[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3762 Introduced in House (IH)]







107th CONGRESS
  2d Session
                                H. R. 3762

To amend title I of the Employee Retirement Income Security Act of 1974 
and the Internal Revenue Code of 1986 to provide additional protections 
  to participants and beneficiaries in individual account plans from 
    excessive investment in employer securities and to promote the 
  provision of retirement investment advice to workers managing their 
 retirement income assets, and to amend the Securities Exchange Act of 
1934 to prohibit insider trades during any suspension of the ability of 
   plan participants or beneficiaries to direct investment away from 
                 equity securities of the plan sponsor.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           February 14, 2002

  Mr. Boehner (for himself, Mr. Sam Johnson of Texas, Mr. Oxley, Mr. 
 Fletcher, Mr. Petri, Mrs. Roukema, Mr. McKeon, Mr. Castle, Mr. Upton, 
Mr. Tancredo, Mrs. Biggert, Mr. Keller, Mr. Culberson, Mr. Calvert, Mr. 
   King, Mr. LaTourette, Mr. Hill, Mr. Rehberg, Mr. Boozman, and Mr. 
  Wilson of South Carolina) introduced the following bill; which was 
   referred to the Committee on Education and the Workforce, and in 
 addition to the Committees on Ways and Means, and Financial Services, 
for a period to be subsequently determined by the Speaker, in each case 
for consideration of such provisions as fall within the jurisdiction of 
                        the committee concerned

_______________________________________________________________________

                                 A BILL


 
To amend title I of the Employee Retirement Income Security Act of 1974 
and the Internal Revenue Code of 1986 to provide additional protections 
  to participants and beneficiaries in individual account plans from 
    excessive investment in employer securities and to promote the 
  provision of retirement investment advice to workers managing their 
 retirement income assets, and to amend the Securities Exchange Act of 
1934 to prohibit insider trades during any suspension of the ability of 
   plan participants or beneficiaries to direct investment away from 
                 equity securities of the plan sponsor.

    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 ``Pension Security Act of 2002''.

SEC. 2. IMPROVED DISCLOSURE OF PENSION BENEFIT INFORMATION BY 
              INDIVIDUAL ACCOUNT PLANS.

    (a) Pension Benefit Statements Required on Periodic Basis.--
            (1) In general.--Subsection (a) of section 105 of the 
        Employee Retirement Income Security Act of 1974 (29 U.S.C. 
        1025) is amended by inserting ``and, in the case of an 
        applicable individual account plan, shall furnish at least 
        quarterly to each plan participant (and to each beneficiary 
        with a right to direct investments),'' after ``who so requests 
        in writing,''.
            (2) Information required from individual account plans.--
        Section 105 of such Act (29 U.S.C. 1025) is amended by adding 
        at the end the following new subsection:
    ``(e)(1) The quarterly statements required under subsection (a) 
shall include (together with the information required in subsection 
(a)) the following:
            ``(A) the value of investments allocated to the individual 
        account, including the value of any assets held in the form of 
        employer securities, without regard to whether such securities 
        were contributed by the plan sponsor or acquired at the 
        direction of the plan or of the participant or beneficiary, and 
        an explanation of any limitations or restrictions on the right 
        of the participant or beneficiary to direct an investment; and
            ``(B) an explanation, written in a manner calculated to be 
        understood by the average plan participant, of the importance, 
        for the long-term retirement security of participants and 
        beneficiaries, of a well-balanced and diversified investment 
        portfolio, including a discussion of the risk of holding 
        substantial portions of a portfolio in the security of any one 
        entity, such as employer securities.''.
            (3) Definition of applicable individual account plan.--
        Section 3 of such Act (29 U.S.C. 1002) is amended by adding at 
        the end the following new subsection:
    ``(42) The term `applicable individual account plan' means any 
individual account plan, except that such term does not include an 
employee stock ownership plan (within the meaning of section 4975(e)(7) 
of the Internal Revenue Code of 1986) unless there are any 
contributions to such plan (or earnings thereunder) held within such 
plan that are subject to subsection (k)(3) or (m)(2) of section 401 of 
the Internal Revenue Code of 1986.''.
    (b) Civil Penalties for Failure To Provide Quarterly Benefit 
Statements.--Section 502 of such Act (29 U.S.C. 1132) is amended--
            (1) in subsection (a)(6), by striking ``(5), or (6)'' and 
        inserting ``(5), (6), or (7)'';
            (2) by redesignating paragraph (7) of subsection (c) as 
        paragraph (8); and
            (3) by inserting after paragraph (6) of subsection (c) the 
        following new paragraph:
    ``(7) The Secretary may assess a civil penalty against any plan 
administrator of up to $1,000 a day from the date of such plan 
administrator's failure or refusal to provide participants or 
beneficiaries with a benefit statement on at least a quarterly basis in 
accordance with section 105(a).''.

