[House Report 108-98]
[From the U.S. Government Publishing Office]
108th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 108-98
======================================================================
PROVIDING FOR CONSIDERATION OF H.R. 1000, PENSION SECURITY ACT OF 2003
_______
May 13, 2003.--Referred to the House Calendar and ordered to be printed
_______
Mr. Linder, from the Committee on Rules, submitted the following
R E P O R T
[To accompany H. Res. 230]
The Committee on Rules, having had under consideration
House Resolution 230, by a nonrecord vote, report the same to
the House with the recommendation that the resolution be
adopted.
SUMMARY OF PROVISIONS OF THE RESOLUTION
The resolution provides for the consideration of H.R. 1000,
the Pension Security Act of 2003, under a modified closed rule.
The rule provides one hour and 20 minutes of debate in the
House, with 40 minutes equally divided and controlled by the
chairman and ranking minority member of the Committee on
Education and the Workforce, and 40 minutes equally divided and
controlled by the chairman and ranking minority member of the
Committee on Ways and Means.
The rule provides that the amendment recommended by the
Committee on Education and the Workforce now printed in the
bill shall be considered as adopted. The rule waives all points
of order against the bill, as amended.
The rule makes in order the amendment printed in this
report, if offered by Representative George Miller of
California or his designee, which shall be considered as read,
and shall be separately debatable for one hour equally divided
and controlled by the proponent and an opponent. The rule
waives all points of order against the amendment printed in
this report.
Finally, the rule provides one motion to recommit with or
without instructions.
The waiver of all points of order against the bill includes
a waiver of clause 5(a) of rule XXI (prohibiting the inclusion
of a tax or tariff in a measure not reported by a committee
having jurisdiction over such measures), which is necessary
because the Committee on Ways and Means did not report H.R.
1000.
COMMITTEE VOTES
Pursuant to clause 3(b) of House rule XIII the results of
each record vote on an amendment or motion to report, together
with the names of those voting for and against, are printed
below:
Rules Committee record vote No. 70
Date: May 13, 2003.
Measure: H.R. 1000, Pension Security Act of 2003.
Motion by: Mrs. Slaughter.
Summary of motion: To make in order the amendment offered
by Representative Sanders which requires companies that convert
to cash balance pension plans to allow workers who are at least
40 years old or have at least 10 years of service the choice to
remain in the traditional defined benefit pension plan.
Requires the Treasury Department to immediately withdraw
proposed regulations that would allow companies to convert to
cash balance plans.
Results: Defeated 4 to 9.
Vote by Members: Goss--Nay; Linder--Nay; Pryce--Nay; Diaz-
Balart--Nay; Hastings (WA)--Nay; Myrick--Nay; Sessions--Nay;
Reynolds--Nay; Frost--Yea; Slaughter--Yea; McGovern--Yea;
Hastings (FL)--Yea; Dreier--Nay.
Rules Committee record vote No. 71
Date: May 13, 2003.
Measure: H.R. 1000, Pension Security Act of 2003.
Motion by: Mr. McGovern.
Summary of motion: To make in order the amendment offered
by Representative Visclosky which increases rights now held by
workers by expanding their role in the management of their
pensions. Requires single-employer pension plans to have
representatives of employees or employee organizations serve as
joint trustees.
Results: Defeated 4 to 9.
Vote by Members: Goss--Nay; Linder--Nay; Pryce--Nay; Diaz-
Balart--Nay; Hastings (WA)--Nay; Myrick--Nay; Sessions--Nay;
Reynolds--Nay; Frost--Yea; Slaughter--Yea; McGovern--Yea;
Hastings (FL)--Yea; Dreier--Nay.
SUMMARY OF THE AMENDMENT MADE IN ORDER
(Summary derived from information provided by amendment
sponsor.)
Miller, George (CA): Amendment in the Nature of a
Substitute. Requires executive pensions to be subject to the
same pension rules that apply to other workers. Changes
provisions that allow special executive pension plans to escape
taxation, to receive special protection against creditors, and
to end-run pension laws that require wide employee
participation at the company. Requires that executive plans be
subject to the same uniform and fair vesting and contribution
limits that apply to rank-and-file employees. Requires
companies changing from traditional pension plans to cash
balance plans to allow older workers the choice of remaining in
the old plan or joining the new plan. Requires executive
compensation packages including pensions to be approved by the
board of directors, and requires companies to notify
shareholders and employees of any new executive pensions (in
plan language), and of any additional benefits to executives
100 days before their adoption. Requires employers negotiating
with its employees over wages and benefits to disclose directly
to employees any changes (or proposed changes) in top executive
pensions, health, or life insurance, and other substantial job
perks, with a penalty for failure to disclose. Gives employees
greater protections when a company declares bankruptcy, and
denies executives preferential protection against creditors.
Imposes an excise tax on executive golden parachutes when they
leave behind companies with plummeting shareholder value or are
facing bankruptcy proceedings. Prevents firms from deducting
more than $1 million in executive performance-based
compensation if it is obtained through manipulation of the
company's pension funds. Imposes tax penalties on executives
who sell stock they acquire from stock options if the sale
would violate restrictions on the sale of corporate stock that
rank-and-file employees face in their 401(k) plans. (One Hour)
TEXT OF THE AMENDMENT MADE IN ORDER
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Pension
Fairness Act of 2003''.
(b) Table of Contents.--The table of contents is as follows:
Sec. 1. Short title and table of contents.
TITLE I--IMPROVEMENTS IN DISCLOSURE
Sec. 101. Pension benefit information.
Sec. 102. Immediate warning of excessive stock holdings.
Sec. 103. Report to participants and beneficiaries of trades in employer
securities.
Sec. 104. Enforcement of information and disclosure requirements.
TITLE II--FREEDOM TO MAKE INVESTMENT DECISIONS WITH PLAN ASSETS.
Sec. 201. Amendments to the Internal Revenue Code of 1986.
Sec. 202. Amendments to the Employee Retirement Income Security Act of
1974.
Sec. 203. Recommendations relating to non-publicly traded stock.
Sec. 204. Effective date of title.
TITLE III--EMPLOYEE REPRESENTATION
Sec. 301. Participation of participants in trusteeship of individual
account plans.
TITLE IV--INCREASED ACCOUNTABILITY
Sec. 401. Bonding or insurance adequate to protect interest of
participants and beneficiaries.
Sec. 402. Liability for breach of fiduciary duty.
Sec. 403. Preservation of rights or claims.
Sec. 404. Office of pension participant advocacy.
Sec. 405. Study regarding insurance system for individual account plans.
Sec. 406. Excise tax on failure of pension plans to provide notice of
transaction restriction periods.
TITLE V--INVESTMENT ADVICE FOR PARTICIPANTS AND BENEFICIARIES
Sec. 501. Independent investment advice.
Sec. 502. Tax treatment of qualified retirement planning services.
TITLE VI--PARITY IN EMPLOYEE BENEFITS
Sec. 601. Inclusion in gross income of funded deferred compensation of
corporate insiders if corporation funds defined contribution
plan with employer stock.
Sec. 602. Performance-based compensation exception to $1,000,000
limitation on deductible compensation not to apply in certain
cases.
TITLE VII--PROTECTION OF RETIREMENT EXPECTATIONS
Sec. 701. Protection of participants from conversions to hybrid defined
benefit plans.
TITLE VIII--TREATMENT OF CORPORATE INSIDERS
Sec. 801. Special rules for executive perks and retirement benefits.
Sec. 802. Golden parachute excise tax to apply to deferred compensation
paid by corporation after major decline in stock value or
corporation declares bankruptcy.
Sec. 803. Adequate disclosure regarding executive compensation packages.
TITLE IX--MISCELLANEOUS PROVISIONS
Sec. 901. Corporate deduction for reinvested ESOP dividends subject to
deductible limits.
Sec. 902. Credit for elective deferrals and IRA contributions by certain
individuals made permanent (saver's tax credit).
Sec. 903. Authority to rescind transfers to plans made for the benefit
of highly compensated employees.
TITLE X--GENERAL PROVISIONS
Sec. 1001. General effective date.
Sec. 1002. Plan amendments.
TITLE I--IMPROVEMENTS IN DISCLOSURE
SEC. 101. PENSION BENEFIT INFORMATION.
(a) Pension Benefit Statements Required on Periodic Basis.--
(1) In general.--Subsection (a) of section 105 of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1025) is amended--
(A) by striking ``shall furnish to any plan
participant or beneficiary who so requests in
writing,'' and inserting ``shall furnish at
least once every 3 years, in the case of a
participant in a defined benefit plan who has
attained age 35, and annually, in the case of
an individual account plan, to each plan
participant, and shall furnish to any plan
participant or beneficiary who so requests,'',
and
(B) by adding at the end the following flush
sentence:
``Information furnished under the preceding sentence to a
participant in a defined benefit plan (other than at the
request of the participant) may be based on reasonable
estimates determined under regulations prescribed by the
Secretary.''.
(2) Model statement.--Section 105 of such Act (29
U.S.C. 1025) is amended by adding at the end the
following new subsection:
``(e)(1) The Secretary of Labor shall develop a model benefit
statement which shall be used by plan administrators in
complying with the requirements of subsection (a). Such
statement shall include--
``(A) the amount of nonforfeitable accrued benefits
as of the statement date which is payable at normal
retirement age under the plan,
``(B) the amount of accrued benefits which are
forfeitable but which may become nonforfeitable under
the terms of the plan,
``(C) the amount or percentage of any reduction due
to integration of the benefit with the participant's
Social Security benefits or similar governmental
benefits,
``(D) information on early retirement benefit and
joint and survivor annuity reductions, and
``(E) in the case of an individual account plan, the
percentage of the net return on investment of plan
assets for the preceding plan year (or, with respect to
investments directed by the participant, the net return
on investment of plan assets for such year so
directed), itemized with respect to each type of
investment, and, stated separately, the administrative
and transaction fees incurred in connection with each
such type of investment, and
``(F) in the case of an individual account plan, the
amount and percentage of assets in the individual
account that consists of employer securities and
employer real property (as defined in paragraphs (1)
and (2), respectively, of section 407(d)), as
determined as of the most recent valuation date of the
plan.
``(2) The Secretary shall also develop a separate notice,
which shall be included by the plan administrator with the
information furnished pursuant to subsection (a), which advises
participants and beneficiaries of generally accepted investment
principles, including principles of risk management and
diversification for long-term retirement security and the risks
of holding substantial assets in a single asset such as
employer securities.''.
(3) Rule for multiemployer plans.--Subsection (d) of
section 105 of such Act (29 U.S.C. 1025) is amended to
read as follows:
``(d) Each administrator of a plan to which more than 1
unaffiliated employer is required to contribute shall furnish
to any plan participant or beneficiary who so requests in
writing, a statement described in subsection (a).''.
(b) Disclosure of Benefit Calculations.--
(1) In general.--Section 105 of such Act (as amended
by subsection (a)) is amended further--
(A) by redesignating subsections (b), (c),
(d), and (e) as subsections (c), (d), (e), and
(f), respectively; and
(B) by inserting after subsection (a) the
following new subsection:
``(b)(1) In the case of a participant or beneficiary who is
entitled to a distribution of a benefit under an employee
pension benefit plan, the administrator of such plan shall
provide to the participant or beneficiary the information
described in paragraph (2) upon the written request of the
participant or beneficiary.
