[House Report 107-396]
[From the U.S. Government Publishing Office]



107th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     107-396

======================================================================



 
 PROVIDING FOR CONSIDERATION OF H.R. 3762, PENSION SECURITY ACT OF 2002

                                _______
                                

   April 10, 2002.--Referred to the House Calendar and ordered to be 
                                printed

                                _______
                                

   Mr. Sessions, from the Committee on Rules, submitted the following

                              R E P O R T

                       [To accompany H. Res. 386]

    The Committee on Rules, having had under consideration 
House Resolution 386, by a nonrecord vote, report the same to 
the House with the recommendation that the resolution be 
adopted.


                SUMMARY OF PROVISIONS OF THE RESOLUTION


    The resolution provides for the consideration of H.R. 3762, 
the Pension Security Act of 2002, under a modified closed rule. 
The rule waives all points of order against consideration of 
the bill.
    The rule provides two hours of debate in the House equally 
divided among and controlled by the chairmen and ranking 
minority members of the Committees on Education and the 
Workforce and Ways and Means. The rule provides that in lieu of 
the amendment recommended by the Committee on Education and the 
Workforce now printed in the bill, the amendment in the nature 
of a substitute printed in part A of this report shall be 
considered as adopted. The rule waives all points of order 
against the bill, as amended.
    The rule makes in order the amendment printed in part B of 
this report, if offered by Representative George Miller of 
California or Representative Rangel of New York or a designee, 
which shall be considered as read, and shall be separately 
debatable for one hour equally divided and controlled by the 
proponent and an opponent. The rule waives all points of order 
against the amendment printed in part B of this report.
    Finally, the rule provides one motion to recommit with or 
without instructions.
    The waiver of all points of order includes a waiver of 
clause 5(a) of rule XXI (prohibiting tax or tariff provisions 
in a bill not reported by a committee with jurisdiction over 
revenue measures).


                            COMMITTEE VOTES


    Pursuant to clause 3(b) of House rule XIII the results of 
each record vote on an amendment or motion to report, together 
with the names of those voting for and against, are printed 
below:

Rules Committee record vote No. 65

    Date: April 10, 2002.
    Measure: H.R. 3762.
    Motion by: Mrs. Slaughter.
    Summary of motion: To make in order the amendment offered 
by Mr. Cardin, which consists of the text of H.R. 3669 as 
reported by the Committee on Ways and Means.
    Results: Defeated 2 to 7.
    Vote by Members: Goss--Nay; Linder--Nay; Hastings (WA)--
Nay; Myrick--Nay; Sessions--Nay; Reynolds--Nay; Slaughter--Yea; 
Hastings (FL)--Yea; Dreier--Nay.

Rules Committee record vote No. 66

    Date: April 10, 2002.
    Measure: H.R. 3762.
    Motion by: Mrs. Slaughter.
    Summary of motion: To make in order the amendment offered 
by Mr. Conyers which establishes a new bureau within the 
Department of Justice to prosecute crimes involving pension 
fraud, creates a new 10-year felony for defrauding shareholders 
of publicly-traded companies, clarifies current criminal laws 
relating to the destruction or fabrication of evidence, and 
provides whistleblower protection to employees of publicly-
traded companies.
    Results: Defeated 2 to 7.
    Vote by members: Goss--Nay; Linder--Nay; Hastings (WA)--
Nay; Myrick--Nay; Sessions--Nay; Reynolds--Nay; Slaughter--Yea; 
Hastings (FL)--Yea; Dreier--Nay.

Rules Committee record vote No. 67

    Date: April 10, 2002.
    Measure: H.R. 3762.
    Motion by: Mrs. Slaughter.
    Summary of motion: To make in order the amendment offered 
by Mr. Holt, which would reduce vesting to one year.
    Results: Defeated 2 to 7.
    Vote by members: Goss--Nay; Linder--Nay; Hastings (WA)--
Nay; Myrick--Nay; Sessions--Nay; Reynolds--Nay; Slaughter--Yea; 
Hastings (FL)--Yea; Dreier--Nay.

Rules Committee record vote No. 68

    Date: April 10, 2002.
    Measure: H.R. 3762.
    Motion by: Mr. Hastings.
    Summary of motion: To make in order the amendment offered 
by Mr. Gutknecht, which requires that healthy companies, when 
changing their pension plan formula provide 90 days notice of 
any pension plan change to all workers and give fully vested 
employees the choice of staying in their current plan or 
switching to the new amended plan. Exempts companies in 
financial distress from penalties, while otherwise healthy 
companies will be subject to an excise tax should they violate 
the provisions of this bill. Distress is to be determined by 
the Secretary of the Treasury, and generally follows the 
guidelines for distress criteria set out in ERISA: liquidation 
in bankruptcy or insolvency proceedings; reorganization in 
bankruptcy or insolvency proceedings; and plan termination 
requires to enable payment of debts while staying in business 
or to avoid unreasonably burdensome pension costs caused by 
declining workforce.
    Results: Defeated 2 to 7.
    Vote by members: Goss--Nay; Linder--Nay; Hastings (WA)--
Nay; Myrick--Nay; Sessions--Nay; Reynolds--Nay; Slaughter--Yea; 
Hastings (FL)--Yea; Dreier--Nay.

Rules Committee record vote No. 69

    Date: April 10, 2002.
    Measure: H.R. 3762.
    Motion by: Mr. Hastings.
    Summary of motion: To make in order the amendment offered 
by Mr. Bentsen, which prohibits employers from unilaterally 
issuing a freeze or lockdown to prevent an employee from 
selling company stock contained in the employee's 401k or 
Employee Stock Ownership Plans (ESOPs) retirement savings 
account. Further, it provides that the Secretary of Labor could 
grant anexemption to the general prohibition if the employer 
meets the following strict standard. The employer must submit a 
petition setting out the reasons for pursuing a lockdown (i.e. 
change in trusteeship or plan management) and establish that a 
lockdown is administratively feasible, in the interests of the 
plan, its participants and beneficiaries and protective of the 
rights of participants and beneficiaries of the plan. If the 
Secretary of Labor grants an exemption, employees must receive 
written notice of the lockdown at least 90 days before it takes 
effect. Should the Secretary of Labor grant an exemption in 
emergency circumstances, the notice requirements could be 
waived.
    Results: Defeated 2 to 7.
    Vote by Members: Goss--Nay; Linder--Nay; Hastings (WA)--
Nay; Myrick--Nay; Sessions--Nay; Reynolds--Nay; Slaughter--Yea; 
Hastings (FL)--Yea; Dreier--Nay.

Rules Committee record vote No. 70

    Date: April 10, 2002.
    Measure: H.R. 3762.
    Motion by: Hastings.
    Summary of motion: To make in order the amendment offered 
by Mr. Bentsen, which provides that plan fiduciaries that 
knowingly misrepresent the present or expected valuation of 
employer securities would be actionable breaches of fiduciary 
duty under ERISA, would be held personally liable for the 
losses incurred as a result of this deception. Further, it 
provides that these claims would survive bankruptcy 
proceedings, should the employer (or other plan fiduciary) seek 
such protection and would be treated as ``priority: in the 
bankruptcy court, eligible for full reimbursement ahead of 
unsecured creditors.
    Results: Defeated 2 to 7.
    Vote by Members: Goss--Nay; Linder--Nay; Hastings (WA)--
Nay; Myrick--Nay; Sessions--Nay; Reynolds--Nay; Slaughter--Yea; 
Hastings (FL)--Yea; Dreier--Nay.

Rules Committee record vote No. 71

    Date: April 10, 2002.
    Measure: H.R. 3762.
    Motion by: Mr. Hastings.
    Summary of motion: To make in order the amendment offered 
by Mr. Bentsen, which would hold accountable company insiders 
who knowingly misrepresent the value of employer securities to 
employees.
    Results: Defeated 2 to 7.
    Vote by Members: Goss--Nay; Linder--Nay; Hastings (WA)--
Nay; Myrick--Nay; Sessions--Nay; Reynolds--Nay; Slaughter--Yea; 
Hastings (FL)--Yea; Dreier--Nay.

Rules Committee record vote No. 72

    Date: April 10, 2002.
    Measure: H.R. 3762.
    Motion by: Mr. Hastings.
    Summary of motion: To make in order the amendment offered 
by Mr. Tierney, which provides that employers may only provide 
independent advice to employees.
    Results: Defeated 2 to 7.
    Vote by Members: Goss--Nay; Linder--Nay; Hastings (WA)--
Nay; Myrick--Nay; Sessions--Nay; Reynolds--Nay; Slaughter--Yea; 
Hastings (FL)--Yea; Dreier--Nay.

Rules Committee record vote No. 73

    Date: April 10, 2002.
    Measure: H.R. 3762.
    Motion by: Mr. Hastings.
    Summary of motion: To make in order the amendment offered 
by Mr. Roemer and Mr. McCollum, which provides warning notice 
of excessive stock holdings. If an employee elects to invest 
25% or more of his or her individual stock account in employer 
stock or his or her account exceeds 25% employer stock 
holdings, then the pension plan administrator would be required 
to notify the individual and in future communications 
periodically, but not less than quarterly, of the risks of a 
lack of diversification. Such notice shall be understandable to 
the average individual.
    Results: Defeated 2 to 7.
    Vote by Members: Goss--Nay; Linder--Nay; Hastings (WA)--
Nay; Myrick--Nay; Sessions--Nay; Reynolds--Nay; Slaughter--Yea; 
Hastings (FL)--Yea; Dreier--Nay.


                AMENDMENTS MADE IN ORDER UNDER THE RULE


    Summaries derived from information provided by sponsors.

Part A--Summary of Amendment to be Considered as Adopted

    Investment Education and Benefit Statement: The bill 
requires the plan administrator to provide a quarterly notice 
to plan participants and beneficiaries of the value of 
investments allocated to their individual account, including 
their rights to diversify any assets held in employer 
securities. The notice will also include an explanation of the 
importance of a diversified investment portfolio including a 
risk of holding substantial portions of a portfolio in any one 
security, such as employer securities. The Secretary shall 
issue guidance and model notices that include the value of 
investments, the rights of employees to diversify any employer 
securities and an explanation of the importance of a 
diversified investment portfolio. Initial guidance will be no 
later than January 1, 2003. The Secretary may also issue 
interim model guidance. Notice may be electronic if reasonably 
accessible to the recipient. Current law provides for an annual 
notice of benefits and no investment education.
    Blackout Notices: The bill requires a new notice 30 days 
prior to any suspension of participant and beneficiaries 
ability to direct or diversify assets. The notice must contain 
the reasons for the suspension, as well as a statement that the 
administrator has evaluated the reasonableness of the expected 
period, and a statement that the participant should evaluate 
the appropriateness of their current investment decisions in 
light of their ability to direct or diversify assets during the 
expected period of suspension. The bill requires that plan 
administrators shall determine prior to distributing notice 
that any suspension, limitation or restriction is reasonable. 
The bill clarifies that notice is required only for suspensions 
longer than three consecutive calendar days and provides for 
specific exceptions to the 30 day rule. In the event of a 
qualified domestic relations order, or a blackout period caused 
by a merger or acquisition, only those employees who are 
impacted by the event will receive the notice. The bill 
provides that the Secretary shall issue guidance and model 
notices that include the above factors and such other 
provisions the Secretary may specify. Initial guidance will be 
no later than January 1, 2003. The Secretary may issue interim 
model guidance. The bill clarifies that notice may be 
electronic if reasonably accessible to the recipient. The bill 
provides that the Secretary may provide for additional 
exceptions to the requirements that are in the interest of 
participants and beneficiaries.
    Inapplicability of Relief from Fiduciary Liability During 
Suspension of Ability of Participants to Direct Investments--
404(c): The bill explains fiduciary duty during blackout 
period. It clarifies that fiduciaries are not liable for losses 
provided that fiduciaries satisfy the requirements of this 
title. Relevant considerations in determining the satisfaction 
of fiduciary duty are also added, such as the provision of the 
blackout notice, the fiduciary's consideration of the 
reasonableness of the period of suspension, and the fiduciary's 
actions solely in the interest of participants and 
beneficiaries.
    Diversification: The bill ensures that all employees 
contributions to pension plans will be immediately 
diversifiable. The bill provides for a five year transition 
rule for the allowable diversification of employer securities 
held in individual account plans as of the date of enactment. 
The bill provides for the option of a rolling three-year 
diversification of employer securities. In this case employer 
securities may be diversified three years after the calendar 
quarter in which they were contributed. The bill exempts 
individual account plans that do not hold employer securities 
that are readily tradable on an established securities market.
    Investment Advice: The bill includes the text of H.R. 2269, 
the Retirement Security Advice Act, which provides increased 
availability of investment advisors to assist plan participants 
in making good decisions about their retirement assets. 
Employees will also be able to use pre-tax dollars to obtain 
their own investment advice.
    Parity for Employees During Blackout: The bill amends 
Section 16 the Securities and Exchange Act of 1934 to prohibit 
company executives and insiders from purchasing or selling any 
employer securities while plan participants and beneficiaries 
are precluded from directing or diversifying their accounts 
during a ``blackout'' period.
    Additional Provisions: Extends the 30-year treasury funding 
relief to plan years 2001 through 2003. Provides permanent 
funding relief for certain frozen pension plans maintained by 
intercity bus lines. Includes ``Byrd droppings'' (ERISA only) 
from H.R. 10 (Portman-Cardin pension reform).