SEC. 3. PROTECTION FROM SUSPENSIONS, LIMITATIONS, OR RESTRICTIONS ON 
              ABILITY OF PARTICIPANT OR BENEFICIARY TO DIRECT OR 
              DIVERSIFY PLAN ASSETS.

    (a) In General.--Section 101 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1021) is amended--
            (1) by redesignating the second subsection (h) as 
        subsection (j); and
            (2) by inserting after the first subsection (h) the 
        following new subsection:
    ``(i) Notice of Suspension, Limitation, or Restriction on Ability 
of Participant or Beneficiary To Direct Investments in Individual 
Account Plan.--
            ``(1) In general.--In the case of an applicable individual 
        account plan, the administrator shall notify participants and 
        beneficiaries of any action that would have the affect of 
        suspending, limiting, or restricting the ability of 
        participants or beneficiaries to direct or diversify assets 
        credited to their accounts.
            ``(2) Notice requirements.--
                    ``(A) In general.--The notices described in 
                paragraph (1) shall--
                            ``(i) be written in a manner calculated to 
                        be understood by the average plan participant 
                        and shall include the reasons for the 
                        suspension, limitation, or restriction, an 
                        identification of the investments affected, and 
                        the expected period of the suspension, 
                        limitation, or restriction, and
                            ``(ii) be furnished at least 30 days in 
                        advance of the action suspending, limiting, or 
                        restricting the ability of the participants or 
                        beneficiaries to direct or diversify assets.
                    ``(B) Exception to 30-day notice requirement.--In 
                any case in which--
                            ``(i) a fiduciary of the plan determines, 
                        in writing, that a deferral of the suspension, 
                        limitation, or restriction would violate the 
                        requirements of subparagraph (A) or (B) of 
                        section 404(a)(1), or
                            ``(ii) the inability to provide the 30-day 
                        advance notice is due to circumstances beyond 
                        the reasonable control of the plan 
                        administrator,
                subparagraph (A)(ii) shall not apply, and the notice 
                shall be furnished as soon as reasonably possible under 
                the circumstances.
            ``(3) Changes in expected period of suspension, limitation, 
        or restriction.--If, following the furnishing of the notice 
        pursuant to this subsection, there is a change in the expected 
        period of the suspension, limitation, or restriction on the 
        right of a participant or beneficiary to direct or diversify 
        assets, the administrator shall provide affected participants 
        and beneficiaries advance notice of the change. Such notice 
        shall meet the requirements of paragraph (2)(A)(i) in relation 
        to the extended suspension, limitation, or restriction.''.
    (b) Civil Penalties for Failure To Provide Notice.--Section 502 of 
such Act (as amended by section 2(b)) is amended further--
            (1) in subsection (a)(6), by striking ``(6), or (7)'' and 
        inserting ``(6), (7), or (8)'';
            (2) by redesignating paragraph (8) of subsection (c) as 
        paragraph (9); and
            (3) by inserting after paragraph (7) of subsection (c) the 
        following new paragraph:
    ``(8) The Secretary may assess a civil penalty against any person 
of up to $100 a day from the date of the person's failure or refusal to 
provide notice to participants and beneficiaries in accordance with 
section 101(i). For purposes of this paragraph, each violation with 
respect to any single participant or beneficiary, shall be treated as a 
separate violation.''.
    (c) Inapplicability of Relief From Fiduciary Liability During 
Suspension of Ability of Participant or Beneficiary To Direct 
Investments.--Section 404(c)(1) of such Act (29 U.S.C. 1104(c)(1)) is 
amended--
            (1) in subparagraph (B), by inserting before the period the 
        following: ``, except that this subparagraph shall not apply 
        for any period during which the ability of a participant or 
        beneficiary to direct the investment of assets in his or her 
        individual account is suspended by a plan sponsor or 
        fiduciary''; and
            (2) by adding at the end the following:
``Any limitation or restriction that may govern the frequency of 
transfers between investment vehicles shall not be treated as a 
suspension referred to in subparagraph (B) to the extent such 
limitation or restriction is disclosed to participants or beneficiaries 
through the summary plan description or materials describing specific 
investment alternatives under the plan.''.

