[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2101 Introduced in House (IH)]







108th CONGRESS
  1st Session
                                H. R. 2101

 To provide additional protections for participants and beneficiaries 
                 under employee pension benefit plans.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 14, 2003

Mr. George Miller of California (for himself, Ms. DeLauro, Mr. Kildee, 
 Mr. Bishop of New York, Mr. Grijalva, Mr. Ryan of Ohio, Mr. Kucinich, 
Mr. Owens, Mr. Tierney, Ms. McCollum, Mr. Davis of Illinois, Mr. Case, 
Mr. Payne, Mr. Bell, Mr. Lynch, Ms. Baldwin, Mrs. Maloney, Mr. Meehan, 
 Mr. Scott of Georgia, Mr. Stark, Ms. Woolsey, Ms. Lee, Ms. Solis, Mr. 
 Blumenauer, Mr. Brown of Ohio, Mr. Farr, Mr. Van Hollen, Ms. Norton, 
 Mr. Miller of North Carolina, Ms. Schakowsky, and Ms. Roybal-Allard) 
 introduced the following bill; which was referred to the Committee on 
Education and the Workforce, and in addition to the Committees on Ways 
 and Means, the Judiciary, and Financial Services, for a period to be 
subsequently determined by the Speaker, in each case for consideration 
  of such provisions as fall within the jurisdiction of the committee 
                               concerned

_______________________________________________________________________

                                 A BILL


 
 To provide additional protections for participants and beneficiaries 
                 under employee pension benefit plans.

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

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Pension Fairness 
Act of 2003''.
    (b) Table of Contents.--The table of contents is as follows:

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

Sec. 101. Pension benefit information.
Sec. 102. Immediate warning of excessive stock holdings.
Sec. 103. Report to participants and beneficiaries of trades in 
                            employer securities.
Sec. 104. Enforcement of information and disclosure requirements.
Sec. 105. Revision of accounting standard required.
    TITLE II--FREEDOM TO MAKE INVESTMENT DECISIONS WITH PLAN ASSETS.

Sec. 201. Amendments to the Internal Revenue Code of 1986.
Sec. 202. Amendments to the Employee Retirement Income Security Act of 
                            1974.
Sec. 203. Recommendations relating to non-publicly traded stock.
Sec. 204. Effective date of title.
                   TITLE III--EMPLOYEE REPRESENTATION

Sec. 301. Participation of participants in trusteeship of individual 
                            account plans.
                   TITLE IV--INCREASED ACCOUNTABILITY

Sec. 401. Bonding or insurance adequate to protect interest of 
                            participants and beneficiaries.
Sec. 402. Liability for breach of fiduciary duty.
Sec. 403. Preservation of rights or claims.
Sec. 404. Office of pension participant advocacy.
Sec. 405. Study regarding insurance system for individual account 
                            plans.
Sec. 406. Excise tax on failure of pension plans to provide notice of 
                            transaction restriction periods.
     TITLE V--INVESTMENT ADVICE FOR PARTICIPANTS AND BENEFICIARIES

Sec. 501. Independent investment advice.
Sec. 502. Tax treatment of qualified retirement planning services.
                 TITLE VI--PARITY IN EMPLOYEE BENEFITS

Sec. 601. Inclusion in gross income of funded deferred compensation of 
                            corporate insiders if corporation funds 
                            defined contribution plan with employer 
                            stock.
Sec. 602. Performance-based compensation exception to $1,000,000 
                            limitation on deductible compensation not 
                            to apply in certain cases.
            TITLE VII--PROTECTION OF RETIREMENT EXPECTATIONS

Sec. 701. Protection of participants from conversions to hybrid defined 
                            benefit plans.
              TITLE VIII--TREATMENT OF CORPORATE INSIDERS

Sec. 801. Special rules for executive perks and retirement benefits.
Sec. 802. Golden parachute excise tax to apply to deferred compensation 
                            paid by corporation after major decline in 
                            stock value or corporation declares 
                            bankruptcy.
Sec. 803. Adequate disclosure regarding executive compensation 
                            packages.
  TITLE IX--ADDITIONAL PROTECTIONS FOR EMPLOYEES OF BANKRUPT EMPLOYERS

Sec. 901. Avoidance of certain transfers; alternate prosecution of 
                            action.
Sec. 902. Limitation on retention bonuses, severance pay, and certain 
                            other payments.
Sec. 903. Priorities.
Sec. 904. Effective date of title.
                   TITLE X--MISCELLANEOUS PROVISIONS

Sec. 1001. Corporate deduction for reinvested ESOP dividends subject to 
                            deductible limits.
Sec. 1002. Credit for elective deferrals and IRA contributions by 
                            certain individuals made permanent (saver's 
                            tax credit).
                      TITLE XI--GENERAL PROVISIONS

Sec. 1101. General effective date.
Sec. 1102. Plan amendments.

                  TITLE I--IMPROVEMENTS IN DISCLOSURE

SEC. 101. PENSION BENEFIT INFORMATION.

    (a) Pension Benefit Statements Required on Periodic Basis.--
            (1) In general.--Subsection (a) of section 105 of the 
        Employee Retirement Income Security Act of 1974 (29 U.S.C. 
        1025) is amended--
                    (A) by striking ``shall furnish to any plan 
                participant or beneficiary who so requests in 
                writing,'' and inserting ``shall furnish at least once 
                every 3 years, in the case of a participant in a 
                defined benefit plan who has attained age 35, and 
                annually, in the case of an individual account plan, to 
                each plan participant, and shall furnish to any plan 
                participant or beneficiary who so requests,'', and
                    (B) by adding at the end the following flush 
                sentence:
``Information furnished under the preceding sentence to a participant 
in a defined benefit plan (other than at the request of the 
participant) may be based on reasonable estimates determined under 
regulations prescribed by the Secretary.''.
            (2) Model statement.--Section 105 of such Act (29 U.S.C. 
        1025) is amended by adding at the end the following new 
        subsection:
    ``(e)(1) The Secretary of Labor shall develop a model benefit 
statement which shall be used by plan administrators in complying with 
the requirements of subsection (a). Such statement shall include--
            ``(A) the amount of nonforfeitable accrued benefits as of 
        the statement date which is payable at normal retirement age 
        under the plan,
            ``(B) the amount of accrued benefits which are forfeitable 
        but which may become nonforfeitable under the terms of the 
        plan,
            ``(C) the amount or percentage of any reduction due to 
        integration of the benefit with the participant's Social 
        Security benefits or similar governmental benefits,
            ``(D) information on early retirement benefit and joint and 
        survivor annuity reductions,
            ``(E) in the case of an individual account plan, the 
        percentage of the net return on investment of plan assets for 
        the preceding plan year (or, with respect to investments 
        directed by the participant, the net return on investment of 
        plan assets for such year so directed), itemized with respect 
        to each type of investment, and, stated separately, the 
        administrative and transaction fees incurred in connection with 
        each such type of investment, and
            ``(F) in the case of an individual account plan, the amount 
        and percentage of assets in the individual account that 
        consists of employer securities and employer real property (as 
        defined in paragraphs (1) and (2), respectively, of section 
        407(d)), as determined as of the most recent valuation date of 
        the plan.
    ``(2) The Secretary shall also develop a separate notice, which 
shall be included by the plan administrator with the information 
furnished pursuant to subsection (a), which advises participants and 
beneficiaries of generally accepted investment principles, including 
principles of risk management and diversification for long-term 
retirement security and the risks of holding substantial assets in a 
single asset such as employer securities.''.
            (3) Rule for multiemployer plans.--Subsection (d) of 
        section 105 of such Act (29 U.S.C. 1025) is amended to read as 
        follows:
    ``(d) Each administrator of a plan to which more than 1 
unaffiliated employer is required to contribute shall furnish to any 
plan participant or beneficiary who so requests in writing, a statement 
described in subsection (a).''.
    (b) Disclosure of Benefit Calculations.--
            (1) In general.--Section 105 of such Act (as amended by 
        subsection (a)) is amended further--
                    (A) by redesignating subsections (b), (c), (d), and 
                (e) as subsections (c), (d), (e), and (f), 
                respectively; and
                    (B) by inserting after subsection (a) the following 
                new subsection:
    ``(b)(1) In the case of a participant or beneficiary who is 
entitled to a distribution of a benefit under an employee pension 
benefit plan, the administrator of such plan shall provide to the 
participant or beneficiary the information described in paragraph (2) 
upon the written request of the participant or beneficiary.
    ``(2) The information described in this paragraph includes--
            ``(A) a worksheet explaining how the amount of the 
        distribution was calculated and stating the assumptions used 
        for such calculation,
            ``(B) upon written request of the participant or 
        beneficiary, any documents relating to the calculation (if 
        available), and
            ``(C) such other information as the Secretary may 
        prescribe.
Any information provided under this paragraph shall be in a form 
calculated to be understood by the average plan participant.''.
            (2) Conforming amendments.--
                    (A) Section 101(a)(2) of such Act (29 U.S.C. 
                1021(a)(2)) is amended by striking ``105(a) and (c)'' 
                and inserting ``105(a), (b), and (d)''.
                    (B) Section 105(c) of such Act (as redesignated by 
                paragraph (1)(A) of this subsection) is amended by 
                inserting ``or (b)'' after ``subsection (a)''.
                    (C) Section 106(b) of such Act (29 U.S.C. 1026(b)) 
                is amended by striking ``sections 105(a) and 105(c)'' 
                and inserting ``subsections (a), (b), and (d) of 
                section 105''.
    (c) Amendments to Internal Revenue Code of 1986.--
            (1) In general.--Chapter 43 of the Internal Revenue Code of 
        1986 (relating to qualified pension, etc., plans) is amended by 
        adding at the end the following new section:

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

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

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

SEC. 102. IMMEDIATE WARNING OF EXCESSIVE STOCK HOLDINGS.

    Section 105 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1025) (as amended by section 101 of this Act) is amended 
further by adding at the end the following new subsection:
    ``(g)(1) Upon receipt of information by the plan administrator of 
an individual account plan indicating that the individual account of 
any participant which had not been excessively invested in employer 
securities is excessively invested in such securities (or that such 
account, as initially invested, is excessively invested in employer 
securities), the plan administrator shall immediately provide to the 
participant a separate, written statement--
            ``(A) indicating that the participant's account has become 
        excessively invested in employer securities,
            ``(B) setting forth the notice described in subsection 
        (e)(7), and
            ``(C) referring the participant to investment education 
        materials and investment advice which shall be made available 
        by or under the plan.
In any case in which such a separate, written statement is required to 
be provided to a participant under this paragraph, each statement 
issued to such participant pursuant to subsection (a) thereafter shall 
also contain such separate, written statement until the plan 
administrator is made aware that such participant's account has ceased 
to be excessively invested in employer securities or the employee, in 
writing, waives the receipt of the notice and acknowledges 
understanding the importance of diversification.
    ``(2) Each notice required under this subsection shall be provided 
in a form and manner which shall be prescribed in regulations of the 
Secretary. Such regulations shall provide for inclusion in the notice a 
prominent reference to the risks of large losses in assets available 
for retirement from excessive investment in employer securities.
    ``(3) For purposes of paragraph (1), a participant's account is 
`excessively invested' in employer securities if more than 10 percent 
of the balance in such account is invested in employer securities (as 
defined in section 407(d)(1)).''.

