HR 1000 RFS 
options which meet the requirements 
of subparagraph (D), or 
‘‘(II) with respect to any em-
ployer security allocated to an applica-
ble individual’s account during any 
plan year, such applicable individual 
may elect to direct the plan to divest 
such employer security after a date 
which is not later than 3 years after 
the end of such plan year and to rein-
vest an equivalent amount in other in-
vestment options which meet the re-
quirements of subparagraph (D). 
‘‘(ii) APPLICABLE
INDIVIDUAL
WITH 
BENEFIT
BASED
ON
YEARS
OF
SERV-
ICE.—For purposes of clause (i), an appli-
cable individual has a benefit based on 3 
years of service if such individual would be 
an applicable individual if only participants 
in the plan who have completed at least 3 
years of service (as determined under sec-
tion 411(a)) were referred to in subpara-
graph (E)(ii)(I). 
‘‘(D) INVESTMENT OPTIONS.—The require-
ments of this subparagraph are met if—
HR 1000 RFS 
‘‘(i) the plan offers not less than 3 in-
vestment options, other than employer se-
curities, to which an applicable individual 
may direct the proceeds from the divest-
ment of employer securities pursuant to 
this paragraph, each of which is diversified 
and has materially different risk and re-
turn characteristics, and 
‘‘(ii) the plan permits the applicable 
individual to choose from any of the invest-
ment options made available under the 
plan to which such proceeds may be so di-
rected, subject to such restrictions as may 
be provided by the plan limiting such 
choice to periodic, reasonable opportunities 
occurring no less frequently than on a 
quarterly basis. 
‘‘(E) DEFINITIONS AND RULES.—For pur-
poses of this paragraph—
‘‘(i) APPLICABLE DEFINED CONTRIBU-
TION PLAN.—The term ‘applicable defined 
contribution plan’ means any defined con-
tribution plan, except that such term does 
not include an employee stock ownership 
plan (within the meaning of section
HR 1000 RFS 
4975(e)(7)) unless there are any contribu-
tions to such plan (or earnings thereon) 
held within such plan that are subject to 
subsection (k)(3) or (m)(2). 
‘‘(ii) APPLICABLE
INDIVIDUAL.—The 
term ‘applicable individual’ means—
‘‘(I) any participant in the plan, 
and 
‘‘(II) any beneficiary of a partici-
pant referred to in clause (i) who has 
an account under the plan with re-
spect to which the beneficiary is enti-
tled to exercise the rights of the par-
ticipant. 
‘‘(iii) 
ELECTIVE
DEFERRAL.—The 
term ‘elective deferral’ means an employer 
contribution 
described 
in 
section 
402(g)(3)(A) (as in effect on the date of 
the enactment of this paragraph). 
‘‘(iv) 
EMPLOYER
SECURITY.—The 
term ‘employer security’ shall have the 
meaning given such term by section 
407(d)(1) of the Employee Retirement In-
come Security Act of 1974 (as in effect on
HR 1000 RFS 
the date of the enactment of this para-
graph). 
‘‘(v) EMPLOYEE
STOCK
OWNERSHIP 
PLAN.—The term ‘employee stock owner-
ship plan’ shall have the same meaning 
given to such term by section 4975(e)(7) 
of the Internal Revenue Code of 1986 (as 
in effect on the date of the enactment of 
this paragraph). 
‘‘(vi) ELECTIONS.—Elections under 
this paragraph may be made not less fre-
quently than quarterly. 
‘‘(F) EXCEPTION
WHERE
THERE
IS
NO 
READILY
TRADABLE
STOCK.—This paragraph 
shall not apply if there is no class of stock 
issued by the employer that is readily tradable 
on an established securities market (or in such 
other circumstances as may be determined 
jointly by the Secretary of the Treasury and the 
Secretary of Labor in regulations). 
‘‘(G) TRANSITION RULE.—
‘‘(i) IN GENERAL.—In the case of any 
defined contribution plan which, on the ef-
fective date of this subsection, holds em-
ployer securities of any class that were ac-
HR 1000 RFS 
quired before such date and on which there 
is a restriction on diversification otherwise 
precluded by this paragraph, this para-
graph shall apply to such securities of such 
class held in any plan year only with re-
spect to the number of such securities 
equal to the applicable percentage of the 
total number of such securities of such 
class held on such date. 
‘‘(ii) APPLICABLE PERCENTAGE.—For 
purposes of clause (i), the applicable per-
centage shall be as follows:
‘‘Plan years for which provi-
sions are effective: 
Applicable percentage: 
1st plan year ..................................
20 percent. 
2nd plan year ................................
40 percent. 
3rd plan year .................................
60 percent. 
4th plan year .................................
80 percent. 
5th plan year or thereafter ............
100 percent.
‘‘(iii) ELECTIVE DEFERRALS TREATED 
AS SEPARATE PLAN NOT INDIVIDUAL AC-
COUNT PLAN.—For purposes of clause (i), 
the applicable percentage shall be 100 per-
cent with respect to—
‘‘(I) employee contributions to a 
plan under which any portion attrib-
utable to elective deferrals is treated 
as a separate plan under section 
407(b)(2) of the Employee Retirement
HR 1000 RFS 
Income Security Act of 1974 as of the 
date of the enactment of this para-
graph, and 
‘‘(II) such elective deferrals. 
‘‘(iv) CONTRIBUTIONS HELD WITHIN 
AN
ESOP.—In the case of contributions 
(other than elective deferrals and employee 
contributions) held within an employee 
stock ownership plan, in the case of the 1st 
and 2nd plan years referred to in the table 
in clause (ii), the applicable percentage 
shall be the greater of the amount deter-
mined under clause (ii) or the percentage 
determined under paragraph (28) (deter-
mined as if paragraph (28) applied to a 
plan described in this paragraph). 
‘‘(v) 
COORDINATION
WITH
PRIOR 
ELECTIONS
UNDER
PARAGRAPH
(28).—In 
any case in which a divestiture of invest-
ment in employer securities of any class 
held by an employee stock ownership plan 
prior to the effective date of this para-
graph was undertaken pursuant to an elec-
tion under paragraph (28) prior to such 
date, the applicable percentage (as deter-