SEC. 4. LIMITATIONS ON RESTRICTIONS OF INVESTMENTS IN EMPLOYER 
              SECURITIES.

    (a) Amendments to the Employee Retirement Income Security Act of 
1974.--Section 204 of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1107) is amended--
            (1) by redesignating subsection (j) as subsection (k); and
            (2) by inserting after subsection (i) the following new 
        subsection:
    ``(j)(1) An applicable individual account plan may not acquire or 
hold any employer securities with respect to which there is any 
restriction on divestment by a participant or beneficiary on or after 
the date on which the participant has completed 3 years of 
participation (as defined in subsection (b)(4)) under the plan or (if 
the plan so provides) 3 years of service (as defined in section 
203(b)(2)) with the employer.
    ``(2) For purposes of paragraph (1), the term `restriction on 
divestment' includes--
            ``(A) any failure to offer at least 3 diversified 
        investment options in which a participant or beneficiary may 
        direct the proceeds from the divestment of employer securities, 
        and
            ``(B) any restriction on the ability of a participant or 
        beneficiary to choose from all otherwise available investment 
        options in which such proceeds may be so directed.''.
    (b) Amendments to the Internal Revenue Code of 1986.--
            (1) In general.--Subsection (a) of section 401 of the 
        Internal Revenue Code of 1986 (relating to requirements for 
        qualification) is amended by inserting after paragraph (34) the 
        following new paragraph:
            ``(35) Limitations on restrictions under applicable defined 
        contribution plans on investments in employer securities.--
                    ``(A) In general.--A trust forming a part of an 
                applicable defined contribution plan shall not 
                constitute a qualified trust under this subsection if 
                the plan acquires or holds any employer securities with 
                respect to which there is any restriction on divestment 
                by a participant or beneficiary on or after the date on 
                which the participant has completed 3 years of 
                participation (as defined in section 411(b)(4)) under 
                the plan or (if the plan so provides) 3 years of 
                service (as defined in section 411(a)(5)) with the 
                employer.
                    ``(B) Definitions.--For purposes of subparagraph 
                (A)--
                            ``(i) Applicable defined contribution 
                        plan.--The term `applicable defined 
                        contribution plan' means any defined 
                        contribution plan, except that such term does 
                        not include an employee stock ownership plan 
                        (as defined in section 4975(e)(7)) unless there 
                        are any contributions to such plan (or earnings 
                        thereunder) held within such plan that are 
                        subject to subsections (k)(3) or (m)(2).
                            ``(ii) Restriction on divestment.--The term 
                        `restriction on divestment' includes--
                                    ``(I) any failure to offer at least 
                                3 diversified investment options in 
                                which a participant or beneficiary may 
                                direct the proceeds from the divestment 
                                of employer securities, and
                                    ``(II) any restriction on the 
                                ability of a participant or beneficiary 
                                to choose from all otherwise available 
                                investment options in which such 
                                proceeds may be so directed.''.
            (2) Conforming amendment.--Section 401(a)(28)(B) of such 
        Code (relating to diversification of investments) is amended by 
        adding at the end the following new clause:
                            ``(v) Exception.--This subparagraph shall 
                        not apply to an applicable defined contribution 
                        plan (as defined in paragraph (35)(B)(i)).''.

SEC. 5. PROHIBITED TRANSACTION EXEMPTION FOR THE PROVISION OF 
              INVESTMENT ADVICE.