SEC. 103. REPORT TO PARTICIPANTS AND BENEFICIARIES OF TRADES IN 
              EMPLOYER SECURITIES.

    (a) In General.--Section 104 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1024) is amended--
            (1) by redesignating subsection (d) as subsection (e); and
            (2) by inserting after subsection (c) the following new 
        subsection:
    ``(d)(1) In any case in which assets in the individual account of a 
participant or beneficiary under an individual account plan include 
employer securities, if any person engages in a transaction 
constituting a direct or indirect purchase or sale of employer 
securities and--
            ``(A) such transaction is required under section 16 of the 
        Securities Exchange Act of 1934 to be reported by such person 
        to the Securities and Exchange Commission, or
            ``(B) such person is a named fiduciary of the plan,
such person shall comply with the requirements of paragraph (2).
    ``(2) A person described in paragraph (1) complies with the 
requirements of this paragraph in connection with a transaction 
described in paragraph (1) if such person provides to the plan 
administrator of the plan a written notification of the transaction not 
later than 1 business day after the date of the transaction.
    ``(3)(A) If the plan administrator is made aware, on the basis of 
notifications received pursuant to paragraph (2) or otherwise, that the 
proceeds from any transaction described in paragraph (1), constituting 
direct or indirect sales of employer securities by any person described 
in paragraph (1), exceed $100,000, the plan administrator of the plan 
shall provide to each participant and beneficiary a notification of 
such transaction. Such notification shall be in writing, except that 
such notification may be in electronic or other form to the extent that 
such form is reasonably accessible to the participant or beneficiary.
    ``(B) In any case in which the proceeds from any transaction 
described in paragraph (1) (with respect to which a notification has 
not been provided pursuant to this paragraph), together with the 
proceeds from any other such transaction or transactions described in 
paragraph (1) occurring during the preceding one-year period, 
constituting direct or indirect sales of employer securities by any 
person described in paragraph (1), exceed (in the aggregate) $100,000, 
such series of transactions by such person shall be treated as a 
transaction described in subparagraph (A) by such person.
    ``(C) Each notification required under this paragraph shall be 
provided as soon as practicable, but not later than 3 business days 
after receipt of the written notification or notifications indicating 
that the transaction (or series of transactions) requiring such notice 
has occurred.
    ``(4) Each notification required under paragraph (2) or (3) shall 
be made in such form and manner as may be prescribed in regulations of 
the Secretary and shall include the number of shares involved in each 
transaction and the price per share, and the notification required 
under paragraph (3) shall be written in language designed to be 
understood by the average plan participant. The Secretary may provide 
by regulation, in consultation with the Securities and Exchange 
Commission, for exemptions from the requirements of this subsection 
with respect to specified types of transactions to the extent that such 
exemptions are consistent with the best interests of plan participants 
and beneficiaries. Such exemptions may relate to transactions involving 
reinvestment plans, stock splits, stock dividends, qualified domestic 
relations orders, and similar matters.
    ``(5) For purposes of this subsection, the term `employer security' 
has the meaning provided in section 407(d)(1).''.
    (b) Effective Date.--The amendments made by this section shall 
apply with respect to transactions occurring after 90 days after the 
date of the enactment of this Act.

SEC. 104. ENFORCEMENT OF INFORMATION AND DISCLOSURE REQUIREMENTS.

    (a) In General.--Section 502(c) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1132(c)) is amended--
            (1) by redesignating paragraph (7) as paragraph (8); and
            (2) by inserting after paragraph (6) the following new 
        paragraph:
    ``(7) The Secretary may assess a civil penalty against any person 
required to provide any notification under the provisions of section 
104(d), any statement under the provisions of subsection (a), (d), or 
(f) of section 105, any information under the provisions of section 
404(c)(4), or any notice under the provisions of section 404(e)(1) of 
up to $1,000 a day from the date of any failure by such person to 
provide such notification, statement, information, or notice in 
accordance with such provisions.''.
    (b) Conforming Amendment.--Section 502(a)(6) of such Act (29 U.S.C. 
1132(a)(6)) (as amended by section 102(b)) is amended further by 
striking ``(5), or (6)'' and inserting ``(5), (6), or (7)''.

SEC. 105. REVISION OF ACCOUNTING STANDARD REQUIRED.

    The Securities and Exchange Commission shall not treat as 
authoritative for purposes of compliance with section 13 of the 
Securities Exchange Act of 1934 (15 U.S.C. 78m) any accounting 
statement of the standard setting body recognized by the Commission 
under section 19(b) of the Securities Act of 1933 (15 U.S.C. 77s(b)) 
that relates to the accounting by an issuer for single-employer defined 
benefit pension plans unless such standard is modified to prevent the 
investment gains of such plan from being treated as income to such 
issuer.

    TITLE II--FREEDOM TO MAKE INVESTMENT DECISIONS WITH PLAN ASSETS

SEC. 201. AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986.

    (a) In General.--Subsection (a) of section 401 of the Internal 
Revenue Code of 1986 (relating to requirements for qualification) is 
amended by adding at the end the following new paragraph:
            ``(35) Diversification requirements for defined 
        contribution plans that hold employer securities.--
                    ``(A) In general.--In the case of a defined 
                contribution plan described in this subsection that 
                includes a trust which is exempt from tax under section 
                501(a) and which holds employer securities that are 
                readily tradable on an established securities market, 
such trust shall not constitute a qualified trust under this section 
unless such plan meets the requirements of subparagraphs (B) and (C).
                    ``(B) Elective deferrals invested in employer 
                securities.--
                            ``(i) In general.--In the case of the 
                        portion of the account attributable to elective 
                        deferrals which is invested in employer 
                        securities, a plan meets the requirements of 
                        this subparagraph if each applicable individual 
                        in such plan may elect to direct the plan to 
                        divest any portion of such securities in the 
                        individual's account and to reinvest an 
                        equivalent amount in other investment options 
                        which meet the requirements of subparagraph 
                        (D). The preceding sentence shall apply to the 
                        extent that the amount attributable to 
                        reinvested portion exceeds the amount to which 
                        a prior election under this subparagraph or 
                        paragraph (28) applies.
                            ``(ii) Applicable individual.--For purposes 
                        of this subparagraph, the term `applicable 
                        individual' means--
                                    ``(I) any participant in the plan,
                                    ``(II) any beneficiary who is an 
                                alternate payee (within the meaning of 
                                section 414(p)(8)) under an applicable 
                                qualified domestic relations order 
                                (within the meaning of section 
                                414(p)(1)(A)), and
                                    ``(III) any beneficiary of a 
                                deceased participant or alternate 
                                payee.
                    ``(C) Other employer contributions.--
                            ``(i) In general.--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 qualified participant in 
                        the plan may elect to direct the plan to divest 
                        any portion of such securities in the 
                        participant's account and to reinvest an 
                        equivalent amount in other investment options 
                        which meet the requirements of subparagraph 
                        (E). The preceding sentence shall apply to the 
                        extent that the amount attributable to such 
                        reinvested portion exceeds the amount to which 
                        a prior election under this subparagraph or 
                        paragraph (28) applies.
                            ``(ii) Qualified participant.--For purposes 
                        of this subparagraph, the term `qualified 
                        participant' means--
                                    ``(I) any participant in the plan 
                                who has completed at least 3 years of 
                                service (as determined under section 
                                411(a)) under the plan,
                                    ``(II) any beneficiary who, with 
                                respect to a participant who met the 
                                service requirement in subclause (I), 
                                is an alternate payee (within the 
                                meaning of section 414(p)(8)) under an 
                                applicable qualified domestic relations 
                                order (within the meaning of section 
                                414(p)(1)(A)), and
                                    ``(III) any beneficiary of a 
                                deceased participant who met the 
                                service requirement in subclause (I) or 
                                alternate payee described in subclause 
                                (II).
                    ``(D) Investment options.--The requirements of this 
                subparagraph are met if the plan offers not less than 3 
                investment options (not inconsistent with regulations 
                prescribed by the Secretary) other than employer 
                securities.
                    ``(E) Preservation of authority of plan to limit 
                investment.--Nothing in this paragraph shall be 
                construed to limit the authority of a plan to impose 
                limitations on the portion of plan assets in any 
                account which may be invested in employer securities.
                    ``(F) Other definitions and rules.--For purposes of 
                this paragraph--
                            ``(i) Employer securities.--The term 
                        `employer securities' shall have the meaning 
                        given such term by section 407(d)(1) of the 
                        Employee Retirement Income Security Act of 
                        1974.
                            ``(ii) Elective deferrals.--For purposes of 
                        this subparagraph, the term `elective 
                        deferrals' means an employer contribution 
                        described in section 402(g)(3)(A) and any 
                        employee contribution.
                            ``(iii) Election.--Elections under this 
                        paragraph shall be not less frequently than 
                        quarterly.
                            ``(iv) Employee stock ownership plan.--The 
                        term `employee stock ownership plan' shall have 
                        the same meaning given to such term by section 
                        4975(e)(7).''.
    (b) Conforming Amendments.--
            (1) Section 401(a)(28) of such Code is amended by adding at 
        the end the following new subparagraph:
                    ``(D) Application.--This paragraph shall not apply 
                with respect to employer securities which are readily 
                tradable on an established securities market.''.
            (2) Section 409(h)(7) of such Code is amended by inserting 
        at the end ``or subparagraph (B) or (C) of section 
        401(a)(35)''.
            (3) Section 4975(e)(7) of such Code is amended by adding at 
        the end the following new sentence: ``A plan shall not fail to 
        be treated as an employee stock ownership plan merely because 
        the plan meets the requirements of section 401(a)(35) (or 
        provides greater diversification rights) or because 
        participants in such plan exercise diversification rights under 
        such section (or greater diversification rights available under 
        the plan).''.
            (4) Section 4980(c)(3)(A) of such Code is amended by 
        striking ``if--'' and all that follows and inserting ``if the 
requirements of subparagraphs (B) and (C) are met.''.
            (5) Section 407 of the Employee Retirement Income Security 
        Act of 1974 (29 U.S.C. 1107) is amended by adding at the end 
        the following new subsection:
    ``(g) Notwithstanding section 408(e) or any other provision of this 
title, an individual account plan may not include provisions that do 
not meet the requirements of section 401(a)(35)(B) of the Internal 
Revenue Code of 1986.''.

SEC. 202. AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 
              1974.