``(2) The information described in this paragraph includes--
``(A) a worksheet explaining how the amount of the
distribution was calculated and stating the assumptions
used for such calculation,
``(B) upon written request of the participant or
beneficiary, any documents relating to the calculation
(if available), and
``(C) such other information as the Secretary may
prescribe.
Any information provided under this paragraph shall be in a
form calculated to be understood by the average plan
participant.''.
(2) Conforming amendments.--
(A) Section 101(a)(2) of such Act (29 U.S.C.
1021(a)(2)) is amended by striking ``105(a) and
(c)'' and inserting ``105(a), (b), and (d)''.
(B) Section 105(c) of such Act (as
redesignated by paragraph (1)(A) of this
subsection) is amended by inserting ``or (b)''
after ``subsection (a)''.
(C) Section 106(b) of such Act (29 U.S.C.
1026(b)) is amended by striking ``sections
105(a) and 105(c)'' and inserting ``subsections
(a), (b), and (d) of section 105''.
(c) Amendments to Internal Revenue Code of 1986.--
(1) In general.--Chapter 43 of the Internal Revenue
Code of 1986 (relating to qualified pension, etc.,
plans) is amended by adding at the end the following
new section:
``SEC. 4980G. FAILURE OF APPLICABLE PLANS TO PROVIDE NOTICE OF
GENERALLY ACCEPTED INVESTMENT PRINCIPLES.
``(a) Imposition of Tax.--There is hereby imposed a tax on
the failure of any applicable pension plan to meet the
requirements of subsection (e) with respect to any applicable
individual.
``(b) Amount of Tax.--The amount of the tax imposed by
subsection (a) on any failure with respect to any applicable
individual shall be $100 for each day in the noncompliance
period with respect to such failure.
``(c) Limitations on Amount of Tax.--
``(1) Tax not to apply to failures corrected within
30 days.--No tax shall be imposed by subsection (a) on
any failure if--
``(A) any person subject to liability for the
tax under subsection (d) exercised reasonable
diligence to meet the requirements of
subsection (e), and
``(B) such person provides the notice
described in subsection (e) during the 30-day
period beginning on the first date such person
knew, or exercising reasonable diligence should
have known, that such failure existed.
``(2) Overall limitation for unintentional
failures.--
``(A) In general.--If the person subject to
liability for tax under subsection (d)
exercised reasonable diligence to meet the
requirements of subsection (e) and paragraph
(1) is not otherwise applicable, the tax
imposed by subsection (a) for failures during
the taxable year of the employer (or, in the
case of a multiemployer plan, the taxable year
of the trust forming part of the plan) shall
not exceed $500,000. For purposes of the
preceding sentence, all multiemployer plans of
which the same trust forms a part shall be
treated as 1 plan.
``(B) Taxable years in the case of certain
controlled groups.--For purposes of this
paragraph, if all persons who are treated as a
single employer for purposes of this section do
not have the same taxable year, the taxable
years taken into account shall be determined
under principles similar to the principles of
section 1561.
``(3) Waiver by secretary.--In the case of a failure
which is due to reasonable cause and not to willful
neglect, the Secretary may waive part or all of the tax
imposed by subsection (a) to the extent that the
payment of such tax would be excessive or otherwise
inequitable relative to the failure involved.
``(d) Liability for Tax.--The following shall be liable for
the tax imposed by subsection (a):
``(1) In the case of a plan other than a
multiemployer plan, the employer.
``(2) In the case of a multiemployer plan, the plan.
``(e) Notice of Generally Accepted Investment Principles.--
``(1) In general.--The plan administrator of an
applicable pension plan shall provide notice of
generally accepted investment principles, including
principles of risk management and diversification, to
each applicable individual.
``(2) Notice.--The notice required by paragraph (1)
shall be written in a manner calculated to be
understood by the average plan participant and shall
provide sufficient information (as determined in
accordance with rules or other guidance adopted by the
Secretary) to allow applicable individuals to
understand generally accepted investment principles,
including principles of risk management and
diversification.
``(3) Timing of notice.--The notice required by
paragraph (1) shall be provided upon enrollment of the
applicable individual in such plan and at least once
per plan year thereafter.
``(4) Form and manner of notice.--The notice required
by paragraph (1) shall be in writing, except that such
notice may be in electronic or other form to the extent
that such form is reasonably accessible to the
applicable individual.
``(f ) Definitions and Special Rules.--For purposes of this
section--
``(1) Applicable individual.--The term `applicable
individual' means with respect to an applicable pension
plan--
``(A) any participant in the applicable
pension plan,
``(B) any beneficiary who is an alternate
payee (within the meaning of section 414(p)(8))
under an applicable qualified domestic
relations order (within the meaning of section
414(p)(1)(A)), and
``(C) any beneficiary of a deceased
participant or alternate payee described in
subparagraph (A) or (B), as the case may be,
who has an accrued benefit under the plan and who is
entitled to direct the investment (or hypothetical
investment) of some or all of such accrued benefit.
``(2) Applicable pension plan.--The term `applicable
pension plan' means--
``(A) a plan described in section
219(g)(5)(A) (other than in clause (iii)
thereof), and
``(B) an eligible deferred compensation plan
(as defined in section 457(b)) of an eligible
employer described in section 457(e)(1)(A),
which permits any participant to direct the investment
of some or all of his account in the plan or under
which the accrued benefit of any participant depends in
whole or in part on hypothetical investments directed
by the participant.''.
(1) Clerical amendment.--The table of sections for
chapter 43 of such Code is amended by adding at the end
the following new item:
``Sec. 4980G. Failure of applicable plans to provide notice of
generally accepted investment principles.''.
(3) Effective date.--
(A) In general.--The amendments made by this
subsection shall take effect 60 days after the
adoption of rules or other guidance to carry
out the amendments made by this subsection,
which shall include a model notice of generally
accepted investment principles, including
principles of risk management and
diversification.
(B) Model investment principles.--For
purposes of subparagraph (A), not later than
120 days after the date of the enactment of
this Act, the Secretary of the Treasury, in
consultation with the Secretary of Labor, shall
issue rules or other guidance and a model
notice which meets the requirements of section
4980G of the Internal Revenue Code of 1986 (as
added by this section).
SEC. 102. IMMEDIATE WARNING OF EXCESSIVE STOCK HOLDINGS.
Section 105 of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1025) (as amended by section 101 of this Act)
is amended further by adding at the end the following new
subsection:
``(g)(1) Upon receipt of information by the plan
administrator of an individual account plan indicating that the
individual account of any participant which had not been
excessively invested in employer securities is excessively
invested in such securities (or that such account, as initially
invested, is excessively invested in employer securities), the
plan administrator shall immediately provide to the participant
a separate, written statement--
``(A) indicating that the participant's account has
become excessively invested in employer securities,
``(B) setting forth the notice described in
subsection (e)(7), and
``(C) referring the participant to investment
education materials and investment advice which shall
be made available by or under the plan.
In any case in which such a separate, written statement is
required to be provided to a participant under this paragraph,
each statement issued to such participant pursuant to
subsection (a) thereafter shall also contain such separate,
written statement until the plan administrator is made aware
that such participant's account has ceased to be excessively
invested in employer securities or the employee, in writing,
waives the receipt of the notice and acknowledges understanding
the importance of diversification.
``(2) Each notice required under this subsection shall be
provided in a form and manner which shall be prescribed in
regulations of the Secretary. Such regulations shall provide
for inclusion in the notice a prominent reference to the risks
of large losses in assets available for retirement from
excessive investment in employer securities.
``(3) For purposes of paragraph (1), a participant's account
is `excessively invested' in employer securities if more than
10 percent of the balance in such account is invested in
employer securities (as defined in section 407(d)(1)).''.
SEC. 103. REPORT TO PARTICIPANTS AND BENEFICIARIES OF TRADES IN
EMPLOYER SECURITIES.
(a) In General.--Section 104 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1024) is amended--
(1) by redesignating subsection (d) as subsection
(e); and
(2) by inserting after subsection (c) the following
new subsection:
``(d)(1) In any case in which assets in the individual
account of a participant or beneficiary under an individual
account plan include employer securities, if any person engages
in a transaction constituting a direct or indirect purchase or
sale of employer securities and--
``(A) such transaction is required under section 16
of the Securities Exchange Act of 1934 to be reported
by such person to the Securities and Exchange
Commission, or
``(B) such person is a named fiduciary of the plan,
such person shall comply with the requirements of paragraph
(2).
``(2) A person described in paragraph (1) complies with the
requirements of this paragraph in connection with a transaction
described in paragraph (1) if such person provides to the plan
administrator of the plan a written notification of the
transaction not later than 1 business day after the date of the
transaction.
``(3)(A) If the plan administrator is made aware, on the
basis of notifications received pursuant to paragraph (2) or
otherwise, that the proceeds from any transaction described in
paragraph (1), constituting direct or indirect sales of
employer securities by any person described in paragraph (1),
exceed $100,000, the plan administrator of the plan shall
provide to each participant and beneficiary a notification of
such transaction. Such notification shall be in writing, except
that such notification may be in electronic or other form to
the extent that such form is reasonably accessible to the
participant or beneficiary.
``(B) In any case in which the proceeds from any transaction
described in paragraph (1) (with respect to which a
notification has not been provided pursuant to this paragraph),
together with the proceeds from any other such transaction or
transactions described in paragraph (1) occurring during the
preceding one-year period, constituting direct or indirect
sales of employer securities by any person described in
paragraph (1), exceed (in the aggregate) $100,000, such series
of transactions by such person shall be treated as a
transaction described in subparagraph (A) by such person.
``(C) Each notification required under this paragraph shall
be provided as soon as practicable, but not later than 3
business days after receipt of the written notification or
notifications indicating that the transaction (or series of
transactions) requiring such notice has occurred.
``(4) Each notification required under paragraph (2) or (3)
shall be made in such form and manner as may be prescribed in
regulations of the Secretary and shall include the number of
shares involved in each transaction and the price per share,
and the notification required under paragraph (3) shall be
written in language designed to be understood by the average
plan participant. The Secretary may provide by regulation, in
consultation with the Securities and Exchange Commission, for
exemptions from the requirements of this subsection with
respect to specified types of transactions to the extent that
such exemptions are consistent with the best interests of plan
participants and beneficiaries. Such exemptions may relate to
transactions involving reinvestment plans, stock splits, stock
dividends, qualified domestic relations orders, and similar
matters.
``(5) For purposes of this subsection, the term `employer
security' has the meaning provided in section 407(d)(1).''.
(b) Effective Date.--The amendments made by this section
shall apply with respect to transactions occurring after 90
days after the date of the enactment of this Act.
SEC. 104. ENFORCEMENT OF INFORMATION AND DISCLOSURE REQUIREMENTS.
(a) In General.--Section 502(c) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1132(c)) is amended--
(1) by redesignating paragraph (7) as paragraph (8);
and
(2) by inserting after paragraph (6) the following
new paragraph:
``(7) The Secretary may assess a civil penalty against any
person required to provide any notification under the
provisions of section 104(d), any statement under the
provisions of subsection (a), (d), or (f) of section 105, any
information under the provisions of section 404(c)(4), or any
notice under the provisions of section 404(e)(1) of up to
$1,000 a day from the date of any failure by such person to
provide such notification, statement, information, or notice in
accordance with such provisions.''.
