116
to the transaction, or in the absence of 
such determination, an interest rate equal 
to the underpayment rate defined in sec-
tion 6621(a)(2), 
‘‘(ii) the eligible person receives in 
such transaction not more than reasonable 
compensation, 
‘‘(iii) such transaction is expressly ap-
proved by an independent fiduciary who 
has investment authority with respect to 
the plan assets involved in the transaction, 
and 
‘‘(iv) immediately after the acquisition 
of the financial product—
‘‘(I) the fair market value of such 
financial product does not exceed 1 
percent of the fair market value of the 
assets of the plan, and 
‘‘(II) the aggregate fair market 
value of all outstanding financial 
products acquired by the plan from 
the eligible person pursuant to this 
subsection does not exceed 5 percent 
of the fair market value of the assets 
of the plan.
117
‘‘(C) SUFFICIENT
GUARANTEE.—A guar-
antee referred to in subparagraph (B) is ‘suffi-
cient’ if such guarantee is irrevocable and, 
under the terms of the guarantee, if the Sec-
retary determines not to grant the exemption, 
the plan has the unconditional right to apply 
the amounts under the guarantee to any losses 
suffered and to the payment of interest deter-
mined under the terms of the transaction. A 
guarantee shall not be treated as failing to be 
‘sufficient’ solely because, under the terms of 
the guarantee, if the Secretary grants the ex-
emption, the guarantee may expire without any 
payments made to the plan. 
‘‘(D) ELIGIBLE PERSON.—The term ‘eligi-
ble person’ means a person that—
‘‘(i) consists of—
‘‘(I) a bank as defined in section 
202(a)(2) of the Investment Advisers 
Act of 1940, 
‘‘(II) an investment adviser reg-
istered under the Investment Advisers 
Act of 1940,
118
‘‘(III) an insurance company 
which is qualified to do business in 
more than one State, or 
‘‘(IV) a broker-dealer registered 
under the Securities Exchange Act of 
1934, 
‘‘(ii) has shareholders’ or partners’ eq-
uity in excess of $1,000,000, and 
‘‘(iii) is not described in section 411 
of the Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1111).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply with respect to transactions occur-
ring after December 31, 2005. 
SEC. 608. PENSION BENEFIT INFORMATION. 
(a) IN GENERAL.—Chapter 43 of the Internal Rev-
enue Code of 1986 (relating to qualified pension, etc., 
plans) is amended by adding at the end the following new 
section: 
‘‘SEC. 4980G. FAILURE OF APPLICABLE PLANS TO PROVIDE 
NOTICE OF GENERALLY ACCEPTED INVEST-
MENT PRINCIPLES. 
‘‘(a) IMPOSITION OF TAX.—There is hereby imposed 
a tax on the failure of any applicable pension plan to meet
119
the requirements of subsection (e) with respect to any ap-
plicable individual. 
‘‘(b) AMOUNT OF TAX.—The amount of the tax im-
posed by subsection (a) on any failure with respect to any 
applicable individual shall be $100 for each day in the 
noncompliance period with respect to such failure. 
‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—
‘‘(1) TAX NOT TO APPLY TO FAILURES COR-
RECTED WITHIN 30 DAYS.—No tax shall be imposed 
by subsection (a) on any failure if—
‘‘(A) any person subject to liability for the 
tax under subsection (d) exercised reasonable 
diligence to meet the requirements of subsection 
(e), and 
‘‘(B) such person provides the notice de-
scribed in subsection (e) during the 30-day pe-
riod beginning on the first date such person 
knew, or exercising reasonable diligence should 
have known, that such failure existed. 
‘‘(2) OVERALL
LIMITATION
FOR
UNINTEN-
TIONAL FAILURES.—
‘‘(A) IN GENERAL.—If the person subject 
to liability for tax under subsection (d) exer-
cised reasonable diligence to meet the require-
ments of subsection (e) and paragraph (1) is
120
not otherwise applicable, the tax imposed by 
subsection (a) for failures during the taxable 
year of the employer (or, in the case of a multi-
employer plan, the taxable year of the trust 
forming part of the plan) shall not exceed 
$500,000. For purposes of the preceding sen-
tence, all multiemployer plans of which the 
same trust forms a part shall be treated as 1 
plan. 
‘‘(B) TAXABLE
YEARS
IN
THE
CASE
OF 
CERTAIN CONTROLLED GROUPS.—For purposes 
of this paragraph, if all persons who are treated 
as a single employer for purposes of this section 
do not have the same taxable year, the taxable 
years taken into account shall be determined 
under principles similar to the principles of sec-
tion 1561. 
‘‘(3) WAIVER BY SECRETARY.—In the case of a 
failure which is due to reasonable cause and not to 
willful neglect, the Secretary may waive part or all 
of the tax imposed by subsection (a) to the extent 
that the payment of such tax would be excessive or 
otherwise inequitable relative to the failure involved. 
‘‘(d) LIABILITY FOR TAX.—The following shall be lia-
ble for the tax imposed by subsection (a):
121
‘‘(1) In the case of a plan other than a multi-
employer plan, the employer. 
‘‘(2) In the case of a multiemployer plan, the 
plan. 
‘‘(e) NOTICE
OF GENERALLY ACCEPTED INVEST-
MENT PRINCIPLES.—
‘‘(1) IN GENERAL.—The plan administrator of 
an applicable pension plan shall provide notice of 
generally accepted investment principles, including 
principles of risk management and diversification, to 
each applicable individual. 
‘‘(2) NOTICE.—The notice required by para-
graph (1) shall be written in a manner calculated to 
be understood by the average plan participant and 
shall provide sufficient information (as determined 
in accordance with rules or other guidance adopted 
by the Secretary) to allow applicable individuals to 
understand generally accepted investment principles, 
including principles of risk management and diver-
sification. 
