Pension Security Act of 2003 - Title I: Improvements in Pension Security - (Sec. 101) Amends the Employee Retirement Income Security Act of 1974 (ERISA) to require individual account plans (IAPs), including those with cash or deferred arrangements under Internal Revenue Code (IRC) section 401(k), to furnish quarterly pension benefit statements to plan participants and beneficiaries with rights to direct investments.
(Sec. 102) Provides that employers are not exempt from liability for failing in fiduciary duty with respect to IAP investments during blackout periods if such a period's imposition suspends, limits, or restricts participants' and beneficiaries' ability to direct or diversify their assets. Exempts an employer from liability for losses during a blackout period that result from participant or beneficiary control of assets prior to the period, if certain requirements are met, including considering the reasonableness of the period, providing notice, and acting solely in the interests of participants and beneficiaries in determining to enter it. Deems a participant or beneficiary to have exercised such prior control if, after reasonable notice of the change in investment options is given before the blackout period, their assets are transferred to plan investment options by their affirmative election or in the manner set forth in the notice. Treats as not imposed as a blackout period any limitations or restrictions on employee ability to divest or diversify assets, if such limitations or restrictions are disclosed to participants and beneficiaries through summary plan descriptions or materials describing specific investment alternatives under the plan.
(Sec. 103) Directs the Secretary of Labor to establish a program to provide informational and educational support for pension plan fiduciaries.
(Sec. 104) Amends ERISA and IRC to set forth diversification requirements for IAPs that hold employer securities readily tradable on an established market. (Exempts from such requirements employee stock ownership plans unless they hold employer stock attributable to employee elective deferrals or employer matching contributions.) Allows participants and beneficiaries, if employer securities are held in an IAP through employee contributions and elective deferrals, to divest such employer securities and reinvest the amounts in other options. Requires employers, if employer securities are held in an IAP through employer contributions, to allow participants and beneficiaries to divest such securities and reinvest in other options; but permits employers to opt to do so in either of the following ways under the plan: (1) after the benefit is based on three years of service as an employee; or (2) with respect to an allocation during a plan year, not more than three years after the end of that plan year. Requires such plans to offer at least: (1) three investment options other than employer securities; and (2) quarterly opportunities to choose among such options. Makes such requirements applicable to assets acquired on or after the effective date of this Act. Requires plans to provide participants and beneficiaries an opportunity to divest assets acquired before such effective date in 20 percent increments over a five-year transition period beginning in 2003, with all of such assets eligible for divestiture beginning in 2007.
(Sec. 105) Allows ERISA and IRC prohibited transaction exemptions under specified conditions, including certain notifications and disclosures, to: (1) a fiduciary adviser's providing certain investment advice to an employee benefit plan or to a participant or beneficiary of such plan; (2) sale, acquisition, or holding of securities or other property (including any lending of money or other extension of credit associated with these) pursuant to such advice; and (3) direct or indirect receipt of fees or other compensation by the fiduciary adviser or an affiliate in connection with providing such advice.
(Sec. 106) Directs the Secretary of Labor to study, and report to specified congressional committees on, the costs and benefits to participants and beneficiaries of requiring independent fiduciary consultants to advise plan fiduciaries in connection with IAPs.
(Sec. 107) Amends the IRC to provide that 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. Applies such provision to highly compensated employees only if such choice 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.
(Sec. 108) Amends the Securities Exchange Act of 1934 to prohibit certain insider trading during pension plan transaction suspension periods.
Title II: Additional Provisions - (Sec. 201) Amends the Retirement Protection Act of 1994 to make permanent an exemption from certain funding rules under the General Agreement on Tariffs and Trade (GATT) for retirement plans sponsored by companies in the interstate bus transportation industry (thereby having ERISA funding rules apply instead).
(Sec. 202) Directs the Secretaries of the Treasury and of Labor to allow: (1) one-participant retirement plans which meet certain requirements and have assets of $250,000 or less as of the close of the plan year to not file an annual return for that year; and (2) the filing of a simplified annual return for any retirement plan which covers fewer than 25 employees on the first day of a plan year and meets certain other requirements.