    (a) Amendments to the Employee Retirement Income Security Act of 
1974.--
            (1) Exemption from prohibited transactions.--Section 408(b) 
        of the Employee Retirement Income Security Act of 1974 (29 
        U.S.C. 1108(b)) is amended by adding at the end the following 
        new paragraph:
            ``(14)(A) Any transaction described in subparagraph (B) in 
        connection with the provision of investment advice described in 
        section 3(21)(A)(ii), in any case in which--
                    ``(i) the investment of assets of the plan is 
                subject to the direction of plan participants or 
                beneficiaries,
                    ``(ii) the advice is provided to the plan or a 
                participant or beneficiary of the plan by a fiduciary 
                adviser in connection with any sale, acquisition, or 
                holding of a security or other property for purposes of 
                investment of plan assets, and
                    ``(iii) the requirements of subsection (g) are met 
                in connection with the provision of the advice.
            ``(B) The transactions described in this subparagraph are 
        the following:
                    ``(i) the provision of the advice to the plan, 
                participant, or beneficiary;
                    ``(ii) the sale, acquisition, or holding of a 
                security or other property (including any lending of 
                money or other extension of credit associated with the 
                sale, acquisition, or holding of a security or other 
                property) pursuant to the advice; and
                    ``(iii) the direct or indirect receipt of fees or 
                other compensation by the fiduciary adviser or an 
                affiliate thereof (or any employee, agent, or 
                registered representative of the fiduciary adviser or 
                affiliate) in connection with the provision of the 
                advice or in connection with a sale, acquisition, or 
holding of a security or other property pursuant to the advice.''.
            (2) Requirements.--Section 408 of such Act is amended 
        further by adding at the end the following new subsection:
    ``(g) Requirements Relating to Provision of Investment Advice by 
Fiduciary Advisers.--
            ``(1) In general.--The requirements of this subsection are 
        met in connection with the provision of investment advice 
        referred to in section 3(21)(A)(ii), provided to an employee 
        benefit plan or a participant or beneficiary of an employee 
        benefit plan by a fiduciary adviser with respect to the plan in 
        connection with any sale, acquisition, or holding of a security 
        or other property for purposes of investment of amounts held by 
        the plan, if--
                    ``(A) in the case of the initial provision of the 
                advice with regard to the security or other property by 
                the fiduciary adviser to the plan, participant, or 
                beneficiary, the fiduciary adviser provides to the 
                recipient of the advice, at a time reasonably 
                contemporaneous with the initial provision of the 
                advice, a written notification (which may consist of 
                notification by means of electronic communication)--
                            ``(i) of all fees or other compensation 
                        relating to the advice that the fiduciary 
                        adviser or any affiliate thereof is to receive 
                        (including compensation provided by any third 
                        party) in connection with the provision of the 
                        advice or in connection with the sale, 
                        acquisition, or holding of the security or 
                        other property,
                            ``(ii) of any material affiliation or 
                        contractual relationship of the fiduciary 
                        adviser or affiliates thereof in the security 
                        or other property,
                            ``(iii) of any limitation placed on the 
                        scope of the investment advice to be provided 
                        by the fiduciary adviser with respect to any 
                        such sale, acquisition, or holding of a 
                        security or other property,
                            ``(iv) of the types of services provided by 
                        the fiduciary advisor in connection with the 
                        provision of investment advice by the fiduciary 
                        adviser, and
                            ``(v) that the adviser is acting as a 
                        fiduciary of the plan in connection with the 
                        provision of the advice,
                    ``(B) the fiduciary adviser provides appropriate 
                disclosure, in connection with the sale, acquisition, 
                or holding of the security or other property, in 
                accordance with all applicable securities laws,
                    ``(C) the sale, acquisition, or holding occurs 
                solely at the direction of the recipient of the advice,
                    ``(D) the compensation received by the fiduciary 
                adviser and affiliates thereof in connection with the 
                sale, acquisition, or holding of the security or other 
                property is reasonable, and
                    ``(E) the terms of the sale, acquisition, or 
                holding of the security or other property are at least 
                as favorable to the plan as an arm's length transaction 
                would be.
            ``(2) Standards for presentation of information.--The 
        notification required to be provided to participants and 
        beneficiaries under paragraph (1)(A) shall be written in a 
        clear and conspicuous manner and in a manner calculated to be 
        understood by the average plan participant and shall be 
        sufficiently accurate and comprehensive to reasonably apprise 
        such participants and beneficiaries of the information required 
        to be provided in the notification.
            ``(3) Exemption conditioned on continued availability of 
        required information on request for 1 year.--The requirements 
        of paragraph (1)(A) shall be deemed not to have been met in 
        connection with the initial or any subsequent provision of 
        advice described in paragraph (1) to the plan, participant, or 
        beneficiary if, at any time during the provision of advisory 
        services to the plan, participant, or beneficiary, the 
        fiduciary adviser fails to maintain the information described 
        in clauses (i) through (iv) of subparagraph (A) in currently 
        accurate form and in the manner described in paragraph (2) or 
        fails--
                    ``(A) to provide, without charge, such currently 
                accurate information to the recipient of the advice no 
                less than annually,
                    ``(B) to make such currently accurate information 
