock of such 
                                corporation or a subsidiary thereof, or
                                    ``(II) the disposition of 
                                substantially all of the assets used in 
                                a trade or business of such corporation 
                                or subsidiary.
                            ``(iii) Noncorporate entities.--Rules 
                        similar to the rules of this subparagraph shall 
                        apply to entities that are not corporations.
                    ``(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 
        this subsection 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 a 
                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.--
                    ``(A) In general.--The term `applicable pension 
                plan' means--
                            ``(i) a plan described in clause (i), (ii), 
                        or (iv) of section 219(g)(5)(A), and
                            ``(ii) 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.
                    ``(B) Exception.--Such term shall not include a 
                one-participant retirement plan (as defined in section 
                4980G(f)(3)).
            ``(3) Transaction restriction period.--
                    ``(A) In general.--The term `transaction 
                restriction period' means a temporary or indefinite 
                period of at least 3 consecutive days during which 
                rights otherwise provided under the plan to 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 or other circumstances 
                specified by the Secretary in regulations). In 
                determining consecutive days, days on which such rights 
                are not normally available shall be disregarded.
                    ``(B) Special rule for employer securities.--
                            ``(i) In general.--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.
                            ``(ii) Business day.--For purposes of 
                        clause (i), under regulations prescribed by the 
                        Secretary, the term `business day' means--
                                    ``(I) in the case of a security 
                                which is traded on an established 
                                security market, any day on which such 
                                security may be traded on the principal 
                                securities market of such security, and
                                    ``(II) in the case of a security 
                                which is not traded on an established 
                                security market, any calendar day.
            ``(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.''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2002.
            (2) Guidance.--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). Such guidance--
                    (A) in the case of a reduction of rights relating 
                to the direction of investments out of employer 
                securities, shall be issued by November 1, 2002 (or, if 
                later, the 60th day after the date of the enactment of 
                this Act), and
                    (B) in any other case shall be issued not later 
                than 120 days after the date of the enactment of this 
                Act.

SEC. 103. 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 and employee contributions 
                invested in employer securities.--In the case of the 
                portion of the account attributable to elective 
                deferrals and employee contributions 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).
                    ``(C) Matching and certain other contributions.--
                            ``(i) In general.--In the case of the 
                        portion of the account attributable to 
                        contributions to which this subparagraph 
                        applies and which is invested in employer 
                        securities, a plan meets the requirements of 
                        this subparagraph if each applicable 3-year 
                        individual in the 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).
                            ``(ii) Contributions to which this 
                        subparagraph applies.--This subparagraph shall 
                        apply to--
                                    ``(I) matching contributions (as 
                                defined in subsection (m)(4)(A)),
                                    ``(II) qualified nonelective 
                                contributions (as defined in subsection 
                                (m)(4)(C)), and
                                    ``(III) contributions made in order 
                                to meet the requirements of subsection 
                                (k)(12)(C). 
                            ``(iii) Applicable 3-year individual.--For 
                        purposes of clause (i), the term `applicable 3-
                        year individual' means any individual who would 
                        be an applicable individual if only 
                        participants in the plan who have completed at 
                        least 3 years of service (as determined under 
                        section 411(a)) were taken into account under 
                        subparagraph (G)(i)(I).
                    ``(D) Other employer contributions.--
                            ``(i) In general.--In the case of the 
                        portion of the account attributable to employer 
                        contributions (other than contributions to 
                        which subparagraph (B) or (C) applies) which is 
                        invested in employer securities, a plan meets 
                        the requirements of this subparagraph if each 
                        applicable 5-year individual described in 
                        clause (ii) 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).
                            ``(ii) Applicable 5-year individual.--For 
                        purposes of clause (i), the term `5-year 
                        individual' means any individual who would be 
                        an applicable individual if only participants 
                        in the plan who have completed at least 5 years 
                        of service (as determined under section 411(a)) 
                        were taken into account under subparagraph 
                        (G)(i)(I).
                    ``(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) Election.--Elections under this paragraph 
                maybe made not less frequently than quarterly.
                    ``(G) Other definitions and rules.--For purposes of 
                this paragraph--
                            ``(i) Applicable individual.--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.
                            ``(ii) Elective deferrals.--The term 
                        `elective deferrals' means an employer 
                        contribution described in section 402(g)(3)(A).
                            ``(iii) 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.
                            ``(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) In general.--The applicable 
                                percentage shall be as follows:

