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107th Congress                                            Rept. 107-383
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 1

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



 
                      PENSION SECURITY ACT OF 2002

                                _______
                                

                 April 4, 2002.--Ordered to be printed

                                _______
                                

    Mr. Boehner, from the Committee on Education and the Workforce, 
                        submitted the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 3762]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Education and the Workforce, to whom was 
referred the bill (H.R. 3762) to amend title I of the Employee 
Retirement Income Security Act of 1974 and the Internal Revenue 
Code of 1986 to provide additional protections to participants 
and beneficiaries in individual account plans from excessive 
investment in employer securities and to promote the provision 
of retirement investment advice to workers managing their 
retirement income assets, and to amend the Securities Exchange 
Act of 1934 to prohibit insider trades during any suspension of 
the ability of plan participants or beneficiaries to direct 
investment away from equity securities of the plan sponsor, 
having considered the same, report favorably thereon with an 
amendment and recommend that the bill as amended do pass.
  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

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

Sec. 1. Short title.

               TITLE I--IMPROVEMENTS IN PENSION SECURITY

Sec. 101. Periodic pension benefits statements.
Sec. 102. Protection from suspensions, limitations, or restrictions on 
ability of participant or beneficiary to direct or diversify plan 
assets.
Sec. 103. Informational and educational support for pension plan 
fiduciaries.
Sec. 104. Limitations on restrictions of investments in employer 
securities.
Sec. 105. Prohibited transaction exemption for the provision of 
investment advice.
Sec. 106. Study regarding impact on retirement savings of participants 
and beneficiaries by requiring fiduciary consultants for individual 
account plans.
Sec. 107. Insider trades during pension plan suspension periods 
prohibited.
Sec. 108. Effective dates of title and related rules.

                    TITLE II--ADDITIONAL PROVISIONS

Sec. 201. Amendments to Retirement Protection Act of 1994.
Sec. 202. Notice and consent period regarding distributions.
Sec. 203. Annual report dissemination.
Sec. 204. Technical corrections to Saver Act.
Sec. 205. Missing participants.
Sec. 206. Reduced pbgc premium for new plans of small employers.
Sec. 207. Reduction of additional pbgc premium for new and small plans.
Sec. 208. Authorization for PBGC to pay interest on premium overpayment 
refunds.
Sec. 209. Substantial owner benefits in terminated plans.
Sec. 210. Benefit suspension notice.
Sec. 211. Studies.
Sec. 212. Interest rate range for additional funding requirements.
Sec. 213. Provisions relating to plan amendments.

               TITLE I--IMPROVEMENTS IN PENSION SECURITY

SEC. 101. PERIODIC PENSION BENEFITS STATEMENTS.

  (a) Requirements.--
          (1) In general.--Section 105(a) of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1025 (a)) is amended to 
        read as follows:
  ``(a)(1)(A) The administrator of an individual account plan shall 
furnish a pension benefit statement--
          ``(i) to each plan participant at least annually,
          ``(ii) to each plan beneficiary upon written request, and
          ``(iii) in the case of an applicable individual account plan, 
        to each plan participant (and to each beneficiary with a right 
        to direct investments) at least quarterly.
  ``(B) The administrator of a defined benefit plan shall furnish a 
pension benefit statement--
          ``(i) at least once every 3 years to each participant with a 
        nonforfeitable accrued benefit who is employed by the employer 
        maintaining the plan at the time the statement is furnished to 
        participants, and
          ``(ii) to a plan participant or plan beneficiary of the plan 
        upon written request.
  ``(2) A pension benefit statement under paragraph (1)--
          ``(A) shall indicate, on the basis of the latest available 
        information--
                  ``(i) the total benefits accrued, and
                  ``(ii) the nonforfeitable pension benefits, if any, 
                which have accrued, or the earliest date on which 
                benefits will become nonforfeitable,
          ``(B) shall be written in a manner calculated to be 
        understood by the average plan participant, and
          ``(C) may be provided in written form or in electronic or 
        other appropriate form to the extent that such form is 
        reasonably accessible to the recipient.
  ``(3)(A) In the case of a defined benefit plan, the requirements of 
paragraph (1)(B)(i) shall be treated as met with respect to a 
participant if the administrator provides the participant at least once 
each year with notice of the availability of the pension benefit 
statement and the ways in which the participant may obtain such 
statement. Such notice shall be provided in written, electronic, or 
other appropriate form, and may be included with other communications 
to the participant if done in a manner reasonably designed to attract 
the attention of the participant.
  ``(B) The Secretary may provide that years in which no employee or 
former employee benefits (within the meaning of section 410(b) of the 
Internal Revenue Code of 1986) under the plan need not be taken into 
account in determining the 3-year period under paragraph (1)(B)(i).''.
          (2) Conforming amendments.--
                  (A) Section 105 of the Employee Retirement Income 
                Security Act of 1974 (29 U.S.C. 1025) is amended by 
                striking subsection (d).
                  (B) Section 105(b) of such Act (29 U.S.C. 1025(b)) is 
                amended to read as follows:
  ``(b) In no case shall a participant or beneficiary of a plan be 
entitled to more than one statement described in clause (i) or (ii) of 
subsection (a)(1)(A) or clause (i) or (ii) of subsection (a)(1)(B), 
whichever is applicable, in any 12-month period. If such report is 
required under subsection (a) to be furnished at least quarterly, the 
requirements of the preceding sentence shall be applied with respect to 
each quarter in lieu of the 12-month period.''.
          (3) Effective date of subsection.--The amendments made by 
        this subsection shall take effect for plan years beginning on 
        or after January 1, 2003.
  (b) Information Required From Applicable Individual Account Plans.--
Section 105 of such Act (as amended by subsection (a)) is amended 
further by adding at the end the following new subsection:
  ``(d)(1) The statements required to be provided at least quarterly 
under subsection (a) shall include (together with the information 
required in subsection (a)) the following:
          ``(A) the value of investments allocated to the individual 
        account, including the value of any assets held in the form of 
        employer securities, without regard to whether such securities 
        were contributed by the plan sponsor or acquired at the 
        direction of the plan or of the participant or beneficiary, and 
        an explanation of any limitations or restrictions on the right 
        of the participant or beneficiary to direct an investment; and
          ``(B) an explanation, written in a manner calculated to be 
        understood by the average plan participant, of the importance, 
        for the long-term retirement security of participants and 
        beneficiaries, of a well-balanced and diversified investment 
        portfolio, including a discussion of the risk of holding 
        substantial portions of a portfolio in the security of any one 
        entity, such as employer securities.
  ``(2) The value of any employer securities that are not readily 
tradable on an established securities market that is required to be 
reported under paragraph (1)(A) may be determined by using the most 
recent valuation of the employer securities.
  ``(3) The Secretary shall issue guidance and model notices which meet 
the requirements of this subsection.''.
  (c) Definition of Applicable Individual Account Plan.--Section 3 of 
such Act (29 U.S.C. 1002) is amended by adding at the end the following 
new subsection:
  ``(42) The term `applicable individual account plan' means any 
individual account plan, except that such term does not include an 
employee stock ownership plan (within the meaning of section 4975(e)(7) 
of the Internal Revenue Code of 1986) unless there are any 
contributions to such plan (or earnings thereunder) held within such 
plan that are subject to subsection (k)(3) or (m)(2) of section 401 of 
the Internal Revenue Code of 1986.''.
  (d) Civil Penalties for Failure To Provide Quarterly Benefit 
Statements.--Section 502 of such Act (29 U.S.C. 1132) is amended--
          (1) in subsection (a)(6), by striking ``(5), or (6)'' and 
        inserting ``(5), (6), or (7)'';
          (2) by redesignating paragraph (7) of subsection (c) as 
        paragraph (8); and
          (3) by inserting after paragraph (6) of subsection (c) the 
        following new paragraph:
  ``(7) The Secretary may assess a civil penalty against any plan 
administrator of up to $1,000 a day from the date of such plan 
administrator's failure or refusal to provide participants or 
beneficiaries with a benefit statement on at least a quarterly basis in 
accordance with section 105(a)(1)(A)(iii).''.
  (e) Model Statements.--The Secretary of Labor shall, not later than 
January 1, 2003, issue initial guidance and a model benefit statement, 
written in a manner calculated to be understood by the average plan 
participant, that may be used by plan administrators in complying with 
the requirements of section 105 of the Employee Retirement Income 
Security Act of 1974. The Secretary may promulgate such interim final 
rules as the Secretary determines are appropriate to carry out the 
amendments made by this section.

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

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

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

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

SEC. 104. LIMITATIONS ON RESTRICTIONS OF INVESTMENTS IN EMPLOYER 
                    SECURITIES.

  (a) Amendments to the Employee Retirement Income Security Act of 
1974.--
          (1) In general.--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)(1) An applicable individual account plan which holds employer 
securities that are readily tradable on an established securities 
market may not acquire or hold any employer securities with respect to 
which there is any restriction on divestment by a participant or 
beneficiary, unless the plan provides that the restriction--
          ``(A) is not applicable on or after a date which is not later 
        than the date on which the participant has completed 3 years of 
        service (as defined in section 203(b)(2)) with the employer or 
        (if the plan so provides) 3 years of participation (as defined 
        in section 204(b)(4)) in the plan, or
          ``(B) is not applicable, with respect to any employer 
        security allocated to the individual account during any 
        calendar quarter, after a date which is not later than 3 years 
        after the end of such quarter.
  ``(2)(A) For purposes of paragraph (1), the term `restriction on 
divestment' includes--
          ``(i) any failure to offer a broad range of investment 
        alternatives (as may be determined by the Secretary) to which a 
        participant or beneficiary may direct the proceeds from the 
        divestment of employer securities, and
          ``(ii) any restriction on the ability of a participant or 
        beneficiary to choose from a broad range of otherwise available 
        investment options (as may be determined by the Secretary) to 
        which such proceeds may be so directed, other than a 
        restriction limiting such ability to so choose to a periodic, 
        reasonable opportunity to so choose occurring no less 
        frequently than on a quarterly basis.''.
          (2) Clerical amendments.--The heading for section 407 of such 
        Act is amended by striking ``10 percent'' and the item relating 
        to such section in the table of contents in section 1 of such 
        Act is amended by striking ``10 percent''.
          (3) Transition rule.--
                  (A) In general.--The amendments made by this 
                subsection shall apply only with respect to assets 
                acquired on or after the effective date of such 
                amendments. In the case of any applicable individual 
                account plan which, on such effective date, holds 
                assets acquired before such date on which there is any 
                restriction on divestment by a participant or 
                beneficiary, such plan shall, before the applicable 
                effective date, provide for the removal of all such 
                restrictions on the applicable percentage of such 
                assets held on such date.
                  (B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage shall be as 
                follows:

Plan years beginning in:            Applicable percentage:
    2003
                                        20 percent.
    2004
                                        40 percent.
    2005
                                        60 percent.
    2006
                                        80 percent.
    2007 or thereafter
                                        100 percent.

  (b) Amendments to the Internal Revenue Code of 1986.--
          (1) In general.--Subsection (a) of section 401 of the 
        Internal Revenue Code of 1986 (relating to requirements for 
        qualification) is amended by inserting after paragraph (34) the 
        following new paragraph:
          ``(35) Limitations on restrictions under applicable defined 
        contribution plans on investments in employer securities.--
                  ``(A) In general.--A trust forming a part of an 
                applicable defined contribution plan shall not 
                constitute a qualified trust under this subsection if 
                the plan acquires or holds any employer securities with 
                respect to which there is any restriction on divestment 
                by a participant or beneficiary on or after the date on 
                which the participant has completed 3 years of 
                participation (as defined in section 411(b)(4)) under 
                the plan or (if the plan so provides) 3 years of 
                service (as defined in section 411(a)(5)) with the 
                employer.
                  ``(B) Definitions.--For purposes of subparagraph 
                (A)--
                          ``(i) Applicable defined contribution plan.--
                        The term `applicable defined contribution plan' 
                        means any defined contribution plan, except 
                        that such term does not include an employee 
                        stock ownership plan (as defined in section 
                        4975(e)(7)) unless there are any contributions 
                        to such plan (or earnings thereunder) held 
                        within such plan that are subject to 
                        subsections (k)(3) or (m)(2).
                          ``(ii) Restriction on divestment.--The term 
                        `restriction on divestment' includes--
                                  ``(I) any failure to offer at least 3 
                                diversified investment options in which 
                                a participant or beneficiary may direct 
                                the proceeds from the divestment of 
                                employer securities, and
                                  ``(II) any restriction on the ability 
                                of a participant or beneficiary to 
                                choose from all otherwise available 
                                investment options in which such 
                                proceeds may be so directed.''.
          (2) Conforming amendment.--Section 401(a)(28)(B) of such Code 
        (relating to diversification of investments) is amended by 
        adding at the end the following new clause:
                          ``(v) Exception.--This subparagraph shall not 
                        apply to an applicable defined contribution 
                        plan (as defined in paragraph (35)(B)(i)).''.

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

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

SEC. 106. STUDY REGARDING IMPACT ON RETIREMENT SAVINGS OF PARTICIPANTS 
                    AND BENEFICIARIES BY REQUIRING FIDUCIARY 
                    CONSULTANTS FOR INDIVIDUAL ACCOUNT PLANS.

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

SEC. 107. INSIDER TRADES DURING PENSION PLAN SUSPENSION PERIODS 
                    PROHIBITED.

  Section 16 of the Securities Exchange Act of 1934 (15 U.S.C. 78p) is 
amended by adding at the end the following new subsection:
  ``(h) Insider Trades During Pension Plan Suspension Periods 
Prohibited.--
          ``(1) Prohibition.--It shall be unlawful for any such 
        beneficial owner, director, or officer of an issuer, directly 
        or indirectly, to purchase (or otherwise acquire) or sell (or 
        otherwise transfer) any equity security of such issuer (other 
        than an exempted security), during any pension plan suspension 
        period with respect to such equity security.
          ``(2) Remedy.--Any profit realized by such beneficial owner, 
        director, or officer from any purchase (or other acquisition) 
        or sale (or other transfer) in violation of this subsection 
        shall inure to and be recoverable by the issuer irrespective of 
        any intention on the part of such beneficial owner, director, 
        or officer in entering into the transaction.
          ``(3) Rulemaking permitted.--The Commission may issue rules 
        to clarify the application of this subsection, to ensure 
        adequate notice to all persons affected by this subsection, and 
        to prevent evasion thereof.
          ``(4) Definitions.--For purposes of this subsection--
                  ``(A) Pension plan suspension period.--The term 
                `pension plan suspension period' means, with respect to 
                an equity security, any period during which the ability 
                of a participant or beneficiary under an applicable 
                individual account plan maintained by the issuer to 
                direct the investment of assets in his or her 
                individual account away from such equity security is 
                suspended by the issuer or a fiduciary of the plan. 
                Such term does not include any limitation or 
                restriction that may govern the frequency of transfers 
                between investment vehicles to the extent such 
                limitation and restriction is disclosed to participants 
                and beneficiaries through the summary plan description 
                or materials describing specific investment 
                alternatives under the plan.
                  ``(B) Applicable individual account plan.--The term 
                `applicable individual account plan' has the meaning 
                provided such term in section 3(42) of the Employee 
                Retirement Income Security Act of 1974.''.

SEC. 108. EFFECTIVE DATES OF TITLE AND RELATED RULES.

  (a) In General.--Except as provided in subsection (b), the amendments 
made by sections 101, 102, 103, 104, and 107 shall apply with respect 
to plan years beginning on or after January 1, 2003.
  (b) Special Rule for Collectively Bargained Plans.--In the case of a 
plan maintained pursuant to 1 or more collective bargaining agreements 
between employee representatives and 1 or more employers ratified on or 
before the date of the enactment of this Act, subsection (a) shall be 
applied to benefits pursuant to, and individuals covered by, any such 
agreement by substituting for ``January 1, 2003'' the date of the 
commencement of the first plan year beginning on or after the earlier 
of--
          (1) the later of--
                  (A) January 1, 2004, or
                  (B) the date on which the last of such collective 
                bargaining agreements terminates (determined without 
                regard to any extension thereof after the date of the 
                enactment of this Act), or
          (2) January 1, 2005.
  (c) Plan Amendments.--If the amendments made by sections 101, 102, 
103, and 104 of this Act require an amendment to any plan, such plan 
amendment shall not be required to be made before the first plan year 
beginning on or after January 1, 2005, if--
          (1) during the period after such amendments made by such 
        sections take effect and before such first plan year, the plan 
        is operated in accordance with the requirements of such 
        amendments made by such sections, and
          (2) such plan amendment applies retroactively to the period 
        after such amendments made by such sections take effect and 
        before such first plan year.
  (d) Amendments Relating to Investment Advice.--The amendments made by 
section 104 shall apply with respect to advice referred to in section 
3(21)(A)(ii) of the Employee Retirement Income Security Act of 1974 or 
section 4975(c)(3)(B) of the Internal Revenue Code of 1986 provided on 
or after January 1, 2003.

                    TITLE II--ADDITIONAL PROVISIONS

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

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

SEC. 202. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.

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

SEC. 203. ANNUAL REPORT DISSEMINATION.

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

SEC. 204. TECHNICAL CORRECTIONS TO SAVER ACT.

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

SEC. 205. MISSING PARTICIPANTS.

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

SEC. 206. REDUCED PBGC PREMIUM FOR NEW PLANS OF SMALL EMPLOYERS.

  (a) In General.--Subparagraph (A) of section 4006(a)(3) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1306(a)(3)(A)) is amended--
          (1) in clause (i), by inserting ``other than a new single-
        employer plan (as defined in subparagraph (F)) maintained by a 
        small employer (as so defined),'' after ``single-employer 
        plan,'',
          (2) in clause (iii), by striking the period at the end and 
        inserting ``, and'', and
          (3) by adding at the end the following new clause:
          ``(iv) in the case of a new single-employer plan (as defined 
        in subparagraph (F)) maintained by a small employer (as so 
        defined) for the plan year, $5 for each individual who is a 
        participant in such plan during the plan year.''.
  (b) Definition of New Single-Employer Plan.--Section 4006(a)(3) of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1306(a)(3)) is amended by adding at the end the following new 
subparagraph:
  ``(F)(i) For purposes of this paragraph, a single-employer plan 
maintained by a contributing sponsor shall be treated as a new single-
employer plan for each of its first 5 plan years if, during the 36-
month period ending on the date of the adoption of such plan, the 
sponsor or any member of such sponsor's controlled group (or any 
predecessor of either) did not establish or maintain a plan to which 
this title applies with respect to which benefits were accrued for 
substantially the same employees as are in the new single-employer 
plan.
  ``(ii)(I) For purposes of this paragraph, the term `small employer' 
means an employer which on the first day of any plan year has, in 
aggregation with all members of the controlled group of such employer, 
100 or fewer employees.
  ``(II) In the case of a plan maintained by two or more contributing 
sponsors that are not part of the same controlled group, the employees 
of all contributing sponsors and controlled groups of such sponsors 
shall be aggregated for purposes of determining whether any 
contributing sponsor is a small employer.''.
  (c) Effective Date.--The amendments made by this section shall apply 
to plans established after December 31, 2001.

SEC. 207. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR NEW AND SMALL PLANS.

  (a) New Plans.--Subparagraph (E) of section 4006(a)(3) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1306(a)(3)(E)) is amended by adding at the end the following new 
clause:
  ``(v) In the case of a new defined benefit plan, the amount 
determined under clause (ii) for any plan year shall be an amount equal 
to the product of the amount determined under clause (ii) and the 
applicable percentage. For purposes of this clause, the term 
`applicable percentage' means--
          ``(I) 0 percent, for the first plan year.
          ``(II) 20 percent, for the second plan year.
          ``(III) 40 percent, for the third plan year.
          ``(IV) 60 percent, for the fourth plan year.
          ``(V) 80 percent, for the fifth plan year.
For purposes of this clause, a defined benefit plan (as defined in 
section 3(35)) maintained by a contributing sponsor shall be treated as 
a new defined benefit plan for each of its first 5 plan years if, 
during the 36-month period ending on the date of the adoption of the 
plan, the sponsor and each member of any controlled group including the 
sponsor (or any predecessor of either) did not establish or maintain a 
plan to which this title applies with respect to which benefits were 
accrued for substantially the same employees as are in the new plan.''.
  (b) Small Plans.--Paragraph (3) of section 4006(a) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)), as amended 
by section 206(b), is amended--
          (1) by striking ``The'' in subparagraph (E)(i) and inserting 
        ``Except as provided in subparagraph (G), the'', and
          (2) by inserting after subparagraph (F) the following new 
        subparagraph:
  ``(G)(i) In the case of an employer who has 25 or fewer employees on 
the first day of the plan year, the additional premium determined under 
subparagraph (E) for each participant shall not exceed $5 multiplied by 
the number of participants in the plan as of the close of the preceding 
plan year.
  ``(ii) For purposes of clause (i), whether an employer has 25 or 
fewer employees on the first day of the plan year is determined taking 
into consideration all of the employees of all members of the 
contributing sponsor's controlled group. In the case of a plan 
maintained by two or more contributing sponsors, the employees of all 
contributing sponsors and their controlled groups shall be aggregated 
for purposes of determining whether the 25-or-fewer-employees 
limitation has been satisfied.''.
  (c) Effective Dates.--
          (1) Subsection (a).--The amendments made by subsection (a) 
        shall apply to plans established after December 31, 2001.
          (2) Subsection (b).--The amendments made by subsection (b) 
        shall apply to plan years beginning after December 31, 2002.

SEC. 208. AUTHORIZATION FOR PBGC TO PAY INTEREST ON PREMIUM OVERPAYMENT 
                    REFUNDS.

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

SEC. 209. SUBSTANTIAL OWNER BENEFITS IN TERMINATED PLANS.

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

SEC. 210. BENEFIT SUSPENSION NOTICE.

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

SEC. 211. STUDIES.

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

SEC. 212. INTEREST RATE RANGE FOR ADDITIONAL FUNDING REQUIREMENTS.

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

SEC. 213. PROVISIONS RELATING TO PLAN AMENDMENTS.

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

                                Purpose

    The purpose of H.R. 3762 is to restore worker confidence in 
America's pension system by establishing new 401(k) plan 
protections and giving workers new tools to protect and enhance 
their retirement savings. H.R. 3762 gives workers new freedom 
to diversify their investments, much greater access to quality 
investment advice, advance notice before blackout periods, more 
information about their pensions, and other tools they can use 
to maximize the potential of their 401(k) plans and ensure a 
secure retirement future.

                            Committee Action

    Committee Chairman John Boehner, Subcommittee on Employer-
Employee Relations Chairman Sam Johnson, Subcommittee Vice-
Chairman Ernie Fletcher and 31 other co-sponsors introduced 
H.R. 3762 on February 14, 2002. The bill is the culmination of 
legislative activity, including hearings, bill introduction, 
mark-up, floor consideration started in the 106th Congress and 
continuing in the 107th, on a number of bills proposed to 
better serve the pension needs of American workers.

                             106th CONGRESS

    In the 106th Congress, the Committee began reviewing the 
pension provisions of the Employee Retirement Income Security 
Act (``ERISA'') and its relevance to the needs of participants, 
beneficiaries and employers in the 21st Century. The forum for 
these hearings was the Committee on Education and the 
Workforce, Subcommittee on Employer-Employee Relations, chaired 
during the 106th Congress by Representative John Boehner.
    On March 11, 1999, Representative Rob Portman and 
Representative Benjamin Cardin introduced H.R. 1102, the 
``Comprehensive Retirement Security and Pension Reform Act of 
1999''. That bill was jointly referred to the Employer-Employee 
Relations Subcommittee of the Education and Workforce Committee 
and to the Ways and Means Committee. The purpose of the bill 
was to make retirement security more available to millions of 
workers by (1) expanding small business retirement plans, (2) 
allowing workers to save more, (3) addressing the needs of an 
increasingly mobile workforce through greater portability and 
other changes, (4) making pensions more secure, and (5) cutting 
the red tape that has hamstrung employers who want to establish 
pension plans for their workers.
    On June 29, 1999, the Subcommittee on Employer Employee 
Relations held a hearing, entitled ``Enhancing Retirement 
Security: A Hearing on H.R. 1102, The `Comprehensive Retirement 
Security and Pension Reform Act of 1999.' '' Testimony was 
received from the bill's authors, Representatives Portman and 
Cardin. On July 14, 1999, the full Education and the Workforce 
Committee discharged the Subcommittee on Employer-Employee 
Relations from consideration of the bill and then marked it up 
and favorably reported it by voice vote to the full House of 
Representatives on the same date. On July 19, 2000, the House 
of Representatives passed the bill by a vote of 401 yeas to 25 
nays.
    Fifteen provisions of Title VI of the bill, containing 
amendments to the Employee Retirement Income Security Act 
(ERISA), were added to H.R. 2488, the ``Taxpayer Refund and 
Relief Act of 1999,'' which passed the House and Senate on 
August 5, 1999, but was vetoed by the President. The tax bill 
passed by Congress, but vetoed by the President, included 
provisions either identical or similar to sections 601-606, 
611-612, 615-616, 618, 621-622, and 627-628 of H.R. 1102, as 
reported.
    Subsequently, twenty-two ERISA provisions from H.R. 1102 
were included in the ``Retirement Savings and Pension Coverage 
Act of 2000,'' part of H.R. 2614, the ``Taxpayer Relief Act of 
2000'' passed by the House on October 26, 2000 (but not acted 
upon by the Senate).
    The Employer-Employee Relations Subcommittee also laid the 
framework for introducing H.R. 4747, the Retirement Security 
Advice Act of 2000 by holding a hearing in the second session 
of the 106th Congress entitled, ``The Evolving Pension and 
Investment World after 25 Years of ERISA.'' The witnesses 
discussed the larger challenges facing the Employee Retirement 
Income Security Act (ERISA) and private pension plans now and 
in the future. The following individuals testified: Professor 
John H. Langbein, Chancellor Kent Professor of Law and Legal 
History, Yale Law School; Mr. Michael S. Gordon, Esquire, from 
the law offices of Michael S. Gordon, Washington, DC; Dr. John 
B. Shoven, Charles R. Schwab Professor of Economics, Stanford 
University; and Dr. Teresa Ghilarducci, Associate Professor of 
Economics at the University of Notre Dame.
    The Subcommittee on Employer-Employee Relations also held 
two days of hearings on March 9 and 10, 2000 regarding H.R. 
4747. Testifying at the March 9th hearing were: Mr. W. Allen 
Reed, President, General Motors Investment Management Company, 
on behalf of the Committee on Investment of Employee Benefit 
Assets (CIEBA) of the Financial Executives Institute; Mr. 
Daniel P. O'Connell, Corporate Director for Employee Benefits 
and HR Systems, United Technologies Corporation, on behalf of 
the ERISA Industry Committee (ERIC); Mr. Damon Silvers, 
Associate General Counsel of the AFL-CIO; Professor Joseph A. 
Grundfest, William A. Franke Professor of Law and Business and 
co-founder of Financial Engines, Incorporated; Ms. Eula 
Ossofsky, President of the Board of Directors, the Older 
Women's League; and Ms. Margaret Raymond, Assistant General 
Counsel, Fidelity Investments, on behalf of the Investment 
Company Institute.
    During the second day of hearings on March 10th, the 
following individuals testified before the Subcommittee on 
Employer-Employee Relations: Mr. Kenneth S. Cohen, Senior Vice 
President and Deputy General Counsel of the Massachusetts 
Mutual Life Insurance Company, on behalf of the American 
Council of Life Insurers; Mr. Marc E. Lackritz, President, the 
Securities Industry Association; Mr. David Certner, Senior 
Coordinator, Department of Federal Affairs for the American 
Association of Retired Persons; Mr. Louis Colosimo, Managing 
Director, Morgan Stanley Dean Witter & Company, Incorporated, 
on behalf of the Bond Market Association; Mr. John Hotz, Deputy 
Director of the Pension Rights Center; and Ms. Deedra Walkey, 
Assistant General Counsel for the Frank Russell Company.
    On March 16, 2000, the Subcommittee held a hearing entitled 
``The Wealth through the Workplace Act: Worker Ownership in 
Today's Economy''. The hearing focused on a bill introduced by 
then Subcommittee Chairman John A. Boehner, H.R. 3462, which 
made stock options more available to ERISA participants. 
Testifying before the Subcommittee that day was Jane F. 
Greenman, Esquire, Deputy General Counsel, Human Resources, 
Honeywell on behalf of the American Benefits Counsel; Mr. Tim 
Byland, Senior Sales Executive, INTERVU, Inc., Fairfax, VA; and 
Mr. Patrick Von Bargen, Executive Director, National Commission 
on Entrepreneurship, Washington, DC.
    On April 4, 2000, the Subcommittee on Employer-Employee 
Relations held a subsequent hearing laying the framework for 
H.R. 4747 entitled ``Modernizing ERISA to Promote Retirement 
Security.'' The following individuals testified: the Honorable 
Leslie Kramerich, Acting Assistant Secretary of Labor for 
Pension and Welfare Benefits, U.S. Department of Labor; and the 
Honorable David M. Strauss, Executive Director of the Pension 
Benefit Guaranty Corporation.
    On June 26, 2000, Representative John A. Boehner, then 
Chairman of the Subcommittee on Employer-Employee Relations, 
introduced H.R. 4747, the Retirement Security Advice Act of 
2000. On July 19, 2000, the Subcommittee on Employer-Employee 
Relations ordered H.R. 4747 favorably reported, as amended, by 
voice vote. There was no further action taken on the 
legislation prior to the conclusion of the 106th Congress.
    Concluding the legislative activity for the 106th Congress, 
the Subcommittee held a hearing on September 14, 2000 entitled 
``How to Improve Pension Coverage for American Workers''. 
Testifying at the hearing was: Theodore Groom, Esquire, Groom 
Law Group, Washington, DC; Mr. Michael Calabrese, Director, 
Public Assets Program, New America Foundation, Washington, DC; 
and Mr. Ed Tinsley, III, President and CEO, K-Bob's Steakhouse, 
Albuquerque, NM.

                             107th CONGRESS

    Building upon the activity of the previous Congress, 
Representative Rob Portman and Representative Ben Cardin, 
introduced on March 14, 2001, H.R. 10, a bill very similar to 
the House passed H.R. 1102 of the previous Congress. The bill 
had 305 cosponsors--175 Republicans and 130 Democrats, 
including Committee Chairman John Boehner, Subcommittee on 
Employer-Employee Relations Chairman Sam Johnson, and 
Subcommittee Ranking Member Rob Andrews.
    The Subcommittee on Employer-Employee Relations held a 
legislative hearing on the bill on April 5, 2001. At the 
hearing, entitled ``Enhancing Retirement Security: A Hearing on 
H.R. 10, The `Comprehensive Retirement Security and Pension 
Reform Act of 2001,' '' testimony was received from the bill's 
authors, Representatives Portman and Cardin, as well as Nanci 
S. Palmintere, director of Tax, Licensing and Customs, Intel 
Corporation, appearing on behalf of the American Benefits 
Council; Richard Turner, Associate General Counsel, American 
General Financial Group, appearing on behalf of the American 
Council of Life Insurers; Judith Mazo, Senior Vice President, 
The Segal Co., on behalf of the Building and Construction 
Trades Department, AFL-CIO and the National Coordinating 
Committee for Multiemployer Plans; and Karen Ferguson, 
Director, the Pension Rights Center.
    On April 26, 2001, the Committee on Education and the 
Workforce approved H.R. 10, as amended, by a voice vote, a 
quorum being present, and by voice vote ordered the bill 
favorably reported.
    On May 5, 2001, the House of Representatives passed H.R. 10 
on a vote of 407 yeas--24 nays. On May 16, 2001, H.R. 10 was 
included in H.R. 1836, the Economic Growth and Tax Relief 
Reconciliation Act, and passed by the House of Representatives 
on a vote of 230 yeas--197 nays. After a conference with the 
Senate, the House passed the Conference Report on May 26th, 
2001, on a vote of 240 yeas--154 nays and the President signed 
the bill into law on June 7, 2001.\1\ Due to the imposition of 
the ``Byrd Rule'' in the Senate,\2\ some of the ERISA 
provisions contained in H.R. 10 were dropped from the bill and 
not included in final passage.
---------------------------------------------------------------------------
    \1\ See House Committee Report 84; Public Law 107-16.
    \2\ Sec. 313 of the Congressional Budget Act restricts non-
mandatory spending provision through budget reconciliation.
---------------------------------------------------------------------------
    On June 21, 2001, Representative John A. Boehner, Chairman 
of the Committee on Education and the Workforce, introduced 
H.R. 2269, ``The Retirement Security Advice Act of 2001,'' a 
bill to promote the provision of retirement investment advice 
to workers managing their retirement income assets. The bill 
was referred to the Committee on Education and Workforce, 
Employee-Employer Subcommittee and the Committee on Ways and 
Means. On July 17, 2001, the Subcommittee on Employer-Employee 
Relations held a hearing on the bill. Testifying before the 
Subcommittee were: the Honorable Ann L. Combs, Assistant 
Secretary for Pension and Welfare Benefits, U.S. Department of 
Labor; Ms. Betty Shepard, Human Resources Administrator, Mohawk 
Industries, Inc.; Mr. Damon Silvers, Associate General Counsel, 
AFL-CIO; Mr. Richard A. Hiller, Vice President, Western 
Division, of TIAA-CREF; Mr. Joseph Perkins, Immediate Past 
Present of the American Association for Retired Persons; and 
Mr. Jon Breyfogle, Principal, The Groom Law Group, on behalf of 
the American Council of Life Insurers.
    On August 2, 2001, the Subcommittee on Employer-Employee 
Relations approved H.R. 2269, without amendment, by voice vote 
and ordered the bill favorably reported to the Full Committee. 
On October 3, 2001, the Committee on Education and the 
Workforce approved H.R. 2269, as amended, by voice vote and 
ordered the bill favorably reported by a roll call vote of 29-
17. Following this action, the Committee on Ways and Means 
considered and marked up the bill on November 7, 2001 and 
reported the bill to the full House on November 13, 2001. The 
bill as amended passed the House of Representatives on November 
15, 2001 on a roll call vote of 280 yeas-144 nays.
    On February 6th and 7th, 2002, the full Committee held a 
hearing entitled ``The Enron Collapse and its Implications for 
Worker Retirement Security''. At the first session of this 
hearing the sole witness was the Honorable Elaine Chao, 
Secretary of Labor. On the second day, the witnesses were: Mr. 
Thomas O. Padgett, Senior Lab Analyst, EOTT (Enron Subsidiary); 
Ms. Cindy K. Olson, Executive Vice President, Human Resources 
and Community Relations, and Building Services, Enron 
Corporation; Ms. Mikie Rath, Benefits Manager, Enron 
Corporation; Mr. Scott Peterson, Global Practice Leader for 
Defined Contribution Services, Hewitt Associates; and Ms. 
Teresa Ghilarducci, Associate Professor, Department of 
Economics, University of Notre Dame.
    Following the two-day hearing of the full Committee, the 
Subcommittee on Employer-Employee Relations, held a hearing on 
February 13, 2002 entitled ``Enron and Beyond: Enhancing Worker 
Retirement Security.'' The witness were: Jack L. VanDerhei, 
PhD, CEBS, Professor, Department of Risk, Insurance, and 
Healthcare Management, The Fox School of Business and 
Management, Temple University, appearing on behalf of the 
Employee Benefit Research Institute; Douglas Kruse, PhD, 
Professor, School of Management and Labor Relations, Rutgers 
University; Mr. Norman Stein, Douglas Arant Professor of Law, 
University of Alabama, School of Law; and Ms. Rebecca Miller, 
CPA, Partner, McGladrey & Pullen, LLP.
    On February 14, 2002, Chairman John Boehner and 
Subcommittee on Employer-Employee Relations Chairman Sam 
Johnson introduced H.R. 3762, ``The Pension Security Act.'' The 
bill embodied the pension reform principles outlined by 
President George W. Bush. The President envisioned new 
protections for workers so that they would have the freedom to 
diversify employer contributions after three years. To ensure 
parity between the top floor and the shop floor, the 
President's proposal would preclude senior executives from 
selling company stock outside of the company 401(k) while 
workers were unable to diversify their plan account during a 
blackout. In order to ensure that employer plan administrators 
made sound decisions about blackouts, the President's proposed 
plan would have held fiduciaries liable if they violated their 
duty to act in the interests of workers when they created the 
blackout period. The President's plan would also increase the 
information workers receive about their benefits and their 
notice as to the limiting of their rights during a blackout. 
The final prong of the President's plan was his call for the 
Senate to pass the Retirement Security Advice Act, H.R. 2269, 
which encouraged employers to make investment advice available 
to their workers.
    After the introduction of this bill, the Employer-Employee 
Relations Subcommittee held a hearing entitled ``Enron and 
Beyond: Legislative Solutions'' on February 27, 2002. The 
witnesses were: Mr. Dave Evans, Vice President, Retirement and 
Financial Services, Independent Insurance Agents of America Ms. 
Angela Reynolds, Director, International Pension and Benefits, 
NCR Corporation; Mr. Erik Olsen, Member, Board of Directors, 
American Association of Retired Persons; Dr. John H. Warner, 
Jr., Corporate Executive Vice President, Science Applications 
International Corp., appearing on behalf of the Profit Sharing 
Council of America; Mr. Richard Ferlauto, Director of Pensions 
and Benefits, American Federation of State County, and 
Municipal Employees, testifying on behalf of AFSCME and AFL-
CIO); and John M. Vine, Esq., Partner, Covington and Burling, 
testifying on behalf of the ERISA Industry Committee.
    On March 20, 2002, the Committee on the Education and the 
Workforce marked-up and approved H.R. 3762, as amended, the 
``Pension Security Act of 2002.'' The Committee considered 
seventeen amendments, adopting three of them, and ordered the 
bill favorably reported to the House of Representatives by a 
roll call vote of 28 yeas-19 nays.

