I

105TH CONGRESS

1ST SESSION H. R. 818

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 HOUSE OF REPRESENTATIVES

FEBRUARY 25, 1997

Mr. CONDIT (for himself, Mr. MCDERMOTT, and Mr. FOGLIETTA) introduced

the following bill; which was referred to the Committee on Education and

the Workforce

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,
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1 SECTION 1. SHORT TITLE.

2 This Act may be cited as the ‘‘401(k) Pension Protec3 tion Act of 1997’’.

4 SEC. 2. SECTION 401(k) INVESTMENT PROTECTION.

5 (a) LIMITATIONS ON INVESTMENT IN EMPLOYER SE6 CURITIES AND EMPLOYER REAL PROPERTY BY CASH OR

7 DEFERRED ARRANGEMENTS.—Paragraph (3) of section

8 407(d) of the Employee Retirement Income Security Act

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

10 end the following new subparagraph:

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

12 does not include that portion of an individual ac13 count plan that consists of elective deferrals (as de14 fined in section 402(g)(3) of the Internal Revenue

15 Code of 1986) pursuant to a qualified cash or de16 ferred arrangement as defined in section 401(k) of

17 the Internal Revenue Code of 1986 (and earnings

18 thereon), if such elective deferrals (or earnings

19 thereon) are required to be invested in qualifying

20 employer securities or qualifying employer real prop21 erty or both pursuant to the documents and instru22 ments governing the plan or at the direction of a

23 person other than the participant (or the partici24 pant’s beneficiary) on whose behalf such elective de25 ferrals are made to the plan. For the purposes of

26 subsection (a), such portion shall be treated as a
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1 separate plan. This subparagraph shall not apply to

2 an individual account plan if the fair market value

3 of the assets of all individual account plans main4 tained by the employer equals not more than 10 per5 cent of the fair market value of the assets of all pen6 sion plans maintained by the employer.’’.

7 (b) EFFECTIVE DATE.—

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

9 this section shall take effect on the date of the en10 actment of this Act.

11 (2) TRANSITION RULE FOR PLANS HOLDING

12 EXCESS SECURITIES OR PROPERTY.—

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

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

15 has holdings of employer securities and em16 ployer real property (as defined in section

17 407(d) of the Employee Retirement Income Se18 curity Act of 1974 (29 U.S.C. 1107(d)) in ex19 cess of the amount specified in such section

20 407, the amendment made by this section ap21 plies to any acquisition of such securities and

22 property on or after such date, but does not

23 apply to the specific holdings which constitute

24 such excess during the period of such excess.
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1 (B) SPECIAL RULE FOR CERTAIN ACQUISI2 TIONS.—Employer securities and employer real

3 property acquired pursuant to a binding written

4 contract to acquire such securities and real

5 property entered into and in effect on the date

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

7 acquired immediately before such date.

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