(Sec. 203) Directs the Secretary of the Treasury to continue to update and improve the Employee Plans Compliance Resolution System (or any successor program) giving special attention to specified factors. Authorizes the Secretary of the Treasury to effectuate these and any other employee plans correction policies, including waiving 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) Directs the Secretary of the Treasury to modify specified IRC rules relating to pension plan nondiscrimination, coverage, and line of business requirements to make them more flexible in certain respects, to the extent the Secretary deems appropriate.
(Sec. 205) Amends IRC and the Taxpayer Relief Act of 1997 to extend to all governmental plans a moratorium on the application of certain nondiscrimination rules applicable to State and local plans.
(Sec. 206) Amends ERISA to direct the Secretary of the Treasury to modify specified regulations to require: (1) that the applicable distribution notice period be not more than 180 (currently 90) and not less than 30 days before the date distribution commences; and (2) the description of a participant's right, if any, to defer receipt of a distribution include a description of the consequences of failing to defer such receipt.
(Sec. 207) Allows summary annual reports on employee benefit plans to be disseminated through electronic means or other new technologies.
(Sec. 208) Revises ERISA with respect to the National Summit on Retirement Savings.
(Sec. 209) Directs the Pension Benefit Guaranty Corporation (PBGC) to issue missing participant rules for multiemployer plans. Allows the transfer of missing participants' benefits to the PBGC upon plan termination in the case of certain plans not subject to the PBGC termination insurance program.
(Sec. 210) Reduces PBGC premiums for new plans of small employers. Sets the flat-rate premium at five dollars per plan participant for the first five years of a new single-employer plan of an employer with 100 or fewer employees.
(Sec. 211) Reduces PBGC additional premiums for new and small plans. Phases in, over a five-year period, the variable-rate premium for a new defined benefit plan. Limits, for a plan maintained by an employer with 25 or fewer employees, the variable-rate premium to no more than five dollars times the number of plan participants at the end of the preceding year.
(Sec. 212) Authorizes the PBGC to pay interest on premium overpayment refunds.
(Sec. 213) Revises rules for substantial owner benefits in terminated plans. Reduces the phase-in periods for guaranteed benefits for a ten-percent or more owner (substantial owner) in the case of plan termination. Applies the allocation of asset rules to a substantial owner with less than 50 percent ownership in the same manner as other participants.
(Sec. 214) Requires the Secretary of Labor to revise specified regulations to require more timely notification of suspension of pension benefits to recipients who return to work for an employer from whose pension plan they are receiving a retirement annuity.
(Sec. 215) Directs the Secretary of Labor to study and report on: (1) model small employer group plans; and (2) the effect of this Act on pension plan coverage.
(Sec. 216) Revises the formula for determining the interest rate range for additional funding requirements for pension plans by the PBGC.
Title III: General Provisions - (Sec. 301) Sets forth provisions relating to certain amendments to pension plans or annuity contracts.
[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1000 Introduced in House (IH)]
108th CONGRESS
1st Session
H. R. 1000
To amend title I of the Employee Retirement Income Security Act of 1974
and the Internal Revenue Code of 1986 to provide additional protections
to participants and beneficiaries in individual account plans from
excessive investment in employer securities and to promote the
provision of retirement investment advice to workers managing their
retirement income assets.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 27, 2003
Mr. Boehner (for himself, Mr. Sam Johnson of Texas, Mr. Greenwood, Mr.
Gibbons, Mr. Keller, Mr. Wilson of South Carolina, Mr. Norwood, Mr.
Platts, Mr. Tiberi, Mr. Shays, Mr. Simmons, Mr. McKeon, Mrs. Biggert,
Mr. Frelinghuysen, Mr. Isakson, Ms. Ginny Brown-Waite of Florida, Mr.
LaTourette, Ms. Norton, Mr. Souder, Mr. Sensenbrenner, Mr. English, Mr.
Green of Wisconsin, Mr. Herger, Mr. Weldon of Pennsylvania, Mr.
Beauprez, Mr. Feeney, Mr. Ney, Mr. Ballenger, Mr. Sweeney, Mr. Brady of
Texas, Mr. Burr, Mrs. Musgrave, Mr. DeMint, Mr. Crane, Ms. Hart, Mr.
Oxley, Mr. Upton, Mrs. Blackburn, Mr. Kline, Mr. Cole, Mr. Castle, Mr.
Peterson of Pennsylvania, Mr. Tancredo, Mr. Rogers of Michigan, Mr.
