I
107TH CONGRESS
1ST SESSION
H. R. 3445
To amend the Employee Retirement Income Security Act of 1974 to improve
the retirement security of American families.
IN THE HOUSE OF REPRESENTATIVES
DECEMBER 11, 2001
Mr. ANDREWS (for himself, Mr. GEORGE MILLER of California, Mr. KILDEE,
Mr. OWENS, Mr. PAYNE, Mrs. MINK of Hawaii, Mr. SCOTT, Ms. WOOL-
SEY, Ms. RIVERS, Mr. HINOJOSA, Mr. TIERNEY, Mr. KIND, Ms.
SANCHEZ, Mr. FORD, Mr. KUCINICH, Mr. HOLT, Ms. SOLIS, and Ms.
MCCOLLUM) introduced the following bill; which was referred to the Com-
mittee on Education and the Workforce, and in addition to the Commit-
tees on Armed Services, and Government Reform, for a period to be sub-
sequently 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 the Employee Retirement Income Security Act
of 1974 to improve the retirement security of American
families.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Retirement Enhancement Act of 2001’’.
(b) TABLE OF CONTENTS.—The table of contents is
as follows:
Sec. 1. Short title and table of contents.
TITLE I—IMPROVED PARTICIPATION AND VESTING
Sec. 101. Minimum coverage requirements.
Sec. 102. Minimum participation requirements.
Sec. 103. Faster vesting of benefits under defined contribution plans.
Sec. 104. Model small employer group pension plan.
Sec. 105. Enforcement under ERISA of requirements for simplified employee
pensions.
TITLE II—IMPROVED PENSION PROTECTIONS FOR WOMEN
Sec. 201. Elimination of integration with workers’ compensation and similar
benefits.
Sec. 202. Spousal consent required for distributions from defined contribution
plans.
Sec. 203. Modifications of joint and survivor annuity requirements.
Sec. 204. Division of pension benefits upon divorce.
Sec. 205. Periods of family and medical leave treated as hours of service for
pension participation and vesting.
Sec. 206. Right of spouse to know distribution information.
Sec. 207. Repeal of reduction in military survivor benefit plan annuities at age
62.
Sec. 208. Survivor annuities for widows, widowers, and former spouses of Fed-
eral employees who die before attaining age for deferred annu-
ity under Civil Service Retirement System.
Sec. 209. Order of precedence for disposition of amounts remaining in the
thrift savings account of a Federal employee (or former em-
ployee) who dies before making an effective election controlling
such disposition.
Sec. 210. Interest on amounts paid to make up for certain civil service annuity
benefits wrongfully denied.
Sec. 211. Amendments relating to effective date provision of the Civil Service
Retirement Spouse Equity Act of 1984.
TITLE III—SIMPLIFIED INVESTMENT STANDARDS
Sec. 301. Exemption from prohibited transaction rules for emergent trans-
actions.
Sec. 302. Prohibited transaction exemption for the provision of investment ad-
vice.
Sec. 303. Participation of participants in trusteeship of defined contribution
plans.
Sec. 304. Diversification in defined contribution plan investments.
Sec. 305. Removal of $500,000 cap on bonding requirement.
Sec. 306. Disclosure regarding investments and voting of proxies.
TITLE IV—IMPROVEMENTS IN PENSION INFORMATION AND
ENFORCEMENT
Sec. 401. Periodic pension benefit statements.
Sec. 402. Disclosures to Secretary of Labor relating to plan termination and re-
lating to plan sponsors after acquisition or merger of plans.
Sec. 403. Disclosure of operating income of employers adjusted so as to exclude
certain components mandated in FASB rules governing ac-
counting for defined benefit pension plans.
Sec. 404. Specific information regarding multiemployer plans included in an-
nual report.
Sec. 405. Limited scope audits.
Sec. 406. Reporting and enforcement requirements for employee benefit plans.
Sec. 407. Study of pension trends and characteristics.
Sec. 408. Early resolution program for pension benefit claims.
Sec. 409. De novo review of benefit determinations.
Sec. 410. Allowable relief.
Sec. 411. Assessment by Secretary of Labor of penalties for failures to meet
disclosure requirements.
Sec. 412. Missing participants.
Sec. 413. Fiduciary duties with respect to changes in investment options.
Sec. 414. Secretary of Labor required to provide assistance.
Sec. 415. Exclusivity of powers and procedures applicable to rights or claims.
TITLE V—IMPROVED PENSION PROTECTIONS FOR THE
CHANGING WORKFORCE
Sec. 501. Loans from retirement plans for health insurance and job training ex-
penses.
Sec. 502. Automatic rollover upon mandatory distribution in excess of $1,000.
Sec. 503. Prompt distribution from defined contribution plans upon termination
of participant’s covered employment.
Sec. 504. Extended period for recoupment of overpayments.
TITLE VI—GENERAL PROVISIONS
Sec. 601. General effective date.
Sec. 602. Plan amendments.
TITLE I—IMPROVED
PARTICIPATION AND VESTING
SEC. 101. MINIMUM COVERAGE REQUIREMENTS.
(a) IN GENERAL.—Part 2 of subtitle B of title I of
the Employee Retirement Income Security Act of 1974
(29 U.S.C. 201 et seq.) is amended by inserting after sec-
tion 201 the following new section:
‘‘MINIMUM COVERAGE REQUIREMENTS
‘‘SEC. 201A. (a) GENERAL RULE.—Each pension
plan maintained by an employer shall benefit all employees
of the employer.
‘‘(b) EXCLUSION
OF CERTAIN EMPLOYEES.—For
purposes of this section, there shall be excluded from
consideration—
‘‘(1) employees who are included in a unit of
employees covered by an agreement which, as deter-
mined in accordance with regulations issued by the
Secretary, constitutes a collective bargaining agree-
ment between employee representatives and one or
more employers, if there is evidence that retirement
benefits were the subject of good faith bargaining
between such employee representatives and such em-
ployer or employers,
‘‘(2) in the case of a trust established or main-
tained pursuant to an agreement which, as deter-
mined in accordance with regulations issued by the
Secretary, constitutes a collective bargaining agree-
ment between airline pilots represented in accord-
ance with title II of the Railway Labor Act and one
or more employers, all employees not covered by
such agreement, and
‘‘(3) employees who are nonresident aliens and
who receive no earned income (within the meaning
of section 911(d)(2) of the Internal Revenue Code of
1986) from the employer which constitutes income
from sources within the United States (within the
meaning of section 861(a)(3) of such Code).