                available, upon request and without charge, to the 
                recipient of the advice, or
                    ``(C) in the event of a material change to the 
                information described in clauses (i) through (iv) of 
                paragraph (1)(A), to provide, without charge, such 
                currently accurate information to the recipient of the 
advice at a time reasonably contemporaneous to the material change in 
information.
            ``(4) Maintenance for 6 years of evidence of compliance.--A 
        fiduciary adviser referred to in paragraph (1) who has provided 
        advice referred to in such paragraph shall, for a period of not 
        less than 6 years after the provision of the advice, maintain 
        any records necessary for determining whether the requirements 
        of the preceding provisions of this subsection and of 
        subsection (b)(14) have been met. A transaction prohibited 
        under section 406 shall not be considered to have occurred 
        solely because the records are lost or destroyed prior to the 
        end of the 6-year period due to circumstances beyond the 
        control of the fiduciary adviser.
            ``(5) Exemption for plan sponsor and certain other 
        fiduciaries.--
                    ``(A) In general.--Subject to subparagraph (B), a 
                plan sponsor or other person who is a fiduciary (other 
                than a fiduciary adviser) shall not be treated as 
                failing to meet the requirements of this part solely by 
                reason of the provision of investment advice referred 
                to in section 3(21)(A)(ii) (or solely by reason of 
                contracting for or otherwise arranging for the 
                provision of the advice), if--
                            ``(i) the advice is provided by a fiduciary 
                        adviser pursuant to an arrangement between the 
                        plan sponsor or other fiduciary and the 
                        fiduciary adviser for the provision by the 
                        fiduciary adviser of investment advice referred 
                        to in such section,
                            ``(ii) the terms of the arrangement require 
                        compliance by the fiduciary adviser with the 
                        requirements of this subsection, and
                            ``(iii) the terms of the arrangement 
                        include a written acknowledgment by the 
                        fiduciary adviser that the fiduciary adviser is 
                        a fiduciary of the plan with respect to the 
                        provision of the advice.
                    ``(B) Continued duty of prudent selection of 
                adviser and periodic review.--Nothing in subparagraph 
                (A) shall be construed to exempt a plan sponsor or 
                other person who is a fiduciary from any requirement of 
                this part for the prudent selection and periodic review 
                of a fiduciary adviser with whom the plan sponsor or 
                other person enters into an arrangement for the 
                provision of advice referred to in section 
                3(21)(A)(ii). The plan sponsor or other person who is a 
                fiduciary has no duty under this part to monitor the 
                specific investment advice given by the fiduciary 
                adviser to any particular recipient of the advice.
                    ``(C) Availability of plan assets for payment for 
                advice.--Nothing in this part shall be construed to 
                preclude the use of plan assets to pay for reasonable 
                expenses in providing investment advice referred to in 
                section 3(21)(A)(ii).
            ``(6) Definitions.--For purposes of this subsection and 
        subsection (b)(14)--
                    ``(A) Fiduciary adviser.--The term `fiduciary 
                adviser' means, with respect to a plan, a person who is 
                a fiduciary of the plan by reason of the provision of 
                investment advice by the person to the plan or to a 
                participant or beneficiary and who is--
                            ``(i) registered as an investment adviser 
                        under the Investment Advisers Act of 1940 (15 
                        U.S.C. 80b-1 et seq.) or under the laws of the 
                        State in which the fiduciary maintains its 
                        principal office and place of business,
                            ``(ii) a bank or similar financial 
                        institution referred to in section 408(b)(4),
                            ``(iii) an insurance company qualified to 
                        do business under the laws of a State,
                            ``(iv) a person registered as a broker or 
                        dealer under the Securities Exchange Act of 
                        1934 (15 U.S.C. 78a et seq.),
                            ``(v) an affiliate of a person described in 
                        any of clauses (i) through (iv), or
                            ``(vi) an employee, agent, or registered 
                        representative of a person described in any of 
                        clauses (i) through (v) who satisfies the 
                        requirements of applicable insurance, banking, 
                        and securities laws relating to the provision 
                        of the advice.
                    ``(B) Affiliate.--The term `affiliate' of another 
                entity means an affiliated person of the entity (as 
                defined in section 2(a)(3) of the Investment Company 
                Act of 1940 (15 U.S.C. 80a-2(a)(3))).
                    ``(C) Registered representative.--The term 
                `registered representative' of another entity means a 
                person described in section 3(a)(18) of the Securities 
                Exchange Act of 1934 (15 U.S.C. 78c(a)(18)) 
                (substituting the entity for the broker or dealer 
                referred to in such section) or a person described in 
                section 202(a)(17) of the Investment Advisers Act of 
                1940 (15 U.S.C. 80b-2(a)(17)) (substituting the entity 
                for the investment adviser referred to in such 
                section).''.
    (b) Amendments to the Internal Revenue Code of 1986.--
            (1) Exemption from prohibited transactions.--Subsection (d) 
        of section 4975 of the Internal Revenue Code of 1986 (relating 
        to exemptions from tax on prohibited transactions) is amended--
                    (A) in paragraph (14), by striking ``or'' at the 
                end;
                    (B) in paragraph (15), by striking the period at 
                the end and inserting ``; or''; and
                    (C) by adding at the end the following new 
                paragraph:
            ``(16) any transaction described in subsection (f)(7)(A) in 
        connection with the provision of investment advice described in 
        subsection (e)(3)(B), in any case in which--
                    ``(A) the investment of assets of the plan is 