(b) Conforming Amendment.--Section 502(a)(6) of such Act (29
U.S.C. 1132(a)(6)) (as amended by section 102(b)) is amended
further by striking ``(5), or (6)'' and inserting ``(5), (6),
or (7)''.
TITLE II--FREEDOM TO MAKE INVESTMENT DECISIONS WITH PLAN ASSETS
SEC. 201. AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986.
(a) In General.--Subsection (a) of section 401 of the
Internal Revenue Code of 1986 (relating to requirements for
qualification) is amended by adding at the end the following
new paragraph:
``(35) Diversification requirements for defined
contribution plans that hold employer securities.--
``(A) In general.--In the case of a defined
contribution plan described in this subsection
that includes a trust which is exempt from tax
under section 501(a) and which holds employer
securities that are readily tradable on an
established securities market, such trust shall
not constitute a qualified trust under this
section unless such plan meets the requirements
of subparagraphs (B) and (C).
``(B) Elective deferrals invested in employer
securities.--
``(i) In general.--In the case of the
portion of the account attributable to
elective deferrals which is invested in
employer securities, a plan meets the
requirements of this subparagraph if
each applicable individual in such plan
may elect to direct the plan to divest
any portion of such securities in the
individual's account and to reinvest an
equivalent amount in other investment
options which meet the requirements of
subparagraph (D). The preceding
sentence shall apply to the extent that
the amount attributable to reinvested
portion exceeds the amount to which a
prior election under this subparagraph
or paragraph (28) applies.
``(ii) Applicable individual.--For
purposes of this subparagraph, the term
`applicable individual' means--
``(I) any participant in the
plan,
``(II) any beneficiary who is
an alternate payee (within the
meaning of section 414(p)(8))
under an applicable qualified
domestic relations order
(within the meaning of section
414(p)(1)(A)), and
``(III) any beneficiary of a
deceased participant or
alternate payee.
``(C) Other employer contributions.--
``(i) In general.--In the case of the
portion of the account attributable to
employer contributions (other than
elective deferrals) which is invested
in employer securities, a plan meets
the requirements of this subparagraph
if each qualified participant in the
plan may elect to direct the plan to
divest any portion of such securities
in the participant's account and to
reinvest an equivalent amount in other
investment options which meet the
requirements of subparagraph (E). The
preceding sentence shall apply to the
extent that the amount attributable to
such reinvested portion exceeds the
amount to which a prior election under
this subparagraph or paragraph (28)
applies.
``(ii) Qualified participant.--For
purposes of this subparagraph, the term
`qualified participant' means--
``(I) any participant in the
plan who has completed at least
3 years of service (as
determined under section
411(a)) under the plan,
``(II) any beneficiary who,
with respect to a participant
who met the service requirement
in subclause (I), is an
alternate payee (within the
meaning of section 414(p)(8))
under an applicable qualified
domestic relations order
(within the meaning of section
414(p)(1)(A)), and
``(III) any beneficiary of a
deceased participant who met
the service requirement in
subclause (I) or alternate
payee described in subclause
(II).
``(D) Investment options.--The requirements
of this subparagraph are met if the plan offers
not less than 3 investment options (not
inconsistent with regulations prescribed by the
Secretary) other than employer securities.
``(E) Preservation of authority of plan to
limit investment.--Nothing in this paragraph
shall be construed to limit the authority of a
plan to impose limitations on the portion of
plan assets in any account which may be
invested in employer securities.
``(F) Other definitions and rules.--For
purposes of this paragraph--
``(i) Employer securities.--The term
`employer securities' shall have the
meaning given such term by section
407(d)(1) of the Employee Retirement
Income Security Act of 1974.
``(ii) Elective deferrals.--For
purposes of this subparagraph, the term
`elective deferrals' means an employer
contribution described in section
402(g)(3)(A) and any employee
contribution.
``(iii) Election.--Elections under
this paragraph shall be not less
frequently than quarterly.
``(iv) Employee stock ownership
plan.--The term `employee stock
ownership plan' shall have the same
meaning given to such term by section
4975(e)(7).''.
(b) Conforming Amendments.--
(1) Section 401(a)(28) of such Code is amended by
adding at the end the following new subparagraph:
``(D) Application.--This paragraph shall not
apply with respect to employer securities which
are readily tradable on an established
securities market.''.
(2) Section 409(h)(7) of such Code is amended by
inserting at the end ``or subparagraph (B) or (C) of
section 401(a)(35)''.
(3) Section 4975(e)(7) of such Code is amended by
adding at the end the following new sentence: ``A plan
shall not fail to be treated as an employee stock
ownership plan merely because the plan meets the
requirements of section 401(a)(35) (or provides greater
diversification rights) or because participants in such
plan exercise diversification rights under such section
(or greater diversification rights available under the
plan).''.
(4) Section 4980(c)(3)(A) of such Code is amended by
striking ``if--'' and all that follows and inserting
``if the requirements of subparagraphs (B) and (C) are
met.''.
(5) Section 407 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1107) is amended by
adding at the end the following new subsection:
``(g) Notwithstanding section 408(e) or any other provision
of this title, an individual account plan may not include
provisions that do not meet the requirements of section
401(a)(35)(B) of the Internal Revenue Code of 1986.''.
SEC. 202. AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974.
(a) Amendments to the Employee Retirement Income Security Act
of 1974.--Section 404 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1104) is amended by adding at
the end the following new subsection:
``(e) Diversification of Investment of Account Assets Held
Under Individual Account Plans.--
``(1) In general.--In the case of an individual
account plan under which a participant or beneficiary
is permitted to exercise control over assets in his or
her account, with respect to the assets in the account
to which the participant or beneficiary has a
nonforfeitable right and which consist of employer
securities which are readily tradable on an established
securities market, the plan shall meet the requirements
of paragraphs (2), (3), (4), (5), (6), and (7).
``(2) Assets attributable to employee
contributions.--In the case of any portion of the
account assets described in paragraph (1) which is
attributable to employee contributions, there shall be
no restrictions on the right of a participant or
beneficiary to allocate the assets in such portion to
any investment option provided under the plan.
``(3) Elective deferrals invested in employer
securities.--
``(A) In general.--In the case of the portion
of the account assets described in paragraph
(1) which is attributable to elective deferrals
and is invested in employer securities, a plan
meets the requirements of this paragraph if
each applicable individual in such plan may
elect to direct the plan to divest any portion
of such securities in the individual's account
and to reinvest an equivalent amount in other
investment options which meet the requirements
of paragraph (5). The preceding sentence shall
apply to the extent that the amount
attributable to such reinvested portion exceeds
the amount to which a prior election under this
paragraph or section 401(a)(28) of the Internal
Revenue Code of 1986 applies.
``(B) Applicable individual.--For purposes of
this paragraph, the term `applicable
individual' means--
``(i) any participant in the plan,
``(ii) any beneficiary who is an
alternate payee (within the meaning of
section 206(d)(3)(K)) under an
applicable qualified domestic relations
order (within the meaning of section
206(d)(3)(B)(i)), and
``(iii) any beneficiary of a deceased
participant or alternate payee.
``(4) Other employer contributions.--
``(A) In general.--In the case of the portion
of the account assets described in paragraph
(1) which is attributable employer
contributions (other than elective deferrals)
and is invested in employer securities, a plan
meets the requirements of this paragraph if
each qualified participant in the plan may
elect to direct the plan to divest any portion
of such securities in the participant's account
and to reinvest an equivalent amount in other
investment options which meet the requirements
of paragraph (6). The preceding sentence shall
apply to the extent that the amount
attributable to such reinvested portion exceeds
the amount to which a prior election under this
paragraph or section 401(a)(28) of such Code
applies.
``(B) Qualified participant.--For purposes of
this paragraph, the term `qualified
participant' means--
``(i) any participant in the plan who
has completed at least 3 years of
service (as determined under section
203(a)) under the plan,
``(ii) any beneficiary who, with
respect to a participant who met the
service requirement in clause (i), is
an alternate payee (within the meaning
of section 206(d)(3)(K)) under an
applicable qualified domestic relations
order (within the meaning of section
206(d)(3)(B)(i)), and
``(iii) any beneficiary of a deceased
participant who met the service
requirement in clause (i) or alternate
payee described in clause (ii).
``(5) Investment options.--The requirements of this
paragraph are met if, with respect to the account
assets described in paragraph (1), the plan offers not
less than 3 investment options (not inconsistent with
regulations prescribed by the Secretary) other than
employer securities.
``(6) Prompt compliance with directions to allocate
investments.--
``(A) In general.--Except as provided in
subparagraph (B), a plan meets the requirements
of this paragraph with respect to plan assets
described in paragraph (1) if the plan provides
that, within 5 days after the date of any
election by a participant or beneficiary
allocating any such assets to any investment
option provided under the plan, the plan
administrator shall take such actions as are
necessary to effectuate such allocation.
``(B) Special rule for periodic elections.--
In any case in which the plan provides for
elections periodically during prescribed
periods, the 5-day period described in
subparagraph (A) shall commence at the end of
each such prescribed period.
``(7) Notice of rights and of importance of
diversification.--A plan meets the requirements of this
paragraph if the plan provides that, not later than 30
days prior to the date on which the right of a
participant under the plan to his or her accrued
benefit becomes nonforfeitable, the plan administrator
shall provide to such participant and his or her
beneficiaries a written notice--
``(A) setting forth their rights under this
section with respect to the accrued benefit,
and
``(B) describing the importance of
diversifying the investment of account assets.
``(8) Preservation of authority of plan to limit
investment.--Nothing in this subsection shall be
construed to limit the authority of a plan to impose
limitations on the portion of plan assets in any
account which may be invested in employer securities.
``(9) Other definitions and rules.--For purposes of
this subsection--
``(A) Employer securities.--The term
`employer securities' shall have the meaning
given such term by section 407(d)(1) of the
Employee Retirement Income Security Act of
1974.
``(B) Elective deferrals.--The term `elective
deferrals' means an employer contribution
described in section 402(g)(3)(A) of such Code
and any employee contribution.
``(C) Election.--Elections under this
subsection shall be not less frequently than
quarterly.
``(D) Employee stock ownership plan.--The
term `employee stock ownership plan' shall have
the same meaning given to such term by section
4975(e)(7) of such Code.
SEC. 203. RECOMMENDATIONS RELATING TO NON-PUBLICLY TRADED STOCK.
Within 1 year after the date of the enactment of this Act,
the Secretary of Labor and the Secretary of the Treasury shall
jointly transmit to the Committee on Education and the
Workforce and the Committee on Ways and Means of the House of
Representatives and the Committee on Health, Education, Labor,
and Pensions and the Committee on Finance of the Senate their
recommendations regarding legislative changes relating to
treatment, under section 404(e) of the Employee Retirement
Income Security Act of 1974 and section 401(a)(35) of the
Internal Revenue Code of 1986 (as added by this title), of
individual account plans under which a participant or
beneficiary is permitted to exercise control over assets in his
or her account, in cases in which such assets do not include
employer securities which are readily tradable under an
established securities market.
SEC. 204. EFFECTIVE DATE OF TITLE.
(a) In General.--Except as provided in subsection (b), the
amendments made by this title shall apply with respect to plan
years beginning after December 31, 2003.