Paragraph (1) shall not apply with respect to coverage of
employees under a plan pursuant to an agreement under
such paragraph. Paragraph (2) shall not apply in the case
of a plan which provides contributions or benefits for em-
ployees whose principal duties are not customarily per-
formed aboard aircraft in flight.
‘‘(c) EXCLUSION OF EMPLOYEES NOT MEETING AGE
AND SERVICE REQUIREMENTS.—
‘‘(1) IN GENERAL.—If a plan—
‘‘(A) prescribes, consistent with section
202(a), minimum age and service requirements
as a condition of participation, and
‘‘(B) excludes all employees not meeting
such requirements from participation,
then such employees shall be excluded from consider-
ation for purposes of this section.
‘‘(2) REQUIREMENTS MAY BE MET SEPARATELY
WITH RESPECT TO EXCLUDED GROUP.—If employees
not meeting the minimum age or service require-
ments of section 202(a)(1) (without regard to sub-
paragraph (B) thereof) are covered under a plan of
the employer which meets the requirements of sub-
section (a) separately with respect to such employ-
ees, such employees may be excluded from consider-
ation in determining whether any plan of the em-
ployer meets the requirements of subsection (a).
‘‘(3) REQUIREMENTS NOT TREATED AS BEING
MET BEFORE ENTRY DATE.—An employee shall not
be treated as meeting the age and service require-
ments described in this subsection until the first
date on which, under the plan, any employee with
the same age and service would be eligible to com-
mence participation in the plan.
‘‘(d) LINE OF BUSINESS EXCEPTION.—
‘‘(1) IN GENERAL.—If, under section 414(r) of
the Internal Revenue Code of 1986, an employer is
treated as operating separate lines of business for a
year, the employer may apply the requirements of
this section for such year separately with respect to
employees in each separate line of business.
‘‘(2) PLAN
MUST
BE
NONDISCRIMINATORY.—
Paragraph (1) shall not apply with respect to any
plan maintained by an employer unless such plan
benefits such employees as qualify under a classifica-
tion set up by the employer and found by the Sec-
retary of the Treasury not to be discriminatory in
favor of highly compensated employees.
‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) HIGHLY COMPENSATED EMPLOYEE.—The
term ‘highly compensated employee’ has the mean-
ing given such term by section 414(q) of the Inter-
nal Revenue Code of 1986.
‘‘(2) AGGREGATION RULES.—An employer may
elect to designate—
‘‘(A) 2 or more trusts,
‘‘(B) 1 or more trusts and 1 or more annu-
ity plans, or
‘‘(C) 2 or more annuity plans,
as part of 1 plan to determine whether the require-
ments of this section are met with respect to such
plan.
‘‘(3) SPECIAL
RULES
FOR
CERTAIN
DISPOSI-
TIONS OR ACQUISITIONS.—
‘‘(A) IN GENERAL.—If a person becomes,
or ceases to be, a member of a group described
in subsection (b), (c), (m), or (o) of section 414
of such Code, then the requirements of this sec-
tion shall be treated as having been met during
the transition period with respect to any plan
covering employees of such person or any other
member of such group if—
‘‘(i) such requirements were met im-
mediately before each such change, and
‘‘(ii) the coverage under such plan is
not significantly changed during the transi-
tion period (other than by reason of the
change in members of a group) or such
plan meets such other requirements as the
Secretary of the Treasury may prescribe
by regulation.
‘‘(B) TRANSITION PERIOD.—For purposes
of subparagraph (A), the term ‘transition pe-
riod’ means the period—
‘‘(i) beginning on the date of the
change in members of a group, and
‘‘(ii) ending on the last day of the 1st
plan year beginning after the date of such
change.
‘‘(4) ELIGIBILITY
TO
CONTRIBUTE.—In the
case of contributions which are subject to section
401(k) or 401(m) of the Internal Revenue Code of
1986, employees who are eligible to contribute (or
elect to have contributions made on their behalf)
shall be treated as benefiting under the plan.
‘‘(5) REGULATIONS.—The Secretary of the
Treasury shall prescribe such regulations as may be
necessary or appropriate to carry out the purposes
of this section.’’
(b) EMPLOYER MAY NOT REQUEST EMPLOYEE TO
WAIVE RIGHTS.—Section 203 of such Act (29 U.S.C.
1053) is amended by adding at the end the following new
subsection:
‘‘(f) An employer may not request an employee to
waive any right of coverage under, or participation in, any
pension plan which is granted by this title.’’
SEC. 102. MINIMUM PARTICIPATION REQUIREMENTS.
(a) IN GENERAL.—Sections 202(a)(3), 203(b)(2),
and 204(b)(4) of the Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1052(a)(3), 1053(b)(2), and
1054(b)(4)) are each amended by striking ‘‘1,000 hours’’
each place it appears and inserting ‘‘750 hours’’.
(b) CONFORMING AMENDMENTS.—
(1) Sections 202(a)(3)(D), 203(b)(2)(D), and
204(b)(4)(E) 
(29 
U.S.C. 
1052(a)(3)(D),
1053(b)(2)(D), and 1054(b)(4)(E)) are each amend-
ed by striking ‘‘125 days’’ and inserting ‘‘94 days’’.
(2) Sections 202(b)(5)(B) and 203(b)(3)(E)(ii)
(29 U.S.C. 1052(b)(5)(B) and 1053(b)(3)(E)(ii))
are each amended by striking ‘‘501 hours’’ and in-
serting ‘‘376 hours’’.
(3) 
Section 
203(b)(3)(A) 
(29 
U.S.C.
1053(b)(3)(A)) is amended by striking ‘‘500 hours’’
and inserting ‘‘375 hours’’.
SEC. 103. FASTER VESTING OF BENEFITS UNDER DEFINED
CONTRIBUTION PLANS.
Paragraph (2) of section 203(a) of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C.
1053(a)) is amended by striking subparagraphs (A) and
(B) and inserting the following:
‘‘(A) A plan satisfies the requirements of
this subparagraph if an employee has a non-
forfeitable right to 100 percent of the employ-
ee’s accrued benefit derived from employer
contributions—
‘‘(i) in the case of a defined benefit
plan, as of completion by the employee of
at least 5 years of service, or
‘‘(ii) in the case of a defined contribu-
tion plan, as of completion by the employee
of at least 3 years of service.
‘‘(B) A plan satisfies the requirements of
this subparagraph if an employee has a non-
forfeitable right to a percentage of the employ-
ee’s accrued benefit derived from employer con-
tributions determined under the applicable table
set forth in clause (i) or (ii).