Kolbe, Mr. Janklow, Mr. Reynolds, Mr. Rehberg, Mr. Hill, Mr. Fossella,
Mr. Boozman, Mr. Culberson, and Mr. Walsh) introduced the following
bill; which was referred to the Committee on Education and the
Workforce, and in addition to the Committee on Ways and Means, for a
period to be subsequently determined by the Speaker, in each case for
consideration of such provisions as fall within the jurisdiction of the
committee concerned
_______________________________________________________________________
A BILL
To amend title I of the Employee Retirement Income Security Act of 1974
and the Internal Revenue Code of 1986 to provide additional protections
to participants and beneficiaries in individual account plans from
excessive investment in employer securities and to promote the
provision of retirement investment advice to workers managing their
retirement income assets.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Pension Security
Act of 2003''.
(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. Inapplicability of relief from fiduciary liability during
blackout periods.
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. Effective dates 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.
TITLE III--GENERAL PROVISIONS
Sec. 301. Provisions relating to plan amendments.
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 individual who is a plan participant or
beneficiary and who has 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)(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, at least once each year, provides the
participant with notice, at the participant's last known address, 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)(1)(A)(iii) in the case of applicable individual
account plans shall include (together with the information required in
subsection (a)) the following:
``(A) the value of each investment to which assets in the
individual account have been allocated, determined as of the
most recent valuation date under the plan, including the value
of any assets held in the form of employer securities, without
regard to whether such securities were contributed by the plan
sponsor or acquired at the direction of the plan or of the
participant or beneficiary,
``(B) an explanation, written in a manner calculated to be
understood by the average plan participant, of any limitations
or restrictions on the right of the participant or beneficiary
to direct an investment, and
``(C) 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 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 pension
plan with respect to which the following requirements are met:
``(i) on the first day of the plan year--
``(I) the plan covered only one individual (or the
individual and the individual's spouse) and the
individual owned 100 percent of the plan sponsor
(whether or not incorporated), or
``(II) the plan covered only one or more partners
(or partners and their spouses) in the plan sponsor;
``(ii) the plan meets the minimum coverage requirements of
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) the plan does not provide benefits to anyone except
the individual (and the individual's spouse) or the partners
(and their spouses);
``(iv) the plan 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) the plan 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 ``(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 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 180 days after the date of the enactment of this
Act, 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 with respect to which the following
requirements are met:
``(i) on the first day of the plan year--
``(I) the plan covered only one
individual (or the individual and the
individual's spouse) and the individual
owned 100 percent of the plan sponsor
(whether or not incorporated), or
``(II) the plan covered only one or
more partners (or partners and their
spouses) in the plan sponsor;
``(ii) the plan meets the minimum coverage
requirements of 410(b) without being combined
with any other plan of the business that covers
the employees of the business;
``(iii) the plan does not provide benefits
to anyone except the individual (and the
individual's spouse) or the partners (and their
spouses);
``(iv) the plan 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) the plan 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. INAPPLICABILITY OF RELIEF FROM FIDUCIARY LIABILITY DURING
BLACKOUT PERIODS.
(a) In General.--Section 404(c) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1104(c)) is amended by adding at the
end the following new paragraph:
``(4)(A) Paragraph (1)(B) shall not apply in connection with the
direction or diversification of assets credited to the account of any
participant or beneficiary during a blackout period if, by reason of
the imposition of such blackout period, the ability of such participant
or beneficiary to direct or diversify such assets is suspended,
limited, or restricted.
``(B) If a fiduciary authorizing a blackout period meets the
requirements of this title in connection with authorizing such blackout
period, such fiduciary shall not be liable under this title for any
loss occurring during the blackout period as a result of any exercise
by the participant or beneficiary of control over assets in his or her
account prior to the blackout period. Matters to be considered in
determining whether such fiduciary has met the requirements of this
title include whether such fiduciary--
``(i) has considered the reasonableness of the expected
length of the blackout period,
``(ii) has provided the notice required under section
101(i)(2), and
``(iii) has acted in accordance with the requirements of
subsection (a) in determining whether to enter into the
blackout period.