                subject to the direction of plan participants or 
                beneficiaries,
                    ``(B) the advice is provided to the plan or a 
                participant or beneficiary of the plan by a fiduciary 
                adviser in connection with any sale, acquisition, or 
                holding of a security or other property for purposes of 
                investment of plan assets, and
                    ``(C) the requirements of subsection (f)(7)(B) are 
                met in connection with the provision of the advice.''.
            (2) Allowed transactions and requirements.--Subsection (f) 
        of such section 4975 (relating to other definitions and special 
        rules) is amended by adding at the end the following new 
        paragraph:
            ``(7) Provisions relating to investment advice provided by 
        fiduciary advisers.--
                    ``(A) Transactions allowable in connection with 
                investment advice provided by fiduciary advisers.--The 
                transactions referred to in subsection (d)(16), in 
                connection with the provision of investment advice by a 
                fiduciary adviser, are the following:
                            ``(i) the provision of the advice to the 
                        plan, participant, or beneficiary;
                            ``(ii) the sale, acquisition, or holding of 
                        a security or other property (including any 
                        lending of money or other extension of credit 
                        associated with the sale, acquisition, or 
                        holding of a security or other property) 
                        pursuant to the advice; and
                            ``(iii) the direct or indirect receipt of 
                        fees or other compensation by the fiduciary 
                        adviser or an affiliate thereof (or any 
                        employee, agent, or registered representative 
                        of the fiduciary adviser or affiliate) in 
                        connection with the provision of the advice or 
                        in connection with a sale, acquisition, or 
                        holding of a security or other property 
                        pursuant to the advice.
                    ``(B) Requirements relating to provision of 
                investment advice by fiduciary advisers.--The 
                requirements of this subparagraph (referred to in 
                subsection (d)(16)(C)) are met in connection with the 
                provision of investment advice referred to in 
                subsection (e)(3)(B), provided to a plan or a 
                participant or beneficiary of a plan by a fiduciary 
                adviser with respect to the plan in connection with any 
                sale, acquisition, or holding of a security or other 
                property for purposes of investment of amounts held by 
                the plan, if--
                            ``(i) in the case of the initial provision 
                        of the advice with regard to the security or 
                        other property by the fiduciary adviser to the 
                        plan, participant, or beneficiary, the 
                        fiduciary adviser provides to the recipient of 
                        the advice, at a time reasonably 
                        contemporaneous with the initial provision of 
                        the advice, a written notification (which may 
                        consist of notification by means of electronic 
                        communication)--
                                    ``(I) of all fees or other 
                                compensation relating to the advice 
                                that the fiduciary adviser or any 
                                affiliate thereof is to receive 
                                (including compensation provided by any 
                                third party) in connection with the 
                                provision of the advice or in 
                                connection with the sale, acquisition, 
                                or holding of the security or other 
                                property,
                                    ``(II) of any material affiliation 
                                or contractual relationship of the 
                                fiduciary adviser or affiliates thereof 
                                in the security or other property,
                                    ``(III) of any limitation placed on 
                                the scope of the investment advice to 
                                be provided by the fiduciary adviser 
                                with respect to any such sale, 
                                acquisition, or holding of a security 
                                or other property,
                                    ``(IV) of the types of services 
                                provided by the fiduciary advisor in 
                                connection with the provision of 
                                investment advice by the fiduciary 
                                adviser, and
                                    ``(V) that the adviser is acting as 
                                a fiduciary of the plan in connection 
                                with the provision of the advice,
                            ``(ii) the fiduciary adviser provides 
                        appropriate disclosure, in connection with the 
                        sale, acquisition, or holding of the security 
                        or other property, in accordance with all 
                        applicable securities laws,
                            ``(iii) the sale, acquisition, or holding 
                        occurs solely at the direction of the recipient 
                        of the advice,
                            ``(iv) the compensation received by the 
                        fiduciary adviser and affiliates thereof in 
                        connection with the sale, acquisition, or 
                        holding of the security or other property is 
                        reasonable, and
                            ``(v) the terms of the sale, acquisition, 
                        or holding of the security or other property 
                        are at least as favorable to the plan as an 
                        arm's length transaction would be.
                    ``(C) Standards for presentation of information.--
                The notification required to be provided to 
                participants and beneficiaries under subparagraph 
                (B)(i) shall be written in a clear and conspicuous 
                manner and in a manner calculated to be understood by 
                the average plan participant and shall be sufficiently 
                accurate and comprehensive to reasonably apprise such 
                participants and beneficiaries of the information 
                required to be provided in the notification.
                    ``(D) Exemption conditioned on making required 
                information available annually, on request, and in the 