                     Committee Statement and Views


                 A. Background and Need for Legislation

    The Employee Retirement Income Security Act (``ERISA'') \3\ 
was enacted in 1974 to provide a safe, honest and efficient 
structure for protecting pension benefits for America's private 
sector employees. ERISA created federal standards and remedies 
for pensions with U.S. Department of Labor oversight. As 
demonstrated at a number of bipartisan hearings held by the 
Committee on Education and the Workforce, (hereinafter the 
``Committee'') and the Subcommittee on Employer-Employee 
Relations during the 107th Congress, as well as hearings held 
by the Subcommittee during the 106th Congress, ERISA has been 
largely successful in protecting the integrity of privately 
managed pension plans.
---------------------------------------------------------------------------
    \3\ 29 U.S.C. Sec. 1001, et seq.
---------------------------------------------------------------------------
    In fact, there is a great deal of evidence that the private 
pension system is a great success story. As Secretary of Labor 
Elaine Chao stated in her testimony before the Committee on 
February 6, 2002:

          Just two generations ago, a ``comfortable 
        retirement'' was available to just a privileged few; 
        for many, old age was characterized by poverty and 
        insecurity. Today, thanks to the private pension system 
        that has flourished under ERISA, the majority of 
        American workers and their families can look forward to 
        spending their retirement years in relative comfort. 
        Today, more than 46 million Americans are earning 
        pension benefits on the job. More than $4 trillion is 
        invested in the private pension system. This is, by any 
        measure, a remarkable achievement.\4\
---------------------------------------------------------------------------
    \4\ Hearing on ``The Enron Collapse and Its Implications for Worker 
Retirement Security'' before the Committee on Education and the 
Workforce, U.S. House of Representatives, 107th Congress, Second 
Session, February 6, 2002 (to be published).

    Secretary Chao explained the basic structure of ERISA and 
how that structure preserves security for plan participants and 
---------------------------------------------------------------------------
beneficiaries.

          The fiduciary provisions of Title I of ERISA, which 
        are administered by the Labor Department, were enacted 
        to address public concern that funding, vesting and 
        management of plan assets were inadequate. ERISA's 
        enactment was the culmination of a long line of 
        legislative proposals concerned with the labor and tax 
        aspects of employee benefit plans. Since its enactment 
        in 1974, ERISA has been strengthened and amended to 
        meet the changing retirement and health care needs of 
        employees and their families. The Department's Pension 
        and Welfare Benefits Administration is charged with 
        interpreting and enforcing the statute. The Office of 
        the Inspector General also has some criminal 
        enforcement responsibilities regarding certain ERISA 
        covered plans.
          Under ERISA, the Department has enforcement and 
        interpretative authority over issues related to pension 
        plan coverage, reporting, disclosure and fiduciary 
        responsibilities of those who handle plan funds. 
        Additionally, the Labor Department regularly works in 
        coordination with other state and federal enforcement 
        agencies including the Internal Revenue Service, 
        Federal Bureau of Investigation, and the Securities and 
        Exchange Commission. Another agency with responsibility 
        for private pensions is the Pension Benefit Guaranty 
        Corporation, which insures defined-benefit pensions.
          ERISA focuses on the conduct of persons (fiduciaries) 
        who are responsible for operating pension and welfare 
        benefit plans. Such persons must operate the plans 
        solely in the interests of the participants and 
        beneficiaries. If a fiduciary's conduct fails to meet 
        ERISA's standard, the fiduciary is personally liable 
        for plan losses attributable to such failure.\5\
---------------------------------------------------------------------------
    \5\ Hearing on ``The Enron Collapse and Its Implications for Worker 
Retirement Security'' before the Committee on Education and the 
Workforce, U.S. House of Representatives, 107th Congress, Second 
Session, February 6, 2002 (to be published).

    Although ERISA has made pensions safer for participants, 
the evolving nature of pension plans with increased 
participation of participants in securities markets call for 
improved safeguards to protect these individually controlled 
pension accounts. That was illustrated in significant fashion 
by the collapse of Enron Corporation, a Houston Texas energy 
bond-trading firm. On December 2, 2001, Enron Corp. filed the 
largest bankruptcy petition in U.S. history. The day after 
declaring bankruptcy, the company announced that it would lay 
off 4,000 of its 7,500 employees as part of a corporate 
restructuring program to drastically cut costs. Significant 
scrutiny by the Congress, federal regulatory authorities and 
media and public attention followed and focused on two main 
areas: alleged accounting errors and/or securities violations 
that caused the company to vastly overstate its earnings and 
ultimately collapse financially and, most important to the 
Committee on Education and the Workforce's jurisdiction, the 
losses in the company's 401(k) plan \6\ that diminished the 
retirement funds of many Enron employees.
---------------------------------------------------------------------------
    \6\ Sponsorship of any retirement plan is voluntary, but any 
company that sponsors a plan for its employees must abide by the 
standards established by ERISA. A 401(k) plan is a type of benefit plan 
that can be offered under ERISA as individual account plan. 401(k) 
refers to a provision in the Internal Revenue Code that provides for 
tax-qualified retirement plans with the requirement that cash-deferred 
plans be nondiscriminatory, ensuring that highly paid executives do not 
benefit disproportionately. I.R. Code Sec. 401(k). These tax-qualified 
plans can be funded by contributions from employer, employee or both. 
Savings are paid out at retirement, which is when the taxes are paid.
---------------------------------------------------------------------------
    In response to the Enron situation, the Committee held 
three hearings to examine the facts of the Enron situation and 
whether it demonstrated any broader implications for pension 
reforms. The facts in the Enron bankruptcy showed that 57% of 
Enron's 401(k) plan assets were invested in company stock, 
which fell in value by 98.8% during 2001.\7\ Most of these plan 
assets were voluntarily directed by participants into Enron 
stock. Enron contributed an employer match of up to 3% of the 
employee's contribution in Enron stock. The employer match was 
restricted from trading until age 50--meaning that employees 
could not divest the company stock contributed by Enron until 
they reached age 50. Otherwise, the investment allocations in 
the Enron plan were unrestricted and could be traded daily.\8\ 
A further complicating factor in the Enron situation was that 
prior to Enron announcing bankruptcy, Enron's 401(k) plan 
changed plan record keepers.\9\ The change of plan record 
keepers required the plan to enter into an eleven business day 
trading suspension period during which Enron employees could 
not have access to their accounts. During the suspension 
period, Enron announced a $600 million loss. Enron stock 
consequently dropped during that period, from approximately $13 
to $8. In the year prior to the suspension period, Enron stock 
had dropped from $81.39 in January 2001 to $20.65 in October 
2001.
---------------------------------------------------------------------------
    \7\ Hearing on ``Enron and Beyond: Legislative Solutions'' before 
the Subcommittee on Employer Employee Relations, U.S. House of 
Representatives, 107th Congress, Second Session, February 13, 2002 (to 
be published).
    \8\ Hearing on ``The Enron Collapse and Its Implications for Worker 
Retirement Security'' before the Committee on Education and the 
Workforce, U.S. House of Representatives, 107th Congress, Second 
Session, February 7, 2002 (to be published).
    \9\ A plan record keeper's role includes processing all 
transactions by plan participants, including contributions, changes in 
investments and withdrawals, loans, and distributions. Record keepers 
can also provide customer service centers and can respond to 
participant inquiries. The record keeper, however, does not design the 
plan or determine investment options in the plan. Likewise, record 
keepers do not make any discretionary decisions about the plan.
---------------------------------------------------------------------------
    At the Committee's first day of hearings regarding Enron, 
Secretary of Labor Elaine Chao testified about the steps the 
Department of Labor was taking to respond to Enron. In 
addition, she outlined changes the Bush Administration felt 
were necessary to protect pension plan participants from future 
Enron situations. The second day featured a panel of Enron 
executives, an Enron employee, a representative from Enron's 
plan record keeper, and an economist. The Enron employee, the 
Enron executives, and the plan record keeper testified about 
the events surrounding the Enron situation.
    The second day of hearings gave the Committee an 
understanding of the facts that lead to problems at Enron, 
which included areas such as the lack of investment advice and 
confusion about the blackout period. An Enron employee, Tom 
Padgett, testified he lost over $600,000 over the course of a 
year in his 401(k) plan because it was primarily invested in 
Enron stock. Mr. Padgett observed that he managed his own 
retirement funds and did not have access to ``Wall Street'' 
information:

          Based on what we were told--repeatedly by the men at 
        the top--I never dreamed that this disaster could have 
        happened. We are not Wall Street analysts. I am sure 
        that most Enron employees manage their investments 
        themselves, like * * * I did. The fact remains, though, 
        that good investment decisions require honest 
        information. We all know now that the information that 
        we were given was false.\10\
---------------------------------------------------------------------------
    \10\ Hearing on ``The Enron Collapse and Its Implications for 
Worker Retirement Security'' before the Committee on Education and the 
Workforce, U.S. House of Representatives, 107th Congress, Second 
Session, February 7, 2002 (to be published).

    The Committee also heard from Enron Benefits Manager, Mikie 
Rath, who testified that Enron's 401(k) plan offered a menu of 
20 investment options, including mutual funds, a Schwab self-
directed brokerage account, and Enron stock. Ms. Rath confirmed 
that Enron offered a matching contribution in company stock 
starting in 1998. Finally, Ms. Rath explained that the Enron 
plan offered daily trading for all investments, including Enron 
stock. Only the matching stock contribution was restricted from 
trading until the participant reached age 50.
    Ms. Rath also offered insight into the so-called 
``lockdown'' or ``blackout'' period at Enron when trading in 
the 401(k) plan was suspended for eleven days while Enron 
changed plan service providers.

          After Enron outsourced its benefits services in 2000, 
        it became clear that Northern Trust [Enron's former 
        plan record keeper] had difficulty providing the level 
        of service demanded by Enron's employees. In January 
        2001, Enron began searching for a new benefits 
        administrator, and after a Request for Proposal 
        process, we selected Hewitt in May of 2001.

    Ms. Rath explained what happened during the lockdown 
period:

          Enron, Northern Trust, and Hewitt worked together to 
        shorten [the] time period as much as possible without 
        sacrificing the integrity of participants' accounts. 
        Ultimately, the trading suspension encompassed eleven 
        trading days from October 29 to November 13, 2001. 
        Enron mailed a brochure to all participants some three 
        weeks before the trading suspension, explaining the 
        transition and notifying them of the temporary 
        suspension. Enron employees with email accounts 
        received additional reminders in the days leading up to 
        the transition.
          Unfortunately, as the Committee is no doubt aware, 
        the commencement of the transition coincided with 
        certain bad news about the state of Enron's finances. 
        We considered postponing the transition but found it 
        was not feasible to notify more than 20,000 
        participants in a timely fashion. As the Enron news 
        continued to break, we and the plan's Administrative 
        Committee again considered stopping the transition. 
        However, in addition to the problem of notifying 
        participants, it would actually take longer to reverse 
        the transition than to finish it. Ultimately, we worked 
        with Hewitt to shave one week off the transition and we 
        implemented a process for notifying participants of the 
        early resumption of trading.\11\
---------------------------------------------------------------------------
    \11\ Hearing on ``The Enron Collapse and Its Implications for 
Worker Retirement Security'' before the Committee on Education and the 
Workforce, U.S. House of Representatives, 107th Congress, Second 
Session, February 7, 2002 (to be published).

    Scott Peterson, Practice Leader for the Defined 
Contribution Services of Hewitt Associates LLC, also testified 
before the Committee about how lockdowns, in general, work. 
Hewitt Associates became the new plan record keeper for the 
---------------------------------------------------------------------------
Enron plan in May 2001.

          In the case of large plans such as the Enron 401(k) 
        plan, a transition period, commonly referred to as a 
        blackout period, is standard. A blackout period is 
        designed to ensure accuracy of the date transferred by 
        the old record keeper and to enable the new record 
        keeper to transfer the data to its system and confirm 
        its operational integrity. Trustees need to follow a 
        similar process if trustees are changing. During all 
        portions of this period, plan participants are 
        restricted in their ability to deposit or withdraw 
        funds or to change their investments.\12\
---------------------------------------------------------------------------
    \12\ Hearing on ``The Enron Collapse and Its Implications for 
Worker Retirement Security'' before the Committee on Education and the 
Workforce, U.S. House of Representatives, 107th Congress, Second 
Session, February 7, 2002 (to be published).

    Mr. Peterson also detailed some of the events that occurred 
---------------------------------------------------------------------------
during Enron's lockdown period:

          [T]he blackout period for loans, withdrawals, etc. 
        actually began after the close of trading on October 
        19, 2001. The blackout period for changes in investment 
        options including the Enron Corp. stock fund, was 
        scheduled to begin after the close of trading on 
        October 26, 2001.
          On October 25, 2001, almost a week into the first 
        phase of the blackout period, a member of the Enron 
        Benefits Department contacted Hewitt and posed a few 
        questions. Specifically, we were asked about the 
        systems issues and similar practical consequences of 
        accelerating the live date by shortening the blackout 
        period. * * * Enron mentioned the possibility that they 
        could postpone the whole conversion and wait until the 
        following February or March.
          Enron asked that we respond to these questions that 
        same day and we did so. With respect to accelerating 
        the live date, we pointed out a series of risk 
        considerations. These risks included the adverse 
        effects on plan participants of commencing our record 
        keeping activities with incorrect plan data due to a 
        shortened review period and the possible compromising 
        of the quality of the services we could provide to plan 
        participants. In addition, we noted that similar data 
        quality issues could arise with respect to the new 
        trustee's reconciliation process. * * * Finally, we 
        discussed some of the factors Enron would want to 
        consider in deciding whether to delay the transition 
        period in its entirety. These factors include extra 
        cost, staffing implications, and the inability to 
        predict whether the Enron stock would be any less 
        volatile. We also made clear that we would work with 
        Enron to accommodate any changes it might decide to 
        make in the schedule.
          Later on October 25, 2001, a member of Enron's 
        Benefit Resources Department called to notify us that a 
        determination had been made that the transition would 
        go forward on the then current schedule. We 
        subsequently learned that Enron had been advised by its 
        legal counsel that it should not alter the blackout 
        schedule. As a result, restrictions on changes in 
        investment allocations took effect at the close of 
        business on the next day, October 26, 2001.\13\
---------------------------------------------------------------------------
    \13\ Hearing on ``The Enron Collapse and Its Implications for 
Worker Retirement Security'' before the Committee on Education and the 
Workforce, U.S. House of Representatives, 107th Congress, Second 
Session, February 7, 2002 (to be published).

    At the prior day's hearing, Secretary Chao testified about 
the Department of Labor's resources in responding to companies 
---------------------------------------------------------------------------
in crisis and their specific efforts with respect to Enron:

          On November 16, 2001, over two weeks before Enron 
        declared bankruptcy, the Department launched an 
        investigation into the activities of Enron's pension 
        plans. Our investigation is fact intensive with our 
        investigators conducting document searches and 
        interviews. The investigation is examining the full 
        range of relevant issues to determine whether 
        violations of ERISA occurred, including Enron's 
        treatment of their recent blackout period.
          In early December, it became apparent that Enron 
        would enter bankruptcy. Because the health and pension 
        benefits of workers were at risk, we initiated our 
        rapid response participant assistance program to 
        provide as much help as possible to individual workers.
          On December 6 and 7, 2001, the Department, working 
        directly with the Texas Workforce Commission, met on-
        site in Houston with 1200 laid-off employees from Enron 
        to provide information about unemployment insurance, 
        job placement, retraining and employee benefits issues. 
        PWBA's staff was there to answer questions about health 
        care continuation coverage under COBRA, special 
        enrollment rights under HIPAA, pension plans, how to 
        file claims for benefits, and other questions posed by 
        the employees. We also distributed 4500 booklets to the 
        workers and Enron personnel describing employee 
        benefits rights after job loss, and provided Enron 
        employees with a direct line to our benefit advisors 
        and to nearby One-Stop reemployment centers. These 
        services were made available nationwide to other Enron 
        locations.
          The Rapid ERISA Action Team (REACT) enforcement 
        program is designed to assist vulnerable workers who 
        are potentially exposed to the greatest risk of loss, 
        such as when their employer has filed for bankruptcy. 
        The new REACT initiative enables PWBA to respond in an 
        expedited manner to protect the rights and benefits of 
        plan participants. Since introduction of the REACT 
        program in 2000, we have initiated over 500 REACT 
        investigations and recovered over $10 million.
          Under REACT, PWBA reviews the company's benefit 
        plans, the rules that govern them, and takes immediate 
        action to ascertain whether the plan's assets are 
        accounted for. We also advise all those affected by the 
        bankruptcy filing, and provide rapid assistance in 
        filing proofs of claim to protect the plans, the 
        participants, and the beneficiaries. PWBA investigates 
        the conduct of the responsible fiduciaries and 
        evaluated whether a lawsuit should be filed to recover 
        plan losses and secure benefits.
          Our investigation of Enron was begun under REACT. 
        Because I do not want to jeopardize our ongoing Enron 
        investigation, I cannot discuss the details of the 
        case. Without drawing any conclusions about Enron 
        activities, I will attempt to briefly describe what 
        constitutes a fiduciary duty under ERISA, how that duty 
        impacts [a]n investment in employer securities, the 
        duty to disclose, and the ability to impose blackout 
        periods.
          Determining whether ERISA has been violated often 
        requires a finding of a breach of fiduciary 
        responsibility. Fiduciaries include the named fiduciary 
        of a plan, as well as those individuals who exercise 
        discretionary authority in the management of employee 
        benefits plans, individuals who give investment advice 
        for compensation, and those who have discretionary 
        responsibility for administration of the pension plan.
          ERISA holds fiduciaries to an extremely high standard 
        of care, under which the fiduciary must act in the sole 
        interest of the plan, its participants and 
        beneficiaries, using the care, skill and diligence of 
        an expert--the ``prudent expert'' rule. The fiduciary 
        also must follow plan documents to the extent 
        consistent with the law. Fiduciaries may be held 
        personally liable for damages and equitable relief, 
        such as disgorgement of profits, for breaching their 
        duties under ERISA.
          While a participant or beneficiary can sue on their 
        behalf of the plan, the Secretary of the Labor can also 
        sue on behalf of the plan, and pursue civil penalties. 
        We have 683 enforcement and compliance personnel and 65 
        attorneys who work on ERISA matters. In calendar year 
        2001, the Department closed approximately 4,800 civil 
        cases and recovered over $662 million. There were also 
        77 criminal indictments during the year, as well as 42 
        convictions and 49 guilty pleas.\14\
---------------------------------------------------------------------------
    \14\ Hearing on ``The Enron Collapse and Its Implications for 
Worker Retirement Security'' before the Committee on Education and the 
Workforce, U.S. House of Representatives, 107th Congress, Second 
Session, February 6, 2002 (to be published).

    Secretary Chao also detailed principles for a legislative 
proposal announced by President George W. Bush. She explained, 
at the President's direction, a Task Force comprised of the 
Department of Labor, Treasury and Commerce, had studied the 
broader implications of the Enron situation in regard to 
retirement security, and made recommendations to the President. 
Secretary Chao summarized the President's plan as follows: 
``The President's Retirement Security Plan, announced on 
February 1, would strengthen workers' ability to manage their 
retirement funds more effectively by giving them freedom to 
diversify, better information, and access to professional 
investment advice. It would ensure that senior executives are 
held to the same restrictions as American workers during 
temporary blackout periods and that employers assume full 
fiduciary responsibility during such times.'' \15\
---------------------------------------------------------------------------
    \15\ Hearing on ``The Enron Collapse and Its Implications for 
Worker Retirement Security'' before the Committee on Education and the 
Workforce, U.S. House of Representatives, 107th Congress, Second 
Session, February 6, 2002 (to be published).
---------------------------------------------------------------------------
    On February 13, 2002, the Subcommittee on Employer-Employee 
Relations held a hearing to discuss legislative solutions to 
some of the problems the Enron situation had presented. One of 
the focal points at the hearing was Congress' policy decision 
to encourage employers to offer contributions in the form of 
company stock to their employees' 401(k) plans.
    Dr. Jack VanDerhei, testifying on behalf of the Employee 
Benefits Research Institute (EBRI), explained that EBRI has 
maintained a database on 35,367 401(k) plans from 1996 through 
2000. Of the approximately 36,000 plans in the EBRI database, 
only 2.9% of 401(k) plans include company stock, however of 
that small number of plans, Dr. VanDerhei noted that the plans 
that hold company stock represented 42% of the participants in 
the database. Dr. VanDerhei also observed that ``[p]revious 
research has shown that the availability and level of a company 
match is a primary impetus for at least some employees to make 
contributions to their 401(k) plan.'' \16\
---------------------------------------------------------------------------
    \16\ Hearing on ``Enron and Beyond: Enhancing Worker Retirement 
Security'' before the Subcommittee on Employer-Employee Relations, 
Committee on Education and the Workforce, U.S. House of 
Representatives, 107th Congress, Second Session, February 13, 2002 (to 
be published).
---------------------------------------------------------------------------
    Dr. Douglas Kruse, Professor of Management and Labor 
Relations at Rutgers University testified ``employee-owners 
represent a substantial portion of the U.S. workforce and 25 
years of research shows that employee ownership often leads to 
higher-performing workplaces and better compensation and 
worklives for employees.''
    Dr. Kruse recognized that ``employee-owners'' may have 
limited information about the state of their company, but 
believed that this should not be an impediment to employee 
ownership.

          Employees clearly need good information and 
        investment advice to ensure that they make intelligent 
        decisions; once they receive such information and 
        advice, they should not be prevented from accepting 
        company stock from employers or investing their own 
        assets in company stock. Obviously many individuals 
        make well-informed choices to invest much of their 
        assets in farms or small businesses that they operate, 
        which are often very risky assets. Limiting workers' 
        involvement in employee ownership plans due to a 
        concern about their financial risk would be akin to 
        preventing individuals from owning their own farms or 
        small businesses. Substantial new restrictions on 
        employee ownership of stock would very likely cut back 
        a potentially lucrative benefit for employees, without 
        providing anything of value in return since employees 
        generally do not sacrifice pay or other benefits when 
        they participate in employee ownership plans.\17\
---------------------------------------------------------------------------
    \17\ Hearing on ``Enron and Beyond: Enhancing Worker Retirement 
Security'' before the Subcommittee on Employer-Employee Relations, 
Committee on Education and the Workforce, U.S. House of 
Representatives, 107th Congress, Second Session, February 13, 2002 (to 
be published).

    Additionally, Rebecca Miller, Managing Director for 
Employee Benefits Practice Policy, RSM McGladrey, Inc., 
testified that employee ownership was a positive tool and 
resulted in increases in productivity and performance for 
companies, and better benefits and higher retirement income and 
wages for employees.\18\ Ms. Miller recommended that if any 
legislative change should be made, ``[t]he first focus of 
change in the retirement plan rules should be on investment 
education and assistance. It is clear from Enron, Lucent and 
other recent experiences with participant directed 401(k) 
plans--employees are generally unsophisticated investors. They 
need a better understanding of risk management, 
diversification, etc.''
---------------------------------------------------------------------------
    \18\ Hearing on ``Enron and Beyond: Enhancing Worker Retirement 
Security'' before the Subcommittee on Employer-Employee Relations, 
Committee on Education and the Workforce, U.S. House of 
Representatives, 107th Congress, Second Session, February 13, 2002 (to 
be published).
---------------------------------------------------------------------------
    As a result of the hearings held by the Committee and 
Subcommittee, on February 14, 2002, Chairman John Boehner and 
Subcommittee Chairman Sam Johnson introduced H.R. 3762, the 
Pension Security Act, embodying the principles set forth by the 
President.\19\ Following introduction of the bill, the 
Subcommittee on Employer-Employee Relations held a hearing on 
February 27, 2002 on the legislative solutions to Enron.\20\ 
Interest groups expressed support for H.R. 3762, but also 
cautioned the Subcommittee to tread carefully in creating 
additional regulations for employers.
---------------------------------------------------------------------------
    \19\ The substance of H.R. 3762 is explained more thoroughly infra 
n. ________.
    \20\ By the time of the Feb. 27, 2002 hearing, more than fourteen 
bills had been introduced in the second session of the 107th Congress 
related to pensions and the fallout from Enron. They include H.R. 3416, 
H.R. 3463, H.R. 3509, H.R. 3622, H.R. 3623, H.R. 3640, H.R. 3692, H.R. 
3642, H.R. 3657, H.R. 3669, H.R. 3677, S. 1838, S. 1919, and S. 1921.
---------------------------------------------------------------------------
    Angela Reynolds, the Director of International Pension & 
Benefits of NCR Corporation, appeared on behalf of the American 
Benefits Council and testified:

          [O]ne cannot examine the realities of the 401(k) 
        system without concluding that overly aggressive 
        legislative change could unintentionally harm the very 
        people that Congress hopes to protect. Chairman Johnson 
        and Chairman Boehner, you both understand the delicate 
        balance of regulation and incentives upon which the 
        success of our voluntary, employer-sponsored pension 
        system depends, and we appreciate your sensitivity to 
        these issues as you lead this Committee's response to 
        the Enron bankruptcy. In order to avoid unintended 
        harms, the Council believes that retirement policy 
        responses to Enron should focus on ensuring that 401(k) 
        participants have the information, education and 
        professional advice they need to wisely exercise their 
        investment responsibility. Chairman Johnson, this is 
        the course that you and Chairman Boehner have 
        charted.\21\
---------------------------------------------------------------------------
    \21\ Hearing on ``Enron and Beyond: Legislative Solutions'' before 
the Subcommittee on Employer-Employee Relations, Committee on Education 
and the Workforce, U.S. House of Representatives, 107th Congress, 
Second Session, February 27, 2002 (to be published).

    Dr. John Warner, the Corporate Executive Vice President and 
Director, Science Applications International Corporation, 
appearing on behalf of Profit Sharing Council of America agreed 
with Ms. Reynolds and underscored the need for additional 
---------------------------------------------------------------------------
education and advice for plan participants:

          There is an ongoing need to educate all employees in 
        the basics of investing. Congress should work with 
        employers to encourage financial education for 
        employees and identify and remove barriers that deter 
        many employers from making professional investment 
        advice available to workers. The advice provision in 
        H.R. 3762 will help some plan sponsors, as will a 
        provision in H.R. 3669, cosponsored by Representatives 
        Portman and Cardin, that will allow workers to purchase 
        financial advice with pre-tax dollars.\22\
---------------------------------------------------------------------------
    \22\ Hearing on ``Enron and Beyond: Legislative Solutions'' before 
the Subcommittee on Employer-Employee Relations, Committee on Education 
and the Workforce, U.S. House of Representatives, 107th Congress, 
Second Session, February 27, 2002 (to be published).

    In addition, some of the witnesses expressed concern for 
other legislative proposals regarding pension reform. Ms. 
Reynolds addressed her concerns about H.R. 3657, the bill 
introduced by Representative George Miller, ranking member of 
---------------------------------------------------------------------------
the Committee:

          One of our * * * concerns about H.R. 3657 is that, 
        unlike the Boehner/Johnson legislation (H.R. 3762), it 
        does not advance targeted responses to the specific 
        issues raised by Enron but rather seeks to make wide-
        ranging and fundamental changes to our nation's defined 
        contribution plan retirement system. The bill would 
        fundamentally alter the governance system for 401(k) 
        and other defined contribution plans, radically change 
        the enforcement mechanism applicable to all ERISA 
        claims (not those just in the pension area) and 
        substantially revise the rules on vesting of employer 
        contributions. The results would be increased workplace 
        conflict, hampered plan administration, more 
        litigation, fewer employer contributions and, for many 
        employees, no retirement plan at all. These changes 
        would undermine the 401(k) system's current success and 
        should be rejected.\23\
---------------------------------------------------------------------------
    \23\ Hearing on ``Enron and Beyond: Legislative Solutions'' before 
the Subcommittee on Employer-Employee Relations, Committee on Education 
and the Workforce, U.S. House of Representatives, 107th Congress, 
Second Session, February 27, 2002 (to be published).

    John M. Vine, Esq., representing the ERISA Industry 
Committee (ERIC), testified that the proposal to mandate joint 
trusteeship in H.R. 3657, Representative Miller's proposal, on 
---------------------------------------------------------------------------
individual account plans would create problems:

          ERIC also strongly opposes proposals that have been 
        made for the joint trusteeship of individual account 
        plans. Joint trusteeship will be divisive, disruptive, 
        and counter-productive. It will politicize fiduciary 
        responsibility. It will create employee relations 
        strife. It will allow unions to speak for nonunion 
        workers. It will require employers to spend resources 
        on conducting [plan] elections rather than on 
        discharging fiduciary responsibilities. It will 
        disrupt, rather than strengthen, plan management. And 
        because it will discourage employers from setting up 
        plans, it will reduce retirement savings.\24\
---------------------------------------------------------------------------
    \24\ Hearing on ``Enron and Beyond: Legislative Solutions'' before 
the Subcommittee on Employer-Employee Relations, Committee on Education 
and the Workforce, U.S. House of Representatives, 107th Congress, 
Second Session, February 27, 2002 (to be published).

    David G. Evans from the Independent Insurance Agents of 
America echoed Ms. Reynolds' testimony and added that over-
regulation would lead to employers offering plans that are not 
subject to ERISA's same fiduciary standards. Mr. Evans noted 
that other plans including IRA, SEP (Simplified Employer 
Pension) or SIMPLE IRAs do not have fiduciary liability 
exposure as it relates to investments because employees can 
move their account to any investment vehicle. ``This ability 
becomes a two-edged sword because they can choose to take 
monies out of these accounts even though they have to pay an 
excise tax in addition to ordinary income tax. Yet, some 
employees will do this, damaging their future standard of 
living in retirement, in order to get their hands on the 
money.'' \25\
---------------------------------------------------------------------------
    \25\ Hearing on ``Enron and Beyond: Legislative Solutions'' before 
the Subcommittee on Employer-Employee Relations, Committee on Education 
and the Workforce, U.S. House of Representatives, 107th Congress, 
Second Session, February 27, 2002 (to be published).
---------------------------------------------------------------------------

                             B. Legislation

    As described supra, improving the retirement security of 
American workers has been the subject of considerable Committee 
attention during the current, and past Congress. The Enron 
bankruptcy and the tragic losses to retirement savings faced by 
Enron employees sharpened the focus on some immediate needs to 
shore up the pension laws that govern 42 million American 
workers with individual account pension plans. More than $2.0 
trillion are currently held in retirement assets by American 
workers.
    The proposal offered by President Bush on Feb. 1, 2002 
outlined new principles to protect the retirement security of 
American workers. Those principles would:
           Provide workers with greater freedom to 
        diversify and manage their own retirement funds;
           Ensure that senior corporate executives are 
        held to the same restrictions as average American 
        workers during ``blackout periods'' and that employers 
        assume full fiduciary responsibility during these 
        times;
           Give workers quarterly information about 
        their investments and rights to diversify them; and
           Expand workers' access to investment 
        advice.\26\
---------------------------------------------------------------------------
    \26\ February 1, 2002 Press Release, Office of the Press Secretary, 
President of the United States.
---------------------------------------------------------------------------
    As outlined, President Bush envisioned new protections for 
workers so that they would have the freedom to diversify 
employer contributions to their individual accounts after three 
years. To ensure parity between the top floor and the shop 
floor, the President's proposal would preclude senior 
executives from selling company stock outside of the company 
401(k) while workers were unable to diversify their plan assets 
during a blackout. In order to ensure that employer plan 
administrators made sound decisions about blackouts, the 
President's plan would hold them liable if they violated their 
duty to act in the interests of workers when they created the 
blackout period. The President's plan proposed to increase the 
information workers receive about their pension benefits and 
their notice as to the limiting of their rights during a 
blackout. The final prong of the President's plan was his call 
for the Senate to pass the Retirement Security Advice Act, H.R. 
2269, which encouraged employers to make investment advice 
available to their workers.\27\
---------------------------------------------------------------------------
    \27\ Ibid; see also discussion of H.R. 2269, Committee Action, 
infra n. 31-32.
---------------------------------------------------------------------------
    H.R. 3762, the Pension Security Act, embodies the 
principles set out by the President. Committee Chairman John 
Boehner and Subcommittee Chairman Sam Johnson introduced it 
Feb. 14, 2002 with bipartisan support.
    The legislation builds on the rights and protections 
contained in Title I of the Employee Retirement Income Security 
Act of 1974 (ERISA). Section 2(b) \28\ of ERISA sets forth this 
Congressional Finding and Declaration of Policy:
---------------------------------------------------------------------------
    \28\ 29 U.S.C. Sec. 1001(b).

          It is hereby declared to be the policy of this Act to 
        protect interstate commerce and the interests of 
        participants in employee benefit plans and their 
        beneficiaries, by requiring the disclosure and 
        reporting to participants and beneficiaries of 
        financial and other information with respect thereto, 
        by establishing standards of conduct, responsibility, 
        and obligation for fiduciaries of employee benefit 
        plans, and by providing for appropriate remedies, 
        sanctions and ready access to the Federal courts.\29\
---------------------------------------------------------------------------
    \29\ Ibid.

    Title I of ERISA contains these fundamental protections for 
participants and beneficiaries of employee benefit plans. Part 
1 of Title I \30\ sets forth the duties of plan administrators 
to notify participants and beneficiaries of the terms of the 
benefit plans in which they participate, their rights under 
these plans, the benefits which have accrued under the terms of 
their plans, and any changes which may be made to these 
benefits or rights.
---------------------------------------------------------------------------
    \30\ 29 U.S.C. Sec. 1021, 1022, 1024, 1025.
---------------------------------------------------------------------------
    Equally important, Part 4 of Title I of ERISA \31\ explains 
the fundamental duties of fiduciaries to employee benefit 
plans. In short, fiduciaries are to act solely in the interest 
of participants and beneficiaries with care, skill, prudence 
and diligence. Fiduciaries are to diversify the investments of 
employee benefit plans so as to minimize the risk of large 
losses, and are to act in accordance with the terms of the 
plan.\32\
---------------------------------------------------------------------------
    \31\29 U.S.C. Sec. 1104.
    \32\ ERISA has included an general exception to the diversification 
requirement with respect to employer securities in individual account 
plans in order to accommodate employee stock option plans (ESOPs).
---------------------------------------------------------------------------
    In 1974, the Congressional crafters of ERISA noted the lack 
of employee information and safeguards with regard to employee 
benefit plans and provided for such disclosure and safeguards 
as would protect employees' interests.\33\ In 1974, however, 
pension plans were primarily in the form of traditional defined 
benefit plans, which typically guaranteed specific monthly 
pension payments for the duration of a participant's lifetime. 
In this context, ERISA's one per year limit on the reports that 
outlined the total and nonforfeitable pension benefits that had 
accrued to the participant was more than adequate.\34\
---------------------------------------------------------------------------
    \33\ 29 U.S.C. Sec. 1001(a).
    \34\ 29 U.S.C. Sec. 1025(b).
---------------------------------------------------------------------------
    Likewise, in 1974 the fiduciary duty to diversify the 
investments of the plan was an adequate safeguard to minimize 
the risk of large losses to defined benefit plans where risk is 
borne by the sponsor.\35\
---------------------------------------------------------------------------
    \35\ 29 U.S.C. Sec. 1104(a)(1)(C).
---------------------------------------------------------------------------
    Today's workforce is very different than the workforce in 
1974. Employees are much less likely to work for long periods 
of time for a single employer and are less likely to 
participate in traditional defined benefit plans. In response 
to these labor trends, Congress has adapted pension and tax law 
to allow for individual retirement account plans, such as the 
401(k) plan, which are well suited for today's mobile 
workforce. Today's retirement plan system is largely one of 
pension plans that, while employer sponsored, are individual in 
nature where employers and employees jointly contribute to an 
account and the employee has the ability to direct its own 
account, choosing investments that best meet its retirement 
needs.
    Individual account plans necessitate different safeguards 
and standards for information disclosure in order to provide 
the same level of retirement security for participants and 
beneficiaries that were envisioned in 1974. As such, the 
provisions of H.R. 3762 represent a logical upgrade to the 
provisions of Title I of ERISA to ensure adequate retirement 
protection for today's workforce.