(b) Exception.--The amendments made by this section shall not
apply to employer securities held by an employee stock
ownership plan which are not subject to section 401(a)(28) of
the Internal Revenue Code of 1986 by reason of section
1175(a)(2) of the Tax Reform Act of 1986 (100 Stat. 2519).
(c) Delayed Effective Date of Existing Holdings.--In any case
in which a portion of the nonforfeitable accrued benefit of a
participant or beneficiary is held in the form of employer
securities (as defined in section 407(d)(1) of the Employee
Retirement Income Security Act of 1974) immediately before the
first date of the first plan year to which the amendments made
by this title apply, such portion shall be taken into account
only with respect to plan years beginning on or after January
1, 2005.
TITLE III--EMPLOYEE REPRESENTATION
SEC. 301. PARTICIPATION OF PARTICIPANTS IN TRUSTEESHIP OF INDIVIDUAL
ACCOUNT PLANS.
(a) In General.--Section 403(a) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1103(a)) is amended--
(1) by redesignating paragraphs (1) and (2) as
subparagraphs (A) and (B), respectively;
(2) by inserting ``(1)'' after ``(a)''; and
(3) by adding at the end the following new paragraph:
``(2)(A) The assets of a single-employer plan which is an
individual account plan and under which some or all of the
assets are derived from employee contributions shall be held in
trust by a joint board of trustees, which shall consist of two
or more trustees representing on an equal basis the interests
of the employer or employers maintaining the plan and the
interests of the participants and their beneficiaries and
having equal voting rights.
``(B)(i) Except as provided in clause (ii), in any case in
which the plan is maintained pursuant to one or more collective
bargaining agreements between one or more employee
organizations and one or more employers, the trustees
representing the interests of the participants and their
beneficiaries shall be designated by such employee
organizations.
``(ii) Clause (i) shall not apply with respect to a plan
described in such clause if the employee organization (or all
employee organizations, if more than one) referred to in such
clause file with the Secretary, in such form and manner as
shall be prescribed in regulations of the Secretary, a written
waiver of their rights under clause (i).
``(iii) In any case in which clause (i) does not apply with
respect to a single-employer plan because the plan is not
described in clause (i) or because of a waiver filed pursuant
to clause (ii), the trustee or trustees representing the
interests of the participants and their beneficiaries shall be
selected by the plan participants in accordance with
regulations of the Secretary.
``(C) An individual shall not be treated as ineligible for
selection as trustee solely because such individual is an
employee of the plan sponsor, except that the employee so
selected may not be a highly compensated employee (as defined
in section 414(q) of the Internal Revenue Code of 1986).
``(D) The Secretary shall provide by regulation for the
appointment of a neutral individual, in accordance with the
procedures under section 203(f) of the Labor Management
Relations Act, 1947 (29 U.S.C. 173(f)), to cast votes as
necessary to resolve tie votes by the trustees.''.
(b) Regulations.--The Secretary of Labor shall prescribe the
initial regulations necessary to carry out the provisions of
the amendments made by this section not later than 90 days
after the date of the enactment of this Act.
TITLE IV--INCREASED ACCOUNTABILITY
SEC. 401. BONDING OR INSURANCE ADEQUATE TO PROTECT INTEREST OF
PARTICIPANTS AND BENEFICIARIES.
Section 412 of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1112) is amended by adding at the end the
following new subsection:
``(f) Notwithstanding the preceding provisions of this
section, each fiduciary of an individual account plan shall be
bonded or insured, in accordance with regulations which shall
be prescribed by the Secretary, in an amount sufficient to
ensure coverage by the bond or insurance of financial losses
due to any failure to meet the requirements of this part.''.
SEC. 402. LIABILITY FOR BREACH OF FIDUCIARY DUTY.
(a) Additional Equitable or Remedial Relief.--Section 409 of
the Employee Retirement Income Security Act of 1974 (29 U.S.C.
1109) is amended--
(1) by redesignating subsection (b) as subsection
(c);
(2) in subsection (a), by striking ``, including
removal of such fiduciary''; and
(3) by inserting after subsection (a) the following
new subsection:
``(b) The equitable or remedial relief referred to in
subsection (a) may include (but is not limited to) a court
order removing the fiduciary from the plan referred to in
subsection (a) and a court order prohibiting, conditionally or
unconditionally, and permanently or for such period of time as
the court shall determine, the fiduciary from serving--
``(1) as an administrator, fiduciary, officer,
trustee, custodian, counsel, agent, employee, or
representative in any capacity of any employee benefit
plan,
``(2) as a consultant or adviser to an employee
benefit plan, including but not limited to any entity
whose activities are in whole or substantial part
devoted to providing goods or services to any employee
benefit plan, or
``(3) in any capacity that involves decisionmaking
authority or custody or control of the moneys, funds,
assets, or property of any employee benefit plan.''.
(b) Liability for Participating In or Concealing Fiduciary
Breach in Connection with Individual Account Plans.--
(1) Application to participants and beneficiaries of
401(k) plans.--
(A) In general.--Part 4 of subtitle B of
title I of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1101 et seq.)
is amended by adding after section 409 the
following new section:
``SEC. 409A. LIABILITY FOR BREACH OF FIDUCIARY DUTY IN 401(K) PLANS.
``(a) Any person who is a fiduciary with respect to an
individual account plan that includes a qualified cash or
deferred arrangement under section 401(k) of the Internal
Revenue Code of 1986 who breaches any of the responsibilities,
obligations, or duties imposed upon fiduciaries by this title
shall be personally liable to make good to each participant and
beneficiary of the plan any losses to such participant or
beneficiary resulting from each such breach, and to restore to
such participant or beneficiary any profits of such fiduciary
which have been made through use of assets of the plan by the
fiduciary, and shall be subject to such other equitable or
remedial relief as the court may deem appropriate, including
removal of such fiduciary. A fiduciary may also be removed for
a violation of section 411 of this Act.
``(b) The right of participants and beneficiaries under
subsection (a) to sue for breach of fiduciary duty with respect
to an individual account plan that includes a qualified cash or
deferred arrangement under section 401(k) of such Code shall be
in addition to all existing rights that participants and
beneficiaries have under section 409, section 502, and any
other provision of this title, and shall not be construed to
give rise to any inference that such rights do not already
exist under section 409, section 502, or any other provision of
this title.
``(c) No fiduciary shall be liable with respect to a breach
of fiduciary duty under this title if such breach was committed
before he or she became a fiduciary or after he or she ceased
to be a fiduciary.''
(B) Conforming amendment.--The table of
contents for part 4 of subtitle B of title I of
such Act is amended by inserting the following
new item after the item relating to section
409:
``Sec. 409A. Liability for breach of fiduciary duty in 401(k)
plans.''
(2) Insider liability.--
(A) In general.--Section 409 of the Employee
Retirement Income Security Act of 1974 (29
U.S.C. 1109) is amended by redesignating
subsection (b) as subsection (c) and by
inserting after subsection (a) the following
new subsection:
``(b)(1)(A) If an insider with respect to the plan sponsor of
an individual account plan that holds employer securities that
are readily tradable on an established securities market--
``(i) knowingly participates in a breach of fiduciary
responsibility to which subsection (a) applies, or
``(ii) knowingly undertakes to conceal such a breach,
such insider shall be personally liable under this subsection
for such breach in the same manner as the fiduciary who commits
such breach.
``(B) For purposes of subparagraph (A), the term `insider'
means, with respect to any plan sponsor of a plan to which
subparagraph (A) applies--
``(i) any officer or director with respect to the
plan sponsor, or
``(ii) any independent qualified public accountant of
the plan or of the plan sponsor.
``(3) Any relief provided under this subsection or section
409A--
``(A) if provided to an individual account plan,
shall inure to the individual accounts of the affected
participants or beneficiaries, and
``(B) if provided to a participant or beneficiary,
shall be payable to the individual account plan on
behalf of such participant or beneficiary unless such
plan has been terminated.''
(B) Conforming amendment.--Section 409(c) of
such Act (29 U.S.C. 1109(c)), as redesignated
by subparagraph (A), is amended by inserting
before the period the following: ``, unless
such liability arises under subsection (b)''.
(c) Maintenance of Fiduciary Liability.--Section 404(c)(1)(B)
of such Act (29 U.S.C. 1104(c)(1)(B)) is amended by inserting
before the period the following: ``, except that this
subparagraph shall not be construed to exempt any fiduciary
from liability for any violation of subsection (e)''.
(d) Effective Date.--The amendments made by this section
shall apply with respect to breaches occurring on or after the
date of the enactment of this Act.
SEC. 403. PRESERVATION OF RIGHTS OR CLAIMS.
Section 502 of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1132) is amended by adding at the end the
following new subsection:
``(n)(1) The rights under this title (including the right to
maintain a civil action) may not be waived, deferred, or lost
pursuant to any agreement not authorized under this title with
specific reference to this subsection.
``(2) Paragraph (1) shall not apply to an agreement providing
for arbitration or participation in any other nonjudicial
procedure to resolve a dispute if the agreement is entered into
knowingly and voluntarily by the parties involved after the
dispute has arisen or is pursuant to the terms of a collective
bargaining agreement.''.
SEC. 404. OFFICE OF PENSION PARTICIPANT ADVOCACY.
(a) In General.--Subtitle A of title III of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 3001 et seq.)
is amended by inserting after section 3004 the following new
section:
``OFFICE OF PENSION PARTICIPANT ADVOCACY
``Sec. 3005. (a) Establishment.--
``(1) In general.--There is established in the
Department of Labor an office to be known as the
`Office of Pension Participant Advocacy'.
``(2) Pension participant advocate.--The Office of
Pension Participant Advocacy shall be under the
supervision and direction of an official to be known as
the `Pension Participant Advocate' who shall--
``(A) have demonstrated experience in the
area of pension participant assistance, and
``(B) be selected by the Secretary after
consultation with pension participant advocacy
organizations.
The Pension Participant Advocate shall report directly
to the Secretary and shall be entitled to compensation
at the same rate as the highest rate of basic pay
established for the Senior Executive Service under
section 5382 of title 5, United States Code.
``(b) Functions of Office.--It shall be the function of the
Office of Pension Participant Advocacy to--
``(1) evaluate the efforts of the Federal Government,
business, and financial, professional, retiree, labor,
women's, and other appropriate organizations in
assisting and protecting pension plan participants,
including--
``(A) serving as a focal point for, and
actively seeking out, the receipt of
information with respect to the policies and
activities of the Federal Government, business,
and such organizations which affect such
participants,
``(B) identifying significant problems for
pension plan participants and the capabilities
of the Federal Government, business, and such
organizations to address such problems, and
``(C) developing proposals for changes in
such policies and activities to correct such
problems, and communicating such changes to the
appropriate officials,
``(2) promote the expansion of pension plan coverage
and the receipt of promised benefits by increasing the
awareness of the general public of the value of pension
plans and by protecting the rights of pension plan
participants, including--
``(A) enlisting the cooperation of the public
and private sectors in disseminating
information, and
``(B) forming private-public partnerships and
other efforts to assist pension plan
participants in receiving their benefits,
``(3) advocating for the full attainment of the
rights of pension plan participants, including by
making pension plan sponsors and fiduciaries aware of
their responsibilities,
``(4) giving priority to the special needs of low and
moderate income participants,
``(5) developing needed information with respect to
pension plans, including information on the types of
existing pension plans, levels of employer and employee
contributions, vesting status, accumulated benefits,
benefits received, and forms of benefits, and
``(6) pursuing claims on behalf of participants and
beneficiaries and providing appropriate assistance in
the resolution of disputes between participants and
beneficiaries and pension plans, including assistance
in obtaining settlement agreements.