                        ``Plan years                         Applicable
                        beginning in:                       percentage:
                                2003.................              20  
                                2004.................              40  
                                2005.................              60  
                                2006.................              80  
                                2007 or thereafter...            100.  
                                    ``(II) Elective deferrals treated 
                                as separate plan not individual account 
                                plan.--In the case of elective 
                                deferrals and employee contributions 
                                (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.
                                    ``(III) Contributions held within 
                                an esop.--In the case of contributions 
                                (other than elective deferrals and 
                                employee contributions) held within an 
                                employee stock ownership plan, in the 
                                case of years 2003 and 2004, the 
                                applicable percentage shall be the 
                                greater of the amount determined under 
                                subclause (I) or the percentage 
                                determined under paragraph (28) 
                                (determined as if paragraph (28) 
                                applied to a plan described in this 
                                paragraph).
                            ``(vi) Coordination with paragraph (28).--
                        Subparagraphs (B), (C), and (D) shall apply to 
                        the extent that the amount attributable to the 
                        applicable percentage under such subparagraph 
                        exceeds the amount to which a prior election 
                        under such subparagraph or paragraph (28) 
                        applies.
                    ``(H) Exception for certain esops.--This paragraph 
                shall apply to an employee stock ownership plan only if 
                the plan holds amounts attributable to deferrals or 
                contributions to which subparagraph (B) or (C) 
                apply.''.
    (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 
                to a plan to which paragraph (35) applies.''.
            (2) Section 409(h)(7) of such Code is amended by inserting 
        before the period at the end ``or subparagraph (B), (C), or (D) 
        of section 401(a)(35)''.
            (3) 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.''.
    (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. 104. 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 
        provided by a qualified investment advisor 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 taxable years beginning after December 31, 2002.

SEC. 105. SPECIAL RULES.

    (a) 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, the 
amendments made by this title shall not apply to plan years beginning 
before the earlier of--
            (1) the later of--
                    (A) January 1, 2004, 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, 2005.
    (b) Plan Amendments.--If the amendments made by this title require 
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, 
2005, if--
            (1) during the period after such amendments made by this 
        title take effect and before such first plan year, the plan is 
        operated in accordance with the requirements of such amendments 
        made by this title, and
            (2) such plan amendment applies retroactively to the period 
        after such amendments made by this Act take effect and before 
        such first plan year.

          TITLE II--OTHER TAX PROVISIONS RELATING TO PENSIONS

SEC. 201. AMENDMENTS TO RETIREMENT PROTECTION ACT OF 1994.

    (a) Transition Rule Made Permanent.--Paragraph (1) of section 
769(c) of the Retirement Protection Act of 1994 is amended--
            (1) by striking ``transition'' each place it appears in the 
        heading and the text, and
            (2) by striking ``for any plan year beginning after 1996 
        and before 2010''.
    (b) Special Rules.--Paragraph (2) of section 769(c) of the 
Retirement Protection Act of 1994 is amended to read as follows:
            ``(2) Special rules.--The rules described in this paragraph 
        are as follows:
                    ``(A) For purposes of section 412(l)(9)(A) of the 
                Internal Revenue Code of 1986, the funded current 
                liability percentage for any plan year shall be treated 
                as not less than 90 percent.
                    ``(B) For purposes of section 412(m) of the 
                Internal Revenue Code of 1986, the funded current 
                liability percentage for any plan year shall be treated 
                as not less than 100 percent.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2001.

SEC. 202. REPORTING SIMPLIFICATION.

    (a) Simplified Annual Filing Requirement for Owners and Their 
Spouses.--
            (1) In general.--The Secretary of the Treasury and the 
        Secretary of Labor shall modify the requirements for filing 
        annual returns with respect to one-participant retirement plans 
        to ensure that such plans with assets of $250,000 or less as of 
        the close of the plan year need not file a return for that 
        year.
            (2) One-participant retirement plan defined.--For purposes 
        of this subsection, the term ``one-participant retirement 
        plan'' means a retirement plan that--
                    (A) on the first day of the plan year--
                            (i) covered only the employer (and the 
                        employer's spouse) and the employer owned the 
                        entire business (whether or not incorporated); 
                        or
                            (ii) covered only one or more partners (and 
                        their spouses) in a business partnership 
                        (including partners in an S or C corporation);
                    (B) meets the minimum coverage requirements of 
                section 410(b) of the Internal Revenue Code of 1986 
                without being combined with any other plan of the 
                business that covers the employees of the business;
                    (C) does not provide benefits to anyone except the 
                employer (and the employer's spouse) or the partners 
                (and their spouses);
                    (D) does not cover a business that is a member of 
                an affiliated service group, a controlled group of 
                corporations, or a group of businesses under common 
                control; and
                    (E) does not cover a business that leases 
                employees.
            (3) Other definitions.--Terms used in paragraph (2) which 
        are also used in section 414 of the Internal Revenue Code of 
        1986 shall have the respective meanings given such terms by 
        such section.
            (4) Effective date.--The provisions of this subsection 
        shall apply to plan years beginning on or after January 1, 
        2002.
    (b) Simplified Annual Filing Requirement for Plans With Fewer Than 
25 Employees.--In the case of plan years beginning after December 31, 
2003, the Secretary of the Treasury and the Secretary of Labor shall 
provide for the filing of a simplified annual return for any retirement 
plan which covers less than 25 employees on the first day of a plan 
year and which meets the requirements described in subparagraphs (B), 
(D), and (E) of subsection (a)(2).