H.R. 3762's investment education and benefit statement

    H.R. 3762 amends ERISA to require plan administrators of 
``applicable individual account plan'' to provide a quarterly 
notice to plan participants and beneficiaries of the value of 
investments allocated to their individual account. Building 
upon ERISA's current requirement to provide an annual notice of 
benefits at the request of participants and beneficiaries,\36\ 
the new provision will increase the benefit information 
available to participants who may be making real time 
investment decisions about the assets held in their 
``applicable individual account plans.'' Provisions from H.R. 
10, the Comprehensive Retirement Security and Pension Reform 
Act of 2001, were also incorporated into H.R. 3762 to require 
plan administrators of all individual account plans, as defined 
by Section 3 (34) of ERISA to provide a pension benefit 
statement at least annually.
---------------------------------------------------------------------------
    \36\ 29 U.S.C. Sec. 1025(a).
---------------------------------------------------------------------------
    H.R. 3762 defines ``applicable individual account plan'' by 
limiting the existing definition of individual account plan in 
ERISA \37\ to exclude employee stock ownership plans (ESOP) 
\38\ unless there are any contributions to such plan or 
earnings held within such plan that are subject to subsection 
(k)(3) or (m)(2) of section 401 of the Internal Revenue Code of 
1986. The Committee considered limiting the definition of 
applicable individual account plan only to those accounts that 
hold employer securities that are readily tradable on an 
established securities market because the value assigned to 
employer securities that are not traded on an established 
securities market depend upon valuations or appraisals obtained 
from third party experts that are generally made on an annual 
basis. The Committee rejected limiting the quarterly statement 
only to publicly traded companies because it believes that all 
participants and beneficiaries should receive more regular 
information about their accounts. The Committee, however, does 
not intend to regulate corporate accounting practices through 
this legislation. Thus, the Committee clarified that the 
quarterly benefits statement does not require that the value of 
non-publicly traded stock held in an individual account plan be 
determined quarterly. Rather, the bill provides that the 
quarterly statement will give the value of any employer 
securities that are not readily tradable on an established 
securities market based upon the most recent valuation of such 
employer securities.
---------------------------------------------------------------------------
    \37\ 29 U.S.C. Sec. 1102 (34).
    \38\ 26 U.S.C. Sec. 4975 (e)(7).
---------------------------------------------------------------------------
    Additional provisions from H.R. 10 which were added to H.R. 
3762 require administrators of traditional defined benefit 
plans to furnish a benefit statement to each participant of a 
defined benefit plan at least once every three years and to a 
plan participant or beneficiary upon written request. In the 
case of a defined benefit plan, if administrators annually 
provide participants with a notice of the availability of a 
pension benefit statement, the new requirements are treated as 
having been met.
    Because many participants and beneficiaries have on-line 
access to their accounts, H.R. 3762 specifies that the new 
notices may be provided in electronic or other appropriate form 
provided that such form is reasonably accessible to the 
recipient.
    H.R. 3762 gives participants new rights to diversify the 
assets that are contributed to their account in the form of 
employer securities. Because of this new right, the new 
quarterly benefit statement for applicable individual accounts 
will include an explanation of any limitations or restrictions 
on the right of the participant or beneficiary to direct an 
investment, including their right to diversify any assets held 
in employer securities. Because Section 105 of ERISA was 
created not only to report on the benefits of participants and 
beneficiaries, but also to report on the rights of participants 
and beneficiaries under their benefit plans, this new 
diversification right is correctly placed in Section 105 of 
ERISA.
    As shown by the concentration of Enron securities held by 
Enron pension plan participants, American workers need 
assistance in recognizing the importance of diversification to 
a well-balanced and secure retirement account. Because of this, 
the benefit statement will also include an explanation of the 
importance of a diversified investment portfolio, including the 
risk of holding substantial portions of a portfolio in any one 
security, such as employer securities. As in the case of the 
Enron employees, participants of individual account pension 
plans all too frequently depart from the principles of 
diversification by holding more than one fourth of their 
retirement portfolio in employer securities, particularly in 
pension plans that have more than 5,000 participants.\39\ 
Because of this, the required educational information about the 
importance of diversification is appropriately placed in the 
same statement that specifies the participant's right to 
diversify assets held in employer securities.
---------------------------------------------------------------------------
    \39\ Testimony of Jack L. VanDerhei, Ph.D., CEBS, EBRI Fellow, 
Hearing on ``Enron and Beyond: Enhancing Worker Retirement Security'' 
before the Subcommittee on Employer-Employee Relations, Committee on 
Education and the Workforce, U.S. House of Representatives, 107th 
Congress, Second Session, February 13, 2002 (to be published).
---------------------------------------------------------------------------
    During Committee consideration of H.R. 3762, Representive 
Tim Roemer offered and withdrew an amendment that would have 
required plan administrators to issue a warning to participants 
and beneficiaries if 25 percent of their individual account was 
concentrated in any one security. The Committee believes that 
such a requirement would be extremely difficult to administer 
given the daily fluctuation of securities and is concerned that 
even if such provision were enacted, it could result in 
participants receiving potentially confusing information that 
could be outdated in a matter of days. H.R. 3762 already 
requires a quarterly reminder about the importance of 
diversification, which would also provide appropriate 
information about the participant's account without reducing 
its overall efficacy. However, the Committee views the 
principle of diversification very seriously and will work to 
strengthen the diversification education principles contained 
in the notice in the spirit of Representative Roemer's 
amendment.
    In order to help plan sponsors and administrators comply 
with the bill's requirements relating to investment education 
and benefit statements, the Secretary of Labor shall issue 
guidance and model notices that include the value of 
investments, the rights of employees to diversify any employer 
securities and an explanation of the importance of a 
diversified investment portfolio. This initial guidance will be 
promulgated no later than January 1, 2003. So that plan 
sponsors and administrators are able to comply in a timely 
fashion, the Secretary may also issue interim model guidance.
    Consistent with current law civil penalties of $1000 for a 
plan administrator's failure to file an annual report,\40\ H.R. 
3762 amends Section 502 of ERISA \41\ to allow the Secretary to 
assess a civil penalty against a plan administrator of up to 
$1,000 a day from the date of such plan administrator's failure 
to provide participants and beneficiaries with a benefit 
statement on a quarterly basis.
---------------------------------------------------------------------------
    \40\ 29 U.S.C. Sec. 1132 (c)(2).
    \41\ 29 U.S.C. Sec. 1132.
---------------------------------------------------------------------------

H.R. 3762's protection from restrictions on participants' ability to 
        diversify plan assets

    In order to protect against large losses, ERISA places a 
duty on plan fiduciaries to diversify assets.\42\ In the case 
of individual account pension plans that permit participants 
and beneficiaries to exercise control over the assets in their 
account, Section 404(c) of ERISA specifies that fiduciaries are 
not liable for any loss that results from such participant's or 
beneficiary's exercise of control.\43\ As such, the 
responsibility to diversify to protect against large losses 
passes from the fiduciary to the participant or beneficiary. 
This presents a unique challenge when plan administrators 
interrupt the otherwise available ability of participants and 
beneficiaries to direct or diversify assets, as in the case of 
a ``blackout'' or ``lockdown'' where participants are unable to 
access their accounts while the administration of the plan is 
switched from one service provider to another or plan 
investment options are changed. In order to protect the 
retirement security of pension plan participants in these 
cases, the Committee believes that additional duties for plan 
administrators, and additional information to plan 
beneficiaries and participants are needed.
---------------------------------------------------------------------------
    \42\ 29 U.S.C. Sec. 1104(a)(1)(C).
    \43\ 29 U.S.C. Sec. 1104(c)(1)(B).
---------------------------------------------------------------------------
    In any case in which the plan administrator temporarily 
suspends, limits, or restricts the ability of participants or 
beneficiaries to direct or diversify assets, H.R. 3762 requires 
that the administrator must first make a determination that the 
expected period of the suspension is reasonable. The Committee 
intends this duty to determine the reasonableness of the period 
of suspension to be read in the context of part 4 of ERISA \44\ 
which requires that plan fiduciaries discharge their duties 
prudently and solely in the interest of participants and 
beneficiaries--the highest duty of loyalty known to the 
law.\45\ Like fiduciary conduct in general, whether a fiduciary 
meets these requirement is determined by evaluating the conduct 
of the fiduciary ex ante, rather than ex post, with the benefit 
of 20-20 hindsight. Plan administrators should evaluate the 
amount of time that the participants' ability to direct or 
diversify will be suspended and the potential impact of this 
suspension on the participants' accounts in light of the need 
for the suspension and its potential benefits for participants 
and the plan. The Committee understands that there are many 
good reasons that may justify a suspension period, including 
hiring a more efficient recordkeeper, reducing plan 
administrative expenses, and enhancing plan investment options 
by making available more choices or better performing, lower 
expense investments.
---------------------------------------------------------------------------
    \44\ 29 U.S.C. Sec. 1104(a)(1).
    \45\ See, e.g., Donovan v. Bierwith, 680 F.2d 263, 272 n.8 (2d 
Cir.1982).
---------------------------------------------------------------------------
    Rather than defining a term such as ``blackout,'' H.R. 3762 
requires plan administrators to make a determination of 
reasonableness for any action that would have the effect of 
temporarily suspending, limiting, or restricting any ability of 
participants or beneficiaries of individual account plans to 
direct or diversify assets credited to their accounts. In order 
to trigger the notice requirement and determination of 
reasonableness, the suspension must be more than three 
consecutive calendar days on which the ability to diversify is 
otherwise available under the terms of the plan.
    Once a plan administrator has made a determination of 
reasonableness, H.R. 3762 requires plan administrators to 
notify plan participants and beneficiaries of the upcoming 
suspension, limitation or restriction on the ability of 
participants to trade. The new notice shall be issued 30 days 
prior to any suspension of participants' and beneficiaries' 
ability to direct or diversify assets. H.R. 3762 specifies that 
the notice must contain the reasons for the suspension, an 
identification of the investments affected, the expected period 
of the suspension, a statement that the administrator has 
evaluated the reasonableness of the expected period, and a 
statement that the participant should evaluate the 
appropriateness of their current investment decisions in light 
of their inability to direct or diversify assets during the 
expected period of suspension. Based on this notice, if they 
deem it appropriate participants may reallocate their 
investments away from more volatile investments, including 
employer securities, during the suspension period.
    As was clearly the case in the Enron situation, employees 
did not take appropriate action to diversify their accounts in 
advance of the ``blackout.'' \46\ Because the stock market and 
the Enron securities specifically were in an extremely volatile 
state, a warning to participants and beneficiaries about their 
own responsibilities may have protected the Enron employees 
from some of their losses. In the view of the Committee, it is 
only when participants and beneficiaries have been provided 
with this notice that they are adequately prepared to be 
responsible for their own individual accounts in the event of a 
blackout.
---------------------------------------------------------------------------
    \46\ Testimony of Mr. Thomas O. Padgett, Senior Lab Analyst at EOTT 
(An Enron subsidiary), Hearing on ``The Enron Collapse and its 
Implications for Worker Retirement Security'' before the Committee on 
Education and the Workforce, U.S. House of Representatives, 107th 
Congress, Second Session, February 7, 2002 (to be published).
---------------------------------------------------------------------------
    The Committee believes that the determination of 
reasonableness with respect to a ``blackout'' and the provision 
of additional information to participants and beneficiaries 
about their own duty to evaluate the appropriateness of their 
current investment decisions are fundamental to the fiduciary 
protection from liability contained in 404(c) of ERISA.\47\ 
Generally, participants and beneficiaries of applicable 
individual account plans bear the risk of their own accounts. 
The Committee believes that during a suspension, the plan 
fiduciary and the plan participants and beneficiaries each have 
responsibilities that amount to a shared risk. H.R. 3762 
balances this shared responsibility by requiring plan 
administrators to make a determination of reasonableness and to 
provide information to participants and beneficiaries, and by 
educating participants and beneficiaries so that they can 
adequately evaluate the appropriateness of their investment 
decisions in light of their inability to direct or diversify 
during a suspension. As H.R. 3762 indicates, it is only then 
that fiduciaries are relieved of their own liability and 
granted the 404(c) \48\ liability protection.
---------------------------------------------------------------------------
    \47\ 29 U.S.C. Sec. 1104(c)(1)(B).
    \48\ Ibid.
---------------------------------------------------------------------------
    H.R. 3762 amends section 404(c) of ERISA to clarify that 
the protection afforded plan fiduciaries under this section 
will be lost in the event of a suspension period unless the 
fiduciary acts in a manner consistent with the requirements of 
title 1 of ERISA in entering into the suspension period. The 
intention of the provision is to ensure that plan fiduciaries 
address suspension periods in a manner that ensures the 
interests of plan participants are protected. In the 
Committee's view, even prior to this amendment, plan 
fiduciaries generally had a fiduciary duty to act solely in the 
interest of participants and beneficiaries when taking the 
actions that typically lead to a suspension period, such as 
hiring a new record keeper or selecting new plan investment 
options.\49\ The amendment makes clear that among the factors 
the Department or a court should consider in evaluating whether 
a fiduciary met its fiduciary obligations include whether the 
fiduciary considered in advance the reasonableness of the 
expected suspension period, provided the suspension notice 
required by H.R. 3762 and acted solely in the interest of 
participants and beneficiaries in determining whether or not to 
enter into the suspension. The Committee notes that the duty to 
act solely in the interest of participants is one of the 
several duties set forth in section 404(a)(1) of ERISA that 
have applied to all fiduciary decisions since ERISA's 
enactment. Of course, in entering into a suspension period a 
plan fiduciary must meet the other applicable requirements of 
part 4 of ERISA, including the duty to act prudently and follow 
the terms of the plan (where consistent with the requirements 
of title I).
---------------------------------------------------------------------------
    \49\ The Committee notes that both the courts and the Department of 
Labor have indicated that selecting service providers (like a plan 
record keeper) and selecting plan investment options are fiduciary 
duties subject to the requirements of Title I of ERISA. See, e.g., 
Brock v. Hendershott, 840 F.2d 339, 342 (6th Cir. 1988) (selection of 
service provider is a fiduciary decision); 57 Fed. Reg. 46906, 46924 
n.27 (Oct. 13, 1992) (Preamble to Department of Labor Regulation 
interpreting ERISA section 404(c)) (limiting or designating investment 
options under a section 404(c) plan is itself a fiduciary function).
---------------------------------------------------------------------------
    Provided the plan fiduciary entering into the suspension 
period satisfies his duties under title I of ERISA, the 
amendments to section 404(c) make clear that the fiduciary will 
not be liable for investment losses that are attributable to a 
plan participant's prior exercise of control over plan 
investments (i.e., the investment elections made by the 
participant prior to the suspension). In the event of a 
suspension that occurs when a plan is changing investment 
options, it is the Committee's view that a participant will 
have exercised prior investment control over investment in the 
plan's new investments options if (1) the participant gave 
affirmative investment instructions with respect to the new 
investment options, or (2) the participant approved the 
investment through a negative consent process. Under the latter 
option, participant consent would occur where the participant 
is informed in advance of the change in investment options, is 
told how the account will be invested if the participant fails 
to provide an affirmative election (i.e., was informed of the 
default selections) and elects not to make an affirmative 
direction selecting new investment options. It is the 
Committee's expectation that information regarding new plan 
investment options, including default investments for 
participants, may be included in connection with the notice of 
an upcoming suspension, limit or restriction on trading. It is 
the Committee's further view that by providing for both 
affirmative and negative election, participants will generally 
exercise investment control over the selection of new 
investment options when a plan fiduciary or service provider 
employs common processes such as ``fund mapping'' (i.e., 
matching the plan's new investment options to the plan's prior 
investment options) provided proper advance notice is provided. 
The Committee notes that both the Department of Labor and the 
courts have on numerous occasions endorsed the concept of 
negative consent, concluding that both plan fiduciaries and 
plan participants may exercise control over plan investments 
through negative consent.\50\
---------------------------------------------------------------------------
    \50\ DOL Adv. Op. 2001-02A (Feb. 15, 2001) (default allocation of 
demutualization proceeds where fiduciary of 401(k) plan fails to 
respond to insurer notices seeking affirmative direction); DOL Adv. Op. 
97-16A (May 22, 1997) (substitution of new mutual fund in defined 
contribution plans where plan fiduciary fails to respond to advance 
notices by insurer seeking approval of new fund); Herman v. NationsBank 
Trust Co., 126 F. 3d 1354, 1370-71 (11th Cir. 1997) (participants with 
voting rights over shares allocated to their individual ESOP accounts 
failed to vote proxies with respect to allocated shares are deemed to 
have exercised control over shares).
---------------------------------------------------------------------------
    H.R. 3762 provides for specific exceptions from the duty to 
notice all participants and beneficiaries under the plan. In 
the event of a qualified domestic relations order, or a 
blackout period caused by a merger, acquisition, divestiture or 
other such action by the plan sponsor or plan, only those 
employees who are impacted by the event will receive the 
notice. The Committee intends this exception to cover instances 
where a single employer plan is merged with a multi-employer 
plan. In these instances, as in the case with many mergers and 
acquisitions, the new participants and beneficiaries will not 
have been a part of the plan 30 days prior to the suspension of 
their ability to direct assets. Rather, the suspension will 
occur as they are joining the plan. For this reason, H.R. 3762 
specifies that such notice shall be given as soon as reasonably 
practicable in advance of the change. The bill provides that 
the Secretary of Labor may provide for additional exceptions to 
the requirements that are in the interest of participants and 
beneficiaries.
    In any case where the inability to provide the notice is 
due to events that were unforeseeable or circumstances beyond 
the reasonable control of the plan administrator, the notice 
shall be furnished to all participants and beneficiaries under 
the plan as soon as reasonably possible under the 
circumstances. Among other cases, the Committee intends this 
exception to apply in the case of participants and 
beneficiaries who have moved and left no forwarding address. In 
such cases, a plan administrator's notification to the last 
known address shall meet the notice requirements of this 
section.
    Should there be a change in the expected period of the 
suspension, H.R. 3762 requires the plan administrator to 
provide notice to affected participants and beneficiaries as 
soon as reasonably practicable in advance of the change.
    H.R. 3762 provides that the Secretary of Labor shall issue 
guidance and model notices that include the above factors and 
such other provisions the Secretary may specify. The initial 
guidance will be promulgated no later than January 1, 2003. In 
order to assist plan administrators in complying with the new 
requirements in a timely fashion, the Secretary may issue 
interim model guidance.
    H.R. 3762 amends Section 502 of ERISA \51\ to allow the 
Secretary to assess a civil penalty against a plan 
administrator of up to $100 a day from the date of the plan 
administrator's failure or refusal to provide notice to 
participants and beneficiaries in accordance with the new 
notice requirements.
---------------------------------------------------------------------------
    \51\ 29 U.S.C. Sec. 1132.
---------------------------------------------------------------------------

H.R. 3762's provision for fiduciary education

    During Committee consideration of H.R. 3762, the Committee 
adopted an amendment offered by Representative Marge Roukema 
that directed the Department of Labor to establish a program to 
make information and educational resources available to pension 
plan fiduciaries on an ongoing basis in order to assist them in 
diligently and efficiently carrying out their fiduciary duties 
with respect to the plan.
    The fiduciary duty of loyalty--the highest duty of loyalty 
known to the law,\52\ is a protection to participants and 
beneficiaries only if the fiduciary understands the 
responsibilities and implications of this duty. As such, the 
Committee unanimously agreed that the provision of educational 
information to pension plan fiduciaries is of the utmost 
importance.
---------------------------------------------------------------------------
    \52\ See, e.g., Donovan v. Bierwith, 680 F.2d 263, 272 n.8 (2d Cir. 
1982).
---------------------------------------------------------------------------

H.R. 3762's right to diversify

    H.R. 3762 amends ERISA to reduce the period of time in 
which companies can require workers to hold company stock to 
three years. Currently, ERISA limits to 10 percent the amount 
of company stock that can be held in a pension plan.\53\ The 
Internal Revenue Code provides that for employer stock 
contributions made in an ESOP, the time these securities can be 
required to be held is until the participant is age 55 and has 
at least 10 years of participation in the plan.\54\
---------------------------------------------------------------------------
    \53\ See 29 U.S.C. Sec. 1107, 1114.
    \54\ 26 U.S.C. Sec. 401(a)(28).
---------------------------------------------------------------------------
    H.R. 3762 gives employees a new right to diversify employer 
securities in their individual account after three years of 
service with the employer or three years after receiving 
employer stock in their individual account plan. In a survey 
conducted by EBRI of the International Society of Certified 
Employee Benefit Specialist members, of the plans where 
employer contributions were required to be in company stock, 
60% of them reported that the stock was restricted until a 
specified age and/or service requirement is met.\55\ Current 
law has encouraged employers to offer employer securities as 
part of ERISA plans and the Committee has received a great deal 
of testimony regarding the benefits of increasing employee 
ownership through employer securities.\56\ In light of the 
recent events of Enron, which demonstrated the problems with 
over-concentration in one particular investment, the Committee 
recognizes that requiring employees to hold employer securities 
for long periods of time may run counter to an employee's 
objective of a diversified retirement portfolio. The Committee 
believes that the three-year diversification rule will provide 
employees the flexibility to choose how to invest their savings 
while continuing to encourage employers to make matching 
contributions.
---------------------------------------------------------------------------
    \55\ Testimony of Dr. Jack VanDerhei, Hearing on ``Enron and 
Beyond: Enhancing Worker Retirement Security'' before the Subcommittee 
on Employer Employee Relations, U.S. House of Representatives, 107th 
Congress, Second Session, February 13, 2002 (to be published).
    \56\ See Hearing on ``Enron and Beyond: Enhancing Worker Retirement 
Security'' before the Subcommittee on Employer Employee Relations, 
Committee on Education and the Workforce, U.S. House of 
Representatives, 107th Congress, Second Session, February 13, 2002 (to 
be published); Hearing on Enron and Beyond: Legislative Solutions'' 
before the Subcommittee on Employer Employee Relations, Committee on 
Education and the Workforce, U.S. House of Representatives, 107th 
Congress, Second Session, February 27, 2002 (to be published).
---------------------------------------------------------------------------
    The President specifically outlined this proposal in his 
plan and stated that: ``Employers should be encouraged to make 
generous contributions to workers'' 401(k) plans, including the 
option to use company stock to make matching contributions. 
However, workers must be free to choose how to invest their 
retirement savings. The President's proposal will ensure that 
workers can sell company stock and diversify into other 
investment options after they have participated in the 401(k) 
plan for three years. While many companies already allow rapid 
diversification, others impose holding periods which can last 
for decades.'' \57\
---------------------------------------------------------------------------
    \57\ February 1, 2002 Press Release, Office of the Press Secretary, 
President of the United States.
---------------------------------------------------------------------------
    The Committee believes that employees should have greater 
options in determining if and when to diversify from employer 
securities. The Committee also wants to continue to encourage 
employers to offer matching contributions and employee stock 
ownership programs. To that end, the Committee requires 
employers that have publicly traded employer securities to 
permit employees to diversify from employer securities into 
other investments either three years after they begin to 
participate in the plan or three years after the employer 
contribution is credited to the participant's account. The 
three-year time period tracks the new three-year vesting rules 
implemented by the Economic Growth and Tax Relief Act, H.R. 
1836, passed by Congress last year. Allowing plan sponsors to 
require the employee to hold the security for three years 
preserves the benefits of employee ownership while still 
providing employees much more flexibility than currently 
allowed. The Committee also continues to encourage employee 
stock ownership plans (``ESOPs'') by exempting ``stand alone'' 
ESOPs from the bill's diversification provisions.\58\ The 
Committee believes this strikes a balance between preserving 
the incentives for employers to offer employer stock to their 
employees while allowing employees the freedom to make greater 
investment decisions. Finally, the Committee exempts privately 
held companies from the diversification requirement. The 
Committee believes that the three-year rule for privately held 
companies would be too onerous and would discourage them from 
offering contributions because the companies would be required 
to hold cash in reserve to purchase back any stock 
contributions. This could result in serious financial strain on 
these companies. The Committee believes, however, that 
employers who have publicly traded stock do not feel the same 
financial burden.
---------------------------------------------------------------------------
    \58\ A ``stand-alone'' ESOP does not contain employer matching or 
employee pre-tax or after-tax contributions.
---------------------------------------------------------------------------
    At the time diversification is required to be permitted by 
the employer, the Committee has specified that employers must 
offer a ``broad range of investment alternatives'' to the 
employees. The Committee does not want to be overly 
prescriptive by specifying the types of investment vehicles 
into which employers may offer re-investment. However, the 
Committee intends that employers should offer a range of 
investment options that would be acceptable to meet section 
404(c) standards.\59\ If necessary, the Department of Labor may 
issue clarifications on how the investment alternatives of 
404(c) relate to this provision.
---------------------------------------------------------------------------
    \59\ 29 C.F.R. Sec. 2550.404(c)-1(b)(2)(ii)(C).
---------------------------------------------------------------------------
    Opponents of the bill have argued that three years is too 
long to require employees to hold employer stock in their 
accounts and that the diversification should be one year after 
the employee begins service. The Committee notes several 
difficulties with that proposal. First, many plans do not even 
allow employees to participate in the pension plan until they 
have served for a year. Reducing diversification to one year 
would, in essence, require immediate diversification once the 
employee is enrolled in the plan. Second, such a short 
diversification time greatly reduces the incentive to employers 
to provide any company match because it can be so quickly 
transferred out of employer securities. Third, the 
diversification does not coordinate with the three and five 
year vesting rules. The Committee believes that the three-year 
diversification rule strikes the appropriate balance between 
allowing diversification, coordinating with current vesting 
structure, and continuing to encourage employers to contribute 
a company match to participants' accounts.
    Among the amendments the Committee made at the mark-up, is 
the option for plans to administer the three-year 
diversification requirement through a cliff or a rolling 
vehicle. In the cliff situation, once the participant completed 
three years of service with the employer, all employer security 
contributions made by the employer will be immediately 
diversifiable. For the rolling option, the plan may require the 
participant to hold the employer security for three years once 
the security has been credited to the participant's account. 
Although the three-year rolling option would be more difficult 
to administer, the employer community has expressed a strong 
desire to provide them with the option. The rolling option will 
apply only to those contributions made after the effective date 
of the amendment, i.e., plan years beginning on or after 
January 1, 2003. The Committee believes the rolling option 
provides employers a continued incentive to make matches while 
still providing diversification rights to employees within a 
short period of time.
    The Committee has provided a five-year transition rule with 
respect to the diversification of amounts held in an applicable 
individual account plan as of the effective date of the 
provision. Under this transition rule, applicable individual 
account plans must allow assets invested in employer securities 
on which there are restrictions on divestment to be reinvested 
in other investments over a five-year period based on an 
applicable percentage of such amounts. The transition rule 
applies only to contributions that exist in plan participant 
accounts on the day of enactment. The transition rule does not 
apply to contributions that are received after the day of 
enactment. The Committee also intends that the three-year 
holding requirement not apply to employer contributions that 
are subject to the five-year transition rule.

H.R. 3762's Department of Labor study on requiring fiduciary 
        consultants to plans

    During Committee Consideration of H.R. 3762, the Committee 
considered and adopted an amendment by Representative Marge 
Roukema that required the Secretary of Labor to undertake a 
study of the costs and benefits to participants and 
beneficiaries of requiring independent consultants to advise 
plan fiduciaries in connection with the administration of 
individual account plans.
    The Committee believes that independent consultants to the 
fiduciaries of individual account pension plans could help 
protect plan participants' assets because plan managers would 
receive advice and guidance from an independent source 
regarding the management or disposition of plan assets. 
However, the Committee is concerned that a requirement to 
obtain such counsel could add to plan costs that may be borne 
by participants and beneficiaries, and even more seriously, 
impact the availability of individual account plans altogether. 
Because of this, the Committee has determined that a study to 
determine the relative costs and benefits of such a new 
requirement is the appropriate action to take in order to allow 
the Committee to make an informed decision about a new 
requirement.

Other proposals offered

    The Committee also considered other substantive changes to 
the administration of pension plans. During consideration of 
H.R. 3762 the Committee considered and rejected two amendments 
that would have required that any plan which permits employee 
control of investment decisions must have a joint board of 
trustees to act as fiduciaries of the plan. This board would be 
comprised of both employer and employee representative.
    The Committee notes that employee representation on a board 
of trustees is currently allowable under ERISA and is practiced 
by many companies. However, requiring all pension plans to 
include employee representatives is a fundamental change to 
pension law--a change that Congress rejected in 1989 by a vote 
of 250-173. Advocates of joint trusteeship argue that employees 
are the only party that truly has the employee's best interest 
at heart. The Committee strongly disagrees with this viewpoint. 
ERISA standards strictly govern the duty of every fiduciary--
whether an employee or an employer. Each fiduciary must act in 
the sole interest of participants and beneficiaries. If 
fiduciaries don't act in the sole interest of participants and 
beneficiaries they are liable under ERISA.
    In addition to these fundamental concerns, the Committee 
also fears that the amendment would have greatly increased the 
administrative burdens of pension plans by requiring new 
processes to select employees as trustees, allow for votes of 
all pension plan participants and resolve disputes related to 
pension issues. These administrative costs would be borne by 
the pension plan itself--a detriment to account balances for 
participants.

H.R. 3762's investment advice provision

    The Pension Security Act also provides for employees to 
have greater access to investment advice in making investment 
decisions. H.R. 3762 incorporates the Retirement Security 
Advice Act, H.R. 2269, which passed the House in the fall of 
2001 with a large bipartisan vote. Although ERISA has been 
largely successful in protecting the integrity of privately 
managed pension plans, its drafters did not contemplate the 
explosive growth of defined contribution plans. In particular, 
provisions of ERISA have resulted in a huge shift of 
responsibility to plan participants for investing individual 
assets effectively without a corresponding shift in investment 
advice.
    That concern is even clearer now, with the decline of many 
high-technology stocks and greater volatility in the financial 
markets. Despite the obvious benefits of equity investment, for 
the first time since the inception of the 401(k) program, total 
401(k) assets declined in 2000. This decline was due in large 
part to volatile equity markets, but the lack of available 
investment advice exacerbated the problem. The average 401(k) 
participant balance dropped to $41,919 in 2000 from $46,740 in 
1999. The hearings on Enron's pension funds made the concern 
even more palpable. Some executives with independent access to 
investment advice were counseled to diversify well before 
Enron's stock collapsed. Many employees who lacked such access 
lost enormous retirement savings assets, even though their 
Enron shares were largely tradable.
    The bill amends ERISA and the Internal Revenue Code to 
permit the provision of investment advice to plan participants 
and beneficiaries, the purchase or sale of assets pursuant to 
the investment advice and the direct or indirect receipt of 
fees in connection with providing the advice. The bill is 
intended to enable regulated financial institutions that 
provide investment options and administrative and other 
services to employee benefit plans also to provide investment 
advisory services directly to plans, participants and 
beneficiaries desiring these services.
    In order to nurture a dynamic, competitive, and consumer-
responsive market for employer-provided investment advice, the 
bill seeks to give providers, sponsors, and participants 
flexibility within which to be innovative while protecting 
participants through strong and clear expressions of the 
adviser's overarching fiduciary duty--the highest duty of 
loyalty known to the law \60\--and through rigorous but 
practical disclosures of any potential conflicts of interest.
---------------------------------------------------------------------------
    \60\ See, e.g., Donovan v. Bierwith, 680 F.2d 263, 272 n.8 (2d Cir. 
1982).
---------------------------------------------------------------------------
    The bill establishes a new statutory exemption from ERISA's 
prohibited transaction rules for certain comprehensively 
regulated entities to provide advice services to plan 
fiduciaries or plan participants (``fiduciary advisers''). The 
Committee intends the exemption to specifically provide relief 
from both the party in interest restrictions (section 406(a)) 
and conflict of interest rules (section 406(b)) and is 
therefore broader than the Department of Labor has construed 
other statutory exemptions.\61\
---------------------------------------------------------------------------
    \61\ Compare with 29 C.F.R. 2550.408b-2(a) (limiting relief of 
section 408(b)(2) to transactions described in section 406(a)).
---------------------------------------------------------------------------
    The Committee intends that the investment advice provision 
in this bill incorporate the substantive provisions and report 
language of H.R. 2269, as reported by this Committee on October 
31, 2001, with three distinctions. In the floor debate on 
November 15, 2001, Chairman Boehner engaged in a colloquy with 
Representative Earl Pomeroy wherein Chairman Boehner agreed to 
add three provisions to the bill. The investment advice 
provision in H.R. 3762 contains those additional provisions and 
further discussion about them is provided below.
    Adviser Qualifications.--The first concern raised in the 
colloquy was that advisers who provide advice should have an 
individual license or test administered by a state or federal 
agency in order to insure that plan participants receive 
qualified advice. The Committee added language that clarifies 
that in the situation that agents of banks or credit unions 
offer advice, the agent or employee must be in the 
institution's trust department, which is regularly examined by 
a state or federal agency. While this provision does not 
require those employees or agents of a bank or similar 
institution to have a license, it does ensure that the bank 
employees giving advice are well-regulated and supervised, thus 
ensuring quality advice by banking institutions.
    Two Improvements to the Disclosure Form.--In response to 
Chairman Boehner's and Representative Pomeroy's colloquy 
regarding H.R. 2269, the Committee has made two other 
improvements to the disclosure form in H.R. 3762 required to be 
provided to participants prior to the advice. First, the 
Committee has required the Secretary of Labor to issue a model 
disclosure. The Committee intends that this model disclosure 
will promote uniformity among the disclosures, which should 
assure that the disclosures are readily understandable to the 
average plan participant. Second, the Committee has added a 
disclosure that requires the fiduciary adviser to remind plan 
participants that they are free to seek advice elsewhere and 
that the other advisor may be unaffiliated with the plan and 
its investment options. The purpose of this disclosure is to 
remind participants that independent advice can be sought 
outside of the plan context.
    With the addition of these three provisions, the investment 
advice provision contained in H.R. 3762 bill will empower 
workers with the information they need to make the most of the 
retirement savings and investment opportunities afforded them 
by today's 401(k)-type plans. This legislation will foster a 
competitive, dynamic investment advice marketplace that serves 
worker needs but also establish a strong, protective framework 
that safeguards their interests.

H.R. 3762's prohibition of insider trades during pension plan 
        suspension periods

    H.R. 3762 amends Section 16 of the Securities and Exchange 
Act of 1934 \62\ to prohibit beneficial owners, directors or 
officers of an issuer of an equity from purchasing or selling 
any equity security of such issuer while plan participants and 
beneficiaries are precluded from directing or diversifying 
their accounts during a ``blackout'' period. The bill also 
directs that any profit from a prohibited sale shall be 
recoverable by the issuer.
---------------------------------------------------------------------------
    \62\ 15 U.S.C. Sec. 78p.
---------------------------------------------------------------------------
    The Committee believes that this provision institutes true 
parity between the top floor and the shop floor. In the case of 
the Enron blackout period, while employees were prohibited from 
directing their own assets, company executives profited from 
sales of company stock. The Committee believes such actions to 
be fundamentally unfair and has drafted H.R. 3762 in order to 
prevent events like this in the future.
    Because the amendment to Section 16 of the Securities 
Exchange Act is not within the jurisdiction of the Education 
and the Workforce Committee, the Committee was not able to 
modify the introduced language in any way. The Committee would 
note its intention to remedy concerns about the difficulty of 
administering a prohibition on insider trades with regard to 
beneficial owners. The Committee also intends to clarify that 
the prohibition on insider trades would only be triggered by a 
suspension of the ability of a majority of plan participants 
and beneficiaries to direct or diversify assets. The Committee 
does not intend for the prohibition to be triggered by mergers 
or acquisitions of the plan sponsor unless they are of such 
magnitude as to impact the majority of plan participants and 
beneficiaries.
    During Committee consideration of H.R. 3762, the Committee 
considered and rejected an amendment offered by Representative 
George Miller that would have required senior executives and 
named fiduciaries to report insider sales of $10,000 to $1 
million to their pension plan administrator within one day of 
the sale. Following such reports, the plan administrator would 
have been required to notify each participant and beneficiary 
within three business days of any insider trades that were 
either greater than $100,000 or reached that level in a series 
of transactions over a one year period. These provisions were 
to be enforced by a civil penalty of $1,000 per day, imposed on 
any person who fails to provide the notice.
    The Committee notes that the Securities and Exchange 
Commission (SEC) governs the corporate disclosure requirements 
of company insiders. As a part of an effort to improve the 
financial reporting system, the SEC is considering a variety of 
ways to improve public disclosure of trading activities and 
plans to propose rules that require insiders to notify the SEC 
of any sale within 7-8 business days. As a part of this 
initiative, the SEC intends to provide for electronic filing of 
these insider transaction reports.\63\
---------------------------------------------------------------------------
    \63\ February 13, 2002 Press Release, U.S. Securities and Exchange 
Commission.
---------------------------------------------------------------------------
    The Committee was greatly concerned by the new reporting 
regime that would have been imposed by the Miller amendment. 
The Committee fears that such additional reporting requirements 
for plan administrators as proposed by the Miller amendment, 
would result in greater confusion for participants as well as 
being complicated and burdensome to implement. The Committee 
notes that the transactions to be reported, although of 
definite interest to plans and plan participants, are not, 
strictly speaking, transactions involving plan assets. Rather, 
they are transactions that affect all investors and the entire 
marketplace. Because of this, the Committee views the 
Securities and Exchange Commission, rather than the Department 
of Labor, as the appropriate agency to deal with such 
transactions.

