[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3762 Referred in Senate (RFS)]

  2d Session
                                H. R. 3762


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 15, 2002

     Received; read twice and referred to the Committee on Health, 
                     Education, Labor, and Pensions

_______________________________________________________________________

                                 AN ACT


 
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 AND TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Pension Security 
Act of 2002''.
    (b) Table of Contents.--The table of contents is as follows:

Sec. 1. Short title and table of contents.
               TITLE I--IMPROVEMENTS IN PENSION SECURITY

Sec. 101. Periodic pension benefits statements.
Sec. 102. Protection from suspensions, limitations, or restrictions on 
                            ability of participant or beneficiary to 
                            direct or diversify plan assets.
Sec. 103. Informational and educational support for pension plan 
                            fiduciaries.
Sec. 104. Diversification requirements for defined contribution plans 
                            that hold employer securities.
Sec. 105. Prohibited transaction exemption for the provision of 
                            investment advice.
Sec. 106. Study regarding impact on retirement savings of participants 
                            and beneficiaries by requiring consultants 
                            to advise plan fiduciaries of individual 
                            account plans.
Sec. 107. Treatment of qualified retirement planning services.
Sec. 108. Insider trades during pension fund blackout periods 
                            prohibited.
Sec. 109. Effective dates of title and related rules.
            TITLE II--OTHER 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. Annual report dissemination.
Sec. 208. Technical corrections to Saver Act.
Sec. 209. Missing participants.
Sec. 210. Reduced PBGC premium for new plans of small employers.
Sec. 211. Reduction of additional PBGC premium for new and small plans.
Sec. 212. Authorization for PBGC to pay interest on premium overpayment 
                            refunds.
Sec. 213. Substantial owner benefits in terminated plans.
Sec. 214. Benefit suspension notice.
Sec. 215. Studies.
Sec. 216. Interest rate range for additional funding requirements.
Sec. 217. 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--IMPROVEMENTS IN PENSION SECURITY

SEC. 101. PERIODIC PENSION BENEFITS STATEMENTS.

    (a) Amendments to the Employee Retirement Income Security Act of 
1974.--
            (1) Requirements.--
                    (A) In general.--Section 105(a) of the Employee 
                Retirement Income Security Act of 1974 (29 U.S.C. 
                1025(a)) is amended to read as follows:
    ``(a)(1)(A) The administrator of an individual account plan shall 
furnish a pension benefit statement--
            ``(i) to each plan participant at least annually,
            ``(ii) to each plan beneficiary upon written request, and
            ``(iii) in the case of an applicable individual account 
        plan, to each plan participant (and to each beneficiary with a 
        right to direct investments) at least quarterly.
    ``(B) The administrator of a defined benefit plan shall furnish a 
pension benefit statement--
            ``(i) at least once every 3 years to each participant with 
        a nonforfeitable accrued benefit who is employed by the 
        employer maintaining the plan at the time the statement is 
        furnished to participants, and
            ``(ii) to a plan participant or plan beneficiary of the 
        plan upon written request.
    ``(2) A pension benefit statement under paragraph (1)--
            ``(A) shall indicate, on the basis of the latest available 
        information--
                    ``(i) the total benefits accrued, and
                    ``(ii) the nonforfeitable pension benefits, if any, 
                which have accrued, or the earliest date on which 
                benefits will become nonforfeitable,
            ``(B) shall be written in a manner calculated to be 
        understood by the average plan participant, and
            ``(C) may be provided in written form or in electronic or 
        other appropriate form to the extent that such form is 
        reasonably accessible to the recipient.
    ``(3) In the case of an applicable individual account plan, the 
requirements of paragraph (1)(A) shall be treated as met if the 
quarterly statement (together with the information required in 
subparagraphs (A) and (B) of subsection (d)(1)) is available 
electronically in reasonably accessible form, and the participant or 
beneficiary is provided at least once each year a notice that such 
statement (together with such information) is available in such form. 
Such notice shall be in written, electronic, or other appropriate form.
    ``(4)(A) In the case of a defined benefit plan, the requirements of 
paragraph (1)(B)(i) shall be treated as met with respect to a 
participant if the administrator provides the participant at least once 
each year with notice of the availability of the pension benefit 
statement and the ways in which the participant may obtain such 
statement. Such notice shall be provided in written, electronic, or 
other appropriate form, and may be included with other communications 
to the participant if done in a manner reasonably designed to attract 
the attention of the participant.
    ``(B) The Secretary may provide that years in which no employee or 
former employee benefits (within the meaning of section 410(b) of the 
Internal Revenue Code of 1986) under the plan need not be taken into 
account in determining the 3-year period under paragraph (1)(B)(i).''.
                    (B) Conforming amendments.--
                            (i) Section 105 of the Employee Retirement 
                        Income Security Act of 1974 (29 U.S.C. 1025) is 
                        amended by striking subsection (d).
                            (ii) Section 105(b) of such Act (29 U.S.C. 
                        1025(b)) is amended to read as follows:
    ``(b) In no case shall a participant or beneficiary of a plan be 
entitled to more than one statement described in clause (i) or (ii) of 
subsection (a)(1)(A) or clause (i) or (ii) of subsection (a)(1)(B), 
whichever is applicable, in any 12-month period. If such report is 
required under subsection (a) to be furnished at least quarterly, the 
requirements of the preceding sentence shall be applied with respect to 
each quarter in lieu of the 12-month period.''.
            (2) Information required from applicable individual account 
        plans.--Section 105 of such Act (as amended by paragraph (1)) 
        is amended further by adding at the end the following new 
        subsection:
    ``(d)(1) The statements required to be provided at least quarterly 
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 more 
        than 25 percent of a portfolio in the security of any one 
        entity, such as employer securities.
    ``(2) The value of any employer securities that are not readily 
tradable on an established securities market that is required to be 
reported under paragraph (1)(A) may be determined by using the most 
recent valuation of the employer securities.
    ``(3) The Secretary shall issue guidance and model notices which 
meet the requirements of this subsection.''.
            (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 paragraph:
    ``(42)(A) 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. Such term shall not include a one-
participant retirement plan.
    ``(B) The term `one-participant retirement plan' means a retirement 
plan that--
            ``(i) 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),
            ``(ii) meets the minimum coverage requirements of section 
        410(b) of the Internal Revenue Code of 1986 (as in effect on 
        the date of the enactment of this paragraph) without being 
        combined with any other plan of the business that covers the 
        employees of the business,
            ``(iii) does not provide benefits to anyone except the 
        employer (and the employer's spouse) or the partners (and their 
        spouses),
            ``(iv) 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
            ``(v) does not cover a business that leases employees.''.
            (4) Civil penalties for failure to provide quarterly 
        benefit statements.--Section 502 of such Act (29 U.S.C. 1132) 
        is amended--
                    (A) in subsection (a)(6), by striking ``(5), or 
                (6)'' and inserting ``(5), (6), or (7)'';
                    (B) by redesignating paragraph (7) of subsection 
                (c) as paragraph (8); and
                    (C) 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)(1)(A)(iii).''.
            (5) Model statements.--The Secretary of Labor shall, not 
        later than January 1, 2003, issue initial guidance and a model 
        benefit statement, written in a manner calculated to be 
        understood by the average plan participant, that may be used by 
        plan administrators in complying with the requirements of 
        section 105 of the Employee Retirement Income Security Act of 
        1974. Not later than 75 days after the date of the enactment of 
        this Act, the Secretary shall promulgate interim final rules 
        necessary to carry out the amendments made by this subsection.
    (b) Amendments to the Internal Revenue Code of 1986.--
            (1) Provision of investment education notices to 
        participants in certain plans.--Section 414 of the Internal 
        Revenue Code of 1986 (relating to definitions and special 
        rules) is amended by adding at the end the following:
    ``(w) Provision of Investment Education Notices to Participants in 
Certain Plans.--
            ``(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 annually 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 (or electronically posted on 
        the plan's website) to the extent that such form is reasonably 
        accessible to the applicable individual.
            ``(5) Definitions.--For purposes of this subsection--
                    ``(A) Applicable individual.--The term `applicable 
                individual' means--
                            ``(i) any participant in the applicable 
                        pension plan,
                            ``(ii) 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
                            ``(iii) any beneficiary of a deceased 
                        participant or alternate payee.
                    ``(B) Applicable pension plan.--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 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 or a plan 
        to which section 105 of the Employee Retirement Income Security 
        Act of 1974 applies.
                    ``(C) One-participant retirement plan defined.--The 
                term `one-participant retirement plan' means a 
                retirement plan that--
                            ``(i) 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),
                            ``(ii) 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,
                            ``(iii) does not provide benefits to anyone 
                        except the employer (and the employer's spouse) 
                        or the partners (and their spouses),
                            ``(iv) 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
                            ``(v) does not cover a business that leases 
                        employees.
            ``(6) Cross reference.--