SEC. 203. IMPROVEMENT OF EMPLOYEE PLANS COMPLIANCE RESOLUTION SYSTEM.

    The Secretary of the Treasury shall continue to update and improve 
the Employee Plans Compliance Resolution System (or any successor 
program) giving special attention to--
            (1) increasing the awareness and knowledge of small 
        employers concerning the availability and use of the program;
            (2) taking into account special concerns and circumstances 
        that small employers face with respect to compliance and 
        correction of compliance failures;
            (3) extending the duration of the self-correction period 
        under the Self-Correction Program for significant compliance 
        failures;
            (4) expanding the availability to correct insignificant 
        compliance failures under the Self-Correction Program during 
        audit; and
            (5) assuring that any tax, penalty, or sanction that is 
        imposed by reason of a compliance failure is not excessive and 
        bears a reasonable relationship to the nature, extent, and 
        severity of the failure.
The Secretary of the Treasury shall have full authority to effectuate 
the foregoing with respect to the Employee Plans Compliance Resolution 
System (or any successor program) and any other employee plans 
correction policies, including the authority to waive income, excise, 
or other taxes to ensure that any tax, penalty, or sanction is not 
excessive and bears a reasonable relationship to the nature, extent, 
and severity of the failure.

SEC. 204. FLEXIBILITY IN NONDISCRIMINATION, COVERAGE, AND LINE OF 
              BUSINESS RULES.

    (a) Nondiscrimination.--
            (1) In general.--The Secretary of the Treasury shall, by 
        regulation, provide that a plan shall be deemed to satisfy the 
        requirements of section 401(a)(4) of the Internal Revenue Code 
        of 1986 if such plan satisfies the facts and circumstances test 
        under section 401(a)(4) of such Code, as in effect before 
        January 1, 1994, but only if--
                    (A) the plan satisfies conditions prescribed by the 
                Secretary to appropriately limit the availability of 
                such test; and
                    (B) the plan is submitted to the Secretary for a 
                determination of whether it satisfies such test.
        Subparagraph (B) shall only apply to the extent provided by the 
        Secretary.
            (2) Effective dates.--
                    (A) Regulations.--The regulation required by 
                paragraph (1) shall apply to years beginning after 
                December 31, 2003.
                    (B) Conditions of availability.--Any condition of 
                availability prescribed by the Secretary under 
                paragraph (1)(A) shall not apply before the first year 
                beginning not less than 120 days after the date on 
                which such condition is prescribed.
    (b) Coverage Test.--
            (1) In general.--Section 410(b)(1) of the Internal Revenue 
        Code of 1986 (relating to minimum coverage requirements) is 
        amended by adding at the end the following:
                    ``(D) In the case that the plan fails to meet the 
                requirements of subparagraphs (A), (B) and (C), the 
                plan--
                            ``(i) satisfies subparagraph (B), as in 
                        effect immediately before the enactment of the 
                        Tax Reform Act of 1986,
                            ``(ii) is submitted to the Secretary for a 
                        determination of whether it satisfies the 
                        requirement described in clause (i), and
                            ``(iii) satisfies conditions prescribed by 
                        the Secretary by regulation that appropriately 
                        limit the availability of this subparagraph.
                Clause (ii) shall apply only to the extent provided by 
                the Secretary.''.
            (2) Effective dates.--
                    (A) In general.--The amendment made by paragraph 
                (1) shall apply to years beginning after December 31, 
                2003.
                    (B) Conditions of availability.--Any condition of 
                availability prescribed by the Secretary under 
                regulations prescribed by the Secretary under section 
                410(b)(1)(D) of the Internal Revenue Code of 1986 shall 
                not apply before the first year beginning not less than 
                120 days after the date on which such condition is 
                prescribed.
    (c) Line of Business Rules.--The Secretary of the Treasury shall, 
on or before December 31, 2003, modify the existing regulations issued 
under section 414(r) of the Internal Revenue Code of 1986 in order to 
expand (to the extent that the Secretary determines appropriate) the 
ability of a pension plan to demonstrate compliance with the line of 
business requirements based upon the facts and circumstances 
surrounding the design and operation of the plan, even though the plan 
is unable to satisfy the mechanical tests currently used to determine 
compliance.