    (a) Amendments to the Employee Retirement Income Security Act of 
1974.--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) Diversification of Investment of Account Assets Held Under 
Individual Account Plans.--
            ``(1) In general.--In the case of an individual account 
        plan under which a participant or beneficiary is permitted to 
        exercise control over assets in his or her account, with 
        respect to the assets in the account to which the participant 
        or beneficiary has a nonforfeitable right and which consist of 
        employer securities which are readily tradable on an 
        established securities market, the plan shall meet the 
        requirements of paragraphs (2), (3), (4), (5), (6), and (7).
            ``(2) Assets attributable to employee contributions.--In 
        the case of any portion of the account assets described in 
        paragraph (1) which is attributable to employee contributions, 
        there shall be no restrictions on the right of a participant or 
        beneficiary to allocate the assets in such portion to any 
        investment option provided under the plan.
            ``(3) Elective deferrals invested in employer securities.--
                    ``(A) In general.--In the case of the portion of 
                the account assets described in paragraph (1) which is 
                attributable to elective deferrals and is invested in 
                employer securities, a plan meets the requirements of 
                this paragraph if each applicable individual in such 
                plan may elect to direct the plan to divest any portion 
                of such securities in the individual's account and to 
                reinvest an equivalent amount in other investment 
                options which meet the requirements of paragraph (5). 
                The preceding sentence shall apply to the extent that 
                the amount attributable to such reinvested portion 
                exceeds the amount to which a prior election under this 
                paragraph or section 401(a)(28) of the Internal Revenue 
                Code of 1986 applies.
                    ``(B) Applicable individual.--For purposes of this 
                paragraph, the term `applicable individual' means--
                            ``(i) any participant in the plan,
                            ``(ii) any beneficiary who is an alternate 
                        payee (within the meaning of section 
                        206(d)(3)(K)) under an applicable qualified 
                        domestic relations order (within the meaning of 
                        section 206(d)(3)(B)(i)), and
                            ``(iii) any beneficiary of a deceased 
                        participant or alternate payee.
            ``(4) Other employer contributions.--
                    ``(A) In general.--In the case of the portion of 
                the account assets described in paragraph (1) which is 
                attributable employer contributions (other than 
                elective deferrals) and is invested in employer 
                securities, a plan meets the requirements of this 
                paragraph if each qualified participant in the plan may 
                elect to direct the plan to divest any portion of such 
                securities in the participant's account and to reinvest 
                an equivalent amount in other investment options which 
                meet the requirements of paragraph (6). The preceding 
                sentence shall apply to the extent that the amount 
                attributable to such reinvested portion exceeds the 
                amount to which a prior election under this paragraph 
                or section 401(a)(28) of such Code applies.
                    ``(B) Qualified participant.--For purposes of this 
                paragraph, the term `qualified participant' means--
                            ``(i) any participant in the plan who has 
                        completed at least 3 years of service (as 
                        determined under section 203(a)) under the 
                        plan,
                            ``(ii) any beneficiary who, with respect to 
                        a participant who met the service requirement 
                        in clause (i), is an alternate payee (within 
                        the meaning of section 206(d)(3)(K)) under an 
                        applicable qualified domestic relations order 
                        (within the meaning of section 
                        206(d)(3)(B)(i)), and
                            ``(iii) any beneficiary of a deceased 
                        participant who met the service requirement in 
                        clause (i) or alternate payee described in 
                        clause (ii).
            ``(5) Investment options.--The requirements of this 
        paragraph are met if, with respect to the account assets 
        described in paragraph (1), the plan offers not less than 3 
        investment options (not inconsistent with regulations 
        prescribed by the Secretary) other than employer securities.
            ``(6) Prompt compliance with directions to allocate 
        investments.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), a plan meets the requirements of this 
                paragraph with respect to plan assets described in 
                paragraph (1) if the plan provides that, within 5 days 
                after the date of any election by a participant or 
                beneficiary allocating any such assets to any 
                investment option provided under the plan, the plan 
                administrator shall take such actions as are necessary 
                to effectuate such allocation.
                    ``(B) Special rule for periodic elections.--In any 
                case in which the plan provides for elections 
                periodically during prescribed periods, the 5-day 
                period described in subparagraph (A) shall commence at 
the end of each such prescribed period.
            ``(7) Notice of rights and of importance of 
        diversification.--A plan meets the requirements of this 
        paragraph if the plan provides that, not later than 30 days 
        prior to the date on which the right of a participant under the 
        plan to his or her accrued benefit becomes nonforfeitable, the 
        plan administrator shall provide to such participant and his or 
        her beneficiaries a written notice--
                    ``(A) setting forth their rights under this section 
                with respect to the accrued benefit, and
                    ``(B) describing the importance of diversifying the 
                investment of account assets.
            ``(8) Preservation of authority of plan to limit 
        investment.--Nothing in this subsection shall be construed to 
        limit the authority of a plan to impose limitations on the 
        portion of plan assets in any account which may be invested in 
        employer securities.
            ``(9) Other definitions and rules.--For purposes of this 
        subsection--
                    ``(A) Employer securities.--The term `employer 
                securities' shall have the meaning given such term by 
                section 407(d)(1) of the Employee Retirement Income 
                Security Act of 1974.
                    ``(B) Elective deferrals.--The term `elective 
                deferrals' means an employer contribution described in 
                section 402(g)(3)(A) of such Code and any employee 
                contribution.
                    ``(C) Election.--Elections under this subsection 
                shall be not less frequently than quarterly.
                    ``(D) Employee stock ownership plan.--The term 
                `employee stock ownership plan' shall have the same 
                meaning given to such term by section 4975(e)(7) of 
                such Code.

SEC. 203. RECOMMENDATIONS RELATING TO NON-PUBLICLY TRADED STOCK.

    Within 1 year after the date of the enactment of this Act, the 
Secretary of Labor and the Secretary of the Treasury shall jointly 
transmit to the Committee on Education and the Workforce and the 
Committee on Ways and Means of the House of Representatives and the 
Committee on Health, Education, Labor, and Pensions and the Committee 
on Finance of the Senate their recommendations regarding legislative 
changes relating to treatment, under section 404(e) of the Employee 
Retirement Income Security Act of 1974 and section 401(a)(35) of the 
Internal Revenue Code of 1986 (as added by this title), of individual 
account plans under which a participant or beneficiary is permitted to 
exercise control over assets in his or her account, in cases in which 
such assets do not include employer securities which are readily 
tradable under an established securities market.

SEC. 204. EFFECTIVE DATE OF TITLE.

    (a) In General.--Except as provided in subsection (b), the 
amendments made by this title shall apply with respect to plan years 
beginning after December 31, 2003.
    (b) Exception.--The amendments made by this section shall not apply 
to employer securities held by an employee stock ownership plan which 
are not subject to section 401(a)(28) of the Internal Revenue Code of 
1986 by reason of section 1175(a)(2) of the Tax Reform Act of 1986 (100 
Stat. 2519).
    (c) Delayed Effective Date of Existing Holdings.--In any case in 
which a portion of the nonforfeitable accrued benefit of a participant 
or beneficiary is held in the form of employer securities (as defined 
in section 407(d)(1) of the Employee Retirement Income Security Act of 
1974) immediately before the first date of the first plan year to which 
the amendments made by this title apply, such portion shall be taken 
into account only with respect to plan years beginning on or after 
January 1, 2005.

                   TITLE III--EMPLOYEE REPRESENTATION

SEC. 301. PARTICIPATION OF PARTICIPANTS IN TRUSTEESHIP OF INDIVIDUAL 
              ACCOUNT PLANS.

    (a) In General.--Section 403(a) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1103(a)) is amended--
            (1) by redesignating paragraphs (1) and (2) as 
        subparagraphs (A) and (B), respectively;
            (2) by inserting ``(1)'' after ``(a)''; and
            (3) by adding at the end the following new paragraph:
    ``(2)(A) The assets of a single-employer plan which is an 
individual account plan and under which some or all of the assets are 
derived from employee contributions shall be held in trust by a joint 
board of trustees, which shall consist of two or more trustees 
representing on an equal basis the interests of the employer or 
employers maintaining the plan and the interests of the participants 
and their beneficiaries and having equal voting rights.
    ``(B)(i) Except as provided in clause (ii), in any case in which 
the plan is maintained pursuant to one or more collective bargaining 
agreements between one or more employee organizations and one or more 
employers, the trustees representing the interests of the participants 
and their beneficiaries shall be designated by such employee 
organizations.
    ``(ii) Clause (i) shall not apply with respect to a plan described 
in such clause if the employee organization (or all employee 
organizations, if more than one) referred to in such clause file with 
the Secretary, in such form and manner as shall be prescribed in 
regulations of the Secretary, a written waiver of their rights under 
clause (i).
    ``(iii) In any case in which clause (i) does not apply with respect 
to a single-employer plan because the plan is not described in clause 
(i) or because of a waiver filed pursuant to clause (ii), the trustee 
or trustees representing the interests of the participants and their 
beneficiaries shall be selected by the plan participants in accordance 
with regulations of the Secretary.
    ``(C) An individual shall not be treated as ineligible for 
selection as trustee solely because such individual is an employee of 
the plan sponsor, except that the employee so selected may not be a 
highly compensated employee (as defined in section 414(q) of the 
Internal Revenue Code of 1986).
    ``(D) The Secretary shall provide by regulation for the appointment 
of a neutral individual, in accordance with the procedures under 
section 203(f) of the Labor Management Relations Act, 1947 (29 U.S.C. 
173(f)), to cast votes as necessary to resolve tie votes by the 
trustees.''.
    (b) Regulations.--The Secretary of Labor shall prescribe the 
initial regulations necessary to carry out the provisions of the 
amendments made by this section not later than 90 days after the date 
of the enactment of this Act.

                   TITLE IV--INCREASED ACCOUNTABILITY

SEC. 401. BONDING OR INSURANCE ADEQUATE TO PROTECT INTEREST OF 
              PARTICIPANTS AND BENEFICIARIES.

    Section 412 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1112) is amended by adding at the end the following new 
subsection:
    ``(f) Notwithstanding the preceding provisions of this section, 
each fiduciary of an individual account plan shall be bonded or 
insured, in accordance with regulations which shall be prescribed by 
the Secretary, in an amount sufficient to ensure coverage by the bond 
or insurance of financial losses due to any failure to meet the 
requirements of this part.''.

SEC. 402. LIABILITY FOR BREACH OF FIDUCIARY DUTY.

    (a) Additional Equitable or Remedial Relief.--Section 409 of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1109) is 
amended--
            (1) by redesignating subsection (b) as subsection (c);
            (2) in subsection (a), by striking ``, including removal of 
        such fiduciary''; and
            (3) by inserting after subsection (a) the following new 
        subsection:
    ``(b) The equitable or remedial relief referred to in subsection 
(a) may include (but is not limited to) a court order removing the 
fiduciary from the plan referred to in subsection (a) and a court order 
prohibiting, conditionally or unconditionally, and permanently or for 
such period of time as the court shall determine, the fiduciary from 
serving--
            ``(1) as an administrator, fiduciary, officer, trustee, 
        custodian, counsel, agent, employee, or representative in any 
        capacity of any employee benefit plan,
            ``(2) as a consultant or adviser to an employee benefit 
        plan, including but not limited to any entity whose activities 
        are in whole or substantial part devoted to providing goods or 
        services to any employee benefit plan, or
            ``(3) in any capacity that involves decisionmaking 
        authority or custody or control of the moneys, funds, assets, 
        or property of any employee benefit plan.''.
    (b) Liability for Participating in or Concealing Fiduciary Breach 
in Connection With Individual Account Plans.--
            (1) Application to participants and beneficiaries of 401(k) 
        plans.--
                    (A) In general.--Part 4 of subtitle B of title I of 
                the Employee Retirement Income Security Act of 1974 (29 
                U.S.C. 1101 et seq.) is amended by adding after section 
                409 the following new section:

``SEC. 409A. LIABILITY FOR BREACH OF FIDUCIARY DUTY IN 401(K) PLANS.