``(C) If a blackout period arises in connection with a change in
the investment options offered under the plan, a participant or
beneficiary shall be deemed to have exercised control over the assets
in his or her account prior to the blackout period, if, after
reasonable notice of the change in investment options is given to such
participant or beneficiary before such blackout period, assets in the
account of the participant or beneficiary are transferred--
``(i) to plan investment options in accordance with the
affirmative election of the participant or beneficiary, or
``(ii) in any case in which there is no such election, in
the manner set forth in such notice.
``(D) Any imposition of any limitation or restriction that may
govern the frequency of transfers between investment vehicles shall not
be treated as the imposition of a blackout period 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.
``(E) For purposes of this paragraph, the term `blackout period'
has the meaning given such term by section 101(i)(7).''.
(b) Guidance.--The Secretary of Labor shall, on or before December
31, 2004, issue interim final regulations providing guidance on how
plan sponsors or any other affected fiduciaries can satisfy their
fiduciary responsibilities during any blackout period during which the
ability of a participant or beneficiary to direct the investment of
assets in his or her individual account is suspended.
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. Such program shall provide information concerning the practices
that define prudent investment procedures for plan fiduciaries.
Information provided under the program shall address the relevant
investment considerations for defined benefit and defined contribution
plans, including investment in employer securities by such plans. In
developing such program, the Secretary shall solicit information from
the public, including investment education professionals.''.
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 referred to in paragraph
(5)(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 if there is no class of stock
issued by the employer (or by a corporation which is an
affiliate of the employer (as defined in section 407(d)(7)))
that is readily tradable on an established securities market
(or in such other circumstances as may be determined jointly by
the Secretary of Labor and the Secretary of the Treasury in
regulations).
``(7) Transition rule.--
``(A) In general.--In the case of any individual
account plan which, on the first day of the first plan
year to which this subsection applies, holds employer
securities of any class that were acquired before such
date and on which there is a restriction on
diversification otherwise precluded by this subsection,
this subsection shall apply to such securities of such
class held in any plan year only with respect to the
number of such securities equal to the applicable
percentage of the total number of such securities of
such class held on such date.
``(B) Applicable percentage.--For purposes of
subparagraph (A), the applicable percentage shall be as
follows:
``Plan years for which provisions Applicable percentage:
are effective:
1st plan year................................ 20 percent
2nd plan year................................ 40 percent
3rd plan year................................ 60 percent
4th plan year................................ 80 percent
5th plan year or thereafter.................. 100 percent.
``(C) Elective deferrals treated as separate plan
not individual account plan.--For purposes of
subparagraph (A), the applicable percentage shall be
100 percent with respect to--
``(i) employee contributions to a plan
under which any portion attributable to
elective deferrals is treated as a separate
plan under section 407(b)(2) as of the date of
the enactment of this paragraph, and
``(ii) such elective deferrals.
``(D) Coordination with prior elections.--In any
case in which a divestiture of investment in employer
securities of any class held by an employee stock
ownership plan prior to the effective date of this
subsection was undertaken pursuant to other applicable
Federal law prior to such date, the applicable
percentage (as determined without regard to this subparagraph) in
connection with such securities shall be reduced to the extent
necessary to account for the amount to which such election applied.
``(8) Regulations.--The Secretary of the Treasury shall
prescribe regulations under this subsection in consultation
with the Secretary of Labor.''.
(b) Amendments to the Internal Revenue Code of 1986.--
(1) In general.--Section 401(a) of the Internal Revenue
Code of 1986 (relating to requirements for qualification) is
amended by inserting after paragraph (34) the following new
paragraph:
``(35) Diversification requirements for defined
contribution plans that hold employer securities.--
``(A) In general.--An applicable defined
contribution plan shall meet the requirements of
subparagraphs (B) and (C).
``(B) Employee contributions and elective deferrals
invested in employer securities.--In the case of the
portion of the account attributable to employee
contributions and elective deferrals which is invested
in employer securities, a plan meets the requirements
of this subparagraph if each applicable individual in
such plan may elect to direct the plan to divest any
such securities in the individual's account and to
reinvest an equivalent amount in other investment
options which meet the requirements of subparagraph
(D).