‘‘(i) In the case of a defined benefit
plan, the applicable table is the following:
The nonforfeitable
‘‘Years of service:
percentage is:
3 .......................................................................................
4 .......................................................................................
5 .......................................................................................
6 .......................................................................................
7 or more ..........................................................................
100.
‘‘(ii) In the case of a defined contribu-
tion plan, the applicable table is the fol-
lowing:
The nonforfeitable
‘‘Years of service:
percentage is:
1 .......................................................................................
2 .......................................................................................
3 .......................................................................................
4 .......................................................................................
5 or more ..........................................................................
100.’’.
SEC. 104. MODEL SMALL EMPLOYER GROUP PENSION
PLAN.
(a) IN GENERAL.—Section 206 of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 1056)
is amended by adding at the end the following new sub-
section:
‘‘(g) MODEL SIMPLIFIED GROUP PENSION PLANS.—
‘‘(1) ESTABLISHMENT OF MODEL PLAN.—The
Secretary, in consultation with the Secretary of the
Treasury, shall prescribe by regulations one or more
model simplified group pension plans which would—
‘‘(A) provide simplicity and minimal ad-
ministrative responsibilities to employers and
provide adequate retirement benefits to employ-
ees upon adoption by an employer, including
models which could be established by a group of
small employers, an employee association, an
employer association, or a financial institution,
‘‘(B) cover all employees of the employer,
‘‘(C) accept contributions from successive
employers,
‘‘(D) readily permit and accept rollovers to
and from other qualified plans (as defined in
section 203(e)(2)), and
‘‘(E) constitute a plan meeting the require-
ments of this Act and Internal Revenue Code of
1986.
In devising a model pension plan, the Secretary shall
consider the adequacy of existing simplified em-
ployee pension plan alternatives and may make rec-
ommendations to adopt such plans as model sim-
plified plans.
‘‘(2) ADVERTISEMENT OF MODEL PLAN.—The
Secretary, in consultation with the Secretary of the
Treasury and the Administrator of the Small Busi-
ness Administration, shall advertise the model plans
developed pursuant to paragraph (1), including
through contracts (to the extent provided in appro-
priation Acts) with applicable organizations, to en-
sure that small employers and their employees are
apprised of the availability of administratively simple
single and group pension plans.’’.
(b) EXEMPTION OF PLAN SPONSOR FROM FIDU-
CIARY LIABILITY.—Section 404(a) of such Act (29 U.S.C.
1104(a)) is amended by adding at the end the following
new paragraph:
‘‘(3) A plan sponsor of an employee benefit plan shall
not be liable under this part in connection with such plan
for any act or practice by such plan sponsor consistent
with the requirements of such plan if such plan conforms
to the terms of a model simplified group pension plan pre-
scribed pursuant to section 206(g).’’.
(c) INITIAL REGULATIONS.—Regulations under sec-
tion 206(g) of the Employee Retirement Income Security
Act of 1974 (added by this section) for the first model
simplified pension plans shall be issued within 12 months
of the date of the enactment of this Act.
(d) STUDY.—Not later than 3 years after the date
of the enactment of this Act, the Secretary of Labor and
the Secretary of the Treasury shall conduct a joint study
to determine the feasibility of permitting non-highly com-
pensated employees whose employer does not cover them
under a pension plan, and other non-covered individuals,
to seek an automatic payroll deduction or other deferral
mechanism to make contributions to a pension plan con-
forming to the the requirements of a model simplified
group pension plan developed pursuant to section 206(g)
of the Employee Retirement Income Security Act of 1974
or to similar pension plans. Such Secretaries shall submit
a joint report to the Congress describing the results of
such study and making such recommendations as the Sec-
retaries determine necessary or appropriate.
SEC. 105. ENFORCEMENT UNDER ERISA OF REQUIREMENTS
FOR SIMPLIFIED EMPLOYEE PENSIONS.
Subtitle A of title III of the Employee Retirement
Income Security Act of 1974 is amended by adding after
section 3004 (29 U.S.C. 1204) the following new section:
‘‘TREATMENT OF SIMPLIFIED EMPLOYEE PENSIONS
‘‘SEC. 3005. For purposes of part 5 of subtitle B of
title I, the requirements of section 408(k) of the Internal
Revenue Code of 1986 relating to simplified employee pen-
sions (as defined in section 408(k)(1) of such Code) shall
be treated as requirements of title I applicable to employee
pension benefit plans (as defined in section 3(2)) which
are such simplified employee pensions.’’.
TITLE II—IMPROVED PENSION
PROTECTIONS FOR WOMEN
SEC. 201. ELIMINATION OF INTEGRATION WITH WORKERS’
COMPENSATION AND SIMILAR BENEFITS.
Section 206 of the Employee Retirement Income Se-
curity Act of 1974 (as amended by section 104(a)) is
amended further by adding at the end the following new
subsection:
‘‘(h) INTEGRATION WITH WORKERS’ COMPENSATION
AND SIMILAR BENEFITS PRECLUDED.—Benefits under an
employee pension benefit plan may not vary based on the
amount of benefits received by a participant or beneficiary
under an applicable worker’s compensation law, unemploy-
ment compensation law, or disability insurance law, or on
whether the participant or beneficiary is entitled to such
benefits.’’.
SEC. 202. SPOUSAL CONSENT REQUIRED FOR DISTRIBU-
TIONS 
FROM 
DEFINED 
CONTRIBUTION
PLANS.
(a) IN GENERAL.—Section 205(b) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1055(b)) is amended to read as follows:
‘‘(b)(1) This section shall apply to any defined benefit
plan and to any individual account plan.
‘‘(2) This section shall not apply to a plan which the
Secretary of the Treasury or his delegate has determined
is a plan described in section 404(c) of the Internal Rev-
enue Code of 1986 (or a continuation thereof) in which
participation is substantially limited to individuals who,
before January 1, 1976, ceased employment covered by
the plan.’’
(b) HARDSHIP DISTRIBUTION.—Section 205 of such
Act (29 U.S.C. 1055) is amended by adding at the end
the following new subsection:
‘‘(m) This section shall not apply to a hardship dis-
tribution under section 401(k)(2)(B)(i)(IV) of the Internal
Revenue Code of 1986.’’
(c) SPECIAL RULE FOR CASH-OUTS.—Section 205(g)
of such Act (29 U.S.C. 1055(g)) is amended by adding
at the end the following new paragraph:
‘‘(4) SPECIAL RULE FOR DEFINED CONTRIBU-
TION PLANS.—
‘‘(A) IN GENERAL.—In the case of an indi-
vidual account plan, notwithstanding paragraph
(2), if the present value of the qualified joint
and survivor annuity or the qualified preretire-
ment survivor annuity exceeds $10,000, the
plan may immediately distribute 50 percent of
the present value of such annuity to each
spouse, subject to the requirements of section
203(f) as if each spouse were a participant.