    ``(a) Any person who is a fiduciary with respect to an individual 
account plan that includes a qualified cash or deferred arrangement 
under section 401(k) of the Internal Revenue Code of 1986 who breaches 
any of the responsibilities, obligations, or duties imposed upon 
fiduciaries by this title shall be personally liable to make good to 
each participant and beneficiary of the plan any losses to such 
participant or beneficiary resulting from each such breach, and to 
restore to such participant or beneficiary any profits of such 
fiduciary which have been made through use of assets of the plan by the 
fiduciary, and shall be subject to such other equitable or remedial 
relief as the court may deem appropriate, including removal of such 
fiduciary. A fiduciary may also be removed for a violation of section 
411 of this Act.
    ``(b) The right of participants and beneficiaries under subsection 
(a) to sue for breach of fiduciary duty with respect to an individual 
account plan that includes a qualified cash or deferred arrangement 
under section 401(k) of such Code shall be in addition to all existing 
rights that participants and beneficiaries have under section 409, 
section 502, and any other provision of this title, and shall not be 
construed to give rise to any inference that such rights do not already 
exist under section 409, section 502, or any other provision of this 
title.
    ``(c) No fiduciary shall be liable with respect to a breach of 
fiduciary duty under this title if such breach was committed before he 
or she became a fiduciary or after he or she ceased to be a 
fiduciary.''
                    (B) Conforming amendment.--The table of contents 
                for part 4 of subtitle B of title I of such Act is 
                amended by inserting the following new item after the 
                item relating to section 409:

                              ``Sec. 409A. Liability for breach of 
                                        fiduciary duty in 401(k) 
                                        plans.''
            (2) Insider liability.--
                    (A) In general.--Section 409 of the Employee 
                Retirement Income Security Act of 1974 (29 U.S.C. 1109) 
                is amended by redesignating subsection (b) as 
                subsection (c) and by inserting after subsection (a) 
                the following new subsection:
    ``(b)(1)(A) If an insider with respect to the plan sponsor of an 
individual account plan that holds employer securities that are readily 
tradable on an established securities market--
            ``(i) knowingly participates in a breach of fiduciary 
        responsibility to which subsection (a) applies, or
            ``(ii) knowingly undertakes to conceal such a breach,
such insider shall be personally liable under this subsection for such 
breach in the same manner as the fiduciary who commits such breach.
    ``(B) For purposes of subparagraph (A), the term `insider' means, 
with respect to any plan sponsor of a plan to which subparagraph (A) 
applies--
            ``(i) any officer or director with respect to the plan 
        sponsor, or
            ``(ii) any independent qualified public accountant of the 
        plan or of the plan sponsor.
    ``(3) Any relief provided under this subsection or section 409A--
            ``(A) if provided to an individual account plan, shall 
        inure to the individual accounts of the affected participants 
        or beneficiaries, and
            ``(B) if provided to a participant or beneficiary, shall be 
        payable to the individual account plan on behalf of such 
        participant or beneficiary unless such plan has been 
        terminated.''
                    (B) Conforming amendment.--Section 409(c) of such 
                Act (29 U.S.C. 1109(c)), as redesignated by 
                subparagraph (A), is amended by inserting before the 
                period the following: ``, unless such liability arises 
                under subsection (b)''.
    (c) Maintenance of Fiduciary Liability.--Section 404(c)(1)(B) of 
such Act (29 U.S.C. 1104(c)(1)(B)) is amended by inserting before the 
period the following: ``, except that this subparagraph shall not be 
construed to exempt any fiduciary from liability for any violation of 
subsection (e)''.
    (d) Effective Date.--The amendments made by this section shall 
apply with respect to breaches occurring on or after the date of the 
enactment of this Act.

SEC. 403. PRESERVATION OF RIGHTS OR CLAIMS.

    Section 502 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1132) is amended by adding at the end the following new 
subsection:
    ``(n)(1) The rights under this title (including the right to 
maintain a civil action) may not be waived, deferred, or lost pursuant 
to any agreement not authorized under this title with specific 
reference to this subsection.
    ``(2) Paragraph (1) shall not apply to an agreement providing for 
arbitration or participation in any other nonjudicial procedure to 
resolve a dispute if the agreement is entered into knowingly and 
voluntarily by the parties involved after the dispute has arisen or is 
pursuant to the terms of a collective bargaining agreement.''.

SEC. 404. OFFICE OF PENSION PARTICIPANT ADVOCACY.

    (a) In General.--Subtitle A of title III of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 3001 et seq.) is amended by 
inserting after section 3004 the following new section:

                ``office of pension participant advocacy

    ``Sec. 3005. (a) Establishment.--
            ``(1) In general.--There is established in the Department 
        of Labor an office to be known as the `Office of Pension 
        Participant Advocacy'.
            ``(2) Pension participant advocate.--The Office of Pension 
        Participant Advocacy shall be under the supervision and 
        direction of an official to be known as the `Pension 
        Participant Advocate' who shall--
                    ``(A) have demonstrated experience in the area of 
                pension participant assistance, and
                    ``(B) be selected by the Secretary after 
                consultation with pension participant advocacy 
                organizations.
        The Pension Participant Advocate shall report directly to the 
        Secretary and shall be entitled to compensation at the same 
        rate as the highest rate of basic pay established for the 
        Senior Executive Service under section 5382 of title 5, United 
        States Code.
    ``(b) Functions of Office.--It shall be the function of the Office 
of Pension Participant Advocacy to--
            ``(1) evaluate the efforts of the Federal Government, 
        business, and financial, professional, retiree, labor, women's, 
        and other appropriate organizations in assisting and protecting 
        pension plan participants, including--
                    ``(A) serving as a focal point for, and actively 
                seeking out, the receipt of information with respect to 
                the policies and activities of the Federal Government, 
                business, and such organizations which affect such 
                participants,
                    ``(B) identifying significant problems for pension 
                plan participants and the capabilities of the Federal 
                Government, business, and such organizations to address 
                such problems, and
                    ``(C) developing proposals for changes in such 
                policies and activities to correct such problems, and 
                communicating such changes to the appropriate 
                officials,
            ``(2) promote the expansion of pension plan coverage and 
        the receipt of promised benefits by increasing the awareness of 
        the general public of the value of pension plans and by 
        protecting the rights of pension plan participants, including--
                    ``(A) enlisting the cooperation of the public and 
                private sectors in disseminating information, and
                    ``(B) forming private-public partnerships and other 
                efforts to assist pension plan participants in 
                receiving their benefits,
            ``(3) advocating for the full attainment of the rights of 
        pension plan participants, including by making pension plan 
        sponsors and fiduciaries aware of their responsibilities,
            ``(4) giving priority to the special needs of low and 
        moderate income participants,
            ``(5) developing needed information with respect to pension 
        plans, including information on the types of existing pension 
        plans, levels of employer and employee contributions, vesting 
        status, accumulated benefits, benefits received, and forms of 
        benefits, and
            ``(6) pursuing claims on behalf of participants and 
        beneficiaries and providing appropriate assistance in the 
        resolution of disputes between participants and beneficiaries 
        and pension plans, including assistance in obtaining settlement 
        agreements.
    ``(c) Reports.--
            ``(1) Annual report.--Not later than December 31 of each 
        calendar year, the Pension Participant Advocate shall report to 
        the Committee on Education and the Workforce and the Committee 
        on Ways and Means of the House of Representatives and the 
Committee on Health, Education, Labor, and Pensions and the Committee 
on Finance of the Senate on its activities during the fiscal year 
ending in the calendar year. Such report shall--
                    ``(A) identify significant problems the Advocate 
                has identified,
                    ``(B) include specific legislative and regulatory 
                changes to address the problems, and
                    ``(C) identify any actions taken to correct 
                problems identified in any previous report.
        The Advocate shall submit a copy of such report to the 
        Secretary and any other appropriate official at the same time 
        it is submitted to the committees of Congress.
            ``(2) Specific reports.--The Pension Participant Advocate 
        shall report to the Secretary or any other appropriate official 
        any time the Advocate identifies a problem which may be 
        corrected by the Secretary or such official.
            ``(3) Reports to be submitted directly.--The report 
        required under paragraph (1) shall be provided directly to the 
        committees of Congress without any prior review or comment by 
        the Secretary or any other Federal officer or employee.
    ``(d) Specific Powers.--
            ``(1) Receipt of information.--Subject to such 
        confidentiality requirements as may be appropriate, the 
        Secretary and other Federal officials shall, upon request, 
        provide such information (including plan documents) as may be 
        necessary to enable the Pension Participant Advocate to carry 
        out the Advocate's responsibilities under this section.
            ``(2) Appearances.--The Pension Participant Advocate may 
        represent the views and interests of pension plan participants 
        before any Federal agency, including, upon request of a 
        participant, in any proceeding involving the participant.
            ``(3) Contracting authority.--In carrying out 
        responsibilities under subsection (b)(5), the Pension 
        Participant Advocate may, in addition to any other authority 
        provided by law--
                    ``(A) contract with any person to acquire 
                statistical information with respect to pension plan 
                participants, and
                    ``(B) conduct direct surveys of pension plan 
                participants.''
    (b) Conforming Amendment.--The table of contents in section 1 of 
such Act is amended by inserting after the item relating to section 
3004 the following new item:

``Sec. 3051. Office of Pension Participant Advocacy.''.
    (c) Effective Date.--The amendment made by this section shall take 
effect on January 1, 2004.

SEC. 405. 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 contract to 
carry out 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 and impact of such a system, and
            (2) options for developing such a system.
    (b) Report.--Not later than 3 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 
Committee on Education and the Workforce and the Committee on Ways and 
Means of the House of Representatives and the Committee on Health, 
Education, Labor, and Pensions and the Committee on Finance of the 
Senate.

SEC. 406. EXCISE TAX ON FAILURE OF PENSION PLANS TO PROVIDE NOTICE OF 
              TRANSACTION RESTRICTION PERIODS.

