To amend title I of the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986 to provide a reasonable correction period for certain security and commodity transactions under the prohibited transaction rules.

Summary: Amends the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code to allow a correction period for certain security and commodity transactions under the prohibited transaction rules.

SECTION 1. CORRECTION PERIOD FOR CERTAIN TRANSACTIONS INVOLVING 
              SECURITIES AND COMMODITIES.

    (a) Amendment of Employee Retirement Income Security Act of 1974.--
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) Except as provided in subparagraphs (B) and (C), 
        a transaction described in section 406(a) in connection with 
        the acquisition, holding, or disposition of any security or 
        commodity, if the transaction is corrected before the end of 
        the correction period.
            ``(B) Subparagraph (A) does not apply to any transaction 
        between a plan and a plan sponsor or its affiliates that 
        involves the acquisition or sale of an employer security (as 
        defined in section 407(d)(1)) or the acquisition, sale, or 
        lease of employer real property (as defined in section 
        407(d)(2)).
            ``(C) In the case of any fiduciary or other party in 
        interest (or any other person knowingly participating in such 
        transaction), subparagraph (A) does not apply to any 
        transaction if, at the time the transaction occurs, such 
        fiduciary or party in interest (or other person) knew that the 
        transaction would (without regard to this paragraph) constitute 
        a violation of section 406(a).
            ``(D) For purposes of this paragraph, the term `correction 
        period' means, in connection with a fiduciary or party in 
        interest (or other person knowingly participating in the 
        transaction), the 14-day period beginning on the date on which 
        such fiduciary or party in interest (or other person) 
        discovers, or reasonably should have discovered, that the 
        transaction would (without regard to this paragraph) constitute 
        a violation of section 406(a).
            ``(E) For purposes of this paragraph--
                    ``(i) The term `security' has the meaning given 
                such term by section 475(c)(2) of the Internal Revenue 
                Code of 1986 (without regard to subparagraph (F)(iii) 
                and the last sentence thereof).
                    ``(ii) The term `commodity' has the meaning given 
                such term by section 475(e)(2) of such Code (without 
                regard to subparagraph (D)(iii) thereof).''.
    (b) Amendment of Internal Revenue Code of 1986.--
            (1) In general.--Subsection (d) of section 4975 of the 
        Internal Revenue Code of 1986 (relating to exemptions) is 
        amended by striking ``or'' at the end of paragraph (14), by 
        striking the period at the end of paragraph (15) and inserting 
        ``, or'', and by adding at the end the following new paragraph:
            ``(16) except as provided in subsection (f)(7), a 
        transaction described in subparagraph (A), (B), (C), or (D) of 
        subsection (c)(1) in connection with the acquisition, holding, 
        or disposition of any security or commodity, if the transaction 
        is corrected before the end of the correction period.''.
            (2) Special rules relating to correction period.--
        Subsection (f) of section 4975 of such Code (relating to other 
        definitions and special rules) is amended by adding at the end 
        the following new paragraph:
            ``(7) Correction period.--
                    ``(A) In general.--For purposes of subsection 
                (d)(16), the term `correction period' means the 14-day 
                period beginning on the date on which the disqualified 
                person discovers, or reasonably should have discovered, 
                that the transaction would (without regard to this 
                paragraph and subsection (d)(16)) constitute a 
                prohibited transaction.
                    ``(B) Exceptions.--
                            ``(i) Employer securities.--Subsection 
                        (d)(16) does not apply to any transaction 
                        between a plan and a plan sponsor or its 
                        affiliates that involves the acquisition or 
                        sale of an employer security (as defined in 
                        section 407(d)(1)) or the acquisition, sale, or 
                        lease of employer real property (as defined in 
                        section 407(d)(2)).
                            ``(ii) Knowing prohibited transaction.--In 
                        the case of any disqualified person, subsection 
                        (d)(16) does not apply to a transaction if, at 
                        the time the transaction is entered into, the 
                        disqualified person knew that the transaction 
                        would (without regard to this paragraph) 
                        constitute a prohibited transaction.
                    ``(C) Abatement of tax where there is a 
                correction.--If a transaction is not treated as a 
                prohibited transaction by reason of subsection (d)(16), 
                then no tax under subsection (a) and (b) shall be 
                assessed with respect to such transaction, and if 
                assessed the assessment shall be abated, and if 
                collected shall be credited or refunded as an 
                overpayment.
                    ``(D) Securities and commodities defined.--For 
                purposes of this paragraph and subsection (d)(16)--
                            ``(i) Security.--The term `security' has 
                        the meaning given such term by section 
                        475(c)(2) (without regard to subparagraph 
                        (F)(iii) and the last sentence thereof).
                            ``(ii) Commodity.--The term `commodity' has 
                        the meaning given such term by section 
                        475(e)(2) (without regard to subparagraph 
                        (D)(iii) thereof).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to any transaction which the fiduciary or disqualified person 
discovers, or reasonably should have discovered, after the date of the 
enactment of this Act constitutes a prohibited transaction.