[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 1971 Reported in Senate (RS)]






                                                       Calendar No. 552
107th CONGRESS
  2d Session
                                S. 1971

                          [Report No. 107-242]

To amend the Internal Revenue Code of 1986 and the Employee Retirement 
   Income Security Act of 1974 to protect the retirement security of 
    American workers by ensuring that pension assets are adequately 
   diversified and by providing workers with adequate access to, and 
    information about, their pension plans, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           February 27, 2002

 Mr. Grassley introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

                             August 2, 2002

Reported under authority of the order of the Senate of August 1, 2002, 
                    by Mr. Baucus, with an amendment
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 and the Employee Retirement 
   Income Security Act of 1974 to protect the retirement security of 
    American workers by ensuring that pension assets are adequately 
   diversified and by providing workers with adequate access to, and 
    information about, their pension plans, and for other purposes.

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

<DELETED>SECTION 1. SHORT TITLE.</DELETED>

<DELETED>    This Act may be cited as the ``National Employee Savings 
and Trust Equity Guarantee Act''.</DELETED>

   <DELETED>TITLE I--DIVERSIFICATION OF PENSION PLAN ASSETS</DELETED>

<DELETED>SEC. 101. DEFINED CONTRIBUTION PLANS REQUIRED TO PROVIDE 
              EMPLOYEES WITH FREEDOM TO INVEST THEIR PLAN 
              ASSETS.</DELETED>

<DELETED>    (a) Amendments of Internal Revenue Code.--</DELETED>
        <DELETED>    (1) Qualification requirement.--Section 401(a) of 
        the Internal Revenue Code of 1986 (relating to qualified 
        pension, profit-sharing, and stock bonus plans) is amended by 
        inserting after paragraph (34) the following new 
        paragraph:</DELETED>
        <DELETED>    ``(35) Diversification requirements for certain 
        defined contribution plans.--</DELETED>
                <DELETED>    ``(A) In general.--A trust which is part 
                of an applicable defined contribution plan shall not be 
                treated as a qualified trust unless the plan--
                </DELETED>
                        <DELETED>    ``(i) provides that a participant 
                        or beneficiary of a participant has the right 
                        at any time to invest any elective deferrals 
                        (and earnings thereon) contributed to his or 
                        her account in the form of publicly traded 
                        employer securities in any other investment 
                        option offered under the plan,</DELETED>
                        <DELETED>    ``(ii) provides that a participant 
                        with 3 or more years of service and any 
                        beneficiary of a participant has the right to 
                        invest any publicly traded employer securities 
                        (and earnings thereon) to which clause (i) does 
                        not apply and which are allocated to his or her 
                        account in any other investment option offered 
                        under the plan, and</DELETED>
                        <DELETED>    ``(iii) offers at least 3 
                        investment options (not inconsistent with 
                        regulations prescribed by the 
                        Secretary).</DELETED>
                <DELETED>    ``(B) Certain restrictions and conditions 
                not allowed.--A plan shall not meet the requirements of 
                subparagraph (A) if the plan imposes restrictions or 
                conditions on the investment of publicly traded 
                employer securities which are not imposed on the 
                investment of other assets of the plan. This 
                subparagraph shall not apply to any restrictions or 
                conditions imposed by reason of application of 
                securities laws.</DELETED>
                <DELETED>    ``(C) Applicable defined contribution 
                plan.--For purposes of this paragraph--</DELETED>
                        <DELETED>    ``(i) In general.--The term 
                        `applicable defined contribution plan' means 
                        any defined contribution plan which holds any 
                        publicly traded employer securities.</DELETED>
                        <DELETED>    ``(ii) Exception for certain 
                        esops.--Such term does not include an employee 
                        stock ownership plan (within the meaning of 
                        section 4975(e)(7)) if--</DELETED>
                                <DELETED>    ``(I) there are no 
                                contributions to such plan (or earnings 
                                thereunder) which are held within such 
                                plan and are subject to subsections 
                                (k)(3) or (m)(2), and</DELETED>
                                <DELETED>    ``(II) such plan is a 
                                separate plan (within the meaning of 
                                section 414(l)) with respect to any 
                                other defined benefit plan or defined 
                                contribution plan maintained by the 
                                same employer or employers.</DELETED>
                <DELETED>    ``(D) Other definitions.--For purposes of 
                this paragraph--</DELETED>
                        <DELETED>    ``(i) Publicly traded employer 
                        securities.--The term `publicly traded employer 
                        securities' means employer securities which are 
                        readily tradable on an established securities 
                        market.</DELETED>
                        <DELETED>    ``(ii) Employer securities.--The 
                        term `employer securities' has the meaning 
                        given such term by section 407(d)(1) of the 
                        Employee Retirement Income Security Act of 
                        1974.</DELETED>
                        <DELETED>    ``(iii) Year of service.--The term 
                        `year of service' has the meaning given such 
                        term by section 411(a)(5).''</DELETED>
        <DELETED>    (2) Conforming amendment.--Section 401(a)(28)(B) 
        of such Code (relating to additional requirements relating to 
        employee stock ownership plans) is amended by adding at the end 
        the following new clause:</DELETED>
                        <DELETED>    ``(v) Exception.--This paragraph 
                        shall not apply to an applicable defined 
                        contribution plan (as defined in paragraph 
                        (35)(C)).''</DELETED>
<DELETED>    (b) Amendment of ERISA.--Section 204 of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1054) is amended by 
redesignating subsection (j) as subsection (k) and by adding at the end 
the following new subsection:</DELETED>
<DELETED>    ``(j)(1) An applicable individual account plan shall 
provide that--</DELETED>
        <DELETED>    ``(A) a participant or beneficiary of a 
        participant has the right at any time to invest any elective 
        deferrals (and earnings thereon) contributed to his or her 
        account in the form of publicly traded employer securities in 
        any other investment option offered under the plan,</DELETED>
        <DELETED>    ``(B) a participant with 3 or more years of 
        service and any beneficiary of a participant has the right to 
        invest any publicly traded employer securities (and earnings 
        thereon) to which subparagraph (A) does not apply and which are 
        allocated to his or her account in any other investment option 
        offered under the plan, and</DELETED>
        <DELETED>    ``(C) offers at least 3 investment options (not 
        inconsistent with regulations prescribed by the 
        Secretary).</DELETED>
<DELETED>    ``(2) A plan shall not meet the requirements of paragraph 
(1) if the plan imposes restrictions or conditions on the investment of 
publicly traded employer securities which are not imposed on the 
investment of other assets of the plan.</DELETED>
<DELETED>    ``(3)(A) For purposes of this subsection, the term 
`applicable individual account plan' means any individual account plan 
which holds any publicly traded employer securities.</DELETED>
<DELETED>    ``(B) 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) if--</DELETED>
        <DELETED>    ``(i) there are no contributions to such plan (or 
        earnings thereunder) which are held within such plan and 
        subject to subsection (k)(3) or (m)(2) of section 401 of such 
        Code, and</DELETED>
        <DELETED>    ``(ii) such plan is a separate plan (within the 
        meaning of section 414(l) of such Code) with respect to any 
        other defined benefit plan or defined contribution plan 
        maintained by the same employer or employers.</DELETED>
<DELETED>    ``(4) For purposes of this subsection--</DELETED>
        <DELETED>    ``(A) the term `publicly traded employer 
        securities' means employer securities which are readily 
        tradable on an established securities market,</DELETED>
        <DELETED>    ``(B) the term `employer security' has the meaning 
        given such term by section 407(d)(1), and</DELETED>
        <DELETED>    ``(C) the term `year of service' has the meaning 
        given such term by section 203(b)(2).''</DELETED>
<DELETED>    (c) Effective Dates.--</DELETED>
        <DELETED>    (1) In general.--The amendments made by this 
        section shall apply to plan years beginning on or after January 
        1, 2003.</DELETED>
        <DELETED>    (2) Special rule for collectively bargained 
        agreements.--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 
        earlier of--</DELETED>
                <DELETED>    (A) the later of--</DELETED>
                        <DELETED>    (i) January 1, 2004, or</DELETED>
                        <DELETED>    (ii) the date on which the last of 
                        such collective bargaining agreements 
                        terminates (determined without regard to any 
                        extension thereof after such date of 
                        enactment), or</DELETED>
                <DELETED>    (B) January 1, 2005.</DELETED>

    <DELETED>TITLE II--PROTECTION OF EMPLOYEES DURING PENSION PLAN 
                TRANSACTION SUSPENSION PERIOD</DELETED>

<DELETED>SEC. 201. PROTECTION OF PARTICIPANTS OR BENEFICIARIES FROM 
              SUSPENSION OF ABILITY TO DIVERSIFY PLAN ASSETS.</DELETED>

<DELETED>    (a) Notice Requirements.--</DELETED>
        <DELETED>    (1) Excise tax.--</DELETED>
                <DELETED>    (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:</DELETED>

<DELETED>``SEC. 4980G. FAILURE OF APPLICABLE PLANS TO PROVIDE NOTICE OF 
              TRANSACTION SUSPENSION PERIOD.</DELETED>

<DELETED>    ``(a) Imposition of Tax.--There is hereby imposed a tax on 
the failure of any applicable defined contribution plan to meet the 
requirements of subsection (e) with respect to any participant or 
beneficiary.</DELETED>
<DELETED>    ``(b) Amount of Tax.--</DELETED>
        <DELETED>    ``(1) In general.--The amount of the tax imposed 
        by subsection (a) on any failure with respect to any 
        participant or beneficiary shall be $100 for each day in the 
noncompliance period with respect to the failure.</DELETED>
        <DELETED>    ``(2) Noncompliance period.--For purposes of this 
        section, the term `noncompliance period' means, with respect to 
        any failure, the period beginning on the date the failure first 
        occurs and ending on the date the notice to which the failure 
        relates is provided or the failure is otherwise 
        corrected.</DELETED>
<DELETED>    ``(c) Limitations on Amount of Tax.--</DELETED>
        <DELETED>    ``(1) Tax not to apply where failure not 
        discovered and reasonable diligence exercised.--No tax shall be 
        imposed by subsection (a) on any failure during any period for 
        which it is established to the satisfaction of the Secretary 
        that any person subject to liability for tax under subsection 
        (d) did not know that the failure existed and exercised 
        reasonable diligence to meet the requirements of subsection 
        (e).</DELETED>
        <DELETED>    ``(2) Tax not to apply to failures corrected as 
        soon as reasonably practicable.--No tax shall be imposed by 
        subsection (a) on any failure if--</DELETED>
                <DELETED>    ``(A) any person subject to liability for 
                the tax under subsection (d) exercised reasonable 
                diligence to meet the requirements of subsection (e), 
                and</DELETED>
                <DELETED>    ``(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.</DELETED>
        <DELETED>    ``(3) Overall limitation for unintentional 
        failures.--</DELETED>
                <DELETED>    ``(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.</DELETED>
                <DELETED>    ``(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.</DELETED>
        <DELETED>    ``(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.</DELETED>
<DELETED>    ``(d) Liability for Tax.--The following shall be liable 
for the tax imposed by subsection (a):</DELETED>
        <DELETED>    ``(1) In the case of a plan other than a 
        multiemployer plan, the employer.</DELETED>
        <DELETED>    ``(2) In the case of a multiemployer plan, the 
        plan.</DELETED>
<DELETED>    ``(e) Notice of Transaction Suspension Period.--</DELETED>
        <DELETED>    ``(1) In general.--The plan administrator of an 
        applicable defined contribution plan shall provide notice of 
        any transaction suspension period to each participant or 
        beneficiary to whom the transaction suspension period applies 
        (and to any employee organization representing such 
        participants).</DELETED>
        <DELETED>    ``(2) Notice.--The notice required by paragraph 
        (1) shall be written in a manner calculated to be understood by 
        the average plan participant and shall provide sufficient 
information (as determined in accordance with rules or other guidance 
adopted by the Secretary) to allow applicable individuals to understand 
the timing and effect of such transaction suspension period.</DELETED>
        <DELETED>    ``(3) Timing of notice.--</DELETED>
                <DELETED>    ``(A) In general.--Except as provided in 
                subparagraph (B), the notice required by paragraph (1) 
                shall be provided not later than 30 days before the 
                beginning of the transaction suspension 
                period.</DELETED>
                <DELETED>    ``(B) Exceptions to 30-day notice.--
                </DELETED>
                        <DELETED>    ``(i) Unplanned events.--In the 
                        case of any transaction suspension period which 
                        is imposed by reason of an event outside of the 
                        control of a plan sponsor or administrator, 
                        subparagraph (A) shall not apply and the notice 
                        shall be furnished as soon as reasonably 
                        possible under the circumstances.</DELETED>
                        <DELETED>    ``(ii) Acquisitions, etc.--In the 
                        case of any transaction suspension period--
                        </DELETED>
                                <DELETED>    ``(I) in connection with 
                                an acquisition or disposition to which 
                                section 410(b)(6)(C) applies, 
                                or</DELETED>
                                <DELETED>    ``(II) due to such other 
                                circumstances specified by the 
                                Secretary,</DELETED>
                        <DELETED>the Secretary may provide that 
                        subparagraph (A) shall not apply and the notice 
                        shall be furnished at such time as the 
                        Secretary specifies.</DELETED>
        <DELETED>    ``(4) Form and manner of notice.--The notice 
        required by paragraph (1) shall be in writing, except that such 
        notice may be in electronic or other form to the extent that 
        such form is reasonably accessible to the applicable 
        individual.</DELETED>
<DELETED>    ``(f) Definitions and Special Rules.--For purposes of this 
section--</DELETED>
        <DELETED>    ``(1) Applicable defined contribution plan.--The 
        term `applicable defined contribution plan' means a defined 
        contribution plan which--</DELETED>
                <DELETED>    ``(A) is a qualified retirement plan (as 
                defined in section 4974(c)), and</DELETED>
                <DELETED>    ``(B) permits a participant or beneficiary 
                to exercise control over assets in his or her 
                account.</DELETED>
        <DELETED>    ``(2) Transaction suspension period.--</DELETED>
                <DELETED>    ``(A) In general.--The term `transaction 
                suspension period' means a temporary or indefinite 
                period of 2 or more consecutive business days during 
                which there is a substantial reduction (other than by 
                reason of application of securities laws) in the rights 
                of 1 or more participants or beneficiaries to direct 
                investments in a defined contribution plan.</DELETED>
                <DELETED>    ``(B) Business day.--For purposes of this 
                paragraph, a day shall not be treated as a business day 
                to the extent that 1 or more established securities 
                markets for trading securities are not 
                open.''</DELETED>
                <DELETED>    (B) Clerical amendment.--The table of 
                sections for chapter 43 of such Code is amended by 
                adding at the end the following new item:</DELETED>