                                ``For provisions relating to penalty 
for failure to provide the notice required by this section, see section 
6652(m).''.
            (2) Penalty for failure to provide notice.--Section 6652 of 
        such Code (relating to failure to file certain information 
        returns, registration statements, etc.) is amended by 
        redesignating subsection (m) as subsection (n) and by inserting 
        after subsection (l) the following new subsection:
    ``(m) Failure to Provide Investment Education Notices to 
Participants in Certain Plans.--In the case of each failure to provide 
a written explanation as required by section 414(w) with respect to an 
applicable individual (as defined in such section), at the time 
prescribed therefor, unless it is shown that such failure is due to 
reasonable cause and not to willful neglect, there shall be paid, on 
notice and demand of the Secretary and in the same manner as tax, by 
the person failing to provide such notice, an amount equal to $100 for 
each such failure, but the total amount imposed on such person for all 
such failures during any calendar year shall not exceed $50,000.''.

SEC. 102. PROTECTION FROM SUSPENSIONS, LIMITATIONS, OR RESTRICTIONS ON 
              ABILITY OF PARTICIPANT OR BENEFICIARY TO DIRECT OR 
              DIVERSIFY PLAN ASSETS.

    (a) Amendments to the Employee Retirement Income Security Act of 
1974.--
            (1) Notice requirements.--
                    (A) In general.--Section 101 of the Employee 
                Retirement Income Security Act of 1974 (29 U.S.C. 1021) 
                is amended--
                            (i) by redesignating the second subsection 
                        (h) as subsection (j); and
                            (ii) 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) Duties of plan administrator.--
                    ``(A) In general.--In the case of any action having 
                the effect of temporarily suspending, limiting, or 
                restricting any ability of participants or 
                beneficiaries under an applicable individual account 
                plan, which is otherwise available under the terms of 
                such plan, to direct or diversify assets credited to 
                their accounts, if such suspension, limitation, or 
                restriction is for any period of more than 3 
                consecutive business days, the plan administrator 
                shall--
                            ``(i) in advance of taking such action, 
                        determine, in accordance with the requirements 
                        of part 4, that the expected period of 
                        suspension, limitation, or restriction is 
                        reasonable, and
                            ``(ii) after making the determination under 
                        subparagraph (A) and in advance of taking such 
                        action, notify the plan participants and 
                        beneficiaries who are affected by such action 
                        in accordance with this subsection.
                    ``(B) Exceptions.--Subparagraph (A) does not apply 
                in connection with any suspension, limitation, or 
                restriction--
                            ``(i) which occurs by reason of the 
                        application of the securities laws (as defined 
                        in section 3(a)(47) of the Securities Exchange 
                        Act of 1934), or
                            ``(ii) to the extent the suspension, 
                        limitation, or restriction is a change to the 
                        terms of the plan disclosed to participants or 
                        beneficiaries through the summary plan 
                        description or materials describing specific 
                        investment alternatives under the plan.
                    ``(C) Business day.--For purposes of subparagraph 
                (A), 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.
            ``(2) Notice requirements.--
                    ``(A) In general.--The notices described in 
                paragraph (1) shall be written in a manner calculated 
                to be understood by the average plan participant and 
                shall include--
                            ``(i) the reasons for the suspension, 
                        limitation, or restriction,
                            ``(ii) an identification of the investments 
                        affected,
                            ``(iii) the expected period of the 
                        suspension, limitation, or restriction,
                            ``(iv) a statement that the plan 
                        administrator has evaluated the reasonableness 
                        of the expected period of suspension, 
                        limitation, or restriction,
                            ``(v) a statement that the participant or 
                        beneficiary should evaluate the appropriateness 
                        of their current investment decisions in light 
                        of their inability to direct or diversify 
                        assets credited to their accounts during the 
                        expected period of suspension, limitation, or 
                        restriction, and
                            ``(vi) such other matters as the Secretary 
                        may include in the model notices issued under 
                        subparagraph (E).
                    ``(B) Provision of notice.--Except as otherwise 
                provided in this subsection, notices described in 
                paragraph (1) shall be furnished to all participants 
                and beneficiaries under the plan 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.
                    ``(C) 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 events that were 
                        unforeseeable or circumstances beyond the 
                        reasonable control of the plan administrator,
                subparagraph (B) shall not apply, and the notice shall 
                be furnished to all participants and beneficiaries 
                under the plan as soon as reasonably possible under the 
                circumstances unless such a notice in advance of the 
                termination of the suspension, limitation, or 
                restriction is impracticable.
                    ``(D) Written notice.--The notice required to be 
                provided under 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 recipient.
                    ``(E) Model notices.--The Secretary shall issue 
                model notices which meet the requirements of this 
                paragraph.
            ``(3) Exception for suspensions, limitations, or 
        restrictions with limited applicability.--In any case in which 
        the suspension, limitation, or restriction described in 
        paragraph (1)--
                    ``(A) applies only to 1 or more individuals, each 
                of whom is the participant, an alternate payee (as 
                defined in section 206(d)(3)(K)), or any other 
                beneficiary pursuant to a qualified domestic relations 
                order (as defined in section 206(d)(3)(B)(i)), or
                    ``(B) applies only to 1 or more participants or 
                beneficiaries in connection with a merger, acquisition, 
                divestiture, or similar transaction involving the plan 
                or plan sponsor and occurs solely in connection with 