                event of material change.--The requirements of 
                subparagraph (B)(i) shall be deemed not to have been 
                met in connection with the initial or any subsequent 
provision of advice described in subparagraph (B) to the plan, 
participant, or beneficiary if, at any time during the provision of 
advisory services to the plan, participant, or beneficiary, the 
fiduciary adviser fails to maintain the information described in 
subclauses (I) through (IV) of subparagraph (B)(i) in currently 
accurate form and in the manner required by subparagraph (C), or 
fails--
                            ``(i) to provide, without charge, such 
                        currently accurate information to the recipient 
                        of the advice no less than annually,
                            ``(ii) to make such currently accurate 
                        information available, upon request and without 
                        charge, to the recipient of the advice, or
                            ``(iii) in the event of a material change 
                        to the information described in subclauses (I) 
                        through (IV) of subparagraph (B)(i), to 
                        provide, without charge, such currently 
                        accurate information to the recipient of the 
                        advice at a time reasonably contemporaneous to 
                        the material change in information.
                    ``(E) Maintenance for 6 years of evidence of 
                compliance.--A fiduciary adviser referred to in 
                subparagraph (B) who has provided advice referred to in 
                such subparagraph shall, for a period of not less than 
                6 years after the provision of the advice, maintain any 
                records necessary for determining whether the 
                requirements of the preceding provisions of this 
                paragraph and of subsection (d)(16) have been met. A 
                transaction prohibited under subsection (c)(1) shall 
                not be considered to have occurred solely because the 
                records are lost or destroyed prior to the end of the 
                6-year period due to circumstances beyond the control 
                of the fiduciary adviser.
                    ``(F) Exemption for plan sponsor and certain other 
                fiduciaries.--A plan sponsor or other person who is a 
                fiduciary (other than a fiduciary adviser) shall not be 
                treated as failing to meet the requirements of this 
                section solely by reason of the provision of investment 
                advice referred to in subsection (e)(3)(B) (or solely 
                by reason of contracting for or otherwise arranging for 
                the provision of the advice), if--
                            ``(i) the advice is provided by a fiduciary 
                        adviser pursuant to an arrangement between the 
                        plan sponsor or other fiduciary and the 
                        fiduciary adviser for the provision by the 
                        fiduciary adviser of investment advice referred 
                        to in such section,
                            ``(ii) the terms of the arrangement require 
                        compliance by the fiduciary adviser with the 
                        requirements of this paragraph,
                            ``(iii) the terms of the arrangement 
                        include a written acknowledgment by the 
                        fiduciary adviser that the fiduciary adviser is 
                        a fiduciary of the plan with respect to the 
                        provision of the advice, and
                            ``(iv) the requirements of part 4 of 
                        subtitle B of title I of the Employee 
                        Retirement Income Security Act of 1974 are met 
                        in connection with the provision of such 
                        advice.
                    ``(G) Definitions.--For purposes of this paragraph 
                and subsection (d)(16)--
                            ``(i) Fiduciary adviser.--The term 
                        `fiduciary adviser' means, with respect to a 
                        plan, a person who is a fiduciary of the plan 
                        by reason of the provision of investment advice 
                        by the person to the plan or to a participant 
                        or beneficiary and who is--
                                    ``(I) registered as an investment 
                                adviser under the Investment Advisers 
                                Act of 1940 (15 U.S.C. 80b-1 et seq.) 
                                or under the laws of the State in which 
                                the fiduciary maintains its principal 
                                office and place of business,
                                    ``(II) a bank or similar financial 
                                institution referred to in subsection 
                                (d)(4),
                                    ``(III) an insurance company 
                                qualified to do business under the laws 
                                of a State,
                                    ``(IV) a person registered as a 
                                broker or dealer under the Securities 
                                Exchange Act of 1934 (15 U.S.C. 78a et 
                                seq.),
                                    ``(V) an affiliate of a person 
                                described in any of subclauses (I) 
                                through (IV), or
                                    ``(VI) an employee, agent, or 
                                registered representative of a person 
                                described in any of subclauses (I) 
                                through (V) who satisfies the 
                                requirements of applicable insurance, 
                                banking, and securities laws relating 
                                to the provision of the advice.
                            ``(ii) Affiliate.--The term `affiliate' of 
                        another entity means an affiliated person of 
                        the entity (as defined in section 2(a)(3) of 
                        the Investment Company Act of 1940 (15 U.S.C. 
                        80a-2(a)(3))).
                            ``(iii) Registered representative.--The 
                        term `registered representative' of another 
                        entity means a person described in section 
                        3(a)(18) of the Securities Exchange Act of 1934 
                        (15 U.S.C. 78c(a)(18)) (substituting the entity 
                        for the broker or dealer referred to in such 
                        section) or a person described in section 
                        202(a)(17) of the Investment Advisers Act of 
                        1940 (15 U.S.C. 80b-2(a)(17)) (substituting the 
                        entity for the investment adviser referred to 
                        in such section).''.

