I
107TH CONGRESS
2D SESSION
H. R. 3623
To amend title I of the Employee Retirement Income Security Act of 1974
to prohibit knowing misrepresentations by fiduciaries of 401(k) plans
which may induce participants and beneficiaries to act contrary to their
own best interest in controlling the assets in their own accounts, and
to amend title 11 of the United States Code to protect claims based
on such misrepresentations.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 24, 2002
Mr. BENTSEN introduced the following bill; which was referred to the Com-
mittee on Education and the Workforce, and in addition to the Com-
mittee on the Judiciary, for a period to be subsequently determined by
the Speaker, in each case for consideration of such provisions as fall with-
in the jurisdiction of the committee concerned
A BILL
To amend title I of the Employee Retirement Income Secu-
rity Act of 1974 to prohibit knowing misrepresentations
by fiduciaries of 401(k) plans which may induce partici-
pants and beneficiaries to act contrary to their own
best interest in controlling the assets in their own ac-
counts, and to amend title 11 of the United States
Code to protect claims based on such misrepresentations.
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 ‘‘Employee Savings Pro-
tection Act of 2002’’.
SEC. 2. PROHIBITION OF MISREPRESENTATIONS BY PLAN
FIDUCIARIES RELATING TO THE PRESENT OR
EXPECTED VALUATION OF EMPLOYER SECU-
RITIES.
(a) IN GENERAL.—Section 404(a) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1104(a)) is amended by adding at the end the following
new paragraph:
‘‘(3) Any knowing misrepresentation by a fiduciary
of an individual account plan that includes a cash or de-
ferred arrangement (as defined in section 401(k)(2) of the
Internal Revenue Code of 1986) to a participant or bene-
ficiary under the plan relating to the present or expected
valuation of employer securities that—
‘‘(A) was made at a time reasonably contem-
poraneous with a period of decisionmaking by the
participant or beneficiary in the exercise of his or
her control over the assets in his or her account, or
‘‘(B) could otherwise be reasonably perceived as
likely to induce decisions that were made by the par-
ticipant or beneficiary in the exercise of his or her
control over such assets,
shall be treated as a failure by the fiduciary to discharge
the fiduciary’s duties with respect to a plan in accordance
with the preceding provisions of this subsection.’’.
(b) LIABILITY FOR MISREPRESENTATION.—Section
404(c) of such Act (29 U.S.C. 1104(c)) is amended by
adding at the end the following new paragraph:
‘‘(4) In the case of an individual account plan that
includes a cash or deferred arrangement (as defined in
section 401(k)(2) of the Internal Revenue Code of 1986),
paragraph (1)(B) shall not apply in connection with any
loss which results from any exercise of control by a partici-
pant or beneficary over the assets in his or her account
undertaken in reliance on a misrepresentation described
in paragraph (a)(3).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to misrepresentations
made on or after January 1, 2000.
SEC. 3. PROTECTION OF CERTAIN EMPLOYEE CLAIMS IN
BANKRUPTCY.
(a) AMENDMENTS.—Title 11 of the United States
Code is amended—
(1) in section 507(a) by adding at the end the
following:
‘‘(10) Tenth, allowed unsecured claims arising
under part 4 of subtitle B of title I of the Employee
Retirement Income Security Act of 1974 by oper-
ation of section 404(c)(4) of such Act for failures by
fiduciaries to discharge their duties as described in
section 404(a)(3) of such Act.’’; and
(2) in section 1129(a)(9)(B) by striking ‘‘or
507(a)(7)’’ 
and 
inserting 
‘‘507(a)(7), 
or
507(a)(10)’’.
(b) EFFECTIVE DATE; APPLICATION
OF AMEND-
MENTS.—The amendments made by subsection (a) shall
take effect on January 1, 2000, and shall apply with re-
spect to cases commenced under title 11 of the United
States Code on or after such date.
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