‘‘(B) EXCEPTION.—The plan may dis-
tribute a different percentage of the present
value of an annuity to each spouse if a court
order or contractual agreement between the
spouses provides for such different percentage.’’
SEC. 203. MODIFICATIONS OF JOINT AND SURVIVOR ANNU-
ITY REQUIREMENTS.
(a) AMOUNT OF ANNUITY.—
(1) IN
GENERAL.—Paragraph (1) of section
205(a) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1055(a)) is amended by in-
serting ‘‘or, at the election of the participant, shall
be provided in the form of a qualified joint and 75
percent survivor annuity’’ after ‘‘survivor annuity,’’.
(2) DEFINITION.—Subsection (d) of section 205
of such Act (29 U.S.C. 1055) is amended—
(A) by redesignating paragraphs (1) and
(2) as subparagraphs (A) and (B), respectively,
(B) by inserting ‘‘(1)’’ after ‘‘(d)’’, and
(C) by adding, after subparagraph B, the
following new paragraph:
‘‘(2) For purposes of this section, the term ‘qualified
joint and 75 percent survivor annuity’ means a joint and
survivor annuity under which the survivor annuity for the
life of the surviving spouse is equal to at least 75 percent
of the amount of the annuity which is payable during the
joint lives of the participant and spouse.’’
(3) CONFORMING AMENDMENTS.—
(A) Paragraph (1) of section 205(c) of
such Act (29 U.S.C. 1055) is amended by in-
serting ‘‘or qualified joint and 75 percent sur-
vivor annuity’’ after ‘‘qualified joint and sur-
vivor annuity’’.
(B) Subsection (e)(1) of such Act is
amended by inserting ‘‘or, if the participant has
so elected, a qualified joint and 75 percent sur-
vivor annuity’’ after ‘‘qualified joint and sur-
vivor annuity’’ each time it appears.
(b) ILLUSTRATION REQUIREMENT.—Clause (i) of
section 
205(c)(3)(A) 
of 
such 
Act 
(29 
U.S.C.
1055(c)(3)(A)) is amended to read as follows:
‘‘(i) the terms and conditions of each qualified
joint and survivor annuity and qualified joint and 75
percent survivor annuity offered, accompanied by an
illustration of the benefits under each such annuity
for the particular participant and spouse and an ac-
knowledgement form to be signed by the participant
and the spouse that they have read and considered
the illustration before any form of retirement benefit
is chosen.’’.
SEC. 204. DIVISION OF PENSION BENEFITS UPON DIVORCE.
(a) IN GENERAL.—Section 206(d)(3) of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1056(d)(3)) is amended by redesignating subpara-
graph (N) as subparagraph (O) and by inserting after
subparagraph (M) the following new subparagraph:
‘‘(N) SPECIAL
RULES
AND
PROCEDURES
FOR DOMESTIC RELATIONS ORDERS NOT SPECI-
FYING DIVISION OF PENSION BENEFITS.—
‘‘(i) IN
GENERAL.—In any case in
which—
‘‘(I) a domestic relations order
(including an annulment or other
order of marital dissolution) relates to
provision of marital property with re-
spect to a marriage of at least 5 years
duration between an individual who is
a participant in a pension plan and
such individual’s former spouse,
‘‘(II) such order, and all prior or-
ders (if any) described in subclause
(I) relating to such marriage, do not
specifically provide that pension bene-
fits were considered by the parties
and that no division of such benefits
is intended,
‘‘(III) such order is not a quali-
fied domestic relations order (as de-
termined without regard to this sub-
paragraph) and there is no other prior
qualified 
domestic 
relations 
order
issued in connection with the dissolu-
tion of the marriage to which such
order relates, and
‘‘(IV) the former spouse notifies
the plan within the period prescribed
under clause (vii) that the former
spouse is entitled to benefits under
the plan in accordance with the provi-
sions of this subparagraph,
such domestic relations order shall be
treated as a qualified domestic relations
order for purposes of this paragraph.
‘‘(ii) AMOUNT OF BENEFIT.—Any do-
mestic relations order treated as a quali-
fied domestic relations order under clause
(i) shall be treated as specifying that the
former spouse is entitled to the applicable
percentage of the marital share of the par-
ticipant’s accrued benefit.
‘‘(iii) MARITAL SHARE.—For purposes
of clause (ii), the marital share of a par-
ticipant’s accrued benefit is an amount
equal to the product of—
‘‘(I) such benefit as of the date
of the first payment under the plan
(to the extent such accrued benefit is
vested on the date of the dissolution
of the marriage or any later date),
and
‘‘(II) a fraction, the numerator of
which is the period of participation by
the participant under the plan start-
ing with the date of marriage and
ending with the date of dissolution of
marriage, and the denominator of
which is the total period of participa-
tion by the participant under the plan.
‘‘(iv) 
APPLICABLE
PERCENTAGE.—
For purposes of clause (ii), the applicable
percentage is—
‘‘(I) except as provided in sub-
clause (II), 50 percent, and
‘‘(II) in the case of a participant
who fails to provide the plan with no-
tice of a domestic relations order
within the time prescribed under
clause (v), 67 percent.
‘‘(v) NOTICE BY PARTICIPANT.—Each
participant in a pension plan shall, within
60 days after the dissolution of the mar-
riage of the participant—
‘‘(I) notify the plan administrator
of the plan of such dissolution, and
‘‘(II) provide to the plan adminis-
trator a copy of the domestic relations
order (including an annulment or
other order of marital dissolution)
providing for such dissolution and the
last known address of the partici-
pant’s former spouse.
‘‘(vi) NOTICE
BY
PLAN
ADMINIS-
TRATOR.—Each plan administrator receiv-
ing notice under clause (v) shall promptly
notify the former spouse of a participant of
such spouse’s rights under this subpara-
graph, including the time period within
which such spouse is required to notify the
plan of the spouse’s intention to claim
rights under this subparagraph.
‘‘(vii) NOTICE BY FORMER SPOUSE.—
A former spouse may notify the plan ad-
ministrator of such spouse’s intent to claim
rights under this subparagraph at any time
before the last day of the 1-year period fol-
lowing receipt of notice under clause (vi).
