539 
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 correc-
tion 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 partici-
pating in such transaction), subparagraph (A) does 
not apply to any transaction if, at the time the 
transaction occurs, such fiduciary or party in inter-
est (or other person) knew (or reasonably should 
have known) that the transaction would (without re-
gard to this paragraph) constitute a violation of sec-
tion 406(a). 
‘‘(D) For purposes of this paragraph, the term 
‘correction period’ means, in connection with a fidu-
ciary 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 rea-
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ccoleman on PROD1PC71 with BILLS
540 
sonably 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 In-
ternal Revenue Code of 1986 (without regard to 
subparagraph (F)(iii) and the last sentence 
thereof). 
‘‘(ii) The term ‘commodity’ has the mean-
ing given such term by section 475(e)(2) of 
such Code (without regard to subparagraph 
(D)(iii) thereof). 
‘‘(iii) The term ‘correct’ means, with re-
spect to a transaction— 
‘‘(I) to undo the transaction to the ex-
tent possible and in any case to make good 
to the plan or affected account any losses 
resulting from the transaction, and 
‘‘(II) to restore to the plan or affected 
account any profits made through the use 
of assets of the plan.’’. 
(b) AMENDMENT OF INTERNAL REVENUE CODE OF 
1986.— 
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ccoleman on PROD1PC71 with BILLS
541 
(1) IN
GENERAL.—Subsection (d) of section 
4975 of the Internal Revenue Code of 1986 (relating 
to exemptions), as amended by sections 601 and 
611, is amended by striking ‘‘or’’ at the end of para-
graph (21), by striking the period at the end of 
paragraph (22) and inserting ‘‘, or’’, and by adding 
at the end the following new paragraph: 
‘‘(23) except as provided in subsection (f)(11), 
a transaction described in subparagraph (A), (B), 
(C), or (D) of subsection (c)(1) in connection with 
the acquisition, holding, or disposition of any secu-
rity or commodity, if the transaction is corrected be-
fore 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), 
as amended by sections 601 and 611, is amended by 
adding at the end the following new paragraph: 
‘‘(11) CORRECTION PERIOD.— 
‘‘(A) IN GENERAL.—For purposes of sub-
section (d)(23), 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 para-
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542 
graph and subsection (d)(23)) constitute a pro-
hibited transaction. 
‘‘(B) EXCEPTIONS.— 
‘‘(i) EMPLOYER
SECURITIES.—Sub-
section (d)(23) 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 ac-
quisition, sale, or lease of employer real 
property (as defined in section 407(d)(2)). 
‘‘(ii) KNOWING
PROHIBITED
TRANS-
ACTION.—In the case of any disqualified 
person, subsection (d)(23) does not apply 
to a transaction if, at the time the trans-
action is entered into, the disqualified per-
son knew (or reasonably should have 
known) that the transaction would (with-
out 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)(23), then no tax under sub-
section (a) and (b) shall be assessed with re-
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spect to such transaction, and if assessed the 
assessment shall be abated, and if collected 
shall be credited or refunded as an overpay-
ment. 
‘‘(D) DEFINITIONS.—For purposes of this 
paragraph and subsection (d)(23)— 
‘‘(i) SECURITY.—The term ‘security’ 
has the meaning given such term by sec-
tion 475(c)(2) (without regard to subpara-
graph (F)(iii) and the last sentence there-
of). 
‘‘(ii) COMMODITY.—The term ‘com-
modity’ has the meaning given such term 
by section 475(e)(2) (without regard to 
subparagraph (D)(iii) thereof). 
‘‘(iii) CORRECT.—The term ‘correct’ 
means, with respect to a transaction— 
‘‘(I) to undo the transaction to 
the extent possible and in any case to 
make good to the plan or affected ac-
count any losses resulting from the 
transaction, and 
‘‘(II) to restore to the plan or af-
fected account any profits made 
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ccoleman on PROD1PC71 with BILLS
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through the use of assets of the 
plan.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to any transaction which the fidu-
ciary or disqualified person discovers, or reasonably should 
have discovered, after the date of the enactment of this 
Act constitutes a prohibited transaction. 
Subtitle C—Fiduciary and Other 
Rules 
SEC. 621. INAPPLICABILITY OF RELIEF FROM FIDUCIARY 
LIABILITY DURING SUSPENSION OF ABILITY 
OF PARTICIPANT OR BENEFICIARY TO DI-
RECT INVESTMENTS. 
(a) IN GENERAL.—Section 404(c) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 
1104(c)) is amended— 
(1) in paragraph (1)— 
(A) by redesignating subparagraphs (A) 
and (B) as clauses (i) and (ii), respectively, and 
by inserting ‘‘(A)’’ after ‘‘(c)(1)’’, 
(B) in subparagraph (A)(ii) (as redesig-
nated by paragraph (1)), by inserting before the 
period the following: ‘‘, except that this clause 
shall not apply in connection with such partici-
pant or beneficiary for any blackout period dur-
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