H.R. 3762's modification of funding rules for plans sponsored by 
        interurban or interstate bus service companies

    Under present law, defined benefit pension plans are 
required to meet certain minimum funding rules. In some cases, 
additional contributions are required if a defined benefit 
pension plan is underfunded. Additional contributions generally 
are not required in the case of a plan with a funded current 
liability percentage of at least 90 percent. A plan's funded 
current liability percentage is the value of plan assets as a 
percentage of current liability. In general, a plan's current 
liability means all liabilities to employees and their 
beneficiaries under the plan. Quarterly minimum funding 
contributions are required in the case of underfunded plans.
    The Pension Benefit Guaranty Corporation (``PBGC'') insures 
benefits under most defined benefit pension plans in the event 
the plan is terminated with insufficient assets to pay for plan 
benefits. The PBGC is funded in part by a flat-rate premium per 
plan participant, and a variable rate premium based on plan 
underfunding.
    Under present law, a special rule modifies the minimum 
funding requirements in the case of certain plans. The special 
rule applies in the case of plans that (1) were not required to 
pay a variable rate PBGC premium for the plan year beginning in 
1996, (2) do not, in plan years beginning after 1995 and before 
2009, merge with another plan (other than a plan sponsored by 
an employer that was a member of the controlled group of the 
employer in 1996), and (3) are sponsored by a company that is 
engaged primarily in interurban or interstate passenger bus 
service.
    The special rule treats a plan to which it applies as 
having a funded current liability percentage of at least 90 
percent for plan years beginning after 1996 and before 2005 if 
for such plan year the funded current liability percentage is 
at least 85 percent. If the funded current liability of the 
plan is less than 85 percent for any plan year beginning after 
1996 and before 2005, the relief from the minimum funding 
requirements applies only if certain specified contributions 
are made.
    For plan years beginning after 2004 and before 2010, the 
funded current liability percentage will be deemed to be at 
least 90 percent if the actual funded current liability 
percentage is at least at certain specified levels.
    The relief from the minimum funding requirements applies 
for the plan year beginning in 2005, 2006, 2007, and 2008 only 
if contributions to the plan equal at least the expected 
increase in current liability due to benefits accruing during 
the plan year.
    H.R. 3762 modifies the special funding rule for plans 
sponsored by a company engaged primarily in interurban or 
interstate passenger bus service. Currently, plans must use the 
fixed mortality assumption under the General Agreement on 
Tariffs and Trade (GATT) legislation. Recognizing this 
situation, Congress temporarily exempted this industry from 
these rules in the Taxpayer Relief Act of 1997,\64\ and 
requiring them to comply with the normal funding rules of ERISA 
apply to them. In addition, the modification of the current 
rule provides that (1) the funded current liability percentage 
of a plan to which the rule applies is treated as not less than 
90 percent for purposes of the minimum funding rules applicable 
to underfunded plans, and (2) the funded current liability 
percentage of a plan to which the rule applies is treated as 
not less than 100 percent for purposes of the quarterly 
contribution requirement. The provision is effective with 
respect to plan years beginning after December 31, 2001.
---------------------------------------------------------------------------
    \64\ P.L. 105-34.
---------------------------------------------------------------------------
    The Committee believes that this provision is proper 
pension policy since these plans are ``frozen'' (not accepting 
new participants) and are adequately funded. Application of the 
GATT rules is not proper for these plans due to their different 
mortality experience. If the provision was not enacted, these 
bus companies would have to divert capital from other corporate 
needs to be in technical compliance with pension rules that do 
not practically apply or benefit their employees.

H.R. 3762's notice and consent period regarding distributions

    Notice and consent requirements in Section 205 of ERISA 
apply to certain distributions from qualified retirement plans. 
These requirements relate to the content and timing of 
information that a plan must provide to a participant prior to 
a distribution, and to whether the plan must obtain the 
participant's consent to the distribution. The nature and 
extent of the notice and consent requirements applicable to a 
distribution depend upon the value of the participant's vested 
accrued benefit and whether the joint and survivor annuity 
requirements apply to the participant.
    If the present value of the participant's vested accrued 
benefit exceeds $5,000, the plan may not distribute the 
participant's benefit without the written consent of the 
participant. The participant's consent to a distribution is not 
valid unless the participant has received from the plan a 
notice that contains a written explanation of: (1) the material 
features and the relative values of the optional forms of 
benefit available under the plan, (2) the participant's right, 
if any, to have the distribution directly transferred to 
another retirement plan or IRA, and (3) the rules concerning 
the taxation of a distribution. If the joint and survivor 
annuity requirements apply to the participant, this notice also 
must contain a written explanation of (1) the terms and 
conditions of the qualified joint and survivor annuity 
(``QJSA''), (2) the participant's right to make, and the effect 
of, an election to waive the QJSA, (3) the rights of the 
participant's spouse with respect to a participant's waiver of 
the QJSA, and (4) the right to make, and the effect of, a 
revocation of a waiver of the QJSA. The plan generally must 
provide this notice to the participant no less than 30 days and 
no more than 90 days before the date distribution commences.
    If the participant's vested accrued benefit does not exceed 
$5,000, the terms of the plan may provide for distribution 
without the participant's consent. The plan generally is 
required, however, to provide to the participant a notice that 
contains a written explanation of: (1) the participant's right, 
if any, to have the distribution directly transferred to 
another retirement plan or IRA, and (2) the rules concerning 
the taxation of a distribution. The plan generally must provide 
this notice to the participant no less than 30 days and no more 
than 90 days before the date distribution commences.
    H.R. 3762 requires qualified retirement plans to provide 
the applicable distribution notice no less than 30 days and no 
more than 180 days before the date distribution commences. The 
Secretary of the Treasury is directed to modify the applicable 
regulations to reflect the extension of the notice period to 
180 days and to provide that the description of a participant's 
right, if any, to defer receipt of a distribution shall also 
describe the consequences of failing to defer such receipt. The 
provision is effective for years beginning after December 31, 
2002.
    The Committee understands that an employee is not always 
able to evaluate distribution alternatives, select the most 
appropriate alternative, and notify the plan of the selection 
within a 90-day period. The Committee believes that requiring a 
plan to furnish multiple distribution notices to an employee 
who does not make a distribution election within 90 days is 
administratively burdensome. In addition, the Committee 
believes that participants who are entitled to defer 
distributions should be informed of the impact of a decision 
not to defer distribution on the taxation and accumulation of 
their retirement benefits.

H.R. 3762's annual report dissemination

    Section 104(b)(3) of ERISA requires that within nine months 
after the close of each plan year, the plan administrator must 
``furnish'' a summary annual report to each plan participant 
and to each beneficiary receiving benefits. The summary annual 
report is a summary of the annual report filed with the DOL 
regarding the financial position and management of the plan.
    The bill requires that plan administrators furnish a 
summary annual report would be satisfied if the report were 
made reasonably available through electronic means or other new 
technology. This provision would be interpreted consistent with 
the regulations of the Departments of Labor and Treasury. The 
change applies to reports for years beginning after December 
31, 2002.
    The Committee believes that this simplification of the 
summary annual report requirement will reduce the burden and 
cost of plan administration and disclosure, thereby encouraging 
more employers to establish and maintain retirement plans.

H.R. 3762's technical corrections to the SAVER Act

    The Savings Are Vital to Everyone's Retirement (SAVER) Act 
of 1997 (P.L. 105-92), in addition to establishing an ongoing 
program by the Department of Labor on retirement savings 
education and outreach \65\ convenes a National Summit on 
Retirement Savings at the White House, co hosted by the 
President and the bipartisan Congressional leadership.\66\ 
Summits were held in 1998 and 2002. The National Summit brings 
together experts in the fields of employee benefits and 
retirement savings, key leaders of government, and interested 
parties from the private sector and general public. The 
Congressional leadership and the President select the 
delegates. The National Summit is a public-private partnership, 
receiving substantial funding from private sector 
contributions. The goals of the National Summits are to: (1) 
advance the public's knowledge and understanding of retirement 
savings and facilitate the development of a broad-based, public 
education program; (2) identify the barriers which hinder 
workers from setting aside adequate savings for retirement and 
impede employers, especially small employers, from assisting 
their workers in accumulating retirement savings; and (3) 
develop specific recommendations for legislative, executive, 
and private sector actions to promote retirement income savings 
among American workers.
---------------------------------------------------------------------------
    \65\ P.L. 105-92, sec. 516
    \66\ Ibid. sec. 517.
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    This section of H.R. 3762 makes technical amendments to the 
SAVER Act regarding the administration of future statutorily 
created National Summits on Retirement Savings. It clarifies 
that National Summits shall be held in 2002 and 2006, and adds 
an additional National Summit in 2010. To facilitate the 
administration of future National Summits, the DOL is given 
authority to enter into cooperative agreements (pursuant to the 
Federal Grant and Cooperative Agreement Act of 1977) with any 
appropriate, qualified entity.
    Six new statutory delegates are added to future summits: 
the Chairman and Ranking Member of the House Ways and Means 
Committee, the Senate Finance Committee, and the Subcommittee 
on Employer-Employee Relations of the House Education and the 
Workforce Committee, respectively. Further, the President, in 
consultation with the Congressional leadership, may appoint up 
to 3% of the delegates (not to exceed 10) from a list of 
nominees provided by the private sector partner in Summit 
administration. The section also clarifies that new delegates 
are to be appointed for each future National Summit (as was the 
intent of the original legislation) and sets deadlines for 
their appointment.
    H.R. 3762 also sets deadlines for DOL to publish the Summit 
agenda, gives DOL limited reception and representation 
authority, and mandates that DOL consult with the Congressional 
leadership in drafting the post-Summit report. The section is 
effective upon date of enactment.
    H.R. 3762 clarifies the administration of future National 
Summits and is designed to assist in their planning and 
execution. It is also intended to clarify issues regarding the 
selection of delegates to future National Summits.

H.R. 3762's missing participants

    The plan administrator of a defined benefit pension plan 
that is subject to Title IV of ERISA, is maintained by a single 
employer, and terminates under a standard termination is 
required to distribute the assets of the plan. With respect to 
a participant whom the plan administrator cannot locate after a 
diligent search, the plan administrator satisfies the 
distribution requirement only by purchasing irrevocable 
commitments from an insurer to provide all benefit liabilities 
under the plan or transferring the participant's designated 
benefit to the PBGC, which holds the benefit of the missing 
participant as trustee until the PBGC locates the missing 
participant and distributes the benefit. The PBGC missing 
participant program is not available to multiemployer plans or 
defined contribution plans and other plans not covered by Title 
IV of ERISA.
    H.R. 3762 directs the PBGC to prescribe rules for 
terminating multiemployer plans similar to the present-law 
missing participant rules applicable to terminating single 
employer plans that are subject to Title IV of ERISA. The 
missing participants program is also extended to defined 
contribution plans, defined benefit plans that do not have more 
than 25 active participants and are maintained by professional 
service employers, and the portions of defined benefit plans 
that provide benefits based upon the separate accounts of 
participants and therefore are treated as defined contribution 
plans under ERISA.
    The provision is effective for distributions from 
terminating plans that occur after the PBGC adopts final 
regulations implementing the provision. The Committee expects 
the regulations to be completed within one year.
    By allowing plan sponsors the option of transferring 
pension funds to PBGC, the chances will be increased that a 
missing participant will be able to recover benefits. Sponsors 
of terminated multiemployer plans and plans that are not 
covered by Title IV face uncertainty with respect to missing 
participants due to a lack of statutory or regulatory guidance. 
The Committee believes that it is appropriate to extend the 
established PBGC missing participant program to these plans in 
order to reduce uncertainty for plan sponsors and increase the 
likelihood that missing participants will receive their 
retirement benefits.

H.R. 3762's reduction of PBGC premium for new plans of small employers

    Under present law ERISA sec. 4006, the Pension Benefit 
Guaranty Corporation (``PBGC'') provides insurance protection 
for participants and beneficiaries under certain defined 
benefit pension plans by guaranteeing certain basic benefits 
under the plan in the event the plan is terminated with 
insufficient assets to pay benefits promised under the plan. 
The guaranteed benefits are funded in part by premium payments 
from employers who sponsor defined benefit plans. The amount of 
the required annual PBGC premium for a single-employer plan is 
generally a flat rate premium of $19 per participant and an 
additional variable rate premium based on a charge of $9 per 
$1,000 of unfunded vested benefits. Unfunded vested benefits 
under a plan generally means (1) the unfunded current liability 
for vested benefits under the plan, over (2) the value of the 
plan's assets, reduced by any credit balance in the funding 
standard account. No variable rate premium is imposed for a 
year if contributions to the plan were at least equal to the 
full funding limit.
    The PBGC guarantee is phased in ratably in the case of 
plans that have been in effect for less than 5 years, and with 
respect to benefit increases from a plan amendment that was in 
effect for less than 5 years before termination of the plan.
    Under the provision in H.R. 3762, for the first five plan 
years of a new single-employer plan of a small employer, the 
flat-rate PBGC premium is $5 per plan participant.
    A small employer is a contributing sponsor that, on the 
first day of the plan year, has 100 or fewer employees. For 
this purpose, all employees of the members of the controlled 
group of the contributing sponsor are taken into account. In 
the case of a plan to which more than one unrelated 
contributing sponsor contributes, employees of all contributing 
sponsors (and their controlled group members) are taken into 
account in determining whether the plan is a plan of a small 
employer.
    A new plan means a defined benefit plan maintained by a 
contributing sponsor if, during the 36-month period ending on 
the date of adoption of the plan, such contributing sponsor (or 
controlled group member or a predecessor of either) has not 
established or maintained a plan subject to PBGC coverage with 
respect to which benefits were accrued for substantially the 
same employees as are in the new plan. The provisions relating 
to new plans are effective for plans established after December 
31, 2001.
    The Committee believes that reducing the PBGC premiums for 
new and small plans will help encourage the establishment of 
defined benefit pension plans. The number of single-employer 
defined benefit plans covered by PBGC has declined dramatically 
in recent years--from 112,000 in 1985 to 43,000 in 1997. Most 
of the decline is because of the termination of small plans. An 
employer incurs a number of one-time costs to establish a plan. 
The proposal is intended to remove the PBGC premium as a 
disincentive to the establishment of a defined benefit plan by 
a small employer.

H.R. 3762's reduction of additional PBGC premium for new and small 
        plans

    Under present law, the PBGC provides insurance protection 
for participants and beneficiaries under certain defined 
benefit pension plans by guaranteeing certain basic benefits 
under the plan in the event the plan is terminated with 
insufficient assets to pay benefits promised under the plan. 
The guaranteed benefits are funded in part by premium payments 
from employers who sponsor defined benefit plans. The amount of 
the required annual PBGC premium for a single-employer plan is 
generally a flat rate premium of $19 per participant and an 
additional variable rate premium based on a charge of $9 per 
$1,000 of unfunded vested benefits. Unfunded vested benefits 
under a plan generally means (1) the unfunded current liability 
for vested benefits under the plan, over (2) the value of the 
plan's assets, reduced by any credit balance in the funding 
standard account. No variable rate premium is imposed for a 
year if contributions to the plan were at least equal to the 
full funding limit.
    The PBGC guarantee is phased in ratably in the case of 
plans that have been in effect for less than 5 years, and with 
respect to benefit increases from a plan amendment that was in 
effect for less than 5 years before termination of the plan.
    H.R. 3762 amends ERISA sec. 4006(a)(3) to provide that the 
variable premium is phased in for new defined benefit plans 
over a six-year period starting with the plan's first plan 
year. The amount of the variable premium is a percentage of the 
variable premium otherwise due, as follows: 0 percent of the 
otherwise applicable variable premium in the first plan year; 
20 percent in the second plan year; 40 percent in the third 
plan year; 60 percent in the fourth plan year; 80 percent in 
the fifth plan year; and 100 percent in the sixth plan year 
(and thereafter).
    A new plan would mean a defined benefit plan maintained by 
a contributing sponsor if, during the 36 month period ending on 
the date of adoption of such plan, such contributing sponsor 
(or controlled group member or a predecessor of either) had not 
established or maintained a plan subject to PBGC coverage with 
respect to which benefits were accrued to substantially the 
same employees as in the new plan.
    The provision also provides that, in the case of any plan 
(not just a new plan) of an employer with 25 or fewer 
employees, the variable-rate premium is no more than $5 
multiplied by the number of plan participants in the plan at 
the close of the preceding year.
    The provision relating to premiums for new plans is 
effective for plans established after December 31, 2001. The 
provision reducing the PBGC variable premium for small plans is 
effective for years beginning after December 31, 2002.
    The Committee believes this provision will help encourage 
the establishment of defined benefit pension plans. The number 
of single-employer defined benefit plans covered by PBGC has 
declined dramatically in recent years--from 112,000 in 1985 to 
43,000 in 1997. Moreover, employers that establish plans are 
not choosing defined benefit plans. The PBGC variable rate 
premium can be a disincentive to some employers.

H.R. 3762's authorization for PBGC to pay interest on premium 
        overpayment refunds

    Under Sec. 4007(b) of ERISA, the PBGC charges interest on 
underpayments of premiums, but is not authorized to pay 
interest on overpayments. The provision in H.R. 3762 allows the 
PBGC to pay interest on overpayments made by premium payers. 
Interest paid on overpayments is to be calculated at the same 
rate and in the same manner as interest is charged on premium 
underpayments. The provision is effective with respect to 
interest accruing for periods beginning not earlier than the 
date of enactment.
    The Committee believes that premium payers should receive 
interest on monies that are owed to them and that this 
provision will decrease the burden on employers sponsoring 
these types of plans.

H.R. 3762's substantial owner benefits in terminated plans

    The PBGC provides participants and beneficiaries in a 
defined benefit pension plan with certain minimal guarantees as 
to the receipt of benefits under the plan in case of plan 
termination. The employer sponsoring the defined benefit 
pension plan is required to pay premiums to the PBGC to provide 
insurance for the guaranteed benefits. In general, the PBGC 
will guarantee all basic benefits which are payable in periodic 
installments for the life (or lives) of the participant and his 
or her beneficiaries and are non-forfeitable at the time of 
plan termination. The amount of the guaranteed benefit is 
subject to certain limitations. One limitation is that the plan 
(or an amendment to the plan which increases benefits) must be 
in effect for 60 months before termination for the PBGC to 
guarantee the full amount of basic benefits for a plan 
participant, other than a substantial owner. In the case of a 
substantial owner, the guaranteed basic benefit is phased in 
over 30 years beginning with participation in the plan. A 
substantial owner is one who owns, directly or indirectly, more 
than 10 percent of the voting stock of a corporation or all the 
stock of a corporation. Special rules restricting the amount of 
benefit guaranteed and the allocation of assets also apply to 
substantial owners.
    H.R. 3762 provides that the 60-month phase-in of guaranteed 
benefits applies to a substantial owner with less than 50 
percent ownership interest. For a substantial owner with a 50 
percent or more ownership interest (``majority owner''), the 
phase-in depends on the number of years the plan has been in 
effect. The majority owner's guaranteed benefit is limited so 
that it may not be more than the amount phased in over 60 
months for other participants. The rules regarding allocation 
of assets apply to substantial owners, other than majority 
owners, in the same manner as other participants.
    The provision is effective for plan terminations with 
respect to which notices of intent to terminate are provided, 
or for which proceedings for termination are instituted by the 
PBGC, after December 31, 2002.
    The Committee believes that the present-law rules 
concerning limitations on guaranteed benefits for substantial 
owners are overly complicated and restrictive and thus may 
discourage some small business owners from establishing defined 
benefit pension plans. Moreover, the current special 
substantial owner rules are inordinately complex and require 
plan documents going back as far as 30 years, which are often 
difficult or impossible to obtain.

H.R. 3762's benefit suspension notice

    Section 203(a)(3)(B) of ERISA provides that a plan will not 
fail to satisfy the vesting requirements with respect to a 
participant by reason of suspending payment of the 
participant's benefits while such participant is employed. 
Under the applicable Department of Labor regulations, such a 
suspension is only permissible if the plan notifies the 
participant during the first calendar month or payroll period 
in which the plan withholds benefit payments. Such notice must 
provide certain information and must also include a copy of the 
plan's provisions relating to the suspension of payments.
    In the case of a plan that suspends benefits for 
participants working past normal retirement age (i.e., does not 
commence benefit payments to those participants and also does 
not provide an actuarially increased benefit upon retirement), 
the employer must monitor plan participants to determine when 
any participant who is still employed attains normal retirement 
age. In order to ``suspend'' payment of such a participant's 
benefits, generally a plan must, as noted above, promptly 
provide the participant with a suspension notice.
    H.R. 3762 directs the Secretary of Labor to revise the 
regulations relating to the benefit suspension notice to 
generally permit the information currently required to be set 
forth in a suspension notice to be included in the summary plan 
description. The provision also directs the Secretary of Labor 
to eliminate the requirement that the notice include a copy of 
relevant plan provisions. However, individuals reentering the 
workforce to resume work with a former employer--or with an 
employer that belongs to the same multiemployer pension plan--
after they have begun to receive benefits will still receive 
the notification of the suspension of benefits (and a copy of 
the plan's provisions relating to suspension of payments). In 
addition, if a reduced rate of future benefit accrual will 
apply to a returning employee (as of his or her first date of 
participation in the plan after returning to work) who has 
begun to receive benefits, the notice must include a statement 
that the rate of future benefit accrual will be reduced. The 
individual benefit-suspension statement only need include such 
notice of reduction of future benefit accrual where the 
reduction is the result of a plan amendment covered under 
section 204(h). Such notice should include a description of the 
change and the date it took effect.
    The modification made under this section shall apply to 
plan years beginning after December 31, 2002.
    The Committee believes that the present-law rules regarding 
suspension notices create unjustified burdens on defined 
benefit plans that do not pay benefits to active participants 
upon attainment of normal retirement age when they continue to 
draw pay. This dispenses with individual notices going to 
employees at the time they attain the normal retirement age--a 
practice that often unduly alarms workers who believe they are 
being encouraged to retire by their employer. The provision 
does provide notice of suspension to those who are reentering 
the workforce, along with notice of any reduction in rate of 
future benefit accrual.

H.R. 3762's studies

    Study on small employer group plans: H.R. 3762 directs the 
Department of Labor, in consultation with the Treasury 
Department, to conduct a study to determine (1) the most 
appropriate form(s) of pension plans that would be simple to 
create and easy to maintain by multiple small employers, while 
providing ready portability of benefits for all participants 
and beneficiaries, (2) how such arrangements could be 
established by employer or employee associations, (3) how such 
arrangements could provide for employees to contribute 
independent of employer sponsorship, and (4) appropriate 
methods and strategies for making such pension plan coverage 
more widely available to American workers.
    The Department is to consider the adequacy and availability 
of existing pension plans and the extent to which existing 
models may be modified to be more accessible to both employees 
and employers. The Secretary of Labor is to issue a report 
within 18 months, including recommendations for one or more 
model plans or arrangements as described above which may serve 
as the basis for appropriate administrative or legislative 
action.
    Study on pension coverage: H.R. 3762 also directs the 
Secretary of Labor to report to the Committee on Education and 
the Workforce of the House of Representatives and the Committee 
on Health, Education, Labor and Pensions of the Senate 
regarding the effect of the bill on pension coverage, 
including: the extent of pension plan coverage for low and 
middle-income workers, the levels of pension plan benefits 
generally, the quality of pension plan coverage generally, 
worker's access to and participation in pension plans, and 
retirement security. This report is required to be submitted no 
later than five years after the date of enactment. This section 
is effective upon enactment.
    The Committee believes that the possibility of small 
employer pooling for pension coverage is worthy of study and 
consideration. During Committee hearings, witnesses have 
focused on the problem of low pension plan sponsorship rates by 
small employers. Some have proposed a possible solution of 
allowing individual small employers to join together to sponsor 
pension plans or to join into an existing group pension plan 
vehicle (similar to the ``association health plan'' concept 
reported out by the Employer-Employee Relations Subcommittee in 
the 106th Congress in H.R. 2047).
    The Committee also believes that it is appropriate to study 
the effects of this Act on pension coverage.

H.R. 3762's interest rate range for additional funding requirements

    ERISA and the Code impose both minimum and maximum funding 
requirements with respect to defined benefit pension plans. The 
minimum funding requirements are designed to provide at least a 
certain level of benefit security by requiring the employer to 
make certain minimum contributions to the plan. The amount of 
contributions required for a plan year is generally the amount 
needed to fund benefits earned during that year plus that 
year's portion of other liabilities that are amortized over a 
period of years, such as benefits resulting from a grant of 
past service credit.
    Additional contributions are required under a special 
funding rule if a single-employer defined benefit pension plan 
is underfunded. Under the special rule, a plan is considered 
underfunded for a plan year if the value of the plan assets is 
less than 90 percent of the plan's current liability. The value 
of plan assets, as a percentage of current liability is the 
plan's ``funded current liability percentage.''
    In general, a plan's current liability means all 
liabilities to employees and their beneficiaries under the 
plan. The interest rate used to determine a plan's current 
liability must be within a permissible range of the weighted 
average of the interest rates on 30-year Treasury securities 
for the four-year period ending on the last day before the plan 
year begins. The permissible range is from 90 percent to 105 
percent. As a result of debt reduction, the Department of the 
Treasury does not currently issue 30-year Treasury securities.
    In general, plan contributions required to satisfy the 
funding rules must be made within 8\1/2\ months after the end 
of the plan year. If the contribution is made by such due date, 
the contribution is treated as if it were made on the last day 
of the plan year. In the case of a plan with a funded current 
liability percentage of less than 100 percent for the preceding 
plan year, estimated contributions for the current plan year 
must be made in quarterly installments during the current plan 
year. The amount of each required installment is 25 percent of 
the lesser of (1) 90 percent of the amount required to be 
contributed for the current plan year or (2) 100 percent of the 
amount required to be contributed for the preceding plan year.
    Because benefits under a defined benefit pension plan may 
be funded over a period of years, plan assets may not be 
sufficient to provide the benefits owed under the plan to 
employees and their beneficiaries if the plan terminates before 
all benefits are paid. In order to protect employees and their 
beneficiaries, the Pension Benefit Guaranty Corporation 
(``PBGC'') generally insures the benefits owed under defined 
benefit pension plans. Employers pay premiums to the PBGC for 
this insurance coverage.
    In the case of an underfunded plan, additional PBGC 
premiums are required based on the amount of unfunded vested 
benefits. These premiums are referred to as ``variable rate 
premiums.'' In determining the amount of unfunded vested 
benefits, the interest rate used is 85 percent of the interest 
rate on 30-year Treasury securities for the month preceding the 
month in which the plan year begins.
    Section 405 of the Job Creation and Worker Assistance Act 
of 2002, Public Law 107-147, enacted March 9, 2002, provides a 
special interest rate rule applicable in determining the amount 
of additional contributions for plan years beginning after 
December 31, 2001, and before January 1, 2004 (the ``applicable 
plan years'').
    The special rule expands the permissible range of the 
statutory interest rate used in calculating a plan's current 
liability for purposes of applying the additional contribution 
requirements for the applicable plan years. The permissible 
range is from 90 percent to 120 percent for these years. Use of 
a higher interest rate under the expanded range will affect the 
plan's current liability, which may in turn affect the need to 
make additional contributions and the amount of any additional 
contributions.
    Because the quarterly contributions requirements are based 
on current liability for the preceding plan year, a special 
rule is provided for applying these requirements for plan years 
beginning in 2002 (when the expanded range first applies) and 
2004 (when the expanded range no longer applies). In each of 
those years (``present year''), current liability for the 
preceding year is redetermined, using the permissible range 
applicable to the present year. This redetermined current 
liability will be used for purposes of the plan's funded 
current liability percentage for the preceding year, which may 
affect the need to make quarterly contributions and for 
purposes of determining the amount of any quarterly 
contributions in the present year, which is based in part on 
the preceding year.
    Under the provisions of H.R. 3762, the special interest 
rate rule for 2002 and 2003 would apply also in determining the 
amount of additional contributions for the 2001 plan year that 
must be contributed to the plan within 8\1/2\ months after the 
end of the plan year (e.g., by September 15, 2002). The 
proposal would not affect quarterly contributions required to 
be made for the 2001 plan year.
    In addition, due to this change in the interest rate, the 
bill conforms those provisions of ERISA which are directly 
related to the consequences of a plan being under-funded such 
as the establishment of a separate fund in the PBGC for 
additional premiums, the special participant notice 
requirements, reporting requirements to the PBGC and 
information that the PBGC may request in underfunding 
situations.
    The provisions of the bill would be effective as if 
included in section 405 of the Job Creation and Worker 
Assistance Act of 2002.
    The Committee notes that the Treasury Department has 
discontinued issuing the 30-Year Treasury bond. Pension plans 
are required to use this rate as a benchmark for a variety of 
pension calculation purposes, including the valuation of 
current funding liabilities and Pension Benefit Guaranty 
Corporation (PBGC) variable premium calculations. The decision 
by Treasury compels the Committee to adjust the interest rate 
for these purposes.
    The 30-Year Treasury Bond interest rate is at historic 
lows, causing it to be an inaccurate proxy for long-term rates 
of return likely to be earned by pension funds. By increasing 
the acceptable range of the percentage part of the funding 
formula, which uses the 30-Year Treasury bond as its base, plan 
sponsors will have a more realistic interest rate assumption 
when calculating necessary contributions to defined benefit 
plans.
    The Committee believes that this change will prevent plan 
sponsors from both making unneeded contributions to pension 
plans and paying unwarranted extra premiums to the PBGC for 
under-funding situations that do not exist. Since these under-
funding situations do not exist, the special participant notice 
and PBGC reporting requirements will not apply.
    (The valuation of lump sum distributions from pension plans 
is not affected by this change.)

H.R. 3762's provisions relating to plan amendments

    Currently, plans making amendments because of changes in 
the law must make them by the time they are required to file 
income taxes for the year in which the change in law occurs.
    H.R. 3762 eases this burden on plans by permitting certain 
plan amendments made pursuant to the changes made by the bill 
(or regulations issued under the provisions of the bill) to be 
retroactively effective. If the plan amendment meets the 
requirements of the bill, then the plan is treated as being 
operated in accordance with its terms and the amendment does 
not violate the prohibition of reductions of accrued benefits. 
In order for this treatment to apply, the plan amendment must 
be made on or before the last day of the first plan year 
beginning on or after January 1, 2004.
    The provision applies to plan amendments required to 
maintain qualified status, as well as other amendments pursuant 
to the provisions of the bill (or applicable regulations). A 
plan amendment is not considered to be pursuant to the bill (or 
applicable regulations) if it has an effective date before the 
effective date of the provision of the bill (or regulations) to 
which it relates. Similarly, the provision does not provide 
relief from section 204(g) or Internal Revenue Code section 
411(d)(6) for periods prior to the effective date of the 
relevant provision of the bill (or regulations) or the plan 
amendment. The Secretary of the Treasury is given authority to 
provide exceptions to the relief from the prohibition on 
reductions in accrued benefits. The provision is effective on 
the date of enactment.
    The Committee believes that plan sponsors should have 
adequate time to amend their plans to reflect amendments to the 
law.

                                Summary

    Title I of ERISA contains fundamental protections for 
participants and beneficiaries of employee benefit plans. Part 
1 of Title I sets forth the duties of plan administrators to 
notify participants and beneficiaries of the terms of the 
benefit plans in which they participate, their rights under 
these plans, and the benefits which have accrued under the 
terms of their plans. Part 4 of Title I explains the 
fundamental duty of fiduciaries to act in the sole interest of 
participants and beneficiaries of employee benefit plans.
    When ERISA was enacted in 1974, Congress provided for such 
disclosure and safeguards as would protect employees' 
retirement security. In 1974, pension plans were primarily in 
the form of defined benefit plans, which made specific 
guarantees for retirement payments to ensure the retirement 
security of participants and beneficiaries.
    Today's workforce is very different than the workforce in 
1974. Today's retirement plan context is largely one of pension 
plans that are individual in nature where participants have the 
ability to direct their own accounts, choosing investments that 
best meet their retirement needs.
    Individual account plans necessitate different safeguards 
and standards for information disclosure in order to provide 
the same level of retirement security for participants and 
beneficiaries that was envisioned in 1974. As such, the 
provisions of H.R. 3762 represent a logical upgrade to the 
provisions of Title I of ERISA to ensure adequate retirement 
protection for today's workforce.
    The bill requires the plan administrator to provide a 
quarterly notice to plan participants and beneficiaries of the 
value of investments allocated to their individual account, 
including their rights to diversify any assets held in employer 
securities. The notice will also include an explanation of the 
importance of a diversified investment portfolio including a 
risk of holding substantial portions of a portfolio in any one 
security, such as employer securities.
    In the event of a suspension of participant and 
beneficiary's ability to direct or diversify assets, H.R. 3762 
requires that plan administrators shall determine that any 
suspension, limitation or restriction is reasonable. Once this 
determination has been made, the bill requires plan 
administrators to notify participants and beneficiaries 30 days 
prior to the suspension. The notice must contain the reasons 
for the suspension, the investments that will be affected, the 
likely period of the suspension, a statement that the 
administrator has evaluated the reasonableness of the expected 
period, and a statement that the participant should evaluate 
the appropriateness of their current investment decisions in 
light of their inability to direct or diversify assets during 
the expected period of suspension.
    The bill clarifies that fiduciaries are not liable for 
losses during a period of suspension provided that fiduciaries 
satisfy their fiduciary duty with regard to the interruption of 
participant and beneficiary's ability to direct or diversify 
assets. H.R. 3762 outlines relevant considerations in 
determining the satisfaction of fiduciary duty, such as the 
provision of the blackout notice, the fiduciary's consideration 
of the reasonableness of the period of suspension, and the 
fiduciary's actions solely in the interest of participants and 
beneficiaries. If fiduciaries meet these requirements, the bill 
protects them from any losses sustained by participants and 
beneficiaries during a period of suspension.
    In order to promote education of fiduciaries as to their 
fiduciary duty, the bill requires the Department of Labor to 
establish a program to make information and educational 
resources available to pension plan fiduciaries on an ongoing 
basis in order to assist them in diligently and efficiently 
carrying out their fiduciary duties with respect to the plan.
    H.R. 3762 mandates that employees must be able to diversify 
contributions to their account that are in the form of employer 
securities after three years. The bill provides for the option 
of a rolling three-year diversification of employer securities. 
In this case employer securities may be diversified three years 
after the calendar quarter in which they were contributed. The 
bill also sets forth a five-year transition rule for the 
allowable diversification of employer securities held in 
individual account plans as of the date of enactment. The bill 
exempts individual account plans that do not hold employer 
securities that are readily tradable on an established 
securities market from the diversification requirements.
    H.R. 3762 requires the Secretary of Labor to undertake a 
study of the costs and benefits to participants and 
beneficiaries of requiring independent consultants to advise 
plan fiduciaries in connection with the administration of 
individual account plans.
    The bill includes the text of H.R. 2269, the Retirement 
Security Advice Act, which, as modified, provides increased 
availability of investment advisors to assist plan participants 
in making good decisions about their retirement assets.
    H.R. 3762 amends Section 16 of the Securities and Exchange 
Act of 1934 to prohibit beneficial owners, directors or 
officers of an issuer of an equity from purchasing or selling 
any equity security of such issuer while plan participants and 
beneficiaries are precluded from directing or diversifying 
their accounts during a ``blackout'' period. The bill also 
directs that any profit from a prohibited sale shall be 
recoverable by the issuer.
    The bill also includes provisions contained in H.R. 10 from 
the first session of the 107th Congress which were excluded 
because of a Senate procedural rule affecting the Conference 
Report of H.R. 1836, the ``Economic Growth and Tax Relief 
Reconciliation Act.'' H.R. 3762 provides incentives to small 
businesses to offer pension plans to their workers by lowering 
Pension Benefit Guaranty Corporation (PBGC) premiums for new 
small business defined benefit plans. The bill allows the PBGC 
to pay employers interest if they over pay their premiums to 
it. Furthermore, the bill also expands the missing participant 
program administered by the PBGC to include defined 
contribution plans so that individuals may locate 401(k) money 
they may have left with a previous employer. The bill also 
modifies the rules of the PBGC for small business owners when 
plans terminate.
    H.R. 3762 extends the notice and consent period for 
distributions to allow individuals to plan for and request a 
pension distribution further in advance, while also modifying 
the rules dealing with the distribution of the Benefit 
Suspension Notice to those employees who although they have 
reached retirement age, continue to work for their employer.
    Part 5 of Title I of ERISA provides for the holding of 
National Summits on Retirement Savings to advance the public's 
knowledge and awareness of the importance of saving for their 
future retirement. The bill provides for Summits in 2006 and 
2010 and modifies the appointment procedure for delegate 
selection.
    The bill also provides for a study on small employer group 
plans and the effect of the legislation on pension plans.
    Finally, the bill also includes provisions dealing with 
problems that have arisen due to the change in status of the 30 
year Treasury Bond and certain mortality tables as a benchmark 
for certain pension calculations.
    On this last point, ERISA requires defined benefit plans to 
make annual contributions based upon calculations that take 
into account the liability of the plan to pay benefits to 
participants. A statutory factor in these calculations is the 
30-year Treasury bond. With the government buy back of some of 
these bonds in the past few years in response to the budget 
surplus and the announcement by the Department of Treasury in 
the fall of 2001 that they were no longer going to issue these 
instruments, its validity as a statutory benchmark has been 
brought into question.
    The mortality tables used by defined benefit pension plans 
to determine funding requirements can sometimes be 
inappropriate for certain pension plans. In 1997, Congress 
granted interim relief to certain frozen (no new participants) 
plans of inter-city bus companies because these tables did not 
accurately reflect the mortality experience of the plan. The 
bill specifies that this relief is permanent.