                becoming or ceasing to be a participant or beneficiary 
                under the plan by reason of such merger, acquisition, 
                divestiture, or transaction,
        the requirement of this subsection that the notice be provided 
        to all participants and beneficiaries shall be treated as met 
        if the notice required under paragraph (1) is provided to all 
        the individuals referred to in subparagraph (A) or (B) to whom 
        the suspension, limitation, or restriction applies as soon as 
        reasonably practicable.
            ``(4) Changes in period of suspension, limitation, or 
        restriction.--If, following the furnishing of the notice 
        pursuant to this subsection, there is a change in the period of 
        the suspension, limitation, or restriction (specified in such 
        notice pursuant to paragraph (2)(A)(iii)) on the right of a 
        participant or beneficiary to direct or diversify assets, the 
        administrator shall provide affected participants and 
        beneficiaries notice of the change as soon as reasonably 
        practicable. In relation to the extended suspension, 
        limitation, or restriction, such notice shall meet the 
        requirements of paragraph (2)(D) and shall specify any material 
        change in the matters referred to in clauses (i) through (vi) 
        of paragraph (2)(A).
            ``(5) Regulatory exceptions.--The Secretary may provide by 
        regulation for additional exceptions to the requirements of 
        this subsection which the Secretary determines are in the 
        interests of participants and beneficiaries.
            ``(6) Guidance and model notices.--The Secretary shall 
        issue guidance and model notices which meet the requirements of 
        this subsection.''.
                    (B) Issuance of initial guidance and model 
                notice.--The Secretary of Labor shall issue initial 
                guidance and a model notice pursuant to section 
                101(i)(6) of the Employee Retirement Income Security 
                Act of 1974 (as added by this subsection) not later 
                than January 1, 2003. Not later than 75 days after the 
                date of the enactment of this Act, the Secretary shall 
                promulgate interim final rules necessary to carry out 
                the amendments made by this subsection.
            (2) Civil penalties for failure to provide notice.--Section 
        502 of such Act (as amended by section 101(a)(4)) is amended 
        further--
                    (A) in subsection (a)(6), by striking ``(6), or 
                (7)'' and inserting ``(6), (7), or (8)'';
                    (B) by redesignating paragraph (8) of subsection 
                (c) as paragraph (9); and
                    (C) by inserting after paragraph (7) of subsection 
                (c) the following new paragraph:
    ``(8) The Secretary may assess a civil penalty against a plan 
administrator of up to $100 a day from the date of the plan 
administrator'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.''.
            (3) 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--
                    (A) by redesignating subparagraphs (A) and (B) as 
                clauses (i) and (ii), respectively, and by inserting 
                ``(A)'' after ``(c)(1)'';
                    (B) in subparagraph (A)(ii) (as redesignated by 
                subparagraph (A)), by inserting before the period the 
                following: ``, except that this clause shall not apply 
                in connection with such participant or beneficiary for 
                any period during which the ability of such participant 
                or beneficiary to direct the investment of the assets 
                in his or her account is suspended by a plan sponsor or 
                fiduciary''; and
                    (C) by adding at the end the following new 
                subparagraphs:
    ``(B) If the person referred to in subparagraph (A)(ii) meets the 
requirements of this title in connection with authorizing the 
suspension, such person shall not be liable under this title for any 
loss occurring during the suspension as a result of any exercise by the 
participant or beneficiary of control over assets in his or her account 
prior to the suspension. Matters to be considered in determining 
whether such person has satisfied the requirements of this title 
include whether such person--
            ``(i) has considered the reasonableness of the expected 
        period of the suspension as required under section 
        101(i)(1)(A)(i),
            ``(ii) has provided the notice required under section 
        101(i)(1)(A)(ii), and
            ``(iii) has acted in accordance with the requirements of 
        subsection (a) in determining whether to enter into the 
        suspension.
    ``(C) 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 (A)(ii) 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.''.
    (b) Amendments to the Internal Revenue Code of 1986.--
            (1) 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) Tax not to apply when providing notice not reasonably 
        practicable.--No tax shall be imposed by subsection (a) if, in 
        the case of the occurrence of an unforeseeable event, it is not 
        reasonably practicable to provide such notice before the 
        beginning of the transaction restriction period.
            ``(3) 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.
            ``(4) 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 
                subparagraph (B), 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.
            ``(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, with respect to an 
                applicable pension plan, a period beginning on a day in 
                which there is a substantial reduction in rights 
                described in subparagraph (B) which are not restored as 
                of the beginning of the 3rd day following the day of 
                such reduction.
                    ``(B) Rights described.--For purposes of this 
                paragraph, rights described in this section with 
                respect to an applicable pension plan are rights under 
                such plan of 1 or more applicable individuals to direct 
                investments in such plan, to obtain loans from such 
                plan, or to obtain distributions from such plan.
                    ``(C) Special rule for employer securities.--For 
                purposes of this paragraph--
                            ``(i) In general.--In the case of rights 
                        relating to directing investments out of 
                        employer securities, such rights shall be 
                        treated as substantially reduced if such rights 
                        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.
                            ``(iii) Employer securities.--For purposes 
                        of this subparagraph, 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.
                    ``(D) Exceptions.--Rights which are substantially 
                reduced by reason of the application of securities laws 
                or other circumstances specified by the Secretary in 
                regulations shall not be taken into account for 
                purposes of this paragraph.''.
            (2) 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.''.

            (3) 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. INFORMATIONAL AND EDUCATIONAL SUPPORT FOR PENSION PLAN 
              FIDUCIARIES.