‘‘(3) TIMING OF NOTICE.—The notice required 
by paragraph (1) shall be provided upon enrollment 
of the applicable individual in such plan and at least 
once per plan year thereafter.
122
‘‘(4) FORM AND MANNER OF NOTICE.—The no-
tice required by paragraph (1) shall be in writing, 
except that such notice may be in electronic or other 
form to the extent that such form is reasonably ac-
cessible to the applicable individual. 
‘‘(f) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) APPLICABLE INDIVIDUAL.—The term ‘ap-
plicable individual’ means with respect to an applica-
ble pension plan—
‘‘(A) any participant in the applicable pen-
sion plan, 
‘‘(B) any beneficiary who is an alternate 
payee (within the meaning of section 414(p)(8)) 
under an applicable qualified domestic relations 
order 
(within 
the 
meaning 
of 
section 
414(p)(1)(A)), and 
‘‘(C) any beneficiary of a deceased partici-
pant or alternate payee described in subpara-
graph (A) or (B), as the case may be, 
who has an accrued benefit under the plan and who 
is entitled to direct the investment (or hypothetical 
investment) of some or all of such accrued benefit. 
‘‘(2) APPLICABLE
PENSION
PLAN.—The term 
‘applicable pension plan’ means—
123
‘‘(A) 
a 
plan 
described 
in 
section 
219(g)(5)(A) (other than in clause (iii) thereof), 
and 
‘‘(B) an eligible deferred compensation 
plan (as defined in section 457(b)) of an eligible 
employer described in section 457(e)(1)(A), 
which permits any participant to direct the invest-
ment of some or all of his account in the plan or 
under which the accrued benefit of any participant 
depends in whole or in part on hypothetical invest-
ments directed by the participant.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for chapter 43 of such Code is amended by adding at the 
end the following new item:
‘‘Sec. 4980G. Failure of applicable plans to provide notice of generally accepted 
investment principles.’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by 
this section shall take effect 60 days after the adop-
tion of rules or other guidance to carry out the 
amendments made by this section, which shall in-
clude a model notice of generally accepted invest-
ment principles, including principles of risk manage-
ment and diversification. 
(2) MODEL
INVESTMENT
PRINCIPLES.—For 
purposes of paragraph (1), not later than 120 days
124
after the date of the enactment of this Act, the Sec-
retary of the Treasury, in consultation with the Sec-
retary of Labor, shall issue rules or other guidance 
and a model notice which meets the requirements of 
section 4980G of the Internal Revenue Code of 1986 
(as added by this section). 
SEC. 609. PERMANENCY OF TRANSITION RULE IN RETIRE-
MENT PROTECTION ACT OF 1994. 
(a) TRANSITION RULE MADE PERMANENT.—Section 
769(c) of the Retirement Protection Act of 1994 (26 
U.S.C. 412 note) is amended—
(1) in the heading, by striking ‘‘TRANSITION’’; 
and 
(2) in paragraph (1), by striking ‘‘transition’’ 
and by striking ‘‘for any plan year beginning after 
1996 and before 2010’’. 
(b) SPECIAL RULES.—Paragraph (2) of section 
769(c) of the Retirement Protection Act of 1994 is amend-
ed to read as follows: 
‘‘(2) SPECIAL RULES.—The rules described in 
this paragraph are as follows: 
‘‘(A) For purposes of section 412(l)(9)(A) 
of the Internal Revenue Code of 1986 and sec-
tion 302(d)(9)(A) of the Employee Retirement 
Income Security Act of 1974, the funded cur-
125
rent liability percentage for any plan year shall 
be treated as not less than 90 percent. 
‘‘(B) For purposes of section 412(m) of 
the Internal Revenue Code of 1986 and section 
302(e) of the Employee Retirement Income Se-
curity Act of 1974, the funded current liability 
percentage for any plan year shall be treated as 
not less than 100 percent. 
‘‘(C) For purposes of determining un-
funded 
vested 
benefits 
under 
section 
4006(a)(3)(E)(iii) of the Employee Retirement 
Income Security Act of 1974, the mortality 
table shall be the mortality table used by the 
plan.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to plan years beginning after De-
cember 31, 2004. 
TITLE VII—GENERAL 
PROVISIONS 
SEC. 701. GENERAL EFFECTIVE DATE. 
(a) IN GENERAL.—Except as otherwise provided in 
this Act, and subject to subsection (b), the amendments 
made by this Act shall apply with respect to plan years 
beginning on or after January 1, 2005.
126
(b) SPECIAL RULE FOR COLLECTIVELY BARGAINED 
PLANS.—In the case of a plan maintained pursuant to 1 
or more collective bargaining agreements between em-
ployee representatives and 1 or more employers ratified 
on or before the date of the enactment of this Act, sub-
section (a) shall be applied to benefits pursuant to, and 
individuals covered by, any such agreement by substituting 
for ‘‘January 1, 2005’’ the date of the commencement of 
the first plan year beginning on or after the earlier of—
(1) the later of—
(A) January 1, 2006, or 
(B) the date on which the last of such col-
lective bargaining agreements terminates (de-
termined without regard to any extension there-
of after the date of the enactment of this Act), 
or 
(2) January 1, 2007. 
SEC. 702. PLAN AMENDMENTS. 
If any amendment made by this Act requires an 
amendment to any plan, such plan amendment shall not 
be required to be made before the first plan year beginning 
on or after January 1, 2007, if—
(1) during the period after such amendment 
made by this Act takes effect and before such first 
plan year, the plan is operated in accordance with
127
the requirements of such amendment made by this 
Act, and 
(2) such plan amendment applies retroactively 
to the period after such amendment made by this 
Act takes effect and such first plan year.
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