``(C) Employer contributions invested in employer
securities.--
``(i) In general.--In the case of the
portion of the account attributable to employer
contributions (other than elective deferrals to
which subparagraph (B) applies) which is
invested in employer securities, a plan meets
the requirements of this subparagraph if, under
the plan--
``(I) each applicable individual
with a benefit based on 3 years of
service may elect to direct the plan to
divest any such securities in the
individual's account and to reinvest an
equivalent amount in other investment
options which meet the requirements of
subparagraph (D), or
``(II) with respect to any employer
security allocated to an applicable
individual's account during any plan
year, such applicable individual may
elect to direct the plan to divest such
employer security after a date which is
not later than 3 years after the end of
such plan year and to reinvest an
equivalent amount in other investment
options which meet the requirements of
subparagraph (D).
``(ii) Applicable individual with benefit
based on 3 years of service.--For purposes of
clause (i), an applicable individual has a
benefit based on 3 years of service if such
individual would be an applicable individual if
only participants in the plan who have
completed at least 3 years of service (as
determined under section 411(a)) were referred
to in subparagraph (E)(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 if there is no
class of stock issued by the employer that is readily
tradable on an established securities market (or in
such other circumstances as may be determined jointly
by the Secretary of the Treasury and the Secretary of
Labor in regulations).
``(G) Transition rule.--
``(i) In general.--In the case of any
defined contribution plan which, on the
effective date of this subsection, holds
employer securities of any class that were
acquired before such date and on which there is
a restriction on diversification otherwise
precluded by this paragraph, this paragraph
shall apply to such securities of such class
held in any plan year only with respect to the
number of such securities equal to the
applicable percentage of the total number of
such securities of such class held on such
date.
``(ii) Applicable percentage.--For purposes
of clause (i), the applicable percentage shall
be as follows:
``Plan years for which provisions Applicable percentage:
are effective:
1st plan year................................ 20 percent.
2nd plan year................................ 40 percent.
3rd plan year................................ 60 percent.
4th plan year................................ 80 percent.
5th plan year or thereafter.................. 100 percent.
``(iii) Elective deferrals treated as
separate plan not individual account plan.--For
purposes of clause (i), the applicable
percentage shall be 100 percent with respect
to--
``(I) employee contributions to a
plan under which any portion
attributable to elective deferrals is
treated as a separate plan under
section 407(b)(2) of the Employee
Retirement Income Security Act of 1974
as of the date of the enactment of this
paragraph, and
``(II) such elective deferrals.
``(iv) Contributions held within an esop.--
In the case of contributions (other than
elective deferrals and employee contributions)
held within an employee stock ownership plan,
in the case of the 1st and 2nd plan years
referred to in the table in clause (ii), the
applicable percentage shall be the greater of
the amount determined under clause (ii) or the
percentage determined under paragraph (28)
(determined as if paragraph (28) applied to a
plan described in this paragraph).
``(v) Coordination with prior elections
under paragraph (28).--In any case in which a
divestiture of investment in employer
securities of any class held by an employee
stock ownership plan prior to the effective
date of this paragraph was undertaken pursuant
to an election under paragraph (28) prior to
such date, the applicable percentage (as
determined without regard to this clause) in
connection with such securities shall be
reduced to the extent necessary to account for
the amount to which such election applied.
``(H) Regulations.--The Secretary shall prescribe
regulations under this paragraph in consultation with
the Secretary of Labor.''.
(2) Conforming amendments.--
(A) Section 401(a)(28) of such Code is amended by
adding at the end the following new subparagraph:
``(D) Application.--This paragraph shall not apply
to a plan to which paragraph (35) applies.''.
(B) Section 409(h)(7) of such Code is amended by
inserting before the period at the end ``or
subparagraph (B) or (C) of section 401(a)(35)''.
(C) Section 4980(c)(3)(A) of such Code is amended
by striking ``if--'' and all that follows and inserting
``if the requirements of subparagraphs (B), (C), and
(D) are met.''.
(c) Effective Date.--
(1) In general.--Except as provided in paragraph (2) and
section 108, the amendments made by this section shall apply to
plan years beginning after December 31, 2003, 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) or
a savings association (as defined in section
3(b)(1) of the Federal Deposit Insurance Act
(12 U.S.C. 1813(b)(1))), but only if the advice
is provided through a trust department of the
bank or similar financial institution or
savings association 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)(i), in any case in which--
``(A) the investment of assets of the plan is
subject to the direction of plan participants or
beneficiaries,
``(B) the advice is provided to the plan or a
participant or beneficiary of the plan by a fiduciary
adviser in connection with any sale, acquisition, or
holding of a security or other property for purposes of
investment of plan assets, and
``(C) the requirements of subsection (f)(7)(B) are
met in connection with the provision of the advice.''.