Part B--Summary of Amendment Made in Order

    George Miller/Rangel Democrat Substitute: Executive 
Accountability. Notice to employees when executives are dumping 
company stock. Requires plan participants to be notified of any 
significant sales of employer stock by executives or plan 
fiduciaries. Significant stock sales are sales of $100,000 or 
more either per transaction or in the aggregate.
    Honest, Accurate and Timely Information for Employees. 
Pension plans would be prohibited from giving misleading 
information; requires regular benefit statements to workers, 
including notice about the importance of diversification; 
provides at least 30-day advance notice of plan lockdowns, 
including the right to make investment changes that are 
implemented before alockdown imposes civil penalties for 
failure to provide accurate information to employees. Require 
notice of the importance of diversification when more than 10% 
of an employee's account is invested in employer stock.
    Un-biased, Independent Investment Advice. Provides for 
independent financial advice for employees when company stock 
is offered as an investment option under the plan.
    Gives Employees a Voice on Pension Boards. Requires pension 
plans to include rank and file employees on Pension Boards, 
where critical decisions about workers' retirement security are 
made.
    Lockout Restrictions. Prohibit executives from bailing out 
of employer stock they own if the rank and file employees are 
prohibited from selling their stock under the pension plan.
    Parity of Benefits for Executives and Rank and File 
workers. Closes current law loophole that provides special 
treatment for executive pension plans.
    Given Employees Control Over Their Retirement Savings. 
Gives employees the right to diversify company-matched stock 
after 3 years of plan participation. This enables employees to 
safeguard against future losses.
    Additional Protections for Workers' Pension Benefits. 
Requires plan fiduciaries to secure insurance in an amount 
sufficient to cover benefits under the plan; gives employees 
the right to be made whole in court for 401k plan abuses; 
prohibits companies from forcing workers to waive their right 
to bring a claim under ERISA; enhances Department of Labor 
assistance; protects whistleblowers, and provides for a study 
of defined contribution plans insurance system.
    Tougher Criminal Enforcement. This substitute toughens 
criminals penalties for fiduciaries who violate workers' 
pension rights. (60 minutes)

            PART A--TEXT OF AMENDMENT CONSIDERED AS ADOPTED

  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

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

Sec. 1. Short title and table of contents.

                TITLE I--IMPROVEMENTS IN PENSION SECURITY

Sec. 101. Periodic pension benefits statements.
Sec. 102. Protection from suspensions, limitations, or restrictions on 
          ability of participant or beneficiary to direct or diversify 
          plan assets.
Sec. 103. Informational and educational support for pension plan 
          fiduciaries.
Sec. 104. Diversification requirements for defined contribution plans 
          that hold employer securities.
Sec. 105. Prohibited transaction exemption for the provision of 
          investment advice.
Sec. 106. Study regarding impact on retirement savings of participants 
          and beneficiaries by requiring consultants to advise plan 
          fiduciaries of individual account plans.
Sec. 107. Treatment of qualified retirement planning services.
Sec. 108. Insider trades during pension fund blackout periods 
          prohibited.
Sec. 109. Effective dates of title and related rules.

             TITLE II--OTHER PROVISIONS RELATING TO PENSIONS

Sec. 201. Amendments to Retirement Protection Act of 1994.
Sec. 202. Reporting simplification.
Sec. 203. Improvement of Employee Plans Compliance Resolution System.
Sec. 204. Flexibility in nondiscrimination, coverage, and line of 
          business rules.
Sec. 205. Extension to all governmental plans of moratorium on 
          application of certain nondiscrimination rules applicable to 
          State and local plans.
Sec. 206. Notice and consent period regarding distributions.
Sec. 207. Annual report dissemination.
Sec. 208. Technical corrections to Saver Act.
Sec. 209. Missing participants.
Sec. 210. Reduced PBGC premium for new plans of small employers.
Sec. 211. Reduction of additional PBGC premium for new and small plans.
Sec. 212. Authorization for PBGC to pay interest on premium overpayment 
          refunds.
Sec. 213. Substantial owner benefits in terminated plans.
Sec. 214. Benefit suspension notice.
Sec. 215. Studies.
Sec. 216. Interest rate range for additional funding requirements.
Sec. 217. Provisions relating to plan amendments.

                        TITLE III--STOCK OPTIONS

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

          TITLE IV--SOCIAL SECURITY AND MEDICARE HELD HARMLESS

Sec. 401. Protection of Social Security and Medicare.

               TITLE I--IMPROVEMENTS IN PENSION SECURITY

SEC. 101. PERIODIC PENSION BENEFITS STATEMENTS.

  (a) Amendments to the Employee Retirement Income Security Act 
of 1974.--
          (1) Requirements.--
                  (A) In general.--Section 105(a) of the 
                Employee Retirement Income Security Act of 1974 
                (29 U.S.C. 1025(a)) is amended to read as 
                follows:
  ``(a)(1)(A) The administrator of an individual account plan 
shall furnish a pension benefit statement--
          ``(i) to each plan participant at least annually,
          ``(ii) to each plan beneficiary upon written request, 
        and
          ``(iii) in the case of an applicable individual 
        account plan, to each plan participant (and to each 
        beneficiary with a right to direct investments) at 
        least quarterly.
  ``(B) The administrator of a defined benefit plan shall 
furnish a pension benefit statement--
          ``(i) at least once every 3 years to each participant 
        with a nonforfeitable accrued benefit who is employed 
        by the employer maintaining the plan at the time the 
        statement is furnished to participants, and
          ``(ii) to a plan participant or plan beneficiary of 
        the plan upon written request.
  ``(2) A pension benefit statement under paragraph (1)--
          ``(A) shall indicate, on the basis of the latest 
        available information--
                  ``(i) the total benefits accrued, and
                  ``(ii) the nonforfeitable pension benefits, 
                if any, which have accrued, or the earliest 
                date on which benefits will become 
                nonforfeitable,
          ``(B) shall be written in a manner calculated to be 
        understood by the average plan participant, and
          ``(C) may be provided in written form or in 
        electronic or other appropriate form to the extent that 
        such form is reasonably accessible to the recipient.
  ``(3) In the case of an applicable individual account plan, 
the requirements of paragraph (1)(A) shall be treated as met if 
the quarterly statement (together with the information required 
in subparagraphs (A) and (B) of subsection (d)(1)) is available 
electronically in reasonably accessible form, and the 
participant or beneficiary is provided at least once each year 
a notice that such statement (together with such information) 
is available in such form. Such notice shall be in written, 
electronic, or other appropriate form.
  ``(4)(A) In the case of a defined benefit plan, the 
requirements of paragraph (1)(B)(i) shall be treated as met 
with respect to a participant if the administrator provides the 
participant at least once each year with notice of the 
availability of the pension benefit statement and the ways in 
which the participant may obtain such statement. Such notice 
shall be provided in written, electronic, or other appropriate 
form, and may be included with other communications to the 
participant if done in a manner reasonably designed to attract 
the attention of the participant.
  ``(B) The Secretary may provide that years in which no 
employee or former employee benefits (within the meaning of 
section 410(b) of the Internal Revenue Code of 1986) under the 
plan need not be taken into account in determining the 3-year 
period under paragraph (1)(B)(i).''.
                  (B) Conforming amendments.--
                          (i) Section 105 of the Employee 
                        Retirement Income Security Act of 1974 
                        (29 U.S.C. 1025) is amended by striking 
                        subsection (d).
                          (ii) Section 105(b) of such Act (29 
                        U.S.C. 1025(b)) is amended to read as 
                        follows:
  ``(b) In no case shall a participant or beneficiary of a plan 
be entitled to more than one statement described in clause (i) 
or (ii) of subsection (a)(1)(A) or clause (i) or (ii) of 
subsection (a)(1)(B), whichever is applicable, in any 12-month 
period. If such report is required under subsection (a) to be 
furnished at least quarterly, the requirements of the preceding 
sentence shall be applied with respect to each quarter in lieu 
of the 12-month period.''.
          (2) Information required from applicable individual 
        account plans.--Section 105 of such Act (as amended by 
        paragraph (1)) is amended further by adding at the end 
        the following new subsection:
  ``(d)(1) The statements required to be provided at least 
quarterly under subsection (a) shall include (together with the 
information required in subsection (a)) the following:
          ``(A) the value of investments allocated to the 
        individual account, including the value of any assets 
        held in the form of employer securities, without regard 
        to whether such securities were contributed by the plan 
        sponsor or acquired at the direction of the plan or of 
        the participant or beneficiary, and an explanation of 
        any limitations or restrictions on the right of the 
        participant or beneficiary to direct an investment; and
          ``(B) an explanation, written in a manner calculated 
        to be understood by the average plan participant, of 
        the importance, for the long-term retirement security 
        of participants and beneficiaries, of a well-balanced 
        and diversified investment portfolio, including a 
        discussion of the risk of holding more than 25 percent 
        of a portfolio in the security of any one entity, such 
        as employer securities.
  ``(2) The value of any employer securities that are not 
readily tradable on an established securities market that is 
required to be reported under paragraph (1)(A) may be 
determined by using the most recent valuation of the employer 
securities.
  ``(3) The Secretary shall issue guidance and model notices 
which meet the requirements of this subsection.''.
          (3) Definition of applicable individual account 
        plan.--Section 3 of such Act (29 U.S.C. 1002) is 
        amended by adding at the end the following new 
        paragraph:
  ``(42)(A) The term `applicable individual account plan' means 
any individual account plan, except that such term does not 
include an employee stock ownership plan (within the meaning of 
section 4975(e)(7) of the Internal Revenue Code of 1986) unless 
there are any contributions to such plan (or earnings 
thereunder) held within such plan that are subject to 
subsection (k)(3) or (m)(2) of section 401 of the Internal 
Revenue Code of 1986. Such term shall not include a one-
participant retirement plan.
  ``(B) The term `one-participant retirement plan' means a 
retirement plan that--
          ``(i) on the first day of the plan year--
                  ``(I) covered only the employer (and the 
                employer's spouse) and the employer owned the 
                entire business (whether or not incorporated), 
                or
                  ``(II) covered only one or more partners (and 
                their spouses) in a business partnership 
                (including partners in an S or C corporation),
          ``(ii) meets the minimum coverage requirements of 
        section 410(b) of the Internal Revenue Code of 1986 (as 
        in effect on the date of the enactment of this 
        paragraph) without being combined with any other plan 
        of the business that covers the employees of the 
        business,
          ``(iii) does not provide benefits to anyone except 
        the employer (and the employer's spouse) or the 
        partners (and their spouses),
          ``(iv) does not cover a business that is a member of 
        an affiliated service group, a controlled group of 
        corporations, or a group of businesses under common 
        control, and
          ``(v) does not cover a business that leases 
        employees.''.
          (4) Civil penalties for failure to provide quarterly 
        benefit statements.--Section 502 of such Act (29 U.S.C. 
        1132) is amended--
                  (A) in subsection (a)(6), by striking ``(5), 
                or (6)'' and inserting ``(5), (6), or (7)'';
                  (B) by redesignating paragraph (7) of 
                subsection (c) as paragraph (8); and
                  (C) by inserting after paragraph (6) of 
                subsection (c) the following new paragraph:
  ``(7) The Secretary may assess a civil penalty against any 
plan administrator of up to $1,000 a day from the date of such 
plan administrator's failure or refusal to provide participants 
or beneficiaries with a benefit statement on at least a 
quarterly basis in accordance with section 
105(a)(1)(A)(iii).''.
          (5) Model statements.--The Secretary of Labor shall, 
        not later than January 1, 2003, issue initial guidance 
        and a model benefit statement, written in a manner 
        calculated to be understood by the average plan 
        participant, that may be used by plan administrators in 
        complying with the requirements of section 105 of the 
        Employee Retirement Income Security Act of 1974. Not 
        later than 75 days after the date of the enactment of 
        this Act, the Secretary shall promulgate interim final 
        rules necessary to carry out the amendments made by 
        this subsection.
  (b) Amendments to the Internal Revenue Code of 1986.--
          (1) Provision of investment education notices to 
        participants in certain plans.--Section 414 of the 
        Internal Revenue Code of 1986 (relating to definitions 
        and special rules) is amended by adding at the end the 
        following:
  ``(w) Provision of Investment Education Notices to 
Participants in Certain Plans.--
          ``(1) In general.--The plan administrator of an 
        applicable pension plan shall provide to each 
        applicable individual an investment education notice 
        described in paragraph (2) at the time of the 
        enrollment of the applicable individual in the plan and 
        not less often than annually thereafter.
          ``(2) Investment education notice.--An investment 
        education notice is described in this paragraph if such 
        notice contains--
                  ``(A) an explanation, for the long-term 
                retirement security of participants and 
                beneficiaries, of generally accepted investment 
                principles, including principles of risk 
                management and diversification, and
                  ``(B) a discussion of the risk of holding 
                substantial portions of a portfolio in the 
                security of any one entity, such as employer 
                securities.
          ``(3) Understandability.--Each notice required by 
        paragraph (1) shall be written in a manner calculated 
        to be understood by the average plan participant and 
        shall provide sufficient information (as determined in 
        accordance with guidance provided by the Secretary) to 
        allow recipients to understand such notice.
          ``(4) Form and manner of notices.--The notices 
        required by this subsection shall be in writing, except 
        that such notices may be in electronic or other form 
        (or electronically posted on the plan's website) to the 
        extent that such form is reasonably accessible to the 
        applicable individual.
          ``(5) Definitions.--For purposes of this subsection--
                  ``(A) Applicable individual.--The term 
                `applicable individual' means--
                          ``(i) any participant in the 
                        applicable pension plan,
                          ``(ii) any beneficiary who is an 
                        alternate payee (within the meaning of 
                        section 414(p)(8)) under a qualified 
                        domestic relations order (within the 
                        meaning of section 414(p)(1)(A)), and
                          ``(iii) any beneficiary of a deceased 
                        participant or alternate payee.
                  ``(B) Applicable pension plan.--The term 
                `applicable pension plan' means--
                          ``(i) a plan described in clause (i), 
                        (ii), or (iv) of section 219(g)(5)(A), 
                        and
                          ``(ii) an eligible deferred 
                        compensation plan (as defined in 
                        section 457(b)) of an eligible employer 
                        described in section 457(e)(1)(A),
        which permits any participant to direct the investment 
        of some or all of his account in the plan or under 
        which the accrued benefit of any participant depends in 
        whole or in part on hypothetical investments directed 
        by the participant. Such term shall not include a one-
        participant retirement plan or a plan to which section 
        105 of the Employee Retirement Income Security Act of 
        1974 applies.
                  ``(C) One-participant retirement plan 
                defined.--The term `one-participant retirement 
                plan' means a retirement plan that--
                          ``(i) on the first day of the plan 
                        year--
                                  ``(I) covered only the 
                                employer (and the employer's 
                                spouse) and the employer owned 
                                the entire business (whether or 
                                not incorporated), or
                                  ``(II) covered only one or 
                                more partners (and their 
                                spouses) in a business 
                                partnership (including partners 
                                in an S or C corporation),
                          ``(ii) meets the minimum coverage 
                        requirements of section 410(b) without 
                        being combined with any other plan of 
                        the business that covers the employees 
                        of the business,
                          ``(iii) does not provide benefits to 
                        anyone except the employer (and the 
                        employer's spouse) or the partners (and 
                        their spouses),
                          ``(iv) does not cover a business that 
                        is a member of an affiliated service 
                        group, a controlled group of 
                        corporations, or a group of businesses 
                        under common control, and
                          ``(v) does not cover a business that 
                        leases employees.
          ``(6) Cross reference.--