                      Section-by-Section Analysis


Section 1. Short title and table of contents

    ``Pension Security Act of 2002.''

               Title I--IMPROVEMENTS IN PENSION SECURITY

Section 101. Periodic pension benefits statements

    H.R. 3762 amends ERISA to require plan administrators to 
provide a quarterly notice to plan participants and 
beneficiaries of the value of investments allocated to their 
applicable individual account. Provisions from H.R. 10 were 
also incorporated into H.R. 3762 to require plan administrators 
of all individual account plans to provide a pension benefit 
statement at least annually. For purposes of the quarterly 
benefit statement, the value of such securities that are not 
readily tradable on an established securities market may be 
determined by using the most recent valuation of the employer 
securities.
    The bill also requires administrators of defined benefit 
plans to furnish a benefit statement to each participant of a 
defined benefit plan at least once every three years and to a 
plan participant or beneficiary upon written request. In the 
case of a defined benefit plan, if administrators annually 
provide participants with a notice of the availability of a 
pension benefit statement, the new requirements are treated as 
having been met.
    H.R. 3762 specifies that the new notices may be provided in 
electronic or other appropriate form provided that such form is 
reasonably accessible to the recipient.
    The new quarterly benefit statement for applicable 
individual accounts will include a statement of each 
participant's right to diversify any assets held in employer 
securities. The benefit statement will also include an 
explanation of the importance of a diversified investment 
portfolio including the risk of holding substantial portions of 
a portfolio in any one security, such as employer securities.
    Applicable individual account plans are defined by limiting 
the definition of individual account plan in ERISA to exclude 
employee stock ownership plans unless there are any 
contributions to such plan or earnings held within such plan 
that are subject to subsection (k)(3) or (m)(2) of section 401 
of the IRS Code of 1986.
    The Secretary shall issue guidance and model notices that 
include the value of investments, the rights of employees to 
diversify any employer securities and an explanation of the 
importance of a diversified investment portfolio by January 1, 
2003. The Secretary may also issue interim model guidance.
    The bill amends Section 502 of ERISA to allow the Secretary 
to assess a civil penalty against a plan administrator of up to 
$1,000 a day from the date of such plan administrator's failure 
to provide participants and beneficiaries with a benefit 
statement on a quarterly basis.

Section 102. Protection from suspensions, limitations, or restrictions 
        on ability of participant or beneficiary to direct or diversify 
        plan assets

    H.R. 3762 amends Section 101 of ERISA to add a requirement 
that in the case of any action that would have the effect of 
temporarily suspending, limiting, or restricting any ability of 
participants or beneficiaries of individual account plans to 
direct or diversify assets credited to their accounts. The 
suspension must be more than three consecutive calendar days on 
which the ability to diversify is otherwise available under the 
terms of the plan.
    Once a plan administrator has made a determination of 
reasonableness, H.R. 3762 requires plan administrators to 
notify plan participants and beneficiaries of such action. The 
new notice shall be issued 30 days prior to any suspension of 
participants and beneficiaries ability to direct or diversify 
assets. H.R. 3762 specifies that the notice must contain the 
reasons for the suspension, an identification of the 
investments affected, the expected period of the suspension, a 
statement that the administrator has evaluated the 
reasonableness of the expected period, and a statement that the 
participant should evaluate the appropriateness of their 
current investment decisions in light of their inability to 
direct or diversify assets during the expected period of 
suspension.
    H.R. 3762 provides for specific exceptions from the duty to 
notice all participants and beneficiaries under the plan. In 
the event of a qualified domestic relations order, or a 
blackout period caused by a merger, acquisition, divestiture or 
other such action by the plan sponsor or plan, only those 
employees who are impacted by the event will receive the 
notice. The bill provides that the Secretary may provide for 
additional exceptions to the requirements that are in the 
interest of participants and beneficiaries.
    In any case where the inability to provide the notice is 
due to events that were unforeseeable or circumstances beyond 
the reasonable control of the plan administrator, the notice 
shall be furnished to all participants and beneficiaries under 
the plan as soon as reasonably possible under the 
circumstances.
    Should there be a change in the expected period of the 
suspension, H.R. 3762 requires the plan administrator to 
provide notice to affected participants and beneficiaries as 
soon as reasonably practicable in advance of the change.
    H.R. 3762 provides that the Secretary shall issue guidance 
and model notices that include the above factors and such other 
provisions the Secretary may specify. The initial guidance will 
be promulgated no later than January 1, 2003. The Secretary may 
also issue interim model guidance.
    H.R. 3762 amends Section 502 of ERISA to allow the 
Secretary to assess a civil penalty against a plan 
administrator of up to $100 a day from the date of the plan 
administrator's failure or refusal to provide notice to 
participants and beneficiaries in accordance with the new 
notice requirements.
    H.R. 3762 amends Section 404(c)(1) of ERISA to state that 
the exemption from liability shall not apply in connection with 
any period where a participant or beneficiary's ability to 
direct the investment of the assets in his or her account is 
suspended by a plan sponsor or fiduciary. The bill also adds 
another paragraph that specifies that if fiduciaries meet 
certain requirements, they shall not be liable in a suspension 
period. The bill adds relevant matters to be considered in 
determining whether or not a fiduciary has met their 
obligations. These include the consideration of the 
reasonableness of the suspension period and the provision of 
notice to participants and beneficiaries. The bill also 
restates the implicit fiduciary duty to act in the sole 
interest of participants and beneficiaries in determining to 
enter into the suspension as another matter to be considered. 
As H.R. 3762 indicates, it is only then that fiduciaries are 
relieved of their own liability and granted the 404(c) 
liability protection.

Section 103. Information and educational support for pension plan 
        fiduciaries

    As modified by the adoption of an amendment offered by 
Representative Marge Roukema, H.R. 3762 amends Section 404 of 
ERISA to direct the Department of Labor to establish a program 
to make information and educational resources available to 
pension plan fiduciaries on an ongoing basis in order to assist 
them in diligently and efficiently carrying out their fiduciary 
duties with respect to the plan.

Section 104. Limitations on restrictions of investments in employer 
        securities

    The bill creates a diversification right for individual 
account plans that hold employer securities readily tradable on 
an established securities market. After a participant in such a 
plan has completed three years of participation as defined by 
ERISA section 204(a)(4), the plan may not restrict divestment 
of any employer security held by the participant or it may not 
restrict divestment of any employer security later than 3 years 
during a calendar quarter after the employer security is 
allocated to the individual account.
    A plan must offer a broad range of investment alternatives 
as determined by the Secretary in which the plan participant 
must be allowed to re-allocate and the plan participant must be 
given the right to re-allocate on a periodic, reasonable basis, 
but no less frequently than on a quarterly basis.
    Plans holding employer securities as of the date of 
enactment, must provide for the removal of all trading 
restrictions on those securities on an increasing percentage 
basis annually and requiring complete diversification by the 
plan year beginning 2007.

Section 105. Prohibited transaction exemption for the provision of 
        investment advice

    The bill provides a statutory exemption from the prohibited 
transaction rules of the Employee Retirement Income Security 
Act (ERISA) and the Internal Revenue Code (a new 
Sec. 408(b)(14) of ERISA and a new Sec. 4975(d)(14) of the IRC) 
for: (1) the provision of investment advice regarding plan 
assets subject to the direction of plan participants and 
beneficiaries plan to a plan, its participants and 
beneficiaries, (2) the sale, acquisition, or holding of 
securities or other property pursuant to such investment 
advice, and (3) the direct or indirect receipt of fees or other 
compensation in connection with providing the advice.
    In order to qualify for the exemption, an entity must be a 
``fiduciary adviser'' and must meet a series of detailed 
requirements. The bill defines the following regulated entities 
to qualify as fiduciary advisers: registered investment 
advisers, the trust department of banks or similar 
institutions, insurance companies, registered broker-dealers, 
and the affiliates, employees, agents, or registered 
representatives of those entities who satisfy the requirements 
of the applicable insurance, banking and securities laws with 
respect to the provision of such advice.
    The fiduciary adviser, at a time reasonably contemporaneous 
with the initial delivery of investment advice on a security or 
other property, must provide a clear and conspicuous written 
(including electronic) disclosure of: (1) the fees or other 
compensation that the fiduciary adviser and its affiliates 
receive relating to the provision of investment advice or a 
resulting sale or acquisition of securities or other property 
(including from third parties), (2) any interest of the 
fiduciary adviser (and its affiliates) in any security or other 
property recommended, purchased or sold, (3) any limitation 
placed on the fiduciary's ability to provide advice, (4) the 
advisory services offered, and (5) that the adviser is acting 
as a fiduciary of the plan in connection with the provision of 
such advice; (6) any information required to be disclosed under 
applicable securities laws and (7) that the plan participant 
may seek advice from an unaffiliated adviser. This disclosure 
must be written in a way that the average plan participant 
could understand the information. This material must be 
maintained in currently accurate form. The Secretary of Labor 
will issue a model disclosure form.
    Any investment advice provided to participants or 
beneficiaries may be implemented (through a purchase or sale of 
securities or other property) only at their direction.
    The terms of the transaction must be at least as favorable 
to the plan as an arm's length transaction would be, and the 
compensation received by the fiduciary adviser (and its 
affiliates) in connection with any transaction must be 
reasonable. The fiduciary adviser must also provide a written 
acknowledgement that it is acting as a fiduciary of the plan to 
the plan sponsor.
    Fiduciary advisers must comply with a six-year record-
keeping requirement (for records necessary to determine whether 
the conditions of the exemption have been met).
    A plan sponsor or other fiduciary that arranges for a 
fiduciary adviser to provide investment advice to participants 
and beneficiaries has no duty to monitor the specific 
investment advice given by the fiduciary adviser to any 
particular recipient of advice. The plan sponsor or other 
fiduciary retains the duty of prudent selection and periodic 
review of the fiduciary adviser. The fiduciary adviser must 
acknowledge in writing to the plan sponsor that it is acting as 
a fiduciary of the plan with respect to the advice provided. 
Plan assets may be used to pay for the expenses of providing 
investment advice to participants and beneficiaries.

Section 106. Study regarding impact on retirement savings of 
        participants and beneficiaries by requiring fiduciary 
        consultants for individual account plans

    As modified by an amendment adopted in Committee, H.R. 3762 
requires the Secretary of Labor to undertake a study of the 
costs and benefits to participants and beneficiaries of 
requiring independent consultants to advise plan fiduciaries in 
connection with the administration of individual account plans.
    The study shall address the merit of a requirement, as well 
as relationship to such a requirement to the expenses borne by 
participants and beneficiaries, and the availability of 
individual account plans.

Section 107. Insider trades during pension plan suspension periods 
        prohibited

    H.R. 3762 amends Section 16 of the Securities and Exchange 
Act of 1934 to prohibit beneficial owners, directors or 
officers of an issuer of an equity from purchasing or selling 
any equity security of such issuer while plan participants and 
beneficiaries are precluded from directing or diversifying 
their accounts during a ``blackout'' period. The bill also 
directs that any profit from a prohibited sale shall be 
recoverable by the issuer.

Section 108. Effective dates of title and related rules

    The effective dates of these titles are on or after January 
1, 2003.

                    TITLE II--ADDITIONAL PROVISIONS

Section 201. Amendments to Retirement Protection Act of 1994

    Retirement plans sponsored by interstate bus companies are 
facing inappropriate funding obligations that do not accurately 
reflect the economic realities underlying these plans or the 
interstate bus transportation industry. This situation has 
arisen, in part, due to the decline and elimination of the 30 
year Treasury bond and the fixed mortality assumption that 
these plans must use under the General Agreement on Tariffs and 
Trade (GATT) legislation. Recognizing this situation, Congress 
temporarily exempted this industry from these rules in the 
Taxpayer Relief Act of 1997, thus having the normal funding 
rules of ERISA apply to them. This section makes that exemption 
from the GATT funding rules permanent.

Section 202. Notice and consent period regarding distributions

    Generally, benefits cannot be distributed before the later 
of age 62 or normal retirement age unless the participant 
consents no more than 90 days before benefit commencement. 
Also, information on the tax implications of rollovers must be 
given to the employee within 90 days of distribution. Under 
this provision, the notice and consent period regarding 
distributions would be expanded from 90 days to 180 days.

Section 203. Annual report dissemination

    Within 210 days after the close of a plan's fiscal year, 
the plan administrator must provide certain information to 
participants in a summary annual report (SAR). Under this 
section, Summary Annual Reports could now be distributed 
through electronic means (including Internet) or via other new 
technologies.

Section 204. Technical corrections to the SAVER Act

    The Savings Are Vital to Everyone's Retirement (SAVER) Act 
of 1997 convenes a National Summit on Retirement Savings at the 
White House, which will be co-hosted by the executive and 
legislative branches in 2006 and 2010. The National Summit 
brings together experts in the fields of employee benefits and 
retirement savings, key leaders of government, and interested 
parties from the private sector and general public. The 
Congressional leadership and the President select the 
delegates. The National Summit is a public-private partnership, 
receiving substantial funding from private sector 
contributions. This section provides for technical amendments 
to the SAVER Act, regarding the administration of and delegate 
selection to future statutorily created National Summits on 
Retirement Savings.

Section 205. Expansion of missing participants program

    The PBGC acts as a clearinghouse for benefits due to 
participants who cannot be located. When a defined benefit plan 
terminates, the plan may transfer the benefits of the missing 
participant to the PBGC, which then attempts to locate the 
participant. Under this section, the PBGC's missing participant 
program would be expanded to cover defined contribution plans. 
This expansion would be voluntary at the election of the plan 
sponsor.

Section 206. Reduced PBGC premiums for new plans

    Defined benefit plans are subject to a flat-rate premium of 
$19 per participant. Underfunded defined benefit plans are 
subject to an additional variable rate premium. There is no 
variable rate premium for the first year of a new defined 
benefit plan. Under this provision, new defined benefit plans 
established by employers with 100 employees or less would only 
have to pay a $5 per participant PBGC premium for the first 5 
years of the plan. No variable rate premium would be assessed 
during this period.

Section 207. Reduction of additional PBGC premiums

    Defined benefit plans are subject to a flat-rate premium of 
$19 per participant. Underfunded defined benefit plans are 
subject to an additional variable rate premium. There is no 
variable rate premium for the first year of a new defined 
benefit plan. Under this section, any variable rate premium 
that might be assessed against a new defined benefit plan 
established by a larger employer would be phased-in as follows: 
0% for the first plan year; 20% for the second; 40% for the 
third; 60% for the fourth; 80% for the fifth, and 100% for the 
sixth and succeeding plan years. For employers who have 25 or 
fewer employees on the first day of the plan year, the 
additional premium for each participant would not exceed $5 
multiplied by the number of participants in the plan as of the 
close of the preceding plan year.

Section 208. Authorization for PBGC to pay interest on premium 
        overpayment refunds

    This would allow the PBGC to pay interest on overpayments 
made by premium payers. Interest paid on overpayments would be 
calculated at the same rate and in the same manner as interest 
is charged on premium underpayments.

Section 209. Substantial owner benefits in terminated plans

    ``Substantial owners'' are individuals who own more than 
10% of a business. ERISA contains complicated rules governing 
the benefit earned by substantial owners when a plan is 
terminating. Under this section, the same five-year phase-in 
that currently applies to a participant who is not a 
substantial owner would apply to a substantial owner with less 
than a 50% ownership interest. For a majority owner, the phase-
in would depend on the number of years the plan has been in 
effect, rather than on the number of years the owner has been a 
participant and the initial plan benefit.

Section 210. Benefit suspension notice

    When an employee continues to work beyond normal retirement 
age, or is reemployed after commencing benefits, a defined 
benefit plan may provide for a suspension of pension payments 
during the post normal retirement age employment period. DOL 
regulations require that affected participants be notified in 
writing of such suspension and that such notice include a copy 
of the relevant plan provisions. Under this section, DOL would 
be required to modify its regulations regarding suspension of 
benefits rules to eliminate the requirement of a written 
individual notice and instead require that the suspension of 
benefits rules be outlined in the summary plan description, 
except for individuals reentering the workforce. Those 
rejoining a former employer would still receive the existing 
notice of suspension, along with a notice of any reduction in 
the rate of future benefit accrual.

Section 211. Studies.

    (1) Model Small Employer Group Plans: Under this section, 
the DOL is directed to conduct a study to determine (1) the 
most appropriate form(s) of pension plans that would be simple 
to create and easy to maintain by multiple small employers, 
while providing ready portability of benefits for all 
participants and beneficiaries, (2) how such arrangements could 
be established by employer or employee associations, (3) how 
such arrangements could provide for employees to contribute 
independent of employer sponsorship, and (4) appropriate 
methods and strategies for making such pension plan coverage 
more widely available to American workers.
    (2) Pension Coverage: This section also directs the DOL to 
conduct a study regarding the effect of the bill on pension 
coverage, including: the extent of pension plan coverage for 
low and middle-income workers, the levels of pension plan 
benefits generally, the quality of pension plan coverage 
generally, worker's access to and participation in pension 
plans, and retirement security.

Section 212. Interest rate range for additional funding requirements

    The decline in yield and elimination of the 30 year 
Treasury bond has forced defined benefit pension plan sponsors 
to artificially increase their contributions due to 
inaccurately low rate of the 30 year Treasuries that are used 
as the basis of the statutory formula that determines 
acceptable funding levels. Furthermore, this flawed formula 
might cause some companies to also have to pay to the PBGC a 
penalty for under funding under the formula but in reality 
there is no under funding. This section gives plans an expanded 
formula which takes into consideration the low rate of the 30 
year Treasury bonds for plan years 2001, 2002 and 2003.

Section 213. Provisions relating to plan amendments

    Generally, there is a short time within which to make plan 
amendments to reflect amendments to the law. In addition, the 
anti-cutback rules can have the unintended consequence of 
preventing an employer from amending its plan to reflect a 
change in the law. Under this section, amendments to a plan or 
annuity contract made pursuant to any amendment made by the Act 
would not be required to be made before the last day of the 
first plan year beginning on or after January 1, 2003. 
Operational compliance would, of course, be required with 
respect to all plans as of the applicable effective date of any 
amendment made by the Act. In addition, timely amendments to a 
plan or annuity contract made pursuant to any amendment made by 
the Act would be deemed to satisfy the anti-cutback rules.

                       Explanation of Amendments

    The provisions of the substitute are explained in this 
report.


                             Correspondence

                     Congress of the United States,
                                  House of Representatives,
                                     Washington, DC, April 4, 2002.
Hon. John Boehner,
Chairman, Committee on Education and the Workforce,
Rayburn House Office Building, Washington, DC.
    Dear Mr. Chairman: Due to legislative duties, I was 
unavoidably detained during Committee Consideration of H.R. 
3762, the Pension Security Act of 2002. Consequently, I missed 
roll call number 1 on the substitute amendment offered by 
Representative Miller. Had I been present, I would have voted 
no on the amendment.
    I would appreciate your including this letter in the 
Committee Report to accompany H.R. 3762. Thank you for your 
attention to this matter.
            Sincerely,
                                             Marge Roukema,
                                                Member of Congress.

              Application of Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1 requires a 
description of the application of this bill to the legislative 
branch. This bill gives workers new freedom to diversify their 
investments, much greater access to quality investment advice, 
advance notice before blackout periods, more information about 
their pensions, and other tools they can use to maximize the 
potential of their 401(k) plans and ensure a secure retirement 
future through amendments to the Employee Retirement Income 
Security Act (ERISA) and complementary amendments to the 
Internal Revenue Code. Since ERISA excludes governmental plans, 
the bill does not apply to legislative branch employees. As 
public employees, legislative branch employees are eligible to 
participate in the Federal Employee Retirement System.

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
(2)(b)(1) of rule X of the Rules of the House of 
Representatives, the Committee's oversight findings and 
recommendations are reflected in the body of this report.

                       Unfunded Mandate Statement

    Section 423 of the Congressional Budget and Impoundment 
Control Act (as amended by Section 101(a)(2) of the Unfunded 
Mandates Reform Act, P.L. 104-4) requires a statement of 
whether the provisions of the reported bill include unfunded 
mandates. This bill gives workers new freedom to diversify 
their investments, much greater access to quality investment 
advice, advance notice before blackout periods, more 
information about their pensions, and other tools they can use 
to maximize the potential of their 401(k) plans and ensure a 
secure retirement future through amendments to the Employee 
Retirement Income Security Act (ERISA). In compliance with this 
requirement, the Committee has received a letter from the 
Congressional Budget Office included herein.

     Budget Authority and Congressional Budget Office Cost Estimate

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the House of Representatives and section 308(a) of the 
Congressional Budget Act of 1974 and with respect to 
requirements of 3(c)(3) of Rule XIII of the House of 
Representatives and section 402 of the Congressional Budget Act 
of 1974, the Committee has received the following cost estimate 
for H.R. 3762 from the Director of the Congressional Budget 
Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, April 4, 2002.
Hon. John A. Boehner,
Chairman, Committee on Education and the Workforce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed estimate for H.R. 3762, the Pension 
Security Act of 2002.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Geoffrey 
Gerhardt.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

H.R. 3762--Pension Security Act of 2002

    Summary: H.R. 3762 would make numerous changes to the 
Employee Retirement Income Security Act of 1974 (ERISA) that 
would affect the operations of private pension plans. These 
include new reporting requirements, limitations on certain 
investments, modifications in premiums paid to the Pension 
Benefit Guaranty Corporation (PBGC), and other changes.
    CBO estimates that the bill would increase direct spending 
by $36 million in 2003, by $127 million over the 2003-2007 
period, and by $185 million over the 2003-2012 period. 
Discretionary spending would also increase by $24 million over 
the 2003-2007 period, assuming appropriation of the necessary 
amounts. CBO and the Joint Committee on Taxation (JCT) estimate 
that the bill would have a negligible effect on revenues. Since 
this bill would affect direct spending and revenues, pay-as-
you-go procedures would apply.
    State, local, and tribal governments are exempt from the 
requirements of ERISA that H.R. 3762 would amend, and other 
provisions of the bill would impose no requirements on those 
governments. Consequently, the bill contains no 
intergovernmental mandates as defined in the Unfunded Mandates 
Reform Act (UMRA) and would impose no costs on state, local, or 
tribal governments.
    The bill contains several private-sector mandates on 
sponsors, administrators, and fiduciaries of private pension 
plans. CBO estimates that the direct cost of those new 
requirements would exceed the annual threshold specified in 
UMRA ($115 million in 2002, adjusted annually for inflation), 
but we do not have sufficient information to provide a precise 
estimate of the aggregate cost.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 3762 is shown in the following table. 
The costs of this legislation would fall within budget function 
600 (income security).

----------------------------------------------------------------------------------------------------------------
                                                                   By fiscal year, in millions of dollars--
                                                             ---------------------------------------------------
                                                               2002    2003     2004     2005     2006     2007
----------------------------------------------------------------------------------------------------------------
                                                 DIRECT SPENDING
Reduced PBGC Flat-Rate Premiums.............................       0       1        1        2        2        2
Changes in PBGC Variable Premiums...........................       0      32       -7       76  .......        3
Payments of Interest on Overpayments of PBGC Premiums.......       0       3        3        3        3        3
Benefits Paid to Substantial Owners.........................       0       *        *        *        *        *
                                                             ---------------------------------------------------
      Total Additional Outlays..............................       0      36       -3       81        5        8
                                        SPENDING SUBJECT TO APPROPRIATION

Studies by the Department of Labor:
    Estimated Authorizations................................       0       2        0        0        0        0
    Estimated Outlays.......................................       0       *        1        *        *        *
Information and Educational Support for Pension Plan
 Fiduciaries:
    Estimated Authorizations................................       0       5        5        5        5        6
    Estimated Outlays.......................................       0       3        5        5        5        5
Total Spending Subject to Appropriation:
    Estimated Authorizations................................       0       7        5        5        5        5
    Estimated Outlays.......................................       0       3        6        5        5        5
Memorandum:
Changes in Revenues Resulting from Enactment of Both H.R.        994     994     -270     -593     -485     -327
 3762 and H.R. 3669 \1\.....................................
----------------------------------------------------------------------------------------------------------------
\1\ These revenue effects reflect changes in pension plan funding and were included in CBO's estimate for H.R.
  3669, the Employee Retirement Saving Bill of Rights. Enactment of H.R. 3762 alone would not affect revenues.

Notes.--* =Less than $500,000.

Basis of estimate

            Revenues
    All estimates of the provisions in the bill that affect 
revenues, except the civil penalties under section 102, were 
provided by JCT. JCT estimates that none of those provisions 
would have significant effects on revenue collections. Based on 
information from the Department of Labor, CBO expects that 
additional civil penalties resulting from section 102 would be 
less than $500,000 annually.
    If the bill were enacted in combination with H.R. 3669, the 
Employee Retirement Savings Bill of Rights, which was reported 
by the Committee on Ways and means on march 20, 2002, JCT 
estimates that federal revenues would be increased by $994 
million in 2002, but would be reduced by $991 million over the 
2002-2012 period. These revenue effects were included in CBO's 
estimate for H.R. 3669. According to JCT, the revenue effects 
depend on conforming changes to both the Internal Revenue Code 
and ERISA, and JCT's estimates for H.R. 3669 assumed that the 
conforming changes would be enacted.
            Direct spending
    Reduced Flat-Rate Premiums Paid to the PBGC. Under current 
law, defined benefit pension plans operated by a single 
employer pay two types of annual premiums to the Pension 
Benefit Guaranty Corporation. All covered plans are subject to 
a flat-rate premium of $19 per participant. In addition, 
underfunded plans must also pay a variable-rate premium that 
depends on the amount by which the plan's liabilities exceed 
its assets.
    The bill would reduce the flat-rate premium from $19 to $5 
per participant for plans established by employers with 100 or 
fewer employees during the first five years of the plan's 
operation. According to information obtained from the PBGC, 
approximately 7,500 plans would eventually qualify for this 
reduction. Those plans cover an average of about 10 
participants each. CBO estimates that the change would reduced 
the PBGC's premium income by about $1 million in 2003, $8 
million over the 2003-2007 period, and $18 million from 2003 
through 2012. Since PBGC premiums are offsetting collections to 
a mandatory spending account, reductions in premium receipts 
are reflected as increases in direct spending.
    Changes in Variable Premiums Paid to the PBGC. H.R. 3762 
would make several changes affecting the variable-rate premium 
paid by underfunded plans. CBO estimates, in total, this 
section will decrease receipts from those premiums by $32 
million in 2003, $104 million over the 2003-2007 period, and 
$137 million during the 2003-2012 period.
    First, for all new plans that are underfunded, the bill 
would phase in the variable-rate premium. In the first year, 
plans would pay nothing. In the succeeding four years, they 
would pay 20 percent, 40 percent, 60 percent, and 80 percent, 
respectively, of the full amount. In the sixth and later years, 
they would pay the full variable-rate premium determined by 
their funding status. On the basis of information from the 
PBGC, CBO estimates that this change would affect the premiums 
of approximately 250 plans each year. It would reduce the 
PBGC's total premium receipts by about $19 million over the 
2003-2007 period and $46 million over the 2003-2012 period.
    Second, the bill would reduce the variable-rate premium 
paid by all underfunded plans (not just new plans) established 
by employers with 25 or fewer employees. Under the bill, the 
variable-rate premium per participant paid by those plans would 
not exceed $5 multiplied by the number of participants in the 
plan. CBO estimates that approximately 2,500 plans would have 
their premium payments to the PBGC reduced by this provision 
beginning in 2003. As a result, premium receipts would decline 
by $1 million in 2004, $4 million during the 2004-2007 period, 
and $10 million over the 2003-2012 period.
    Third, the bill would alter the pension funding 
requirements in ERISA, which would allow plans to become more 
underfunded in plan year 2001 without subjecting them to tax 
and other penalties. JCT estimates that this provision would 
initially cause employers to reduce pension plan contributions, 
but later increase these contributions until funding returns to 
baseline levels. Some plans would have to pay higher premiums 
because their level of underfunding would increase. Other 
plans, however, would qualify for a special exemption and not 
be required to pay the variable premium for plan-year 2001. 
Based on information from the PBGC, CBO estimates that the net 
effect would be a decrease of $30 million in premium receipts 
in 2003. CBO estimates H.R. 3762 would increase plan 
underfunding by about $1.2 billion in 2002, leading to an 
increase in premium receipts of $11 million in 2004. Over the 
2003-2007 period, CBO estimates this provision would cause 
receipts to decrease by a net of $1 million.
    Finally, H.R. 3762 would amend the underlying formula used 
to determine variable-rate premiums. Changes to ERISA made by 
the Job Creation and Worker Assistance Act (P.L. 107-147) 
require that, during plan-years 2002 and 2003, the interest 
rate used to calculate plans' liabilities be 100 percent of the 
interest rate on 30-year Treasury securities in the month 
preceding the month in which the plan year begins. This 
interest rate will return to 85 percent of the Treasury rate 
unless and until the Department of the Treasury issues new 
mortality tables for pension beneficiaries, at which time the 
liability calculation will be set at 100 percent. Instead, 
section 212 would set the interest rate at 115 percent of the 
30-year bond rate once the new mortality tables are issued, but 
only through the remainder of plan-years 2002 and 2003, at 
which time the interest rate would return to 100 percent. As 
part of its latest baseline projections CBO anticipates that 
the new mortality tables will be issued immediately before the 
start of plan-year 2003. Therefore, under CBO's assumptions 
about when the new mortality tables will be issue, the bill 
would allow plans to use 115 percent of the 30-year bond rate 
to determine liabilities in plan-year 2003 before being set at 
100 percent of the bond rate thereafter.
    Increasing the interest rate effectively lowers the 
measured amount of underfunding among plans because using 
higher interest rates reduces projected liabilities, which are 
calculated on a present-value basis. By reducing the measured 
level of underfunding, CBO estimates that this provision of 
section 212 would reduce premium collections by $80 million in 
2005.
    Authorization for the PBGC to Pay Interest on Premium 
Overpayment Refunds. The legislation would authorize the PBGC 
to pay interest to plan sponsors on premium overpayments. 
Interest paid on overpayments would be calculated at the same 
rate as interest charged on premium underpayments. On average, 
the PBGC receives $19 million per year in premium overpayments, 
charges an interest rate of 8 percent for underpayments, and 
experiences a two-year lag between the receipt of payments and 
the issuance of refunds. Based on this information, CBO 
estimates that direct spending would increase by $3 million 
annually.
    Substantial Owner Benefits in Terminated Plans. H.R. 3762 
would simplify the rules by which the PBGC pays benefits to 
substantial owners (those with an ownership interest of at 
least 10 percent) of terminated pension plans. Only about one-
third of the plans taken over by the PBGC involve substantial 
owners, and the change in benefits paid to owner employees 
under this provision would be less than $500,000 annually.
    National Summit on Retirement Income Security. H.R. 3762 
would extend the authorization for the National Summit on 
Retirement Income Security so that meetings would be held in 
2006 and 2010. The most recent summit was held in January 2002. 
Based on donations received for that summit, CBO estimates that 
the Department of Labor would receive about $500,000 in private 
donations for each future summit, which would be spent to 
defray part of the costs of the conferences. Therefore, this 
provision would increase revenues and direct spending by the 
same amounts and would have no net impact on the budget 
surplus.
            Discretionary spending
    Studies by the Department of Labor. H.R. 3762 would direct 
the Department of Labor (DOL) to undertake three studies: one 
to determine the most appropriate forms of private pension 
plans, one on the impact of H.R. 3762 on various aspects of 
pension coverage, and one on the impact of requiring fiduciary 
consultants for individual account plans. Based on the costs of 
studies with comparable requirements, CBO estimates these 
studies would cost about $2 million over the 2003-2007 period.
    Informational and Educational Support for Pension Plan 
Fiduciaries. The bill also would require DOL to provide 
information and educational resources to persons serving as 
fiduciaries for employee pension benefit plans. Based on a 
review of other federal programs that provide consumer-related 
and technical information to the public, CBO estimates that 
providing this support would cost about $5 million per year.
    National Summit on Retirement Income Security. H.R. 3762 
would amend the authorization for the National Summit on 
Retirement Security to require the President to convene a 
conference on national savings in 2006 rather than in 2005, and 
to hold an additional summit in 2010. The appropriation of such 
sums as may be necessary is authorized for that purpose. The 
Secretary of Labor is also authorized to accept private 
donations to defray the costs of the conference, and must spend 
the donated funds prior to spending the appropriated funds. 
Based upon the experience of the 1998 and 2002 National 
Summits, CBO estimates that future summits would cost less than 
$1 million and that more than one-half of the expenses would be 
offset by private donations.
    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act sets up pay-as-you-go procedures 
for legislation affecting direct spending or receipts. The net 
changes in outlays and governmental receipts that are subject 
to pay-as-you-go procedures are shown in the following table. 
For the purposes of enforcing pay-as-you-go procedures, only 
the effects through 2006 are counted.

----------------------------------------------------------------------------------------------------------------
                                                       By fiscal year, in millions of dollars--
                                    ----------------------------------------------------------------------------
                                      2002   2003   2004   2005   2006   2007   2008   2009   2010   2011   2012
----------------------------------------------------------------------------------------------------------------
Changes in receipts \1\............      0      0      0      0      0      0      0      0      0      0      0
Changes in outlays.................      0     36     -3     81      5      8     11     11     12     12    12
----------------------------------------------------------------------------------------------------------------
\1\ Enactment of H.R. 3762 alone would not affect revenues, though there would be a revenue effect if the bill
  were enacted in conjunction with H.R. 3669.