(2) Allowed transactions and requirements.--Subsection (f)
of such section 4975 (relating to other definitions and special
rules) is amended by adding at the end the following new
paragraph:
``(7) Provisions relating to investment advice provided by
fiduciary advisers.--
``(A) Transactions allowable in connection with
investment advice provided by fiduciary advisers.--The
transactions referred to in subsection (d)(16), in
connection with the provision of investment advice by a
fiduciary adviser, are the following:
``(i) the provision of the advice to the
plan, participant, or beneficiary;
``(ii) the sale, acquisition, or holding of
a security or other property (including any
lending of money or other extension of credit
associated with the sale, acquisition, or
holding of a security or other property)
pursuant to the advice; and
``(iii) the direct or indirect receipt of
fees or other compensation by the fiduciary
adviser or an affiliate thereof (or any
employee, agent, or registered representative
of the fiduciary adviser or affiliate) in
connection with the provision of the advice or
in connection with a sale, acquisition, or
holding of a security or other property
pursuant to the advice.
``(B) Requirements relating to provision of
investment advice by fiduciary advisers.--The
requirements of this subparagraph (referred to in
subsection (d)(16)(C)) are met in connection with the
provision of investment advice referred to in
subsection (e)(3)(B), provided to a plan or a
participant or beneficiary of a plan by a fiduciary
adviser with respect to the plan in connection with any
sale, acquisition, or holding of a security or other
property for purposes of investment of amounts held by
the plan, if--
``(i) in the case of the initial provision
of the advice with regard to the security or
other property by the fiduciary adviser to the
plan, participant, or beneficiary, the
fiduciary adviser provides to the recipient of
the advice, at a time reasonably
contemporaneous with the initial provision of
the advice, a written notification (which may
consist of notification by means of electronic
communication)--
``(I) of all fees or other
compensation relating to the advice
that the fiduciary adviser or any
affiliate thereof is to receive
(including compensation provided by any
third party) in connection with the
provision of the advice or in
connection with the sale, acquisition,
or holding of the security or other
property,
``(II) of any material affiliation
or contractual relationship of the
fiduciary adviser or affiliates thereof
in the security or other property,
``(III) of any limitation placed on
the scope of the investment advice to
be provided by the fiduciary adviser
with respect to any such sale,
acquisition, or holding of a security
or other property,
``(IV) of the types of services
provided by the fiduciary adviser in
connection with the provision of
investment advice by the fiduciary
adviser,
``(V) that the adviser is acting as
a fiduciary of the plan in connection
with the provision of the advice, and
``(VI) that a recipient of the
advice may separately arrange for the
provision of advice by another adviser,
that could have no material affiliation
with and receive no fees or other
compensation in connection with the
security or other property,
``(ii) the fiduciary adviser provides
appropriate disclosure, in connection with
the sale, acquisition, or holding of the security or other property, in
accordance with all applicable securities laws,
``(iii) the sale, acquisition, or holding
occurs solely at the direction of the recipient
of the advice,
``(iv) the compensation received by the
fiduciary adviser and affiliates thereof in
connection with the sale, acquisition, or
holding of the security or other property is
reasonable, and
``(v) the terms of the sale, acquisition,
or holding of the security or other property
are at least as favorable to the plan as an
arm's length transaction would be.
``(C) Standards for presentation of information.--
The notification required to be provided to
participants and beneficiaries under subparagraph
(B)(i) shall be written in a clear and conspicuous
manner and in a manner calculated to be understood by
the average plan participant and shall be sufficiently
accurate and comprehensive to reasonably apprise such
participants and beneficiaries of the information
required to be provided in the notification.