          ``For provisions relating to penalty for failure to provide 
        the notice required by this section, see section 6652(m).''.

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

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

  (a) Amendments to the Employee Retirement Income Security Act 
of 1974.--
          (1) Notice requirements.--
                  (A) In general.--Section 101 of the Employee 
                Retirement Income Security Act of 1974 (29 
                U.S.C. 1021) is amended--
                          (i) by redesignating the second 
                        subsection (h) as subsection (j); and
                          (ii) by inserting after the first 
                        subsection (h) the following new 
                        subsection:
  ``(i) Notice of Suspension, Limitation, or Restriction on 
Ability of Participant or Beneficiary To Direct Investments in 
Individual Account Plan.--
          ``(1) Duties of plan administrator.--
                  ``(A) In general.--In the case of any action 
                having the effect of temporarily suspending, 
                limiting, or restricting any ability of 
                participants or beneficiaries under an 
                applicable individual account plan, which is 
                otherwise available under the terms of such 
                plan, to direct or diversify assets credited to 
                their accounts, if such suspension, limitation, 
                or restriction is for any period of more than 3 
                consecutive business days, the plan 
                administrator shall--
                          ``(i) in advance of taking such 
                        action, determine, in accordance with 
                        the requirements of part 4, that the 
                        expected period of suspension, 
                        limitation, or restriction is 
                        reasonable, and
                          ``(ii) after making the determination 
                        under subparagraph (A) and in advance 
                        of taking such action, notify the plan 
                        participants and beneficiaries who are 
                        affected by such action in accordance 
                        with this subsection.
                  ``(B) Exceptions.--Subparagraph (A) does not 
                apply in connection with any suspension, 
                limitation, or restriction--
                          ``(i) which occurs by reason of the 
                        application of the securities laws (as 
                        defined in section 3(a)(47) of the 
                        Securities Exchange Act of 1934), or
                          ``(ii) to the extent the suspension, 
                        limitation, or restriction is a change 
                        to the terms of the plan disclosed to 
                        participants or beneficiaries through 
                        the summary plan description or 
                        materials describing specific 
                        investment alternatives under the plan.
                  ``(C) Business day.--For purposes of 
                subparagraph (A), under regulations prescribed 
                by the Secretary, the term `business day' 
                means--
                          ``(i) in the case of a security which 
                        is traded on an established security 
                        market, any day on which such security 
                        may be traded on the principal 
                        securities market of such security, and
                          ``(ii) in the case of a security 
                        which is not traded on an established 
                        security market, any calendar day.
          ``(2) Notice requirements.--
                  ``(A) In general.--The notices described in 
                paragraph (1) shall be written in a manner 
                calculated to be understood by the average plan 
                participant and shall include--
                          ``(i) the reasons for the suspension, 
                        limitation, or restriction,
                          ``(ii) an identification of the 
                        investments affected,
                          ``(iii) the expected period of the 
                        suspension, limitation, or restriction,
                          ``(iv) a statement that the plan 
                        administrator has evaluated the 
                        reasonableness of the expected period 
                        of suspension, limitation, or 
                        restriction,
                          ``(v) a statement that the 
                        participant or beneficiary should 
                        evaluate the appropriateness of their 
                        current investment decisions in light 
                        of their inability to direct or 
                        diversify assets credited to their 
                        accounts during the expected period of 
                        suspension, limitation, or restriction, 
                        and
                          ``(vi) such other matters as the 
                        Secretary may include in the model 
                        notices issued under subparagraph (E).
                  ``(B) Provision of notice.--Except as 
                otherwise provided in this subsection, notices 
                described in paragraph (1) shall be furnished 
                to all participants and beneficiaries under the 
                plan at least 30 days in advance of the action 
                suspending, limiting, or restricting the 
                ability of the participants or beneficiaries to 
                direct or diversify assets.
                  ``(C) Exception to 30-day notice 
                requirement.--In any case in which--
                          ``(i) a fiduciary of the plan 
                        determines, in writing, that a deferral 
                        of the suspension, limitation, or 
                        restriction would violate the 
                        requirements of subparagraph (A) or (B) 
                        of section 404(a)(1), or
                          ``(ii) the inability to provide the 
                        30-day advance notice is due to events 
                        that were unforeseeable or 
                        circumstances beyond the reasonable 
                        control of the plan administrator,
                subparagraph (B) shall not apply, and the 
                notice shall be furnished to all participants 
                and beneficiaries under the plan as soon as 
                reasonably possible under the circumstances 
                unless such a notice in advance of the 
                termination of the suspension, limitation, or 
                restriction is impracticable.
                  ``(D) Written notice.--The notice required to 
                be provided under this subsection shall be in 
                writing, except that such notice may be in 
                electronic or other form to the extent that 
                such form is reasonably accessible to the 
                recipient.
                  ``(E) Model notices.--The Secretary shall 
                issue model notices which meet the requirements 
                of this paragraph.
          ``(3) Exception for suspensions, limitations, or 
        restrictions with limited applicability.--In any case 
        in which the suspension, limitation, or restriction 
        described in paragraph (1)--
                  ``(A) applies only to 1 or more individuals, 
                each of whom is the participant, an alternate 
                payee (as defined in section 206(d)(3)(K)), or 
                any other beneficiary pursuant to a qualified 
                domestic relations order (as defined in section 
                206(d)(3)(B)(i)), or
                  ``(B) applies only to 1 or more participants 
                or beneficiaries in connection with a merger, 
                acquisition, divestiture, or similar 
                transaction involving the plan or plan sponsor 
                and occurs solely in connection with becoming 
                or ceasing to be a participant or beneficiary 
                under the plan by reason of such merger, 
                acquisition, divestiture, or transaction,
        the requirement of this subsection that the notice be 
        provided to all participants and beneficiaries shall be 
        treated as met if the notice required under paragraph 
        (1) is provided to all the individuals referred to in 
        subparagraph (A) or (B) to whom the suspension, 
        limitation, or restriction applies as soon as 
        reasonably practicable.
          ``(4) Changes in period of suspension, limitation, or 
        restriction.--If, following the furnishing of the 
        notice pursuant to this subsection, there is a change 
        in the period of the suspension, limitation, or 
        restriction (specified in such notice pursuant to 
        paragraph (2)(A)(iii)) on the right of a participant or 
        beneficiary to direct or diversify assets, the 
        administrator shall provide affected participants and 
        beneficiaries notice of the change as soon as 
        reasonably practicable. In relation to the extended 
        suspension, limitation, or restriction, such notice 
        shall meet the requirements of paragraph (2)(D) and 
        shall specify any material change in the matters 
        referred to in clauses (i) through (vi) of paragraph 
        (2)(A).
          ``(5) Regulatory exceptions.--The Secretary may 
        provide by regulation for additional exceptions to the 
        requirements of this subsection which the Secretary 
        determines are in the interests of participants and 
        beneficiaries.
          ``(6) Guidance and model notices.--The Secretary 
        shall issue guidance and model notices which meet the 
        requirements of this subsection.''.
                  (B) Issuance of initial guidance and model 
                notice.--The Secretary of Labor shall issue 
                initial guidance and a model notice pursuant to 
                section 101(i)(6) of the Employee Retirement 
                Income Security Act of 1974 (as added by this 
                subsection) not later than January 1, 2003. Not 
                later than 75 days after the date of the 
                enactment of this Act, the Secretary shall 
                promulgate interim final rules necessary to 
                carry out the amendments made by this 
                subsection.
          (2) Civil penalties for failure to provide notice.--
        Section 502 of such Act (as amended by section 
        101(a)(4)) is amended further--
                  (A) in subsection (a)(6), by striking ``(6), 
                or (7)'' and inserting ``(6), (7), or (8)'';
                  (B) by redesignating paragraph (8) of 
                subsection (c) as paragraph (9); and
                  (C) by inserting after paragraph (7) of 
                subsection (c) the following new paragraph:
  ``(8) The Secretary may assess a civil penalty against a plan 
administrator of up to $100 a day from the date of the plan 
administrator's failure or refusal to provide notice to 
participants and beneficiaries in accordance with section 
101(i). For purposes of this paragraph, each violation with 
respect to any single participant or beneficiary shall be 
treated as a separate violation.''.
          (3) Inapplicability of relief from fiduciary 
        liability during suspension of ability of participant 
        or beneficiary to direct investments.--Section 
        404(c)(1) of such Act (29 U.S.C. 1104(c)(1)) is 
        amended--
                  (A) by redesignating subparagraphs (A) and 
                (B) as clauses (i) and (ii), respectively, and 
                by inserting ``(A)'' after ``(c)(1)'';
                  (B) in subparagraph (A)(ii) (as redesignated 
                by subparagraph (A)), by inserting before the 
                period the following: ``, except that this 
                clause shall not apply in connection with such 
                participant or beneficiary for any period 
                during which the ability of such participant or 
                beneficiary to direct the investment of the 
                assets in his or her account is suspended by a 
                plan sponsor or fiduciary''; and
                  (C) by adding at the end the following new 
                subparagraphs:
  ``(B) If the person referred to in subparagraph (A)(ii) meets 
the requirements of this title in connection with authorizing 
the suspension, such person shall not be liable under this 
title for any loss occurring during the suspension as a result 
of any exercise by the participant or beneficiary of control 
over assets in his or her account prior to the suspension. 
Matters to be considered in determining whether such person has 
satisfied the requirements of this title include whether such 
person--
          ``(i) has considered the reasonableness of the 
        expected period of the suspension as required under 
        section 101(i)(1)(A)(i),
          ``(ii) has provided the notice required under section 
        101(i)(1)(A)(ii), and
          ``(iii) has acted in accordance with the requirements 
        of subsection (a) in determining whether to enter into 
        the suspension.
  ``(C) Any limitation or restriction that may govern the 
frequency of transfers between investment vehicles shall not be 
treated as a suspension referred to in subparagraph (A)(ii) to 
the extent such limitation or restriction is disclosed to 
participants or beneficiaries through the summary plan 
description or materials describing specific investment 
alternatives under the plan.''.
  (b) Amendments to the Internal Revenue Code of 1986.--
          (1) Excise tax on failure of pension plans to provide 
        notice of transaction restriction periods.--
                  (A) In general.--Chapter 43 of the Internal 
                Revenue Code of 1986 (relating to qualified 
                pension, etc., plans) is amended by adding at 
                the end the following new section:

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

  ``(a) Imposition of Tax.--There is hereby imposed a tax on 
the failure of any applicable pension plan to meet the 
requirements of subsection (e) with respect to any applicable 
individual.
  ``(b) Amount of Tax.--The amount of the tax imposed by 
subsection (a) on any failure with respect to any applicable 
individual shall be $100.
  ``(c) Limitations on Amount of Tax.--
          ``(1) Tax not to apply to failures corrected as soon 
        as reasonably practicable.--No tax shall be imposed by 
        subsection (a) on any failure if--
                  ``(A) any person subject to liability for the 
                tax under subsection (d) exercised reasonable 
                diligence to meet the requirements of 
                subsection (e), and
                  ``(B) such person provides the notice 
                described in subsection (e) as soon as 
                reasonably practicable after the first date 
                such person knew, or exercising reasonable 
                diligence should have known, that such failure 
                existed and at least 1 business day before the 
                beginning of the transaction restriction 
                period.
          ``(2) Tax not to apply when providing notice not 
        reasonably practicable.--No tax shall be imposed by 
        subsection (a) if, in the case of the occurrence of an 
        unforeseeable event, it is not reasonably practicable 
        to provide such notice before the beginning of the 
        transaction restriction period.
          ``(3) Overall limitation for unintentional 
        failures.--
                  ``(A) In general.--If the person subject to 
                liability for tax under subsection (d) 
                exercised reasonable diligence to meet the 
                requirements of subsection (e), the tax imposed 
                by subsection (a) for failures during the 
                taxable year of the employer (or, in the case 
                of a multiemployer plan, the taxable year of 
                the trust forming part of the plan) shall not 
                exceed $500,000. For purposes of the preceding 
                sentence, all multiemployer plans of which the 
                same trust forms a part shall be treated as 1 
                plan.
                  ``(B) Taxable years in the case of certain 
                controlled groups.--For purposes of this 
                paragraph, if all persons who are treated as a 
                single employer for purposes of this section do 
                not have the same taxable year, the taxable 
                years taken into account shall be determined 
                under principles similar to the principles of 
                section 1561.
          ``(4) Waiver by secretary.--In the case of a failure 
        which is due to reasonable cause and not to willful 
        neglect, the Secretary may waive part or all of the tax 
        imposed by subsection (a) to the extent that the 
        payment of such tax would be excessive or otherwise 
        inequitable relative to the failure involved.
  ``(d) Liability for Tax.--The following shall be liable for 
the tax imposed by subsection (a):
          ``(1) In the case of a plan other than a 
        multiemployer plan, the employer.
          ``(2) In the case of a multiemployer plan, the plan.
  ``(e) Notice of Transaction Restriction Period.--
          ``(1) In general.--The plan administrator of an 
        applicable pension plan shall provide written notice of 
        any transaction restriction period to each applicable 
        individual to whom the transaction restriction period 
        applies (and to each employee organization representing 
        such applicable individuals).
          ``(2) Understandability.--The notice required by 
        paragraph (1) shall be written in a manner calculated 
        to be understood by the average plan participant and 
        shall provide sufficient information (as determined in 
        accordance with guidance provided by the Secretary) to 
        allow recipients to understand the timing and effect of 
        such transaction restriction period.
          ``(3) Timing of notice.--
                  ``(A) In general.--Except as provided in 
                subparagraph (B), the notice required by 
                paragraph (1) shall be provided at least 30 
                days before the beginning of the transaction 
                restriction period.
                  ``(B) Disposition of stock or assets.--
                          ``(i) In general.--If, in connection 
                        with the major corporate disposition by 
                        a corporation maintaining an applicable 
                        pension plan, there is the possibility 
                        of a transaction restriction period--
                                  ``(I) the notice required by 
                                paragraph (1) shall be provided 
                                at least 30 days before the 
                                date of such disposition, and
                                  ``(II) no other notice shall 
                                be required by paragraph (1) 
                                with respect to such period if 
                                notice is provided pursuant to 
                                subclause (I) and such period 
                                begins not more than 30 days 
                                after the date of such 
                                disposition.
                        Subclause (I) shall not apply if the 
                        plan administrator has a substantial 
                        basis to believe that there will be no 
                        transaction restriction period in 
                        connection with the disposition.
                          ``(ii) Major corporate disposition.--
                        For purposes of clause (i), the term 
                        `major corporate disposition' means, 
                        with respect to a corporation--
                                  ``(I) the disposition of 
                                substantially all of the stock 
                                of such corporation or a 
                                subsidiary thereof, or
                                  ``(II) the disposition of 
                                substantially all of the assets 
                                used in a trade or business of 
                                such corporation or subsidiary.
                          ``(iii) Noncorporate entities.--Rules 
                        similar to the rules of this 
                        subparagraph shall apply to entities 
                        that are not corporations.
          ``(4) Form and manner of notice.--The notice required 
        by this subsection shall be in writing, except that 
        such notice may be in electronic or other form to the 
        extent that such form is reasonably accessible to the 
        applicable individual.
  ``(f ) Definitions and Special Rules.--For purposes of this 
section--
          ``(1) Applicable individual.--The term `applicable 
        individual' means--
                  ``(A) any participant in the applicable 
                pension plan, and
                  ``(B) any beneficiary who is an alternate 
                payee (within the meaning of section 414(p)(8)) 
                under a qualified domestic relations order 
                (within the meaning of section 414(p)(1)(A)), 
                and
                  ``(C) any beneficiary of a deceased 
                participant or alternate payee.
          ``(2) Applicable pension plan.--
                  ``(A) In general.--The term `applicable 
                pension plan' means--
                          ``(i) a plan described in clause (i), 
                        (ii), or (iv) of section 219(g)(5)(A), 
                        and
                          ``(ii) an eligible deferred 
                        compensation plan (as defined in 
                        section 457(b)) of an eligible employer 
                        described in section 457(e)(1)(A),
                which maintains accounts for participants under 
                the plan or under which the accrued benefit of 
                any participant depends in whole or in part on 
                hypothetical investments directed by the 
                participant.
                  ``(B) Exception.--Such term shall not include 
                a one-participant retirement plan (as defined 
                in section 4980G(f)(3)).
          ``(3) Transaction restriction period.--
                  ``(A) In general.--The term `transaction 
                restriction period' means, with respect to an 
                applicable pension plan, a period beginning on 
                a day in which there is a substantial reduction 
                in rights described in subparagraph (B) which 
                are not restored as of the beginning of the 3rd 
                day following the day of such reduction.
                  ``(B) Rights described.--For purposes of this 
                paragraph, rights described in this section 
                with respect to an applicable pension plan are 
                rights under such plan of 1 or more applicable 
                individuals to direct investments in such plan, 
                to obtain loans from such plan, or to obtain 
                distributions from such plan.
                  ``(C) Special rule for employer securities.--
                For purposes of this paragraph--
                          ``(i) In general.--In the case of 
                        rights relating to directing 
                        investments out of employer securities, 
                        such rights shall be treated as 
                        substantially reduced if such rights 
                        are significantly restricted for at 
                        least 3 consecutive business days.
                          ``(ii) Business day.--For purposes of 
                        clause (i), under regulations 
                        prescribed by the Secretary, the term 
                        `business day' means--
                                  ``(I) in the case of a 
                                security which is traded on an 
                                established security market, 
                                any day on which such security 
                                may be traded on the principal 
                                securities market of such 
                                security, and
                                  ``(II) in the case of a 
                                security which is not traded on 
                                an established security market, 
                                any calendar day.
                          ``(iii) Employer securities.--For 
                        purposes of this subparagraph, the term 
                        `employer securities' shall have the 
                        meaning given such term by section 
                        407(d)(1) of the Employee Retirement 
                        Income Security Act of 1974.
                  ``(D) Exceptions.--Rights which are 
                substantially reduced by reason of the 
                application of securities laws or other 
                circumstances specified by the Secretary in 
                regulations shall not be taken into account for 
                purposes of this paragraph.''.
          (2) Clerical amendment.--The table of sections for 
        chapter 43 of such Code is amended by adding at the end 
        the following new item:

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

          (3) Guidance.--The Secretary of the Treasury, in 
        consultation with the Secretary of Labor, shall issue 
        guidance in carrying out section 4980H of the Internal 
        Revenue Code of 1986 (as added by this section). Such 
        guidance--
                  (A) in the case of a reduction of rights 
                relating to the direction of investments out of 
                employer securities, shall be issued by 
                November 1, 2002 (or, if later, the 60th day 
                after the date of the enactment of this Act), 
                and
                  (B) in any other case, shall be issued not 
                later than 120 days after the date of the 
                enactment of this Act.