``(c) Reports.--
``(1) Annual report.--Not later than December 31 of
each calendar year, the Pension Participant Advocate
shall report to the Committee on Education and the
Workforce and the Committee on Ways and Means of the
House of Representatives and the Committee on Health,
Education, Labor, and Pensions and the Committee on
Finance of the Senate on its activities during the
fiscal year ending in the calendar year. Such report
shall--
``(A) identify significant problems the
Advocate has identified,
``(B) include specific legislative and
regulatory changes to address the problems, and
``(C) identify any actions taken to correct
problems identified in any previous report.
The Advocate shall submit a copy of such report to the
Secretary and any other appropriate official at the
same time it is submitted to the committees of
Congress.
``(2) Specific reports.--The Pension Participant
Advocate shall report to the Secretary or any other
appropriate official any time the Advocate identifies a
problem which may be corrected by the Secretary or such
official.
``(3) Reports to be submitted directly.--The report
required under paragraph (1) shall be provided directly
to the committees of Congress without any prior review
or comment by the Secretary or any other Federal
officer or employee.
``(d) Specific Powers.--
``(1) Receipt of information.--Subject to such
confidentiality requirements as may be appropriate, the
Secretary and other Federal officials shall, upon
request, provide such information (including plan
documents) as may be necessary to enable the Pension
Participant Advocate to carry out the Advocate's
responsibilities under this section.
``(2) Appearances.--The Pension Participant Advocate
may represent the views and interests of pension plan
participants before any Federal agency, including, upon
request of a participant, in any proceeding involving
the participant.
``(3) Contracting authority.--In carrying out
responsibilities under subsection (b)(5), the Pension
Participant Advocate may, in addition to any other
authority provided by law--
``(A) contract with any person to acquire
statistical information with respect to pension
plan participants, and
``(B) conduct direct surveys of pension plan
participants.''
(b) Conforming Amendment.--The table of contents in section 1
of such Act is amended by inserting after the item relating to
section 3004 the following new item:
``Sec. 3051. Office of Pension Participant Advocacy.''.
(c) Effective Date.--The amendment made by this section shall
take effect on January 1, 2004.
SEC. 405. STUDY REGARDING INSURANCE SYSTEM FOR INDIVIDUAL ACCOUNT
PLANS.
(a) Study.--As soon as practicable after the date of the
enactment of this Act, the Pension Benefit Guaranty Corporation
shall contract to carry out a study relating to the
establishment of an insurance system for individual account
plans. In conducting such study, the Corporation shall
consider--
(1) the feasibility and impact of such a system, and
(2) options for developing such a system.
(b) Report.--Not later than 3 years after the date of the
enactment of this Act, the Corporation shall report the results
of its study, together with any recommendations for legislative
changes, to the Committee on Education and the Workforce and
the Committee on Ways and Means of the House of Representatives
and the Committee on Health, Education, Labor, and Pensions and
the Committee on Finance of the Senate.
SEC. 406. EXCISE TAX ON FAILURE OF PENSION PLANS TO PROVIDE NOTICE OF
TRANSACTION RESTRICTION PERIODS.
(a) In General.--Chapter 43 of the Internal Revenue Code of
1986 (relating to qualified pension, etc., plans) is amended by
adding at the end the following new section:
``SEC. 4980H. FAILURE OF APPLICABLE PLANS TO PROVIDE NOTICE OF
TRANSACTION RESTRICTION PERIODS.
``(a) Imposition of Tax.--There is hereby imposed a tax on
the failure of any applicable pension plan to meet the
requirements of subsection (e) with respect to any applicable
individual.
``(b) Amount of Tax.--The amount of the tax imposed by
subsection (a) on any failure with respect to any applicable
individual shall be $100 for each day in the noncompliance
period with respect to such failure.
``(c) Limitations on Amount of Tax.--
``(1) Tax not to apply to failures corrected as soon
as reasonably practicable.--No tax shall be imposed by
subsection (a) on any failure if--
``(A) any person subject to liability for the
tax under subsection (d) exercised reasonable
diligence to meet the requirements of
subsection (e), and
``(B) such person provides the notice
described in subsection (e) as soon as
reasonably practicable after the first date
such person knew, or exercising reasonable
diligence should have known, that such failure
existed.
``(2) Overall limitation for unintentional
failures.--
``(A) In general.--If the person subject to
liability for tax under subsection (d)
exercised reasonable diligence to meet the
requirements of subsection (e) and paragraph
(1) is not otherwise applicable, the tax
imposed by subsection (a) for failures during
the taxable year of the employer (or, in the
case of a multiemployer plan, the taxable year
of the trust forming part of the plan) shall
not exceed $500,000. For purposes of the
preceding sentence, all multiemployer plans of
which the same trust forms a part shall be
treated as 1 plan.
``(B) Taxable years in the case of certain
controlled groups.--For purposes of this
paragraph, if all persons who are treated as a
single employer for purposes of this section do
not have the same taxable year, the taxable
years taken into account shall be determined
under principles similar to the principles of
section 1561.
``(3) Waiver by secretary.--In the case of a failure
which is due to reasonable cause and not to willful
neglect, the Secretary may waive part or all of the tax
imposed by subsection (a) to the extent that the
payment of such tax would be excessive or otherwise
inequitable relative to the failure involved.
``(d) Liability for Tax.--The following shall be liable for
the tax imposed by subsection (a):
``(1) In the case of a plan other than a
multiemployer plan, the employer.
``(2) In the case of a multiemployer plan, the plan.
``(e) Notice of Transaction Restriction Periods.--
``(1) Duties of plan administrator.--In advance of
the commencement of any transaction restriction period
with respect to an applicable pension plan, the plan
administrator shall notify the plan participants and
beneficiaries who are affected by such action in
accordance with this subsection.
``(2) Notice requirements.--
``(A) In general.--The notices described in
paragraph (1) shall be written in a manner
calculated to be understood by the average plan
participant and shall include--
``(i) the reasons for the transaction
restriction period,
``(ii) an identification of the
investments and other rights affected,
``(iii) the expected beginning date
and length of the transaction
restriction period,
``(iv) in the case of investments
affected, a statement that the
applicable individual should evaluate
the appropriateness of their current
investment decisions in light of their
inability to direct or diversify assets
credited to their accounts during the
transaction restriction period, and
``(v) such other matters as the
Secretary may require by regulation.
``(B) Notice to participants and
beneficiaries.--Except as otherwise provided in
this subsection, notices described in paragraph
(1) shall be furnished to all participants and
beneficiaries under the plan to whom the
transaction restriction period applies at least
30 days in advance of the transaction
restriction period.
``(C) Exception to 30-day notice
requirement.--In any case in which--
``(i) a deferral of the transaction
restriction period would violate the
requirements of subparagraph (A) or (B)
of section 404(a)(1) of the Employee
Retirement Income Security Act of 1974,
and a fiduciary (within the meaning of
section 3(21) of such Act) of the plan
reasonably so determines in writing, or
``(ii) the inability to provide the
30-day advance notice is due to events
that were unforeseeable or
circumstances beyond the reasonable
control of the plan administrator, and
a fiduciary of the plan reasonably so
determines in writing,
subparagraph (B) shall not apply, and the
notice shall be furnished to all participants
and beneficiaries under the plan to whom the
transaction restriction period applies as soon
as reasonably possible under the circumstances
unless such a notice in advance of the
termination of the transaction restriction
period is impracticable.
``(D) Written notice.--The notice required to
be provided under this subsection shall be in
writing, except that such notice may be in
electronic or other form to the extent that
such form is reasonably accessible to the
recipient.
``(E) Notice to issuers of employer
securities subject to transaction restriction
period.--In the case of any transaction
restriction period in connection with an
applicable pension plan, the plan administrator
shall provide timely notice of such transaction
restriction period to the issuer of any
employer securities subject to such transaction
restriction period.
``(3) Exception for transaction restriction periods
with limited applicability.--In any case in which the
transaction restriction period applies to 1 or more
participants or beneficiaries in connection with a
merger, acquisition, divestiture, or similar
transaction involving the plan or plan sponsor and
occurs solely in connection with becoming or ceasing to
be an applicable individual under the plan by reason of
such merger, acquisition, divestiture, or transaction,
the requirement of this subsection that the notice be
provided to all participants and beneficiaries shall be
treated as met if the notice required under paragraph
(1) is provided to such participants or beneficiaries
to whom the transaction restriction period applies as
soon as reasonably practicable.
``(4) Changes in length of transaction restriction
period.--If, following the furnishing of the notice
pursuant to this subsection, there is a change in the
beginning date or length of the transaction restriction
period (specified in such notice pursuant to paragraph
(2)(A)(iii)), the administrator shall provide affected
participants and beneficiaries notice of the change as
soon as reasonably practicable. In relation to the
extended transaction restriction period, such notice
shall meet the requirements of paragraph (2)(D) and
shall specify any material change in the matters
referred to in clauses (i) through (v) of paragraph
(2)(A).
``(5) Regulatory exceptions.--The Secretary may
provide by regulation for additional exceptions to the
requirements of this subsection which the Secretary
determines are in the interests of participants and
beneficiaries.
``(6) Guidance and model notices.--The Secretary
shall issue guidance and model notices which meet the
requirements of this subsection.
``(7) Transaction restriction period.--For purposes
of this subsection--
``(A) In general.--The term `transaction
restriction period' means, in connection with
an applicable pension plan, any period for
which any ability of participants or
beneficiaries under the plan, which is
otherwise available under the terms of such
plan, to direct or diversify assets credited to
their accounts, to obtain loans from the plan,
or to obtain distributions from the plan is
temporarily suspended, limited, or restricted,
if such suspension, limitation, or restriction
is for any period of more than 3 consecutive
business days.
``(B) Exclusions.--The term `transaction
restriction period' does not include a
suspension, limitation, or restriction--
``(i) which occurs by reason of the
application of the securities laws (as
defined in section 3(a)(47) of the
Securities Exchange Act of 1934),
``(ii) which is a change to the plan
which provides for a regularly
scheduled suspension, limitation, or
restriction which is disclosed to
participants or beneficiaries through
any summary of material modifications,
any materials describing specific
investment alternatives under the plan,
or any changes thereto, or
``(iii) which applies to 1 or more
individuals, each of whom is the
participant, an alternate payee (as
defined in section 414(p)(8)), or any
other beneficiary pursuant to a
qualified domestic relations order (as
defined in section 414(p)(1)).
``(8) Applicable individual.--For purposes of this
section, the term `applicable individual' means--
``(A) any participant in the applicable
pension plan,
``(B) any beneficiary who is an alternate
payee (within the meaning of section 414(p)(8))
under an applicable qualified domestic
relations order (within the meaning of section
414(p)(1)(A)), and
``(C) any beneficiary of a deceased
participant or alternate payee,
who has an accrued benefit under the plan and who is
entitled to direct the investment (or hypothetical
investment) of some or all of such accrued benefit.