    Estimated impact on state, local, and tribal governments: 
State, local, and tribal governments are exempt from the 
requirements of ERISA that H.R. 3762 would mend, and other 
provisions of the bill would impose no requirements on those 
governments. Consequently, the bill contains no 
intergovernmental mandates as defined in UMRA and would impose 
no costs on state, local, or tribal governments.
    Estimated impact on the private sector: With only limited 
exceptions, private employers who provide pension plans for 
their workers must follow rules specified in ERISA. Therefore, 
CBO considers changes in ERISA that expand those rules to be 
private-sector mandates under UMRA. H.R. 3762 would make 
several such changes to ERISA that would affect sponsors, 
administrators, and fiduciaries of pension plans. CBO estimates 
that the direct cost to affected entities of the new 
requirements in H.R. 3762 would exceed the annual threshold 
specified in UMRA ($115 million in 2002, adjusted annually for 
inflation), but does not have sufficient information to provide 
a precise estimate of the aggregate cost.
    Benefit Statements. Section 101 of the bill would require 
administrators of private, individual-account (defined 
contribution) pension plans to provide quarterly statements to 
participants and beneficiaries. Those statements would have to 
contain several items, including the amount of accrued 
benefits, the amount of nonforfeitable benefits, the value of 
any assets held in the form of securities of the employing 
firm, an explanation of any limitations or restrictions on the 
right of the participant or beneficiary to direct an 
investment, and an explanation of the importance of a well-
balanced and diversified portfolio. Currently, plans must 
provide more limited statements to participants upon request.
    CBO estimates that the direct cost of this new requirement 
on private plans would be about $100 million annually. An 
estimated 70 million people will participate in private, 
individual-account pension plans in 2003. According to industry 
sources, the majority of plans sponsored by large employers 
already provide pension statements on a quarterly basis, and it 
is becoming increasingly common for plans sponsored by smaller 
employers to do so as well. Thus, CBO estimates that about 30 
million participants would newly receive statements four times 
per year under the bill. The average cost of providing each 
statement would be small because plans are now required to 
provide benefit statements on request. Thus, the bill would 
result in added costs largely for producing and delivering the 
new statements. Written statements would have to be provided to 
most participants, but the bill would allow statements to be 
provided electronically to participants with access to the 
Internet. (Census Bureau information indicates that in 1997 
about 15 percent of workers had access to the Internet at their 
workplace.)
    Section 101 of the bill would also require administrators 
of private, defined-benefit pension plans to provide vested 
participants currently employed by the sponsor with a benefit 
statement at least once every three years, or to provide notice 
to participants of the availability of benefit statements on an 
annual basis. CBO estimates that the added cost of this 
provision would be less than $5 million per year.
    Notice of Restriction Periods. Currently, participants in 
individual-account plans occasionally experience time periods 
(called ``blackout'' periods) when they are unable to direct 
the investment of assets in their accounts. Such periods may 
occur for administrative reasons--for example, when a plan 
changes recordkeepers. Section 102 of the bill generally would 
require plan administrators to provide affected participants 
with 30 days notice before an anticipated suspension, 
limitation, or restriction on the ability of participants to 
direct investments in their accounts. Notice would have to be 
in writing unless participants had access to the Internet.
    CBO estimates that the direct cost to private plans of 
providing advance notice of upcoming blackout periods would be 
about $15 million annually. According to a survey conducted by 
the American Society for Pension Actuaries, blackout periods 
typically occur for a plan about once every three to four 
years. Data for the Bureau of Labor Statistics indicate that 
most participants in individual-account plans are in plans that 
allow at least some direction of assets and, thus, would be 
affected by those periods.
    Fiduciaries' Liability. Currently plan fiduciaries 
generally are not liable for investment decisions made by 
participants, nor are they liable for the inability of 
participants to alter their investments during blackout 
periods. Section 102 of the bill would potentially expand the 
personal liability of plan fiduciaries during blackouts by 
removing the current limitation on liability and adding 
specific new requirements under which they could avoid 
liability.
    Fiduciaries would be required to consider the 
reasonableness of the length of the blackout period, provide 30 
days notice to participants, and act solely in the interest of 
participants in entering the blackout. This provision would 
impost a direct cost on the affected entities by increasing 
their financial exposure during blackouts. CBO does not have 
sufficient information to estimate that added cost, however, 
but expects that abiding by the new requirements to avoid 
liability would add little to their costs.
    Investment in Employers' Securities. Section 103 of the 
bill would require individual-account plans to allow 
participants to sell securities issued by their employer and 
acquired through elective deferrals after three years of 
participation in the plan (or, if the plan so provides, after 
three years of service with the employer). Participants would 
also be allowed to sell securities issued by their employers 
and allocated to their accounts three years after they are 
allocated to them. (The bill would phase in the requirement in 
20 percent annual increments for assets acquired before the 
effective date of the bill.) Section 103 would also require 
plans that offer participants securities issued by employers to 
offer a broad range of investment opportunities.
    Both the expansion of participants' allowable investments 
of future contributions and the phase-in for past contributions 
would increase the administrative and record-keeping costs of 
affected pension plans. According to a small survey sponsored 
by the Employee Benefit Research Institute, 48 percent of 
surveyed 401(k) plans had company stock as an investment option 
for participants, and 43 percent of plans with such an option 
required the employer's contributions to be invested in company 
stock. CBO estimates that the added administrative costs 
attributable to these provisions could easily be $20 million 
annually, with larger amounts in the first year. In addition, 
the potential sale of the employer's stock by plan participants 
as a result of these new requirements could temporarily reduce 
the stock's price, especially for companies whose stock is 
thinly traded. Finally, requiring plans to offer a range of 
investment options would probably add little to plan costs 
because many plans now abide by a safe harbor provision in 
ERISA that has similar requirements.
    Insider Trades. Section 105 of the bill would prohibit 
certain owners and officers of a company from trading 
securities issued by that company during a period when 
participants in the retirement plan are restricted in their 
ability to direct investments. This restriction would increase 
the financial exposure of affected owners and officers and, 
thus, impose a cost on them. CBO does not have sufficient 
information to estimate the amount of that cost.
    Previous CBO estimate: On March 20, 2002, CBO provided the 
Committee on Ways and Means with a cost estimate for H.R. 3669, 
the Employee Retirement Savings Bill of Rights. That bill 
contained a number of changes affecting ERISA's treatment of 
private pension plans, including some adjustments to the PBGC's 
premium formulas, that are similar those contained in H.R. 
3762. Although many of the budgetary effects are similar, the 
estimated change in variable-rate premiums is different. For 
H.R. 3762, the estimated decrease in receipts from variable-
rate premiums is $137 million during the 2003-2012 period, 
while for H.R. 3669 the estimated decrease is $56 million over 
the same period. The estimate for H.R. 3669 also reflected 
changes in pension plan funding that would increase revenues by 
$994 million in 2002 but reduce them by $991 million over the 
2002-2012 period. The JCT revenue estimate for the pension 
funding effects of H.R. 3669 assumed the conforming changes to 
ERISA's that are included in H.R. 3762. H.R. 3669 also included 
changes to the Internal Revenue Code, the Federal Insurance 
Contribution Act, and the Federal Unemployment Tax Act that 
would reduce revenues by $23.4 billion over the 2003-2012 
period.
    Estimate prepared by: Federal Revenues: Erin Whitake; 
Outlays of the Pension Benefit Guaranty Corporation: Geoff 
Gerhardt; Other Spending by the Department of Labor: Christina 
Hawley Sadoti; Impact on State, Local, and Tribal Governments: 
Leo Lex; and Impact on the Private Sector: Bruce Vavrichek.
    Estimate approved by: Robert A. Sunshine, Assistant 
Director for Budget analysis and G. Thomas Woodward, Assistant 
Director for Tax Analysis.

         Statement of General Performance Goals and Objectives

    In accordance with Clause (3)(c) of House Rule XIII, the 
goals of H.R. 3762 to give workers new freedom to diversify 
their investments, much greater access to quality investment 
advice, advance notice before blackout periods, more 
information about their pensions, and other tools they can use 
to maximize the potential of their 401(k) plans and ensure a 
secure retirement future though amendments to the Employee 
Retirement Income Security Act (ERISA) and complementary 
amendments to the Internal Revenue Code. The Committee expects 
the Department of Labor and Department of Treasury to implement 
the changes to the law in accordance with these stated goals.

                   Constitutional Authority Statement

    Under clause 3(d)(1) of rule XIII of the Rules of the House 
of Representatives, the Committee must include a statement 
citing the specific powers granted to Congress in the 
Constitution to enact the law proposed by H.R. 3762. The 
Employee Retirement Income Security Act (ERISA) has been 
determined by the federal courts to be within Congress' 
Constitutional authority. In Commercial Mortgage Insurance, 
Inc. v. Citizens National Bank of Dallas, 526 F.Supp. 510 (N.D. 
Tex. 1981), the court held that Congress legitimately concluded 
that employee benefit plans so affected interstate commerce as 
to be within the scope of Congressional powers under Article 1, 
Section 8, Clause 3 of the Constitution of the United States. 
In Murphy v. Wal-Mart Associates' Group Health Plan, 928 
F.Supp. 700 (E.D. Tex 1996), the court upheld the preemption 
provisions of ERISA. Because H.R. 3762 modifies but does not 
extend the federal regulation of pensions, the Committee 
believes that the Act falls within the same scope of 
Congressional authority as ERISA.

                           Committee Estimate

    Clause 3(d)(2) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the costs that would be incurred in carrying out 
H.R. 3762. However, clause 3(d)(3)(B) of that rule provides 
that this requirement does not apply when the Committee has 
included in its report a timely submitted cost estimate of the 
bill prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

            EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974


                   SHORT TITLE AND TABLE OF CONTENTS

  Section 1. This Act may be cited as the ``Employee Retirement 
Income Security Act of 1974''.

                            TABLE OF CONTENTS

Sec. 1. Short title and table of contents.

             TITLE I--PROTECTION OF EMPLOYEE BENEFIT RIGHTS

                     Subtitle A--General Provisions

     * * * * * * *

                    Part 4--Fiduciary Responsibility

Sec. 401. Coverage.
     * * * * * * *
Sec. 407. [10 percent] limitation with respect to acquisition and 
          holding of employer securities and employer real property by 
          certain plans.
     * * * * * * *

             TITLE I--PROTECTION OF EMPLOYEE BENEFIT RIGHTS

                     Subtitle A--General Provisions

           *       *       *       *       *       *       *


                              DEFINITIONS

  Sec. 3. For purposes of this title:
  (1) * * *

           *       *       *       *       *       *       *

  (42) The term ``applicable individual account plan'' means 
any individual account plan, except that such term does not 
include an employee stock ownership plan (within the meaning of 
section 4975(e)(7) of the Internal Revenue Code of 1986) unless 
there are any contributions to such plan (or earnings 
thereunder) held within such plan that are subject to 
subsection (k)(3) or (m)(2) of section 401 of the Internal 
Revenue Code of 1986.

           *       *       *       *       *       *       *


                   Subtitle B--Regulatory Provisions 

                    Part 1--Reporting and Disclosure

                    duty of disclosure and reporting

  Sec. 101. (a) * * *

           *       *       *       *       *       *       *

  (i) Notice of Suspension, Limitation, or Restriction on 
Ability of Participant or Beneficiary To Direct Investments in 
Individual Account Plan.--
          (1) In general.--In the case of any action having the 
        effect of temporarily suspending, limiting, or 
        restricting any ability of participants or 
        beneficiaries under an applicable individual account 
        plan, which is otherwise available under the terms of 
        such plan, to direct or diversify assets credited to 
        their accounts, if such suspension, limitation, or 
        restriction is for any period of more than 3 
        consecutive calendar days, the plan administrator 
        shall--
                  (A) in advance of taking such action, 
                determine, in accordance with the requirements 
                of part 4, that the expected period of 
                suspension, limitation, or restriction is 
                reasonable, and
                  (B) after making the determination under 
                subparagraph (A) and in advance of taking such 
                action, notify the plan participants and 
                beneficiaries of 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 suspension, 
                        limitation, or restriction,
                          (ii) an identification of the 
                        investments affected,
                          (iii) the expected period of the 
                        suspension, limitation, or restriction,
                          (iv) a statement that the plan 
                        administrator has evaluated the 
                        reasonableness of the expected period 
                        of suspension, limitation, or 
                        restriction,
                          (v) a statement that the participant 
                        or beneficiary should evaluate the 
                        appropriateness of their current 
                        investment decisions in light of their 
                        inability to direct or diversify assets 
                        credited to their accounts during the 
                        expected period of suspension, 
                        limitation, or restriction, and
                          (vi) such other matters as the 
                        Secretary may include in the model 
                        notices issued under subparagraph (E).
                  (B) Provision of notice.--Except as otherwise 
                provided in this subsection, notices described 
                in paragraph (1) shall be furnished to all 
                participants and beneficiaries under the plan 
                at least 30 days in advance of the action 
                suspending, limiting, or restricting the 
                ability of the participants or beneficiaries to 
                direct or diversify assets.
                  (C) Exception to 30-day notice requirement.--
                In any case in which--
                          (i) a fiduciary of the plan 
                        determines, in writing, that a deferral 
                        of the suspension, limitation, or 
                        restriction would violate the 
                        requirements of subparagraph (A) or (B) 
                        of section 404(a)(1), or
                          (ii) the inability to provide the 30-
                        day advance notice is due to events 
                        that were unforeseeable or 
                        circumstances beyond the reasonable 
                        control of the plan administrator,
                subparagraph (B) shall not apply, and the 
                notice shall be furnished to all participants 
                and beneficiaries under the plan as soon as 
                reasonably possible under the circumstances.
                  (D) Written notice.--The notice required to 
                be provided under this subsection shall be in 
                writing, except that such notice may be in 
                electronic or other form to the extent that 
                such form is reasonably accessible to the 
                recipient.
                  (E) Model notices.--The Secretary shall issue 
                model notices which meet the requirements of 
                this paragraph.
          (3) Exception for suspensions, limitations, or 
        restrictions with limited applicability.--In any case 
        in which the suspension, limitation, or restriction 
        described in paragraph (1)--
                  (A) applies only to 1 or more individuals, 
                each of whom is the participant, an alternate 
                payee (as defined in section 206(d)(3)(K)), or 
                any other beneficiary pursuant to a qualified 
                domestic relations order (as defined in section 
                206(d)(3)(B)(i)), or
                  (B) applies only to 1 or more participants or 
                beneficiaries in connection with a merger, 
                acquisition, divestiture, or similar 
                transaction involving the plan or plan sponsor 
                and occurs solely in connection with becoming 
                or ceasing to be a participant or beneficiary 
                under the plan by reason of such merger, 
                acquisition, divestiture, or transaction,
        the requirement of this subsection that the notice be 
        provided to all participants and beneficiaries shall be 
        treated as met if the notice required under paragraph 
        (1) is provided to all the individuals referred to in 
        subparagraph (A) or (B) to whom the suspension, 
        limitation, or restriction applies as soon as 
        reasonably practicable in advance of the suspension, 
        limitation, or restriction.
          (4) Changes in expected period of suspension, 
        limitation, or restriction.--If, following the 
        furnishing of the notice pursuant to this subsection, 
        there is a change in the expected period of the 
        suspension, limitation, or restriction on the right of 
        a participant or beneficiary to direct or diversify 
        assets, the administrator shall provide affected 
        participants and beneficiaries notice of the change as 
        soon as reasonably practicable in advance of the 
        change. Such notice shall meet the requirements of 
        subparagraphs (A) and (D) of paragraph (2) in relation 
        to the extended suspension, limitation, or restriction.
          (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.
  [(h)] (j) Cross Reference.--

          For regulations relating to coordination of reports to the 
        Secretaries of Labor and the Treasury, see section 3004.

           *       *       *       *       *       *       *


    filing with secretary and furnishing information to participants

  Sec. 104. (a) * * *
  (b) Publication of the summary plan descriptions and annual 
reports shall be made to participants and beneficiaries of the 
particular plan as follows:
  (1) * * *

           *       *       *       *       *       *       *

  (3) Within 210 days after the close of the fiscal year of the 
plan, the administrators shall furnish to each participant, and 
to each beneficiary receiving benefits under the plan, a copy 
of the statements and schedules, for such fiscal year, 
described in subparagraphs (A) and (B) of section 103(b)(3) and 
such other material (including the percentage determined under 
section 103(d)(11)) as is necessary to fairly summarize the 
latest annual report. The requirement to furnish information 
under the previous sentence with respect to an employee pension 
benefit plan shall be satisfied if the administrator makes such 
information reasonably available through electronic means or 
other new technology.

           *       *       *       *       *       *       *


               REPORTING OF PARTICIPANT'S BENEFIT RIGHTS

  Sec. 105. [(a) Each administrator of an employee pension 
benefit plan shall furnish to any plan participant or 
beneficiary who so requests in writing, a statement indicating, 
on the basis of the latest available information--
          [(1) the total benefits accrued, and
          [(2) the nonforfeitable pension benefits, if any, 
        which have accrued, or the earliest date on which 
        benefits will become nonforfeitable.
  [(b) In no case shall a participant or beneficiary be 
entitled under this section to receive more than one report 
described in subsection (a) during any one 12-month period.]
  (a)(1)(A) The administrator of an individual account plan 
shall furnish a pension benefit statement--
          (i) to each plan participant at least annually,
          (ii) to each plan beneficiary upon written request, 
        and
          (iii) in the case of an applicable individual account 
        plan, to each plan participant (and to each beneficiary 
        with a right to direct investments) at least quarterly.
  (B) The administrator of a defined benefit plan shall furnish 
a pension benefit statement--
          (i) at least once every 3 years to each participant 
        with a nonforfeitable accrued benefit who is employed 
        by the employer maintaining the plan at the time the 
        statement is furnished to participants, and
          (ii) to a plan participant or plan beneficiary of the 
        plan upon written request.
  (2) A pension benefit statement under paragraph (1)--
          (A) shall indicate, on the basis of the latest 
        available information--
                  (i) the total benefits accrued, and
                  (ii) the nonforfeitable pension benefits, if 
                any, which have accrued, or the earliest date 
                on which benefits will become nonforfeitable,
          (B) shall be written in a manner calculated to be 
        understood by the average plan participant, and
          (C) may be provided in written form or in electronic 
        or other appropriate form to the extent that such form 
        is reasonably accessible to the recipient.
  (3)(A) In the case of a defined benefit plan, the 
requirements of paragraph (1)(B)(i) shall be treated as met 
with respect to a participant if the administrator provides the 
participant at least once each year with notice of the 
availability of the pension benefit statement and the ways in 
which the participant may obtain such statement. Such notice 
shall be provided in written, electronic, or other appropriate 
form, and may be included with other communications to the 
participant if done in a manner reasonably designed to attract 
the attention of the participant.
  (B) The Secretary may provide that years in which no employee 
or former employee benefits (within the meaning of section 
410(b) of the Internal Revenue Code of 1986) under the plan 
need not be taken into account in determining the 3-year period 
under paragraph (1)(B)(i).
  (b) In no case shall a participant or beneficiary of a plan 
be entitled to more than one statement described in clause (i) 
or (ii) of subsection (a)(1)(A) or clause (i) or (ii) of 
subsection (a)(1)(B), whichever is applicable, in any 12-month 
period. If such report is required under subsection (a) to be 
furnished at least quarterly, the requirements of the preceding 
sentence shall be applied with respect to each quarter in lieu 
of the 12-month period.

           *       *       *       *       *       *       *

  [(d) Subsection (a) of this section shall apply to a plan to 
which more than one unaffiliated employer is required to 
contribute only to the extent provided in regulations 
prescribed by the Secretary in coordination with the Secretary 
of the Treasury.]
  (d)(1) The statements required to be provided at least 
quarterly under subsection (a) shall include (together with the 
information required in subsection (a)) the following:
          (A) the value of investments allocated to the 
        individual account, including the value of any assets 
        held in the form of employer securities, without regard 
        to whether such securities were contributed by the plan 
        sponsor or acquired at the direction of the plan or of 
        the participant or beneficiary, and an explanation of 
        any limitations or restrictions on the right of the 
        participant or beneficiary to direct an investment; and
          (B) an explanation, written in a manner calculated to 
        be understood by the average plan participant, of the 
        importance, for the long-term retirement security of 
        participants and beneficiaries, of a well-balanced and 
        diversified investment portfolio, including a 
        discussion of the risk of holding substantial portions 
        of a portfolio in the security of any one entity, such 
        as employer securities.
  (2) The value of any employer securities that are not readily 
tradable on an established securities market that is required 
to be reported under paragraph (1)(A) may be determined by 
using the most recent valuation of the employer securities.
  (3) The Secretary shall issue guidance and model notices 
which meet the requirements of this subsection.

           *       *       *       *       *       *       *


                   Part 2--Participation and Vesting

           *       *       *       *       *       *       *


 REQUIREMENT OF JOINT AND SURVIVOR ANNUITY AND PRERETIREMENT SURVIVOR 
                                ANNUITY

  Sec. 205. (a) * * *

           *       *       *       *       *       *       *

  (c)(1) * * *

           *       *       *       *       *       *       *

  (7) For purposes of this subsection, the term ``applicable 
election period'' means--
          (A) in the case of an election to waive the qualified 
        joint and survivor annuity form of benefit, the [90-
        day] 180-day period ending on the annuity starting 
        date, or

           *       *       *       *       *       *       *


       OTHER PROVISIONS RELATING TO FORM AND PAYMENT OF BENEFITS

  Sec. 206. (a) * * *

           *       *       *       *       *       *       *

  (f) Missing Participants in Terminated Plans.--In the case of 
a plan covered by [title IV] section 4050, [the plan shall 
provide that,] upon termination of the plan, benefits of 
missing participants shall be treated in accordance with 
section 4050.

           *       *       *       *       *       *       *


                            Part 3--Funding

           *       *       *       *       *       *       *


                       MINIMUM FUNDING STANDARDS

  Sec. 302. (a) * * *

           *       *       *       *       *       *       *

  (d) Additional Funding Requirements for Plans Which Are Not 
Multiemployer Plans.--
          (1) * * *

           *       *       *       *       *       *       *

          (7) Current liability.--For purposes of this 
        subsection--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Interest rate and mortality assumptions 
                used.--Effective for plan years beginning after 
                December 31, 1994--
                          (i) Interest rate.--
                                  (I) * * *

           *       *       *       *       *       *       *

                                  (III) Special rule for [2002 
                                and 2003] 2001, 2002, or 
                                2003.--For a plan year 
                                beginning in [2002 or 2003] 
                                2001, 2002, or 2003, 
                                notwithstanding subclause (I), 
                                in the case that the rate of 
                                interest used under subsection 
                                (b)(5) exceeds the highest rate 
                                permitted under subclause (I), 
                                the rate of interest used to 
                                determine current liability 
                                under this subsection may 
                                exceed the rate of interest 
                                otherwise permitted under 
                                subclause (I); except that such 
                                rate of interest shall not 
                                exceed 120 percent of the 
                                weighted average referred to in 
                                subsection (b)(5)(B)(ii).

           *       *       *       *       *       *       *


                    Part 4--Fiduciary Responsibility

           *       *       *       *       *       *       *


                            FIDUCIARY DUTIES

  Sec. 404. (a) * * *

           *       *       *       *       *       *       *

  (c)(1)(A) In the case of a pension plan which provides for 
individual accounts and permits a participant or beneficiary to 
exercise control over assets in his account, if a participant 
or beneficiary exercises control over the assets in his account 
(as determined under regulations of the Secretary)--
          [(A)] (i) such participant or beneficiary shall not 
        be deemed to be a fiduciary by reason of such exercise, 
        and
          [(B)] (ii) no person who is otherwise a fiduciary 
        shall be liable under this part for any loss, or by 
        reason of any breach, which results from such 
        participant's or beneficiary's exercise of control, 
        except that this clause shall not apply in connection 
        with such participant or beneficiary for any period 
        during which the ability of such participant or 
        beneficiary to direct the investment of the assets in 
        his or her account is suspended by a plan sponsor or 
        fiduciary.
  (B) If the person referred to in subparagraph (A)(ii) 
authorizing a suspension meets the requirements of this title 
in connection with authorizing the suspension, such person 
shall not be liable under this title for any loss occurring 
during the suspension as a result of any exercise by the 
participant or beneficiary of control over assets in his or her 
account prior to the suspension. Matters to be considered in 
determining whether such person has satisfied the requirements 
of this title include whether such person--
          (i) has considered the reasonableness of the expected 
        period of the suspension as required under section 
        101(i)(1)(A),
          (ii) has provided the notice required under section 
        101(i)(1)(B), and
          (iii) has acted solely in the interests of plan 
        participants and beneficiaries in determining to enter 
        into the suspension.
  (C) Any limitation or restriction that may govern the 
frequency of transfers between investment vehicles shall not be 
treated as a suspension referred to in subparagraph (A)(ii) to 
the extent such limitation or restriction is disclosed to 
participants or beneficiaries through the summary plan 
description or materials describing specific investment 
alternatives under the plan.

           *       *       *       *       *       *       *

  (e) The Secretary shall establish a program under which 
information and educational resources shall be made available 
on an ongoing basis to persons serving as fiduciaries under 
employee pension benefit plans so as to assist such persons in 
diligently and effectively carrying out their fiduciary duties 
in accordance with this part.

           *       *       *       *       *       *       *


  [10 percent] limitation with respect to acquisition and holding of 
    employer securities and employer real property by certain plans

  Sec. 407. (a) * * *

           *       *       *       *       *       *       *

  (g)(1) An applicable individual account plan which holds 
employer securities that are readily tradable on an established 
securities market may not acquire or hold any employer 
securities with respect to which there is any restriction on 
divestment by a participant or beneficiary, unless the plan 
provides that the restriction--
          (A) is not applicable on or after a date which is not 
        later than the date on which the participant has 
        completed 3 years of service (as defined in section 
        203(b)(2)) with the employer or (if the plan so 
        provides) 3 years of participation (as defined in 
        section 204(b)(4)) in the plan, or
          (B) is not applicable, with respect to any employer 
        security allocated to the individual account during any 
        calendar quarter, after a date which is not later than 
        3 years after the end of such quarter.
  (2)(A) For purposes of paragraph (1), the term ``restriction 
on divestment'' includes--
          (i) any failure to offer a broad range of investment 
        alternatives (as may be determined by the Secretary) to 
        which a participant or beneficiary may direct the 
        proceeds from the divestment of employer securities, 
        and
          (ii) any restriction on the ability of a participant 
        or beneficiary to choose from a broad range of 
        otherwise available investment options (as may be 
        determined by the Secretary) to which such proceeds may 
        be so directed, other than a restriction limiting such 
        ability to so choose to a periodic, reasonable 
        opportunity to so choose occurring no less frequently 
        than on a quarterly basis.

                EXEMPTIONS FROM PROHIBITED TRANSACTIONS

  Sec. 408. (a) * * *
  (b) The prohibitions provided in section 406 shall not apply 
to any of the following transactions:
          (1) * * *

           *       *       *       *       *       *       *

          (14)(A) Any transaction described in subparagraph (B) 
        in connection with the provision of investment advice 
        described in section 3(21)(A)(ii), in any case in 
        which--
                  (i) the investment of assets of the plan is 
                subject to the direction of plan participants 
                or beneficiaries,
                  (ii) the advice is provided to the plan or a 
                participant or beneficiary of the plan by a 
                fiduciary adviser in connection with any sale, 
                acquisition, or holding of a security or other 
                property for purposes of investment of plan 
                assets, and
                  (iii) the requirements of subsection (g) are 
                met in connection with the provision of the 
                advice.
          (B) The transactions described in this subparagraph 
        are the following:
                  (i) the provision of the advice to the plan, 
                participant, or beneficiary;
                  (ii) the sale, acquisition, or holding of a 
                security or other property (including any 
                lending of money or other extension of credit 
                associated with the sale, acquisition, or 
                holding of a security or other property) 
                pursuant to the advice; and
                  (iii) the direct or indirect receipt of fees 
                or other compensation by the fiduciary adviser 
                or an affiliate thereof (or any employee, 
                agent, or registered representative of the 
                fiduciary adviser or affiliate) in connection 
                with the provision of the advice or in 
                connection with a sale, acquisition, or holding 
                of a security or other property pursuant to the 
                advice.

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *


                Part 5--Administration and Enforcement

           *       *       *       *       *       *       *


                           CIVIL ENFORCEMENT

  Sec. 502. (a) A civil action may be brought--
          (1) * * *

           *       *       *       *       *       *       *

          (6) by the Secretary to collect any civil penalty 
        under paragraph (2), (4), [(5), or (6)] (5), (6), (7), 
        or (8) of subsection (c) or under subsection (i) or 
        (l);

           *       *       *       *       *       *       *

  (c)(1) * * *

           *       *       *       *       *       *       *

  (7) The Secretary may assess a civil penalty against any plan 
administrator of up to $1,000 a day from the date of such plan 
administrator's failure or refusal to provide participants or 
beneficiaries with a benefit statement on at least a quarterly 
basis in accordance with section 105(a)(1)(A)(iii).
  (8) The Secretary may assess a civil penalty against a plan 
administrator of up to $100 a day from the date of the plan 
administrator's failure or refusal to provide notice to 
participants and beneficiaries in accordance with section 
101(i). For purposes of this paragraph, each violation with 
respect to any single participant or beneficiary, shall be 
treated as a separate violation.
  [(7)] (9) The Secretary and the Secretary of Health and Human 
Services shall maintain such ongoing consultation as may be 
necessary and appropriate to coordinate enforcement under this 
subsection with enforcement under section 1144(c)(8) of the 
Social Security Act.

           *       *       *       *       *       *       *


                 national summit on retirement savings

  Sec. 517. (a) Authority To Call Summit.--Not later than July 
15, 1998, the President shall convene a National Summit on 
Retirement Income Savings at the White House, to be co-hosted 
by the President and the Speaker and the Minority Leader of the 
House of Representatives and the Majority Leader and Minority 
Leader of the Senate. Such a National Summit shall be convened 
thereafter in [2001 and 2005 on or after September 1 of each 
year involved] 2002, 2006, and 2010. Such a National Summit 
shall--
          (1) * * *
  (b) Planning and Direction.--The National Summit shall be 
planned and conducted under the direction of the Secretary, in 
consultation with, and with the assistance of, the heads of 
such other Federal departments and agencies as the President 
may designate. Such assistance may include the assignment of 
personnel. The Secretary shall, in planning and conducting the 
National Summit, consult with the congressional leaders 
specified in subsection (e)(2). The Secretary shall also, in 
carrying out the Secretary's duties under this subsection, 
consult and coordinate with at least one organization made up 
of private sector businesses and associations partnered with 
Government entities to promote long-term financial security in 
retirement through savings. To effectuate the purposes of this 
paragraph, the Secretary may enter into a cooperative 
agreement, pursuant to the Federal Grant and Cooperative 
Agreement Act of 1977 (31 U.S.C. 6301 et seq.), with any 
appropriate, qualified entity.

           *       *       *       *       *       *       *

  (e) National Summit Participants.--
          (1) * * *
          (2) Statutorily required participation.--The 
        participants in the National Summit shall include the 
        following individuals or their designees:
                  (A) * * *

           *       *       *       *       *       *       *

                  (D) the Chairman and ranking Member of the 
                [Committee on Labor and Human Resources] 
                Committee on Health, Education, Labor, and 
                Pensions of the Senate;

           *       *       *       *       *       *       *

                  [(F) the Chairman and ranking Member of the 
                Subcommittees on Labor, Health and Human 
                Services, and Education of the Senate and House 
                of Representatives; and]
                  (F) the Chairman and Ranking Member of the 
                Subcommittee on Labor, Health and Human 
                Services, and Education of the Committee on 
                Appropriations of the House of Representatives 
                and the Chairman and Ranking Member of the 
                Subcommittee on Labor, Health and Human 
                Services, and Education of the Committee on 
                Appropriations of the Senate;
                  (G) the Chairman and Ranking Member of the 
                Committee on Finance of the Senate;
                  (H) the Chairman and Ranking Member of the 
                Committee on Ways and Means of the House of 
                Representatives;
                  (I) the Chairman and Ranking Member of the 
                Subcommittee on Employer-Employee Relations of 
                the Committee on Education and the Workforce of 
                the House of Representatives; and
                  [(G)] (J) the parties referred to in 
                subsection (b).
          (3) Additional participants.--
                  (A) In general.--[There shall be not more 
                than 200 additional participants.] The 
                participants in the National Summit shall also 
                include additional participants appointed under 
                this subparagraph. Of such additional 
                participants--
                          (i) [one-half shall be appointed by 
                        the President,] not more than 100 
                        participants shall be appointed under 
                        this clause by the President, in 
                        consultation with the elected leaders 
                        of the President's party in Congress 
                        (either the Speaker of the House of 
                        Representatives or the Minority Leader 
                        of the House of Representatives, and 
                        either the Majority Leader or the 
                        Minority Leader of the Senate; and
                          (ii) [one-half shall be appointed by 
                        the elected leaders of Congress] not 
                        more than 100 participants shall be 
                        appointed under this clause by the 
                        elected leaders of Congress of the 
                        party to which the President does not 
                        belong (one-half of that allotment to 
                        be appointed by either the Speaker of 
                        the House of Representatives or the 
                        Minority Leader of the House of 
                        Representatives, and one-half of that 
                        allotment to be appointed by either the 
                        Majority Leader or the Minority Leader 
                        of the Senate).
                  (B) Presidential authority for additional 
                appointments.--The President, in consultation 
                with the elected leaders of Congress referred 
                to in subsection (a), may appoint under this 
                subparagraph additional participants to the 
                National Summit. The number of such additional 
                participants appointed under this subparagraph 
                may not exceed the lesser of 3 percent of the 
                total number of all additional participants 
                appointed under this paragraph, or 10. Such 
                additional participants shall be appointed from 
                persons nominated by the organization referred 
                to in subsection (b)(2) which is made up of 
                private sector businesses and associations 
                partnered with Government entities to promote 
                long term financial security in retirement 
                through savings and with which the Secretary is 
                required thereunder to consult and cooperate 
                and shall not be Federal, State, or local 
                government employees.
                  [(B)] (C) Appointment requirements.--The 
                additional participants described in 
                subparagraph (A) shall be--
                          (i) appointed not later than [January 
                        31, 1998] 3 months before the convening 
                        of each summit;
                          (ii) selected without regard to 
                        political affiliation or past partisan 
                        activity; and
                          (iii) representative of the diversity 
                        of thought in the fields of employee 
                        benefits and retirement income savings.

           *       *       *       *       *       *       *

  (f) National Summit Administration.--
          (1) Administration.--In administering this section, 
        the Secretary shall--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) make available for public comment, no 
                later than 90 days prior to the date of the 
                commencement of the National Summit, a proposed 
                agenda for the National Summit that reflects to 
                the greatest extent possible the purposes for 
                the National Summit set out in this section;

           *       *       *       *       *       *       *

  (g) Report.--The Secretary shall prepare a report, in 
consultation with the congressional leaders specified in 
subsection (e)(2), describing the activities of the National 
Summit and shall submit the report to the President, the 
Speaker and Minority Leader of the House of Representatives, 
the Majority and Minority Leaders of the Senate, and the chief 
executive officers of the States not later than 90 days after 
the date on which the National Summit is adjourned.

           *       *       *       *       *       *       *

  (i) Authorization of Appropriations.--
          (1) In general.--There is authorized to be 
        appropriated [for fiscal years beginning on or after 
        October 1, 1997,] such sums as are necessary to carry 
        out this section.

           *       *       *       *       *       *       *

          (3) Reception and representation authority.--The 
        Secretary is hereby granted reception and 
        representation authority limited specifically to the 
        events at the National Summit. The Secretary shall use 
        any private contributions accepted in connection with 
        the National Summit prior to using funds appropriated 
        for purposes of the National Summit pursuant to this 
        paragraph.

           *       *       *       *       *       *       *

  (k) Contracts.--The Secretary may enter into contracts to 
carry out the Secretary's responsibilities under this section. 
The Secretary [shall enter into a contract on a sole-source 
basis] may enter into a contract on a sole-source basis to 
ensure the timely completion of the National Summit [in fiscal 
year 1998].

           *       *       *       *       *       *       *


                  TITLE IV--PLAN TERMINATION INSURANCE

            Subtitle A--Pension Benefit Guaranty Corporation

           *       *       *       *       *       *       *


                             PREMIUM RATES

  Sec. 4006. (a)(1)  * * *

           *       *       *       *       *       *       *

  (3)(A) Except as provided in subparagraph (C), the annual 
premium rate payable to the corporation by all plans for basic 
benefits guaranteed under this title is--
          (i) in the case of a single-employer plan, other than 
        a new single-employer plan (as defined in subparagraph 
        (F)) maintained by a small employer (as so defined), 
        for plan years beginning after December 31, 1990, an 
        amount equal to the sum of $19 plus the additional 
        premium (if any) determined under subparagraph (E) for 
        each individual who is a participant in such plan 
        during the plan year;

           *       *       *       *       *       *       *

          (iii) in the case of a multiemployer plan, for plan 
        years beginning after the date of enactment of the 
        Multiemployer Pension Plan Amendments Act of 1980, an 
        amount equal to--
                  (I)  * * *

           *       *       *       *       *       *       *

                  (IV) $2.60 for each participant, for the 
                ninth plan year, and for each succeeding plan 
                year[.], and
          (iv) in the case of a new single-employer plan (as 
        defined in subparagraph (F)) maintained by a small 
        employer (as so defined) for the plan year, $5 for each 
        individual who is a participant in such plan during the 
        plan year.

           *       *       *       *       *       *       *

  (E)(i) [The] Except as provided in subparagraph (G), the 
additional premium determined under this subparagraph with 
respect to any plan for any plan year shall be an amount equal 
to the amount determined under clause (ii) divided by the 
number of participants in such plan as of the close of the 
preceding plan year.

           *       *       *       *       *       *       *

  (iii) For purposes of clause (ii)--
          (I)  * * *

           *       *       *       *       *       *       *

  [(IV) In the case of plan years beginning after December 31, 
2001, and before January 1, 2004, subclause (II) shall be 
applied by substituting `100 percent' for `85 percent'. 
Subclause (III) shall be applied for such years without regard 
to the preceding sentence. Any reference to this clause by any 
other sections or subsections shall be treated as a reference 
to this clause without regard to this subclause.]
          (IV) In the case of plan years beginning after 
        December 31, 2001, and before January 1, 2004, 
        subclause (II) shall be applied by substituting ``100 
        percent'' for ``85 percent'' and by substituting ``115 
        percent'' for ``100 percent''. Subclause (III) shall be 
        applied for such years without regard to the preceding 
        sentence. Any reference to this clause or this 
        subparagraph by any other sections or subsections 
        (other than sections 4005, 4010, 4011 and 4043) shall 
        be treated as a reference to this clause or this 
        subparagraph without regard to this subclause.

           *       *       *       *       *       *       *

  (v) In the case of a new defined benefit plan, the amount 
determined under clause (ii) for any plan year shall be an 
amount equal to the product of the amount determined under 
clause (ii) and the applicable percentage. For purposes of this 
clause, the term ``applicable percentage'' means--
          (I) 0 percent, for the first plan year.
          (II) 20 percent, for the second plan year.
          (III) 40 percent, for the third plan year.
          (IV) 60 percent, for the fourth plan year.
          (V) 80 percent, for the fifth plan year.
For purposes of this clause, a defined benefit plan (as defined 
in section 3(35)) maintained by a contributing sponsor shall be 
treated as a new defined benefit plan for each of its first 5 
plan years if, during the 36-month period ending on the date of 
the adoption of the plan, the sponsor and each member of any 
controlled group including the sponsor (or any predecessor of 
either) did not establish or maintain a plan to which this 
title applies with respect to which benefits were accrued for 
substantially the same employees as are in the new plan.
  (F)(i) For purposes of this paragraph, a single-employer plan 
maintained by a contributing sponsor shall be treated as a new 
single-employer plan for each of its first 5 plan years if, 
during the 36-month period ending on the date of the adoption 
of such plan, the sponsor or any member of such sponsor's 
controlled group (or any predecessor of either) did not 
establish or maintain a plan to which this title applies with 
respect to which benefits were accrued for substantially the 
same employees as are in the new single-employer plan.
  (ii)(I) For purposes of this paragraph, the term ``small 
employer'' means an employer which on the first day of any plan 
year has, in aggregation with all members of the controlled 
group of such employer, 100 or fewer employees.
  (II) In the case of a plan maintained by two or more 
contributing sponsors that are not part of the same controlled 
group, the employees of all contributing sponsors and 
controlled groups of such sponsors shall be aggregated for 
purposes of determining whether any contributing sponsor is a 
small employer.
  (G)(i) In the case of an employer who has 25 or fewer 
employees on the first day of the plan year, the additional 
premium determined under subparagraph (E) for each participant 
shall not exceed $5 multiplied by the number of participants in 
the plan as of the close of the preceding plan year.
  (ii) For purposes of clause (i), whether an employer has 25 
or fewer employees on the first day of the plan year is 
determined taking into consideration all of the employees of 
all members of the contributing sponsor's controlled group. In 
the case of a plan maintained by two or more contributing 
sponsors, the employees of all contributing sponsors and their 
controlled groups shall be aggregated for purposes of 
determining whether the 25-or-fewer-employees limitation has 
been satisfied.