``(D) Exemption conditioned on making required
information available annually, on request, and in the
event of material change.--The requirements of
subparagraph (B)(i) shall be deemed not to have been
met in connection with the initial or any subsequent
provision of advice described in subparagraph (B) to
the plan, participant, or beneficiary if, at any time
during the provision of advisory services to the plan,
participant, or beneficiary, the fiduciary adviser
fails to maintain the information described in
subclauses (I) through (IV) of subparagraph (B)(i) in
currently accurate form and in the manner required by
subparagraph (C), or fails--
``(i) to provide, without charge, such
currently accurate information to the recipient
of the advice no less than annually,
``(ii) to make such currently accurate
information available, upon request and without
charge, to the recipient of the advice, or
``(iii) in the event of a material change
to the information described in subclauses (I)
through (IV) of subparagraph (B)(i), to
provide, without charge, such currently
accurate information to the recipient of the
advice at a time reasonably contemporaneous to
the material change in information.
``(E) Maintenance for 6 years of evidence of
compliance.--A fiduciary adviser referred to in
subparagraph (B) who has provided advice referred to in
such subparagraph shall, for a period of not less than
6 years after the provision of the advice, maintain any
records necessary for determining whether the
requirements of the preceding provisions of this
paragraph and of subsection (d)(16) have been met. A
transaction prohibited under subsection (c)(1) shall
not be considered to have occurred solely because the
records are lost or destroyed prior to the end of the
6-year period due to circumstances beyond the control
of the fiduciary adviser.
``(F) Exemption for plan sponsor and certain other
fiduciaries.--A plan sponsor or other person who is a
fiduciary (other than a fiduciary adviser) shall not be
treated as failing to meet the requirements of this
section solely by reason of the provision of investment
advice referred to in subsection (e)(3)(B) (or solely
by reason of contracting for or otherwise arranging for
the provision of the advice), if--
``(i) the advice is provided by a fiduciary
adviser pursuant to an arrangement between the
plan sponsor or other fiduciary and the
fiduciary adviser for the provision by the
fiduciary adviser of investment advice referred
to in such section,
``(ii) the terms of the arrangement require
compliance by the fiduciary adviser with the
requirements of this paragraph,
``(iii) the terms of the arrangement
include a written acknowledgment by the
fiduciary adviser that the fiduciary adviser is
a fiduciary of the plan with respect to the
provision of the advice, and
``(iv) the requirements of part 4 of
subtitle B of title I of the Employee
Retirement Income Security Act of 1974 are met
in connection with the provision of such
advice.
``(G) Definitions.--For purposes of this paragraph
and subsection (d)(16)--
``(i) Fiduciary adviser.--The term
`fiduciary adviser' means, with respect to a
plan, a person who is a fiduciary of the plan
by reason of the provision of investment advice
by the person to the plan or to a participant
or beneficiary and who is--
``(I) registered as an investment
adviser under the Investment Advisers
Act of 1940 (15 U.S.C. 80b-1 et seq.)
or under the laws of the State in which
the fiduciary maintains its principal
office and place of business,
``(II) a bank or similar financial
institution referred to in subsection
(d)(4) or a savings association (as
defined in section 3(b)(1) of the
Federal Deposit Insurance Act (12
U.S.C. 1813(b)(1))), but only if the
advice is provided through a trust
department of the bank or similar
financial institution or savings
association 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, 2003.
SEC. 108. EFFECTIVE DATES AND RELATED RULES.
(a) In General.--Except as otherwise provided in this title or in
subsection (b), the amendments made by this Act shall apply with
respect to plan years beginning on or after the general effective date.
(b) General Effective Date.--For purposes of this section, the term
``general effective date'' means the date which is 1 year after the
date of the enactment of this Act.
(c) 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 ``the general effective
date'' the date of the commencement of the first plan year beginning on
or after the earlier of--
(1) the later of--
(A) the date which is 1 year after the general
effective date, 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) the date which is 2 years after the general effective
date.
(d) Amendments Relating to Investment Advice.--The amendments made
by section 105 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, 2005.
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, 2002.
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 with respect to which the
following requirements are met:
(A) on the first day of the plan year--
(i) the plan covered only one individual
(or the individual and the individual's spouse)
and the individual owned 100 percent of the
plan sponsor (whether or not incorporated), or
(ii) the plan covered only one or more
partners (or partners and their spouses) in the
plan sponsor;
(B) the plan meets the minimum coverage
requirements of 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) the plan does not provide benefits to anyone
except the individual (and the individual's spouse) or
the partners (and their spouses);
(D) the plan 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) the plan 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,
2003.