‘‘(viii) COORDINATION
WITH
PLAN
PROCEDURES.—The determination under
subparagraph (G)(i)(II) with respect to a
domestic relations order to which this sub-
paragraph applies shall be made within a
reasonable period of time after the plan
administrator receives the notice described
in clause (vii).
‘‘(ix) INTERPRETATION AS QUALIFIED
DOMESTIC RELATIONS ORDER.—Each plan
shall establish reasonable rules for deter-
mining how any such deemed domestic re-
lations order is to be interpreted under the
plan so as to constitute a qualified domes-
tic relations order that satisfies subpara-
graphs (C) through (E) (and a copy of
such rules shall be provided to such former
spouse promptly after delivery of the di-
vorce decree). Such rules—
‘‘(I) may delay the effect of such
an order until the earlier of the date
the participant is fully vested or has
terminated employment,
‘‘(II) may allow the former
spouse to be distributed immediately,
‘‘(III) shall permit the former
spouse to be paid not later than the
earliest retirement age under the plan
or the participant’s death,
‘‘(IV) may require the submitter
of the divorce decree to present a
marriage certificate or other evidence
of the marriage date to assist in ben-
efit calculations, and
‘‘(V) may conform to the rules
applicable to qualified domestic rela-
tions orders regarding form or type of
benefit.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply with respect to notifications made
by former spouses pursuant to section 206(d)(3)(N)(vii)
of the Employee Retirement Income Security Act of 1974
after December 31, 2001.
SEC. 205. PERIODS OF FAMILY AND MEDICAL LEAVE
TREATED AS HOURS OF SERVICE FOR PEN-
SION PARTICIPATION AND VESTING.
(a) PARTICIPATION.—
(1) IN
GENERAL.—Paragraph (3) of section
202(a) of the Employee Retirement Income Security
Act of 1974 (relating to minimum participation
standards) is amended by adding at the end the fol-
lowing new subparagraph:
‘‘(E)(i) For purposes of this subsection, in the case
of an individual who is absent from work on leave required
to be given to such individual under the Family and Med-
ical Leave Act of 1993, the plan shall treat as hours of
service—
‘‘(I) the hours of service which otherwise would
normally have been credited to such individual but
for such absence, or
‘‘(II) in any case in which the plan is unable to
determine the hours described in subclause (I), 8
hours of service per day of absence.
‘‘(ii) The hours described in clause (i) shall be treated
as hours of service as provided in this subparagraph—
‘‘(I) only in the year in which the absence from
work begins, if section 203(b)(2)(E)(ii)(I) requires
hours to be credited to the year in which the absence
from work begins, or
‘‘(II) in any other case, in the immediately fol-
lowing year.’’
(2) COORDINATION WITH TREATMENT OF MA-
TERNITY AND PATERNITY ABSENCES UNDER BREAK
IN SERVICE RULES.—Subparagraph (A) of section
202(b)(5) of such Act is amended by adding at the
end of clause (i) the following new sentence: ‘‘The
preceding sentence shall apply to an absence from
work only if no part of such absence is required to
be given under the Family and Medical Leave Act
of 1993.’’
(b) VESTING.—
(1) IN
GENERAL.—Paragraph (2) of section
203(b) of such Act (relating to minimum vesting
standards) is amended by adding at the end the fol-
lowing new subparagraph:
‘‘(E)(i) For purposes of this subsection, in the case
of an individual who is absent from work on leave required
to be given to such individual under the Family and Med-
ical Leave Act of 1993, the plan shall treat as hours of
service—
‘‘(I) the hours of service which otherwise would
normally have been credited to such individual but
for such absence, or
‘‘(II) in any case in which the plan is unable to
determine the hours described in subclause (I), 8
hours of service per day of absence.
‘‘(ii) The hours described in clause (i) shall be treated
as hours of service as provided in this subparagraph—
‘‘(I) only in the year in which the absence from
work begins, if the participant’s rights in his ac-
crued benefit derived from employer contributions
are to any extent not nonforfeitable and the partici-
pant would have a year of service solely because the
period of absence is treated as hours of service as
provided in clause (i); or
‘‘(II) in any other case, in the immediately fol-
lowing year.’’
(2) COORDINATION WITH TREATMENT OF MA-
TERNITY AND PATERNITY ABSENCES UNDER BREAK
IN
SERVICE
RULES.—Clause 
(i) 
of 
section
203(b)(3)(E) of such Act is amended by adding at
the end of clause (i) the following new sentence:
‘‘The preceding sentence shall apply to an absence
from work only if no part of such absence is re-
quired to be given under the Family and Medical
Leave Act of 1993.’’
(c) APPLICATION TO CURRENT EMPLOYEES.—The
amendments made by this section shall not apply to any
employee who does not have at least 1 hour of service in
any plan year beginning after December 31, 2001.
SEC. 206. RIGHT OF SPOUSE TO KNOW DISTRIBUTION IN-
FORMATION.
Paragraph (3) of section 205(c) of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C.
1055(c)(3)) is amended by adding at the end the following
new subparagraph:
‘‘(C) EXPLANATION TO SPOUSE.—At the
time a plan provides a participant with a writ-
ten explanation under subparagraph (A) or (B),
such plan shall provide a copy of such expla-
nation to such participant’s spouse. If the last
known address of the spouse is the same as the
last known address of the participant, the re-
quirement of the preceding sentence shall be
treated as met if the copy referred to in the
preceding sentence is included in a single mail-
ing made to such address and addressed to both
such participant and spouse.’’.
(d) REPEAL
OF
UNNECESSARY
SUPPLEMENTAL
SBP.—(1) Subchapter III of chapter 73 of title 10,
United States Code, is repealed.
(2) The table of subchapters at the beginning of such
chapter is amended by striking the item relating to sub-
chapter III.
(e) EFFECTIVE DATE.—The amendments made by
this section shall take effect on October 1, 2001, and shall
apply with respect to annuity payments for months begin-
ning on or after that date.
SEC. 208. SURVIVOR ANNUITIES FOR WIDOWS, WIDOWERS,
AND FORMER SPOUSES OF FEDERAL EM-
PLOYEES WHO DIE BEFORE ATTAINING AGE
FOR 
DEFERRED 
ANNUITY 
UNDER 
CIVIL
SERVICE RETIREMENT SYSTEM.