           *       *       *       *       *       *       *


                          PAYMENT OF PREMIUMS

  Sec. 4007. (a)  * * *
  (b)(1) If any basic benefit premium is not paid when it is 
due the corporation is authorized to assess a late payment 
charge of not more than 100 percent of the premium payment 
which was not timely paid. The preceding sentence shall not 
apply to any payment of premium made within 60 days after the 
date on which payment is due, if before such date, the 
designated payor obtains a waiver from the corporation based 
upon a showing of substantial hardship arising from the timely 
payment of the premium. The corporation is authorized to grant 
a waiver under this subsection upon application made by the 
designated payor, but the corporation may not grant a waiver if 
it appears that the designated payor will be unable to pay the 
premium within 60 days after the date on which it is due. If 
any premium is not paid by the last date prescribed for a 
payment, interest on the amount of such premium at the rate 
imposed under section 6601(a) of the Internal Revenue Code of 
1986 (relating to interest on underpayment, nonpayment, or 
extensions of time for payment of tax) shall be paid for the 
period from such last date to the date paid.
  (2) The corporation is authorized to pay, subject to 
regulations prescribed by the corporation, interest on the 
amount of any overpayment of premium refunded to a designated 
payor. Interest under this paragraph shall be calculated at the 
same rate and in the same manner as interest is calculated for 
underpayments under paragraph (1).

           *       *       *       *       *       *       *


                          Subtitle B--Coverage

                             PLANS COVERED

  Sec. 4021. (a)  * * *
  (b) This section does not apply to any plan--
          (1)  * * *

           *       *       *       *       *       *       *

          (9) which is established and maintained exclusively 
        for substantial owners [as defined in section 
        4022(b)(6)];

           *       *       *       *       *       *       *

  (d) For purposes of subsection (b)(9), the term ``substantial 
owner'' means an individual who, at any time during the 60-
month period ending on the date the determination is being 
made--
          (1) owns the entire interest in an unincorporated 
        trade or business,
          (2) in the case of a partnership, is a partner who 
        owns, directly or indirectly, more than 10 percent of 
        either the capital interest or the profits interest in 
        such partnership, or
          (3) in the case of a corporation, owns, directly or 
        indirectly, more than 10 percent in value of either the 
        voting stock of that corporation or all the stock of 
        that corporation.
For purposes of paragraph (3), the constructive ownership rules 
of section 1563(e) of the Internal Revenue Code of 1986 shall 
apply (determined without regard to section 1563(e)(3)(C)).

                SINGLE-EMPLOYER PLAN BENEFITS GUARANTEED

  Sec. 4022. (a)  * * *
  (b)(1)  * * *

           *       *       *       *       *       *       *

  [(5)(A) For purposes of this title, the term ``substantial 
owner'' means an individual who--
          [(i) owns the entire interest in an unincorporated 
        trade or business,
          [(ii) in the case of a partnership, is a partner who 
        owns, directly or indirectly, more than 10 percent of 
        either the capital interest or the profits interest in 
        such partnership, or
          [(iii) in the case of a corporation, owns, directly 
        or indirectly, more than 10 percent in value of either 
        the voting stock of that corporation or all the stock 
        of that corporation.
For purposes of clause (iii) the constructive ownership rules 
of section 1563(e) of the Internal Revenue Code of 1986 shall 
apply (determined without regard to section 1563(e)(3)(C)). For 
purposes of this title an individual is also treated as a 
substantial owner with respect to a plan if, at any time within 
the 60 months preceding the date on which the determination is 
made, he was a substantial owner under the plan.
  [(B) In the case of a participant in a plan under which 
benefits have not been increased by reason of any plan 
amendments and who is covered by the plan as a substantial 
owner, the amount of benefits guaranteed under this section 
shall not exceed the product of--
          [(i) a fraction (not to exceed 1) the numerator of 
        which is the number of years the substantial owner was 
        an active participant in the plan, and the denominator 
        of which is 30, and
          [(ii) the amount of the substantial owner's monthly 
        benefits guaranteed under subsection (a) (as limited 
        under paragraph (3) of this subsection).
  [(C) In the case of a participant in a plan, other than a 
plan described in subparagraph (B), who is covered by the plan 
as a substantial owner, the amount of the benefit guaranteed 
under this section shall, under regulations prescribed by the 
corporation, treat each benefit increase attributable to a plan 
amendment as if it were provided under a new plan. The benefits 
guaranteed under this section with respect to all such 
amendments shall not exceed the amount which would be 
determined under subparagraph (B) if subparagraph (B) applied.]
  (5)(A) For purposes of this paragraph, the term ``majority 
owner'' means an individual who, at any time during the 60-
month period ending on the date the determination is being 
made--
          (i) owns the entire interest in an unincorporated 
        trade or business,
          (ii) in the case of a partnership, is a partner who 
        owns, directly or indirectly, 50 percent or more of 
        either the capital interest or the profits interest in 
        such partnership, or
          (iii) in the case of a corporation, owns, directly or 
        indirectly, 50 percent or more in value of either the 
        voting stock of that corporation or all the stock of 
        that corporation.
For purposes of clause (iii), the constructive ownership rules 
of section 1563(e) of the Internal Revenue Code of 1986 shall 
apply (determined without regard to section 1563(e)(3)(C)).
  (B) In the case of a participant who is a majority owner, the 
amount of benefits guaranteed under this section shall equal 
the product of--
          (i) a fraction (not to exceed 1) the numerator of 
        which is the number of years from the later of the 
        effective date or the adoption date of the plan to the 
        termination date, and the denominator of which is 10, 
        and
          (ii) the amount of benefits that would be guaranteed 
        under this section if the participant were not a 
        majority owner.

           *       *       *       *       *       *       *


                        Subtitle C--Terminations

           *       *       *       *       *       *       *


                           REPORTABLE EVENTS

  Sec. 4043. (a)  * * *

           *       *       *       *       *       *       *

  (c) For purposes of this section a reportable event occurs--
          (1)  * * *

           *       *       *       *       *       *       *

          (7) when there is a distribution under the plan to a 
        participant who is a substantial owner as defined in 
        section [4022(b)(6)] 4021(d) if--
                  (A)  * * *

           *       *       *       *       *       *       *


                          ALLOCATION OF ASSETS

  Sec. 4044. (a) In the case of the termination of a single-
employer plan, the plan administrator shall allocate the assets 
of the plan (available to provide benefits) among the 
participants and beneficiaries of the plan in the following 
order:
          (1)  * * *

           *       *       *       *       *       *       *

          (4) Fourth--
                  (A)  * * *
                  (B) to the additional benefits (if any) which 
                would be determined under subparagraph (A) if 
                section [4022(b)(5)] 4022(b)(5)(B) did not 
                apply.

           *       *       *       *       *       *       *

  (b) For purposes of subsection (a)--
          (1)  * * *
          (2) If the assets available for allocation under any 
        paragraph of subsection (a) (other than paragraphs 
        [(5)] (4), (5), and (6)) are insufficient to satisfy in 
        full the benefits of all individuals which are 
        described in that paragraph, the assets shall be 
        allocated pro rata among such individuals on the basis 
        of the present value (as of the termination date) of 
        their respective benefits described in that paragraph.
          (3) If assets available for allocation under 
        paragraph (4) of subsection (a) are insufficient to 
        satisfy in full the benefits of all individuals who are 
        described in that paragraph, the assets shall be 
        allocated first to benefits described in subparagraph 
        (A) of that paragraph. Any remaining assets shall then 
        be allocated to benefits described in subparagraph (B) 
        of that paragraph. If assets allocated to such 
        subparagraph (B) are insufficient to satisfy in full 
        the benefits described in that subparagraph, the assets 
        shall be allocated pro rata among individuals on the 
        basis of the present value (as of the termination date) 
        of their respective benefits described in that 
        subparagraph.
          [(3)] (4) This paragraph applies if the assets 
        available for allocation under paragraph (5) of 
        subsection (a) are not sufficient to satisfy in full 
        the benefits of individuals described in that 
        paragraph.
                  (A)  * * *

           *       *       *       *       *       *       *

          [(4)] (5) If the Secretary of the Treasury determines 
        that the allocation made pursuant to this section 
        (without regard to this paragraph) results in 
        discrimination prohibited by section 401(a)(4) of the 
        Internal Revenue Code of 1986 then, if required to 
        prevent the disqualification of the plan (or any trust 
        under the plan) under section 401(a) or 403(a) of such 
        Code, the assets allocated under subsections (a)(4)(B), 
        (a)(5), and (a)(6) shall be reallocated to the extent 
        necessary to avoid such discrimination.
          [(5)] (6) The term ``mandatory contributions'' means 
        amounts contributed to the plan by a participant which 
        are required as a condition of employment, as a 
        condition of participation in such plan, or as a 
        condition of obtaining benefits under the plan 
        attributable to employer contributions. For this 
        purpose, the total amount of mandatory contributions of 
        a participant is the amount of such contributions 
        reduced (but not below zero) by the sum of the amounts 
        paid or distributed to him under the plan before its 
        termination.
          [(6)] (7) A plan may establish subclasses and 
        categories within the classes described in paragraphs 
        (1) through (6) of subsection (a) in accordance with 
        regulations prescribed by the corporation.

           *       *       *       *       *       *       *


SEC. 4050. MISSING PARTICIPANTS.

  (a)  * * *

           *       *       *       *       *       *       *

  (c) Multiemployer Plans.--The corporation shall prescribe 
rules similar to the rules in subsection (a) for multiemployer 
plans covered by this title that terminate under section 4041A.
  (d) Plans Not Otherwise Subject to Title.--
          (1) Transfer to corporation.--The plan administrator 
        of a plan described in paragraph (4) may elect to 
        transfer a missing participant's benefits to the 
        corporation upon termination of the plan.
          (2) Information to the corporation.--To the extent 
        provided in regulations, the plan administrator of a 
        plan described in paragraph (4) shall, upon termination 
        of the plan, provide the corporation information with 
        respect to benefits of a missing participant if the 
        plan transfers such benefits--
                  (A) to the corporation, or
                  (B) to an entity other than the corporation 
                or a plan described in paragraph (4)(B)(ii).
          (3) Payment by the corporation.--If benefits of a 
        missing participant were transferred to the corporation 
        under paragraph (1), the corporation shall, upon 
        location of the participant or beneficiary, pay to the 
        participant or beneficiary the amount transferred (or 
        the appropriate survivor benefit) either--
                  (A) in a single sum (plus interest), or
                  (B) in such other form as is specified in 
                regulations of the corporation.
          (4) Plans described.--A plan is described in this 
        paragraph if--
                  (A) the plan is a pension plan (within the 
                meaning of section 3(2))--
                          (i) to which the provisions of this 
                        section do not apply (without regard to 
                        this subsection), and
                          (ii) which is not a plan described in 
                        paragraphs (2) through (11) of section 
                        4021(b), and
                  (B) at the time the assets are to be 
                distributed upon termination, the plan--
                          (i) has missing participants, and
                          (ii) has not provided for the 
                        transfer of assets to pay the benefits 
                        of all missing participants to another 
                        pension plan (within the meaning of 
                        section 3(2)).
          (5) Certain provisions not to apply.--Subsections 
        (a)(1) and (a)(3) shall not apply to a plan described 
        in paragraph (4).
  [(c)] (e) Regulatory Authority.--The corporation shall 
prescribe such regulations as are necessary to carry out the 
purposes of this section, including rules relating to what will 
be considered a diligent search, the amount payable to the 
corporation, and the amount to be paid by the corporation.

           *       *       *       *       *       *       *

                              ----------                              


                     INTERNAL REVENUE CODE OF 1986

                        Subtitle A--Income Taxes

CHAPTER 1--NORMAL TAXES AND SURTAXES

           *       *       *       *       *       *       *


               Subchapter D--Deferred Compensation, Etc.

        PART I--PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.

                        Subpart A--General Rule

SEC. 401. QUALIFIED PENSION, PROFIT-SHARING, AND STOCK BONUS PLANS.

  (a) Requirements for qualification.--A trust created or 
organized in the United States and forming part of a stock 
bonus, pension, or profit-sharing plan of an employer for the 
exclusive benefit of his employees or their beneficiaries shall 
constitute a qualified trust under this section--
          (1)  * * *

           *       *       *       *       *       *       *

          (28) Additional Requirements Relating to Employee 
        Stock Ownership Plans.--
                  (A)  * * *
                  (B) Diversification of Investments.--
                          (i)  * * *
                          (v) Exception.--This subparagraph 
                        shall not apply to an applicable 
                        defined contribution plan (as defined 
                        in paragraph (35)(B)(i)).

           *       *       *       *       *       *       *

          (35) Limitations on restrictions under applicable 
        defined contribution plans on investments in employer 
        securities.--
                  (A) In general.--A trust forming a part of an 
                applicable defined contribution plan shall not 
                constitute a qualified trust under this 
                subsection if the plan acquires or holds any 
                employer securities with respect to which there 
                is any restriction on divestment by a 
                participant or beneficiary on or after the date 
                on which the participant has completed 3 years 
                of participation (as defined in section 
                411(b)(4)) under the plan or (if the plan so 
                provides) 3 years of service (as defined in 
                section 411(a)(5)) with the employer.
                  (B) Definitions.--For purposes of 
                subparagraph (A)--
                          (i) Applicable defined contribution 
                        plan.--The term ``applicable defined 
                        contribution plan'' means any defined 
                        contribution plan, except that such 
                        term does not include an employee stock 
                        ownership plan (as defined in section 
                        4975(e)(7)) unless there are any 
                        contributions to such plan (or earnings 
                        thereunder) held within such plan that 
                        are subject to subsections (k)(3) or 
                        (m)(2).
                          (ii) Restriction on divestment.--The 
                        term ``restriction on divestment'' 
                        includes--
                                  (I) any failure to offer at 
                                least 3 diversified investment 
                                options in which a participant 
                                or beneficiary may direct the 
                                proceeds from the divestment of 
                                employer securities, and
                                  (II) any restriction on the 
                                ability of a participant or 
                                beneficiary to choose from all 
                                otherwise available investment 
                                options in which such proceeds 
                                may be so directed.

           *       *       *       *       *       *       *


                Subtitle D--Miscellaneous Excise Taxes

           *       *       *       *       *       *       *


               CHAPTER 43--QUALIFIED PENSION, ETC., PLANS

           *       *       *       *       *       *       *


SEC. 4975. TAX ON PROHIBITED TRANSACTIONS.

  (a)  * * *

           *       *       *       *       *       *       *

  (d) Exemptions.--Except as provided in subsection (f)(6), the 
prohibitions provided in subsection (c) shall not apply to--
          (1)  * * *

           *       *       *       *       *       *       *

          (14) any transaction required or permitted under part 
        1 of subtitle E of title IV or section 4223 of the 
        Employee Retirement Income Security Act of 1974, but 
        this paragraph shall not apply with respect to the 
        application of subsection (c)(1) (E) or (F); [or]
          (15) a merger of multiemployer plans, or the transfer 
        of assets or liabilities between multiemployer plans, 
        determined by the Pension Benefit Guaranty Corporation 
        to meet the requirements of section 4231 of such Act, 
        but this paragraph shall not apply with respect to the 
        application of subsection (c)(1) (E) or (F)[.]; or
          (16) any transaction described in subsection 
        (f)(7)(A) in connection with the provision of 
        investment advice described in subsection (e)(3)(B), in 
        any case in which--
                  (A) the investment of assets of the plan is 
                subject to the direction of plan participants 
                or beneficiaries,
                  (B) the advice is provided to the plan or a 
                participant or beneficiary of the plan by a 
                fiduciary adviser in connection with any sale, 
                acquisition, or holding of a security or other 
                property for purposes of investment of plan 
                assets, and
                  (C) the requirements of subsection (f)(7)(B) 
                are met in connection with the provision of the 
                advice.

           *       *       *       *       *       *       *

  (f) Other Definitions and Special Rules.--For purposes of 
this section--
          (1)  * * *

           *       *       *       *       *       *       *

          (7) Provisions relating to investment advice provided 
        by fiduciary advisers.--
                  (A) Transactions allowable in connection with 
                investment advice provided by fiduciary 
                advisers.--The transactions referred to in 
                subsection (d)(16), in connection with the 
                provision of investment advice by a fiduciary 
                adviser, are the following:
                          (i) the provision of the advice to 
                        the plan, participant, or beneficiary;
                          (ii) the sale, acquisition, or 
                        holding of a security or other property 
                        (including any lending of money or 
                        other extension of credit associated 
                        with the sale, acquisition, or holding 
                        of a security or other property) 
                        pursuant to the advice; and
                          (iii) the direct or indirect receipt 
                        of fees or other compensation by the 
                        fiduciary adviser or an affiliate 
                        thereof (or any employee, agent, or 
                        registered representative of the 
                        fiduciary adviser or affiliate) in 
                        connection with the provision of the 
                        advice or in connection with a sale, 
                        acquisition, or holding of a security 
                        or other property pursuant to the 
                        advice.
                  (B) Requirements relating to provision of 
                investment advice by fiduciary advisers.--The 
                requirements of this subparagraph (referred to 
                in subsection (d)(16)(C)) are met in connection 
                with the provision of investment advice 
                referred to in subsection (e)(3)(B), provided 
                to a plan or a participant or beneficiary of a 
                plan by a fiduciary adviser with respect to the 
                plan in connection with any sale, acquisition, 
                or holding of a security or other property for 
                purposes of investment of amounts held by the 
                plan, if--
                          (i) in the case of the initial 
                        provision of the advice with regard to 
                        the security or other property by the 
                        fiduciary adviser to the plan, 
                        participant, or beneficiary, the 
                        fiduciary adviser provides to the 
                        recipient of the advice, at a time 
                        reasonably contemporaneous with the 
                        initial provision of the advice, a 
                        written notification (which may consist 
                        of notification by means of electronic 
                        communication)--
                                  (I) of all fees or other 
                                compensation relating to the 
                                advice that the fiduciary 
                                adviser or any affiliate 
                                thereof is to receive 
                                (including compensation 
                                provided by any third party) in 
                                connection with the provision 
                                of the advice or in connection 
                                with the sale, acquisition, or 
                                holding of the security or 
                                other property,
                                  (II) of any material 
                                affiliation or contractual 
                                relationship of the fiduciary 
                                adviser or affiliates thereof 
                                in the security or other 
                                property,
                                  (III) of any limitation 
                                placed on the scope of the 
                                investment advice to be 
                                provided by the fiduciary 
                                adviser with respect to any 
                                such sale, acquisition, or 
                                holding of a security or other 
                                property,
                                  (IV) of the types of services 
                                provided by the fiduciary 
                                advisor in connection with the 
                                provision of investment advice 
                                by the fiduciary adviser, and
                                  (V) that the adviser is 
                                acting as a fiduciary of the 
                                plan in connection with the 
                                provision of the advice,
                          (ii) the fiduciary adviser provides 
                        appropriate disclosure, in connection 
                        with the sale, acquisition, or holding 
                        of the security or other property, in 
                        accordance with all applicable 
                        securities laws,
                          (iii) the sale, acquisition, or 
                        holding occurs solely at the direction 
                        of the recipient of the advice,
                          (iv) the compensation received by the 
                        fiduciary adviser and affiliates 
                        thereof in connection with the sale, 
                        acquisition, or holding of the security 
                        or other property is reasonable, and
                          (v) the terms of the sale, 
                        acquisition, or holding of the security 
                        or other property are at least as 
                        favorable to the plan as an arm's 
                        length transaction would be.
                  (C) Standards for presentation of 
                information.--The notification required to be 
                provided to participants and beneficiaries 
                under subparagraph (B)(i) shall be written in a 
                clear and conspicuous manner and in a manner 
                calculated to be understood by the average plan 
                participant and shall be sufficiently accurate 
                and comprehensive to reasonably apprise such 
                participants and beneficiaries of the 
                information required to be provided in the 
                notification.
                  (D) Exemption conditioned on making required 
                information available annually, on request, and 
                in the event of material change.--The 
                requirements of subparagraph (B)(i) shall be 
                deemed not to have been met in connection with 
                the initial or any subsequent provision of 
                advice described in subparagraph (B) to the 
                plan, participant, or beneficiary if, at any 
                time during the provision of advisory services 
                to the plan, participant, or beneficiary, the 
                fiduciary adviser fails to maintain the 
                information described in subclauses (I) through 
                (IV) of subparagraph (B)(i) in currently 
                accurate form and in the manner required by 
                subparagraph (C), or fails--
                          (i) to provide, without charge, such 
                        currently accurate information to the 
                        recipient of the advice no less than 
                        annually,
                          (ii) to make such currently accurate 
                        information available, upon request and 
                        without charge, to the recipient of the 
                        advice, or
                          (iii) in the event of a material 
                        change to the information described in 
                        subclauses (I) through (IV) of 
                        subparagraph (B)(i), to provide, 
                        without charge, such currently accurate 
                        information to the recipient of the 
                        advice at a time reasonably 
                        contemporaneous to the material change 
                        in information.
                  (E) Maintenance for 6 years of evidence of 
                compliance.--A fiduciary adviser referred to in 
                subparagraph (B) who has provided advice 
                referred to in such subparagraph shall, for a 
                period of not less than 6 years after the 
                provision of the advice, maintain any records 
                necessary for determining whether the 
                requirements of the preceding provisions of 
                this paragraph and of subsection (d)(16) have 
                been met. A transaction prohibited under 
                subsection (c)(1) shall not be considered to 
                have occurred solely because the records are 
                lost or destroyed prior to the end of the 6-
                year period due to circumstances beyond the 
                control of the fiduciary adviser.
                  (F) Exemption for plan sponsor and certain 
                other fiduciaries.--A plan sponsor or other 
                person who is a fiduciary (other than a 
                fiduciary adviser) shall not be treated as 
                failing to meet the requirements of this 
                section solely by reason of the provision of 
                investment advice referred to in subsection 
                (e)(3)(B) (or solely by reason of contracting 
                for or otherwise arranging for the provision of 
                the advice), if--
                          (i) the advice is provided by a 
                        fiduciary adviser pursuant to an 
                        arrangement between the plan sponsor or 
                        other fiduciary and the fiduciary 
                        adviser for the provision by the 
                        fiduciary adviser of investment advice 
                        referred to in such section,
                          (ii) the terms of the arrangement 
                        require compliance by the fiduciary 
                        adviser with the requirements of this 
                        paragraph,
                          (iii) the terms of the arrangement 
                        include a written acknowledgment by the 
                        fiduciary adviser that the fiduciary 
                        adviser is a fiduciary of the plan with 
                        respect to the provision of the advice, 
                        and
                          (iv) the requirements of part 4 of 
                        subtitle B of title I of the Employee 
                        Retirement Income Security Act of 1974 
                        are met in connection with the 
                        provision of such advice.
                  (G) Definitions.--For purposes of this 
                paragraph and subsection (d)(16)--
                          (i) Fiduciary adviser.--The term 
                        ``fiduciary adviser'' means, with 
                        respect to a plan, a person who is a 
                        fiduciary of the plan by reason of the 
                        provision of investment advice by the 
                        person to the plan or to a participant 
                        or beneficiary and who is--
                                  (I) registered as an 
                                investment adviser under the 
                                Investment Advisers Act of 1940 
                                (15 U.S.C. 80b-1 et seq.) or 
                                under the laws of the State in 
                                which the fiduciary maintains 
                                its principal office and place 
                                of business,
                                  (II) a bank or similar 
                                financial institution referred 
                                to in subsection (d)(4),
                                  (III) an insurance company 
                                qualified to do business under 
                                the laws of a State,
                                  (IV) a person registered as a 
                                broker or dealer under the 
                                Securities Exchange Act of 1934 
                                (15 U.S.C. 78a et seq.),
                                  (V) an affiliate of a person 
                                described in any of subclauses 
                                (I) through (IV), or
                                  (VI) an employee, agent, or 
                                registered representative of a 
                                person described in any of 
                                subclauses (I) through (V) who 
                                satisfies the requirements of 
                                applicable insurance, banking, 
                                and securities laws relating to 
                                the provision of the advice.
                          (ii) Affiliate.--The term 
                        ``affiliate'' of another entity means 
                        an affiliated person of the entity (as 
                        defined in section 2(a)(3) of the 
                        Investment Company Act of 1940 (15 
                        U.S.C. 80a-2(a)(3))).
                          (iii) Registered representative.--The 
                        term ``registered representative'' of 
                        another entity means a person described 
                        in section 3(a)(18) of the Securities 
                        Exchange Act of 1934 (15 U.S.C. 
                        78c(a)(18)) (substituting the entity 
                        for the broker or dealer referred to in 
                        such section) or a person described in 
                        section 202(a)(17) of the Investment 
                        Advisers Act of 1940 (15 U.S.C. 80b-
                        2(a)(17)) (substituting the entity for 
                        the investment adviser referred to in 
                        such section).

           *       *       *       *       *       *       *

                              ----------                              


           SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934

            DIRECTORS, OFFICERS, AND PRINCIPAL STOCKHOLDERS

  Sec. 16. (a)  * * *

           *       *       *       *       *       *       *

  (h) Insider Trades During Pension Plan Suspension Periods 
Prohibited.--
          (1) Prohibition.--It shall be unlawful for any such 
        beneficial owner, director, or officer of an issuer, 
        directly or indirectly, to purchase (or otherwise 
        acquire) or sell (or otherwise transfer) any equity 
        security of such issuer (other than an exempted 
        security), during any pension plan suspension period 
        with respect to such equity security.
          (2) Remedy.--Any profit realized by such beneficial 
        owner, director, or officer from any purchase (or other 
        acquisition) or sale (or other transfer) in violation 
        of this subsection shall inure to and be recoverable by 
        the issuer irrespective of any intention on the part of 
        such beneficial owner, director, or officer in entering 
        into the transaction.
          (3) Rulemaking permitted.--The Commission may issue 
        rules to clarify the application of this subsection, to 
        ensure adequate notice to all persons affected by this 
        subsection, and to prevent evasion thereof.
          (4) Definitions.--For purposes of this subsection--
                  (A) Pension plan suspension period.--The term 
                ``pension plan suspension period'' means, with 
                respect to an equity security, any period 
                during which the ability of a participant or 
                beneficiary under an applicable individual 
                account plan maintained by the issuer to direct 
                the investment of assets in his or her 
                individual account away from such equity 
                security is suspended by the issuer or a 
                fiduciary of the plan. Such term does not 
                include any limitation or restriction that may 
                govern the frequency of transfers between 
                investment vehicles to the extent such 
                limitation and restriction is disclosed to 
                participants and beneficiaries through the 
                summary plan description or materials 
                describing specific investment alternatives 
                under the plan.
                  (B) Applicable individual account plan.--The 
                term ``applicable individual account plan'' has 
                the meaning provided such term in section 3(42) 
                of the Employee Retirement Income Security Act 
                of 1974.
                              ----------                              


          SECTION 769 OF THE RETIREMENT PROTECTION ACT OF 1994

SEC. 769. SPECIAL FUNDING RULES FOR CERTAIN PLANS.

  (a)  * * *

           *       *       *       *       *       *       *

  (c) [Transition] Rules for Certain Plans.--
          (1) In general.--In the case of a plan that--
                  (A)  * * *

           *       *       *       *       *       *       *

                  (C) is sponsored by a company that is engaged 
                primarily in the interurban or interstate 
                passenger bus service,
        the [transition] rules described in paragraph (2) shall 
        apply [for any plan year beginning after 1996 and 
        before 2010].
          [(2) Transition rules.--The transition rules 
        described in this paragraph are as follows:
                  [(A) For purposes of section 412(l)(9)(A) of 
                the Internal Revenue Code of 1986 and section 
                302(d)(9)(A) of the Employee Retirement Income 
                Security Act of 1974--
                          [(i) the funded current liability 
                        percentage for any plan year beginning 
                        after 1996 and before 2005 shall be 
                        treated as not less than 90 percent if 
                        for such plan year the funded current 
                        liability percentage is at least 85 
                        percent, and
                          [(ii) the funded current liability 
                        percentage for any plan year beginning 
                        after 2004 and before 2010 shall be 
                        treated as not less than 90 percent if 
                        for such plan year the funded current 
                        liability percentage satisfies the 
                        minimum percentage determined according 
                        to the following table:

      

                  [In the case of a     The minimum percentage is:
                   plan year beginning
                   in:
                    [2005.............     86 percent
                    [2006.............     87 percent
                    [2007.............     88 percent
                    [2008.............     89 percent
                    [2009 and              90 percent.
                   thereafter.


                  [(B) Sections 412(c)(7)(E)(i)(I) of such Code 
                and 302(c)(7)(E)(i)(I) of such Act shall be 
                applied--
                          [(i) by substituting ``85 percent'' 
                        for ``90 percent'' for plan years 
                        beginning after 1996 and before 2005, 
                        and
                          [(ii) by substituting the minimum 
                        percentage specified in the table 
                        contained in subparagraph (A)(ii) for 
                        ``90 percent'' for plan years beginning 
                        after 2004 and before 2010.
                  [(C) In the event the funded current 
                liability percentage of a plan is less than 85 
                percent for any plan year beginning after 1996 
                and before 2005, the transition rules under 
                subparagraphs (A) and (B) shall continue to 
                apply to the plan if contributions for such a 
                plan year are made to the plan in an amount 
                equal to the lesser of--
                          [(i) the amount necessary to result 
                        in a funded current liability 
                        percentage of 85 percent, or
                          [(ii) the greater of--
                                  [(I) 2 percent of the plan's 
                                current liability as of the 
                                beginning of such plan year, or
                                  [(II) the amount necessary to 
                                result in a funded current 
                                liability percentage of 80 
                                percent as of the end of such 
                                plan year.
                For the plan year beginning in 2005 and for 
                each of the 3 succeeding plan years, the 
                transition rules under subparagraphs (A) and 
                (B) shall continue to apply to the plan for 
                such plan year only if contributions to the 
                plan for such plan year equal at least the 
                expected increase in current liability due to 
                benefits accruing during such plan year.]
          (2) Special rules.--The rules described in this 
        paragraph are as follows:
                  (A) For purposes of section 302(d)(9)(A) of 
                the Employee Retirement Income Security Act of 
                1974, the funded current liability percentage 
                for any plan year shall be treated as not less 
                than 90 percent.
                  (B) For purposes of section 302(e) of the 
                Employee Retirement Income Security Act of 
                1974, the funded current liability percentage 
                for any plan year shall be treated as not less 
                than 100 percent.
                  (C) For purposes of determining unfunded 
                vested benefits under section 
                4006(a)(3)(E)(iii) of the Employee Retirement 
                Income Security Act of 1974, the mortality 
                table shall be the mortality table used by the 
                plan.

           *       *       *       *       *       *       *


                             MINORITY VIEWS

                              introduction

    Employees at Enron and Global Crossing suffered a 
devastating blow when their life savings were decimated by the 
misconduct and excess of company officials, and by pension 
trustees who knew the company was in peril, but failed to act.
    The Enron scandal has exposed weaknesses in our pension 
laws that allow runaway executive pensions, lock employees out 
of decisions affecting their retirement nest eggs, and fail to 
hold pension plan officials accountable when there is 
wrongdoing. We believe Congress must take urgent steps to 
restore confidence in the pension system for millions of 
Americans who are asking themselves, can this happen again?
    Unfortunately, the Majority's bill fails to include basic 
reforms that are necessary to ensure that there are no more 
Enrons, despite repeated efforts by Democratic members to 
strengthen employee protections. The Wall Street Journal aptly 
summarized the committee markup:

          The Republican-led panel rejected a dozen Democratic 
        amendments that would have offered workers greater 
        protections and imposed stricter rules on employer-
        sponsors of 401(k) and other defined-contribution 
        plans.\1\
---------------------------------------------------------------------------
    \1\ ``House Committee Approves Plan Aimed at Safeguarding 
Pensions,'' Wall Street Journal; March 21, 2002.

    Enron employees lost over $1 billion dollars of their 
retirement nest eggs through a quagmire of conflicts of 
interest and self-dealing by company officials. Rather than 
slamming the door on rules that allow executives to dump 
company stock and gain excessive corporate perks, this bill:
          (1) fails to give employees a choice between 
        investment advice offered by an independent advisor or 
        advice offered by an advisor with potential conflicts 
        of interest that could further jeopardize employee 
        retirement savings;
          (2) fails to allow employees to fully and timely 
        diversify their company matched stock contributions;
          (3) fails to allow employees to participate in 
        safeguarding their pensions through participation on 
        pension trustee boards;
          (4) fails to alert employees when company officials 
        are dumping stock; and
          (5) fails to hold plan officials accountable if they 
        violate the law.

                               BACKGROUND

    Enron Corporation (Enron), a Houston based company was 
formed in 1985. Initially, Enron profited by buying electricity 
from generators and selling it to the public utilities. 
However, with the deregulation of electrical power markets, 
Enron expanded into an energy broker, trading electricity and 
other commodities. By the early 1990s, Enron became a major 
energy trading company. Enron entered contracts with both the 
buyer and the seller and made money on the undisclosed 
difference between the selling price and the buying price of 
various commodities.
    In addition to its commodities business, Enron has another 
division called Assets and Investments that involves building 
power plants around the world, operating them, selling off 
pieces of them, investing in debt and equity securities of 
energy and communications-related businesses, and similar 
transactions. As its services became more complex and its stock 
soared, Enron created various partnerships. It appears that 
Enron used these partnerships to routinely shift debts off its 
books, resulting in gross over-valuing of Enron stock.
    By mid-2001, Enron's complex partnerships were beginning to 
unravel. On October 16, 2001, Enron announced a $618 million 
loss for the third quarter and the value of its stock plunged. 
On October 31, 2001, Enron announced an SEC investigation of 
the company. Just a few days later on November 8, 2001, Enron 
announced that it had overstated earnings over the past four 
years by $586 million and that it was responsible for up to $3 
billion in obligations to various partnerships. With this 
announcement, the bottom fell out of the value of Enron's 
stock. On December 2, 2001, Enron filed Chapter 11 bankruptcy 
in federal court in New York.
    Enron encouraged employees to invest in the company, both 
generally and through their pension plans, and matched their 
401(k) savings plan contributions with company stock. The 
savings plan was the employee's primary retirement plan as 
Enron had previously converted its once sound defined benefit 
plan, first to a floor-offset plan tied to employer stock, and 
then to a cash balanced plan. As of December 31, 2001, 
approximately 60% of the assets in Enron's 401(k) plan were 
invested in Enron stock. Nearly 90% of the Enron stock in the 
savings plan resulted from employee contributions. The fact 
that Enron's stock represented a majority of total plan assets 
is not unusual. A recent survey found that the concentration of 
employer stock in a large number of 401(k) plans is greater 
than 60% of total plan assets (appendix attachment 1). Many 
prominent economist and academics contend that where the 
company matches employee contributions with employer stock, 
employees are implicitly encouraged to, and tend to, invest 
more of their own contributions in company stock.
    Enron matched 50% of employee's contributions with Enron 
stock. Employees were required to hold those matched 
contributions in the form of company stock until age 50. Under 
Enron's plan, only upon reaching age 50 could employees 
diversify their shares and invest in one or more of the other 
investment options. Once again, Enron's policy was similar to 
policies in other companies. A recent Hewitt Associates survey 
shows that 56% of the 401(k) plans that match employee 
contributions with employer stock require participants to reach 
a certain age--typically 50 or 55, or according to ESOP rules--
before they can sell. Of the firms that match with employer 
stock, only 15% allow their employees to sell the stock 
immediately, while 19% do not permit diversification at any 
time.
    In addition, Enron, through pension plan materials, emails, 
and employee meetings, encouraged employees to invest as much 
of their pension monies as possible in company stock. At a 
December 1999, all-employee meeting, Cindy Olson, vice 
president for human resources and a pension plan fiduciary, was 
asked by an employee if 100% of employee contributions should 
be invested in employer stock. Ms. Olson's answer was 
``absolutely.'' Furthermore, in emails dated August 14 and 
August 21, 2001, Enron CEO Key Lay wrote to employees,

         * * * I want to assure you that I have never felt 
        better about the prospects for the company * * * One of 
        my top priorities will be to restore a significant 
        amount of the stock value we have lost as soon as 
        possible. Our performance has never been stronger * * 
        *'' and ``* * *one of my highest priorities is to 
        restore investor confidence in Enron. This should 
        result in a significantly higher stock price * * * I 
        ask your continued help and support as we work together 
        to achieve this goal.