<DELETED>``Sec. 4980G. Failure of applicable plans to provide notice of 
                            transaction suspension period.''
        <DELETED>    (2) Amendments of erisa.--</DELETED>
                <DELETED>    (A) In general.--Section 101 of the 
                Employee Retirement Income Security Act of 1974 (29 
                U.S.C. 11021) is amended by redesignating the second 
                subsection (h) as subsection (j) and by inserting after 
                the first subsection (h) the following new 
                subsection:</DELETED>
<DELETED>    ``(i)(1) The plan administrator of an individual account 
plan which permits a participant or beneficiary to exercise control 
over assets in his or her account applies shall provide notice of any 
transaction suspension period to each participant or beneficiary to 
whom the transaction suspension period applies (and to any employee 
organization representing such participants).</DELETED>
<DELETED>    ``(2) The notice required by paragraph (1) shall be 
written in a manner calculated to be understood by the average plan 
participant and shall provide sufficient information (as determined in 
accordance with rules or other guidance adopted by the Secretary of the 
Treasury) to allow applicable individuals to understand the timing and 
effect of such transaction suspension period.</DELETED>
<DELETED>    ``(3)(A) Except as provided in subparagraph (B), the 
notice required by paragraph (1) shall be provided not later than 30 
days before the beginning of the transaction suspension 
period.</DELETED>
<DELETED>    ``(B)(i) In the case of any transaction suspension period 
which is imposed outside of the control of a plan sponsor or 
administrator, subparagraph (A) shall not apply and the notice shall be 
furnished as soon as reasonably possible under the 
circumstances.</DELETED>
<DELETED>    ``(ii) In the case of any transaction suspension period--
</DELETED>
        <DELETED>    ``(I) in connection with an acquisition or 
        disposition to which section 410(b)(6)(C) of the Internal 
        Revenue Code of 1986 applies, or</DELETED>
        <DELETED>    ``(II) due to such other circumstances specified 
        by the Secretary of the Treasury,</DELETED>
<DELETED>the Secretary of the Treasury may provide that subparagraph 
(A) shall not apply and the notice shall be furnished at such time as 
the Secretary specifies.</DELETED>
<DELETED>    ``(4) The notice required by paragraph (1) shall be in 
writing, except that such notice may be in electronic or other form to 
the extent that such form is reasonably accessible to the applicable 
individual.</DELETED>
<DELETED>    ``(5)(A) For purposes of this subparagraph, the term 
`transaction suspension period' means a temporary or indefinite period 
of 2 or more consecutive business days during which there is a 
substantial reduction (other than by reason of application of 
securities laws) in the rights of 1 or more participants or 
beneficiaries to direct investments in an individual account 
plan.</DELETED>
<DELETED>    ``(B) For purposes of this paragraph, a day shall not be 
treated as a business day to the extent that 1 or more established 
securities markets for trading securities are not open.''</DELETED>
                <DELETED>    (B) Civil penalties for failure to provide 
                notice.--Section 502 of such Act is amended--</DELETED>
                        <DELETED>    (i) in subsection (a)(6), by 
                        striking ``or (6)'' and inserting ``(6), or 
                        (7)'';</DELETED>
                        <DELETED>    (ii) by redesignating paragraph 
                        (7) of subsection (c) as paragraph (8); 
                        and</DELETED>
                        <DELETED>    (iii) by inserting after paragraph 
                        (6) of subsection (c) the following new 
                        paragraph:</DELETED>
<DELETED>    ``(7) The Secretary may assess a civil penalty against any 
person of up to $100 a day from the date of the person's failure or 
refusal to provide notice to participants and beneficiaries in 
accordance with section 101(i). For purposes of this paragraph, each 
violation with respect to any single participant or beneficiary, shall 
be treated as a separate violation.''</DELETED>
<DELETED>    (b) 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--</DELETED>
        <DELETED>    (1) in subparagraph (B), by inserting before the 
        period the following: ``, except that this subparagraph shall 
        not apply for any period during which the ability of a 
        participant or beneficiary to direct the investment of assets 
        in his or her individual account is suspended by a plan sponsor 
        or fiduciary''; and</DELETED>
        <DELETED>    (2) by adding at the end the following:</DELETED>
<DELETED>``Any limitation or restriction that may govern the frequency 
of transfers between investment vehicles shall not be treated as a 
suspension referred to in subparagraph (B) to the extent such 
limitation or restriction is disclosed to participants or beneficiaries 
through the summary plan description or materials describing specific 
investment alternatives under the plan.''</DELETED>
<DELETED>    ``(c) Safe Harbor Guidance.--The Secretary of Labor, in 
consultation with the Secretary of Treasury, shall, prior to December 
31, 2002, issue final regulations providing clear guidance, including 
safe harbors, on how plan sponsors or any other affected fiduciaries 
can satisfy their fiduciary responsibilities during any period which 
the ability of a participant or beneficiary to direct the investment of 
assets in his or her individual account is suspended.''</DELETED>
<DELETED>    (d) Effective Date.--</DELETED>
        <DELETED>    (1) In general.--The amendments made by this 
        section shall apply to plan years beginning after December 31, 
        2002.</DELETED>
        <DELETED>    (2) Exceptions to 30-day notice.--The Secretary of 
        the Treasury shall, no later than 120 days after the date of 
        the enactment of this Act, specify the circumstances under 
        section 4980G(e)(3)(B)(ii) of the Internal Revenue Code of 1986 
        under which the 30-day notice rule would not apply and the time 
        by which the notice is required to be provided.</DELETED>

<DELETED>SEC. 202. CERTAIN SALES AND PURCHASES OF COMPANY STOCK BY 
              CORPORATE INSIDERS TO BE SUBJECT TO EXCISE TAX ON GOLDEN 
              PARACHUTE PAYMENTS.</DELETED>

<DELETED>    (a) In General.--Section 4999 of the Internal Revenue Code 
of 1986 (relating to golden parachute payments) is amended by 
redesignating subsection (c) as subsection (d) and by inserting after 
subsection (b) the following new subsection:</DELETED>
<DELETED>    ``(c) Certain Sales of Company Stock by Corporate 
Insiders.--</DELETED>
        <DELETED>    ``(1) Treatment as excess parachute payment.--
        </DELETED>
                <DELETED>    ``(A) In general.--For purposes of this 
                section, if there is a sale or exchange, or purchase, 
                of stock in a corporation by a corporate insider during 
                any period in which a transaction suspension period 
                affecting the ability of participants and beneficiaries 
                to invest stock in such corporation is in effect with 
                respect to a defined contribution plan--</DELETED>
                        <DELETED>    ``(i) to which section 401(a) (28) 
                        or (35) applies, and</DELETED>
                        <DELETED>    ``(ii) which is maintained by such 
                        corporation (or any other entity consolidated 
                        with such corporation for purposes of reporting 
                        to the Securities and Exchange 
                        Commission),</DELETED>
                <DELETED>any amount realized by the corporate insider 
                on such sale or exchange (or the purchase price in the 
                case of a purchase) shall be treated as an excess 
                parachute payment.</DELETED>
                <DELETED>    ``(B) Limitation.--Subparagraph (A) shall 
                only apply to stock acquired by an individual by reason 
                of the individual's employment with the corporation or 
                by reason of any other relationship with the 
corporation that makes the individual a corporate insider.</DELETED>
        <DELETED>    ``(2) Application to other instruments.--For 
        purposes of paragraph (1)--</DELETED>
                <DELETED>    ``(A) any sale or exchange, or purchase, 
                of an option, warrant, or other derivative of stock in 
                a corporation,</DELETED>
                <DELETED>    ``(B) any transaction involving the 
                exercise of an option, warrant, or other derivative of 
                stock in a corporation, or</DELETED>
                <DELETED>    ``(C) any similar transaction,</DELETED>
        <DELETED>shall be treated in the same manner as a transaction 
        involving the sale or exchange, or purchase, of 
        stock.</DELETED>
        <DELETED>    ``(3) Corporate insider.--For purposes of this 
        subsection, the term `corporate insider' means, with respect to 
        a corporation, any individual who is subject to the 
        requirements of section 16(a) of the Securities Exchange Act of 
        1934 with respect to such corporation.</DELETED>
        <DELETED>    ``(4) Transaction suspension period.--The term 
        `transaction suspension period' has the meaning given such term 
        by section 4980G(f)(2).''</DELETED>
<DELETED>    (b) Effective Date.--The amendments made by this section 
shall apply to sales and exchanges after the 120th day after the date 
of the enactment of this Act.</DELETED>

        <DELETED>TITLE III--PROVIDING OF INFORMATION TO ASSIST 
                         PARTICIPANTS</DELETED>

<DELETED>SEC. 301. PERIODIC PENSION BENEFITS STATEMENTS.</DELETED>

<DELETED>    (a) Excise Tax.--</DELETED>
        <DELETED>    (1) In general.--Chapter 43 of the Internal 
        Revenue Code of 1986 (relating to qualified pension, etc., 
        plans), as amended by this Act, is amended by adding at the end 
        the following new section:</DELETED>

<DELETED>``SEC. 4980H. FAILURE OF CERTAIN DEFINED CONTRIBUTION PLANS TO 
              PROVIDE REQUIRED QUARTERLY STATEMENTS.</DELETED>

<DELETED>    ``(a) Imposition of Tax.--There is hereby imposed a tax on 
the failure of an applicable defined contribution plan to meet the 
requirements of subsection (e) with respect to any participant or 
beneficiary.</DELETED>
<DELETED>    ``(b) Amount of Tax.--</DELETED>
        <DELETED>    ``(1) In general.--The amount of the tax imposed 
        by subsection (a) on any failure with respect to any 
        participant or beneficiary shall be $100 for each day in the 
        noncompliance period with respect to the failure.</DELETED>
        <DELETED>    ``(2) Noncompliance period.--For purposes of this 
        section, the term `noncompliance period' means, with respect to 
        any failure, the period beginning on the date the failure first 
        occurs and ending on the date the statement to which the 
        failure relates is provided or the failure is otherwise 
        corrected.</DELETED>
<DELETED>    ``(c) Limitations on Amount of Tax.--</DELETED>
        <DELETED>    ``(1) Tax not to apply where failure not 
        discovered and reasonable diligence exercised.--No tax shall be 
        imposed by subsection (a) on any failure during any period for 
        which it is established to the satisfaction of the Secretary 
        that any person subject to liability for tax under subsection 
        (d) did not know that the failure existed and exercised 
        reasonable diligence to meet the requirements of subsection 
        (e).</DELETED>
        <DELETED>    ``(2) Tax not to apply to failures corrected 
        within 30 days.--No tax shall be imposed by subsection (a) on 
        any failure if--</DELETED>
                <DELETED>    ``(A) any person subject to liability for 
                the tax under subsection (d) exercised reasonable 
                diligence to meet the requirements of subsection (e), 
                and</DELETED>
                <DELETED>    ``(B) such person provides the statement 
                described in subsection (e) during the 30-day period 
                beginning on the first date such person knew, or 
                exercising reasonable diligence should have known, that 
                such failure existed.</DELETED>
        <DELETED>    ``(3) Overall limitation for unintentional 
        failures.--</DELETED>
                <DELETED>    ``(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.</DELETED>
                <DELETED>    ``(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.</DELETED>
        <DELETED>    ``(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.</DELETED>
<DELETED>    ``(d) Liability for Tax.--The following shall be liable 
for the tax imposed by subsection (a):</DELETED>
        <DELETED>    ``(1) In the case of a plan other than a 
        multiemployer plan, the employer.</DELETED>
        <DELETED>    ``(2) In the case of a multiemployer plan, the 
        plan.</DELETED>
<DELETED>    ``(e) Requirement To Provide Quarterly Statements.--
</DELETED>
        <DELETED>    ``(1) In general.--The administrator of an 
        applicable defined contribution plan shall furnish a pension 
        benefit statement--</DELETED>
                <DELETED>    ``(A) to a plan participant at least once 
                each calendar quarter, and</DELETED>
                <DELETED>    ``(B) to a plan beneficiary upon written 
                request but no more frequently than once during any 12-
                month period.</DELETED>
        <DELETED>    ``(2) Statement.--</DELETED>
                <DELETED>    ``(A) In general.--A pension benefit 
                statement under paragraph (1) shall indicate, on the 
                basis of the latest available information--</DELETED>
                        <DELETED>    ``(i) the total benefits accrued, 
                        and</DELETED>
                        <DELETED>    ``(ii) the nonforfeitable pension 
                        benefits, if any, which have accrued, or the 
                        earliest date on which benefits will become 
                        nonforfeitable.</DELETED>
                <DELETED>    ``(B) Specific information.--A pension 
                benefit statement under paragraph (1) shall include 
                (together with the information required in subparagraph 
                (A))--</DELETED>
                        <DELETED>    ``(i) 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</DELETED>
                        <DELETED>    ``(ii) an explanation of the 
                        importance, for the long-term retirement 
                        security of participants and beneficiaries, of 
                        a well-balanced and diversified investment 
                        portfolio, including a discussion of the risk 
                        of holding substantial portions of a portfolio 
                        in the security of any one entity, such as 
                        employer securities.</DELETED>
        <DELETED>    ``(3) Manner of statement.--A pension benefit 
        statement under paragraph (1)--</DELETED>
                <DELETED>    ``(A) shall be written in a manner 
                calculated to be understood by the average plan 
                participant, and</DELETED>
                <DELETED>    ``(B) may be provided in written, 
                electronic, or other appropriate form.</DELETED>
<DELETED>    ``(f) Applicable Defined Contribution Plan.--For purposes 
of this section, the term `applicable defined contribution plan' means 
a defined contribution plan which--</DELETED>
        <DELETED>    ``(1) is a qualified retirement plan (as defined 
        in section 4974(c)), and</DELETED>
        <DELETED>    ``(2) permits a participant or beneficiary to 
        exercise control over assets in his or her account.''</DELETED>
        <DELETED>    (2) Clerical amendment.--The table of sections for 
        chapter 43 of such Code is amended by adding at the end the 
        following new item:</DELETED>

<DELETED>``Sec. 4980H. Failure of certain defined contribution plans to 
                            provide required quarterly statements.''
<DELETED>    (b) Amendments of ERISA.--</DELETED>
        <DELETED>    (1) 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:</DELETED>
<DELETED>    ``(a)(1)(A) The administrator of an individual account 
plan shall furnish a pension benefit statement--</DELETED>
        <DELETED>    ``(i) to a plan participant at least once annually 
        (each calendar quarter in the case of an applicable individual 
        account plan), and</DELETED>
        <DELETED>    ``(ii) to a plan beneficiary upon written 
        request.</DELETED>
<DELETED>    ``(B) The administrator of a defined benefit plan shall 
furnish a pension benefit statement--</DELETED>
        <DELETED>    ``(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</DELETED>
        <DELETED>    ``(ii) to a participant or beneficiary of the plan 
        upon written request.</DELETED>
<DELETED>Information furnished under subparagraph (B) to a participant 
(other than at the request of the participant) may be based on 
reasonable estimates determined under regulations prescribed by the 
Secretary.</DELETED>
<DELETED>    ``(2)(A) A pension benefit statement under paragraph (1)--
</DELETED>
        <DELETED>    ``(i) shall indicate, on the basis of the latest 
        available information--</DELETED>
                <DELETED>    ``(I) the total benefits accrued, 
                and</DELETED>
                <DELETED>    ``(II) the nonforfeitable pension 
                benefits, if any, which have accrued, or the earliest 
                date on which benefits will become 
                nonforfeitable,</DELETED>
        <DELETED>    ``(ii) shall be written in a manner calculated to 
        be understood by the average plan participant, and</DELETED>
        <DELETED>    ``(iii) may be provided in written, electronic, 
        telephonic, or other appropriate form.</DELETED>
<DELETED>    ``(B) In the case of an applicable individual account 
plan, the pension benefit statement under paragraph (1) shall include 
(together with the information required in subparagraph (A))--
</DELETED>
        <DELETED>    ``(i) 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</DELETED>
        <DELETED>    ``(ii) an explanation of the importance, for the 
        long-term retirement security of participants and 
        beneficiaries, of a well-balanced and diversified investment 
        portfolio, including a discussion of the risk of holding 
        substantial portions of a portfolio in the security of any 1 
        entity, such as employer securities.</DELETED>
<DELETED>    ``(C) For purposes of this subsection, the term 
`applicable individual account plan' means an individual account plan 
to which section 404(c) applies.</DELETED>
<DELETED>    ``(3)(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, 
telephonic, 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.</DELETED>
<DELETED>    ``(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).''</DELETED>
<DELETED>    (c) Conforming Amendments.--</DELETED>
        <DELETED>    (1) Section 105 of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1025) is amended by striking 
        subsection (d).</DELETED>
        <DELETED>    (2) Section 105(b) of such Act (29 U.S.C. 1025(b)) 
        is amended to read as follows:</DELETED>
<DELETED>    ``(b) In no case shall a participant or beneficiary of a 
plan be entitled to more than 1 statement described in subsection 
(a)(1) (A)(ii) or (B)(ii), whichever is applicable, in any 12-month 
period.''</DELETED>
<DELETED>    (d) Model Statements.--The Secretary of Labor shall 
develop 1 or more model benefit statements, 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 4980H of the Internal Revenue Code of 1986 and section 105 of 
the Employee Retirement Income Security Act of 1974.</DELETED>
<DELETED>    (e) Effective Date.--The amendments made by this section 
shall apply to plan years beginning after December 31, 2003.</DELETED>

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``National Employee 
Savings and Trust Equity Guarantee Act''.
    (b) Table of Contents.--

Sec. 1. Short title; table of contents.