    Section 404 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1104) is amended by adding at the end the following new 
subsection:
    ``(e) The Secretary shall establish a program under which 
information and educational resources shall be made available on an 
ongoing basis to persons serving as fiduciaries under employee pension 
benefit plans so as to assist such persons in diligently and 
effectively carrying out their fiduciary duties in accordance with this 
part.''.

SEC. 104. DIVERSIFICATION REQUIREMENTS FOR DEFINED CONTRIBUTION PLANS 
              THAT HOLD EMPLOYER SECURITIES.

    (a) Amendment to the Employee Retirement Income Security Act of 
1974.--Section 204 of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1054) is amended--
            (1) by redesignating subsection (j) as subsection (k); and
            (2) by inserting after subsection (i) the following new 
        subsection:
    ``(j) Diversification Requirements for Individual Account Plans 
that Hold Employer Securities.--
            ``(1) In general.--An applicable individual account plan 
        shall meet the requirements of paragraphs (2) and (3).
            ``(2) Employee contributions and elective deferrals 
        invested in employer securities.--In the case of the portion of 
        the account attributable to employee contributions and elective 
        deferrals which is invested in employer securities, a plan 
        meets the requirements of this paragraph if each applicable 
        individual may elect to direct the plan to divest any such 
        securities in the individual's account and to reinvest an 
        equivalent amount in other investment options which meet the 
        requirements of paragraph (4).
            ``(3) Employer contributions invested in employer 
        securities.--
                    ``(A) In general.--In the case of the portion of 
                the account attributable to employer contributions 
                (other than elective deferrals to which paragraph (2) 
                applies) which is invested in employer securities, a 
                plan meets the requirements of this paragraph if, under 
                the plan--
                            ``(i) each applicable individual with a 
                        benefit based on 3 years of service may elect 
                        to direct the plan to divest any such 
                        securities in the individual's account and to 
                        reinvest an equivalent amount in other 
                        investment options which meet the requirements 
                        of paragraph (4), or
                            ``(ii) with respect to any employer 
                        security allocated to an applicable 
                        individual's account during any plan year, such 
                        applicable individual may elect to direct the 
                        plan to divest such employer security after a 
                        date which is not later than 3 years after the 
                        end of such plan year and to reinvest an 
                        equivalent amount in other investment options 
                        which meet the requirements of paragraph (4).
                    ``(B) Applicable individual with benefit based on 3 
                years of service.--For purposes of subparagraph (A), an 
                applicable individual has a benefit based on 3 years of 
                service if such individual would be an applicable 
                individual if only participants in the plan who have 
                completed at least 3 years of service (as determined 
                under section 203(b)) were taken into account under 
                paragraph (6)(B)(i).
            ``(4) Investment options.--The requirements of this 
        paragraph are met if--
                    ``(A) the plan offers not less than 3 investment 
                options, other than employer securities, to which an 
                applicable individual may direct the proceeds from the 
                divestment of employer securities pursuant to this 
                subsection, each of which is diversified and has 
                materially different risk and return characteristics, 
                and
                    ``(B) the plan permits the applicable individual to 
                choose from any of the investment options made 
                available under the plan to which such proceeds may be 
                so directed, subject to such restrictions as may be 
                provided by the plan limiting such choice to periodic, 
                reasonable opportunities occurring no less frequently 
                than on a quarterly basis.
            ``(5) Definitions and rules.--For purposes of this 
        subsection--
                    ``(A) Applicable individual account plan.--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 thereon) 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) Applicable individual.--The term `applicable 
                individual' means--
                            ``(i) any participant in the plan, and
                            ``(ii) any beneficiary of a participant 
                        referred to in clause (i) who has an account 
                        under the plan with respect to which the 
                        beneficiary is entitled to exercise the rights 
                        of the participant.
                    ``(C) Elective deferral.--The term `elective 
                deferral' means an employer contribution described in 
                section 402(g)(3)(A) of the Internal Revenue Code of 
                1986 (as in effect on the date of the enactment of this 
                subsection).
                    ``(D) Employer security.--The term `employer 
                security' shall have the meaning given such term by 
                section 407(d)(1) of this Act (as in effect on the date 
                of the enactment of this subsection).
                    ``(E) Employee stock ownership plan.--The term 
                `employee stock ownership plan' shall have the same 
                meaning given to such term by section 4975(e)(7) of the 
                Internal Revenue Code of 1986 (as in effect on the date 
                of the enactment of this subsection).
                    ``(F) Elections.--Elections under this subsection 
                may be made not less frequently than quarterly.
            ``(6) Exception where there is no readily tradable stock.--
        This subsection shall not apply with respect to a plan if there 
        is no class of stock issued by any employer maintaining the 
        plan (or by a corporation which is an affiliate of any such 
        employer, as defined in section 407(d)(7) as in effect on the 
        date of the enactment of this subsection) that is readily 
        tradable on an established securities market.
            ``(7) Transition rule.--
                    ``(A) In general.--In the case of any individual 
                account plan which, on the first day of the first plan 
                year to which this subsection applies, holds employer 
                securities of any class that were acquired before such 
                date and on which there is a restriction on 
                diversification otherwise precluded by this subsection, 
                this subsection shall apply to such securities of such 
                class held in any plan year only with respect to the 
                number of such securities equal to the applicable 
                percentage of the total number of such securities of 
                such class held on such date.
                    ``(B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage shall be as 
                follows:

``Plan years for which provisions   Applicable percentage:
        are effective:
    1st plan year..................
                                        20 percent.
    2nd plan year..................
                                        40 percent.
    3rd plan year..................
                                        60 percent.
    4th plan year..................
                                        80 percent.
    5th plan year or thereafter....
                                        100 percent.
                    ``(C) Elective deferrals treated as separate plan 
                not individual account plan.--For purposes of 
                subparagraph (A), the applicable percentage shall be 
                100 percent with respect to--
                            ``(i) employee contributions to a plan 
                        under which any portion attributable to 
                        elective deferrals is treated as a separate 
                        plan under section 407(b)(2) as of the date of 
                        the enactment of this paragraph, and
                            ``(ii) such elective deferrals.
                    ``(D) Coordination with prior elections.--In any 
                case in which a divestiture of investment in employer 
                securities of any class held by an employee stock 
                ownership plan prior to the effective date of this 
                subsection was undertaken pursuant to other applicable 
                Federal law prior to such date, the applicable 
                percentage (as determined without regard to this 
                subparagraph) in connection with such securities shall 
                be reduced to the extent necessary to account for the 
                amount to which such election applied.
            ``(8) Regulations.--The Secretary of the Treasury shall 
        prescribe regulations under this subsection in consultation 
        with the Secretary of Labor.''.
    (b) Amendments to the Internal Revenue Code of 1986.--
            (1) In general.--Section 401(a) of the Internal Revenue 
        Code of 1986 (relating to requirements for qualification) is 
        amended by inserting after paragraph (34) the following new 
        paragraph:
            ``(35) Diversification requirements for defined 
        contribution plans that hold employer securities.--
                    ``(A) In general.--An applicable defined 
                contribution plan shall meet the requirements of 
                subparagraphs (B) and (C).
                    ``(B) Employee contributions and elective deferrals 
                invested in employer securities.--In the case of the 
                portion of the account attributable to employee 
                contributions and elective deferrals which is invested 
                in employer securities, a plan meets the requirements 
                of this subparagraph if each applicable individual in 
                such plan may elect to direct the plan to divest any 
                such securities in the individual's account and to 
                reinvest an equivalent amount in other investment 
                options which meet the requirements of subparagraph 
                (D).
                    ``(C) Employer contributions invested in employer 
                securities.--
                            ``(i) In general.--In the case of the 
                        portion of the account attributable to employer 
                        contributions (other than elective deferrals to 
                        which subparagraph (B) applies) which is 
                        invested in employer securities, a plan meets 
                        the requirements of this subparagraph if, under 
                        the plan--
                                    ``(I) each applicable individual 
                                with a benefit based on 3 years of 
                                service may elect to direct the plan to 
                                divest any such securities in the 
                                individual's account and to reinvest an 
                                equivalent amount in other investment 
                                options which meet the requirements of 
                                subparagraph (D), or
                                    ``(II) with respect to any employer 
                                security allocated to an applicable 
                                individual's account during any plan 
                                year, such applicable individual may 
                                elect to direct the plan to divest such 
                                employer security after a date which is 
                                not later than 3 years after the end of 
                                such plan year and to reinvest an 
                                equivalent amount in other investment 
                                options which meet the requirements of 
                                subparagraph (D).
                            ``(ii) Applicable individual with benefit 
                        based on 3 years of service.--For purposes of 
                        clause (i), an applicable individual has a 
                        benefit based on 3 years of service if such 
                        individual 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 (F)(ii)(I).
                    ``(D) Investment options.--The requirements of this 
                subparagraph are met if--
                            ``(i) the plan offers not less than 3 
                        investment options, other than employer 
                        securities, to which an applicable individual 
                        may direct the proceeds from the divestment of 
                        employer securities pursuant to this paragraph, 
                        each of which is diversified and has materially 
                        different risk and return characteristics, and
                            ``(ii) the plan permits the applicable 
                        individual to choose from any of the investment 
                        options made available under the plan to which 
                        such proceeds may be so directed, subject to 
                        such restrictions as may be provided by the 
                        plan limiting such choice to periodic, 
                        reasonable opportunities occurring no less 
                        frequently than on a quarterly basis.
                    ``(E) Definitions and rules.--For purposes of this 
                paragraph--
                            ``(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 
                        (within the meaning of section 4975(e)(7)) 
                        unless there are any contributions to such plan 
                        (or earnings thereon) held within such plan 
                        that are subject to subsection (k)(3) or 
                        (m)(2).
                            ``(ii) Applicable individual.--The term 
                        `applicable individual' means--
                                    ``(I) any participant in the plan, 
                                and
                                    ``(II) any beneficiary of a 
                                participant referred to in clause (i) 
                                who has an account under the plan with 
                                respect to which the beneficiary is 
                                entitled to exercise the rights of the 
                                participant.
                            ``(iii) Elective deferral.--The term 
                        `elective deferral' means an employer 
                        contribution described in section 402(g)(3)(A) 
                        (as in effect on the date of the enactment of 
                        this paragraph).
                            ``(iv) Employer security.--The term 
                        `employer security' shall have the meaning 
                        given such term by section 407(d)(1) of the 
                        Employee Retirement Income Security Act of 1974 
                        (as in effect on the date of the enactment of 
                        this paragraph).
                            ``(v) Employee stock ownership plan.--The 
                        term `employee stock ownership plan' shall have 
                        the same meaning given to such term by section 
                        4975(e)(7) of the Internal Revenue Code of 1986 
                        (as in effect on the date of the enactment of 
                        this paragraph).
                            ``(vi) Elections.--Elections under this 
                        paragraph may be made not less frequently than 
                        quarterly.
                    ``(F) Exception where there is no readily tradable 
                stock.--This paragraph shall not apply with respect to 
                a plan if there is no class of stock issued by any 
                employer maintaining the plan that is readily tradable 
                on an established securities market.
                    ``(G) Transition rule.--
                            ``(i) In general.--In the case of any 
                        defined contribution plan which, on the 
                        effective date of this subsection, holds 
                        employer securities of any class that were 
                        acquired before such date and on which there is 
                        a restriction on diversification otherwise 
                        precluded by this paragraph, this paragraph 
                        shall apply to such securities of such class 
                        held in any plan year only with respect to the 
                        number of such securities equal to the 
                        applicable percentage of the total number of 
                        such securities of such class held on such 
                        date.
                            ``(ii) Applicable percentage.--For purposes 
                        of clause (i), the applicable percentage shall 
                        be as follows:

``Plan years for which provisions   Applicable percentage:
        are effective:
    1st plan year..................
                                        20 percent.
    2nd plan year..................
                                        40 percent.
    3rd plan year..................
                                        60 percent.
    4th plan year..................
                                        80 percent.
    5th plan year or thereafter....
                                        100 percent.
                            ``(iii) Elective deferrals treated as 
                        separate plan not individual account plan.--For 
                        purposes of clause (i), the applicable 
                        percentage shall be 100 percent with respect 
                        to--
                                    ``(I) employee contributions to a 
                                plan under which any portion 
                                attributable to elective deferrals is 
                                treated as a separate plan under 
                                section 407(b)(2) of the Employee 
                                Retirement Income Security Act of 1974 
                                as of the date of the enactment of this 
                                paragraph, and
                                    ``(II) such elective deferrals.
                            ``(iv) 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 the 1st and 2nd plan years 
                        referred to in the table in clause (ii), the 
                        applicable percentage shall be the greater of 
                        the amount determined under clause (ii) or the 
                        percentage determined under paragraph (28) 
                        (determined as if paragraph (28) applied to a 
                        plan described in this paragraph).
                            ``(v) Coordination with prior elections 
                        under paragraph (28).--In any case in which a 
                        divestiture of investment in employer 
                        securities of any class held by an employee 
                        stock ownership plan prior to the effective 
                        date of this paragraph was undertaken pursuant 
                        to an election under paragraph (28) prior to 
                        such date, the applicable percentage (as 
                        determined without regard to this clause) in 
                        connection with such securities shall be 
                        reduced to the extent necessary to account for 
                        the amount to which such election applied.
                    ``(H) Regulations.--The Secretary shall prescribe 
                regulations under this paragraph in consultation with 
                the Secretary of Labor.''.
            (2) Conforming amendments.--
                    (A) 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.''.
                    (B) Section 409(h)(7) of such Code is amended by 
                inserting before the period at the end ``or 
                subparagraph (B) or (C) of section 401(a)(35)''.
                    (C) 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) and 
        section 109, the amendments made by this section shall apply to 
        plan years beginning after December 31, 2002, and with respect 
        to employer securities allocated to accounts before, on, or 
        after the date of the enactment of this Act.
            (2) Exception.--The amendments made by this section shall 
        not apply to employer securities held by an employee stock 
        ownership plan which are acquired before January 1, 1987.