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

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

    ``(a) Imposition of Tax.--There is hereby imposed a tax on the 
failure of any applicable pension plan to meet the requirements of 
subsection (e) with respect to any applicable individual.
    ``(b) Amount of Tax.--The amount of the tax imposed by subsection 
(a) on any failure with respect to any applicable individual shall be 
$100 for each day in the noncompliance period with respect to such 
failure.
    ``(c) Limitations on Amount of Tax.--
            ``(1) Tax not to apply to failures corrected as soon as 
        reasonably practicable.--No tax shall be imposed by subsection 
        (a) on any failure if--
                    ``(A) any person subject to liability for the tax 
                under subsection (d) exercised reasonable diligence to 
                meet the requirements of subsection (e), and
                    ``(B) such person provides the notice described in 
                subsection (e) as soon as reasonably practicable after 
                the first date such person knew, or exercising 
                reasonable diligence should have known, that such 
                failure existed.
            ``(2) Overall limitation for unintentional failures.--
                    ``(A) In general.--If the person subject to 
                liability for tax under subsection (d) exercised 
                reasonable diligence to meet the requirements of 
                subsection (e) and paragraph (1) is not otherwise 
                applicable, the tax imposed by subsection (a) for 
                failures during the taxable year of the employer (or, 
                in the case of a multiemployer plan, the taxable year 
                of the trust forming part of the plan) shall not exceed 
                $500,000. For purposes of the preceding sentence, all 
                multiemployer plans of which the same trust forms a 
                part shall be treated as 1 plan.
                    ``(B) Taxable years in the case of certain 
                controlled groups.--For purposes of this paragraph, if 
                all persons who are treated as a single employer for 
purposes of this section do not have the same taxable year, the taxable 
years taken into account shall be determined under principles similar 
to the principles of section 1561.
            ``(3) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that the payment of such tax would 
        be excessive or otherwise inequitable relative to the failure 
        involved.
    ``(d) Liability for Tax.--The following shall be liable for the tax 
imposed by subsection (a):
            ``(1) In the case of a plan other than a multiemployer 
        plan, the employer.
            ``(2) In the case of a multiemployer plan, the plan.
    ``(e) Notice of Transaction Restriction Periods.--
            ``(1) Duties of plan administrator.--In advance of the 
        commencement of any transaction restriction period with respect 
        to an applicable pension plan, the plan administrator shall 
        notify the plan participants and beneficiaries who are affected 
        by such action in accordance with this subsection.
            ``(2) Notice requirements.--
                    ``(A) In general.--The notices described in 
                paragraph (1) shall be written in a manner calculated 
                to be understood by the average plan participant and 
                shall include--
                            ``(i) the reasons for the transaction 
                        restriction period,
                            ``(ii) an identification of the investments 
                        and other rights affected,
                            ``(iii) the expected beginning date and 
                        length of the transaction restriction period,
                            ``(iv) in the case of investments affected, 
                        a statement that the applicable individual 
                        should evaluate the appropriateness of their 
                        current investment decisions in light of their 
                        inability to direct or diversify assets 
                        credited to their accounts during the 
                        transaction restriction period, and
                            ``(v) such other matters as the Secretary 
                        may require by regulation.
                    ``(B) Notice to participants and beneficiaries.--
                Except as otherwise provided in this subsection, 
                notices described in paragraph (1) shall be furnished 
                to all participants and beneficiaries under the plan to 
                whom the transaction restriction period applies at 
                least 30 days in advance of the transaction restriction 
                period.
                    ``(C) Exception to 30-day notice requirement.--In 
                any case in which--
                            ``(i) a deferral of the transaction 
                        restriction period would violate the 
                        requirements of subparagraph (A) or (B) of 
                        section 404(a)(1) of the Employee Retirement 
                        Income Security Act of 1974, and a fiduciary 
                        (within the meaning of section 3(21) of such 
                        Act) of the plan reasonably so determines in 
                        writing, or
                            ``(ii) the inability to provide the 30-day 
                        advance notice is due to events that were 
                        unforeseeable or circumstances beyond the 
                        reasonable control of the plan administrator, 
                        and a fiduciary of the plan reasonably so 
                        determines in writing,
                subparagraph (B) shall not apply, and the notice shall 
                be furnished to all participants and beneficiaries 
                under the plan to whom the transaction restriction 
                period applies as soon as reasonably possible under the 
                circumstances unless such a notice in advance of the 
                termination of the transaction restriction period is 
                impracticable.
                    ``(D) Written notice.--The notice required to be 
                provided under this subsection shall be in writing, 
                except that such notice may be in electronic or other 
                form to the extent that such form is reasonably 
                accessible to the recipient.
                    ``(E) Notice to issuers of employer securities 
                subject to transaction restriction period.--In the case 
                of any transaction restriction period in connection 
                with an applicable pension plan, the plan administrator 
                shall provide timely notice of such transaction 
                restriction period to the issuer of any employer 
                securities subject to such transaction restriction 
                period.
            ``(3) Exception for transaction restriction periods with 
        limited applicability.--In any case in which the transaction 
        restriction period applies to 1 or more participants or 
        beneficiaries in connection with a merger, acquisition, 
        divestiture, or similar transaction involving the plan or plan 
        sponsor and occurs solely in connection with becoming or 
        ceasing to be an applicable individual under the plan by reason 
        of such merger, acquisition, divestiture, or transaction, the 
        requirement of this subsection that the notice be provided to 
        all participants and beneficiaries shall be treated as met if 
        the notice required under paragraph (1) is provided to such 
        participants or beneficiaries to whom the transaction 
        restriction period applies as soon as reasonably practicable.
            ``(4) Changes in length of transaction restriction 
        period.--If, following the furnishing of the notice pursuant to 
        this subsection, there is a change in the beginning date or 
        length of the transaction restriction period (specified in such 
        notice pursuant to paragraph (2)(A)(iii)), the administrator 
        shall provide affected participants and beneficiaries notice of 
        the change as soon as reasonably practicable. In relation to 
        the extended transaction restriction period, such notice shall 
        meet the requirements of paragraph (2)(D) and shall specify any 
        material change in the matters referred to in clauses (i) 
        through (v) of paragraph (2)(A).
            ``(5) Regulatory exceptions.--The Secretary may provide by 
        regulation for additional exceptions to the requirements of 
        this subsection which the Secretary determines are in the 
        interests of participants and beneficiaries.
            ``(6) Guidance and model notices.--The Secretary shall 
        issue guidance and model notices which meet the requirements of 
        this subsection.
            ``(7) Transaction restriction period.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `transaction 
                restriction period' means, in connection with an 
                applicable pension plan, any period for which any 
                ability of participants or beneficiaries under the 
                plan, which is otherwise available under the terms of 
                such plan, to direct or diversify assets credited to 
                their accounts, to obtain loans from the plan, or to 
                obtain distributions from the plan is temporarily 
                suspended, limited, or restricted, if such suspension, 
                limitation, or restriction is for any period of more 
                than 3 consecutive business days.
                    ``(B) Exclusions.--The term `transaction 
                restriction period' does not include a suspension, 
                limitation, or restriction--
                            ``(i) which occurs by reason of the 
                        application of the securities laws (as defined 
                        in section 3(a)(47) of the Securities Exchange 
                        Act of 1934),
                            ``(ii) which is a change to the plan which 
                        provides for a regularly scheduled suspension, 
                        limitation, or restriction which is disclosed 
                        to participants or beneficiaries through any 
                        summary of material modifications, any 
                        materials describing specific investment 
                        alternatives under the plan, or any changes 
                        thereto, or
                            ``(iii) which applies to 1 or more 
                        individuals, each of whom is the participant, 
                        an alternate payee (as defined in section 
                        414(p)(8)), or any other beneficiary pursuant 
                        to a qualified domestic relations order (as 
                        defined in section 414(p)(1)).
            ``(8) Applicable individual.--For purposes of this section, 
        the term `applicable individual' means--
                    ``(A) any participant in the applicable pension 
                plan,
                    ``(B) any beneficiary who is an alternate payee 
                (within the meaning of section 414(p)(8)) under an 
                applicable qualified domestic relations order (within 
                the meaning of section 414(p)(1)(A)), and
                    ``(C) any beneficiary of a deceased participant or 
                alternate payee,
        who has an accrued benefit under the plan and who is entitled 
        to direct the investment (or hypothetical investment) of some 
        or all of such accrued benefit.
            ``(9) Applicable pension plan.--For purposes of this 
        subsection, the term `applicable pension plan' means--
                    ``(A) a plan described in section 219(g)(5)(A) 
                (other than in clause (iii) thereof), and
                    ``(B) an eligible deferred compensation plan (as 
                defined in section 457(b)) of an eligible employer 
                described in section 457(e)(1)(A),
        which permits any participant to direct the investment of some 
        or all of his account in the plan or under which the accrued 
        benefit of any participant depends in whole or in part on 
        hypothetical investments directed by the participant.''.
    (b) Clerical Amendment.--The table of sections for chapter 43 of 
such Code is amended by adding at the end the following new item:

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

0    (c) Effective Date and Related Rules.--
            (1) Effective date.--The amendments made by this section 
        shall take effect 180 days after the date of the enactment of 
        this Act. Good faith compliance with the requirements of such 
        amendments in advance of the issuance of applicable regulations 
        thereunder shall be treated as compliance with such provisions.
            (2) Issuance of initial guidance and model notice.--The 
        Secretary of the Treasury shall, in consultation with the 
        Secretary of Labor, issue initial guidance and a model notice 
        pursuant to section 4980H(e)(6) of the Internal Revenue Code of 
        1986 (as added by this section) not later than January 1, 2005. 
        Not later than 75 days after the date of the enactment of this 
        Act, the Secretary shall promulgate interim final rules 
        necessary to carry out the amendments made by this section.
            (3) Plan amendments.--If any amendment made by this section 
        requires an amendment to any plan, such plan amendment shall 
        not be required to be made before the first plan year beginning 
        on or after the effective date of this section, if--
                    (A) during the period after such amendment made by 
                this section takes effect and before such first plan 
                year, the plan is operated in good faith compliance 
                with the requirements of such amendment made by this 
                section, and
                    (B) such plan amendment applies retroactively to 
                the period after such amendment made by this section 
                takes effect and before such first plan year.

     TITLE V--INVESTMENT ADVICE FOR PARTICIPANTS AND BENEFICIARIES

SEC. 501. INDEPENDENT INVESTMENT ADVICE.

    (a) In General.--Section 404(c)(1) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1104(c)(1)) (as amended by 
section 102(c)) is amended further--
            (1) by redesignating subparagraphs (A) and (B) as clauses 
        (i) and (ii), respectively, and by inserting ``(A)'' after 
        ``(c)(1)''; and
            (2) by adding at the end the following new subparagraphs:
    ``(B)(i) In the case of a pension plan described in subparagraph 
(A) which provides investment in employer securities as at least one 
option for investment of plan assets at the direction of the 
participant or beneficiary, such plan shall make available to the 
participant or beneficiary the services of a qualified fiduciary 
adviser for purposes of providing investment advice described in 
section 3(21)(A)(ii) regarding investment in such securities.
    ``(ii) No person who is otherwise a fiduciary shall be liable by 
reason of any investment advice provided by a qualified fiduciary 
adviser pursuant to a request under clause (i) if--
            ``(I) the plan provides for selection and monitoring of 
        such adviser in a prudent and effective manner, and
            ``(II) such adviser is a named fiduciary under the plan in 
        connection with the provision of such advice.
    ``(C) For purposes of subparagraph (B)--
            ``(i) The term `qualified fiduciary adviser' means, with 
        respect to a plan, a person who--
                    ``(I) is a fiduciary of the plan by reason of the 
                provision of qualified investment advice by such person 
                to a participant or beneficiary,
                    ``(II) has no material interest in, and no material 
                affiliation or contractual relationship with any third 
                party having a material interest in, the security or 
                other property with respect to which the person is 
                providing the advice,
                    ``(III) meets the qualifications of clause (ii), 
                and
                    ``(IV) meets the additional requirements of clause 
                (iii).
            ``(ii) A person meets the qualifications of this 
        subparagraph if such person--
                            ``(I) is registered as an investment 
                        adviser under the Investment Advisers Act of 
                        1940 (15 U.S.C. 80b-1 et seq.),
                            ``(II) if not registered as an investment 
                        adviser under such Act by reason of section 
                        203A(a)(1) of such Act (15 U.S.C. 80b-
                        3a(a)(1)), is registered under the laws of the 
                        State in which the fiduciary maintains its 
                        principal office and place of business, and, at 
                        the time the fiduciary last filed the 
                        registration form most recently filed by the 
                        fiduciary with such State in order to maintain 
                        the fiduciary's registration under the laws of 
                        such State, also filed a copy of such form with 
                        the Secretary,
                            ``(III) is registered as a broker or dealer 
                        under the Securities Exchange Act of 1934 (15 
                        U.S.C. 78a et seq.),
                            ``(IV) is a bank or similar financial 
                        institution referred to in section 408(b)(4),
                            ``(V) is an insurance company qualified to 
                        do business under the laws of a State, or
                            ``(VI) is any other comparable entity which 
                        satisfies such criteria as the Secretary 
                        determines appropriate.
                    ``(iii) A person meets the additional requirements 
                of this clause if every individual who is employed (or 
                otherwise compensated) by such person and whose scope 
                of duties includes the provision of qualified 
                investment advice on behalf of such person to any 
                participant or beneficiary is--
                            ``(I) a registered representative of such 
                        person,
                            ``(II) an individual described in subclause 
                        (I), (II), or (III) of clause (i), or
                            ``(III) such other comparable qualified 
                        individual as may be designated in regulations 
                        of the Secretary.''.
    (b) Maintenance of Fiduciary Liability.--Section 404(c)(1)(B) of 
such Act (29 U.S.C. 1104(c)(1)(B)) is amended by inserting before the 
period the following: ``, except that this subparagraph shall not be 
construed to exempt any fiduciary from liability for any violation of 
this section''.