            TITLE I--DIVERSIFICATION OF PENSION PLAN ASSETS

Sec. 101. Defined contribution plans required to provide employees with 
                            freedom to invest their plan assets.

   TITLE II--PROTECTION OF EMPLOYEES DURING PENSION PLAN TRANSACTION 
                           SUSPENSION PERIOD

Sec. 201. Notice to participants or beneficiaries of transaction 
                            suspension periods.
Sec. 202. Inapplicability of relief from fiduciary liability during 
                            suspension of ability of participant or 
                            beneficiary to direct investments.
Sec. 203. Clarification of participant access to remedies.
Sec. 204. Increase in maximum bond amount for plans holding employer 
                            securities.

       TITLE III--PROVIDING OF INFORMATION TO ASSIST PARTICIPANTS

                     Subtitle A--General Provisions

Sec. 301. Periodic pension benefit statements.
Sec. 302. Defined contribution plans required to provide adequate 
                            investment education to participants.
Sec. 303. Information on optional form of benefits.
Sec. 304. Fiduciary duty to provide material information relating to 
                            investment in employer securities.
Sec. 305. Electronic disclosure of insider trading.
Sec. 306. Fiduciary rules for plan sponsors designating independent 
                            investment advisers.

            TITLE IV--OTHER PROVISIONS RELATING TO PENSIONS

                     Subtitle A--General Provisions

Sec. 401. Employee Plans Compliance Resolution System.
Sec. 402. Extension to all governmental plans of moratorium on 
                            application of certain nondiscrimination 
                            rules applicable to State and local plans.
Sec. 403. Notice and consent period regarding distributions.
Sec. 404. Technical corrections to Saver Act.
Sec. 405. Missing participants.
Sec. 406. Reduced PBGC premium for new plans of small employers.
Sec. 407. Reduction of additional PBGC premium for new and small plans.
Sec. 408. Authorization for PBGC to pay interest on premium overpayment 
                            refunds.
Sec. 409. Substantial owner benefits in terminated plans.
Sec. 410. Benefit suspension notice.
Sec. 411. Interest rate range for additional funding requirements.
Sec. 412. Voluntary early retirement incentive and employment retention 
                            plans maintained by local educational 
                            agencies and other entities.
Sec. 413. Automatic rollovers of certain mandatory distributions.
Sec. 414. 2-year extension of transition rule to pension funding 
                            requirements.

                          Subtitle B--Studies

Sec. 421. Study regarding insurance system for individual account 
                            plans.
Sec. 422. Study regarding fees charged by individual account plans.
Sec. 423. Study on revitalizing defined benefit plans.
Sec. 424. Study on floor-offset ESOPS.

                      Subtitle C--Plan Amendments

Sec. 431. Provisions relating to plan amendments.

      TITLE V--PROVISIONS RELATING TO EXECUTIVES AND STOCK OPTIONS

             Subtitle A--Provisions Relating to Executives

                     Part I--Executive Compensation

Sec. 501. Repeal of 1978 Revenue Act limitation on Secretary of the 
                            Treasury's authority to determine year of 
                            inclusion of amounts under private deferred 
                            compensation plans.
Sec. 502. Treatment of nonqualified deferred compensation funded with 
                            assets located outside the United States.
Sec. 503. Treatment of employment loans made to corporate executives.
Sec. 504. Increase in withholding from supplemental wage payments in 
                            excess of $1,000,000.

                 Part II--Signing Corporate Tax Returns

Sec. 511. Signing of corporate tax returns by chief executive officer.

                       Subtitle B--Stock Options

Sec. 521. Exclusion of incentive stock options and employee stock 
                            purchase plan stock options from wages.
Sec. 522. Treatment of sale of stock acquired pursuant to exercise of 
                            stock options to comply with conflict-of-
                            interest requirements.

            TITLE I--DIVERSIFICATION OF PENSION PLAN ASSETS

SEC. 101. DEFINED CONTRIBUTION PLANS REQUIRED TO PROVIDE EMPLOYEES WITH 
              FREEDOM TO INVEST THEIR PLAN ASSETS.

    (a) Amendments of Internal Revenue Code.--
            (1) Qualification requirement.--Section 401(a) of the 
        Internal Revenue Code of 1986 (relating to qualified pension, 
        profit-sharing, and stock bonus plans) is amended by inserting 
        after paragraph (34) the following new paragraph:
            ``(35) Diversification requirements for certain defined 
        contribution plans.--
                    ``(A) In general.--A trust which is part of an 
                applicable defined contribution plan shall not be 
                treated as a qualified trust unless the plan meets the 
                requirements of subparagraphs (B) and (C).
                    ``(B) Employee contributions and elective deferrals 
                invested in employer securities.--In the case of the 
                portion of an applicable individual's account 
                attributable to employee contributions and elective 
                deferrals which is invested in employer securities, a 
                plan meets the requirements of this subparagraph if the 
                applicable individual may elect to direct the plan to 
                divest any such securities and to reinvest an 
                equivalent amount in other investment options meeting 
                the requirements of subparagraph (D).
                    ``(C) Employer contributions invested in employer 
                securities.--In the case of the portion of the account 
                attributable to employer contributions other than 
                elective deferrals which is invested in employer 
                securities, a plan meets the requirements of this 
                subparagraph if each applicable individual who--
                            ``(i) is a participant who has completed at 
                        least 3 years of service, or
                            ``(ii) is a beneficiary of a participant 
                        described in clause (i) or of a deceased 
                        participant,
                may elect to direct the plan to divest any such 
                securities and to reinvest an equivalent amount in 
                other investment options meeting the requirements of 
                subparagraph (D).
                    ``(D) Investment options.--
                            ``(i) In general.--The requirements of this 
                        subparagraph are met if 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.
                            ``(ii) Treatments of certain restrictions 
                        and conditions.--
                                    ``(I) Time for making investment 
                                choices.--A plan shall not be treated 
                                as failing to meet the requirements of 
                                this subparagraph merely because the 
                                plan limits the time for divestment and 
                                reinvestment to periodic, reasonable 
                                opportunities occurring no less 
                                frequently than quarterly.
                                    ``(II) Certain restrictions and 
                                conditions not allowed.--A plan shall 
                                not meet the requirements of this 
                                subparagraph if the plan imposes 
                                restrictions or conditions with respect 
                                to the investment of employer 
                                securities which are not imposed on the 
                                investment of other assets of the plan. 
                                This subclause shall not apply to any 
                                restrictions or conditions imposed by 
                                reason of the application of securities 
                                laws.
                    ``(E) Applicable defined contribution plan.--For 
                purposes of this paragraph--
                            ``(i) In general.--The term `applicable 
                        defined contribution plan' means any defined 
                        contribution plan which holds any publicly 
                        traded employer securities.
                            ``(ii) Exception for certain esops.--Such 
                        term does not include an employee stock 
                        ownership plan if--
                                    ``(I) there are no contributions to 
                                such plan (or earnings thereunder) 
                                which are held within such plan and are 
                                subject to subsection (k) or (m), and
                                    ``(II) such plan is a separate plan 
                                for purposes of section 414(l) with 
                                respect to any other defined benefit 
                                plan or defined contribution plan 
                                maintained by the same employer or 
                                employers.
                            ``(iii) Exception for one participant 
                        plans.--Such term does not include a one-
                        participant retirement plan (as defined in 
                        section 4980G(f)(2)(B)).
                    ``(F) Certain plans treated as holding publicly 
                traded employer securities.--
                            ``(i) In general.--Except as provided in 
                        regulations or in clause (ii), a plan holding 
                        employer securities which are not publicly 
                        traded employer securities shall be treated as 
                        holding publicly traded employer securities if 
                        any employer corporation, or any member of a 
                        controlled group of corporations which includes 
                        such employer corporation, has issued a class 
                        of stock which is a publicly traded employer 
                        security.
                            ``(ii) Exception for certain controlled 
                        groups with publicly traded securities.--Clause 
                        (i) shall not apply to a plan if--
                                    ``(I) no employer corporation, or 
                                parent corporation of an employer 
                                corporation, has issued any publicly 
                                traded employer security, and
                                    ``(II) no employer corporation, or 
                                parent corporation of an employer 
                                corporation, has issued any special 
                                class of stock which grants particular 
                                rights to, or bears particular risks 
                                for, the holder or issuer with respect 
                                to any corporation described in clause 
                                (i) which has issued any publicly 
                                traded employer security.
                            ``(iii) Definitions.--For purposes of this 
                        subparagraph, the term--
                                    ``(I) `controlled group of 
                                corporations' has the meaning given 
                                such term by section 1563(a), except 
                                that `50 percent' shall be substituted 
                                for `80 percent' each place it appears,
                                    ``(II) `employer corporation' means 
                                a corporation which is an employer 
                                maintaining the plan, and
                                    ``(III) `parent corporation' has 
                                the meaning given such term by section 
                                424(e).
                    ``(G) Other definitions.--For purposes of this 
                paragraph--
                            ``(i) 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.
                            ``(ii) Elective deferral.--The term 
                        `elective deferral' means an employer 
                        contribution described in section 402(g)(3)(A).
                            ``(iii) Employer security.--The term 
                        `employer security' has the meaning given such 
                        term by section 407(d)(1) of the Employee 
                        Retirement Income Security Act of 1974.
                            ``(iv) Employee stock ownership plan.--The 
                        term `employee stock ownership plan' has the 
                        meaning given such term by section 4975(e)(7).
                            ``(v) Publicly traded employer 
                        securities.--The term `publicly traded employer 
                        securities' means employer securities which are 
                        readily tradable on an established securities 
                        market.
                            ``(vi) Year of service.--The term `year of 
                        service' has the meaning given such term by 
                        section 411(a)(5).
                    ``(H) Transition rule for securities attributable 
                to employer contributions.--
                            ``(i) Rules phased in over 3 years.--
                                    ``(I) In general.--In the case of 
                                the portion of an account to which 
                                subparagraph (C) applies and which 
                                consists of employer securities 
                                acquired in a plan year beginning 
                                before January 1, 2003, subparagraph 
                                (C) shall only apply to the applicable 
                                percentage of such securities. This 
                                subparagraph shall be applied 
                                separately with respect to each class 
                                of securities.
                                    ``(II) Exception for certain 
                                participants aged 55 or over.--
                                Subclause (I) shall not apply to an 
                                applicable individual who is a 
                                participant who has attained age 55 and 
                                completed at least 3 years of service 
                                before the first plan year beginning 
                                after December 31, 2002.
                            ``(ii) Applicable percentage.--For purposes 
                        of clause (i), the applicable percentage shall 
                        be determined as follows:

``Plan year to which limit applies: The applicable percentage is:
    1st...........................................          33 percent 
    2d............................................          66 percent 
    3d and following..............................         100 percent.
                            ``(iii) Contributions held within an 
                        esop.--Notwithstanding clause (i), in the case 
                        of employer securities held in an employee 
                        stock ownership plan--
                                    ``(I) the percentage of such 
                                employer securities which may be 
                                divested by a participant or 
                                beneficiary shall not be less than the 
                                percentage determined under paragraph 
                                (28) (determined as if paragraph (28) 
                                applied to a plan described in this 
                                paragraph), and
                                    ``(II) the portion of the account 
                                to which subparagraph (C) applies for 
                                any year (after application of clause 
                                (i)) shall be determined by taking into 
                                account the portion of the account to 
                                which an election under paragraph 
                                (28)(B) applied for prior years.
                    ``(I) Regulations.--The Secretary shall prescribe 
                regulations under this paragraph in consultation with 
                the Secretary of Labor.''
            (2) Conforming amendments.--
                    (A) Section 401(a)(28)(B) of such Code (relating to 
                additional requirements relating to employee stock 
                ownership plans) is amended by adding at the end the 
                following new clause:
                            ``(v) Exception.--Except as provided in 
                        paragraph (35)(H), this paragraph shall not 
                        apply to an applicable defined contribution 
                        plan (as defined in paragraph (35)(C)).''
                    (B) Section 409(h)(7) of such Code is amended by 
                inserting ``or subparagraph (B) or (C) of section 
                401(a)(35)'' before the period at the end.
                    (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.''
    (b) Amendments of ERISA.--Section 204 of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1054) is amended by 
redesignating subsection (j) as subsection (k) and by adding after 
subsection (i) the following new subsection:
    ``(j)(1) An applicable defined contribution plan shall meet the 
requirements of paragraphs (2) and (3).
    ``(2) In the case of the portion of an applicable individual's 
account attributable to employee contributions and elective deferrals 
which is invested in employer securities, a plan meets the requirements 
of this paragraph if the applicable individual may elect to direct the 
plan to divest any such securities and to reinvest an equivalent amount 
in other investment options meeting the requirements of paragraph (4).
    ``(3) In the case of the portion of the account attributable to 
employer contributions other than elective deferrals which is invested 
in employer securities, a plan meets the requirements of this paragraph 
if each applicable individual who--
            ``(A) is a participant who has completed at least 3 years 
        of service, or
            ``(B) is a beneficiary of a participant described in 
        subparagraph (A) or of a deceased participant,
may elect to direct the plan to divest any such securities and to 
reinvest an equivalent amount in other investment options meeting the 
requirements of paragraph (4).
    ``(4)(A) The requirements of this paragraph are met if 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.
    ``(B)(i) A plan shall not be treated as failing to meet the 
requirements of this paragraph merely because the plan limits the time 
for divestment and reinvestment to periodic, reasonable opportunities 
occurring no less frequently than quarterly.
    ``(ii) A plan shall not meet the requirements of this paragraph if 
the plan imposes restrictions or conditions with respect to the 
investment of employer securities which are not imposed on the 
investment of other assets of the plan. This subparagraph shall not 
apply to any restrictions or conditions imposed by reason of the 
application of securities laws.
    ``(5) For purposes of this subsection--
            ``(A) The term `applicable defined contribution plan' means 
        any defined contribution plan which holds any publicly traded 
        employer securities.
            ``(B) Such term does not include an employee stock 
        ownership plan if--
                    ``(i) there are no contributions to such plan (or 
                earnings thereunder) which are held within such plan 
                and are subject to subsection (k) or (m) of section 401 
                of the Internal Revenue Code of 1986, and
                    ``(ii) such plan is a separate plan (for purposes 
                of section 414(l) of such Code) with respect to any 
                other defined benefit plan or defined contribution plan 
                maintained by the same employer or employers.
            ``(C) Such term shall not include a one-participant 
        retirement plan (as defined in section 101(i)(7)(B)(ii)).
            ``(D)(i) Except as provided in regulations or in clause 
        (ii), a plan holding employer securities which are not publicly 
        traded employer securities shall be treated as holding publicly 
        traded employer securities if any employer corporation, or any 
        member of a controlled group of corporations which includes 
        such employer corporation, has issued a class of stock which is 
        a publicly traded employer security.
            ``(ii) Clause (i) shall not apply to a plan if--
                    ``(I) no employer corporation, or parent 
                corporation of an employer corporation, has issued any 
                publicly traded employer security, and
                    ``(II) no employer corporation, or parent 
                corporation of an employer corporation, has issued any 
                special class of stock which grants particular rights 
                to, or bears particular risks for, the holder or issuer 
                with respect to any corporation described in clause (i) 
                which has issued any publicly traded employer security.
            ``(iii) Definitions.--For purposes of this subparagraph, 
        the term--
                    ``(I) `controlled group of corporations' has the 
                meaning given such term by section 1563(a) of the 
                Internal Revenue Code of 1986, except that `50 percent' 
                shall be substituted for `80 percent' each place it 
                appears,
                    ``(II) `employer corporation' means a corporation 
                which is an employer maintaining the plan, and
                    ``(III) `parent corporation' has the meaning given 
                such term by section 424(e) of such Code.
    ``(6) For purposes of this paragraph--
            ``(A) 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.
            ``(B) The term `elective deferral' means an employer 
        contribution described in section 402(g)(3)(A) of the Internal 
        Revenue Code of 1986.
            ``(C) The term `employer security' has the meaning given 
        such term by section 407(d)(1).
            ``(D) The term `employee stock ownership plan' has the 
        meaning given such term by section 4975(e)(7) of such Code.
            ``(E) The term `publicly traded employer securities' means 
        employer securities which are readily tradable on an 
        established securities market.
            ``(F) The term `year of service' has the meaning given such 
        term by section 203(b)(2).
    ``(7)(A)(i) In the case of the portion of an account to which 
paragraph (3) applies and which consists of employer securities 
acquired in a plan year beginning before January 1, 2003, paragraph (3) 
shall only apply to the applicable percentage of such securities. This 
subparagraph shall be applied separately with respect to each class of 
securities.
    ``(ii) Clause (i) shall not apply to an applicable individual who 
is a participant who has attained age 55 and completed at least 3 years 
of service before the first plan year beginning after December 31, 
2002.
    ``(B) For purposes of subparagraph (A), the applicable percentage 
shall be determined as follows:

``Plan year to which limit applies: The applicable percentage is:
    1st...........................................          33 percent 
    2d............................................          66 percent 
    3d and following..............................         100 percent.
    ``(C) Notwithstanding subparagraph (A), in the case of employer 
securities held in an employee stock ownership plan--
            ``(i) the percentage of such employer securities that may 
        be divested by a participant or beneficiary shall not be less 
        than the percentage determined under section 401(a)(28) of the 
        Internal Revenue Code of 1986 (determined as if such section 
        applied to a plan described in this subsection), and
            ``(ii) the portion of the account to which paragraph (3) 
        applies for any year (after application of subparagraph (A)) 
        shall be determined by taking into account the portion of the 
        account to which an election under section 401(a)(28)(B) of 
        such Code applied for prior years.
    ``(8) The Secretary of the Treasury shall prescribe regulations 
under this subsection in consultation with the Secretary.''
    (c) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2002.
            (2) Special rule for collectively bargained agreements.--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 ``December 31, 2002'' the earlier of--
                    (A) the later of--
                            (i) December 31, 2003, or
                            (ii) the date on which the last of such 
                        collective bargaining agreements terminates 
                        (determined without regard to any extension 
                        thereof after such date of enactment), or
                    (B) December 31, 2004.

   TITLE II--PROTECTION OF EMPLOYEES DURING PENSION PLAN TRANSACTION 
                           SUSPENSION PERIOD

SEC. 201. NOTICE TO PARTICIPANTS OR BENEFICIARIES OF TRANSACTION 
              SUSPENSION PERIODS.

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

``SEC. 4980G. FAILURE OF APPLICABLE PENSION PLAN TO PROVIDE NOTICE OF 
              TRANSACTION SUSPENSION PERIOD.

    ``(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.--
            ``(1) In general.--The amount of the tax imposed by 
        subsection (a) on any failure with respect to any applicable 
        individual shall be $100 for each day in the noncompliance 
        period with respect to the failure.
            ``(2) Noncompliance period.--For purposes of this section, 
        the term `noncompliance period' means, with respect to any 
        failure, the period beginning on the date the failure first 
        occurs and ending on the date the notice to which the failure 
        relates is provided or the failure is otherwise corrected.
    ``(c) Limitations on Amount of Tax.--
            ``(1) Tax not to apply where failure not discovered and 
        reasonable diligence exercised.--No tax shall be imposed by 
        subsection (a) on any failure during any period for which it is 
        established to the satisfaction of the Secretary that any 
        person subject to liability for tax under subsection (d) did 
        not know that the failure existed and exercised reasonable 
        diligence to meet the requirements of subsection (e).
            ``(2) 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.
            ``(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 not described in paragraph (2) 
        or (3), the employer.
            ``(2) In the case of a multiemployer plan, the plan.
            ``(3) In the case of a plan described in section 403(b) not 
        established or maintained by the employer, the plan 
        administrator.
    ``(e) Notice of Transaction Suspension Period.--
            ``(1) In general.--The plan administrator of an applicable 
        pension plan shall provide notice of any transaction suspension 
        period to each applicable individual to whom the transaction 
        suspension period applies (and to any employee organization 
        representing such individuals).
            ``(2) Notice.--
                    ``(A) In general.--The notice required by paragraph 
                (1) shall be written in a manner calculated to be 
                understood by the average plan participant and shall 
                provide sufficient information (as determined in 
                accordance with rules or other guidance adopted by the 
                Secretary) to allow applicable individuals to 
                understand the timing and effect of such transaction 
                suspension period.
                    ``(B) Specific information.--Information provided 
                under subparagraph (A) shall include--
                            ``(i) the reasons for the suspension,
                            ``(ii) an identification of the rights 
                        described in subsection (f)(3)(B) which will be 
                        affected,
                            ``(iii) the expected beginning date and 
                        length of the period of the suspension, and
                            ``(iv) if rights relating to plan 
                        investments will be affected, a statement that 
                        the applicable individual should evaluate the 
                        appropriateness of current investment decisions 
                        in light of the inability to direct or 
                        diversify assets in the account during the 
                        expected period of suspension.
            ``(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 suspension period.
                    ``(B) Exceptions to 30-day notice.--
                            ``(i) Unplanned events.--In the case of any 
                        transaction suspension period which is imposed 
                        by reason of an event outside of the control of 
                        an employer, plan, or plan administrator, 
                        subparagraph (A) shall not apply and the notice 
shall be furnished as soon as reasonably possible under the 
circumstances.
                            ``(ii) Disposition of stock or assets.--
                                    ``(I) In general.--In the case of a 
                                transaction suspension period beginning 
                                within 30 days after a major corporate 
                                disposition by a corporation 
                                maintaining an applicable pension plan, 
                                the requirements of subparagraph (A) 
                                shall be treated as having been met if, 
                                not later than 30 days before such 
                                major corporate disposition, the plan 
                                administrator (or any employer 
                                maintaining the applicable pension plan 
                                and acting on behalf of the plan 
                                administrator) provides notice of such 
                                transaction suspension period.
                                    ``(II) Major corporate 
                                disposition.--For purposes of subclause 
                                (I), the term `major corporate 
                                disposition' means, with respect to a 
                                corporation, the disposition of 
                                substantially all the stock (or the 
                                assets used in a trade or business) of 
                                such corporation or a subsidiary 
                                thereof.
                                    ``(III) Noncorporate entities.--In 
                                accordance with regulations prescribed 
                                by the Secretary, rules similar to the 
                                rules of subclause (I) shall apply to 
                                entities that are not corporations.
                            ``(iii) Other events.--In the case of any 
                        transaction suspension period due to such other 
                        circumstances specified by the Secretary, 
                        including the application of securities laws, 
                        the Secretary may provide that subparagraph (A) 
                        shall not apply and the notice shall be 
                        furnished at such time as the Secretary 
                        specifies.
            ``(4) Changes in period of suspension.--If there is a 
        change in the beginning date or length of the transaction 
        suspension period after notice has been provided under this 
        subsection, the plan administrator shall provide notice of the 
        change as soon as reasonably practicable.
            ``(5) Form and manner of notice.--The notice required by 
        paragraph (1) shall be in writing and may be delivered in 
        electronic or other form to the extent that such notice may 
        reasonably be expected to be received by the applicable 
        individual.
            ``(6) Model notice.--The Secretary shall, in consultation 
        with the Secretary of Labor, issue a model notice that may be 
        used to meet the requirements of this subsection.
    ``(f) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Applicable individual.--The term `applicable 
        individual' has the meaning given such term by section 
        401(a)(35)(G)(i).
            ``(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), or
                            ``(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 and 
                beneficiaries under the plan. Such term shall not 
                include a one-participant retirement plan.
                    ``(B) One-participant retirement plan.--The term 
                `one-participant retirement plan' means a retirement 
                plan that--
                            ``(i) on the first day of the plan year--
                                    ``(I) covered only the individual 
                                (or the individual and the individual's 
                                spouse) and the individual owned the 
                                entire business (whether or not 
                                incorporated), or
                                    ``(II) covered only 1 or more 
                                partners (or 1 or more partners and 
                                their spouses) in a business 
                                partnership,
                            ``(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 individuals described in subclause 
                        (I) or (II) of clause (i),
                            ``(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 (within the meaning of section 
                        414(n)).
            ``(3) Transaction suspension period.--
                    ``(A) In general.--The term `transaction suspension 
                period' means, with respect to an applicable pension 
                plan, a period of more than 3 consecutive business days 
                during which there is a significant restriction on 
                rights described in subparagraph (B).
                    ``(B) Rights described.--For purposes of this 
                paragraph, rights described in this subparagraph with 
                respect to an applicable pension plan are rights 
                otherwise provided under such plan to 1 or more 
                applicable individuals to direct investments in such 
                plan (including investments in employer securities), to 
                obtain loans from such plan, or to obtain distributions 
                from such plan.
                    ``(C) Exceptions.--
                            ``(i) In general.--Rights which are 
                        significantly restricted 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.
                            ``(ii) Domestic relations order.--Any 
                        restriction required in connection with a 
                        domestic relations order (within the meaning of 
                        section 414(p)(1)(B)) shall not be taken into 
                        account for purposes of this paragraph.
            ``(4) Penalty in lieu of tax for government and church 
        plans.--In the case of a failure of any applicable pension plan 
        which is a governmental or church plan to meet the requirements 
        of subsection (e)--
                    ``(A) no tax shall be imposed by this section with 
                respect to the failure, but
                    ``(B) the provisions of section 6652(m) shall 
                apply.
        For purposes of this paragraph, the terms `governmental plan' 
        and `church plan' have the meanings given such terms by section 
        414.''
                    (B) Aggregation.--Section 414(t) of such Code is 
                amended by striking ``or 4980B'' and inserting ``4980B, 
                or 4980G''.
                    (C) Clerical amendment.--The table of sections for 
                chapter 43 of such Code is amended by adding at the end 
                the following new item:

``Sec. 4980G. Failure of applicable pension plan to provide notice of 
                            transaction suspension period.''
            (2) Penalty for failures by governmental and church 
        plans.--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 Notice of Transaction Suspension Period.--
            ``(1) In general.--In the case of each failure of an 
        applicable pension plan which is a governmental plan or church 
        plan (within the meaning of section 414) to provide the notice 
        required by section 4980G(e) to any applicable individual, such 
        plan shall pay, on notice and demand by the Secretary and in 
        the same manner as tax, an amount equal to $100 for each day in 
        the noncompliance period with respect to the failure.
            ``(2) Certain exceptions to apply.--Rules similar to the 
        rules of section 4980G(c) shall apply for purposes of this 
        subsection.
            ``(3) Definitions.--For purposes of this subsection, any 
        term used in this section which is also used in section 4980G 
        shall have the meaning given such term by section 4980G.''
            (3) Amendments of erisa.--
                    (A) In general.--Section 101 of the Employee 
                Retirement Income Security Act of 1974 (29 U.S.C. 1021) 
                is amended by redesignating the second subsection (h) 
                as subsection (j) and by inserting after the first 
                subsection (h) the following new subsection:
    ``(i)(1) The plan administrator of an applicable pension plan shall 
provide notice of any transaction suspension period to each applicable 
individual to whom the transaction suspension period applies (and to 
any employee organization representing such individuals).
    ``(2)(A) The notice required by paragraph (1) shall be written in a 
manner calculated to be understood by the average plan participant and 
shall provide sufficient information (as determined in accordance with 
rules or other guidance adopted by the Secretary of the Treasury) to 
allow applicable individuals to understand the timing and effect of 
such transaction suspension period.
    ``(B) Information provided under subparagraph (A) shall include--
            ``(i) the reasons for the suspension,
            ``(ii) an identification of the rights described in 
        paragraph (7)(C)(ii) which will be affected,
            ``(iii) the expected beginning date and length of the 
        period of the suspension, and
            ``(iv) if rights relating to plan investments will be 
        affected, a statement that the applicable individual should 
        evaluate the appropriateness of current investment decisions in 
        light of the inability to direct or diversify assets in the 
        account during the expected period of suspension.
    ``(3)(A) 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 suspension period.
    ``(B)(i) In the case of any transaction suspension period which is 
imposed by reason of an event outside of the control of an employer, 
plan, or plan administrator, subparagraph (A) shall not apply and the 
notice shall be furnished as soon as reasonably possible under the 
circumstances.
    ``(ii)(I) In the case of a transaction suspension period beginning 
within 30 days after a major corporate disposition by a corporation 
maintaining an applicable pension plan, the requirements of 
subparagraph (A) shall be treated as having been met if, not later than 
30 days before such major corporate disposition, the plan administrator 
(or any employer maintaining the applicable pension plan and acting on 
behalf of the plan administrator) provides notice of such transaction 
suspension period.
    ``(II) For purposes of subclause (I), the term `major corporate 
disposition' means, with respect to a corporation, the disposition of 
substantially all the stock (or the assets used in a trade or business) 
of such corporation or a subsidiary thereof.
    ``(III) In accordance with regulations prescribed by the Secretary 
of the Treasury, rules similar to the rules of subclause (I) shall 
apply to entities that are not corporations.
    ``(iii) In the case of any transaction suspension period due to 
such other circumstances specified by the Secretary of the Treasury, 
including the application of securities laws, the Secretary of the 
Treasury may provide that subparagraph (A) shall not apply and the 
notice shall be furnished at such time as the Secretary of the Treasury 
specifies.
    ``(4) If there is a change in the beginning date or length of the 
transaction suspension period after notice has been provided under this 
subsection, the plan administrator shall provide notice of the change 
as soon as reasonably practicable.
    ``(5) The notice required by paragraph (1) shall be in writing and 
may be delivered in electronic or other form to the extent that such 
notice may reasonably be expected to be received by the applicable 
individual.
    ``(6) The Secretary of the Treasury shall, in consultation with the 
Secretary, issue a model notice that may be used to meet the 
requirements of this subsection.
    ``(7) For purposes of this section--
            ``(A) The term `applicable individual' has the meaning 
        given such term by section 204(j)(6)(A).
            ``(B)(i) The term `applicable pension plan' means a plan 
        described in clause (i), (ii), or (iv) of section 219(g)(5)(A) 
        of the Internal Revenue Code of 1986 which maintains accounts 
        for participants and beneficiaries under the plan. Such term 
        shall not include a one-participant retirement plan.
            ``(ii) The term `one-participant retirement plan' means a 
        retirement plan that--
                    ``(I) on the first day of the plan year covered 
                only the individual (or the individual and the 
                individual's spouse) and the individual owned the 
                entire business (whether or not incorporated), or 
                covered only 1 or more partners (or 1 or more partners 
                or their spouses) in a business partnership,
                    ``(II) meets the minimum coverage requirements of 
                section 410(b) of such Code 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 
                individuals described in subclause (I),
                    ``(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 (within the meaning of section 414(n) of such 
                Code).
            ``(C)(i) The term `transaction suspension period' means, 
        with respect to an applicable pension plan, a period of more 
        than 3 consecutive business days during which there is a 
        significant restriction on rights described in clause (ii).
            ``(ii) For purposes of this paragraph, rights described in 
        this clause with respect to an applicable pension plan are 
        rights otherwise provided under such plan to 1 or more 
        applicable individuals to direct investments in such plan 
        (including investments in employer securities), to obtain loans 
        from such plan, or to obtain distributions from such plan.
            ``(iii)(I) Rights which are significantly restricted by 
        reason of the application of securities laws or other 
        circumstances specified by the Secretary of the Treasury in 
        regulations shall not be taken into account for purposes of 
        this subparagraph.
            ``(II) Any restriction required in connection with a 
        domestic relations order (within the meaning of section 
        206(d)(3)(B)(ii)) shall not be taken into account for purposes 
        of this subparagraph.''
                    (B) Civil penalties for failure to provide 
                notice.--Section 502 of such Act is amended--
                            (i) in subsection (a)(6), by striking ``or 
                        (6)'' and inserting ``(6), or (7)'';
                            (ii) by redesignating paragraph (7) of 
                        subsection (c) as paragraph (8); and
                            (iii) by inserting after paragraph (6) of 
                        subsection (c) the following new paragraph:
    ``(7) The Secretary may assess a civil penalty against any person 
of up to $100 a day from the date of the person's failure or refusal to 
provide notice to participants and beneficiaries in accordance with 
section 101(i). For purposes of this paragraph, each violation with 
respect to any single participant or beneficiary, shall be treated as a 
separate violation.''
    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2002.
            (2) Special rule for collectively bargained agreements.--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 ``December 31, 2002'' the earlier of--
                    (A) the later of--
                            (i) December 31, 2003, or
                            (ii) the date on which the last of such 
                        collective bargaining agreements terminates 
                        (determined without regard to any extension 
                        thereof after such date of enactment), or
                    (B) December 31, 2004.
            (3) Exceptions to 30-day notice.--The Secretary of the 
        Treasury shall, no later than 120 days after the date of the 
        enactment of this Act, specify the circumstances under section 
        4980G(e)(3)(B)(iii) of the Internal Revenue Code of 1986 and 
        section 101(i)(3)(B)(iii) of the Employee Retirement Income 
        Security Act of 1974 under which the 30-day notice rule would 
        not apply and the time by which the notice is required to be 
        provided.

SEC. 202. INAPPLICABILITY OF RELIEF FROM FIDUCIARY LIABILITY DURING 
              SUSPENSION OF ABILITY OF PARTICIPANT OR BENEFICIARY TO 
              DIRECT INVESTMENTS.

    (a) In General.--Section 404(c)(1) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1104(c)(1)) is amended--
            (1) by redesignating subparagraphs (A) and (B) as clauses 
        (i) and (ii), respectively, and by inserting ``(A)'' after 
        ``(c)(1)'',
            (2) in subparagraph (A)(ii) (as redesignated by paragraph 
        (1)), by inserting before the period the following: ``, except 
        that this clause shall not apply in connection with such 
        participant or beneficiary for any transaction suspension 
        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
            (3) by adding at the end the following new subparagraphs:
    ``(B)(i) If the person referred to in subparagraph (A)(ii) meets 
the requirements of this title in connection with authorizing the 
transaction suspension period, such person shall not be liable under 
this title for any loss occurring during such period as a result of any 
exercise by the participant or beneficiary of control over assets in 
his or her account before the period. Matters to be considered in 
determining whether such person has satisfied the requirements of this 
title include, but are not limited to, whether such person--
            ``(I) has considered the reasonableness of the expected 
        transaction suspension period,
            ``(II) has provided the notice required under section 
        101(i)(1), and
            ``(III) has acted in accordance with the requirements of 
        subsection (a) in determining whether to enter into the 
        transaction suspension period.
    ``(ii) For purposes of this subsection, if a suspension arises in 
connection with a change in the investment options offered under the 
plan, a participant or beneficiary shall be deemed to have exercised 
control over the assets in his or her account prior to the suspension 
if, after notice of the change in investment options is given to such 
participant or beneficiary, assets in the account of the participant or 
beneficiary are transferred--
            ``(I) to plan investment options in accordance with the 
        affirmative election of the participant or beneficiary which 
        otherwise meets the conditions of this subsection; or
            ``(II) in the absence of such an election and in the case 
        in which fiduciary relief was provided under this subsection 
        for the prior investment options, to plan investment options 
        with reasonably comparable risk and return characteristics in 
        accordance with procedures set forth in such notice.
    ``(C) For purposes of this paragraph, the term `transaction 
suspension period' has the meaning given such term by section 
101(i)(7)(C).''
    (b) Guidance.--The Secretary of Labor, in consultation with the 
Secretary of the Treasury, shall, before December 31, 2002, issue final 
regulations providing guidance, including safe harbors, on how plan 
sponsors or any other affected fiduciaries can satisfy their fiduciary 
responsibilities during any transaction suspension period during which 
the ability of a participant or beneficiary to direct the investment of 
assets in his or her individual account is suspended.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2002.
            (2) Special rule for collectively bargained agreements.--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 ``December 31, 2002'' the earlier of--
                    (A) the later of--
                            (i) December 31, 2003, or
                            (ii) the date on which the last of such 
                        collective bargaining agreements terminates 
                        (determined without regard to any extension 
                        thereof after such date of enactment), or
                    (B) December 31, 2004.

SEC. 203. CLARIFICATION OF PARTICIPANT ACCESS TO REMEDIES.

    (a) Participant Access to Remedies.--Section 409(a) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1109(a)) is amended 
by inserting after the first sentence the following new sentence: ``In 
the case of any such breach with respect to a pension plan that is an 
individual account plan, the relief available under this subsection 
shall, to the extent the court may deem appropriate, be apportioned to 
each individual account affected by such breach.''
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 204. INCREASE IN MAXIMUM BOND AMOUNT FOR PLANS HOLDING EMPLOYER 
              SECURITIES.

    (a) In General.--Section 412(a) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1112) is amended by adding at the end 
the following: ``In the case of a plan that holds employer securities 
(within the meaning of section 407(d)(1)), this subsection shall be 
applied by substituting `$1,000,000' for `$500,000' each place it 
appears.''
    (b) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2002.

       TITLE III--PROVIDING OF INFORMATION TO ASSIST PARTICIPANTS

                     Subtitle A--General Provisions

SEC. 301. PERIODIC PENSION BENEFIT STATEMENTS.

    (a) Amendments of Internal Revenue Code.--
            (1) Excise tax.--
                    (A) In general.--Chapter 43 of the Internal Revenue 
                Code of 1986 (relating to qualified pension, etc., 
                plans), as amended by this Act, is amended by adding at 
                the end the following new section:

``SEC. 4980H. FAILURE OF CERTAIN DEFINED CONTRIBUTION PLANS TO PROVIDE 
              REQUIRED ACCOUNT INFORMATION.

    ``(a) Imposition of Tax.--There is hereby imposed a tax on the 
failure of an applicable pension plan to meet the requirements of 
subsection (e) with respect to any participant or beneficiary.
    ``(b) Amount of Tax.--
            ``(1) In general.--The amount of the tax imposed by 
        subsection (a) on any failure with respect to any participant 
        or beneficiary shall be $100 for each day in the noncompliance 
        period with respect to the failure.
            ``(2) Noncompliance period.--For purposes of this section, 
        the term `noncompliance period' means, with respect to any 
        failure, the period beginning on the date the failure first 
        occurs and ending on the date the statement to which the 
        failure relates is provided or the failure is otherwise 
        corrected.
    ``(c) Limitations on Amount of Tax.--
            ``(1) Tax not to apply where failure not discovered and 
        reasonable diligence exercised.--No tax shall be imposed by 
        subsection (a) on any failure during any period for which it is 
        established to the satisfaction of the Secretary that any 
        person subject to liability for tax under subsection (d) did 
        not know that the failure existed and exercised reasonable 
        diligence to meet the requirements of subsection (e).
            ``(2) Tax not to apply to failures corrected within 30 
        days.--No tax shall be imposed by subsection (a) on any failure 
        if--
                    ``(A) any person subject to liability for the tax 
                under subsection (d) exercised reasonable diligence to 
                meet the requirements of subsection (e), and
                    ``(B) such person provides the statement described 
                in subsection (e) during the 30-day period beginning on 
                the first date such person knew, or exercising 
                reasonable diligence should have known, that such 
                failure existed.
            ``(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 not described in paragraph (2) 
        or (3), the employer.
            ``(2) In the case of a multiemployer plan, the plan.
            ``(3) In the case of a plan described in section 403(b) not 
        established or maintained by the employer, the plan 
        administrator.
    ``(e) Requirement To Provide Quarterly Statements.--
            ``(1) In general.--The administrator of an applicable 
        pension plan shall furnish a pension benefit statement as 
        provided in paragraph (2).
            ``(2) Time and manner of statements.--
                    ``(A) Time.--The administrator shall furnish a 
                pension benefit statement--
                            ``(i) at least once each calendar quarter 
                        to an applicable individual who has the right 
                        to direct the investment of assets in his or 
                        her account under the plan,
                            ``(ii) at least once each calendar year to 
                        an applicable individual who does not have the 
                        right to direct the investment of assets in his 
                        or her account under the plan, and
                            ``(iii) upon written request to a plan 
                        beneficiary who is not an applicable 
                        individual, except that this subparagraph shall 
                        apply to only 1 request during any 12-month 
                        period.
                    ``(B) Statement.--
                            ``(i) In general.--A pension benefit 
                        statement furnished under paragraph (1) 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.
                            ``(ii) Specific information.--A pension 
                        benefit statement under clause (i) or (ii) of 
                        subparagraph (A) shall include (together with 
                        the information required in clause (i))--
                                    ``(I) the value of investments 
                                allocated to the individual account 
                                determined as of the most recent 
                                evaluation date under the plan, 
                                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
                                    ``(II) an explanation of any 
                                limitations or restrictions on the 
                                right of the participant or beneficiary 
                                to direct an investment.
                            ``(iii) Manner of statement.--A pension 
                        benefit statement under paragraph (1)--
                                    ``(I) shall be written in a manner 
                                calculated to be understood by the 
                                average plan participant, and
                                    ``(II) shall be in writing and may 
                                be delivered in electronic or other 
                                form to the extent that such statement 
may reasonably be expected to be received by an individual entitled to 
receive it.
    ``(f) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Definitions.--Any term used in this section which is 
        also used in section 4980G shall have the meaning given such 
        term by section 4980G.
            ``(2) Penalty in lieu of tax for government and church 
        plans.--In the case of a failure of any applicable pension plan 
        which is a governmental or church plan to meet the requirements 
        of subsection (e)--
                    ``(A) no tax shall be imposed by this section with 
                respect to the failure, but
                    ``(B) the provisions of section 6652(m) shall 
                apply.
        For purposes of this paragraph, the terms `governmental plan' 
        and `church plan' have the meanings given such terms by section 
        414.''
                    (B) Aggregation.--Section 414(t) of such Code, as 
                amended by this Act, is amended by striking ``or 
                4980G'' and inserting ``4980G, or 4980H''.
                    (C) Clerical amendment.--The table of sections for 
                chapter 43 of such Code, as amended by this Act, is 
                amended by adding at the end the following new item:

``Sec. 4980H. Failure of certain defined contribution plans to provide 
                            account information.''
            (2) Penalty for failures by governmental and church 
        plans.--Section 6652(m) of such Code, as added by this Act, is 
        amended--
                    (A) by inserting ``or 4980H(e)'' after ``4980G(e)'' 
                in paragraph (1),
                    (B) by inserting ``or 4980H(c)'' after ``4980G(c)'' 
                in paragraph (2), and
                    (C) by inserting ``or 4980H'' after ``4980G'' each 
                place it appears in paragraph (3).
    (b) Amendments of ERISA.--
            (1) 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) if the plan is an applicable pension plan--
                    ``(I) at least once each calendar quarter to an 
                applicable individual who has the right to direct the 
                investment of assets in his or her account under the 
                plan, and
                    ``(II) at least once each calendar year to an 
                applicable individual who does not have the right to 
                direct the investment of assets in his or her account 
                under the plan, and
            ``(ii) upon written request to a plan beneficiary who is 
        not an applicable individual.
    ``(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 participant or beneficiary of the plan upon 
        written request.
Information furnished under clause (i) to a participant may be based on 
reasonable estimates determined under regulations prescribed by the 
Secretary.
    ``(2)(A) A pension benefit statement under paragraph (1)--
            ``(i) 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,
            ``(ii) shall be written in a manner calculated to be 
        understood by the average plan participant, and
            ``(iii) shall be in writing and may be delivered in 
        electronic or other form to the extent such statement may 
        reasonably be expected to be received by the individual 
        entitled to receive it.
    ``(B) In the case of an applicable pension plan, the pension 
benefit statement under paragraph (1)(A)(i) shall include (together 
with the information required in subparagraph (A))--
            ``(i) the value of investments allocated to the individual 
        account, including the value of any assets held in the form of 
        employer securities determined as of the most recent valuation 
        date under the plan, 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
            ``(ii) an explanation of any limitations or restrictions on 
        the right of the participant or beneficiary to direct an 
        investment.
    ``(C) For purposes of this subsection, any term used in this 
section which is also used in section 101(i) shall have the same 
meaning as when used in section 101(i).
    ``(3)(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 in writing and may be delivered in 
electronic or other form to the extent such notice may reasonably be 
expected to be received by 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).''
    (c) Conforming Amendments.--
            (1) Section 105 of the Employee Retirement Income Security 
        Act of 1974 (29 U.S.C. 1025) is amended by striking subsection 
        (d).
            (2) 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 1 statement described in subsection (a)(1) 
(A)(ii) or (B)(ii), whichever is applicable, in any 12-month period.''
    (d) Model Statements.--The Secretary of Labor shall develop 1 or 
more model benefit statements, 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 4980H of 
the Internal Revenue Code of 1986 and section 105 of the Employee 
Retirement Income Security Act of 1974.
    (e) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2003.
            (2) Special rule for collectively bargained agreements.--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 ``December 31, 2003'' the earlier of--
                    (A) the later of--
                            (i) December 31, 2004, or
                            (ii) the date on which the last of such 
                        collective bargaining agreements terminates 
                        (determined without regard to any extension 
                        thereof after such date of enactment), or
                    (B) December 31, 2005.