``(9) Applicable pension plan.--For purposes of this
subsection, the term `applicable pension plan' means--
``(A) a plan described in section
219(g)(5)(A) (other than in clause (iii)
thereof), and
``(B) an eligible deferred compensation plan
(as defined in section 457(b)) of an eligible
employer described in section 457(e)(1)(A),
which permits any participant to direct the investment
of some or all of his account in the plan or under
which the accrued benefit of any participant depends in
whole or in part on hypothetical investments directed
by the participant.''.
(b) Clerical Amendment.--The table of sections for chapter 43
of such Code is amended by adding at the end the following new
item:
``Sec. 4980H. Failure of applicable plans to provide notice of
transaction restriction periods.''.
(c) Effective Date and Related Rules.--
(1) Effective date.--The amendments made by this
section shall take effect 180 days after the date of
the enactment of this Act. Good faith compliance with
the requirements of such amendments in advance of the
issuance of applicable regulations thereunder shall be
treated as compliance with such provisions.
(2) Issuance of initial guidance and model notice.--
The Secretary of the Treasury shall, in consultation
with the Secretary of Labor, issue initial guidance and
a model notice pursuant to section 4980H(e)(6) of the
Internal Revenue Code of 1986 (as added by this
section) not later than January 1, 2005. Not later than
75 days after the date of the enactment of this Act,
the Secretary shall promulgate interim final rules
necessary to carry out the amendments made by this
section.
(3) Plan amendments.--If any amendment made by this
section requires an amendment to any plan, such plan
amendment shall not be required to be made before the
first plan year beginning on or after the effective
date of this section, if--
(A) during the period after such amendment
made by this section takes effect and before
such first plan year, the plan is operated in
good faith compliance with the requirements of
such amendment made by this section, and
(B) such plan amendment applies retroactively
to the period after such amendment made by this
section takes effect and before such first plan
year.
TITLE V--INVESTMENT ADVICE FOR PARTICIPANTS AND BENEFICIARIES
SEC. 501. INDEPENDENT INVESTMENT ADVICE.
(a) In General.--Section 404(c)(1) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1104(c)(1)) (as amended
by section 102(c)) is amended further--
(1) by redesignating subparagraphs (A) and (B) as
clauses (i) and (ii), respectively, and by inserting
``(A)'' after ``(c)(1)''; and
(2) by adding at the end the following new
subparagraphs:
``(B)(i) In the case of a pension plan described in
subparagraph (A) which provides investment in employer
securities as at least one option for investment of plan assets
at the direction of the participant or beneficiary, such plan
shall make available to the participant or beneficiary the
services of a qualified fiduciary adviser for purposes of
providing investment advice described in section 3(21)(A)(ii)
regarding investment in such securities.
``(ii) No person who is otherwise a fiduciary shall be liable
by reason of any investment advice provided by a qualified
fiduciary adviser pursuant to a request under clause (i) if--
``(I) the plan provides for selection and monitoring
of such adviser in a prudent and effective manner,
``(II) such adviser is a named fiduciary under the
plan in connection with the provision of such advice,
and
``(III) in the provision of the advice, such adviser
is not conflicted in connection with the provision of
the advice, in accordance with subparagraph (C).
``(C) A qualified fiduciary adviser is not conflicted in the
provision of investment advice if, with respect to any product
taken into account in determining the asset allocation with
respect to which such advice is provided--
``(i) the adviser has no material interest in such
product, or
``(ii) the adviser discloses any material interest
the adviser has in such product to the recipient of the
advice and refers the recipient to an alternative
qualified fiduciary adviser made available by the plan
under subparagraph (B)(i) who has no material interest
in any product taken into account in the recommended
asset allocation.
``(D) For purposes of subparagraph (B)--
``(i) The term `qualified fiduciary adviser' means,
with respect to a plan, a person who--
``(I) is a fiduciary of the plan by reason of
the provision of qualified investment advice by
such person to a participant or beneficiary,
``(II) has no material interest in, and no
material affiliation or contractual
relationship with any third party having a
material interest in, the employer (other than
such person's relationship with the employer in
the capacity of a qualified fiduciary adviser),
``(III) meets the independence requirements
of clause (ii) in connection with investment
advice provided by such person pursuant to
services rendered pursuant to clause (i),
``(IV) meets the qualifications of clause
(iii), and
``(V) meets the additional requirements of
clause (iv).
``(ii) A person meets the independence requirements
of this clause if--
``(I) the amount of compensation payable to
any entity in connection with the provision of
the advice is not dependent on any particular
product with respect to which the advice is
rendered or the value of any such product,
``(II) no recordkeeping is maintained by such
person, the plan, the plan sponsor, or any
other fiduciary with respect to the plan with
respect to which products are recommended by
such person,
``(III) such person has no material interest
in, and no material affiliation or contractual
relationship with any third party having a
material interest in, any other person whose
analysis, with respect to any security or other
property with respect to which the advice is
being provided, is employed in developing
recommendations included in such advice, and
``(IV) the plan provides for prompt
disclosure of material interests and for the
services of alternative qualified fiduciary
advisers, sufficient to meet the requirements
of subparagraph (C).
``(iii) A person meets the qualifications of this
subparagraph if such person--
``(I) is registered as an investment adviser
under the Investment Advisers Act of 1940 (15
U.S.C. 80b-1 et seq.),
``(II) if not registered as an investment
adviser under such Act by reason of section
203A(a)(1) of such Act (15 U.S.C. 80b-
3a(a)(1)), is registered under the laws of the
State in which the fiduciary maintains its
principal office and place of business, and, at
the time the fiduciary last filed the
registration form most recently filed by the
fiduciary with such State in order to maintain
the fiduciary's registration under the laws of
such State, also filed a copy of such form with
the Secretary,
``(III) is registered as a broker or dealer
under the Securities Exchange Act of 1934 (15
U.S.C. 78a et seq.),
``(IV) is a bank or similar financial
institution referred to in section 408(b)(4),
``(V) is an insurance company qualified to do
business under the laws of a State, or
``(VI) is any other comparable entity which
satisfies such criteria as the Secretary
determines appropriate.
``(iv) A person meets the additional requirements of
this clause if every individual who is employed (or
otherwise compensated) by such person and whose scope
of duties includes the provision of qualified
investment advice on behalf of such person to any
participant or beneficiary is--
``(I) a registered representative of such
person,
``(II) an individual described in subclause
(I), (II), or (III) of clause (i), or
``(III) such other comparable qualified
individual as may be designated in regulations
of the Secretary.''.
(b) Maintenance of Fiduciary Liability.--Section 404(c)(1)(B)
of such Act (29 U.S.C. 1104(c)(1)(B)) is amended by inserting
before the period the following: ``, except that this
subparagraph shall not be construed to exempt any fiduciary
from liability for any violation of this section''.
SEC. 502. TAX TREATMENT OF QUALIFIED RETIREMENT PLANNING SERVICES.
(a) In General.--Subsection (m) of section 132 of the
Internal Revenue Code of 1986 (defining qualified retirement
services) is amended by adding at the end the following new
paragraph:
``(4) No constructive receipt.--No amount shall be
included in the gross income of any employee solely
because the employee may choose between any qualified
retirement planning services provided by a qualified
investment advisor and compensation which would
otherwise be includible in the gross income of such
employee. The preceding sentence shall apply to highly
compensated employees only if the choice described in
such sentence is available on substantially the same
terms to each member of the group of employees normally
provided education and information regarding the
employer's qualified employer plan.''.
(b) Conforming Amendments.--
(1) Section 403(b)(3)(B) of such Code is amended by
inserting ``132(m)(4),'' after ``132(f)(4),''.
(2) Section 414(s)(2) of such Code is amended by
inserting ``132(m)(4),'' after ``132(f)(4),''.
(3) Section 415(c)(3)(D)(ii) of such Code is amended
by inserting ``132(m)(4),'' after ``132(f)(4),''.
(c) Effective Date.--The amendment made by this section shall
apply to taxable years beginning after December 31, 2003.
TITLE VI--PARITY IN EMPLOYEE BENEFITS
SEC. 601. INCLUSION IN GROSS INCOME OF FUNDED DEFERRED COMPENSATION OF
CORPORATE INSIDERS IF CORPORATION FUNDS DEFINED
CONTRIBUTION PLAN WITH EMPLOYER STOCK.
(a) In General.--Subpart A of part I of subchapter D of
chapter 1 of the Internal Revenue Code of 1986 is amended by
adding at the end the following new section:
``SEC. 409A. DENIAL OF DEFERRAL FOR FUNDED DEFERRED COMPENSATION OF
CORPORATE INSIDERS IF CORPORATION FUNDS DEFINED
CONTRIBUTION PLAN WITH EMPLOYER STOCK.
``(a) In General.--If an employer maintains a defined
contribution plan to which employer contributions are made in
the form of employer stock and such employer maintains a funded
deferred compensation plan--
``(1) compensation of any corporate insider which is
deferred under such funded deferred compensation plan
shall be included in the gross income of the insider or
beneficiary for the 1st taxable year in which there is
no substantial risk of forfeiture of the rights to such
compensation, and
``(2) the tax treatment of any amount made available
under the plan to a corporate insider or beneficiary
shall be determined under section 72 (relating to
annuities, etc.).
``(b) Funded Deferred Compensation Plan.--For purposes of
this section--
``(1) In general.--The term `funded deferred
compensation plan' means any plan providing for the
deferral of compensation unless--
``(A) the employee's rights to the
compensation deferred under the plan are no
greater than the rights of a general creditor
of the employer, and
``(B) all amounts set aside (directly or
indirectly) for purposes of paying the deferred
compensation, and all income attributable to
such amounts, remain (until made available to
the participant or other beneficiary) solely
the property of the employer (without being
restricted to the provision of benefits under
the plan), and
``(C) the amounts referred to in subparagraph
(B) are available to satisfy the claims of the
employer's general creditors at all times (not
merely after bankruptcy or insolvency).
Such term shall not include a qualified employer plan.
``(2) Special rules.--
``(A) Employee's rights.--A plan shall be
treated as failing to meet the requirements of
paragraph (1)(A) unless, under the written
terms of the plan--
``(i) the compensation deferred under
the plan is paid only upon separation
from service, death, or at a specified
time (or pursuant to a fixed schedule),
and
``(ii) the plan does not permit the
acceleration of the time such deferred
compensation is paid by reason of any
event.
If the employer and employee agree to a
modification of the plan that accelerates the
time for payment of any deferred compensation,
then all compensation previously deferred under
the plan shall be includible in gross income
for the taxable year during which such
modification takes effect and the taxpayer
shall pay interest at the underpayment rate on
the underpayments that would have occurred had
the deferred compensation been includible in
gross income in the taxable years deferred.
``(B) Creditor's rights.--A plan shall be
treated as failing to meet the requirements of
paragraph (1)(B) with respect to amounts set
aside in a trust unless--
``(i) the employee has no beneficial
interest in the trust,
``(ii) assets in the trust are
available to satisfy claims of general
creditors at all times (not merely
after bankruptcy or insolvency), and
``(iii) there is no factor (such as
the location of the trust outside the
United States) that would make it more
difficult for general creditors to
reach the assets in the trust than it
would be if the trust assets were held
directly by the employer in the United
States.
``(c) Corporate Insider.--For purposes of this section, the
term `corporate insider' means, with respect to a corporation,
any individual who is subject to the requirements of section
16(a) of the Securities Exchange Act of 1934 with respect to
such corporation.
``(d) Other definitions.--For purposes of this section--
``(1) Plan includes arrangements, etc.--The term
`plan' includes any agreement or arrangement.
