I
107TH CONGRESS
1ST SESSION
H. R. 3463
To amend the Internal Revenue Code of 1986 to provide protections for
participants in cash or deferred arrangements under section 401(k) with
respect to the acquisition and holding of employer securities.
IN THE HOUSE OF REPRESENTATIVES
DECEMBER 12, 2001
Mr. DEUTSCH (for himself, Mr. GREEN of Texas, Mr. FROST, Ms. LEE, and
Mr. LIPINSKI) introduced the following bill; which was referred to the
Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to provide
protections for participants in cash or deferred arrange-
ments under section 401(k) with respect to the acquisi-
tion and holding of employer securities.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Pension Protection
Act’’.
SEC. 2. PROHIBITION ON 401(k) PLANS ON USING EM-
PLOYEE CONTRIBUTIONS TO ACQUIRING OR
HOLDING MORE THAN 10 PERCENT VALUE IN
EMPLOYER SECURITIES.
(a) IN GENERAL.—Section 401(k) of the Internal
Revenue Code of 1986 (relating to cash or deferred ar-
rangements) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(13) PROHIBITIONS RELATING TO EMPLOYER
SECURITIES.—
‘‘(A) IN GENERAL.—In the case of a cash
or deferred arrangement of an employer, such
arrangement shall not be treated as a qualified
cash or deferred arrangement under this section
unless such arrangement meets the require-
ments of subparagraphs (B), (C), and (D).
‘‘(B) ACQUISITION OF EMPLOYER SECURI-
TIES.—A cash or deferred arrangement of an
employer meets the requirements of this sub-
paragraph if—
‘‘(i) with respect to any employee,
amounts in the plan of which such cash or
deferred arrangement is a part and which
are attributable to employee contributions
under such arrangement are used to ac-
quire employer securities, and
‘‘(ii) immediately after such acquisi-
tion, the aggregate fair market value of
employer securities held on behalf of such
employee by the plan which are attrib-
utable to employee contributions does not
exceed 10 percent of the fair market value
of all assets of the plan attributable to
such employee’s contributions.
‘‘(C) HOLDING EMPLOYER SECURITIES.—
A cash or deferred arrangement of an employer
meets the requirements of this subparagraph if,
with respect to any employee, as of December
31 of any year, the fair market value of em-
ployer securities held by the plan of which such
arrangement is a part on behalf of such em-
ployee is 10 percent or less of the aggregate
fair market value of the assets of the plan at-
tributable to such employee’s contributions.
‘‘(D) DIVESTMENT OF EMPLOYER SECURI-
TIES.—A cash or deferred arrangement of an
employer meets the requirements of this sub-
paragraph if the plan of which such arrange-
ment is a part permits participants to direct the
plan to divest the participant’s account of em-
ployer securities after 3 years after the date on
which such securities are acquired.
‘‘(E) EMPLOYER
SECURITIES.—For pur-
poses of this paragraph, the term ‘employer se-
curities’ has the meaning given such term by
section 409(l).’’.
(b) EFFECTIVE DATE; TRANSITION RULE.—
(1) EFFECTIVE DATE.—Except as provided in
paragraph (2), the amendment made by this section
shall apply to plans on and after the date of the en-
actment of this Act.
(2) TRANSITION
RULE
FOR
PLANS
HOLDING
EXCESS SECURITIES.—In the case of a plan which
on the date of the enactment of this Act has hold-
ings of employer securities (as defined in section
401(k)(13) of the Internal Revenue Code of 1986)
in excess of the amount specified in such section
401(k)(13)(B), section 401(k)(13) of the Internal
Revenue Code of 1986 (as added by this section)
shall apply to any acquisition of such securities on
or after such date of enactment, but section
401(k)(13)(C) of such Code shall not apply to the
specific holdings which constitute such excess during
the period of such excess.
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