SEC. 205. EXTENSION TO ALL GOVERNMENTAL PLANS OF MORATORIUM ON 
              APPLICATION OF CERTAIN NONDISCRIMINATION RULES APPLICABLE 
              TO STATE AND LOCAL PLANS.

    (a) In General.--
            (1) Subparagraph (G) of section 401(a)(5) of the Internal 
        Revenue Code of 1986 and subparagraph (H) of section 401(a)(26) 
        of such Code are each amended by striking ``section 414(d))'' 
        and all that follows and inserting ``section 414(d)).''.
            (2) Subparagraph (G) of section 401(k)(3) of the Internal 
        Revenue Code of 1986 and paragraph (2) of section 1505(d) of 
        the Taxpayer Relief Act of 1997 are each amended by striking 
        ``maintained by a State or local government or political 
        subdivision thereof (or agency or instrumentality thereof)''.
    (b) Conforming Amendments.--
            (1) The heading for subparagraph (G) of section 401(a)(5) 
        of such Code is amended to read as follows: ``Governmental 
        plans.--''.
            (2) The heading for subparagraph (H) of section 401(a)(26) 
        of such Code is amended to read as follows: ``Exception for 
        governmental plans.--''.
            (3) Subparagraph (G) of section 401(k)(3) of such Code is 
        amended by inserting ``Governmental plans.--'' after ``(G)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2002.

SEC. 206. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.

    (a) Expansion of Period.--
            (1) Amendment of internal revenue code.--
                    (A) In general.--Subparagraph (A) of section 
                417(a)(6) of the Internal Revenue Code of 1986 is 
                amended by striking ``90-day'' and inserting ``180-
                day''.
                    (B) Modification of regulations.--The Secretary of 
                the Treasury shall modify the regulations under 
                sections 402(f), 411(a)(11), and 417 of the Internal 
                Revenue Code of 1986 to substitute ``180 days'' for 
                ``90 days'' each place it appears in Treasury 
                Regulations sections 1.402(f)-1, 1.411(a)-11(c), and 
                1.417(e)-1(b).
            (2) Effective date.--The amendment made by paragraph (1)(A) 
        and the modifications required by paragraph (1)(B) shall apply 
        to years beginning after December 31, 2002.
    (b) Consent Regulation Inapplicable to Certain Distributions.--
            (1) In general.--The Secretary of the Treasury shall modify 
        the regulations under section 411(a)(11) of the Internal 
        Revenue Code of 1986 to provide that the description of a 
        participant's right, if any, to defer receipt of a distribution 
        shall also describe the consequences of failing to defer such 
        receipt.
            (2) Effective date.--
                    (A) In general.--The modifications required by 
                paragraph (1) shall apply to years beginning after 
                December 31, 2002.
                    (B) Reasonable notice.--In the case of any 
                description of such consequences made before the date 
                that is 90 days after the date on which the Secretary 
                of the Treasury issues a safe harbor description under 
                paragraph (1), a plan shall not be treated as failing 
                to satisfy the requirements of section 411(a)(11) of 
                such Code by reason of the failure to provide the 
                information required by the modifications made under 
                paragraph (1) if the Administrator of such plan makes a 
                reasonable attempt to comply with such requirements.

SEC. 207. REDUCED PBGC PREMIUM FOR NEW PLANS OF SMALL EMPLOYERS.