SEC. 302. DEFINED CONTRIBUTION PLANS REQUIRED TO PROVIDE ADEQUATE 
              INVESTMENT EDUCATION TO PARTICIPANTS.

    (a) Excise Tax on Failure of Certain Defined Contribution Plans To 
Provide Adequate Investment Information.--
            (1) In general.--So much of section 4980H(e) of the 
        Internal Revenue Code of 1986 as precedes paragraph (2) 
        thereof, as added by section 301, is amended to read as 
        follows:
    ``(e) Requirements To Provide Investment Information.--
            ``(1) In general.--The administrator of an applicable 
        pension plan shall--
                    ``(A) furnish pension benefit statements as 
                provided in paragraph (2), and
                    ``(B) furnish to each applicable individual at 
                least once each year the model form relating to basic 
                investment guidelines as provided in paragraph (3).''
            (2) Basic investment guidelines.--Section 4980H(e) of such 
        Code is amended by adding at the end the following new 
        paragraph:
            ``(3) Basic investment guidelines.--
                    ``(A) In general.--The Secretary shall, in 
                consultation with the Secretary of Labor, develop and 
                make available to applicable pension plans for 
                distribution under paragraph (1)(B) a model form 
                containing basic guidelines for investing for 
                retirement. Except as otherwise provided by the 
                Secretary, such guidelines shall include--
                            ``(i) information on the benefits of 
                        diversification,
                            ``(ii) information on the essential 
                        differences, in terms of risk and return, of 
                        pension plan investments, including stocks, 
                        bonds, mutual funds, and money market 
                        investments,
                            ``(iii) information on how an applicable 
                        individual's pension plan investment 
                        allocations may differ depending on the 
                        individual's age and years to retirement and on 
                        other factors determined by the Secretary,
                            ``(iv) sources of information where 
                        applicable individuals may learn more about 
                        pension rights, individual investing, and 
                        investment advice, and
                            ``(v) such other information related to 
                        individual investing as the Secretary 
                        determines appropriate.
                    ``(B) Calculation information.--The model form 
                under subparagraph (A) shall include addresses for 
                Internet sites, and a worksheet, which an applicable 
                individual may use to calculate--
                            ``(i) the retirement age annuity value of 
                        the applicable individual's nonforfeitable 
                        pension benefits under the plan (determined by 
                        reference to varied historical annual rates of 
                        return and annuity interest rates), and
                            ``(ii) other important amounts relating to 
                        retirement savings, including the amount which 
                        an applicable individual would be required to 
                        save to provide a retirement income equal to 
                        various percentages of their current salary 
                        (adjusted for expected growth prior to 
                        retirement).
                The Secretary of Labor shall develop an Internet site 
                which an applicable individual may use in making such 
                calculations and the address for such site shall be 
                included with the form.
                    ``(C) Public comment; updating.--The Secretary 
                shall--
                            ``(i) provide at least 90 days for public 
                        comment before publishing final notice of the 
                        model form, and
                            ``(ii) update the model form at least 
                        annually.
                    ``(D) Rules relating to form and statement.--The 
                model form under subparagraph (A)--
                            ``(i) shall be written in a manner 
                        calculated to be understood by the average plan 
                        participant, and
                            ``(ii) shall be in writing and may be 
                        delivered in electronic or other form to the 
                        extent such form may reasonably be expected to 
                        be received by the applicable individuals.''
            (3) Conforming amendment.--Section 4980H(c)(3) of such Code 
        is amended by adding at the end the following new subparagraph:
                    ``(C) Separate application.--This paragraph shall 
                be applied separately to failures to meet the 
requirements of subsection (e)(1)(A) and failures to meet the 
requirements of subsection (e)(1)(B).''
    (b) Amendments to ERISA.--
            (1) In general.--Section 104 of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1024) is amended by 
        redesignating subsections (c) and (d) as subsections (d) and 
        (e), respectively, and by inserting after subsection (b) the 
        following new subsection:
    ``(c)(1) The plan administrator of an applicable pension plan shall 
provide to each applicable individual at least once annually the model 
form relating to basic investment guidelines which is described in 
paragraph (2).
    ``(2)(A) The Secretary of the Treasury shall, in consultation with 
the Secretary, develop and make available to applicable pension plans 
for distribution under paragraph (1) a model form containing basic 
guidelines for investing for retirement. Except as otherwise provided 
by the Secretary of the Treasury, such guidelines shall include--
            ``(i) information on the benefits of diversification,
            ``(ii) information on the essential differences, in terms 
        of risk and return, of pension plan investments, including 
        stocks, bonds, mutual funds, and money market investments,
            ``(iii) information on how an applicable individual's 
        pension plan investment allocations may differ depending on the 
        individual's age and years to retirement and on other factors 
        determined by the Secretary of the Treasury,
            ``(iv) sources of information where applicable individuals 
        may learn more about pension rights, individual investing, and 
        investment advice, and
            ``(v) such other information related to individual 
        investing as the Secretary of the Treasury determines 
        appropriate.
    ``(B) The model form under subparagraph (A) shall include addresses 
for Internet sites, and a worksheet, which an applicable individual may 
use to calculate--
            ``(i) the retirement age annuity value of the applicable 
        individual's nonforfeitable pension benefits under the plan 
        (determined by reference to varied historical annual rates of 
        return and annuity interest rates), and
            ``(ii) other important amounts relating to retirement 
        savings, including the amount which an applicable individual 
        would be required to save to provide a retirement income equal 
        to various percentages of their current salary (adjusted for 
        expected growth prior to retirement).
The Secretary shall develop an Internet site which an applicable 
individual may use in making such calculations and the address for such 
site shall be included with the form.
    ``(C) The Secretary of the Treasury shall--
            ``(i) provide at least 90 days for public comment before 
        publishing final notice of the model form, and
            ``(ii) update the model form at least annually.
    ``(3) The model form under paragraph (2)--
            ``(A) shall be written in a manner calculated to be 
        understood by the average plan participant, and
            ``(B) shall be in writing and may be delivered in 
        electronic or other form to the extent such form may reasonably 
        be expected to be received by applicable individuals.
    ``(4) For purposes of this subsection, any term used in this 
section which is also used in section 101(i) shall have the meaning 
given such term by section 101(i).''
            (2) Enforcement.--Section 502(c)(1) of such Act (29 U.S.C. 
        1132(c)(1)) is amended by striking ``or section 101(e)(1)'' and 
        inserting ``, section 101(e)(1), or section 104(c)''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2003.
            (2) Special rule for collectively bargained agreements.--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 ``December 31, 2003'' the earlier of--
                    (A) the later of--
                            (i) December 31, 2004, or
                            (ii) the date on which the last of such 
                        collective bargaining agreements terminates 
                        (determined without regard to any extension 
                        thereof after such date of enactment), or
                    (B) December 31, 2005.

SEC. 303. INFORMATION ON OPTIONAL FORM OF BENEFITS.

    (a) In General.--The Secretary of the Treasury or his delegate 
shall, not later than 30 days after the date of the enactment of this 
Act, issue regulations requiring plan administrators of defined benefit 
plans providing optional forms of benefits to provide a statement 
comparing the relative values of each form of benefit.
    (b) Statement.--The statement under subsection (a) shall be 
provided at such time as specified by the Secretary and shall include 
such information as the Secretary determines appropriate to enable a 
participant, spouse, or surviving spouse to make an informed decision 
as to what form of benefit to elect. Such information shall be provided 
in a form calculated to be understood by the average plan participant.

SEC. 304. FIDUCIARY DUTY TO PROVIDE MATERIAL INFORMATION RELATING TO 
              INVESTMENT IN EMPLOYER SECURITIES.

    (a) In General.--Section 404(c) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1104(c)) is amended by adding at the 
end the following new paragraph:
    ``(4) The plan sponsor and plan administrator of a pension plan 
described in paragraph (1) shall, in addition to any other fiduciary 
duty or responsibility under this part, have a fiduciary duty to ensure 
that each participant and beneficiary under the plan, in connection 
with the investment of assets in his or her account in employer 
securities, is provided with all material investment information 
regarding investment of such assets in employer securities to the 
extent that such information is generally required to be provided by 
the plan sponsor to investors in connection with such an investment 
under applicable securities laws. The provision by the plan sponsor or 
plan administrator of any materially misleading investment information 
shall be treated as a violation of this paragraph.''
    (b) Enforcement.--Section 502 of such Act (29 U.S.C. 1132), as 
amended by section 201, is amended--
            (1) in subsection (a)(6), by striking ``(6), or (7)'' and 
        inserting ``(6), (7), or (8)'';
            (2) by redesignating paragraph (8) of subsection (c) as 
        paragraph (9); and
            (3) by inserting after paragraph (7) of subsection (c) the 
        following new paragraph:
    ``(8) The Secretary may assess a civil penalty against any person 
of up to $1,000 a day from the date of the person's failure or refusal 
to comply with the requirements of section 404(c)(4) until such failure 
or refusal is corrected.''
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2002.

SEC. 305. ELECTRONIC DISCLOSURE OF INSIDER TRADING.

    (a) In General.--Section 101 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1021), as amended by section 201, is 
amended by redesignating subsection (j) as subsection (k) and by 
inserting after subsection (i) the following new subsection:
    ``(j)(1) Except as specifically provided in this Act, and 
notwithstanding any other provision of law, if the Commission requires 
any disclosure of the sale or purchase of any securities by an officer 
or director or other affiliated person of any issuer of the securities 
that--
            ``(A) sponsors an individual account plan, and
            ``(B) permits elective deferrals (as defined in section 
        402(g)(3) of the Internal Revenue Code of 1986) to be invested 
        in employer securities or employer real property,
the issuer shall, within a reasonable period after disclosure to the 
Commission, make such disclosure available on any individual account 
plan website the issuer or plan administrator maintains which is 
accessible only by plan participants and beneficiaries. If a 
participant or beneficiary of an individual account plan does not have 
access to such a website, the information required to be provided under 
this paragraph shall be provided to such participant or beneficiary 
upon request.
    ``(2) The Commission may provide that the disclosure requirement 
under this subsection will be in lieu of any other form of such 
disclosure to participants or beneficiaries that may be required by the 
Commission or under any other Federal law.
    ``(3) In this subsection--
            ``(A) the terms `affiliated person', `Commission', 
        `issuer', and `securities' have the same meanings as in section 
        3 of the Securities Exchange Act of 1934, and
            ``(B) the terms `employer securities' and `employer real 
        property' have the meanings given such terms by section 
        407(d).''
    (b) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2002.

SEC. 306. FIDUCIARY RULES FOR PLAN SPONSORS DESIGNATING INDEPENDENT 
              INVESTMENT ADVISERS.

    (a) In General.--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)(1) In the case of an individual account plan which permits a 
plan participant or beneficiary to exercise control over the assets in 
his or her account, if a plan sponsor or other person who is a 
fiduciary designates and monitors a qualified investment adviser 
pursuant to the requirements of paragraph (3), such fiduciary--
            ``(A) shall be deemed to have satisfied the requirements 
        under this section for the prudent designation and periodic 
        review of an investment adviser with whom the plan sponsor or 
        other person who is a fiduciary enters into an arrangement for 
        the provision of advice referred to in section 3(21)(A)(ii),
            ``(B) shall not be liable under this section for any loss, 
        or by reason of any breach, with respect to the provision of 
        investment advice given by such adviser to any plan participant 
        or beneficiary, and
            ``(C) shall not be liable for any co-fiduciary liability 
        under subsections (a)(2) and (b) of section 405 with respect to 
        the provision of investment advice given by such adviser to any 
        plan participant or beneficiary.
    ``(2)(A) For purposes of this section, the term `qualified 
investment adviser' means, with respect to a plan, a person--
            ``(i) who is a fiduciary of the plan by reason of the 
        provision of investment advice by such person to a plan 
        participant or beneficiary;
            ``(ii) who--
                    ``(I) is registered as an investment adviser under 
                the Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et 
                seq.),
                    ``(II) is registered as an investment adviser under 
                the laws of the State in which such adviser maintains 
                the principal office and place of business of such 
                adviser, but only if such State laws are consistent 
                with section 203A of the Investment Advisers Act of 
                1940 (15 U.S.C. 80b-3a),
                    ``(III) is a bank or similar financial institution 
                referred to in section 408(b)(4),
                    ``(IV) is an insurance company qualified to do 
                business under the laws of a State, or
                    ``(V) is any other comparably qualified entity 
                which satisfies such criteria as the Secretary 
                determines appropriate, consistent with the purposes of 
                this subsection, and
            ``(iii) who meets the requirements of subparagraph (B).
    ``(B) The requirements of this subparagraph are met if every 
individual employed (or otherwise compensated) by a person described in 
subparagraph (A)(ii) who provides investment advice on behalf of such 
person to any plan participant or beneficiary is--
            ``(i) an individual described in subclause (I) of 
        subparagraph (A)(ii),
            ``(ii) an individual described in subclause (II) of 
        subparagraph (A)(ii), but only if such State has an examination 
        requirement to qualify for registration,
            ``(iii) registered as a broker or dealer under the 
        Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.),
            ``(iv) a registered representative as described in section 
        3(a)(18) of the Securities Exchange Act of 1934 (15 U.S.C. 
        78c(a)(18)) or section 202(a)(17) of the Investment Advisers 
        Act of 1940 (15 U.S.C. 80b-2(a)(17)), or
            ``(v) any other comparably qualified individual who 
        satisfies such criteria as the Secretary determines 
        appropriate, consistent with the purposes of this subsection.
    ``(3) The requirements of this paragraph are met if--
            ``(A) the plan sponsor or other person who is a fiduciary 
        in designating a qualified investment adviser receives at the 
        time of the designation, and annually thereafter, a written 
        verification from the qualified investment adviser that the 
        investment adviser--
                    ``(i) is and remains a qualified investment 
                adviser,
                    ``(ii) acknowledges that the investment adviser is 
                a fiduciary with respect to the plan and is solely 
                responsible for its investment advice,
                    ``(iii) has reviewed the plan documents (including 
                investment options) and has determined that its 
                relationship with the plan and the investment advice 
                provided to any plan participant or beneficiary, 
                including any fees or other compensation it will 
                receive, will not constitute a violation of section 
                406,
                    ``(iv) will, in providing investment advice to any 
                participant or beneficiary, consider any employer 
                securities or employer real property allocated to his 
                or her account, and
                    ``(v) has the necessary insurance coverage (as 
                determined by the Secretary) for any claim by any plan 
                participant or beneficiary,
            ``(B) the plan sponsor or other person who is a fiduciary 
        in designating a qualified investment adviser reviews the 
        documents described in paragraph (4) provided by such adviser 
        and determines that there is no material reason not to enter 
        into an arrangement for the provision of advice by such 
        qualified investment adviser, and
            ``(C) the plan sponsor or other person who is a fiduciary 
        in designating a qualified investment adviser, within 30 days 
        of having information brought to its attention that the 
        investment adviser is no longer qualified or that a substantial 
        number of plan participants or beneficiaries have raised 
        concerns about the services being provided by the investment 
        adviser--
                    ``(i) investigates such information and concerns, 
                and
                    ``(ii) determines that there is no material reason 
                not to continue the designation of the adviser as a 
                qualified investment adviser.
    ``(4) A qualified investment adviser shall provide the following 
documents to the plan sponsor or other person who is a fiduciary in 
designating the adviser:
            ``(A) The contract with the plan sponsor or other person 
        who is a fiduciary for the services to be provided by the 
        investment adviser to the plan participants and beneficiaries.
            ``(B) A disclosure as to any fees or other compensation 
        that will be received by the investment adviser for the 
        provision of such investment advice.
            ``(C) The Uniform Application for Investment Adviser 
        Registration as filed with the Securities and Exchange 
        Commission or a substantially similar disclosure application as 
        determined by and filed with the Secretary.
    ``(5) Any qualified investment adviser that acknowledges it is a 
fiduciary pursuant to paragraph (3)(A)(ii) shall be deemed a fiduciary 
under this part with respect to the provision of investment advice to a 
plan participant or beneficiary.''
    (b) Fiduciary Liability.--Section 404(c)(1)(B) is amended by 
inserting ``(other than a qualified investment adviser)'' after 
``fiduciary''.
    (c) Effective Date.--The amendment made by this section shall apply 
with respect to investment advisers designated after the date of the 
enactment of this Act.