SEC. 105. 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 adviser in connection with the 
                        provision of investment advice by the fiduciary 
                        adviser,
                            ``(v) that the adviser is acting as a 
                        fiduciary of the plan in connection with the 
                        provision of the advice, and
                            ``(vi) that a recipient of the advice may 
                        separately arrange for the provision of advice 
                        by another adviser, that could have no material 
                        affiliation with and receive no fees or other 
                        compensation in connection with the security or 
                        other property,
                    ``(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.--
                    ``(A) In general.--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.
                    ``(B) Model form for disclosure of fees and other 
                compensation.--The Secretary shall issue a model form 
                for the disclosure of fees and other compensation 
                required in paragraph (1)(A)(i) which meets the 
                requirements of subparagraph (A).
            ``(3) Exemption conditioned on making required information 
        available annually, on request, and in the event of material 
        change.--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), 
                        but only if the advice is provided through a 
                        trust department of the bank or similar 
                        financial institution which is subject to 
                        periodic examination and review by Federal or 
                        State banking authorities,
                            ``(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 adviser in 
                                connection with the provision of 
                                investment advice by the fiduciary 
                                adviser,
                                    ``(V) that the adviser is acting as 
                                a fiduciary of the plan in connection 
                                with the provision of the advice, and
                                    ``(VI) that a recipient of the 
                                advice may separately arrange for the 
                                provision of advice by another adviser, 
                                that could have no material affiliation 
                                with and receive no fees or other 
                                compensation in connection with the 
                                security or other property,
                            ``(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), but only if the advice is 
                                provided through a trust department of 
                                the bank or similar financial 
                                institution which is subject to 
                                periodic examination and review by 
                                Federal or State banking authorities,
                                    ``(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. 106. STUDY REGARDING IMPACT ON RETIREMENT SAVINGS OF PARTICIPANTS 
              AND BENEFICIARIES BY REQUIRING CONSULTANTS TO ADVISE PLAN 
              FIDUCIARIES OF INDIVIDUAL ACCOUNT PLANS.

    (a) Study.--As soon as practicable after the date of the enactment 
of this Act, the Secretary of Labor shall undertake a study of the 
costs and benefits to participants and beneficiaries of requiring 
independent consultants to advise plan fiduciaries in connection with 
individual account plans. In conducting such study, the Secretary shall 
consider--
            (1) the benefits to plan participants and beneficiaries of 
        engaging independent advisers to provide investment and other 
        advice regarding the assets of the plan to persons who have 
        fiduciary duties with respect to the management or disposition 
        of such assets,
            (2) the extent to which independent advisers are currently 
        retained by plan fiduciaries,
            (3) the availability of assistance to fiduciaries from 
        appropriate Federal agencies,
            (4) the availability of qualified independent consultants 
        to serve the needs of individual account plan fiduciaries in 
        the United States,
            (5) the impact of the additional fiduciary duty of an 
        independent advisor on the strict fiduciary obligations of plan 
        fiduciaries,
            (6) the impact of new requirements (consulting fees, 
        reporting requirements, and new plan duties to prudently 
        identify and contract with qualified independent consultants) 
        on the availability of individual account plans, and
            (7) the impact of a new requirement on the plan 
        administration costs per participant for small and mid-size 
        employers and the pension plans they sponsor.
    (b) Report.--Not later than 1 year after the date of the enactment 
of this Act, the Secretary of Labor shall report the results of the 
study undertaken pursuant to this section, together with any 
recommendations for legislative changes, 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.

SEC. 107. 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. 108. INSIDER TRADES DURING PENSION FUND BLACKOUT PERIODS 
              PROHIBITED.

    (a) Prohibition.--It shall be unlawful for any person who is 
directly or indirectly the beneficial owner of more than 10 percent of 
any class of any equity security (other than an exempted security) 
which is registered under section 12 of the Securities Exchange Act of 
1934 (15 U.S.C. 78l) or who is a director or an officer of the issuer 
of such security, directly or indirectly, to purchase (or otherwise 
acquire) or sell (or otherwise transfer) any equity security of any 
issuer (other than an exempted security), during any blackout period 
with respect to such equity security.
    (b) 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 section 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. Suit to recover such profit may be instituted at law or in 
equity in any court of competent jurisdiction by the issuer, or by the 
owner of any security of the issuer in the name and in behalf of the 
issuer if the issuer shall fail or refuse to bring such suit within 60 
days after request or shall fail diligently to prosecute the same 
thereafter; but no such suit shall be brought more than 2 years after 
the date such profit was realized. This subsection shall not be 
construed to cover any transaction where such beneficial owner was not 
such both at the time of the purchase and sale, or the sale and 
purchase, of the security or security-based swap (as defined in section 
206B of the Gramm-Leach-Bliley Act) involved, or any transaction or 
transactions which the Commission by rules and regulations may exempt 
as not comprehended within the purposes of this subsection.
    (c) 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.
    (d) As used in this section:
            (1) Beneficial owner.--The term ``beneficial owner'' has 
        the meaning provided such term in rules or regulations issued 
        by the Commission under section 16 of the Securities Exchange 
        Act of 1934 (15 U.S.C. 78p).
            (2) Blackout period.--The term ``blackout period'' with 
        respect to the equity securities of any issuer--
                    (A) means any period during which the ability of at 
                least fifty percent of the participants or 
                beneficiaries under all applicable individual account 
                plans maintained by the issuer to purchase (or 
                otherwise acquire) or sell (or otherwise transfer) an 
                interest in any equity of such issuer is suspended by 
                the issuer or a fiduciary of the plan; but
                    (B) does not include--
                            (i) a period in which the employees of an 
                        issuer may not allocate their interests in the 
                        individual account plan due to an express 
                        investment restriction--
                                    (I) incorporated into the 
                                individual account plan; and
                                    (II) timely disclosed to employees 
                                before joining the individual account 
                                plan or as a subsequent amendment to 
                                the plan;
                            (ii) any suspension described in 
                        subparagraph (A) that is imposed solely in 
                        connection with persons becoming participants 
                        or beneficiaries, or ceasing to be participants 
                        or beneficiaries, in an applicable individual 
                        account plan by reason of a corporate merger, 
                        acquisition, divestiture, or similar 
                        transaction.
            (3) Commission.--The term ``Commission'' means the 
        Securities and Exchange Commission.
            (4) Individual account plan.--The term ``individual account 
        plan'' has the meaning provided such term in section 3(34) of 
        the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
        1002(34)).
            (5) Issuer.--The term ``issuer'' shall have the meaning set 
        forth in section 2(a)(4) of the Securities Act of 1933 (15 
        U.S.C. 77b(a)(4)).