    (a) In General.--Subparagraph (A) of section 4006(a)(3) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1306(a)(3)(A)) is amended--
            (1) in clause (i), by inserting ``other than a new single-
        employer plan (as defined in subparagraph (F)) maintained by a 
        small employer (as so defined),'' after ``single-employer 
        plan,'',
            (2) in clause (iii), by striking the period at the end and 
        inserting ``, and'', and
            (3) by adding at the end the following new clause:
            ``(iv) in the case of a new single-employer plan (as 
        defined in subparagraph (F)) maintained by a small employer (as 
        so defined) for the plan year, $5 for each individual who is a 
        participant in such plan during the plan year.''.
    (b) Definition of New Single-Employer Plan.--Section 4006(a)(3) of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1306(a)(3)) is amended by adding at the end the following new 
subparagraph:
    ``(F)(i) For purposes of this paragraph, a single-employer plan 
maintained by a contributing sponsor shall be treated as a new single-
employer plan for each of its first 5 plan years if, during the 36-
month period ending on the date of the adoption of such plan, the 
sponsor or any member of such sponsor's controlled group (or any 
predecessor of either) did not establish or maintain a plan to which 
this title applies with respect to which benefits were accrued for 
substantially the same employees as are in the new single-employer 
plan.
    ``(ii)(I) For purposes of this paragraph, the term `small employer' 
means an employer which on the first day of any plan year has, in 
aggregation with all members of the controlled group of such employer, 
100 or fewer employees.
    ``(II) In the case of a plan maintained by two or more contributing 
sponsors that are not part of the same controlled group, the employees 
of all contributing sponsors and controlled groups of such sponsors 
shall be aggregated for purposes of determining whether any 
contributing sponsor is a small employer.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plans established after December 31, 2001.

SEC. 208. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR NEW AND SMALL PLANS.

    (a) New Plans.--Subparagraph (E) of section 4006(a)(3) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1306(a)(3)(E)) is amended by adding at the end the following new 
clause:
    ``(v) In the case of a new defined benefit plan, the amount 
determined under clause (ii) for any plan year shall be an amount equal 
to the product of the amount determined under clause (ii) and the 
applicable percentage.  For purposes of this clause, the term 
`applicable percentage' means--
            ``(I) 0 percent, for the first plan year.
            ``(II) 20 percent, for the second plan year.
            ``(III) 40 percent, for the third plan year.
            ``(IV) 60 percent, for the fourth plan year.
            ``(V) 80 percent, for the fifth plan year.
For purposes of this clause, a defined benefit plan (as defined in 
section 3(35)) maintained by a contributing sponsor shall be treated as 
a new defined benefit plan for each of its first 5 plan years if, 
during the 36-month period ending on the date of the adoption of the 
plan, the sponsor and each member of any controlled group including the 
sponsor (or any predecessor of either) did not establish or maintain a 
plan to which this title applies with respect to which benefits were 
accrued for substantially the same employees as are in the new plan.''.
    (b) Small Plans.--Paragraph (3) of section 4006(a) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)), as amended 
by section 207(b), is amended--
            (1) by striking ``The'' in subparagraph (E)(i) and 
        inserting ``Except as provided in subparagraph (G), the'', and
            (2) by inserting after subparagraph (F) the following new 
        subparagraph:
    ``(G)(i) In the case of an employer who has 25 or fewer employees 
on the first day of the plan year, the additional premium determined 
under subparagraph (E) for each participant shall not exceed $5 
multiplied by the number of participants in the plan as of the close of 
the preceding plan year.
    ``(ii) For purposes of clause (i), whether an employer has 25 or 
fewer employees on the first day of the plan year is determined taking 
into consideration all of the employees of all members of the 
contributing sponsor's controlled group. In the case of a plan 
maintained by two or more contributing sponsors, the employees of all 
contributing sponsors and their controlled groups shall be aggregated 
for purposes of determining whether the 25-or-fewer-employees 
limitation has been satisfied.''.
    (c) Effective Dates.--
            (1) Subsection (a).--The amendments made by subsection (a) 
        shall apply to plans established after December 31, 2001.
            (2) Subsection (b).--The amendments made by subsection (b) 
        shall apply to plan years beginning after December 31, 2002.

SEC. 209. AUTHORIZATION FOR PBGC TO PAY INTEREST ON PREMIUM OVERPAYMENT 
              REFUNDS.

    (a) In General.--Section 4007(b) of the Employment Retirement 
Income Security Act of 1974 (29 U.S.C. 1307(b)) is amended--
            (1) by striking ``(b)'' and inserting ``(b)(1)'', and
            (2) by inserting at the end the following new paragraph:
    ``(2) The corporation is authorized to pay, subject to regulations 
prescribed by the corporation, interest on the amount of any 
overpayment of premium refunded to a designated payor. Interest under 
this paragraph shall be calculated at the same rate and in the same 
manner as interest is calculated for underpayments under paragraph 
(1).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to interest accruing for periods beginning not earlier than the 
date of the enactment of this Act.

SEC. 210. SUBSTANTIAL OWNER BENEFITS IN TERMINATED PLANS.