SEC. 502. TAX TREATMENT OF QUALIFIED RETIREMENT PLANNING SERVICES.

    (a) In General.--Subsection (m) of section 132 of the Internal 
Revenue Code of 1986 (defining qualified retirement services) is 
amended by adding at the end the following new paragraph:
            ``(4) No constructive receipt.--No amount shall be included 
        in the gross income of any employee solely because the employee 
        may choose between any qualified retirement planning services 
        provided by a qualified investment advisor and compensation 
        which would otherwise be includible in the gross income of such 
        employee. The preceding sentence shall apply to highly 
        compensated employees only if the choice described in such 
        sentence is available on substantially the same terms to each 
        member of the group of employees normally provided education 
        and information regarding the employer's qualified employer 
        plan.''.
    (b) Conforming Amendments.--
            (1) Section 403(b)(3)(B) of such Code is amended by 
        inserting ``132(m)(4),'' after ``132(f)(4),''.
            (2) Section 414(s)(2) of such Code is amended by inserting 
        ``132(m)(4),'' after ``132(f)(4),''.
            (3) Section 415(c)(3)(D)(ii) of such Code is amended by 
        inserting ``132(m)(4),'' after ``132(f)(4),''.
    (c) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2003.

                 TITLE VI--PARITY IN EMPLOYEE BENEFITS

SEC. 601. INCLUSION IN GROSS INCOME OF FUNDED DEFERRED COMPENSATION OF 
              CORPORATE INSIDERS IF CORPORATION FUNDS DEFINED 
              CONTRIBUTION PLAN WITH EMPLOYER STOCK.

    (a) In General.--Subpart A of part I of subchapter D of chapter 1 
of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new section:

``SEC. 409A. DENIAL OF DEFERRAL FOR FUNDED DEFERRED COMPENSATION OF 
              CORPORATE INSIDERS IF CORPORATION FUNDS DEFINED 
              CONTRIBUTION PLAN WITH EMPLOYER STOCK.

    ``(a) In General.--If an employer maintains a defined contribution 
plan to which employer contributions are made in the form of employer 
stock and such employer maintains a funded deferred compensation plan--
            ``(1) compensation of any corporate insider which is 
        deferred under such funded deferred compensation plan shall be 
        included in the gross income of the insider or beneficiary for 
        the 1st taxable year in which there is no substantial risk of 
        forfeiture of the rights to such compensation, and
            ``(2) the tax treatment of any amount made available under 
        the plan to a corporate insider or beneficiary shall be 
        determined under section 72 (relating to annuities, etc.).
    ``(b) Funded Deferred Compensation Plan.--For purposes of this 
section--
            ``(1) In general.--The term `funded deferred compensation 
        plan' means any plan providing for the deferral of compensation 
        unless--
                    ``(A) the employee's rights to the compensation 
                deferred under the plan are no greater than the rights 
                of a general creditor of the employer,
                    ``(B) all amounts set aside (directly or 
                indirectly) for purposes of paying the deferred 
                compensation, and all income attributable to such 
                amounts, remain (until made available to the 
                participant or other beneficiary) solely the property 
                of the employer (without being restricted to the 
                provision of benefits under the plan), and
                    ``(C) the amounts referred to in subparagraph (B) 
                are available to satisfy the claims of the employer's 
                general creditors at all times (not merely after 
                bankruptcy or insolvency).
        Such term shall not include a qualified employer plan.
            ``(2) Special rules.--
                    ``(A) Employee's rights.--A plan shall be treated 
                as failing to meet the requirements of paragraph (1)(A) 
                unless, under the written terms of the plan--
                            ``(i) the compensation deferred under the 
                        plan is paid only upon separation from service, 
                        death, or at a specified time (or pursuant to a 
                        fixed schedule), and
                            ``(ii) the plan does not permit the 
                        acceleration of the time such deferred 
                        compensation is paid by reason of any event.
                If the employer and employee agree to a modification of 
                the plan that accelerates the time for payment of any 
                deferred compensation, then all compensation previously 
                deferred under the plan shall be includible in gross 
                income for the taxable year during which such 
                modification takes effect and the taxpayer shall pay 
                interest at the underpayment rate on the underpayments 
                that would have occurred had the deferred compensation 
                been includible in gross income in the taxable years 
                deferred.
                    ``(B) Creditor's rights.--A plan shall be treated 
                as failing to meet the requirements of paragraph (1)(B) 
                with respect to amounts set aside in a trust unless--
                            ``(i) the employee has no beneficial 
                        interest in the trust,
                            ``(ii) assets in the trust are available to 
                        satisfy claims of general creditors at all 
                        times (not merely after bankruptcy or 
                        insolvency), and
                            ``(iii) there is no factor (such as the 
                        location of the trust outside the United 
                        States) that would make it more difficult for 
                        general creditors to reach the assets in the 
                        trust than it would be if the trust assets were 
                        held directly by the employer in the United 
                        States.
    ``(c) Corporate Insider.--For purposes of this section, 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.
    ``(d) Other definitions.--For purposes of this section--
            ``(1) Plan includes arrangements, etc.--The term `plan' 
        includes any agreement or arrangement.
            ``(2) Substantial risk of forfeiture.--The rights of a 
        person to compensation are subject to a substantial risk of 
        forfeiture if such person's rights to such compensation are 
        conditioned upon the future performance of substantial services 
        by any individual.''
    (b) Clerical Amendment.--The table of sections for such subpart A 
is amended by adding at the end the following new item:

                              ``Sec. 409A. Denial of deferral for 
                                        funded deferred compensation of 
                                        corporate insiders if 
                                        corporation funds defined 
                                        contribution plan with employer 
                                        stock.''
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts deferred after the date of the enactment of this Act.

SEC. 602. PERFORMANCE-BASED COMPENSATION EXCEPTION TO $1,000,000 
              LIMITATION ON DEDUCTIBLE COMPENSATION NOT TO APPLY IN 
              CERTAIN CASES.

    (a) In General.--Paragraph (4) of section 162(m) of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
subparagraph:
                    ``(G) Certain factors not permitted to be taken 
                into account in determining whether performance goals 
                are met.--Subparagraph (C) shall not apply if, in 
                determining whether the performance goals are met, any 
                of the following are taken into account:
                            ``(i) Cost savings as a result of changes 
                        to any qualified employer plan (as defined in 
                        section 4972(d)).
                            ``(ii) Excess assets of such a plan or 
                        earnings thereon.
                            ``(iii) Any excess of the amount assumed to 
                        be the return on the assets of such a plan over 
                        the actual return on such assets.''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of the enactment of this Act.

            TITLE VII--PROTECTION OF RETIREMENT EXPECTATIONS

SEC. 701. PROTECTION OF PARTICIPANTS FROM CONVERSIONS TO HYBRID DEFINED 
              BENEFIT PLANS.