    From October 26 to November 13, 2001, Enron barred any 
retirement plan transactions by employees; effectively 
requiring employees to hold on to Enron stock while it was 
losing value. Enron stock fell from $15.40 at the start of the 
lockdown to $9.98 at the end. Envon contends that it was simply 
changing plan administrators and the restrictions had nothing 
to do with the fact that Enron stock was falling. However, 
Enron materials and emails about the lockdown were unclear as 
to exactly when the lockdown would begin and end. Employees 
asked Enron pension plan administrators to delay the lockdown, 
but the company declined to do so.

                       Lessons Learned From Enron

    The Enron Scandal has brought to light practices common 
among pension plans that must be addressed as part of any real 
reform. Some of these issues include:
    Failure of Savings Plans to Permit Diversification.--Many 
companies that make their pension contributions in employer 
stock place onerous restrictions on the ability of employees to 
rescue their savings if the company is failing, or diversify 
these contributions, once vested, into other plan investment 
options. According to the Employee Benefit Research Institute 
(EBRI), less than 3% of all 401(k) pension plans hold employer 
stock, but they are many of the largest U.S. companies; 
covering 6% of all pension plan participants and 10% of all 
pension plan assets. According to Hewitt Associates, a survey 
of Fortune 500 companies revealed that approximately 85% of 
employers with employer stock in their pension plans restrict 
employee ability to invest freely. A survey reported by the 
Congressional Research Service shows many 401(k) plans 
dangerously over loaded with investments in company stock; such 
as Proctor and Gamble, Home Depot, and Pfizer, whose company 
stock accounts for over 80% of their 401(k) plan. Several of 
these companies do not provide a guarantee defined benefit 
pension plan to their employees, leaving them completely 
vulnerable to the company's solvency and profitability.
    Failure of Pension Plans to Give Employees a Voice in Their 
Financial Future.--Enron stacked its pension board with 
management executives to act as fiduciaries to the pension 
plan. These top-level executives--who has no training or 
experience as pension fiduciaries--took no action to act 
prudently or in the interests of the pension plan participants. 
Key fiduciaries often missed pension plan administrative 
committee meetings, never considered the prudence of employer 
stock as a plan investment, ignored warnings of company 
financial problems, and never obtained timely legal advice to 
protect the pension plan participants. These trustees 
consistently failed to take actions necessary to protect the 
irreplaceable life savings of Enron participants.
    Failure of Plans to Provide Honest Information and 
Advice.--Research shows that generally, companies: fail to 
provide employees with access to meaningful and understandable 
independent financial advice; fail to warn employees of the 
risks of holding excessive employer stock; fail to clearly 
notify employee's of periods in which they are limited from 
changing investment options; and fail to inform employees of 
the employer's financial status and that of its stock.
    Failure to Alert Employees When Executives are Dumping 
Company Stock.--Companies do not alert employees when top 
company officials are dumping company stock. Company executives 
at Enron and Global Crossing were dumping hundreds of millions 
of dollars of company stock as their companies were spiraling 
into financial disaster. Additionally, company executives were 
advising and recommending that employees continue to hold and 
buy additional company stock in their pension plan, while those 
same executives were selling their own stock. (appendix 
attachment 2)
    Failure of Current Pension Rules to Provide Fairness 
Between Executives and Rank-and-File Employees.--While 
thousands of Enron and Global Crossing employees were laid 
off--and in the case of Enron, locked out of their savings 
plans as the company was failing--company executives were 
protected by a variety of corporate perks and company funded 
executive pension compensation arrangements. Loopholes in the 
Employee Retirement Income Security Act (ERISA) and the 
Internal Revenue Code have permitted companies to maneuver to 
safeguard executive pensions and perks, while regular employees 
are left to fend for themselves if the company fails.
    Failure of Current Pension Laws to Provide Relief for 
Employees Who Lost Their Nest Egg.--As a result of likely 
corporate misconduct by Enron executives and its auditors, over 
5,000 hard-working employees have lost their jobs and many of 
the approximately 20,000 employees, retirees, and their 
families have lost the bulk of their retirement savings. 
Because of ERISA's flawed remedy provisions and bankruptcy law 
weaknesses, Enron pension plan participants stand last in line 
to recover $1 billion in plan losses--and are left with a 
bankrupt company that has only $85 million in fiduciary 
insurance.

                       THE COMMITTEE PASSED BILL

Bad Investment Advice for Employees

    The bill reported out of Committee allows for self-
interested investment advice to be provided to employees 
without assuring an independent alternative. For the first time 
since ERISA was enacted almost three decades ago, investment 
firms would be permitted to serve both as principal financial 
advisor and investment managers to employees. As Jane Bryant 
Quinn aptly stated in a March 4, 2002, Newseek column: ``Post-
Enron, how can anyone even think of creating such conflicts of 
interest? You might as well turn the system over to an ice-
skating judge.'' (referring to the ice-skating judging 
impartially scandal at the 2002 Winter Olympics.) (appendix 
attachment 3)
    The Committee bill eliminates current ERISA rules that 
prohibit conflicts of interest that protect plan participants 
from self-interested investment advisors. The bill would permit 
investment advisers to recommend their firm's products and earn 
additional fees on recommended products, upon disclosure of 
their financial conflict. It does not require access to 
independent advice or assure any independent oversight. The 
proposal would actually take ERISA backward and jeopardize the 
retirement savings of millions of workers and their families if 
financial service salespersons market investment products that 
may be good for their bottom line, but not necessarily the 
retirement savings of working families.
    During our hearings, no Enron employees or representatives 
in any way suggested that if only they had access to any form 
of investment advice would their retirement security have been 
protected. Rather, the testimony of Enron employees and others 
demonstrated how employees were provided misleading advice by 
company officials to continue to hold and buy additional Enron 
employer stock; which advice they ultimately relied upon to 
their detriment. The lesson of Enron is not to open the door to 
self-interested players, but rather to tighten the rules to 
ensure that individuals are not misinformed or misled by 
individuals with financial conflicts of interest and offer them 
independent advice. The Enron debacle painfully demonstrates 
how accountants were unable to offer unvarnished advice to one 
of their largest clients for their other financial services and 
how Enron management officials were unable to protect their 
interests of pension plan participants because if conflicted 
with their corporate interests.
    The issue of investment advice is subject to a variety of 
misnomers. First, there is a subtle difference between what is 
investment education and investment advice. Employers are free 
to provide investment education with few restrictions and over 
90% do so. Investment advice, which more strongly involves 
specific investment recommendations, is also readily provided 
by a growing number of employers.
    The financial services industry has, by and large, been 
providing either investment education and/or advice to pension 
plans and participants. There is a fairly well developed market 
of independent advisors and most of the large financial 
investment firms have contracted with independent firms to 
provide advice. The only group that remains restricted is those 
companies who wish to provide specific investment advice on 
their own products in which they receive varying financial 
benefit depending on the investment selected.
    According to a 2001 study conducted by Mercer of plan 
sponsors found that 33% of firms offer investment advice to 
plan participants. The study also found that 93% of employers 
held meetings to educate and communicate with employees on 
retirement issues.
    Those employers that have declined to make investment 
education or advice available have stated two reasons for their 
decision: either excessive cost or fear of liability if 
imprudent advice is provided. An Institute of Management & 
Administrative (IOMA) study of 401(k) plan sponsors found that 
89% of employers/sponsors did not provide advice because they 
were concerned with fidicuiary liability.
    Additional concerns have been raised about the 
qualification of investment advisors under the Committee 
reported bill. Currently, ERISA limits investment advisors to 
federally or state regulated advisors or broker/dealers. The 
Committee reported bill would weaken investment advisor 
qualification requirements and permit non-licensed individuals 
to provide investment advice. The Inspector General (IG) to the 
Department of Labor, in a letter dated March 18, 2002, to 
Congressman George Miller, stated that, ``H.R. 3762 does not 
contain provisions relative to fiduciary adviser 
qualifications.'' The IG further stated, * * *  DOL and plan 
participants would be in a better position to monitor and 
oversee the advice given, if minimum standards for 
qualification and disclosure were established * * * ''\2\
---------------------------------------------------------------------------
    \2\ March 18, 2002, Letter from Office of Inspector General, U.S. 
Department of Labor to Representative George Miller.
---------------------------------------------------------------------------
    Since last year's debate on legislation to expand 
investment advice, the Department of Labor has issued an 
advisory opinion (known as Sun America) which would allow 
employers to provide full-service management within their 
401(k) plans, as long as there is an independent safeguard to 
protect participants from self-dealing by financial advisors.
    Under the Sun America opinion, companies can contract with 
financial service firms to provide two different types of 
investment advice services--either automatic enrollment in a 
professionally managed investment account that is invested 
according to a participant's needs and preferences or 
discretionary investment advice on investment options.
    Under both types of services, if the advice provider 
provides advice on its proprietary funds, then it would be 
required to contract with an independent investment firm to 
program its investment recommendations. Sun America provides a 
new avenue for firms that would otherwise be subject to 
conflicts of interest to provide investment advice. It has been 
publicly reported that a number of large financial service 
firms are considering using the DOL opinion to provide 
investment advice.
    We have long been concerned about opening ERISA to 
conflicts without guaranties of independence, and post-Enron, 
there is greater reason for caution. Conflicted investment 
advice would not have protected Enron's employees and their 
retirement savings. Most investment advisors do not provide 
advice on employer stock and the Committee bill specifically 
permits them to limit the scope of their advice. Post-Enron we 
should do everything possible to ensure that workers' 401(k) 
money is subject to the highest standards of care, not the 
lowest.

The Committee Bill Fails to Give Employees Control of Their Nest Egg

    The Committee bill continues to lock employees into company 
matched stock for 3 years after the contributions have been 
made, and does not permit billions of dollars in existing 
company stock currently owned by employees to be fully divested 
until 2007. At a time when markets move at lightning speed, and 
company fortunes--like Enron, Global Crossing, and myriad other 
companies--can spiral downward in months, such a limitation is 
unconscionable and continues to leave employees at risk of 
losing all of their retirement savings.
    The Republican proposal creates an unworkable morass of 
inadequate employee protections. The Committee bill would 
permit companies to restrict employee diversification of 
existing contributions for 5 years, and limit diversification 
of future contributions to an annual 3-year diversification 
rule (new contributions made in 2002 would not be eligible for 
diversification until 2005, contributions made in 2003 would be 
eligible in 2006, and so on). Companies will continue to be 
able to tie the hands of employees by subjecting them to 
different and administratively complex rules depending on when 
contributions are made. According to the most recent Bureau of 
Labor Statistics data on employee tenure, average job tenure 
for all employees 16 and over is 3.5 years, and for employees 
ages 25-34 is 2.6 years. For millions of employees, the 
Republican proposal will not change their ability to protect 
their individual savings. By comparison, the Democratic 
Substitute would allow all company-matched stock to be 
diversified after one year of employment.
    The Democratic Substitute would significantly revamp ERISA. 
The goal of ERISA is to protect the interests of participants 
and their beneficiaries in employee benefit plan. However, when 
ERISA was enacted, 401(k) plans did not exist, and changes to 
ERISA have not kept pace with trends in retirement plans. Under 
current law, plan sponsors can require participants to hold on 
to employer stock contributed by the employer until retirement 
age. The Democratic Substitute allows employees to have 
immediate control over their own contributions to their 401(k) 
plans and requires that employees be able to control their 
employer contribution after one year of service in the plan.
    Enron, like many companies, matched employee contributions 
with company stock. Despite the rapid decline in the value of 
Enron stock, employees were prohibited from protecting their 
own retirement security by an outright prohibition on selling 
company contributions until reaching age 50. Enron is not the 
only company compelling employees to invest pension savings in 
their own company--or bar them for transferring shares out, or 
punishing them if they do. At K-Mart and other companies, if 
you sell company stock in your 401(k) plan before a certain 
age, the company withholds its employer contribution to your 
plan for six months. There should be no such restriction or 
penalty.
    As previously stated, a recent Hewitt Associates survey 
shows that 56% of 401(k) plans that match employee 
contributions with employer stock require participants to reach 
a certain age--typically 50 or 55, or according to ESOP rules--
before they can sell. Of the firms that match employee 
contributions with employer stock, only 15% allow their 
employees to sell the stock immediately, while 19% do not 
permit diversification at any time. Employees' retirement nest 
eggs should not be threatened by arbitrary restrictions on 
their ability to sell company stock contributed by the 
employer. Employees must be given the opportunity to diversify 
their investments--and where necessary--rescue their savings 
when the company's fortunes turn bad.
    According to Department of Labor data reported in 1997, 29% 
of all employees currently have immediate full vesting. A 
recent survey done by Hewitt Associates of 25% of Fortune 500 
companies regarding the vesting requirements for employer 
contributions in 401(k) plans found that 33% of plans had 
immediate vesting. Further, only 3% of plans tied 
diversification rights to vesting periods. A number of notable 
companies state that they do not restrict employee ability to 
diversify, including Abbott Laboratories, Chevron, Coca Cola, 
McDonald's, Pfizer and Proctor and Gamble.
    Professor Shlomo Bernartzi of UCLA, who has done extensive 
research on the issue of company stock as a 401(k) investment, 
has stated, ``Since you already have all your human capital 
invested in the company, my rule of thumb is, don't invest any 
of your plan assets in the company.''
    The Democratic Substitute would provide employees total 
control over the investment of money that they earned and 
contributed to their retirement plans, and that their employer 
contributed to their plans as part of their compensation, after 
one year of service. This change is critical to help avoid the 
problem we just witnessed with Enron. It will provide employees 
the ability to rescue their nest eggs, as well as diversify and 
manage their investments consistent with the advice of 
financial professionals and the goals of their families. These 
investments are the employee's money. They should be the ones 
who decide where and how to invest them.

The Committee Bill Fails to Require Companies to Provide Notice to 
        Employees Who Are Dumping Company Stock

    The Committee's hearings confirmed that Enron company 
executives--with inside information about the real financial 
condition of the company--were dumping millions of dollars in 
company stock while employees were left in the dark and locked 
out of their savings. Similarly, it appears that executives at 
Global Crossing were also acting on insider knowledge for their 
exclusive benefit--and to the detriment of rank-and-file 
employees--when they sold company stock valued at $1.3 billion 
and cashed out executive pension plans. Current SEC rules 
permit inside stock sale disclosures to lag anywhere from 40 
days to a year, depending on the nature of the disclosure. Such 
information is not readily available to the public. Ken Lay, 
Enron's CEO, trading almost daily, sold Enron stock 350 times 
and received $101.3 million. Between early 1999 and July 2001, 
Lay sold 1.8 million Enron shares back to the company and was 
able to avoid prompt disclosure--none of the 350 transactions 
required timely notice.
    The Committee bill fails to address this issue. 
Furthermore, the Majority defeated a Democratic Amendment that 
requires insiders to immediately report stock sales to the 
pension trustees. The trustees would then be required to notify 
plan participants of any stock sale over $100,000 (or series of 
sales over $100,000) within only 3 business days. The amendment 
was designed to complement new SEC rules being developed that 
would require immediate disclosure to investors.

The Committee Bill Fails to Provide Employees a Voice in Their Own 
        Retirement Savings

    At Enron there was a catastrophic failure by its pension 
plan trustees to protect the irreplaceable life savings of 
thousands of Enron employees, despite conclusive evidence that 
a number of the trustees were aware or should have been aware 
that the company was covering up serious financial problems. 
The actions of Cindy Olson, an Enron executive appointed to sit 
on the pension plan administrative committee, is a clear case 
of the inherent conflict of interest where the executive is 
charged with presiding as a pension trustee--with legal 
responsibility to act solely in the plan interests--while at 
the same time serving the company with the sole focus of 
promoting the company in the most favorable light and 
maximizing the corporate bottom line.
    Ms. Olson testified before this Committee that she had 
personal knowledge that there was significant risk and trouble 
in holding Enron stock through the receipt of Sherron Watkins' 
memorandum in August of 2001.\3\ She also knew that there was a 
huge concentration of investment of Enron stock, both in the 
voluntary contributions from the employees and obviously in the 
employer match, in the pension plan. Ms. Olson, acting as both 
a fiduciary and an executive, made a decision not to inform 
other plan fiduciaries so that they might consider warning the 
employees or otherwise educating them. Ms. Olson further 
testified that while she chose not to educate employees, she 
was divesting herself of shares that she held in her own 
personal account. Ms. Olson also missed four trustee meetings 
during the critical period in which Enron stock was in 
freefall.
---------------------------------------------------------------------------
    \3\ Sherron Watkins memo, distributed anonymously to employees at 
Enron in August of 2001, warned that Enron ``will implode in a wave of 
accounting scandals.
---------------------------------------------------------------------------
    Another trustee, Todd Lindholm, missed at least eight 
trustee meetings in 2001. Mr. Lindholm signed the approval 
sheets for Enron's LJMI partnership, one of a number of 
investment schemes to hid Enron debts.\4\
---------------------------------------------------------------------------
    \4\ From minutes of Enron Administrative Committee Meetings 
conducted in 2001.
---------------------------------------------------------------------------
    Another trustee, Paula H. Reicker, worked in investment 
relations where she regularly fielded concerns by investors 
over Enron's tangled financial statements, as well as concerns 
about Andrew Fastow's conflicted relationships as an Enron 
employee and investor in Enron partnerships.\5\
---------------------------------------------------------------------------
    \5\ Vinson and Elkins Interviews; confidential interviews with 
selected Enron officials, 2001.
---------------------------------------------------------------------------
    Pensions have changed dramatically in recent years. We are 
no longer operating in a defined benefit pension plan world 
where employers make all or most of the contributions to a 
pooled fund of monies. Now, most workers are in defined 
contribution plans, such as 401(k) plans, where they contribute 
their own salaries to their pension plans. It is simply 
unconscionable that we permit employers 100% control over 
monies that are generally 67% or more of employee salary 
deferrals. The Committee bill does nothing to let employees 
decide what to do with their monies or protect themselves if 
financial circumstances change. In the case of Enron, we saw 
that company executives were unable to separate the workers' 
interests from those of the company. It is common practice 
among state and local pensions, multi-employer union pensions, 
non-profit organization pensions, and international pensions 
for employees to be involved in their own funds. For example 6 
out of 9 members on the board of Ohio's Public Employees 
Retirement System, 3 out of 6 members on the board of Texas' 
Employee Retirement System, and 6 out of 13 members on the 
board of California's Public Employee Retirement System are 
elected by active and retired employees/participants in the 
respective plans. It is time to bring ERISA into the 21st 
century. If 401(k)'s put the risk of retirement saving on 
employees, then employees should have the ability to manage and 
make decisions about their own investments.
    The Republican bill keeps the status quo on pension boards 
by denying employees a voice on pension boards. By contrast, 
the Democratic Substitute would require employee 
representatives on pension boards.
    Dr. Teresa Ghilarducci, an economics professor at the 
University of Notre Dame, testified before this Committee and 
urged Committee members to require that employees have 
representatives on boards that oversee retirement plans. Dr. 
Ghilarducci testified that ``the United States is the only 
industrialized nation that does not require employee 
representation on a pension board.'' In pension plans that 
permit employees to direct control of their pension 
investments, the Democratic Substitute would require the plan 
to include an equal number of employer and employee trustees to 
oversee the plan. Despite research showing that plans with 
employee trustees experience a higher rate of savings and 
investment by employees, have more active involvement by 
employees in investment decisions, and that such representation 
helps solve inherent conflict of interests, many plans today 
have no employee trustees overseeing employees' pension funds.
    If equal representation of employee and employer trustees 
had been on the Enron board, it is likely that the board would 
have carried out ERISA requirements to manage the plans solely 
for the benefit of the employees and losses may have been 
mitigated. The Democratic Substitute is narrowly tailored to 
defined contribution plans that hold employee monies. It is 
patently unfair that these plans, which primarily contain 
deferred worker salaries, are 100% controlled by employers. 
It's the workers money, they should have at least an equal say 
in how it is invested and managed.

The Committee Bill Continues Special Treatment for Company Executives 
        Pensions at the Expense of Rank-and File Employees.

    Enron and Global Crossing have brought attention to serious 
inequities in pension rules for executives and rank and file 
employees. As Enron began to implode in a wave of accounting 
scandals, company executives, such as CEO Ken Lay, were able to 
not only cash out millions in company stock, but also protected 
themselves through a number of executives type 401(k) plans 
that are not subject to attack by Enron's numerous general 
creditors. Enron agreed to pay Mr. Lay a total of $1.25 million 
in life insurance premiums on a $12 million dollar policy. 
These agreements--commonly referred to as ``split-dollar'' 
policies--are used to give executives tax-free pensions 
benefits, and place such benefits beyond the reach of 
creditors. Mr. Lay also received a guaranteed return of 12% on 
a special deferred compensation plan, and a pension estimated 
at approximately $482,000 a year for life. By contrast, 
employees must stand in line behind even the company's general 
creditors to get any recovery of their hard earned savings--a 
prospect that is quite unlikely. Neither ERISA nor the Internal 
Revenue Code intended to permit executives to protect their 
financial security through questionably funded executive 
pension plan arrangements. As President Bush has frequently 
states: ``what's good for the top floor should be good for the 
shop floor.'' The Committee bill does nothing to address this 
great inequity.

The Committee Bill Fails to Hold Company Officials Responsible for 
        Misconduct and Fails to Enhance Plan Accountability

    The Majority bill fails to include a number of critical 
accountability provisions that are designed to prohibit future 
scandals and ensure that employers don't skirt responsibility 
for wrongdoing.
    Because of weak remedy provisions in current law, Enron 
employees who had their life savings decimated will likely 
never recover their funds in court. Employees who get cheated 
out of their retirement funds as a result of misconduct by 
company officials should be able to make them pay for their 
misdeeds.
    Over 50 million workers currently participate in 401(k) 
type and similar plans, representing almost $2 trillion worth 
of investments. However, current law does not provide adequate 
redress for the workers at Enron or Global Crossing, and 
millions of others like them who lose their retirement savings. 
Current pension law interpretations severely limit the ability 
of employees to collect damages resulting from the misconduct 
of company officials. Current law primarily limits liability to 
fiduciaries that fail to act solely in the interests of the 
plan participants. Fiduciaries are those persons formally named 
to oversee the plan, or any individual who has control over 
plan assets. Non-fiduciaries who participate in a violation of 
the law have limited liability.
    Additionally, liability is currently limited by the courts 
to equitable relief, which means employees can only receive the 
pension they were wrongfully denied. Many courts will not award 
aggrieved employees any interest for the years they did not 
timely received their benefits. Furthermore, many courts will 
not award them attorneys' fees and court costs. And no court 
will award them recovery for other monetary losses, such as the 
value of foreclosed homes or loans incurred to make ends meet.
    The Democratic Substitute clarifies ERISA remedies to that 
in cases of a breach of duty by a fiduciary, or breach by a 
knowing participant, the plan or employees may be made whole. 
Additionally, the Democratic Substitute requires that employers 
may not require participants to sign waivers of statutory 
pension rights as part of a termination or severance agreement. 
ERISA was enacted to protect workers and retirees. When 
workers' retirement funds are misused, Congress must ensure 
that workers will get timely and adequate redress.
    Additional critical accountability provisions offered by 
Democrats, but rejected by the Majority include:
    Direct Reporting to the Department of Labor in Cases of 
Fraud or Abuse.--For over a decade the Inspector General of the 
Labor Department has recommended Urgent Legislative Action that 
would require pension plan accountants to report suspected 
pension fraud or abuse directly to the DOL. The current system 
provides the Secretary of Labor with no information regarding 
irregularities by pension plans and leads to after-the-fact 
enforcement actions by the Secretary where only a fraction of 
the money is recovered.\6\
---------------------------------------------------------------------------
    \6\ March 18, 2002, Letter from Office of Inspector General, U.S. 
Department of Labor to Representative George Miller.
---------------------------------------------------------------------------
    Assurance That Plan Fiduciaries Have Insurance or be 
Bonded.--Such coverage is critical to cover financial losses 
due to breach of fiduciary duty as determined by the Secretary 
of Labor. It is a significant weakness of ERISA that it does 
not require pension plan fiduciaries to obtain insurance.
    Strong Prohibitions Against Providing False and Misleading 
Information to Plan Participants.--Employees should be 
protected against false and misleading information provided by 
pension plan officials. The Committee bill requires quarterly 
statements, but does nothing to prevent executives from 
misleading employees, nor does it require executives to notify 
employees of critical decisions affecting the performance of 
the company.
    Prohibition on Waivers of Legal Rights.--Employers should 
not be permitted to skirt responsibility for wrongdoing by 
coercing employees to sign waivers giving away their federal 
pension rights. It is alleged that Enron required employees to 
waiver their rights to file ERISA claims in order to receive 
severance benefits. Recently, their have been a spate of court 
cases in which companies attempted to deny workers their 
statutory legal rights through boilerplant contract waiver 
language. ERISA never intends these types of abrogation of 
statutory rights and they should be explicitly prohibited.
    Improved Labor Department Assistance.--The Department of 
Labor shall establish an office of the Participant Advocate to 
monitor potential abuses of employee pension plan rights and 
assist pension plan participants in preventing loss of 
retirement savings. It has been a longstanding concern that the 
Department of Labor generally does not act proactively or 
prophylactically to assist employees in protecting their 
pensions and other employee benefits or to prevent pension plan 
abuses. Future Enrons could be averted if the Department were 
more active and zealous in protecting the interests of pension 
plan participants and their families.

                                appendix

Item #1

                                            EMPLOYER STOCK IN SELECTED DEFINED CONTRIBUTION RETIREMENT PLANS
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                    Company                                         Closing stock price at the end of
                                                  stock as a                               --------------------------------------------------
                                                  percentage                                                                                     Total
                  Company name                    of defined   Does company have a defined                                                    percentage
                                                 contribution         benefit plan?          1996    1997    1998     1999     2000    2001     change
                                                    plan's
                                                    assets
--------------------------------------------------------------------------------------------------------------------------------------------------------
Procter & Gamble...............................        91.5    No.........................   52.89   77.97   89.47    107.72   76.60   78.75       48.9
Anheuser-Busch.................................        81.6    Yes........................   17.49   19.99   31.34     34.54   44.81   45.03      157.5
Coca-Cola......................................        81.0    Yes........................   49.60   64.23   65.14     57.03   60.40   47.15       -4.9
Abbott Laboratories............................        80.0    Yes........................    23.6   31.10   46.57     34.54   47.41   55.54      140.8
General Electric...............................        77.4    Yes........................   16.29   24.08   33.62     51.20   46.94   39.72      143.8
William Wrigley, Jr............................        75.0    Yes........................   24.97   37.21   42.86     40.21   47.35   51.18      105.0
Pfizer.........................................        74.8    Yes........................   13.28   24.09   41.16     31.51   45.43   39.72      199.1
Home Depot.....................................        72.0    No.........................   25.78   29.68   54.09     83.93   47.08   49.41       91.7
BB&T; (Branch Banking & Trust)..................        69.6    Yes........................   15.68   30.16   37.72     25.53   36.33   36.11      130.3
Texas Instruments..............................        69.0    Yes........................    7.77   11.03   21.27     48.19   47.27   27.98      260.1
Duke Energy....................................        67.9    Yes........................   18.06   23.70   29.14     23.28   41.94   38.98      115.8
Target.........................................        66.0    Yes........................    9.29   16.51   26.63     36.42   31.97   40.99      341.2
Textron........................................        65.0    Yes........................   43.67   57.04   72.08     74.09   45.20   41.13       -5.8
Reliant Energy.................................        64.5    Yes........................   14.75   20.38   27.19     19.50   41.44   26.15       77.3
Kroger.........................................        63.6    Yes........................   11.09   17.94   27.28     16.00   24.63   24.60      121.8
Southern Company...............................        62.8    Yes........................    1.83    6.38   10.91      6.69   17.78   25.02    1,267.2
ExxonMobil.....................................        62.0    Yes........................   22.67   29.50   34.50     40.08   43.47   37.84       66.9
Household International........................        61.4    Yes........................   29.02   41.34   37.20     35.49   53.96   57.72       98.9
Sherwin-Williams...............................        59.1    Yes........................   26.65   25.56   27.63     19.74   25.59   27.36        2.7
BellSouth......................................        57.9    Yes........................   19.11   27.02   23.80     45.10   39.99   37.96       98.6
Merck..........................................        57.5    Yes........................   35.70   49.96   71.70     64.20   91.56   58.10       62.7
Williams.......................................        57.0    Yes........................   16.97   13.01   29.16     29.13   39.11   25.32       49.2
McDonald's.....................................        56.8    No.........................   22.47   23.66   38.19     39.87   33.78   26.47       17.8
TXU (Texas Utilities)..........................        56.3    Yes........................   28.15   31.55   38.37     29.56   40.71   45.95       63.2
Dell Computer..................................        53.4    No.........................    1.66   10.50   36.59     51.00   17.44   27.18    1,537.3
Ford Motor Company.............................         5.2    Yes........................   30.78   47.09   57.24     51.86   22.29   15.62     -49.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
 1. Stock prices have been adjusted for stock splits and dividends. From 12/31/96 to 12/31/01, the total return on the S&P; 500 was 65.7%.
 Source: Company filings of S.E.C. Forms 10-K and 11-K and company spokespersons for retirement plans; finance.yahoo.com for stock prices.

Item #2

Selling High

    J. Clifford Baxter was one of 13 Enron executives or 
directors who sold shares worth more than $30 million between 
October 1998 and November 2001.

------------------------------------------------------------------------
                                                                 Stock
            Eron official               Title (most recent)    proceeds
                                                              (millions)
------------------------------------------------------------------------
Lou Pai.............................  Chairman, Enron             $353.7
                                       Accelerator.
Kenneth Lay.........................  Chairman..............       101.3
Rebecca Mark-Jusbasche..............  Director..............        79.5
Ken Harrison........................  CEO, Portland General         75.2
                                       Electric *.
Kenneth Rice........................  Chairman, Enron               72.8
                                       Broadband.
Jeffrey Skilling....................  Director (former CEO).        66.9
Robert Belfer.......................  Director..............        51.1
Mark Frevert........................  Chairman, Enron               50.3
                                       Wholesale.
Stanley Horton......................  Chairman, Enron               45.5
                                       Transportation.
Joseph Sutton.......................  Vice Chairman.........        40.1
J. Clifford Baxter..................  Vice Chairman.........        35.2
Joseph Hirko........................  ECO, Enron Broadband..        35.2
Andrew Fastow.......................  Chief financial               30.5
                                       officer.
------------------------------------------------------------------------
* Subsidiary.
Source: Court documents.

Item #3

                     [From Newsweek, Mar. 4, 2002]

                     Help! I'm Scared For My 401(k)

    Enron shows that employees need investment advice. It's 
time for companies to step up.

                         (By Jane Bryant Quinn)

    At the end of the day, what would really help employees 
manage their 401(k)s? Good investment advice, that's what. Your 
company may distribute an educational booklet that shows pretty 
pie charts and defines words like ``diversification.'' But 
after all the reading is done--after you decide whether you're 
a conservative, moderate or aggressive investor--two questions 
remain: How should you invest your money and should you own 
company stock?
    Post-Enron, a laser beam has been turned on America's 
investing skills. What we see isn't pretty. By now the public 
has read a ton of stories about diversification, yet most 
people still don't get it. Even if you own mutual funds, you 
aren't diversified if they focus on a single industry (remember 
when we were all tech, all the time?).
    Most corporations think that your 401(k) is entirely your 
problem. If you make mistakes--well, better luck in the next 
life. But this life is not a dress rehearsal. Most top 
executives get company-paid advice to help them manage their 
multimillions. Why shouldn't the grunts with just 401(k)s get a 
few suggestions, too?
    At some companies, they do. These include such well-known 
names as Merck, Xerox, 3M, Hewlett-Packard, Continental 
Airlines, Mattel and H&R; Block. But plenty of CEOs won't even 
consider offering advice because they're afraid you'll sue them 
if it doesn't work out. Congress could end that worry by making 
just one little change in the pension law. But when lawmakers 
tinker, trouble starts. They're going for bigger changes that 
help the industry, not you.
    I'll get to that in a moment. First let me tell you about 
the galloping movement by good guys to offer 401(k) advice. 
Three online advisory firms dominate this business today: 
Financial Engines in Palo Alto, Calif., offered directly by 600 
employee plans; mPower in San Francisco, with 250 plans, and 
Morningstar's ClearFuture in Chicago, with 400 plans. All three 
serve many other corporate and public-sector plans through 
financial institutions such as the Vanguard Group (Financial 
Engines) and T. Rowe Price (ClearFuture).
    Computerized online advisers work roughly--very roughly--
the same way. Employees log on to the Web site, supply some 
personal and financial information, then enter the income 
they're aiming for when they retire. The program advises them 
on which specific funds in their 401(k) will serve them best.
    Markets, of course, never work out the way we think. 
Financial Engines was the first to explain this kind of risk to 
investors. Its program looks at your savings rate, your 
investments and the years you have left to work. Then it 
calculates your odds of retiring with the income you want. You 
might be startled to learn that your plan has only a 40 percent 
chance of success--or, badly, a 60 percent chance of falling 
short. To reduce that risk, you'd have to save more and invest 
it less aggressively. Alternatively, you might decide to plan 
on a lower income at 65.
    mPower takes the same approach, although it's not as clear 
about explaining risk. ClearFuture shows you 21 possible mixes 
of stocks and bonds, aggressive to conservative. It picks funds 
from your 401(k) to match the level of risk you choose.
    I ran two simple all-stock portfolios through all three 
systems. Each made different suggestions--no surprise there. 
But all were diversified, which is the first step to wisdom. 
Two added bonds. All showed that my sample employee wasn't 
saving enough.
    I also checked how the three programs treated a heavy 
investment in your company's stock. mPower usually tells you to 
sell the entire position, because a single stock is always 
riskier than a diversified fund. ClearFuture suggests that you 
put no more than 10 percent of your money there. Financial 
Engines shows you how various positions in company stock raise 
or lower your total amount of investment risk. In their 
separate voices, they're all saying ``beware.''
    By the way, you can also use these services independently. 
Try financialengines.com ($39.95 per quarter for advice); 
mPower on MSN Money ($20 a year), or ClearFuture at 
morningstar.com--$30 today, but starting in early April sold 
only as part of a $109 package.
    By now, you're probably asking the same question I did: 
with so many companies contracting for 401(k) advice, what's 
with those CEOs who say they don't dare in case they're sued? 
It comes down to how they read the pension law. The Department 
of Labor, which administers the law, has issued advisory 
opinions encouraging advice. ``It's perfectly legal,'' says 
former DOL official Olena Berg Lacy. But Washington attorney 
Richard McHugh says that most of his clients won't provide it 
unless the Congress specifically says OK.
    Fine--let's do it. But alas, the industry sees this as its 
chance to chip away at some of the law's consumer-protection 
rules. For example, the DOL has always insisted that companies 
offer independent advice. But the House just passed a contrary 
bill sponsored by Ohio Republican John Boehner. It lets the 
financial-service firms that provide your 401(k)--such as 
brokers, fund groups and insurers--advise you on whether to buy 
their own funds and even which ones.
    Post-Enron, how can anyone even think of creating such 
conflicts of interest? You might as well turn the system over 
to an ice-skating judge. Boehner helped his bill sweep through 
by claiming, wrongly, that current law ``prohibits'' employers 
from hiring 401(k) advisers. The president backs Boehner. Ann 
Combs, DOL's assistant secretary for pension and welfare 
benefits, says she's sure that the conflicts could be managed, 
with disclosure. (Why don't I feel comforted?)
    In the Senate, a bill from New Mexico Democrat Jeff 
Bingaman would end the time-tested rule that employers be 
liable for choosing advisers ``prudently'' and monitoring what 
they do. To encourage more 401(k) advice, he'd create less 
encompassing liability rules. But it's risky to be loosening 
this standard now.
    There's one last reason companies might not want to bother 
with 401(k) advice, says Gerry O'Connor, of the Chicago-based 
consultant Spectrem Group. Employees say they want it but may 
not use it when it's there. Companies have to believe in it and 
promote it to make it work. And you have to step up to the 
plate yourself.

                                   George Miller.
                                   Major R. Owens.
                                   Patsy T. Mink.
                                   Lynn Woolsey.
                                   Ruben Hinojosa.
                                   John F. Tierney.
                                   Loretta Sanchez.
                                   Dennis J. Kucinich.
                                   Rush Holt.
                                   Susan Davis.
                                   Dale E. Kildee.
                                   Donald M. Payne.
                                   Robert E. Andrews.
                                   Bobby Scott.
                                   Lynn N. Rivers.
                                   Ron Kind.
                                   Harold E. Ford, Jr.
                                   Hilda L. Solis.
                                   Betty McCollum.