    (a) Modification of Phase-In of Guarantee.--Section 4022(b)(5) of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1322(b)(5)) is amended to read as follows:
    ``(5)(A) For purposes of this paragraph, the term `majority owner' 
means an individual who, at any time during the 60-month period ending 
on the date the determination is being made--
            ``(i) owns the entire interest in an unincorporated trade 
        or business,
            ``(ii) in the case of a partnership, is a partner who owns, 
        directly or indirectly, 50 percent or more of either the 
        capital interest or the profits interest in such partnership, 
        or
            ``(iii) in the case of a corporation, owns, directly or 
        indirectly, 50 percent or more in value of either the voting 
        stock of that corporation or all the stock of that corporation.
For purposes of clause (iii), the constructive ownership rules of 
section 1563(e) of the Internal Revenue Code of 1986 shall apply 
(determined without regard to section 1563(e)(3)(C)).
    ``(B) In the case of a participant who is a majority owner, the 
amount of benefits guaranteed under this section shall equal the 
product of--
            ``(i) a fraction (not to exceed 1) the numerator of which 
        is the number of years from the later of the effective date or 
        the adoption date of the plan to the termination date, and the 
        denominator of which is 10, and
            ``(ii) the amount of benefits that would be guaranteed 
        under this section if the participant were not a majority 
        owner.''.
    (b) Modification of Allocation of Assets.--
            (1) Section 4044(a)(4)(B) of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1344(a)(4)(B)) is amended by 
        striking ``section 4022(b)(5)'' and inserting ``section 
        4022(b)(5)(B)''.
            (2) Section 4044(b) of such Act (29 U.S.C. 1344(b)) is 
        amended--
                    (A) by striking ``(5)'' in paragraph (2) and 
                inserting ``(4), (5),'', and
                    (B) by redesignating paragraphs (3) through (6) as 
                paragraphs (4) through (7), respectively, and by 
                inserting after paragraph (2) the following new 
                paragraph:
            ``(3) If assets available for allocation under paragraph 
        (4) of subsection (a) are insufficient to satisfy in full the 
        benefits of all individuals who are described in that 
        paragraph, the assets shall be allocated first to benefits 
        described in subparagraph (A) of that paragraph. Any remaining 
        assets shall then be allocated to benefits described in 
        subparagraph (B) of that paragraph. If assets allocated to such 
        subparagraph (B) are insufficient to satisfy in full the 
        benefits described in that subparagraph, the assets shall be 
        allocated pro rata among individuals on the basis of the 
        present value (as of the termination date) of their respective 
        benefits described in that subparagraph.''.
    (c) Conforming Amendments.--
            (1) Section 4021 of the Employee Retirement Income Security 
        Act of 1974 (29 U.S.C. 1321) is amended--
                    (A) in subsection (b)(9), by striking ``as defined 
                in section 4022(b)(6)'', and
                    (B) by adding at the end the following new 
                subsection:
    ``(d) For purposes of subsection (b)(9), the term `substantial 
owner' means an individual who, at any time during the 60-month period 
ending on the date the determination is being made--
            ``(1) owns the entire interest in an unincorporated trade 
        or business,
            ``(2) in the case of a partnership, is a partner who owns, 
        directly or indirectly, more than 10 percent of either the 
        capital interest or the profits interest in such partnership, 
        or
            ``(3) in the case of a corporation, owns, directly or 
        indirectly, more than 10 percent in value of either the voting 
        stock of that corporation or all the stock of that corporation.
For purposes of paragraph (3), the constructive ownership rules of 
section 1563(e) of the Internal Revenue Code of 1986 shall apply 
(determined without regard to section 1563(e)(3)(C)).''.
    (2) Section 4043(c)(7) of such Act (29 U.S.C. 1343(c)(7)) is 
amended by striking ``section 4022(b)(6)'' and inserting ``section 
4021(d)''.
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to plan 
        terminations--
                    (A) under section 4041(c) of the Employee 
                Retirement Income Security Act of 1974 (29 U.S.C. 
                1341(c)) with respect to which notices of intent to 
                terminate are provided under section 4041(a)(2) of such 
                Act (29 U.S.C. 1341(a)(2)) after December 31, 2002, and
                    (B) under section 4042 of such Act (29 U.S.C. 1342) 
                with respect to which proceedings are instituted by the 
                corporation after such date.
            (2) Conforming amendments.--The amendments made by 
        subsection (c) shall take effect on January 1, 2003.

SEC. 211. STUDIES.