            TITLE IV--OTHER PROVISIONS RELATING TO PENSIONS

                     Subtitle A--General Provisions

SEC. 401. EMPLOYEE PLANS COMPLIANCE RESOLUTION SYSTEM.

    (a) In General.--The Secretary of the Treasury shall have full 
authority to establish and implement 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.
    (b) Improvements.--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.

SEC. 402. EXTENSION TO ALL GOVERNMENTAL PLANS OF MORATORIUM ON 
              APPLICATION OF CERTAIN NONDISCRIMINATION RULES APPLICABLE 
              TO STATE AND LOCAL PLANS.

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

SEC. 403. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.

    (a) Expansion of Period.--
            (1) Amendment of internal revenue code.--
                    (A) In general.--Section 417(a)(6)(A) 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 by substituting ``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 relating to sections 203(e) 
                and 205 of such Act by substituting ``180 days'' for 
                ``90 days'' each place it appears.
            (3) Effective date.--The amendments and modifications made 
        or required by this subsection shall apply to years beginning 
        after December 31, 2002.
    (b) Notification of Right to Defer.--
            (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.--A plan shall not be treated 
                as failing to meet the requirements of section 
                411(a)(11) of such Code or section 205 of such Act with 
                respect to any description of consequences described in 
                paragraph (1) made within 90 days after the Secretary 
                of the Treasury issues the modifications required by 
                paragraph (1) if the plan administrator makes a 
                reasonable attempt to comply with such requirements.

SEC. 404. 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 in the 
        text;
            (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. 405. 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 amendments 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. 406. 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. 407. 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 406(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. 408. 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 amendments made by subsection (a) shall 
apply to interest accruing for periods beginning not earlier than the 
date of the enactment of this Act.

SEC. 409. 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. 410. 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. 411. 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'',
            (2) by inserting ``(108 percent for plan years beginning in 
        2001)'' after ``120 percent'', and
            (3) 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'',
            (2) by inserting ``(108 percent for plan years beginning in 
        2001)'' after ``120 percent'', and
            (3) by striking ``2002 and 2003'' in the heading and 
        inserting ``2001, 2002, and 2003''.
    (c) PBGC.--The last sentence of 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: ``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. 412. VOLUNTARY EARLY RETIREMENT INCENTIVE AND EMPLOYMENT RETENTION 
              PLANS MAINTAINED BY LOCAL EDUCATIONAL AGENCIES AND OTHER 
              ENTITIES.

    (a) Voluntary Early Retirement Incentive Plans.--
            (1) Treatment as plan providing severance pay.--Section 
        457(e)(11) of the Internal Revenue Code of 1986 (relating to 
        certain plans excluded) is amended by adding at the end the 
        following new subparagraph:
                    ``(D) Certain voluntary early retirement incentive 
                plans.--
                            ``(i) In general.--If an applicable 
                        voluntary early retirement incentive plan--
                                    ``(I) makes payments or supplements 
                                as an early retirement benefit, 
                                retirement-type subsidy, or as a 
                                benefit described in the last sentence 
                                of section 411(a)(9), and
                                    ``(II) such payments or supplements 
                                are made in coordination with a defined 
                                benefit plan which is described in 
                                section 401(a) and includes a trust 
                                exempt from tax under section 501(a) 
                                and which is maintained by an 
eligible employer described in paragraph (1)(A) or by an education 
association described in clause (ii)(II),
                        such applicable plan shall be treated for 
                        purposes of subparagraph (A)(i) as a bona fide 
                        severance pay plan with respect to such 
                        payments or supplements to the extent such 
                        payments or supplements could otherwise have 
                        been provided under such defined benefit plan 
                        (determined as if section 411 applied to such 
                        defined benefit plan).
                            ``(ii) Applicable voluntary early 
                        retirement incentive plan.--For purposes of 
                        this subparagraph, the term `applicable 
                        voluntary early retirement incentive plan' 
                        means a voluntary early retirement incentive 
                        plan maintained by--
                                    ``(I) a local educational agency 
                                (as defined in section 9101 of the 
                                Elementary and Secondary Education Act 
                                of 1965 (20 U.S.C. 7801)), or
                                    ``(II) an education association 
                                which principally represents employees 
                                of 1 or more agencies described in 
                                subclause (I) and which is described in 
                                section 501(c) (5) or (6) and exempt 
                                from tax under section 501(a).''
            (2) Age discrimination in employment act.--Section 4(l)(1) 
        of the Age Discrimination in Employment Act of 1967 (29 U.S.C. 
        623(l)(1)) is amended--
                    (A) by inserting ``(A)'' after ``(1)'',
                    (B) by redesignating subparagraphs (A) and (B) as 
                clauses (i) and (ii), respectively,
                    (C) by redesignating clauses (i) and (ii) of 
                subparagraph (B) (as in effect before the amendments 
                made by subparagraph (B)) as subclauses (I) and (II), 
                respectively, and
                    (D) by adding at the end the following:
                    ``(B) A voluntary early retirement incentive plan 
                that--
                            ``(i) is maintained by--
                                    ``(I) a local educational agency 
                                (as defined in section 9101 of the 
                                Elementary and Secondary Education Act 
                                of 1965 (20 U.S.C. 7801), or
                                    ``(II) an education association 
                                which principally represents employees 
                                of 1 or more agencies described in 
                                subclause (I) and which is described in 
                                section 501(c) (5) or (6) of the 
                                Internal Revenue Code of 1986 and 
                                exempt from taxation under section 
                                501(a) of such Code, and
                            ``(ii) makes payments or supplements 
                        described in subclauses (I) and (II) of 
                        subparagraph (A)(ii) in coordination with a 
                        defined benefit plan (as so defined) maintained 
                        by an eligible employer described in section 
                        457(e)(1)(A) of such Code or by an education 
                        association described in clause (i)(II),
                shall be treated solely for purposes of subparagraph 
                (A)(ii) as if it were a part of the defined benefit 
                plan with respect to such payments or supplements. 
                Payments or supplements under such a voluntary early 
                retirement incentive plan shall not constitute 
                severance pay for purposes of section 4(l)(2) of the 
                Age Discrimination in Employment Act (29 U.S.C. 
                623(l)(2)).''
    (b) Employment Retention Plans.--
            (1) In general.--Section 457(f)(2) of the Internal Revenue 
        Code of 1986 (relating to exceptions) is amended by striking 
        ``and'' at the end of subparagraph (D), by striking the period 
        at the end of subparagraph (E) and inserting ``, and'', and by 
        adding at the end the following:
                    ``(F) that portion of any applicable employment 
                retention plan described in paragraph (4) with respect 
                to any participant.''
            (2) Definitions and rules relating to employment retention 
        plans.--Section 457(f) of such Code is amended by adding at the 
        end the following new paragraph:
            ``(4) Employment retention plans.--For purposes of 
        paragraph (2)(F)--
                    ``(A) In general.--The portion of an applicable 
                employment retention plan described in this paragraph 
                with respect to any participant is that portion of the 
                plan which provides benefits payable to the participant 
                not in excess of twice the applicable dollar limit 
                determined under subsection (e)(15).
                    ``(B) Other rules.--
                            ``(i) Limitation.--Paragraph (2)(F) shall 
                        only apply to the portion of the plan described 
                        in subparagraph (A) for years preceding the 
                        year in which such portion is paid or otherwise 
                        made available to the participant.
                            ``(ii) Treatment.--A plan shall not be 
                        treated for purposes of this title as providing 
                        for the deferral of compensation for any year 
                        with respect to the portion of the plan 
                        described in subparagraph (A).
                    ``(C) Applicable employment retention plan.--The 
                term `applicable employment retention plan' means an 
                employment retention plan maintained by--
                            ``(i) a local educational agency (as 
                        defined in section 9101 of the Elementary and 
                        Secondary Education Act of 1965 (20 U.S.C. 
                        7801), or
                            ``(ii) an education association which 
                        represents employees of 1 or more agencies 
                        described in clause (i) and which is described 
                        in section 501(c) (5) or (6) and exempt from 
                        taxation under section 501(a), and
                    ``(D) Employment retention plan.--The term 
                `employment retention plan' means a plan to pay, upon 
                termination of employment, compensation to an employee 
                of a local educational agency or education association 
                described in subparagraph (C) for purposes of--
                            ``(i) retaining the services of the 
                        employee, or
                            ``(ii) rewarding such employee for the 
                        employee's service with 1 or more such agencies 
                        or associations.''
    (c) Coordination With ERISA.--Section 3(2)(B) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1002(2)(B)) is 
amended by adding at the end the following: ``An applicable voluntary 
early retirement incentive plan (as defined in section 
457(e)(11)(D)(ii) of the Internal Revenue Code of 1986) making payments 
or supplements described in section 457(e)(11)(D)(i) of such Code, and 
an applicable employment retention plan (as defined in section 
457(f)(4)(C) of such Code) making payments of benefits described in 
section 457(f)(4)(A) of such Code, shall, for purposes of this title, 
be treated as a welfare plan (and not a pension plan) with respect to 
such payments and supplements.''
    (d) Effective Dates.--
            (1) In general.--The amendments made by this Act shall take 
        effect on the date of the enactment of this Act.
            (2) Tax amendments.--The amendments made by subsections 
        (a)(1) and (b) shall apply to taxable years ending after the 
        date of the enactment of this Act.
            (3) ERISA amendments.--The amendment made by subsection (c) 
        shall apply to plan years ending after the date of the 
        enactment of this Act.
            (4) No inference.--No inference (including any inference as 
        to whether a voluntary early retirement incentive plan is a 
        defined benefit plan for any purpose) may be drawn from the 
        amendments made by this section with respect to the application 
        of any law to--
                    (A) any plan or arrangement to which such 
                amendments do not apply, or
                    (B) any period or year to which such amendments do 
                not apply.

SEC. 413. AUTOMATIC ROLLOVERS OF CERTAIN MANDATORY DISTRIBUTIONS.

    (a) In General.--Subsections (c) and (d) of section 657 of the 
Economic Growth and Tax Relief Reconciliation Act of 2001, as amended 
by section 411(t) of the Job Creation and Worker Assistance Act of 
2002, are amended to read as follows:
    ``(c) Regulations.--
            ``(1) Automatic rollover safe harbor.--Not later than 
        December 31, 2002, the Secretary of Labor shall prescribe 
        interim final regulations or other administrative guidance 
        providing for safe harbors under which the designation of an 
        institution and investment of funds in accordance with section 
        401(a)(31)(B) of the Internal Revenue Code of 1986 is deemed to 
        satisfy the fiduciary requirements of section 404(a) of the 
        Employee Retirement Income Security Act of 1974 (29 U.S.C. 
        1104(a)).
            ``(2) Use of low-cost individual retirement plans.--The 
        Secretary of the Treasury and the Secretary of Labor may 
        provide, and shall give consideration to providing, special 
        relief with respect to the use of low-cost individual 
        retirement plans for purposes of transfers under section 
        401(a)(31)(B) of the Internal Revenue Code of 1986 and for 
        other uses that promote the preservation of assets for 
        retirement income purposes.
    ``(d) Effective Date.--The amendments made by this section shall 
apply to distributions made after December 31, 2003.''
    (b) Effective Date.--The amendment made by this section shall take 
effect as if included in the amendments made by, and provisions of, 
section 657 of the Economic Growth and Tax Relief Reconciliation Act of 
2001.

SEC. 414. 2-YEAR EXTENSION OF TRANSITION RULE TO PENSION FUNDING 
              REQUIREMENTS.

    (a) In General.--Section 769(c) of the Retirement Protection Act of 
1994, as added by section 1508 of the Taxpayer Relief Act of 1997, is 
amended--
            (1) by inserting ``except as provided in paragraph (3),'' 
        before ``the transaction rules'', and
            (2) by adding at the end the following:
            ``(3) Special rules.--In the case of plan years beginning 
        in 2004 and 2005, the following transition rules shall apply in 
        lieu of the transition rules described in paragraph (2):
                    ``(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.''
    (b) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2002.

                          Subtitle B--Studies

SEC. 421. STUDY REGARDING INSURANCE SYSTEM FOR INDIVIDUAL ACCOUNT 
              PLANS.

    (a) Study.--As soon as practicable after the date of the enactment 
of this Act, the Pension Benefit Guaranty Corporation shall undertake a 
study relating to the establishment of an insurance system for 
individual account plans. In conducting such study, the Corporation 
shall consider--
            (1) the feasibility of such a system,
            (2) the problem with insuring investments in employer 
        securities, and
            (3) options for developing such a system.
    (b) Report.--Not later than 2 years after the date of the enactment 
of this Act, the Corporation shall report the results of its study, 
together with any recommendations for legislative changes, to the 
Committees on Ways and Means and Education and the Workforce of the 
House of Representatives and the Committees on Finance and Health, 
Education, Labor, and Pensions of the Senate.