SEC. 103. INFORMATIONAL AND EDUCATIONAL SUPPORT FOR PENSION PLAN 
                    FIDUCIARIES.

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

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

  (a) Amendment to the Employee Retirement Income Security Act 
of 1974.--Section 204 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1054) is amended--
          (1) by redesignating subsection (j) as subsection 
        (k); and
          (2) by inserting after subsection (i) the following 
        new subsection:
  ``(j) Diversification Requirements for Individual Account 
Plans That Hold Employer Securities.--
          ``(1) In general.--An applicable individual account 
        plan shall meet the requirements of paragraphs (2) and 
        (3).
          ``(2) Employee contributions and elective deferrals 
        invested in employer securities.--In the case of the 
        portion of the account attributable to employee 
        contributions and elective deferrals which is invested 
        in employer securities, a plan meets the requirements 
        of this paragraph if each applicable individual may 
        elect to direct the plan to divest any such securities 
        in the individual's account and to reinvest an 
        equivalent amount in other investment options which 
        meet the requirements of paragraph (4).
          ``(3) Employer contributions invested in employer 
        securities.--
                  ``(A) In general.--In the case of the portion 
                of the account attributable to employer 
                contributions (other than elective deferrals to 
                which paragraph (2) applies) which is invested 
                in employer securities, a plan meets the 
                requirements of this paragraph if, under the 
                plan--
                          ``(i) each applicable individual with 
                        a benefit based on 3 years of service 
                        may elect to direct the plan to divest 
                        any such securities in the individual's 
                        account and to reinvest an equivalent 
                        amount in other investment options 
                        which meet the requirements of 
                        paragraph (4), or
                          ``(ii) with respect to any employer 
                        security allocated to an applicable 
                        individual's account during any plan 
                        year, such applicable individual may 
                        elect to direct the plan to divest such 
                        employer security after a date which is 
                        not later than 3 years after the end of 
                        such plan year and to reinvest an 
                        equivalent amount in other investment 
                        options which meet the requirements of 
                        paragraph (4).
                  ``(B) Applicable individual with benefit 
                based on 3 years of service.--For purposes of 
                subparagraph (A), an applicable individual has 
                a benefit based on 3 years of service if such 
                individual would be an applicable individual if 
                only participants in the plan who have 
                completed at least 3 years of service (as 
                determined under section 203(b)) were taken 
                into account under paragraph (6)(B)(i).
          ``(4) Investment options.--The requirements of this 
        paragraph are met if--
                  ``(A) the plan offers not less than 3 
                investment options, other than employer 
                securities, to which an applicable individual 
                may direct the proceeds from the divestment of 
                employer securities pursuant to this 
                subsection, each of which is diversified and 
                has materially different risk and return 
                characteristics, and
                  ``(B) the plan permits the applicable 
                individual to choose from any of the investment 
                options made available under the plan to which 
                such proceeds may be so directed, subject to 
                such restrictions as may be provided by the 
                plan limiting such choice to periodic, 
                reasonable opportunities occurring no less 
                frequently than on a quarterly basis.
          ``(5) Definitions and rules.--For purposes of this 
        subsection--
                  ``(A) Applicable individual account plan.--
                The term `applicable individual account plan' 
                means any individual account plan, except that 
                such term does not include an employee stock 
                ownership plan (within the meaning of section 
                4975(e)(7) of the Internal Revenue Code of 
                1986) unless there are any contributions to 
                such plan (or earnings thereon) held within 
                such plan that are subject to subsection (k)(3) 
                or (m)(2) of section 401 of the Internal 
                Revenue Code of 1986.
                  ``(B) Applicable individual.--The term 
                `applicable individual' means--
                          ``(i) any participant in the plan, 
                        and
                          ``(ii) any beneficiary of a 
                        participant referred to in clause (i) 
                        who has an account under the plan with 
                        respect to which the beneficiary is 
                        entitled to exercise the rights of the 
                        participant.
                  ``(C) Elective deferral.--The term `elective 
                deferral' means an employer contribution 
                described in section 402(g)(3)(A) of the 
                Internal Revenue Code of 1986 (as in effect on 
                the date of the enactment of this subsection).
                  ``(D) Employer security.--The term `employer 
                security' shall have the meaning given such 
                term by section 407(d)(1) of this Act (as in 
                effect on the date of the enactment of this 
                subsection).
                  ``(E) Employee stock ownership plan.--The 
                term `employee stock ownership plan' shall have 
                the same meaning given to such term by section 
                4975(e)(7) of the Internal Revenue Code of 1986 
                (as in effect on the date of the enactment of 
                this subsection).
                  ``(F) Elections.--Elections under this 
                subsection may be made not less frequently than 
                quarterly.
          ``(6) Exception where there is no readily tradable 
        stock.--This subsection shall not apply with respect to 
        a plan if there is no class of stock issued by any 
        employer maintaining the plan (or by a corporation 
        which is an affiliate of any such employer, as defined 
        in section 407(d)(7) as in effect on the date of the 
        enactment of this subsection) that is readily tradable 
        on an established securities market.
          ``(7) Transition rule.--
                  ``(A) In general.--In the case of any 
                individual account plan which, on the first day 
                of the first plan year to which this subsection 
                applies, holds employer securities of any class 
                that were acquired before such date and on 
                which there is a restriction on diversification 
                otherwise precluded by this subsection, this 
                subsection shall apply to such securities of 
                such class held in any plan year only with 
                respect to the number of such securities equal 
                to the applicablepercentage of the total number 
                of such securities of such class held on such 
                date.
                  ``(B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage 
                shall be as follows:

``Plan years for which provi-              Applicable percentage:
    sions are effective:
  1st plan year..............................20 percent
  2nd plan year..............................40 percent
  3rd plan year..............................60 percent
  4th plan year..............................80 percent
  5th plan year or thereafter................100 percent.

                  ``(C) Elective deferrals treated as separate 
                plan not individual account plan.--For purposes 
                of subparagraph (A), the applicable percentage 
                shall be 100 percent with respect to--
                          ``(i) employee contributions to a 
                        plan under which any portion 
                        attributable to elective deferrals is 
                        treated as a separate plan under 
                        section 407(b)(2) as of the date of the 
                        enactment of this paragraph, and
                          ``(ii) such elective deferrals.
                  ``(D) Coordination with prior elections.--In 
                any case in which a divestiture of investment 
                in employer securities of any class held by an 
                employee stock ownership plan prior to the 
                effective date of this subsection was 
                undertaken pursuant to other applicable Federal 
                law prior to such date, the applicable 
                percentage (as determined without regard to 
                this subparagraph) in connection with such 
                securities shall be reduced to the extent 
                necessary to account for the amount to which 
                such election applied.
          ``(8) Regulations.--The Secretary of the Treasury 
        shall prescribe regulations under this subsection in 
        consultation with the Secretary of Labor.''
  (b) Amendments to the Internal Revenue Code of 1986.--
          (1) In general.--Section 401(a) of the Internal 
        Revenue Code of 1986 (relating to requirements for 
        qualification) is amended by inserting after paragraph 
        (34) the following new paragraph:
          ``(35) Diversification requirements for defined 
        contribution plans that hold employer securities.--
                  ``(A) In general.--An applicable defined 
                contribution plan shall meet the requirements 
                of subparagraphs (B) and (C).
                  ``(B) Employee contributions and elective 
                deferrals invested in employer securities.--In 
                the case of the portion of the account 
                attributable to employee contributions and 
                elective deferrals which is invested in 
                employer securities, a plan meets the 
                requirements of this subparagraph if each 
                applicable individual in such plan may elect to 
                direct the plan to divest any such securities 
                in the individual's account and to reinvest an 
                equivalent amount in other investment options 
                which meet the requirements of subparagraph 
                (D).
                  ``(C) Employer contributions invested in 
                employer securities.--
                          ``(i) In general.--In the case of the 
                        portion of the account attributable to 
                        employer contributions (other than 
                        elective deferrals to which 
                        subparagraph (B) applies) which is 
                        invested in employer securities, a plan 
                        meets the requirements of this 
                        subparagraph if, under the plan--
                                  ``(I) each applicable 
                                individual with a benefit based 
                                on 3 years of service may elect 
                                to direct the plan to divest 
                                any such securities in the 
                                individual's account and to 
                                reinvest an equivalent amount 
                                in other investment options 
                                which meet the requirements of 
                                subparagraph (D), or
                                  ``(II) with respect to any 
                                employer security allocated to 
                                an applicable individual's 
                                account during any plan year, 
                                such applicable individual may 
                                elect to direct the plan to 
                                divest such employer security 
                                after a date which is not later 
                                than 3 years after the end of 
                                such plan year and to reinvest 
                                an equivalent amount in other 
                                investment options which meet 
                                the requirements of 
                                subparagraph (D).
                          ``(ii) Applicable individual with 
                        benefit based on 3 years of service.--
                        For purposes of clause (i), an 
                        applicable individual has a benefit 
                        based on 3 years of service if such 
                        individual would be an applicable 
                        individual if only participants in the 
                        plan who have completed at least 3 
                        years of service (as determined under 
                        section 411(a)) were taken into account 
                        under subparagraph (F)(ii)(I).
                  ``(D) Investment options.--The requirements 
                of this subparagraph are met if--
                          ``(i) the plan offers not less than 3 
                        investment options, other than employer 
                        securities, to which an applicable 
                        individual may direct the proceeds from 
                        the divestment of employer securities 
                        pursuant to this paragraph, each of 
                        which is diversified and has materially 
                        different risk and return 
                        characteristics, and
                          ``(ii) the plan permits the 
                        applicable individual to choose from 
                        any of the investment options made 
                        available under the plan to which such 
                        proceeds may be so directed, subject to 
                        such restrictions as may be provided by 
                        the plan limiting such choice to 
                        periodic, reasonable opportunities 
                        occurring no less frequently than on a 
                        quarterly basis.
                  ``(E) Definitions and rules.--For purposes of 
                this paragraph--
                          ``(i) Applicable defined contribution 
                        plan.--The term `applicable defined 
                        contribution plan' means any defined 
                        contribution plan, except that such 
                        term does not include an employee stock 
                        ownership plan (within the meaning of 
                        section 4975(e)(7)) unless there are 
                        any contributions to such plan (or 
                        earnings thereon) held within such plan 
                        that are subject to subsection (k)(3) 
                        or (m)(2).
                          ``(ii) Applicable individual.--The 
                        term `applicable individual' means--
                                  ``(I) any participant in the 
                                plan, and
                                  ``(II) any beneficiary of a 
                                participant referred to in 
                                clause (i) who has an account 
                                under the plan with respect to 
                                which the beneficiary is 
                                entitled to exercise the rights 
                                of the participant.
                          ``(iii) Elective deferral.--The term 
                        `elective deferral' means an employer 
                        contribution described in section 
                        402(g)(3)(A) (as in effect on the date 
                        of the enactment of this paragraph).
                          ``(iv) Employer security.--The term 
                        `employer security' shall have the 
                        meaning given such term by section 
                        407(d)(1) of the Employee Retirement 
                        Income Security Act of 1974 (as in 
                        effect on the date of the enactment of 
                        this paragraph).
                          ``(v) Employee stock ownership 
                        plan.--The term `employee stock 
                        ownership plan' shall have the same 
                        meaning given to such term by section 
                        4975(e)(7) of the Internal Revenue Code 
                        of 1986 (as in effect on the date of 
                        the enactment of this paragraph).
                          ``(vi) Elections.--Elections under 
                        this paragraph may be made not less 
                        frequently than quarterly.
                  ``(F) Exception where there is no readily 
                tradable stock.--This paragraph shall not apply 
                with respect to a plan if there is no class of 
                stock issued by any employer maintaining the 
                plan that is readily tradable on an established 
                securities market.
                  ``(G) Transition rule.--
                          ``(i) In general.--In the case of any 
                        defined contribution plan which, on the 
                        effective date of this subsection, 
                        holds employer securities of any class 
                        that were acquired before such date and 
                        on which there is a restriction on 
                        diversification otherwise precluded by 
                        this paragraph, this paragraph shall 
                        apply to such securities of such class 
                        held in any plan year only with respect 
                        to the number of such securities equal 
                        to the applicable percentage of the 
                        total number of such securities of such 
                        class held on such date.
                          ``(ii) Applicable percentage.--For 
                        purposes of clause (i), the applicable 
                        percentage shall be as follows:

``Plan years for which provi-              Applicable percentage:
    sions are effective:
  1st plan year..............................20 percent
  2nd plan year..............................40 percent
  3rd plan year..............................60 percent
  4th plan year..............................80 percent
  5th plan year or thereafter................100 percent.