    (a) Model Small Employer Group Plans Study.--As soon as practicable 
after the date of the enactment of this Act, the Secretary of Labor, in 
consultation with the Secretary of the Treasury, shall conduct a study 
to determine--
            (1) the most appropriate form or forms of--
                    (A) employee pension benefit plans which would--
                            (i) be simple in form and easily maintained 
                        by multiple small employers, and
                            (ii) provide for ready portability of 
                        benefits for all participants and 
                        beneficiaries,
                    (B) alternative arrangements providing comparable 
                benefits which may be established by employee or 
                employer associations, and
                    (C) alternative arrangements providing comparable 
                benefits to which employees may contribute in a manner 
                independent of employer sponsorship, and
            (2) appropriate methods and strategies for making pension 
        plan coverage described in paragraph (1) more widely available 
        to American workers.
    (b) Matters to Be Considered.--In conducting the study under 
subsection (a), the Secretary of Labor shall consider the adequacy and 
availability of existing employee pension benefit plans and the extent 
to which existing models may be modified to be more accessible to both 
employees and employers.
    (c) Report.--Not later than 18 months after the date of the 
enactment of this Act, the Secretary of Labor shall report the results 
of the study under subsection (a), together with the Secretary's 
recommendations, to the Committee on Education and the Workforce and 
the Committee on Ways and Means of the House of Representatives and the 
Committee on Health, Education, Labor, and Pensions and the Committee 
on Finance of the Senate. Such recommendations shall include one or 
more model plans described in subsection (a)(1)(A) and model 
alternative arrangements described in subsections (a)(1)(B) and 
(a)(1)(C) which may serve as the basis for appropriate administrative 
or legislative action.
    (d) Study on Effect of Legislation.--Not later than 5 years after 
the date of the enactment of this Act, the Secretary of Labor shall 
submit to the Committee on Education and the Workforce of the House of 
Representatives and the Committee on Health, Education, Labor, and 
Pensions of the Senate a report on the effect of the provisions of this 
Act and title VI of the Economic Growth and Tax Relief Reconciliation 
Act of 2001 on pension plan coverage, including any change in--
            (1) the extent of pension plan coverage for low and middle-
        income workers,
            (2) the levels of pension plan benefits generally,
            (3) the quality of pension plan coverage generally,
            (4) workers' access to and participation in pension plans, 
        and
            (5) retirement security.

SEC. 212. INTEREST RATE RANGE FOR ADDITIONAL FUNDING REQUIREMENTS.

    (a) In General.--Subclause (III) of section 412(l)(7)(C)(i) of the 
Internal Revenue Code of 1986 is amended--
            (1) by striking ``2002 or 2003'' in the text and inserting 
        ``2001, 2002, or 2003'', and
            (2) by striking ``2002 and 2003'' in the heading and 
        inserting ``2001, 2002, and 2003''.
    (b) Effective Date.--The amendments made by this section shall take 
effect as if included in the amendments made by section 405 of the Job 
Creation and Worker Assistance Act of 2002.

SEC. 213. PROVISIONS RELATING TO PLAN AMENDMENTS.

    (a) In General.--If this section applies to any plan or contract 
amendment--
            (1) such plan or contract shall be treated as being 
        operated in accordance with the terms of the plan for purposes 
        of the Internal Revenue Code of 1986 during the period 
        described in subsection (b)(2)(A), and
            (2) except as provided by the Secretary of the Treasury, 
        such plan shall not fail to meet the requirements of section 
        411(d)(6) of the Internal Revenue Code of 1986 by reason of 
        such amendment.
    (b) Amendments to Which Section Applies.--
            (1) In general.--This section shall apply to any amendment 
        to any plan or annuity contract which is made--
                    (A) pursuant to any amendment made by this title or 
                title VI of the Economic Growth and Tax Relief 
                Reconciliation Act of 2001, or pursuant to any 
                regulation issued by the Secretary of the Treasury 
                under this title or such title VI, and
                    (B) on or before the last day of the first plan 
                year beginning on or after January 1, 2005.
        In the case of a governmental plan (as defined in section 
        414(d) of the Internal Revenue Code of 1986), this paragraph 
        shall be applied by substituting ``2007'' for ``2005''.
            (2) Conditions.--This section shall not apply to any 
        amendment unless--
                    (A) during the period--
                            (i) beginning on the date the legislative 
                        or regulatory amendment described in paragraph 
                        (1)(A) takes effect (or in the case of a plan 
                        or contract amendment not required by such 
                        legislative or regulatory amendment, the 
                        effective date specified by the plan), and
                            (ii) ending on the date described in 
                        paragraph (1)(B) (or, if earlier, the date the 
                        plan or contract amendment is adopted),
                the plan or contract is operated as if such plan or 
                contract amendment were in effect; and
                    (B) such plan or contract amendment applies 
                retroactively for such period.