SEC. 422. STUDY REGARDING FEES CHARGED BY 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 
administrative and transaction fees incurred by participants and 
beneficiaries in connection with the investment of assets in their 
accounts under individual account plans. In conducting such study, the 
Secretary shall consider--
            (1) how the fees compare to fees charged for similar 
        services provided to investors not in individual account plans, 
        and
            (2) whether participants or beneficiaries are adequately 
        notified of the fees.
    (b) Report.--Not later than 1 year after the date of the enactment 
of this Act, the Secretary shall report the results of its study, 
together with any recommendations for legislative changes, to the 
Committees on Ways and Means and Education and the Workforce of the 
House of Representatives and the Committees on Finance and Health, 
Education, Labor, and Pensions of the Senate.

SEC. 423. STUDY ON REVITALIZING DEFINED BENEFIT PLANS.

    (a) Study.--As soon as practicable after the date of enactment of 
this Act, the Secretary of the Treasury shall undertake a study on ways 
to revitalize interest in defined benefit plans among employers. In 
conducting such study, the Secretary shall consider--
            (1) ways to encourage the establishment of defined benefit 
        plans by small- and mid-sized employers,
            (2) ways to encourage the continued maintenance of defined 
        benefit plans by larger employers, and
            (3) legislative proposals to accomplish the objectives 
        described in paragraphs (1) and (2).
    (b) Report.--Not later than 18 months after the date of the 
enactment of this Act, the Secretary of the Treasury shall report the 
results of the study, together with any recommendations for legislative 
changes, to the Committees on Ways and Means and Education and the 
Workforce of the House of Representatives and the Committees on Finance 
and Health, Education, Labor, and Pensions of the Senate.

SEC. 424. STUDY ON FLOOR-OFFSET ESOPS.

    (a) Study.--As soon as practicable after the date of the enactment 
of this Act, the Pension Benefit Guaranty Corporation shall undertake a 
study to determine the number of floor-offset employee stock ownership 
plans still in existence and the extent to which such plans pose a risk 
to plan participants or beneficiaries and to the Corporation. Such 
study shall consider legislative proposals to address such risks.
    (b) Report.--Not later than 12 months after the date of the 
enactment of this Act, the Corporation shall report the results of its 
study, together with any recommendations for legislative changes, to 
the Committees on Ways and Means and Education and the Workforce of the 
House of Representatives and the Committees on Finance and Health, 
Education, Labor, and Pensions of the Senate.

                      Subtitle C--Plan Amendments

SEC. 431. 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 Act or 
                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 such Acts, 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 V--PROVISIONS RELATING TO EXECUTIVES AND STOCK OPTIONS

             Subtitle A--Provisions Relating to Executives

                     PART I--EXECUTIVE COMPENSATION

SEC. 501. REPEAL OF 1978 REVENUE ACT LIMITATION ON SECRETARY OF THE 
              TREASURY'S AUTHORITY TO DETERMINE YEAR OF INCLUSION OF 
              AMOUNTS UNDER PRIVATE DEFERRED COMPENSATION PLANS.

    (a) Repeal.--Section 132 of the Revenue Act of 1978 (Public Law 95-
600) is repealed.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of the enactment of this Act.

SEC. 502. TREATMENT OF NONQUALIFIED DEFERRED COMPENSATION FUNDED WITH 
              ASSETS LOCATED OUTSIDE THE UNITED STATES.

    (a) In General.--Section 83(c) of the Internal Revenue Code of 1986 
(relating to special rules for property transferred in connection with 
performance of services) is amended by adding at the end the following 
new paragraph:
            ``(4) Foreign assets funding nonqualified deferred 
        compensation arrangements.--
                    ``(A) In general.--In determining whether there is 
                a transfer of property for purposes of subsection (a), 
                if assets are--
                            ``(i) designated or otherwise available for 
                        the payment of nonqualified deferred 
                        compensation, and
                            ``(ii) located outside the United States,
                such assets shall not be treated as subject to the 
                claims of creditors.
                    ``(B) Compensation for services performed in 
                foreign jurisdiction.--Subparagraph (A) shall not apply 
                to assets located in a foreign jurisdiction if 
                substantially all of the services to which the 
                nonqualified deferred compensation relates are 
                performed in such jurisdiction.
                    ``(C) Regulations.--The Secretary shall prescribe 
                such regulations as are necessary to carry out the 
                provisions of this paragraph, including regulations to 
                exempt arrangements from the application of this 
                paragraph if--
                            ``(i) the arrangement will not result in an 
                        improper deferral of United States tax, and
                            ``(ii) the assets involved in the 
                        arrangement will be readily accessible in any 
                        insolvency or bankruptcy proceeding.''
    (b) Effective Date.--The amendments made by this section shall 
apply to amounts deferred after the date of the enactment of this Act 
in taxable years ending after such date.

SEC. 503. TREATMENT OF EMPLOYMENT LOANS MADE TO CORPORATE EXECUTIVES.

    (a) In General.--Subchapter C of chapter 80 of the Internal Revenue 
Code of 1986 (relating to provisions affecting more than one subtitle) 
is amended by adding after section 7872 the following new section:

``SEC. 7872A. TREATMENT OF EMPLOYMENT LOANS MADE TO CORPORATE 
              EXECUTIVES.

    ``(a) General Rule.--If--
            ``(1) an employer which is a C corporation directly or 
        indirectly makes a loan to an applicable employee, and
            ``(2) the requirements of subsection (b) are not met with 
        respect to such loan,
then such employer shall, for purposes of subtitles A and C, be treated 
as having paid compensation (and not as having made a loan) to the 
employee in an amount equal to the amount of the loan.
    ``(b) Minimum Requirements To Be Treated as a Loan.--
            ``(1) In general.--A loan meets the requirements of this 
        subsection only if--
                    ``(A) the loan is evidenced by a promissory note or 
                other written evidence of indebtedness,
                    ``(B) there is adequate collateral or security for 
                the loan, and
                    ``(C) there is a fixed schedule of not greater than 
                10 years over which the loan is to be repaid in 
                substantially equal installments or in such other form 
                as the Secretary may prescribe.
            ``(2) Collateral.--For purposes of paragraph (1)(B), there 
        shall not be taken into account as collateral or security--
                    ``(A) any stock or capital or profits interests in 
                the employer,
                    ``(B) any option or other contract to purchase such 
                stock or interests,
                    ``(C) any restricted stock or ownership interest,
                    ``(D) any nonqualified deferred compensation, or
                    ``(E) any similar asset to the extent provided by 
                the Secretary.
            ``(3) Relocation loans.--This section shall not apply to a 
        loan by an employer to an employee the proceeds of which are 
        used by the employee to purchase a principal residence if the 
        purchase is in connection with the commencement of work by an 
        employee or a change in the principal place of work of an 
        employee to which section 217 applies.
            ``(4) Coordination with other provisions.--Section 483, 
        643(i), or 1274 shall not apply to any loan to the extent this 
        section applies to the loan.
    ``(c) Rules Applicable to Treatment of Amounts as Compensation.--
            ``(1) Coordination with other recharacterizations.--
        Subsection (a) shall not apply to a loan which, without regard 
        to this section, is recharacterized as compensation or 
        dividends or with respect to which amounts are otherwise 
        includible in the employee's gross income for purposes of this 
        title.
            ``(2) Treatment as supplemental wage payment.--If an 
        employer is treated under subsection (a) as having made a 
        payment of compensation to an applicable employee, such payment 
        shall be treated as a supplemental wage payment made on the 
        date the loan was made.
            ``(3) Subsequent repayments.--
                    ``(A) In general.--The Secretary shall prescribe 
                rules for the application of this title in any case 
                where an applicable employee repays any amount of a 
                loan to which subsection (a) applies.
                    ``(B) Modification of preceding tax treatment.--The 
                rules under subparagraph (A) shall, to the extent the 
                Secretary determines appropriate, provide that--
                            ``(i) the employee shall be allowed a 
                        deduction (and the employer shall include in 
                        gross income) for the taxable year of the 
                        repayment any portion of the amount repaid that 
                        was previously included in gross income of the 
                        employee (or allowed as a deduction to the 
                        employer), and
                            ``(ii) the amount treated as compensation 
                        for purposes of subtitle C (other than chapter 
                        24) and the Social Security Act for the 
                        calendar year of the repayment shall be reduced 
                        by any portion of the amount repaid that was 
                        previously treated as compensation for such 
                        purposes.
                    ``(C) Carryforwards.--The rules under subparagraph 
                (A) shall, to the extent the Secretary determines 
                appropriate, provide that any reduction described in 
                subparagraph (B)(ii) may be carried forward to 1 or 
                more succeeding years to the extent necessary to 
                properly take the repayment into account.
    ``(d) Other Definitions and Rules.--For purposes of this section--
            ``(1) Applicable employee.--
                    ``(A) In general.--The term `applicable employee' 
                means an employee who, at the time the loan is made--
                            ``(i) is an officer or director of the 
                        employer,
                            ``(ii) is a 5-percent owner (within the 
                        meaning of section 416(i)) of the employer, or
                            ``(iii) has an aggregate outstanding 
                        balance of loans (including such loan) made 
                        directly or indirectly to the employee by the 
                        employer in excess of $1,000,000.
                    ``(B) Employee.--For purposes of subparagraph (A), 
                the term `employee' includes a director.
            ``(2) Application of section to loans of individuals who 
        are not officers, directors, or owners.--In the case of an 
        individual who is an applicable employee solely by reason of 
        paragraph (1)(A)(iii)--
                    ``(A) this section shall only apply to the portion 
                of a loan constituting the excess described in such 
                paragraph, and
                    ``(B) such portion shall be treated as a separate 
                loan for purposes of applying this section.
            ``(3) Aggregation.--All persons treated as a single 
        employer under subsection (a) or (b) of section 52 shall be 
        treated as a single person for purposes of this section.
    ``(e) Regulations.--The Secretary shall prescribe such regulations 
as are necessary to carry out the purposes of this section.''
    (b) Application of Section 7872 to Excessive Employee Loans.--
Section 7872 of the Internal Revenue Code of 1986 (relating to below-
market interest rate loans) is amended by redesignating subsection (h) 
as subsection (i) and by inserting after subsection (g) the following 
new subsection:
    ``(h) Special Rule for Excessive Employment Loans.--
            ``(1) In general.--If the principal amount of any loan made 
        by an employer which is a C corporation to a director or 
        employee, when added to the aggregate outstanding balance (as 
        of the date of the loan) of all other loans made by such 
        employer to such director or employee, exceeds $1,000,000--
                    ``(A) the portion of the loan constituting such 
                excess shall be treated as a separate loan for purposes 
                of applying this section, and
                    ``(B) in determining whether such separate loan is 
                a below-market loan (and in applying this section to 
                such loan if it is a below-market loan), the applicable 
                Federal rate used shall be the rate determined without 
                regard to this subsection plus 3 percentage points.
            ``(2) Aggregation.--All persons treated as a single 
        employer under subsection (a) or (b) of section 52 shall be 
        treated as a single employer for purposes of this subsection.''
    (c) Conforming Amendment.--The table of sections for subchapter C 
of chapter 80 of the Internal Revenue Code of 1986 is amended by adding 
after the item relating to section 7872 the following new item:

``Sec. 7872A. Treatment of employment loans made to corporate 
                            executives.''
    (d) Effective Date.--The amendments made by this section shall 
apply to--
            (1) loans made after the date of the enactment of this Act, 
        and
            (2) refinancings after such date of loans made before such 
        date.

SEC. 504. INCREASE IN WITHHOLDING FROM SUPPLEMENTAL WAGE PAYMENTS IN 
              EXCESS OF $1,000,000.

    (a) In General.--If an employer elects under Treasury Regulation 
31.3402(g)-1 to determine the amount to be deducted and withheld from 
any supplemental wage payment by using a flat percentage rate, the rate 
to be used in determining the amount to be so deducted and 
withheld shall not be less than 28 percent (or the corresponding rate 
in effect under section 1(i)(2) of the Internal Revenue Code of 1986 
for taxable years beginning in the calendar year in which the payment 
is made).
    (b) Special Rule for Large Payments.--
            (1) In general.--Notwithstanding subsection (a), if the 
        supplemental wage payment, when added to all such payments 
        previously made by the employer to the employee during the 
        calendar year, exceeds $1,000,000, the rate used with respect 
        to such excess shall be equal to the maximum rate of tax in 
        effect under section 1 of such Code for taxable years beginning 
        in such calendar year.
            (2) Aggregation.--All persons treated as a single employer 
        under subsection (a) or (b) of section 52 of the Internal 
        Revenue Code of 1986 shall be treated as a single employer for 
        purposes of this subsection.
    (c) Conforming Amendment.--Section 13273 of the Revenue 
Reconciliation Act of 1993 (Public Law 103-66) is repealed.
    (d) Effective Date.--The provisions of, and the amendment made by, 
this section shall apply to payments made after December 31, 2002.

                 PART II--SIGNING CORPORATE TAX RETURNS

SEC. 511. SIGNING OF CORPORATE TAX RETURNS BY CHIEF EXECUTIVE OFFICER.

    (a) In General.--Section 6062 of the Internal Revenue Code of 1986 
(relating to signing of corporation returns) is amended by striking the 
first sentence and inserting the following new sentence: ``The return 
of a corporation with respect to income shall be signed by the chief 
executive officer of such corporation (or other such officer of the 
corporation as the Secretary may designate if the corporation does not 
have a chief executive officer).''
    (b) Effective Date.--The amendment made by this section shall apply 
to returns filed after the date of the enactment of this Act.

                       Subtitle B--Stock Options

SEC. 521. 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 the Internal Revenue Code of 1986 (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 the Internal Revenue Code of 1986 (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.''

SEC. 522. TREATMENT OF SALE OF STOCK ACQUIRED PURSUANT TO EXERCISE OF 
              STOCK OPTIONS TO COMPLY WITH CONFLICT-OF-INTEREST 
              REQUIREMENTS.

    (a) In General.--Section 421 of the Internal Revenue Code of 1986 
(relating to general rules for certain stock options) is amended by 
adding at the end the following new subsection:
    ``(d) Certain Sales To Comply With Conflict-of-Interest 
Requirements.--If--
            ``(1) a share of stock is transferred to an eligible person 
        (as defined in section 1043(b)(1)) pursuant to such person's 
        exercise of an option to which this part applies, and
            ``(2) such share is disposed of by such person pursuant to 
        a certificate of divestiture (as defined in section 
        1043(b)(2)),
such disposition shall be treated as meeting the requirements of 
section 422(a)(1) or 423(a)(1), whichever is applicable.''
    (b) Effective Date.--The amendment made by this section shall apply 
to sales after July 1, 2002.




                                                       Calendar No. 552

107th CONGRESS

  2d Session

                                S. 1971

                          [Report No. 107-242]

_______________________________________________________________________

                                 A BILL

To amend the Internal Revenue Code of 1986 and the Employee Retirement 
   Income Security Act of 1974 to protect the retirement security of 
    American workers by ensuring that pension assets are adequately 
   diversified and by providing workers with adequate access to, and 
    information about, their pension plans, and for other purposes.

_______________________________________________________________________

                             August 2, 2002

Reported under authority of the order of the Senate of August 1, 2002, 
                           with an amendment