I
107TH CONGRESS
2D SESSION
H. R. 5653
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 prohib-
ited transaction rules.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 16, 2002
Mr. BOEHNER (for himself, Mr. SAM JOHNSON of Texas, Mr. ANDREWS, and
Mr. PORTMAN) introduced the following bill; which was referred to the
Committee on Education and the Workforce, and in addition to the Com-
mittee on Ways and Means, for a period to be subsequently determined
by the Speaker, in each case for consideration of such provisions as fall
within the jurisdiction of the committee concerned
A BILL
To amend title I of the Employee Retirement Income Secu-
rity Act of 1974 and the Internal Revenue Code of
1986 to provide a reasonable correction period for certain
security and commodity transactions under the prohib-
ited transaction rules.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. CORRECTION PERIOD FOR CERTAIN TRANS-
ACTIONS INVOLVING SECURITIES AND COM-
MODITIES.
(a) AMENDMENT OF EMPLOYEE RETIREMENT IN-
COME 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 fol-
lowing 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 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 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 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-
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).’’.
(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 sub-
section (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 para-
graph and subsection (d)(16)) constitute a pro-
hibited transaction.
‘‘(B) EXCEPTIONS.—
‘‘(i) EMPLOYER
SECURITIES.—Sub-
section (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 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)(16) does not apply
to a transaction if, at the time the trans-
action is entered into, the disqualified per-
son knew 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)(16), then no tax under sub-
section (a) and (b) shall be assessed with re-
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) SECURITIES AND COMMODITIES DE-
FINED.—For purposes of this paragraph and
subsection (d)(16)—
‘‘(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).’’.
(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.
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