II

105TH CONGRESS

1ST SESSION S. 106

To require that employees who participate in cash or deferred arrangements

are free to determine whether to be invested in employer real property

and employer securities, and if not, to protect such employees by applying

the same prohibited transaction rules that apply to traditional defined

benefit pension plans, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JANUARY 21, 1997

Mrs. BOXER introduced the following bill; which was read twice and referred

to the Committee on Finance

A BILL

To require that employees who participate in cash or deferred

arrangements are free to determine whether to be invested in employer real property and employer securities,

and if not, to protect such employees by applying the

same prohibited transaction rules that apply to traditional defined benefit pension plans, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘401(k) Pension Protec5 tion Act of 1997’’.
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1 SEC. 2. SECTION 401(k) INVESTMENT PROTECTION.

2 (a) LIMITATIONS ON INVESTMENT IN EMPLOYER SE3 CURITIES AND EMPLOYER REAL PROPERTY BY CASH OR

4 DEFERRED ARRANGEMENTS.—Paragraph (3) of section

5 407(d) of the Employee Retirement Income Security Act

6 of 1974 (29 U.S.C. 1107(d)) is amended by adding at the

7 end the following new subparagraph:

8 ‘‘(D) The term ‘eligible individual account plan’

9 does not include that portion of an individual ac10 count plan that consists of elective deferrals (as de11 fined in section 402(g)(3) of the Internal Revenue

12 Code of 1986) pursuant to a qualified cash or de13 ferred arrangement as defined in section 401(k) of

14 the Internal Revenue Code of 1986 (and earnings

15 thereon), if such elective deferrals (or earnings

16 thereon) are required to be invested in qualifying

17 employer securities or qualifying employer real prop18 erty or both pursuant to the documents and instru19 ments governing the plan or at the direction of a

20 person other than the participant (or the partici21 pant’s beneficiary) on whose behalf such elective de22 ferrals are made to the plan. For the purposes of

23 subsection (a), such portion shall be treated as a

24 separate plan. This subparagraph shall not apply to

25 an individual account plan if the fair market value
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1 of the assets of all individual account plans main2 tained by the employer equals not more than 10 per3 cent of the fair market value of the assets of all pen4 sion plans maintained by the employer.’’.

5 (b) EFFECTIVE DATE.—

6 (1) IN GENERAL.—The amendments made by

7 this section shall take effect on the date of the en8 actment of this Act.

9 (2) TRANSITION RULE FOR PLANS HOLDING

10 EXCESS SECURITIES OR PROPERTY.—

11 (A) IN GENERAL.—In the case of a plan

12 which on the date of the enactment of this Act,

13 has holdings of employer securities and em14 ployer real property (as defined in section

15 407(d) of the Employee Retirement Income Se16 curity Act of 1974 (29 U.S.C. 1107(d)) in ex17 cess of the amount specified in such section

18 407, the amendment made by this section ap19 plies to any acquisition of such securities and

20 property on or after such date, but does not

21 apply to the specific holdings which constitute

22 such excess during the period of such excess.

23 (B) SPECIAL RULE FOR CERTAIN ACQUISI24 TIONS.—Employer securities and employer real

25 property acquired pursuant to a binding written
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1 contract to acquire such securities and real

2 property entered into and in effect on the date

3 of the enactment of this Act, shall be treated as

4 acquired immediately before such date.

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