                          ``(iii) Elective deferrals treated as 
                        separate plan not individual account 
                        plan.--For purposes of clause (i), the 
                        applicable percentage shall be 100 
                        percent with respect to--
                                  ``(I) employee contributions 
                                to a plan under which any 
                                portion attributable to 
                                elective deferrals is treated 
                                as a separate plan under 
                                section 407(b)(2) of the 
                                Employee Retirement Income 
                                Security Act of 1974 as of the 
                                date of the enactment of this 
                                paragraph, and
                                  ``(II) such elective 
                                deferrals.
                          ``(iv) Contributions held within an 
                        esop.--In the case of contributions 
                        (other than elective deferrals and 
                        employee contributions) held within an 
                        employee stock ownership plan, in the 
                        case of the 1st and 2nd plan years 
                        referred to in the table in clause 
                        (ii), the applicable percentage shall 
                        be the greater of the amount determined 
                        under clause (ii) or the percentage 
                        determined under paragraph (28) 
                        (determined as if paragraph (28) 
                        applied to a plan described in this 
                        paragraph).
                          ``(v) Coordination with prior 
                        elections under paragraph (28).--In any 
                        case in which a divestiture of 
                        investment in employer securities of 
                        any class held by an employee stock 
                        ownership plan prior to the effective 
                        date of this paragraph was undertaken 
                        pursuant to an election under paragraph 
                        (28) prior to such date, the applicable 
                        percentage (as determined without 
                        regard to this clause) in connection 
                        with such securities shall be reduced 
                        to the extent necessary to accountfor 
                        the amount to which such election 
                        applied.
                  ``(H) Regulations.--The Secretary shall 
                prescribe regulations under this paragraph in 
                consultation with the Secretary of Labor.''.
          (2) Conforming amendments.--
                  (A) Section 401(a)(28) of such Code is 
                amended by adding at the end the following new 
                subparagraph:
                  ``(D) Application.--This paragraph shall not 
                apply to a plan to which paragraph (35) 
                applies.''.
                  (B) Section 409(h)(7) of such Code is amended 
                by inserting before the period at the end ``or 
                subparagraph (B) or (C) of section 
                401(a)(35)''.
                  (C) Section 4980(c)(3)(A) of such Code is 
                amended by striking ``if--'' and all that 
                follows and inserting ``if the requirements of 
                subparagraphs (B), (C), and (D) are met.''.
  (c) Effective Date.--
          (1) In general.--Except as provided in paragraph (2) 
        and section 109, the amendments made by this section 
        shall apply to plan years beginning after December 31, 
        2002, and with respect to employer securities allocated 
        to accounts before, on, or after the date of the 
        enactment of this Act.
          (2) Exception.--The amendments made by this section 
        shall not apply to employer securities held by an 
        employee stock ownership plan which are acquired before 
        January 1, 1987.

SEC. 105. PROHIBITED TRANSACTION EXEMPTION FOR THE PROVISION OF 
                    INVESTMENT ADVICE.

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

SEC. 106. STUDY REGARDING IMPACT ON RETIREMENT SAVINGS OF PARTICIPANTS 
                    AND BENEFICIARIES BY REQUIRING CONSULTANTS TO 
                    ADVISE PLAN FIDUCIARIES OF INDIVIDUAL ACCOUNT 
                    PLANS.

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

SEC. 107. TREATMENT OF QUALIFIED RETIREMENT PLANNING SERVICES.

  (a) In General.--Subsection (m) of section 132 of the 
Internal Revenue Code of 1986 (defining qualified retirement 
services) is amended by adding at the end the following new 
paragraph:
          ``(4) No constructive receipt.--No amount shall be 
        included in the gross income of any employee solely 
        because the employee may choose between any qualified 
        retirement planning services provided by a qualified 
        investment advisor and compensation which would 
        otherwise be includible in the gross income of such 
        employee. The preceding sentence shall apply to highly 
        compensated employees only if the choice described in 
        such sentence is available on substantially the same 
        terms to each member of the group of employees normally 
        provided education and information regarding the 
        employer's qualified employer plan.''.
  (b) Conforming Amendments.--
          (1) Section 403(b)(3)(B) of such Code is amended by 
        inserting ``132(m)(4),'' after ``132(f)(4),''.
          (2) Section 414(s)(2) of such Code is amended by 
        inserting ``132(m)(4),'' after ``132(f)(4),''.
          (3) Section 415(c)(3)(D)(ii) of such Code is amended 
        by inserting ``132(m)(4),'' after ``132(f)(4),''.
  (c) Effective Date.--The amendment made by this section shall 
apply to taxable years beginning after December 31, 2002.

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

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

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

  (a) In General.--Except as otherwise provided in this title 
or in subsection (b), the amendments made by this title shall 
apply with respect to plan years beginning on or after January 
1, 2003.
  (b) Special Rule for Collectively Bargained Plans.--In the 
case of a plan maintained pursuant to 1 or more collective 
bargaining agreements between employee representatives and 1 or 
more employers ratified on or before the date of the enactment 
of this Act, subsection (a) shall be applied to benefits 
pursuant to, and individuals covered by, any such agreement by 
substituting for ``January 1, 2003'' the date of the 
commencement of the first plan year beginning on or after the 
earlier of--
          (1) the later of--
                  (A) January 1, 2004, or
                  (B) the date on which the last of such 
                collective bargaining agreements terminates 
                (determined without regard to any extension 
                thereof after the date of the enactment of this 
                Act), or
          (2) January 1, 2005.
  (c) Plan Amendments.--If the amendments made by sections 101, 
102, 103, and 104 of this Act require an amendment to any plan, 
such plan amendment shall not be required to be made before the 
first plan year beginning on or after January 1, 2005, if--
          (1) during the period after such amendments made by 
        such sections take effect and before such first plan 
        year, the plan is operated in accordance with the 
        requirements of such amendments made by such sections, 
        and
          (2) such plan amendment applies retroactively to the 
        period after such amendments made by such sections take 
        effect and before such first plan year.
  (d) Amendments Relating to Investment Advice.--The amendments 
made by section 104 shall apply with respect to advice referred 
to in section 3(21)(A)(ii) of the Employee Retirement Income 
Security Act of 1974 or section 4975(c)(3)(B) of the Internal 
Revenue Code of 1986 provided on or after January 1, 2003.

            TITLE II--OTHER PROVISIONS RELATING TO PENSIONS

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

  (a) Transition Rule Made Permanent.--Paragraph (1) of section 
769(c) of the Retirement Protection Act of 1994 is amended--
          (1) by striking ``transition'' each place it appears 
        in the heading and the text, and
          (2) by striking ``for any plan year beginning after 
        1996 and before 2010''.
  (b) Special Rules.--Paragraph (2) of section 769(c) of the 
Retirement Protection Act of 1994 is amended to read as 
follows:
          ``(2) Special rules.--The rules described in this 
        paragraph are as follows:
                  ``(A) For purposes of section 412(l)(9)(A) of 
                the Internal Revenue Code of 1986 and section 
                302(d)(9)(A) of the Employee Retirement Income 
                Security Act of 1974, the funded current 
                liability percentage for any plan year shall be 
                treated as not less than 90 percent.
                  ``(B) For purposes of section 412(m) of the 
                Internal Revenue Code of 1986 and section 
                302(e) of the Employee Retirement Income 
                Security Act of 1974, the funded current 
                liability percentage for any plan year shall be 
                treated as not less than 100 percent.
                  ``(C) For purposes of determining unfunded 
                vested benefits under section 
                4006(a)(3)(E)(iii) of the Employee Retirement 
                Income Security Act of 1974, the mortality 
                table shall be the mortality table used by the 
                plan.''.
  (c) Effective Date.--The amendments made by this section 
shall apply to plan years beginning after December 31, 2001.

SEC. 202. REPORTING SIMPLIFICATION.

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

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

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

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

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

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

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

SEC. 206. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.

  (a) Expansion of Period.--
          (1) Amendment of internal revenue code.--
                  (A) In general.--Subparagraph (A) of section 
                417(a)(6) of the Internal Revenue Code of 1986 
                is amended by striking ``90-day'' and inserting 
                ``180-day''.
                  (B) Modification of regulations.--The 
                Secretary of the Treasury shall modify the 
                regulations under sections 402(f), 411(a)(11), 
                and 417 of the Internal Revenue Code of 1986 to 
                substitute ``180 days'' for ``90 days'' each 
                place it appears in Treasury Regulations 
                sections 1.402(f)-1, 1.411(a)-11(c), and 
                1.417(e)-1(b).
          (2) Amendment of erisa.--
                  (A) In general.--Section 205(c)(7)(A) of the 
                Employee Retirement Income Security Act of 1974 
                (29 U.S.C. 1055(c)(7)(A)) is amended by 
                striking ``90-day'' and inserting ``180-day''.
                  (B) Modification of regulations.--The 
                Secretary of the Treasury shall modify the 
                regulations under part 2 of subtitle B of title 
                I of the Employee Retirement Income Security 
                Act of 1974 to the extent that they relate to 
                sections 203(e) and 205 of such Act to 
                substitute ``180 days'' for ``90 days'' each 
                place it appears.
          (3) Effective date.--The amendments made by 
        paragraphs (1)(A) and (2)(A) and the modifications 
        required by paragraphs (1)(B) and (2)(B) shall apply to 
        years beginning after December 31, 2002.
  (b) Consent Regulation Inapplicable to Certain 
Distributions.--
          (1) In general.--The Secretary of the Treasury shall 
        modify the regulations under section 411(a)(11) of the 
        Internal Revenue Code of 1986 and under section 205 of 
        the Employee Retirement Income Security Act of 1974 to 
        provide that the description of a participant's right, 
        if any, to defer receipt of a distribution shall also 
        describe the consequences of failing to defer such 
        receipt.
          (2) Effective date.--
                  (A) In general.--The modifications required 
                by paragraph (1) shall apply to years beginning 
                after December 31, 2002.
                  (B) Reasonable notice.--In the case of any 
                description of such consequences made before 
                the date that is 90 days after the date on 
                which the Secretary of the Treasury issues a 
                safe harbor description under paragraph (1), a 
                plan shall not be treated as failing to satisfy 
                the requirements of section 411(a)(11) of such 
                Code or section 205 of such Act by reason of 
                the failure to provide the information required 
                by the modifications made under paragraph (1) 
                if the Administrator of such plan makes a 
                reasonable attempt to comply with such 
                requirements.

SEC. 207. ANNUAL REPORT DISSEMINATION.

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

SEC. 208. TECHNICAL CORRECTIONS TO SAVER ACT.

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

SEC. 209. MISSING PARTICIPANTS.

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

SEC. 210. REDUCED PBGC PREMIUM FOR NEW PLANS OF SMALL EMPLOYERS.