(a) BENEFITS FOR WIDOW OR WIDOWER.—Section
8341(f) of title 5, United States Code, is amended—
(1) in the matter preceding paragraph (1) by—
(A) by inserting ‘‘a former employee sepa-
rated from the service with title to deferred an-
nuity from the Fund dies before having estab-
lished a valid claim for annuity and is survived
by a spouse, or if’’ before ‘‘a Member’’; and
(B) by inserting ‘‘of such former employee
or Member’’ after ‘‘the surviving spouse’’;
(2) in paragraph (1)—
(A) by inserting ‘‘former employee or’’ be-
fore ‘‘Member commencing’’; and
(B) by inserting ‘‘former employee or’’ be-
fore ‘‘Member dies’’; and
(3) in the undesignated sentence following para-
graph (2)—
(A) in the matter preceding subparagraph
(A) by inserting ‘‘former employee or’’ before
‘‘Member’’; and
(B) in subparagraph (B) by inserting
‘‘former employee or’’ before ‘‘Member’’.
(b) BENEFITS
FOR
FORMER
SPOUSE.—Section
8341(h) of title 5, United States Code, is amended—
(1) in paragraph (1)—
(A) by redesignating such paragraph as
paragraph (1)(A); and
(B) by adding at the end the following:
‘‘(B) Subject to paragraphs (2) through (5) of this
subsection, a former spouse of a former employee who dies
after having separated from the service with title to a de-
ferred annuity under section 8338(a) but before having
established a valid claim for annuity is entitled to a sur-
vivor annuity under this subsection, if and to the extent
expressly provided for in an election under section
8339(j)(3) of this title, or in the terms of any decree of
divorce or annulment or any court order or court-approved
property settlement agreement incident to such decree.’’;
and
(2) in paragraph (2)—
(A) in subparagraph (A)(ii) by striking ‘‘or
annuitant,’’ and inserting ‘‘annuitant, or former
employee’’; and
(B) in subparagraph (B)(iii) by inserting
‘‘former employee or’’ before ‘‘Member’’.
(c) PROTECTION OF SURVIVOR BENEFIT RIGHTS.—
Section 8339(j)(3) of title 5, United States Code, is
amended by adding at the end the following: ‘‘The Office
shall provide by regulation for the application of this sub-
section to the widow, widower, or surviving former spouse
of a former employee who dies after having separated from
the service with title to a deferred annuity under section
8338(a) but before having established a valid claim for
annuity.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act and shall apply only in the case of a former
employee who dies on or after such date.
SEC. 209. ORDER OF PRECEDENCE FOR DISPOSITION OF
AMOUNTS REMAINING IN THE THRIFT SAV-
INGS ACCOUNT OF A FEDERAL EMPLOYEE
(OR FORMER EMPLOYEE) WHO DIES BEFORE
MAKING AN EFFECTIVE ELECTION CONTROL-
LING SUCH DISPOSITION.
(a) IN GENERAL.—Section 8433(e) of title 5, United
States Code, is amended—
(1) by striking ‘‘(e)’’ and inserting ‘‘(e)(1)’’;
(2) by striking all that follows ‘‘paid’’ and in-
serting ‘‘in accordance with paragraph (2).’’; and
(3) by adding at the end the following:
‘‘(2) An amount under paragraph (1) shall be paid
in a manner consistent with the provisions of section
8424(d), except that, in applying the order of precedence
under such provisions—
‘‘(A) the widow or widower of the decedent shall
be the first party entitled to receive (instead of any
designated beneficiary); and
‘‘(B) if there is no widow or widower, the party
next entitled to receive shall be the beneficiary or
beneficiaries designated by the employee or Member
(or former employee or Member) in accordance with
the procedures that would otherwise normally apply,
subject to such additional conditions as the Execu-
tive Director shall by regulation prescribe based on
section 205(c)(2) of the Employee Retirement In-
come Security Act of 1974.’’.
(b) EFFECTIVE DATE.—This section and the amend-
ment made by this section shall take effect on the 90th
day after the date of the enactment of this Act, and shall
apply in the case of any individual who dies on or after
such 90th day.
SEC. 210. INTEREST ON AMOUNTS PAID TO MAKE UP FOR
CERTAIN CIVIL SERVICE ANNUITY BENEFITS
WRONGFULLY DENIED.
(a) IN GENERAL.—Chapter 77 of title 5, United
States Code, is amended by adding at the end the fol-
lowing:
‘‘§ 7704. Interest on amounts paid to make up for cer-
tain annuity benefits wrongfully denied
‘‘(a) In the case of an individual who, on the basis
of a timely appeal to the Merit Systems Protection Board
under section 8347(d) or 8461(e), or petition for judicial
review under section 7703 from a final order or decision
of the Board in any such appeal, is found by the relevant
authority—
‘‘(1) to have been affected by an erroneous ap-
plication or interpretation of subchapter III of chap-
ter 83, chapter 84, or any other provision of law (or
any rule or regulation relating thereto), and
‘‘(2) to be entitled to receive an amount equal
to all or any part of an annuity not paid to such in-
dividual as a result of such erroneous application or
interpretation,
the amount under paragraph (2) may, in the discretion
of such authority, be made payable with interest.
‘‘(b) Any such interest—
‘‘(1) shall be computed in such manner as the
Merit Systems Protection Board or the court (as the
case may be) considers appropriate; and
‘‘(2) shall be payable out of the Civil Service
Retirement and Disability Fund.
‘‘(c) For purposes of this section, the term ‘annuity’
means any annuity (including a survivor annuity) payable
out of the Civil Service Retirement and Disability Fund.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 8348(a)(1)(A) of title 5, United
States Code, is amended by striking ‘‘Fund;’’ and
inserting ‘‘Fund (including any interest payable
under section 7704);’’.
(2) The analysis for chapter 77 of title 5,
United States Code, is amended by adding at the
end the following:
‘‘7704. Interest on amounts paid to make up for certain annuity benefits wrong-
fully denied.’’.
SEC. 211. AMENDMENTS RELATING TO EFFECTIVE DATE
PROVISION OF THE CIVIL SERVICE RETIRE-
MENT SPOUSE EQUITY ACT OF 1984.
(a) ELIMINATION
OF CERTAIN BARS
TO ELIGI-
BILITY.—Section 4(b) of the Civil Service Retirement
Spouse Equity Act of 1984 (5 U.S.C. 8341 note) is
amended—
(1) in paragraph (1)(B)(i), by striking ‘‘after
September 14, 1978, and’’; and
(2) by repealing paragraph (4).
(b) NEW DEADLINE FOR APPLICATIONS.—
(1) IN GENERAL.—Section 4(b)(1)(B)(iv) of the
Civil Service Retirement Spouse Equity Act of 1984
is amended by striking ‘‘May 7, 1989’’ and inserting
‘‘May 7, 2002’’.