SEC. 6. INSIDER TRADES DURING PENSION PLAN SUSPENSION PERIODS 
              PROHIBITED.

    Section 16 of the Securities Exchange Act of 1934 (15 U.S.C. 78p) 
is amended by adding at the end the following new subsection:
    ``(h) Insider Trades During Pension Plan Suspension Periods 
Prohibited.--
            ``(1) Prohibition.--It shall be unlawful for any such 
        beneficial owner, director, or officer of an issuer, directly 
        or indirectly, to purchase (or otherwise acquire) or sell (or 
        otherwise transfer) any equity security of such issuer (other 
        than an exempted security), during any pension plan suspension 
        period with respect to such equity security.
            ``(2) Remedy.--Any profit realized by such beneficial 
        owner, director, or officer from any purchase (or other 
        acquisition) or sale (or other transfer) in violation of this 
        subsection shall inure to and be recoverable by the issuer 
        irrespective of any intention on the part of such beneficial 
        owner, director, or officer in entering into the transaction.
            ``(3) Rulemaking permitted.--The Commission may issue rules 
        to clarify the application of this subsection, to ensure 
        adequate notice to all persons affected by this subsection, and 
        to prevent evasion thereof.
            ``(4) Definitions.--For purposes of this subsection--
                    ``(A) Pension plan suspension period.--The term 
                `pension plan suspension period' means, with respect to 
                an equity security, any period during which the ability 
                of a participant or beneficiary under an applicable 
                individual account plan maintained by the issuer to 
                direct the investment of assets in his or her 
                individual account away from such equity security is 
                suspended by the issuer or a fiduciary of the plan. 
                Such term does not include any limitation or 
                restriction that may govern the frequency of transfers 
                between investment vehicles to the extent such 
                limitation and restriction is disclosed to participants 
                and beneficiaries through the summary plan description 
                or materials describing specific investment 
                alternatives under the plan.
                    ``(B) Applicable individual account plan.--The term 
                `applicable individual account plan' has the meaning 
                provided such term in section 3(42) of the Employee 
                Retirement Income Security Act of 1974.''.

SEC. 7. EFFECTIVE DATES AND RELATED RULES.

    (a) In General.--Except as provided in subsection (b), the 
amendments made by sections 2, 3, 4, and 6 shall apply with respect to 
plan years beginning on or after January 1, 2003.
    (b) Special Rule for Collectively Bargained Plans.--In the case of 
a plan maintained pursuant to 1 or more collective bargaining 
agreements between employee representatives and 1 or more employers 
ratified on or before the date of the enactment of this Act, subsection 
(a) shall be applied to benefits pursuant to, and individuals covered 
by, any such agreement by substituting for ``January 1, 2003'' the date 
of the commencement of the first plan year beginning on or after 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.
    (c) Plan Amendments.--If the amendments made by sections 2, 3, and 
4 of this Act 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 
        Act take effect and before such first plan year, the plan is 
        operated in accordance with the requirements of such amendments 
        made by this Act, 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.
    (d) Amendments Relating to Investment Advice.--The amendments made 
by section 5 shall apply with respect to advice referred to in section 
3(21)(A)(ii) of the Employee Retirement Income Security Act of 1974 or 
section 4975(c)(3)(B) of the Internal Revenue Code of 1986 provided on 
or after January 1, 2003.
                                 <all>