  (a) In General.--Subparagraph (A) of section 4006(a)(3) of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1306(a)(3)(A)) is amended--
          (1) in clause (i), by inserting ``other than a new 
        single-employer plan (as defined in subparagraph (F)) 
        maintained by a small employer (as so defined),'' after 
        ``single-employer plan,'',
          (2) in clause (iii), by striking the period at the 
        end and inserting ``, and'', and
          (3) by adding at the end the following new clause:
          ``(iv) in the case of a new single-employer plan (as 
        defined in subparagraph (F)) maintained by a small 
        employer (as so defined) for the plan year, $5 for each 
        individual who is a participant in such plan during the 
        plan year.''.
  (b) Definition of New Single-Employer Plan.--Section 
4006(a)(3) of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1306(a)(3)) is amended by adding at the end the 
following new subparagraph:
  ``(F)(i) For purposes of this paragraph, a single-employer 
plan maintained by a contributing sponsor shall be treated as a 
new single-employer plan for each of its first 5 plan years if, 
during the 36-month period ending on the date of the adoption 
of such plan, the sponsor or any member of such sponsor's 
controlled group (or any predecessor of either) did not 
establish or maintain a plan to which this title applies with 
respect to which benefits were accrued for substantially the 
same employees as are in the new single-employer plan.
  ``(ii)(I) For purposes of this paragraph, the term `small 
employer' means an employer which on the first day of any plan 
year has, in aggregation with all members of the controlled 
group of such employer, 100 or fewer employees.
  ``(II) In the case of a plan maintained by two or more 
contributing sponsors that are not part of the same controlled 
group, the employees of all contributing sponsors and 
controlled groups of such sponsors shall be aggregated for 
purposes of determining whether any contributing sponsor is a 
small employer.''.
  (c) Effective Date.--The amendments made by this section 
shall apply to plans first effective after December 31, 2002.

SEC. 211. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR NEW AND SMALL PLANS.

  (a) New Plans.--Subparagraph (E) of section 4006(a)(3) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1306(a)(3)(E)) is amended by adding at the end the following 
new clause:
  ``(v) In the case of a new defined benefit plan, the amount 
determined under clause (ii) for any plan year shall be an 
amount equal to the product of the amount determined under 
clause (ii) and the applicable percentage. For purposes of this 
clause, the term `applicable percentage' means--
          ``(I) 0 percent, for the first plan year.
          ``(II) 20 percent, for the second plan year.
          ``(III) 40 percent, for the third plan year.
          ``(IV) 60 percent, for the fourth plan year.
          ``(V) 80 percent, for the fifth plan year.
For purposes of this clause, a defined benefit plan (as defined 
in section 3(35)) maintained by a contributing sponsor shall be 
treated as a new defined benefit plan for each of its first 5 
plan years if, during the 36-month period ending on the date of 
the adoption of the plan, the sponsor and each member of any 
controlled group including the sponsor (or any predecessor of 
either) did not establish or maintain a plan to which this 
title applies with respect to which benefits were accrued for 
substantially the same employees as are in the new plan.''.
  (b) Small Plans.--Paragraph (3) of section 4006(a) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1306(a)), as amended by section 210(b), is amended--
          (1) by striking ``The'' in subparagraph (E)(i) and 
        inserting ``Except as provided in subparagraph (G), 
        the'', and
          (2) by inserting after subparagraph (F) the following 
        new subparagraph:
  ``(G)(i) In the case of an employer who has 25 or fewer 
employees on the first day of the plan year, the additional 
premium determined under subparagraph (E) for each participant 
shall not exceed $5 multiplied by the number of participants in 
the plan as of the close of the preceding plan year.
  ``(ii) For purposes of clause (i), whether an employer has 25 
or fewer employees on the first day of the plan year is 
determined by taking into consideration all of the employees of 
all members of the contributing sponsor's controlled group. In 
the case of a plan maintained by two or more contributing 
sponsors, the employees of all contributing sponsors and their 
controlled groups shall be aggregated for purposes of 
determining whether the 25-or-fewer-employees limitation has 
been satisfied.''.
  (c) Effective Dates.--
          (1) Subsection (a).--The amendments made by 
        subsection (a) shall apply to plans first effective 
        after December 31, 2002.
          (2) Subsection (b).--The amendments made by 
        subsection (b) shall apply to plan years beginning 
        after December 31, 2002.

SEC. 212. AUTHORIZATION FOR PBGC TO PAY INTEREST ON PREMIUM OVERPAYMENT 
                    REFUNDS.

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

SEC. 213. SUBSTANTIAL OWNER BENEFITS IN TERMINATED PLANS.

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

SEC. 214. BENEFIT SUSPENSION NOTICE.

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

SEC. 215. STUDIES.

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

SEC. 216. INTEREST RATE RANGE FOR ADDITIONAL FUNDING REQUIREMENTS.

  (a) In General.--Subclause (III) of section 412(l)(7)(C)(i) 
of the Internal Revenue Code of 1986 is amended--
          (1) by striking ``2002 or 2003'' in the text and 
        inserting ``2001, 2002, or 2003'', and
          (2) by striking ``2002 and 2003'' in the heading and 
        inserting ``2001, 2002, and 2003''.
  (b) Special Rule.--Subclause (III) of section 302(d)(7)(C)(i) 
of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1082(d)(7)(C)(i)) is amended--
          (1) by striking ``2002 or 2003'' in the text and 
        inserting ``2001, 2002, or 2003'', and
          (2) by striking ``2002 and 2003'' in the heading and 
        inserting ``2001, 2002, and 2003''.
  (c) PBGC.--Subclause (IV) of section 4006(a)(3)(E)(iii) of 
such Act (29 U.S.C. 1306(a)(3)(E)(iii)) is amended to read as 
follows--
          ``(IV) In the case of plan years beginning after 
        December 31, 2001, and before January 1, 2004, 
        subclause (II) shall be applied by substituting `100 
        percent' for `85 percent' and by substituting `115 
        percent' for `100 percent'. Subclause (III) shall be 
        applied for such years without regard to the preceding 
        sentence. Any reference to this clause or this 
        subparagraph by any other sections or subsections 
        (other than sections 4005, 4010, 4011 and 4043) shall 
        be treated as a reference to this clause or this 
        subparagraph without regard to this subclause.''.
  (d) Effective Date.--The amendments made by this section 
shall take effect as if included in the amendments made by 
section 405 of the Job Creation and Worker Assistance Act of 
2002.

SEC. 217. PROVISIONS RELATING TO PLAN AMENDMENTS.

  (a) In General.--If this section applies to any plan or 
contract amendment--
          (1) such plan or contract shall be treated as being 
        operated in accordance with the terms of the plan 
        during the period described in subsection (b)(2)(A), 
        and
          (2) except as provided by the Secretary of the 
        Treasury, such plan shall not fail to meet the 
        requirements of section 411(d)(6) of the Internal 
        Revenue Code of 1986 and section 204(g) of the Employee 
        Retirement Income Security Act of 1974 by reason of 
        such amendment.
  (b) Amendments to Which Section Applies.--
          (1) In general.--This section shall apply to any 
        amendment to any plan or annuity contract which is 
        made--
                  (A) pursuant to any amendment made by this 
                title or title VI of the Economic Growth and 
                Tax Relief Reconciliation Act of 2001, or 
                pursuant to any regulation issued by the 
                Secretary of the Treasury or the Secretary of 
                Labor under this title or such title VI, and
                  (B) on or before the last day of the first 
                plan year beginning on or after January 1, 
                2005.
        In the case of a governmental plan (as defined in 
        section 414(d) of the Internal Revenue Code of 1986), 
        this paragraph shall be applied by substituting 
        ``2007'' for ``2005''.
          (2) Conditions.--This section shall not apply to any 
        amendment unless--
                  (A) during the period--
                          (i) beginning on the date the 
                        legislative or regulatory amendment 
                        described in paragraph (1)(A) takes 
                        effect (or in the case of a plan or 
                        contract amendment not required by such 
                        legislative or regulatory amendment, 
                        the effective date specified by the 
                        plan), and
                          (ii) ending on the date described in 
                        paragraph (1)(B) (or, if earlier, the 
                        date the plan or contract amendment is 
                        adopted),
                the plan or contract is operated as if such 
                plan or contract amendment were in effect; and
                  (B) such plan or contract amendment applies 
                retroactively for such period.

                        TITLE III--STOCK OPTIONS

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

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

          TITLE IV--SOCIAL SECURITY AND MEDICARE HELD HARMLESS

SEC. 401. PROTECTION OF SOCIAL SECURITY AND MEDICARE.

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


         PART B--TEXT OF AMENDMENT MADE IN ORDER UNDER THE RULE


      An Amendment in the Nature of a Substitute To Be Offered by 
Representative George Miller of California or Representative Rangel of 
            New York or a Designee, Debatable for 60 Minutes

  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

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

Sec. 1. Short title and table of contents.

                   TITLE I--IMPROVEMENTS IN DISCLOSURE

Sec. 101. Pension benefit information.
Sec. 102. Immediate warning of excessive stock holdings.
Sec. 103. Additional fiduciary protections relating to lockdowns.
Sec. 104. Report to participants and beneficiaries of trades in employer 
          securities.
Sec. 105. Provision to participants and beneficiaries of material 
          investment information in accurate form.
Sec. 106. Enforcement of information and disclosure requirements.

                 TITLE II--DIVERSIFICATION REQUIREMENTS

Sec. 201. Freedom to make investment decisions with plan assets.
Sec. 202. Effective date of title.

                   TITLE III--EMPLOYEE REPRESENTATION

Sec. 301. Participation of participants in trusteeship of individual 
          account plans.

                       TITLE IV--EXECUTIVE PARITY

Sec. 401. Inclusion in gross income of funded deferred compensation of 
          corporate insiders if corporation funds defined contribution 
          plan with employer stock.
Sec. 402. Insider trades during pension fund blackout periods 
          prohibited.

                    TITLE V--INCREASED ACCOUNTABILITY

Sec. 501. Bonding or insurance adequate to protect interest of 
          participants and beneficiaries.
Sec. 502. Liability for breach of fiduciary duty.
Sec. 503. Preservation of rights or claims.
Sec. 504. Office of Pension Participant Advocacy.
Sec. 505. Additional criminal penalties.
Sec. 506. Study regarding insurance system for individual account plans.

     TITLE VI--INVESTMENT ADVICE FOR PARTICIPANTS AND BENEFICIARIES

Sec. 601. Independent investment advice.
Sec. 602. Tax treatment of qualified retirement planning services.

                      TITLE VII--GENERAL PROVISIONS

Sec. 701. General effective date.
Sec. 702. 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, and
          ``(E) 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 asssets 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) Excise tax on failure of defined contribution 
        plans to provide notice of generally accepted 
        investment principles.--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. 4980I. FAILURE OF DEFINED CONTRIBUTION PLANS TO PROVIDE NOTICE 
                    OF GENERALLY ACCEPTED INVESTMENT PRINCIPLES.

  ``(a) Imposition of Tax.--There is hereby imposed a tax on 
the failure of any defined contribution plan to meet the 
requirements of subsection (e) with respect to any participant 
or beneficiary.
  ``(b) Amount of Tax.--The amount of the tax imposed by 
subsection (a) on any failure with respect to any participant 
or beneficiary shall be $1,000 for each day on which such 
failure is not corrected.
  ``(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), 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) Requirements Relating to Notice of Generally Accepted 
Investment Principles.--The plan administrator of any defined 
contribution plan shall provide annually a separate notice 
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.''.
          (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. 4980I. Failure of defined contribution plans to provide 
                  notice of generally accepted investment principles.''.

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. ADDITIONAL FIDUCIARY PROTECTIONS RELATING TO LOCKDOWNS.