``(2) Substantial risk of forfeiture.--The rights of
a person to compensation are subject to a substantial
risk of forfeiture if such person's rights to such
compensation are conditioned upon the future
performance of substantial services by any
individual.''
(b) Clerical Amendment.--The table of sections for such
subpart A is amended by adding at the end the following new
item:
``Sec. 409A. Denial of deferral for funded deferred compensation
of corporate insiders if corporation funds defined
contribution plan with employer stock.''
(c) Effective Date.--The amendments made by this section
shall apply to amounts deferred after the date of the enactment
of this Act.
SEC. 602. PERFORMANCE-BASED COMPENSATION EXCEPTION TO $1,000,000
LIMITATION ON DEDUCTIBLE COMPENSATION NOT TO APPLY
IN CERTAIN CASES.
(a) In General.--Paragraph (4) of section 162(m) of the
Internal Revenue Code of 1986 is amended by adding at the end
the following new subparagraph:
``(G) Certain factors not permitted to be
taken into account in determining whether
performance goals are met.--Subparagraph (C)
shall not apply if, in determining whether the
performance goals are met, any of the following
are taken into account:
``(i) Cost savings as a result of
changes to any qualified employer plan
(as defined in section 4972(d)).
``(ii) Excess assets of such a plan
or earnings thereon.
``(iii) Any excess of the amount
assumed to be the return on the assets
of such a plan over the actual return
on such assets.''
(b) Effective Date.--The amendment made by this section shall
apply to taxable years beginning after the date of the
enactment of this Act.
TITLE VII--PROTECTION OF RETIREMENT EXPECTATIONS
SEC. 701. PROTECTION OF PARTICIPANTS FROM CONVERSIONS TO HYBRID DEFINED
BENEFIT PLANS.
(a) Amendments to the Employee Retirement Income Security Act
of 1974.--
(1) Election to maintain rate of accrual in effect
before plan amendment.--Section 204(b)(1) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1054(b)(1)) is amended by adding at the end the
following new subparagraph:
``(I)(i) Notwithstanding the preceding subparagraphs, in the
case of a plan amendment to a defined benefit plan--
``(I) which has the effect of converting the plan to
a plan under which the accrued benefit is expressed to
participants and beneficiaries as an amount other than
an annual benefit commencing at normal retirement age
(or which has a similar effect as determined under
regulations issued under clause (iii)), and
``(II) which has the effect of reducing the rate of
future benefit accrual of 1 or more participants,
such plan shall be treated as not satisfying the requirements
of this paragraph unless such plan meets the requirements of
clause (ii).
``(ii) A plan meets the requirements of this clause if the
plan provides each participant who has attained 10 years of
service (as determined under section 203) under the plan at the
time such amendment takes effect with--
``(I) notice of the plan amendment indicating that it
has such effect, including a comparison of the present
and projected values of the accrued benefit determined
both with and without regard to the plan amendment, and
``(II) an election, on the date of the conversion, to
either receive benefits under the terms of the plan as
in effect on or after the effective date of such plan
amendment or to receive benefits under the terms of the
plan as in effect immediately before the effective date
of such plan amendment (taking into account all benefit
accruals under such terms since such date).
``(iii) The Secretary shall issue regulations under which any
plan amendment which has an effect similar to the effect
described in clause (i)(I) shall be treated as a plan amendment
described in clause (i)(I). Such regulations may provide that
if a plan sponsor represents in communications to participants
and beneficiaries that a plan amendment has an effect described
in the preceding sentence, such plan amendment shall be treated
as a plan amendment described in clause (i)(I).''.
(2) Early retirement subsidy taken into account for
purposes of opening balance of hybrid defined benefit
plan.--Section 204(g) of such Act (29 U.S.C. 1054(g))
is amended by adding at the end the following new
paragraph:
``(6) In the case of a plan amendment to a defined benefit
plan which has the effect of converting the plan to a plan
under which the accrued benefit is expressed to participants
and beneficiaries as an amount other than an annual benefit
commencing at normal retirement age (or a plan amendment to
such plan having a similar effect as determined under
regulations issued under subsection (b)(1)(I)(iii)), such
amendment shall not be treated as reducing accrued benefits
merely because under such amendment any early retirement
benefit or retirement-type subsidy (within the meaning of
paragraph (2)(A)) is taken into account for purposes of the
opening balance of the amended plan.''.
(3) Interest rate for determinations relating to plan
conversions.--Section 204(g) of such Act (as amended by
paragraph (2)) is amended further by adding at the end
the following new paragraph:
``(7) Interest rate.--For purposes of this paragraph--
``(A) in the case of an amendment described in
paragraph (1) which takes effect on or after the
enactment of this paragraph, the interest rate and
mortality tables to be used in determining the present
value of the accrued benefit under such amendment shall
be the applicable rate and tables under section
417(e)(3) of the Internal Revenue Code of 1986 as of
the date on which such amendment takes effect, and
``(B) in the case of amendments described in
paragraph (1) which took effect before the enactment of
this paragraph, the interest rate and mortality tables
to be used in determining the present value of the
accrued benefit under such amendments shall be the
applicable rate and tables which were in effect under
section 412(l) of the Internal Revenue Code of 1986 as
of the effective date of the respective amendment.''.
(b) Amendments to the Internal Revenue Code of 1986.--
(1) Election to maintain rate of accrual in effect
before plan amendment.--Section 411(b)(1) of the
Internal Revenue Code of 1986 (relating to accrued
benefit requirements for defined benefit plans) is
amended by adding at the end the following new
subparagraph:
``(I) Election to maintain rate of accrual in
effect before certain plan amendments.--
``(i) In general.--Notwithstanding
the preceding subparagraphs, in the
case of a plan amendment to a defined
benefit plan--
``(I) which has the effect of
converting the plan to a plan
under which the accrued benefit
is expressed to participants
and beneficiaries as an amount
other than an annual benefit
commencing at normal retirement
age (or which has a similar
effect as determined under
regulations issued under clause
(iii)), and
``(II) which has the effect
of reducing the rate of future
benefit accrual of 1 or more
participants,
such plan shall be treated as not
satisfying the requirements of this
paragraph unless such plan meets the
requirements of clause (ii).
``(ii) Requirements.--A plan meets
the requirements of this clause if the
plan provides each participant who has
attained 10 years of service (as
determined under section 203) under the
plan at the time such amendment takes
effect with--
``(I) notice of the plan
amendment indicating that it
has such effect, including a
comparison of the present and
projected values of the accrued
benefit determined both with
and without regard to the plan
amendment, and
``(II) an election, on the
date of the conversion, to
either receive benefits under
the terms of the plan as in
effect on or after the
effective date of such plan
amendment or to receive
benefits under the terms of the
plan as in effect immediately
before the effective date of
such plan amendment (taking
into account all benefit
accruals under such terms since
such date).
``(iii) Regulations.--The Secretary
shall issue regulations under which any
plan amendment which has an effect
similar to the effect described in
clause (i)(I) shall be treated as a
plan amendment described in clause
(i)(I). Such regulations may provide
that if a plan sponsor represents in
communications to participants and
beneficiaries that a plan amendment has
an effect described in the preceding
sentence, such plan amendment shall be
treated as a plan amendment described
in clause (i)(I).''.
(2) Early retirement subsidy taken into account for
purposes of opening balance of hybrid defined benefit
plan.--Paragraph (6) of section 411(d) (relating to
accrued benefit not to be decreased by amendment) is
amended by adding at the end the following new
subparagraph:
``(F) Early retirement subsidy taken into
account for purposes of opening balance of
hybrid defined benefit plan.--In the case of a
plan amendment to a defined benefit plan which
has the effect of converting the plan to a plan
under which the accrued benefit is expressed to
participants and beneficiaries as an amount
other than an annual benefit commencing at
normal retirement age (or a plan amendment to
such plan having a similar effect as determined
under regulations issued under subsection
(b)(1)(I)(iii)), such amendment shall not be
treated as reducing accrued benefits merely
because under such amendment any early
retirement benefit or retirement-type subsidy
(within the meaning of section subparagraph
(B)(i)) is taken into account for purposes of
the opening balance of the amended plan.''.
(3) Interest rate for determinations relating to plan
conversions.--
Paragraph (6) of section 411(d) of such Code (as amended by
paragraph (2)) is amended further by adding at the end the
following new subparagraph:
``(G) Interest rate.--For purposes of this
paragraph--
``(i) in the case of an amendment
described in subparagraph (A) which
takes effect on or after the enactment
of this subparagraph, the interest rate
and mortality tables to be used in
determining the present value of the
accrued benefit under such amendment
shall be the applicable rate and tables
under section 417(e)(3) as of the date
on which such amendment takes effect,
and
``(ii) in the case of amendments
described in subparagraph (A) which
took effect before the enactment of
this subparagraph, the interest rate
and mortality tables to be used in
determining the present value of the
accrued benefit under such amendments
shall be the applicable rate and tables
which were in effect under section
412(l) as of the effective date of the
respective amendment.''.
(b) Effective Date and Related Rules.--
(1) In general.--The amendments made by this section
shall apply to plan amendments taking effect after the
date of the enactment of this Act.
(2) Plan amendments subject to litigation.--The
amendments made by this section also shall apply to any
plan amendment taking effect on or before such date
if--
(A) no determination letter is issued on or
before such date by the Internal Revenue
Service which has the effect of approving the
plan amendment, and
(B) such plan amendment is, on April 8, 2003,
subject to a court action based on age
discrimination.
(3) Special rule.--In the case of a plan amendment
taking effect before 90 days after the date of the
enactment of this Act, the requirements of section
204(b)(1)(I) of the Employee Retirement Income Security
Act of 1974 (as added by this section) and section
411(b)(1)(I) of the Internal Revenue Code of 1986 (as
added by this section) shall be treated as satisfied in
connection with such plan amendment, in the case of any
participant described in such sections 204(b)(1)(I) and
411(b)(1)(I) in connection with such plan amendment,
if, as of the end of such 90-day period--
(A) the notice described in clause (i)(I) of
such section 204(b)(1)(I) and clause (i)(I) of
such section 411(b)(1)(I) in connection with
such plan amendment has been provided to such
participant, and
(B) the plan provides for the election
described in clause (i)(II) of such section
204(b)(1)(I) and clause (i)(II) of such section
411(b)(1)(I) in connection with such
participant's retirement under the plan.
TITLE VIII--TREATMENT OF CORPORATE INSIDERS
SEC. 801. SPECIAL RULES FOR EXECUTIVE PERKS AND RETIREMENT BENEFITS.
(a) In General.--Part I of subchapter D of chapter 1 of the
Internal Revenue Code of 1986 (relating to pension, profit-
sharing, stock bonus plans, etc.) is amended by adding at the
end the following new subpart:
``SUBPART F--SPECIAL RULES FOR EXECUTIVE PERKS AND RETIREMENT BENEFITS
``Sec. 420A. Holding period requirement for stock acquired
through exercise of option.
``Sec. 420B. Additional tax on nondisclosed retirement perks.
``Sec. 420C. Definitions and special rule.
``SEC. 420A. HOLDING PERIOD REQUIREMENT FOR STOCK ACQUIRED THROUGH
EXERCISE OF OPTION.