                        TITLE III--STOCK OPTIONS

SEC. 301. EXCLUSION OF INCENTIVE STOCK OPTIONS AND EMPLOYEE STOCK 
              PURCHASE PLAN STOCK OPTIONS FROM WAGES.

    (a) Exclusion From Employment Taxes.--
            (1) Social security taxes.--
                    (A) Section 3121(a) of the Internal Revenue Code of 
                1986 (relating to definition of wages) is amended by 
                striking ``or'' at the end of paragraph (20), by 
                striking the period at the end of paragraph (21) and 
                inserting ``; or'', and by inserting after paragraph 
                (21) the following new paragraph:
            ``(22) remuneration on account of--
                    ``(A) a transfer of a share of stock to any 
                individual pursuant to an exercise of an incentive 
                stock option (as defined in section 422(b)) or under an 
                employee stock purchase plan (as defined in section 
                423(b)), or
                    ``(B) any disposition by the individual of such 
                stock.''.
                    (B) Section 209(a) of the Social Security Act is 
                amended by striking ``or'' at the end of paragraph 
                (17), by striking the period at the end of paragraph 
                (18) and inserting ``; or'', and by inserting after 
paragraph (18) the following new paragraph:
            ``(19) Remuneration on account of--
                    ``(A) a transfer of a share of stock to any 
                individual pursuant to an exercise of an incentive 
                stock option (as defined in section 422(b) of the 
                Internal Revenue Code of 1986) or under an employee 
                stock purchase plan (as defined in section 423(b) of 
                such Code), or
                    ``(B) any disposition by the individual of such 
                stock.''.
            (2) Railroad retirement taxes.--Subsection (e) of section 
        3231 of such Code is amended by adding at the end the following 
        new paragraph:
            ``(11) Qualified stock options.--The term `compensation' 
        shall not include any remuneration on account of--
                    ``(A) a transfer of a share of stock to any 
                individual pursuant to an exercise of an incentive 
                stock option (as defined in section 422(b)) or under an 
                employee stock purchase plan (as defined in section 
                423(b)), or
                    ``(B) any disposition by the individual of such 
                stock.''.
            (3) Unemployment taxes.--Section 3306(b) of such Code 
        (relating to definition of wages) is amended by striking ``or'' 
        at the end of paragraph (16), by striking the period at the end 
        of paragraph (17) and inserting ``; or'', and by inserting 
        after paragraph (17) the following new paragraph:
            ``(18) remuneration on account of--
                    ``(A) a transfer of a share of stock to any 
                individual pursuant to an exercise of an incentive 
                stock option (as defined in section 422(b)) or under an 
                employee stock purchase plan (as defined in section 
                423(b)), or
                    ``(B) any disposition by the individual of such 
                stock.''.
    (b) Wage Withholding Not Required on Disqualifying Dispositions.--
Section 421(b) of such Code (relating to effect of disqualifying 
dispositions) is amended by adding at the end the following new 
sentence: ``No amount shall be required to be deducted and withheld 
under chapter 24 with respect to any increase in income attributable to 
a disposition described in the preceding sentence.''.
    (c) Wage Withholding Not Required on Compensation Where Option 
Price is Between 85 Percent and 100 Percent of Value of Stock.--Section 
423(c) of such Code (relating to special rule where option price is 
between 85 percent and 100 percent of value of stock) is amended by 
adding at the end the following new sentence: ``No amount shall be 
required to be deducted and withheld under chapter 24 with respect to 
any amount treated as compensation under this subsection.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to stock acquired pursuant to options exercised after the date of 
the enactment of this Act.

          TITLE IV--SOCIAL SECURITY AND MEDICARE HELD HARMLESS

SEC. 401. PROTECTION OF SOCIAL SECURITY AND MEDICARE.

    The amounts transferred to any trust fund under the Social Security 
Act shall be determined as if this Act had not been enacted.




                                                 Union Calendar No. 232

107th CONGRESS

  2d Session

                               H. R. 3669

                      [Report No. 107-382, Part I]

_______________________________________________________________________

                                 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.

_______________________________________________________________________

                             April 9, 2002

 The Committee on Education and the Workforce discharged; committed to 
the Committee of the Whole House on the State of the Union and ordered 
                             to be printed