(b) Simplified Annual Filing Requirement for Plans With Fewer Than
25 Employees.--In the case of plan years beginning after December 31,
2004, 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, 2004.
(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,
2004.
(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, 2004, 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, 2003.
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, 2003.
(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, 2003.
(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, 2003.
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 ``2006
and 2010'';
(2) 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'';
(3) in subsection (e)(3)(B), by striking ``January 31,
1998'' and inserting ``2 months before the convening of each
summit;'';
(4) in subsection (f)(1)(C), by inserting ``, no later than
60 days prior to the date of the commencement of the National
Summit,'' after ``comment'';
(5) 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
(6) 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 amendments made by this section shall
apply to distributions made after final regulations implementing
subsections (c) and (d) of section 4050 of the Employee Retirement
Income Security Act of 1974 (as added by subsection (a)), respectively,
are prescribed.
SEC. 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, 2003.
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, 2003.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply to plan years beginning after December 31, 2003.
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, 2003, 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, 2004.
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, 2003.
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.--
(1) General rule.--Subject to paragraph (2), 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.
(2) Election.--The plan sponsor or plan administrator of a
plan may elect whether to have the amendments made by
subsections (a) and (b) apply. Such election shall be made in
such manner and at such time as the Secretary of the Treasury
or his delegate may prescribe and, once made, may not be
revoked. An election to apply such amendments shall not be
treated as a prohibited change in actuarial assumptions for
purposes of reports required to be filed with the Secretary of
Labor, the Secretary of Treasury, or the Pension Benefit
Guaranty Corporation.
TITLE III--GENERAL PROVISIONS
SEC. 301. 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 section 101,
102, 103, or 104, by title II, or by 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 any such section, title II, or such title VI, and
(B) on or before the last day of the first plan
year beginning on or after January 1, 2006.
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 ``2008'' for ``2006''.
(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.
<all>
House Committee on Ways and Means Granted an extension for further consideration ending not later than March 28, 2003.
House Committee on Ways and Means Granted an Extention for Further Consideration Ending not Later Than May 9, 2003..
House Committee on Ways and Means Granted an extension for further consideration ending not later than May 9, 2003.
Committee on Ways and Means discharged.
Committee on Ways and Means discharged.
Placed on the Union Calendar, Calendar No. 50.
Rules Committee Resolution H. Res. 230 Reported to House. Rule provides for consideration of H.R. 1000 with 1 hour and 20 minutes of general debate. Previous question shall be considered as ordered without intervening motions except motion to recommit with or without instructions. The amendment recommended by the Committee on Education and the Workforce now printed in the bill shall be considered as adopted. All points of order against the bill, as amended, are waived. Measure will be considered read. A specified amendment is in order.
Rule H. Res. 230 passed House.
Considered under the provisions of rule H. Res. 230. (consideration: CR H4040-4092)
Rule provides for consideration of H.R. 1000 with 1 hour and 20 minutes of general debate. Previous question shall be considered as ordered without intervening motions except motion to recommit with or without instructions. The amendment recommended by the Committee on Education and the Workforce now printed in the bill shall be considered as adopted. All points of order against the bill, as amended, are waived. Measure will be considered read. A specified amendment is in order.
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DEBATE - The House proceeded with one hour and 20 minutes of debate on H.R. 1000, as amended by the rule.
DEBATE - Pursuant to H. Res. 230 the House proceeded with 60 minutes of debate on the Andrews substitute amendment.
The previous question was ordered on the amendment and the bill as amended pursuant to the rule.
Mr. Miller, George moved to recommit with instructions to Education and the Workforce. (consideration: CR H4089-4092; text: CR H4089-4090)
The previous question on the motion to recommit with instructions was ordered without objection.
On motion to recommit with instructions Failed by the Yeas and Nays: 202 - 226 (Roll no. 188).
Roll Call #188 (House)Passed/agreed to in House: On passage Passed by the Yeas and Nays: 271 - 157 (Roll no. 189).(text: CR H4050-4059)
Roll Call #189 (House)On passage Passed by the Yeas and Nays: 271 - 157 (Roll no. 189). (text: CR H4050-4059)
Roll Call #189 (House)Motion to reconsider laid on the table Agreed to without objection.
Received in the Senate and Read twice and referred to the Committee on Health, Education, Labor, and Pensions.