(2) AUTHORITY TO WAIVE DEADLINE.—Section
4(b) of the Civil Service Retirement Spouse Equity
Act of 1984 is amended by adding at the end the
following:
‘‘(6)(A) The Director of the Office of Personnel Man-
agement may waive the deadline under paragraph
(1)(B)(iv) in any case in which the Director determines
that the circumstances so warrant.
‘‘(B) In making a determination under this para-
graph, one of the factors which may be taken into account
is whether the individual involved has previously submitted
a timely application under this section—
‘‘(i) which was denied; but
‘‘(ii) which, based on criteria applied under this
section pursuant to changes in law subsequent to the
denial, would have been approved.’’.
TITLE III—SIMPLIFIED
INVESTMENT STANDARDS
SEC. 301. EXEMPTION FROM PROHIBITED TRANSACTION
RULES FOR EMERGENT TRANSACTIONS.
(a) AMENDMENTS TO THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974.—Section 408 of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1108) is amended by adding at the end the fol-
lowing new subsection:
‘‘(g)(1) Pursuant to regulations issued by the Sec-
retary, a transaction between an employee benefit plan
and an eligible person constituting the purchase or sale
of a financial product which is in violation of a restriction
imposed by section 406 or 407(a) shall be exempted under
subsection (a) from treatment as a violation of such re-
striction if—
‘‘(A) prior to engaging in the transaction, the
plan acquires from the eligible person a qualifying
guarantee, consisting of a letter of credit or other
form of written guarantee, issued by a bank or simi-
lar financial institution (other than the eligible per-
son requesting the exemption or an affiliate) regu-
lated and supervised by, and subject to periodic ex-
amination by, an agency of a State or of the Federal
Government, in a stated amount equal, as of the
close of business on the day preceding the trans-
action, to not less than 100 percent of the amount
of plan assets involved in the transaction, plus inter-
est on that amount at a rate determined by the par-
ties to the transaction, or in the absence of such de-
termination, an interest rate equal to the under-
payment rate defined in section 6621(a)(2) of the
Internal Revenue Code of 1986;
‘‘(B) the eligible person receives in such trans-
action not more than reasonable compensation;
‘‘(C) such transaction is expressly approved by
an independent fiduciary who has investment au-
thority with respect to the plan assets involved in
the transaction;
‘‘(D) within 60 days after the transaction, the
eligible person submits to the Secretary an applica-
tion for an exemption under subsection (a) from
such restriction;
‘‘(E) immediately after the acquisition of the fi-
nancial 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;
‘‘(F) the Secretary determines not to grant the
exemption; and
‘‘(G) the transaction is reversed within 60 days
after the date of the Secretary’s determination.
‘‘(2) For purposes of this subsection—
‘‘(A) a guarantee referred to in paragraph (1)
is ‘qualifying’ if such guarantee is irrevocable and,
under the terms of the guarantee—
‘‘(i) if the Secretary grants the exemption,
the guarantee may expire without any payments
made to the plan, and
‘‘(ii) if the Secretary determines not to
grant the exemption, the plan has the uncondi-
tional right to apply the amounts under the
guarantee to any losses suffered and to the pay-
ment of interest determined under paragraph
(1); and
‘‘(B) the term ‘eligible 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 registered
under the Investment Advisers Act of
1940,
‘‘(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’ equity
in excess of $1,000,000, and
‘‘(iii) is not described in section 411.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply with respect to transactions occur-
ring after December 31, 2001.
SEC. 302. PROHIBITED TRANSACTION EXEMPTION FOR THE
PROVISION OF INVESTMENT ADVICE.
(a) AMENDMENTS TO THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974.—
(1) IN GENERAL.—Section 408(b) of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1108(b)) is amended by adding at the end
the following new paragraph:
‘‘(14)(A) Any transaction described in subpara-
graph (B) in connection with the provision of invest-
ment advice described in section 3(21)(A)(ii), in any
case in which—
‘‘(i) the plan provides for individual ac-
counts and permits a participant or beneficiary
to exercise control over assets in his or her ac-
count,
‘‘(ii) the advice is qualified investment ad-
vice provided to a participant or beneficiary of
the plan by a fiduciary adviser in connection
with any sale, acquisition, or holding of a secu-
rity or other property for purposes of invest-
ment of plan assets, and
‘‘(iii) the requirements of subsection (g)
are met in connection with each instance of the
provision of the advice.
‘‘(B) The transactions described in this sub-
paragraph are the following:
‘‘(i) the provision of the advice to the par-
ticipant or beneficiary;
‘‘(ii) the sale, acquisition, or holding of a
security or other property (including any lend-
ing of money or other extension of credit associ-
ated with the sale, acquisition, or holding of a
security or other property) pursuant to the ad-
vice; and
‘‘(iii) the direct or indirect receipt of fees
or other compensation by the fiduciary adviser
or an affiliate thereof (or any employee, agent,
or registered representative of the fiduciary ad-
viser or affiliate) in connection with the provi-
sion of the advice.’’.
(2) REQUIREMENTS.—Section 408 of such Act
is amended further by adding at the end the fol-
lowing new subsection:
‘‘(g) REQUIREMENTS FOR EXEMPTION FROM PRO-
HIBITED TRANSACTIONS WITH RESPECT TO PROVISION
OF INVESTMENT ADVICE.—
‘‘(1) IN GENERAL.—The requirements of this
subsection are met in connection with the provision
of qualified investment advice provided to a partici-
pant or beneficiary of an employee benefit plan by
a fiduciary adviser with respect to the plan in con-
nection with any sale, acquisition, or holding of a se-
curity or other property for purposes of investment
of amounts held by the plan, if the requirements of
the following subparagraphs are met:
‘‘(A) WRITTEN DISCLOSURES.—At a time
contemporaneous with the provision of the ad-
vice in connection with the sale, acquisition, or
holding of the security or other property, the fi-
duciary adviser shall provide to the recipient of
the advice a clear and conspicuous notification,
written in a manner to be reasonably under-
stood by the average plan participant pursuant
to regulations which shall be prescribed by the
Secretary (including mathematical examples), of
the following:
‘‘(i) INTERESTS HELD BY THE FIDU-
CIARY ADVISER.—Any interest of the fidu-
ciary adviser in, or any affiliation or con-
tractual relationship of the fiduciary ad-
viser (or affiliates thereof) with any third
party having an interest in, the security or
other property.