  (a) Amendment to 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)(1) In the case of any eligible individual account plan 
(as defined in section 407(d)(3)) no lockdown may take effect 
until at least 30 days after written notice of such lockdown is 
provided by the plan administrator to such participant or 
beneficiary (and to each employee organization representing any 
such participant).
  ``(2) Subject to such regulations as the Secretary may 
prescribe, the requirements of paragraph (1) shall not apply in 
cases of emergency.
  ``(3) A plan described in paragraph (1) shall provide that 
each participant and beneficiary required to receive a notice 
under paragraph (1)(A) is entitled to direct the plan to divest 
within 3 business days (but in no event later than the 
beginning of the lockdown) any security or other property in 
which any assets allocated to the account of such individual 
are invested and to reinvest such assets in any other 
investment option offered under the plan.
  ``(4) For purposes of this subsection, the term `lockdown' 
means any temporary lockdown, blackout, or freeze with respect 
to, suspension of, or similar limitation on the ability of a 
participant or beneficiary to exercise control over the assets 
in his or her account as otherwise generally provided under the 
plan (as determined under regulations of the Secretary), 
including the ability to direct investments, obtain loans, or 
obtain distributions.''.
  (b) Amendments to Internal Revenue Code of 1986.--
          (1) Excise tax on failures with respect to 
        lockdowns.--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 DEFINED CONTRIBUTION PLANS WITH RESPECT TO 
                    LOCKDOWNS.

  ``(a) Imposition of Tax.--There is hereby imposed a tax on 
the failure of any defined contribution plan to meet the 
requirements of subsection (e) with respect to any participant 
or beneficiary.
  ``(b) Amount of Tax.--The amount of the tax imposed by 
subsection (a) on any failure with respect to any participant 
or beneficiary shall be $100.
  ``(c) Limitations on Amount of Tax.--
          ``(1) Tax not to apply to failures corrected as soon 
        as reasonably practicable.--No tax shall be imposed by 
        subsection (a) on any failure if--
                  ``(A) any person subject to liability for the 
                tax under subsection (d) exercised reasonable 
                diligence to meet the requirements of 
                subsection (e), and
                  ``(B) such person meets the requirements of 
                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), 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) Requirements Relating to Lockdowns.--
          ``(1) In general.--In the case of any defined 
        contribution plan no lockdown may take effect until at 
        least 30 days after written notice of such lockdown is 
        provided by the plan administrator to each participant 
        or beneficiary (and to each employee organization 
        representing any such participant).
          ``(2) Exception for emergency.--Subject to such 
        regulations as the Secretary may prescribe, the 
        requirements of paragraph (1) shall not apply in cases 
        of emergency.
          ``(3) Requirement relating to divestment.--A plan 
        described in paragraph (1) shall provide that each 
        participant and beneficiary required to receive a 
        notice under paragraph (1)(A) is entitled to direct the 
        plan to divest within 3 business days (but in no event 
        later than the beginning of the lockdown) any security 
        or other property in which any assets allocated to the 
        account of such individual are invested and to reinvest 
        such assets in any other investment option offered 
        under the plan.
          ``(4) Lockdown defined.--For purposes of this 
        subsection, the term `lockdown' means any temporary 
        lockdown, blackout, or freeze with respect to, 
        suspension of, or similar limitation on the ability of 
        a participant or beneficiary to exercise control over 
        the assets in his or her account as otherwise generally 
        provided under the plan (as determined under 
        regulations of the Secretary), including the ability to 
        direct investments, obtain loans, or obtain 
        distributions.''.
          (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 defined contribution plans with 
                  respect to lockdowns.''.

SEC. 104. 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 on or after 
July 1, 2002.

SEC. 105. PROVISION TO PARTICIPANTS AND BENEFICIARIES OF MATERIAL 
                    INVESTMENT INFORMATION IN ACCURATE FORM.

  Section 404(c) of the Employee Retirement Income Security Act 
of 1974 (29 U.S.C. 1104(c)) is amended by adding at the end the 
following new paragraph:
  ``(4) The plan sponsor and plan administrator of a pension 
plan described in paragraph (1) shall have a fiduciary duty to 
ensure that each participant and beneficiary under the plan, in 
connection with the investment by the participant or 
beneficiary of plan assets in the exercise of his or her 
control over assets in his account, is provided with all 
material investment information regarding investment of such 
assets to the extent that the provision of such information is 
generally required to be disclosed by the plan sponsor to 
investors in connection with such aninvestment under applicable 
securities laws. The provision by the plan sponsor or plan 
administrator of any misleading investment information shall be 
treated as a violation of this paragraph.''.

SEC. 106. 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(f)(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)''.

                 TITLE II--DIVERSIFICATION REQUIREMENTS

SEC. 201. FREEDOM TO MAKE INVESTMENT DECISIONS WITH PLAN ASSETS.

  (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) (as amended by section 
103) is amended further by adding at the end the following new 
subsection:
  ``(f)(1)(A)(i) Subject to clause (ii), an individual account 
plan under which a participant or beneficiary is permitted to 
exercise control over assets in his or her account shall 
provide that--
          ``(I) any such participant or beneficiary has the 
        right to allocate all assets in his or her account (and 
        any portion thereof) attributable to employee 
        contributions to any investment option provided under 
        the plan, and
          ``(II) any such participant who has completed 3 years 
        of service (as defined in section 203(b)(2)) with the 
        employer, or any such beneficiary of such a 
        participant, has the right to allocate all assets in 
        his or her account (and any portion thereof) 
        attributable to employer contributions to any 
        investment option provided under the plan.
The application of any penalty or any restriction based on age 
or years of service in connection with any exercise of such 
right as provided under this clause shall be construed as a 
violation of this clause.
  ``(ii) Clause (i) shall apply only to so much of a 
nonforfeitable accrued benefit as consists of employer 
securities which are readily tradable on an established 
securities market.
  ``(B)(i) Except as provided in clause (ii), within 5 days 
after the date of any election by a participant or beneficiary 
allocating his or her nonforfeitable accrued benefit to any 
investment option provided under the plan, the plan 
administrator shall take such actions as are necessary to 
effectuate such allocation.
  ``(ii) In any case in which the plan provides for elections 
periodically during prescribed periods, the 5-day period 
described in clause (i) shall commence at the end of each such 
prescribed period.
  ``(C) 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 to the extent that any such limitation is consistent 
with this title and not more restrictive than is permitted 
under this title.
  ``(2) Not later than 30 days prior to the date on which the 
right of a participant under an individual account 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.''.
  (b) Amendments to the Internal Revenue Code of 1986.--
          (1) Excise tax on failure to permit diversification 
        of employer securities.--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 DEFINED CONTRIBUTION PLANS TO PERMIT 
                    DIVERSIFICATION OF EMPLOYER SECURITIES.

  ``(a) Imposition of Tax.--There is hereby imposed a tax on 
the failure of any defined contribution plan to meet the 
requirements of subsection (e) with respect to any participant 
or beneficiary.
  ``(b) Amount of Tax.--The amount of the tax imposed by 
subsection (a) on any failure with respect to any participant 
or beneficiary shall be $1,000 for each day for which the 
failure is not corrected.
  ``(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 meets the requirements of 
                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), 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) Requirements Relating to Diversification of Employer 
Security.--
          ``(1) In general.--The requirements of this 
        subsection are the requirements of paragraphs (2), (3), 
        and (4).
          ``(2) Right to direct investments.--
                  ``(A) In general.--Subject to subparagraph 
                (B), a plan meets the requirements of this 
                paragraph if, under the plan--
                          ``(i) any participant or beneficiary 
                        who is permitted to exercise control 
                        over assets in his or her account has 
                        the right to allocate all assets in his 
                        or her account (and any portion 
                        thereof) attributable to employee 
                        contributions to any investment option 
                        provided under the plan, and
                          ``(ii) any such participant who has 
                        completed 3 years of service (as 
                        defined in section 411(a)(5)) with the 
                        employer, or any such beneficiary of 
                        such a participant, has the right to 
                        allocate all assets in his or her 
                        account (and any portion thereof) 
                        attributable to employer contributions 
                        to any investment option provided under 
                        the plan.
                The application of any penalty or any 
                restriction based on age or years of service in 
                connection with any exercise of such right as 
                provided under this clause shall be construed 
                as a violation of this clause.
                  ``(B) Limitation to readily tradable employer 
                securities.--Subparagraph (A) shall apply only 
                to so much of a nonforfeitable accrued benefit 
                as consists of employer securities which are 
                readily tradable on an established securities 
                market.
          ``(3) Prompt compliance with directions to allocate 
        investments.--
                  ``(A) In general.--Except as provided in 
                subparagraph (B), a plan meets the requirements 
                of this paragraph if the plan provides that, 
                within 5 days after the date of any election by 
                a participant or beneficiary allocating his or 
                her nonforfeitable accrued benefit 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.
          ``(4) 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.
          ``(5) 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.''.
          (2) Clerical amendment.--The table of sections for 
        chapter 43 of such Code is amended by adding at the end 
        the following new item:

         ``Sec. 4980H. Failure of defined contribution plans to permit 
                  diversification of employer securities.''.

  (c) 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 section), 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. 202. EFFECTIVE DATE OF TITLE.

  (a) In General.--Subject to subsection (b), the amendments 
made by this title shall apply with respect to plan years 
beginning on or after January 1, 2003.
  (b) Delayed Effective Date for 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, 2004.

                   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--EXECUTIVE PARITY

SEC. 401. 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, and
                  ``(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.''

  (b) Effective Date.--The amendments made by this section 
shall apply to amounts deferred after the date of the enactment 
of this Act.

SEC. 402. INSIDER TRADES DURING PENSION FUND BLACKOUT PERIODS 
                    PROHIBITED.

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

                   TITLE V--INCREASED ACCOUNTABILITY

SEC. 501. 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. 502. LIABILITY FOR BREACH OF FIDUCIARY DUTY.

  (a) Liability for Participating In or Concealing Fiduciary 
Breach.--
          (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 employer 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) to an individual account plan shall inure to 
        the individual accounts of the affected participants or 
        beneficiaries, and
          ``(B) to a participant or beneficiary shall be 
        payable to the individual account plan on behalf ofsuch 
        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)''.
  (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 subsection (e) or (f)''.

SEC. 503. 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. 504. OFFICE OF PENSION PARTICIPANT ADVOCACY.

  (a) In General.--Title III of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 3001 et seq.) is amended by 
adding at the end the following:
          ``(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 of the House of Representatives and the 
        Committee on Health, Education, Labor, and Pensions 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 than 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 for title 
III of such Act is amended by adding at the end the following:

          ``Subtitle C--Office of Pension Participant Advocacy

``3051. Office of Pension Participant Advocacy.''.

  (c) Effective Date.--The amendment made by this section shall 
take effect on January 1, 2003.

SEC. 505. ADDITIONAL CRIMINAL PENALTIES.

  Section 501 of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1131) is amended--
          (1) by inserting ``(a)'' after ``Sec. 501.'';
          (2) by striking ``$5,000'' and inserting ``$50,000'' 
        and by striking ``$100,000'' and inserting 
        ``$500,000''; and
          (3) by adding at the end the following new 
        subsection:
  ``(b) Any person described in subsection (a) of 402 of the 
Employee Pension Freedom Act of 2002 who willfully violates 
such section or section 104(d) or causes an individual account 
plan to fail to meet the requirements of section 409A of the 
Internal Revenue Code of 1986 shall upon conviction be fined 
not more than $500,000 or imprisoned not more than one year, or 
both.''.

SEC. 506. 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.

     TITLE VI--INVESTMENT ADVICE FOR PARTICIPANTS AND BENEFICIARIES

SEC. 601. 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 
                onbehalf 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. 602. 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, 2002.

                     TITLE VII--GENERAL PROVISIONS

SEC. 701. 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, 2003.
  (b) Special Rule for Collectively Bargained Plans.--In the 
case of a plan maintained pursuant to 1 or more collective 
bargaining agreements between employee representatives and 1 or 
more employers ratified on or before the date of the enactment 
of this Act, subsection (a) shall be applied to benefits 
pursuant to, and individuals covered by, any such agreement by 
substituting for ``January 1, 2003'' the date of the 
commencement of the first plan year beginning on or after the 
earlier of--
          (1) the later of--
                  (A) January 1, 2004, or
                  (B) the date on which the last of such 
                collective bargaining agreements terminates 
                (determined without regard to any extension 
                thereof after the date of the enactment of this 
                Act), or
          (2) January 1, 2005.

SEC. 702. 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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