    (a) Amendments to the Employee Retirement Income Security Act of 
1974.--
            (1) Election to maintain rate of accrual in effect before 
        plan amendment.--Section 204(b)(1) of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1054(b)(1)) is amended 
        by adding at the end the following new subparagraph:
    ``(I)(i) Notwithstanding the preceding subparagraphs, in the case 
of a plan amendment to a defined benefit plan--
            ``(I) which has the effect of converting the plan to a plan 
        under which the accrued benefit is expressed to participants 
        and beneficiaries as an amount other than an annual benefit 
        commencing at normal retirement age (or which has a similar 
        effect as determined under regulations issued under clause 
        (iii)), and
            ``(II) which has the effect of reducing the rate of future 
        benefit accrual of 1 or more participants,
such plan shall be treated as not satisfying the requirements of this 
paragraph unless such plan meets the requirements of clause (ii).
    ``(ii) A plan meets the requirements of this clause if the plan 
provides each participant who has attained 10 years of service (as 
determined under section 203) under the plan at the time such amendment 
takes effect with--
            ``(I) notice of the plan amendment indicating that it has 
        such effect, including a comparison of the present and 
        projected values of the accrued benefit determined both with 
        and without regard to the plan amendment, and
            ``(II) an election, on the date of the conversion, to 
        either receive benefits under the terms of the plan as in 
        effect on or after the effective date of such plan amendment or 
        to receive benefits under the terms of the plan as in effect 
        immediately before the effective date of such plan amendment 
        (taking into account all benefit accruals under such terms 
        since such date).
    ``(iii) The Secretary shall issue regulations under which any plan 
amendment which has an effect similar to the effect described in clause 
(i)(I) shall be treated as a plan amendment described in clause (i)(I). 
Such regulations may provide that if a plan sponsor represents in 
communications to participants and beneficiaries that a plan amendment 
has an effect described in the preceding sentence, such plan amendment 
shall be treated as a plan amendment described in clause (i)(I).''.
            (2) Early retirement subsidy taken into account for 
        purposes of opening balance of hybrid defined benefit plan.--
        Section 204(g) of such Act (29 U.S.C. 1054(g)) is amended by 
        adding at the end the following new paragraph:
    ``(6) In the case of a plan amendment to a defined benefit plan 
which has the effect of converting the plan to a plan under which the 
accrued benefit is expressed to participants and beneficiaries as an 
amount other than an annual benefit commencing at normal retirement age 
(or a plan amendment to such plan having a similar effect as determined 
under regulations issued under subsection (b)(1)(I)(iii)), such 
amendment shall not be treated as reducing accrued benefits merely 
because under such amendment any early retirement benefit or 
retirement-type subsidy (within the meaning of paragraph (2)(A)) is 
taken into account for purposes of the opening balance of the amended 
plan.''.
            (3) Interest rate for determinations relating to plan 
        conversions.--Section 204(g) of such Act (as amended by 
        paragraph (2)) is amended further by adding at the end the 
        following new paragraph:
    ``(7) For purposes of this subsection--
            ``(A) in the case of an amendment described in paragraph 
        (1) which takes effect on or after the enactment of this 
        paragraph, the interest rate and mortality tables to be used in 
        determining the present value of the accrued benefit under such 
        amendment shall be the applicable rate and tables under section 
        417(e)(3) of the Internal Revenue Code of 1986 as of the date 
        on which such amendment takes effect, and
            ``(B) in the case of amendments described in paragraph (1) 
        which took effect before the enactment of this paragraph, the 
        interest rate and mortality tables to be used in determining 
        the present value of the accrued benefit under such amendments 
        shall be the applicable rate and tables which were in effect 
        under section 412(l) of the Internal Revenue Code of 1986 as of 
        the effective date of the respective amendment.''.
    (b) Amendments to the Internal Revenue Code of 1986.--
            (1) Election to maintain rate of accrual in effect before 
        plan amendment.--Section 411(b)(1) of the Internal Revenue Code 
        of 1986 (relating to accrued benefit requirements for defined 
        benefit plans) is amended by adding at the end the following 
        new subparagraph:
                    ``(I) Election to maintain rate of accrual in 
                effect before certain plan amendments.--
                            ``(i) In general.--Notwithstanding the 
                        preceding subparagraphs, in the case of a plan 
                        amendment to a defined benefit plan--
                                    ``(I) which has the effect of 
                                converting the plan to a plan under 
                                which the accrued benefit is expressed 
                                to participants and beneficiaries as an 
                                amount other than an annual benefit 
                                commencing at normal retirement age (or 
                                which has a similar effect as 
                                determined under regulations issued 
                                under clause (iii)), and
                                    ``(II) which has the effect of 
                                reducing the rate of future benefit 
                                accrual of 1 or more participants,
                        such plan shall be treated as not satisfying 
                        the requirements of this paragraph unless such 
plan meets the requirements of clause (ii).
                            ``(ii) Requirements.--A plan meets the 
                        requirements of this clause if the plan 
                        provides each participant who has attained 10 
                        years of service (as determined under section 
                        203) under the plan at the time such amendment 
                        takes effect with--
                                    ``(I) notice of the plan amendment 
                                indicating that it has such effect, 
                                including a comparison of the present 
                                and projected values of the accrued 
                                benefit determined both with and 
                                without regard to the plan amendment, 
                                and
                                    ``(II) an election, on the date of 
                                the conversion, to either receive 
                                benefits under the terms of the plan as 
                                in effect on or after the effective 
                                date of such plan amendment or to 
                                receive benefits under the terms of the 
                                plan as in effect immediately before 
                                the effective date of such plan 
                                amendment (taking into account all 
                                benefit accruals under such terms since 
                                such date).
                            ``(iii) Regulations.--The Secretary shall 
                        issue regulations under which any plan 
                        amendment which has an effect similar to the 
                        effect described in clause (i)(I) shall be 
                        treated as a plan amendment described in clause 
                        (i)(I). Such regulations may provide that if a 
                        plan sponsor represents in communications to 
                        participants and beneficiaries that a plan 
                        amendment has an effect described in the 
                        preceding sentence, such plan amendment shall 
                        be treated as a plan amendment described in 
                        clause (i)(I).''.
            (2) Early retirement subsidy taken into account for 
        purposes of opening balance of hybrid defined benefit plan.--
        Paragraph (6) of section 411(d) (relating to accrued benefit 
        not to be decreased by amendment) is amended by adding at the 
        end the following new subparagraph:
                    ``(F) Early retirement subsidy taken into account 
                for purposes of opening balance of hybrid defined 
                benefit plan.--In the case of a plan amendment to a 
                defined benefit plan which has the effect of converting 
                the plan to a plan under which the accrued benefit is 
                expressed to participants and beneficiaries as an 
                amount other than an annual benefit commencing at 
                normal retirement age (or a plan amendment to such plan 
                having a similar effect as determined under regulations 
                issued under subsection (b)(1)(I)(iii)), such amendment 
                shall not be treated as reducing accrued benefits 
                merely because under such amendment any early 
                retirement benefit or retirement-type subsidy (within 
                the meaning of section subparagraph (B)(i)) is taken 
                into account for purposes of the opening balance of the 
                amended plan.''.
            (3) Interest rate for determinations relating to plan 
        conversions.--Paragraph (6) of section 411(d) of such Code (as 
        amended by paragraph (2)) is amended further by adding at the 
        end the following new subparagraph:
                    ``(G) Interest rate.--For purposes of this 
                paragraph--
                            ``(i) in the case of an amendment described 
                        in subparagraph (A) which takes effect on or 
                        after the enactment of this subparagraph, the 
                        interest rate and mortality tables to be used 
                        in determining the present value of the accrued 
                        benefit under such amendment shall be the 
                        applicable rate and tables under section 
                        417(e)(3) as of the date on which such 
                        amendment takes effect, and
                            ``(ii) in the case of amendments described 
                        in subparagraph (A) which took effect before 
                        the enactment of this subparagraph, the 
                        interest rate and mortality tables to be used 
                        in determining the present value of the accrued 
                        benefit under such amendments shall be the 
                        applicable rate and tables which were in effect 
                        under section 412(l) as of the effective date 
                        of the respective amendment.''.
    (b) Effective Date and Related Rules.--
            (1) In general.--The amendments made by this section shall 
        apply to plan amendments taking effect after the date of the 
        enactment of this Act.
            (2) Plan amendments subject to litigation.--The amendments 
        made by this section also shall apply to any plan amendment 
        taking effect on or before such date if--
                    (A) no determination letter is issued on or before 
                such date by the Internal Revenue Service which has the 
                effect of approving the plan amendment, and
                    (B) such plan amendment is, on April 8, 2003, 
                subject to a court action based on age discrimination.
            (3) Special rule.--In the case of a plan amendment taking 
        effect before 90 days after the date of the enactment of this 
        Act, the requirements of section 204(b)(1)(I) of the Employee 
        Retirement Income Security Act of 1974 (as added by this 
        section) and section 411(b)(1)(I) of the Internal Revenue Code 
        of 1986 (as added by this section) shall be treated as 
        satisfied in connection with such plan amendment, in the case 
        of any participant described in such sections 204(b)(1)(I) and 
        411(b)(1)(I) in connection with such plan amendment, if, as of 
        the end of such 90-day period--
                    (A) the notice described in clause (i)(I) of such 
                section 204(b)(1)(I) and clause (i)(I) of such section 
                411(b)(1)(I) in connection with such plan amendment has 
                been provided to such participant, and
                    (B) the plan provides for the election described in 
                clause (i)(II) of such section 204(b)(1)(I) and clause 
                (i)(II) of such section 411(b)(1)(I) in connection with 
such participant's retirement under the plan.

              TITLE VIII--TREATMENT OF CORPORATE INSIDERS

SEC. 801. SPECIAL RULES FOR EXECUTIVE PERKS AND RETIREMENT BENEFITS.

    (a) In General.--Part I of subchapter D of chapter 1 of the 
Internal Revenue Code of 1986 (relating to pension, profit-sharing, 
stock bonus plans, etc.) is amended by adding at the end the following 
new subpart:

 ``subpart f--special rules for executive perks and retirement benefits

                              ``Sec. 420A. Holding period requirement 
                                        for stock acquired through 
                                        exercise of option.
                              ``Sec. 420B. Additional tax on 
                                        nondisclosed retirement perks.
                              ``Sec. 420C. Definitions and special 
                                        rule.

``SEC. 420A. HOLDING PERIOD REQUIREMENT FOR STOCK ACQUIRED THROUGH 
              EXERCISE OF OPTION.

    ``(a) In General.--In the case of a corporate insider with respect 
to a corporation, the tax imposed by this chapter on a corporate 
insider for any taxable year shall be increased by 50 percent of the 
amount realized by such insider from the disqualified disposition 
during such year of stock acquired by the corporate insider upon the 
exercise of a stock option granted by the corporation with respect to 
which such individual is a corporate insider.
    ``(b) Disqualified Disposition of Stock.--
            ``(1) In general.--For purposes of subsection (a), the term 
        `disqualified disposition of stock' means any sale, exchange, 
        or other disposition of stock which, if such stock were 
        employer securities held in a qualified cash or deferred 
        arrangement (as defined in section 401(k)(2)), would violate 
        any restriction imposed on the sale or other disposition of 
        such securities by the plan of which such arrangement is a 
        part.
            ``(2) Special rule for 2 or more cash or deferred 
        arrangements.--If a corporation has more than 1 qualified cash 
        or deferred arrangement (as so defined), the restrictions which 
        apply for purposes of paragraph (1) shall be the most 
        restrictive provisions relating to the disposition of employer 
        securities held pursuant to any such arrangements.

``SEC. 420B. ADDITIONAL TAX ON NONDISCLOSED RETIREMENT PERKS.

    ``(a) In General.--In the case of a publicly traded corporation, 
the tax imposed by this chapter for the taxable year shall be increased 
by 50 percent of the net cost to the corporation for the taxable year 
of personal perks provided to a retired executive of the corporation.
    ``(b) Waiver if Perks Provided Pursuant to Shareholder Approval.--
Subsection (a) shall not apply with respect to any personal perks 
provided pursuant to a contract if--
            ``(1) all of the material terms of such contract (including 
        a description of the benefits to be provided to the executive 
        and the extent of such benefits) are disclosed to shareholders, 
        and
            ``(2) such contract is approved by a majority of the vote 
        in a separate shareholder vote before any benefits are provided 
        under the contract.
    ``(c) Net Cost of Personal Perks.--
            ``(1) In general.--For purposes of subsection (a), the net 
        cost of personal perks provided to a retired executive is the 
        excess of--
                    ``(A) the cost to the corporation of such perks, 
                over
                    ``(B) the amount paid in cash during the taxable 
                year by the executive to reimburse the corporation for 
                the cost of such perks.
            ``(2) Personal perks.--For purposes of paragraph (1), the 
        term `personal perks' means--
                    ``(A) the use of corporate-owned property,
                    ``(B) travel expenses, including meals and lodging, 
                unless such expenses are directly related to the 
                performance of services by the executive for the 
                corporation and the business relationship of such 
                expenses is substantiated under the requirements of 
                section 274,
                    ``(C) tickets to sporting or other entertainment 
                events,
                    ``(D) amounts paid or incurred for membership in 
                any club organized for business, pleasure, recreation, 
                or other social purpose, and
                    ``(E) other personal services, including services 
                related to maintenance or protection of any personal 
                residence of the executive.
            ``(3) Cost relating to use of corporate-owned property.--
        For purposes of this subsection--
                    ``(A) In general.--The cost taken into account with 
                respect to the use of corporate-owned property shall be 
                the allocable portion of the total cost of operating 
                such property.
                    ``(B) Allocable portion.--For purposes of 
                subparagraph (A), the allocable portion of total cost 
                is--
                            ``(i) the portion of the total cost 
                        (including depreciation) incurred by the 
                        corporation for operating and maintaining such 
property during the corporation's taxable year in which such use 
occurred,
                            ``(ii) which is allocable to the use 
                        (determined on the basis of the relationship of 
                        such use to the total use of the property 
                        during the taxable year).

``SEC. 420C. DEFINITIONS AND SPECIAL RULE.