SEC. 109. EFFECTIVE DATES OF TITLE AND RELATED RULES.

    (a) In General.--Except as otherwise provided in this title or in 
subsection (b), the amendments made by this title 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 101, 102, 
103, and 104 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 such 
        sections take effect and before such first plan year, the plan 
        is operated in accordance with the requirements of such 
        amendments made by such sections, and
            (2) such plan amendment applies retroactively to the period 
        after such amendments made by such sections take effect and 
        before such first plan year.
    (d) Amendments Relating to Investment Advice.--The amendments made 
by section 104 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.

            TITLE II--OTHER 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 and section 302(d)(9)(A) 
                of the Employee Retirement Income Security Act of 1974, 
                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 and section 302(e) of the 
                Employee Retirement Income Security Act of 1974, the 
                funded current liability percentage for any plan year 
                shall be treated as not less than 100 percent.
                    ``(C) For purposes of determining unfunded vested 
                benefits under section 4006(a)(3)(E)(iii) of the 
                Employee Retirement Income Security Act of 1974, the 
                mortality table shall be the mortality table used by 
                the plan.''.
    (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) Amendment of erisa.--
                    (A) In general.--Section 205(c)(7)(A) of the 
                Employee Retirement Income Security Act of 1974 (29 
                U.S.C. 1055(c)(7)(A)) is amended by striking ``90-day'' 
                and inserting ``180-day''.
                    (B) Modification of regulations.--The Secretary of 
                the Treasury shall modify the regulations under part 2 
                of subtitle B of title I of the Employee Retirement 
                Income Security Act of 1974 to the extent that they 
                relate to sections 203(e) and 205 of such Act to 
                substitute ``180 days'' for ``90 days'' each place it 
                appears.
            (3) Effective date.--The amendments made by paragraphs 
        (1)(A) and (2)(A) and the modifications required by paragraphs 
        (1)(B) and (2)(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 and under section 205 of the Employee 
        Retirement Income Security Act of 1974 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 or section 205 of such Act 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. ANNUAL REPORT DISSEMINATION.

    (a) Report Available Through Electronic Means.--Section 104(b)(3) 
of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1024(b)(3)) is amended by adding at the end the following new sentence: 
``The requirement to furnish information under the previous sentence 
with respect to an employee pension benefit plan shall be satisfied if 
the administrator makes such information reasonably available through 
electronic means or other new technology.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to reports for years beginning after December 31, 2002.

SEC. 208. TECHNICAL CORRECTIONS TO SAVER ACT.

    Section 517 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1147) is amended--
            (1) in subsection (a), by striking ``2001 and 2005 on or 
        after September 1 of each year involved'' and inserting ``2002, 
        2006, and 2010'';
            (2) in subsection (b), by adding at the end the following 
        new sentence: ``To effectuate the purposes of this paragraph, 
        the Secretary may enter into a cooperative agreement, pursuant 
        to the Federal Grant and Cooperative Agreement Act of 1977 (31 
        U.S.C. 6301 et seq.), with any appropriate, qualified 
        entity.'';
            (3) in subsection (e)(2)--
                    (A) by striking ``Committee on Labor and Human 
                Resources'' in subparagraph (D) and inserting 
                ``Committee on Health, Education, Labor, and 
                Pensions'';
                    (B) by striking subparagraph (F) and inserting the 
                following:
                    ``(F) the Chairman and Ranking Member of the 
                Subcommittee on Labor, Health and Human Services, and 
                Education of the Committee on Appropriations of the 
                House of Representatives and the Chairman and Ranking 
                Member of the Subcommittee on Labor, Health and Human 
                Services, and Education of the Committee on 
                Appropriations of the Senate;'';
                    (C) by redesignating subparagraph (G) as 
                subparagraph (J); and
                    (D) by inserting after subparagraph (F) the 
                following new subparagraphs:
                    ``(G) the Chairman and Ranking Member of the 
                Committee on Finance of the Senate;
                    ``(H) the Chairman and Ranking Member of the 
                Committee on Ways and Means of the House of 
                Representatives;
                    ``(I) the Chairman and Ranking Member of the 
                Subcommittee on Employer-Employee Relations of the 
                Committee on Education and the Workforce of the House 
                of Representatives; and'';
            (4) in subsection (e)(3)--
                    (A) by striking ``There shall be not more than 200 
                additional participants.'' in subparagraph (A) and 
                inserting ``The participants in the National Summit 
                shall also include additional participants appointed 
                under this subparagraph.'';
                    (B) by striking ``one-half shall be appointed by 
                the President,'' in subparagraph (A)(i) and inserting 
                ``not more than 100 participants shall be appointed 
                under this clause by the President,'';
                    (C) by striking ``one-half shall be appointed by 
                the elected leaders of Congress'' in subparagraph 
                (A)(ii) and inserting ``not more than 100 participants 
                shall be appointed under this clause by the elected 
                leaders of Congress'';
                    (D) by redesignating subparagraph (B) as 
                subparagraph (C); and
                    (E) by inserting after subparagraph (A) the 
                following new subparagraph:
                    ``(B) Presidential authority for additional 
                appointments.--The President, in consultation with the 
                elected leaders of Congress referred to in subsection 
                (a), may appoint under this subparagraph additional 
                participants to the National Summit. The number of such 
                additional participants appointed under this 
                subparagraph may not exceed the lesser of 3 percent of 
                the total number of all additional participants 
                appointed under this paragraph, or 10. Such additional 
                participants shall be appointed from persons nominated 
                by an organization referred to in subsection (b) which 
                is made up of private sector businesses and 
                associations partnered with Government entities to 
                promote long term financial security in retirement 
                through savings and with which the Secretary is 
                required thereunder to consult and cooperate and shall 
                not be Federal, State, or local government 
                employees.'';
            (5) in subsection (e)(3)(C) (as redesignated), by striking 
        ``January 31, 1998'' and inserting ``3 months before the 
        convening of each summit;'';
            (6) in subsection (f)(1)(C), by inserting ``, no later than 
        90 days prior to the date of the commencement of the National 
        Summit,'' after ``comment'';
            (7) in subsection (g), by inserting ``, in consultation 
        with the congressional leaders specified in subsection 
        (e)(2),'' after ``report'' the first place it appears;
            (8) in subsection (i)--
                    (A) by striking ``for fiscal years beginning on or 
                after October 1, 1997,''; and
                    (B) by adding at the end the following new 
                paragraph:
            ``(3) Reception and representation authority.--The 
        Secretary is hereby granted reception and representation 
        authority limited specifically to the events at the National 
        Summit. The Secretary shall use any private contributions 
        accepted in connection with the National Summit prior to using 
        funds appropriated for purposes of the National Summit pursuant 
        to this paragraph.''; and
            (9) in subsection (k)--
                    (A) by striking ``shall enter into a contract on a 
                sole-source basis'' and inserting ``may enter into a 
                contract on a sole-source basis''; and
                    (B) by striking ``in fiscal year 1998''.