``(a) In General.--In the case of a corporate insider with
respect to a corporation, the tax imposed by this chapter on a
corporate insider for any taxable year shall be increased by 50
percent of the amount realized by such insider from the
disqualified disposition during such year of stock acquired by
the corporate insider upon the exercise of a stock option
granted by the corporation with respect to which such
individual is a corporate insider.
``(b) Disqualified Disposition of Stock.--
``(1) In general.--For purposes of subsection (a),
the term `disqualified disposition of stock' means any
sale, exchange, or other disposition of stock which, if
such stock were employer securities held in a qualified
cash or deferred arrangement (as defined in section
401(k)(2)), would violate any restriction imposed on
the sale or other disposition of such securities by the
plan of which such arrangement is a part.
``(2) Special rule for 2 or more cash or deferred
arrangements.--If a corporation has more than 1
qualified cash or deferred arrangement (as so defined),
the restrictions which apply for purposes of paragraph
(1) shall be the most restrictive provisions relating
to the disposition of employer securities held pursuant
to any such arrangements.
``SEC. 420B. ADDITIONAL TAX ON NONDISCLOSED RETIREMENT PERKS.
``(a) In General.--In the case of a publicly traded
corporation, the tax imposed by this chapter for the taxable
year shall be increased by 50 percent of the net cost to the
corporation for the taxable year of personal perks provided to
a retired executive of the corporation.
``(b) Waiver If Perks Provided Pursuant to Shareholder
Approval.--Subsection (a) shall not apply with respect to any
personal perks provided pursuant to a contract if--
``(1) all of the material terms of such contract
(including a description of the benefits to be provided
to the executive and the extent of such benefits) are
disclosed to shareholders, and
``(2) such contract is approved by a majority of the
vote in a separate shareholder vote before any benefits
are provided under the contract.
``(c) Net Cost of Personal Perks.--
``(1) In general.--For purposes of subsection (a),
the net cost of personal perks provided to a retired
executive is the excess of--
``(A) the cost to the corporation of such
perks, over
``(B) the amount paid in cash during the
taxable year by the executive to reimburse the
corporation for the cost of such perks.
``(2) Personal perks.--For purposes of paragraph (1),
the term `personal perks' means--
``(A) the use of corporate-owned property,
``(B) travel expenses, including meals and
lodging, unless such expenses are directly
related to the performance of services by the
executive for the corporation and the business
relationship of such expenses is substantiated
under the requirements of section 274,
``(C) tickets to sporting or other
entertainment events,
``(D) amounts paid or incurred for membership
in any club organized for business, pleasure,
recreation, or other social purpose, and
``(E) other personal services, including
services related to maintenance or protection
of any personal residence of the executive.
``(3) Cost relating to use of corporate-owned
property.--For purposes of this subsection--
``(A) In general.--The cost taken into
account with respect to the use of corporate-
owned property shall be the allocable portion
of the total cost of operating such property.
``(B) Allocable portion.--For purposes of
subparagraph (A), the allocable portion of
total cost is--
``(i) the portion of the total cost
(including depreciation) incurred by
the corporation for operating and
maintaining such property during the
corporation's taxable year in which
such use occurred,
``(ii) which is allocable to the use
(determined on the basis of the
relationship of such use to the total
use of the property during the taxable
year).
``SEC. 420C. DEFINITIONS AND SPECIAL RULE.
``(a) Definitions.--For purposes of this subpart--
``(1) Corporate insider.--The term `corporate
insider' means, with respect to a corporation, any
individual--
``(A) who is subject to the requirements of
section 16(a) of the Securities Exchange Act of
1934 with respect to such corporation, or
``(B) who would be subject to such
requirements if such corporation were an issuer
of equity securities referred to in such
section.
``(2) Retired executive.--The term `retired
executive' means any corporate insider who is no longer
performing services on a substantially full time basis
in the capacity that resulted in being subject to the
requirements of section 16(a) of the Securities
Exchange Act of 1934.
``(3) Publicly traded corporation.--The term
`publicly traded corporation' means any corporation
issuing any class of securities required to be
registered under section 12 of the Securities Exchange
Act of 1934.
``(4) Corporate-owned property.--
``(A) In general.--Except as provided in
subparagraph (B), the term `corporate-owned
property' means any of the following property
owned by a corporation--
``(i) planes,
``(ii) apartments or other
residences,
``(iii) vacation, sports, and
entertainment facilities, and
``(iv) cars.
Such term includes any such property which is
leased or chartered by the corporation.
``(B) Exceptions.--Such term does not include
any property used directly by the corporation
in providing transportation, lodging, or
entertainment services to the general public.
``(b) Additions to Tax Not Treated As Tax for Certain
Purposes.--The tax imposed by sections 420A and 420B shall not
be treated as a tax imposed by this chapter for purposes of
determining--
``(1) the amount of any credit allowable under this
chapter, or
``(2) the amount of the minimum tax imposed by
section 55.''.
(b) Clerical Amendment.--The table of subparts for part I of
subchapter D of chapter 1 of such Code is amended by adding at
the end the following new item:
``Subpart F. Special Rules for Executive Perks and Retirement
Benefits.''.
(c) Effective Date.--The amendments made by this section
shall take effect as follows:
(1) Section 420A of the Internal Revenue Code of 1986
(as added by this section) shall apply to stock
acquired pursuant to the exercise of an option after
the date of the enactment of this Act.
(2)(A) Except as provided by subparagraph (B),
section 420B of such Code (as so added) shall apply to
perks provided after the date of the enactment of this
Act.
(B) In the case of perks provided pursuant to a
contract in existence on the date of the enactment of
this Act, such section 420B shall apply to such perks
after the date of the first annual shareholders meeting
after the date of the enactment of this Act.
SEC. 802. GOLDEN PARACHUTE EXCISE TAX TO APPLY TO DEFERRED COMPENSATION
PAID BY CORPORATION AFTER MAJOR DECLINE IN STOCK
VALUE OR CORPORATION DECLARES BANKRUPTCY.
(a) In General.--Section 4999 of the Internal Revenue Code of
1986 (relating to golden parachute payments) is amended by
redesignating subsection (c) as subsection (d) and by inserting
after subsection (b) the following new subsection:
``(c) Tax To Apply to Deferred Compensation Paid After Major
Stock Value Decline or Bankruptcy.--
``(1) In general.--For purposes of this section, the
term `excess parachute payment' includes severance pay,
and any other payment of deferred compensation, which
is received by a corporate insider after the date that
the insider ceases to be employed by the corporation
if--
``(A) there is at least a 75-percent decline
in the value of the stock in such corporation
during the 1-year period ending on such date,
or
``(B) such corporation becomes a debtor in a
title 11 or similar case (as defined in section
368(a)(3)(A)) during the 180-day period
beginning 90 days before such date.
Such term shall not include any payment from a
qualified employer plan.
``(2) Corporate insider.--For purposes of paragraph
(1), the term `corporate insider' means, with respect
to a corporation, any individual who is subject to the
requirements of section 16(a) of the Securities
Exchange Act of 1934 with respect to such
corporation.''
(b) Effective Date.--The amendment made by this section shall
apply with respect to cessations of employment after the date
of the enactment of this Act.
SEC. 803. ADEQUATE DISCLOSURE REGARDING EXECUTIVE COMPENSATION
PACKAGES.
(a) In General.--Section 402 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1102) is amended by
inserting after subsection (c) the following new subsection:
``(d) Disclosure Regarding Executive Compensation Packages.--
``(1) In general.--In any case in which an employer
takes any action to establish or substantially improve
an executive compensation package with respect to any
employee, such action may not take effect unless the
employer has met the requirements of paragraph (2).
``(2) Requirements.--An employer meets the
requirements of this paragraph if--
``(A) not less than 100 days prior to the
effective date of the action described in
paragraph (1), the employer provides written
notification of the action to--
``(i) each employee of the employer,
``(ii) each employee organization
representing employees of the employer
(if any), and
``(iii) in the case of an employer
that is a corporation, the board of
directors, and
``(B) in the case of an employer that is a
corporation, the board of directors has
approved such action.
Any such written notification shall be written in
language calculated to be understood by the average
plan participant.
``(3) Definitions.--For purposes of this subsection--
``(A) Executive compensation package.--The
term `executive compensation package' means a
combination of pay, benefits under employee
benefit plans, and other forms of compensation
provided by an employer primarily for employees
who are members of a select group of management
or highly compensated employees.
``(B) Substantial improvement.--An executive
compensation package is `substantially
improved' if the present value of such package
is increased by not less than 10 percent.''.
(b) Effective Date.--The amendment made by this section shall
apply with respect to actions taken after the date of the
enactment of this Act.
TITLE IX--MISCELLANEOUS PROVISIONS
SEC. 901. CORPORATE DEDUCTION FOR REINVESTED ESOP DIVIDENDS SUBJECT TO
DEDUCTIBLE LIMITS.
(a) In General.--Subsection (a) of section 404 of the
Internal Revenue Code of 1986 (relating to general rule) is
amended by adding at the end the following new paragraph:
``(13) Certain dividends reinvested in employee stock
ownership plans subject to deductible limits.--For
purposes of this subsection, an applicable dividend
described in subsection (k)(2)(A)(iii)(I) shall be
treated as compensation.''.
(b) Effective Date.--The amendment made by this section shall
apply to taxable years beginning after December 31, 2003.
SEC. 902. CREDIT FOR ELECTIVE DEFERRALS AND IRA CONTRIBUTIONS BY
CERTAIN INDIVIDUALS MADE PERMANENT (SAVER'S TAX
CREDIT).
Section 25B of the Internal Revenue Code of 1986 is amended
by striking subsection (h) (relating to termination).
SEC. 903. AUTHORITY TO RESCIND TRANSFERS TO PLANS MADE FOR THE BENEFIT
OF HIGHLY COMPENSATED EMPLOYEES.
Section 403 of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1103) is amended by adding at the end the
following new subsection:
``(e) The plan administrator or any person acting as the plan
administrator may avoid a transfer of an interest in property
to any trust or similar arrangement for the benefit of any
insider or other management employee to fund supplemental
retirement benefits or other deferred compensation.''.
TITLE X--GENERAL PROVISIONS
SEC. 1001. GENERAL EFFECTIVE DATE.
(a) In General.--Except as otherwise provided in this Act,
the amendments made by this Act shall apply with respect to
plan years beginning on or after January 1, 2004.
(b) Special Rule for Collectively Bargained Plans.--In the
case of a plan maintained pursuant to 1 or more collective
bargaining agreements between employee representatives and 1 or
more employers ratified on or before the date of the enactment
of this Act, subsection (a) shall be applied to benefits
pursuant to, and individuals covered by, any such agreement by
substituting for ``January 1, 2004'' the date of the
commencement of the first plan year beginning on or after the
earlier of--
(1) the later of--
(A) January 1, 2005, or
(B) the date on which the last of such
collective bargaining agreements terminates
(determined without regard to any extension
thereof after the date of the enactment of this
Act), or
(2) January 1, 2006.
SEC. 1002. PLAN AMENDMENTS.
If any amendment made by this Act requires an amendment to
any plan, such plan amendment shall not be required to be made
before the first plan year beginning on or after the effective
date specified in section 601, if--
(1) during the period after such amendment made by
this Act takes effect and before such first plan year,
the plan is operated in accordance with the
requirements of such amendment made by this Act, and
(2) such plan amendment applies retroactively to the
period after such amendment made by this Act takes
effect and before such first plan year.