    ``(a) Definitions.--For purposes of this subpart--
            ``(1) Corporate insider.--The term `corporate insider' 
        means, with respect to a corporation, any individual--
                    ``(A) who is subject to the requirements of section 
                16(a) of the Securities Exchange Act of 1934 with 
                respect to such corporation, or
                    ``(B) who would be subject to such requirements if 
                such corporation were an issuer of equity securities 
                referred to in such section.
            ``(2) Retired executive.--The term `retired executive' 
        means any corporate insider who is no longer performing 
        services on a substantially full time basis in the capacity 
        that resulted in being subject to the requirements of section 
        16(a) of the Securities Exchange Act of 1934.
            ``(3) Publicly traded corporation.--The term `publicly 
        traded corporation' means any corporation issuing any class of 
        securities required to be registered under section 12 of the 
        Securities Exchange Act of 1934.
            ``(4) Corporate-owned property.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `corporate-owned property' 
                means any of the following property owned by a 
                corporation--
                            ``(i) planes,
                            ``(ii) apartments or other residences,
                            ``(iii) vacation, sports, and entertainment 
                        facilities, and
                            ``(iv) cars.
                Such term includes any such property which is leased or 
                chartered by the corporation.
                    ``(B) Exceptions.--Such term does not include any 
                property used directly by the corporation in providing 
                transportation, lodging, or entertainment services to 
                the general public.
    ``(b) Additions to Tax Not Treated as Tax for Certain Purposes.--
The tax imposed by sections 420A and 420B shall not be treated as a tax 
imposed by this chapter for purposes of determining--
            ``(1) the amount of any credit allowable under this 
        chapter, or
            ``(2) the amount of the minimum tax imposed by section 
        55.''.
    (b) Clerical Amendment.--The table of subparts for part I of 
subchapter D of chapter 1 of such Code is amended by adding at the end 
the following new item:

                              ``Subpart F. Special Rules for Executive 
                                        Perks and Retirement 
                                        Benefits.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect as follows:
            (1) Section 420A of the Internal Revenue Code of 1986 (as 
        added by this section) shall apply to stock acquired pursuant 
        to the exercise of an option after the date of the enactment of 
        this Act.
            (2)(A) Except as provided by subparagraph (B), section 420B 
        of such Code (as so added) shall apply to perks provided after 
        the date of the enactment of this Act.
            (B) In the case of perks provided pursuant to a contract in 
        existence on the date of the enactment of this Act, such 
        section 420B shall apply to such perks after the date of the 
        first annual shareholders meeting after the date of the 
        enactment of this Act.

SEC. 802. GOLDEN PARACHUTE EXCISE TAX TO APPLY TO DEFERRED COMPENSATION 
              PAID BY CORPORATION AFTER MAJOR DECLINE IN STOCK VALUE OR 
              CORPORATION DECLARES BANKRUPTCY.

    (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:
    ``(c) Tax To Apply to Deferred Compensation Paid After Major Stock 
Value Decline or Bankruptcy.--
            ``(1) In general.--For purposes of this section, the term 
        `excess parachute payment' includes severance pay, and any 
        other payment of deferred compensation, which is received by a 
        corporate insider after the date that the insider ceases to be 
        employed by the corporation if--
                    ``(A) there is at least a 75-percent decline in the 
                value of the stock in such corporation during the 1-
                year period ending on such date, or
                    ``(B) such corporation becomes a debtor in a title 
                11 or similar case (as defined in section 368(a)(3)(A)) 
                during the 180-day period beginning 90 days before such 
                date.
        Such term shall not include any payment from a qualified 
        employer plan.
            ``(2) Corporate insider.--For purposes of paragraph (1), 
        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.''
    (b) Effective Date.--The amendment made by this section shall apply 
with respect to cessations of employment after the date of the 
enactment of this Act.

SEC. 803. ADEQUATE DISCLOSURE REGARDING EXECUTIVE COMPENSATION 
              PACKAGES.

    (a) In General.--Section 402 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1102) is amended by inserting after 
subsection (c) the following new subsection:
    ``(d) Disclosure Regarding Executive Compensation Packages.--
            ``(1) In general.--In any case in which an employer takes 
        any action to establish or substantially improve an executive 
        compensation package with respect to any employee, such action 
        may not take effect unless the employer has met the 
requirements of paragraph (2).
            ``(2) Requirements.--An employer meets the requirements of 
        this paragraph if--
                    ``(A) not less than 100 days prior to the effective 
                date of the action described in paragraph (1), the 
                employer provides written notification of the action 
                to--
                            ``(i) each employee of the employer,
                            ``(ii) each employee organization 
                        representing employees of the employer (if 
                        any), and
                            ``(iii) in the case of an employer that is 
                        a corporation, the board of directors, and
                    ``(B) in the case of an employer that is a 
                corporation, the board of directors has approved such 
                action.
        Any such written notification shall be written in language 
        calculated to be understood by the average plan participant.
            ``(3) Definitions.--For purposes of this subsection--
                    ``(A) Executive compensation package.--The term 
                `executive compensation package' means a combination of 
                pay, benefits under employee benefit plans, and other 
                forms of compensation provided by an employer primarily 
                for employees who are members of a select group of 
                management or highly compensated employees.
                    ``(B) Substantial improvement.--An executive 
                compensation package is `substantially improved' if the 
                present value of such package is increased by not less 
                than 10 percent.''.
    (b) Effective Date.--The amendment made by this section shall apply 
with respect to actions taken after the date of the enactment of this 
Act.

  TITLE IX--ADDITIONAL PROTECTIONS FOR EMPLOYEES OF BANKRUPT EMPLOYERS

SEC. 901. AVOIDANCE OF CERTAIN TRANSFERS; ALTERNATE PROSECUTION OF 
              ACTION.

    Section 547 of title 11, United States Code, is amended by adding 
at the end the following:
    ``(h) Notwithstanding subsections (b) and (c), the trustee may 
avoid a transfer of a debtor's interest in property to any trust or 
similar arrangement to fund supplemental retirement benefits or other 
deferred compensation for the benefit of an insider or other management 
employee made on or within one year before the date of the filing of 
the petition.
    ``(i) If the trustee consents or fails to commence a proceeding 
authorized under section 506, 543, 544, 545, 547, 548, 549, 550, 552, 
553, or 724, on request of a party in interest or a committee of 
creditors appointed under section 1102 of this title, after notice and 
a hearing, the court may authorize such party in interest or committee 
of creditors to commence and prosecute such proceeding if the court 
finds that commencing and prosecuting such proceeding is in the best 
interest of the estate and for the benefit of the estate.''.

SEC. 902. LIMITATION ON RETENTION BONUSES, SEVERANCE PAY, AND CERTAIN 
              OTHER PAYMENTS.

    Section 503 of title 11, United States Code, is amended by adding 
at the end the following:
    ``(c)(1) Notwithstanding subsection (b), there shall neither be 
allowed, nor paid--
            ``(A) a transfer made to, or an obligation incurred for the 
        benefit of, an insider of the debtor for the purpose of 
        inducing such person to remain with the debtor's business, 
        absent a finding by the court based on evidence in the record 
        that--
                    ``(i) the transfer or obligation is essential to 
                retention of the person because the individual has a 
                bona fide job offer from another business at the same 
                or greater rate of compensation;
                    ``(ii) the services provided by the person are 
                essential to the survival of the business; and
                    ``(iii) either--
                            ``(I) the amount of the transfer made to, 
                        or obligation incurred for the benefit of, the 
                        person is not greater than an amount equal to 
                        10 times the amount of the mean transfer or 
                        obligation of a similar kind given to 
                        nonmanagement employees for any purpose during 
                        the calendar year in which the transfer is made 
                        or the obligation is incurred; or
                            ``(II) if no such similar transfers were 
                        made to, or obligations were incurred for the 
                        benefit of, such nonmanagement employees during 
                        such calendar year, the amount of the transfer 
                        or obligation is not greater than an amount 
                        equal to 25 percent of the amount of any 
                        similar transfer or obligation made to or 
                        incurred for the benefit of such insider for 
                        any purpose during the calendar year before the 
                        year in which such transfer is made or 
                        obligation is incurred;
            ``(B) a severance payment to an insider of the debtor, 
        unless--
                    ``(i) the payment is part of a program that is 
                generally applicable to all full-time employees; and
                    ``(ii) the amount of the payment is not greater 
                than 10 times the amount of the mean severance pay 
                given to nonmanagement employees during the calendar 
                year in which the payment is made; or
            ``(C) other transfers or obligations that are outside the 
        ordinary course of business and not justified by the facts and 
        circumstances of the case.
    ``(2) For purposes of paragraph (1)(C), transfers made to, or 
obligations incurred for the benefit of, officers, managers, or 
consultants hired after the date of the filing of the petition shall be 
considered outside the ordinary course of business.''.

SEC. 903. PRIORITIES

    Section 507(a) of title 11, United States Code, is amended--
            (1) in paragraph (3), by striking ``earned within 90 days 
        before the date of the filing of the petition or the date of 
the cessation of the debtor's business, whichever occurs first,''; and
            (2) in paragraphs (3) and (4), by striking ``$4,000'' and 
        inserting ``$10,000''.

SEC. 904. EFFECTIVE DATE OF TITLE.

    The amendments made by this title shall take effect on the date of 
the enactment of this Act.

                   TITLE X--MISCELLANEOUS PROVISIONS

SEC. 1001. CORPORATE DEDUCTION FOR REINVESTED ESOP DIVIDENDS SUBJECT TO 
              DEDUCTIBLE LIMITS.

    (a) In General.--Subsection (a) of section 404 of the Internal 
Revenue Code of 1986 (relating to general rule) is amended by adding at 
the end the following new paragraph:
            ``(13) Certain dividends reinvested in employee stock 
        ownership plans subject to deductible limits.--For purposes of 
        this subsection, an applicable dividend described in subsection 
        (k)(2)(A)(iii)(I) shall be treated as compensation.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2003.

SEC. 1002. CREDIT FOR ELECTIVE DEFERRALS AND IRA CONTRIBUTIONS BY 
              CERTAIN INDIVIDUALS MADE PERMANENT (SAVER'S TAX CREDIT).

    Section 25B of the Internal Revenue Code of 1986 is amended by 
striking subsection (h) (relating to termination).

                      TITLE XI--GENERAL PROVISIONS

SEC. 1101. GENERAL EFFECTIVE DATE.

    (a) In General.--Except as otherwise provided in this Act, the 
amendments made by this Act shall apply with respect to plan years 
beginning on or after January 1, 2004.
    (b) Special Rule for Collectively Bargained Plans.--In the case of 
a plan maintained pursuant to 1 or more collective bargaining 
agreements between employee representatives and 1 or more employers 
ratified on or before the date of the enactment of this Act, subsection 
(a) shall be applied to benefits pursuant to, and individuals covered 
by, any such agreement by substituting for ``January 1, 2004'' the date 
of the commencement of the first plan year beginning on or after the 
earlier of--
            (1) the later of--
                    (A) January 1, 2005, or
                    (B) the date on which the last of such collective 
                bargaining agreements terminates (determined without 
                regard to any extension thereof after the date of the 
                enactment of this Act), or
            (2) January 1, 2006.

SEC. 1102. PLAN AMENDMENTS.

    If any amendment made by this Act requires an amendment to any 
plan, such plan amendment shall not be required to be made before the 
first plan year beginning on or after the effective date specified in 
section 601, if--
            (1) during the period after such amendment made by this Act 
        takes effect and before such first plan year, the plan is 
        operated in accordance with the requirements of such amendment 
        made by this Act, and
            (2) such plan amendment applies retroactively to the period 
        after such amendment made by this Act takes effect and before 
        such first plan year.
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