SEC. 209. MISSING PARTICIPANTS.

    (a) In General.--Section 4050 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1350) is amended by redesignating 
subsection (c) as subsection (e) and by inserting after subsection (b) 
the following new subsections:
    ``(c) Multiemployer Plans.--The corporation shall prescribe rules 
similar to the rules in subsection (a) for multiemployer plans covered 
by this title that terminate under section 4041A.
    ``(d) Plans Not Otherwise Subject to Title.--
            ``(1) Transfer to corporation.--The plan administrator of a 
        plan described in paragraph (4) may elect to transfer a missing 
        participant's benefits to the corporation upon termination of 
        the plan.
            ``(2) Information to the corporation.--To the extent 
        provided in regulations, the plan administrator of a plan 
        described in paragraph (4) shall, upon termination of the plan, 
        provide the corporation information with respect to benefits of 
        a missing participant if the plan transfers such benefits--
                    ``(A) to the corporation, or
                    ``(B) to an entity other than the corporation or a 
                plan described in paragraph (4)(B)(ii).
            ``(3) Payment by the corporation.--If benefits of a missing 
        participant were transferred to the corporation under paragraph 
        (1), the corporation shall, upon location of the participant or 
        beneficiary, pay to the participant or beneficiary the amount 
        transferred (or the appropriate survivor benefit) either--
                    ``(A) in a single sum (plus interest), or
                    ``(B) in such other form as is specified in 
                regulations of the corporation.
            ``(4) Plans described.--A plan is described in this 
        paragraph if--
                    ``(A) the plan is a pension plan (within the 
                meaning of section 3(2))--
                            ``(i) to which the provisions of this 
                        section do not apply (without regard to this 
                        subsection), and
                            ``(ii) which is not a plan described in 
                        paragraphs (2) through (11) of section 4021(b), 
                        and
                    ``(B) at the time the assets are to be distributed 
                upon termination, the plan--
                            ``(i) has missing participants, and
                            ``(ii) has not provided for the transfer of 
                        assets to pay the benefits of all missing 
                        participants to another pension plan (within 
                        the meaning of section 3(2)).
            ``(5) Certain provisions not to apply.--Subsections (a)(1) 
        and (a)(3) shall not apply to a plan described in paragraph 
        (4).''.
    (b) Conforming Amendments.--Section 206(f) of such Act (29 U.S.C. 
1056(f)) is amended--
            (1) by striking ``title IV'' and inserting ``section 
        4050''; and
            (2) by striking ``the plan shall provide that,''.
    (c) Effective Date.--The amendment made by this section shall apply 
to distributions made after final regulations implementing subsections 
(c) and (d) of section 4050 of the Employee Retirement Income Security 
Act of 1974 (as added by subsection (a)), respectively, are prescribed.

SEC. 210. 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 first effective after December 31, 2002.

SEC. 211. 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 210(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 by 
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 first effective after December 31, 2002.
            (2) Subsection (b).--The amendments made by subsection (b) 
        shall apply to plan years beginning after December 31, 2002.

SEC. 212. 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. 213. 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. 214. BENEFIT SUSPENSION NOTICE.

    (a) Modification of Regulation.--The Secretary of Labor shall 
modify the regulation under subparagraph (B) of section 203(a)(3) of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1053(a)(3)(B)) to provide that the notification required by such 
regulation in connection with any suspension of benefits described in 
such subparagraph--
            (1) in the case of an employee who returns to service 
        described in section 203(a)(3)(B)(i) or (ii) of such Act after 
        commencement of payment of benefits under the plan, shall be 
        made during the first calendar month or the first 4 or 5-week 
        payroll period ending in a calendar month in which the plan 
        withholds payments, and
            (2) in the case of any employee who is not described in 
        paragraph (1)--
                    (A) may be included in the summary plan description 
                for the plan furnished in accordance with section 
                104(b) of such Act (29 U.S.C. 1024(b)), rather than in 
                a separate notice, and
                    (B) need not include a copy of the relevant plan 
                provisions.
    (b) Effective Date.--The modification made under this section shall 
apply to plan years beginning after December 31, 2002.

SEC. 215. 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. 216. 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) Special Rule.--Subclause (III) of section 302(d)(7)(C)(i) of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1082(d)(7)(C)(i)) 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''.
    (c) PBGC.--Subclause (IV) of section 4006(a)(3)(E)(iii) of such Act 
(29 U.S.C. 1306(a)(3)(E)(iii)) is amended to read as follows--
            ``(IV) In the case of plan years beginning after December 
        31, 2001, and before January 1, 2004, subclause (II) shall be 
        applied by substituting `100 percent' for `85 percent' and by 
        substituting `115 percent' for `100 percent'. Subclause (III) 
        shall be applied for such years without regard to the preceding 
        sentence. Any reference to this clause or this subparagraph by 
        any other sections or subsections (other than sections 4005, 
        4010, 4011 and 4043) shall be treated as a reference to this 
        clause or this subparagraph without regard to this 
        subclause.''.
    (d) 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. 217. 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 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 and section 
        204(g) of the Employee Retirement Income Security Act of 1974 
        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 or 
                the Secretary of Labor 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.

            Passed the House of Representatives April 11, 2002.

            Attest:

                                                 JEFF TRANDAHL,

                                                                 Clerk.