‘‘(ii) RELATED FEES OR COMPENSA-
TION
IN
CONNECTION
WITH
THE
PROVI-
SION OF THE ADVICE.—All fees or other
compensation relating to the advice (in-
cluding 
fees 
or 
other 
compensation
itemized with respect to each security or
other property with respect to which the
advice is provided) that the fiduciary ad-
viser (or any affiliate thereof) is to receive
(including compensation provided by any
third party) in connection with the provi-
sion of the advice or in connection with the
sale, acquisition, or holding of the security
or other property.
‘‘(iii) ONGOING FEES OR COMPENSA-
TION IN CONNECTION WITH THE SECURITY
OR
PROPERTY
INVOLVED.—All fees or
other compensation that the fiduciary ad-
viser (or any affiliate thereof) is to receive,
on an ongoing basis, in connection with
any security or other property with respect
to which the fiduciary adviser gives the ad-
vice.
‘‘(iv) APPLICABLE
LIMITATIONS
ON
SCOPE OF ADVICE.—Any limitation placed
(in accordance with the requirements of
this subsection) on the scope of the advice
to be provided by the fiduciary adviser with
respect to the sale, acquisition, or holding
of the security or other property.
‘‘(v) TYPES OF SERVICES GENERALLY
OFFERED.—The types of services offered
by the fiduciary adviser in connection with
the provision of qualified investment advice
by the fiduciary adviser.
‘‘(vi) FIDUCIARY STATUS OF THE FI-
DUCIARY ADVISER.—That the fiduciary ad-
visor is a fiduciary of the plan.
‘‘(B) DISCLOSURE BY FIDUCIARY ADVISER
IN ACCORDANCE WITH APPLICABLE SECURITIES
LAWS.—The fiduciary adviser shall provide ap-
propriate disclosure, in connection with the sale,
acquisition, or holding of the security or other
property, in accordance with all applicable secu-
rities laws.
‘‘(C) TRANSACTION OCCURRING SOLELY AT
DIRECTION
OF
RECIPIENT
OF
ADVICE.—The
sale, acquisition, or holding of the security or
other property shall occur solely at the direction
of the recipient of the advice.
‘‘(D) REASONABLE COMPENSATION.—The
compensation received by the fiduciary adviser
and affiliates thereof in connection with the
sale, acquisition, or holding of the security or
other property shall be reasonable.
‘‘(E) ARM’S LENGTH TRANSACTION.—The
terms of the sale, acquisition, or holding of the
security or other property shall be at least as
favorable to the plan as an arm’s length trans-
action would be.
‘‘(2) CONTINUED AVAILABILITY OF INFORMA-
TION FOR AT LEAST 1 YEAR.—The requirements of
paragraph (1)(A) shall be deemed not to have been
met in connection with the initial or any subsequent
provision of advice described in paragraph (1) if, at
any time during the 1-year period following the pro-
vision of the advice, the fiduciary adviser fails to
maintain the information described in clauses (i)
through (iv) of subparagraph (A) in currently accu-
rate form or to make the information available, upon
request and without charge, to the recipient of the
advice.
‘‘(3) EVIDENCE OF COMPLIANCE MAINTAINED
FOR AT LEAST 6 YEARS.—A fiduciary adviser re-
ferred to in paragraph (1) who has provided advice
referred to in such paragraph shall, for a period of
not less than 6 years after the provision of the ad-
vice, maintain any records necessary for determining
whether the requirements of the preceding provisions
of this subsection and of subsection (b)(14) have
been met. A transaction prohibited under section
406 shall not be considered to have occurred solely
because the records are lost or destroyed prior to the
end of the 6-year period due to circumstances be-
yond the control of the fiduciary adviser.
‘‘(4) MODEL
DISCLOSURE
FORMS.—The Sec-
retary shall prescribe regulations setting forth model
disclosure forms to assist fiduciary advisers in com-
plying with the disclosure requirements of under this
subsection.
‘‘(5) 
EXEMPTION
FOR
EMPLOYERS
CON-
TRACTING FOR QUALIFIED INVESTMENT ADVICE.—
‘‘(A) RELIANCE
ON
CONTRACTUAL
AR-
RANGEMENTS.—Subject to subparagraph (B), a
plan sponsor or other person who is a fiduciary
(other than a fiduciary adviser) shall not be
treated as failing to meet the requirements of
this part solely by reason of the provision of
qualified investment advice (or solely by reason
of contracting for or otherwise arranging for
the provision of the investment advice), if—
‘‘(i) the advice is provided by a fidu-
ciary adviser pursuant to an arrangement
between the plan sponsor or other fidu-
ciary and the fiduciary adviser for the pro-
vision by the fiduciary adviser of qualified
investment advice, and
‘‘(ii) the terms of the arrangement re-
quire compliance by the fiduciary adviser
with the requirements of this subsection.
‘‘(B) CONTINUED DUTY FOR EMPLOYER TO
PRUDENTLY SELECT AND REVIEW FIDUCIARY
ADVISERS.—Nothing in subparagraph (A) shall
be construed to exempt a plan sponsor or other
person who is a fiduciary from any requirement
of this part for the prudent selection and peri-
odic review of a fiduciary adviser with whom
the plan sponsor or other person enters into an
arrangement for the provision of qualified in-
vestment advice. The plan sponsor or other per-
son who is a fiduciary shall not be liable under
this part with respect to the specific qualified
investment advice given by the fiduciary adviser
to any particular recipient of the advice. Pursu-
ant to regulations which shall be prescribed by
the Secretary, the fiduciary adviser shall pro-
vide appropriate disclosures to the plan sponsor
to enable the plan sponsor to fulfill its fiduciary
responsibilities under this part. In connection
with the provision of the advice by a fiduciary
adviser on an ongoing basis, such regulations
shall provide for such disclosures on at least an
annual basis.
‘‘(C) PLAN ASSETS MAY BE USED TO PAY
REASONABLE EXPENSES.—Nothing in this part
shall be construed to preclude the use of plan
assets to pay for reasonable expenses in pro-
viding qualified investment advice.
‘‘(6) ANNUAL REVIEWS BY THE SECRETARY.—
The Secretary shall conduct annual reviews of ran-
domly selected fiduciary advisers providing qualified
investment advice to participants and beneficiaries.
In the case of each review, the Secretary shall review
the following:
‘‘(A) COMPLIANCE BY ADVICE COMPUTER
MODELS WITH GENERALLY ACCEPTED INVEST-
MENT MANAGEMENT PRINCIPLES.—The extent
to which advice computer models employed by
the fiduciary adviser comply with generally ac-
cepted investment management principles.
‘‘(B) COMPLIANCE WITH DISCLOSURE RE-
QUIREMENTS.—The extent to which disclosures
provided by the fiduciary adviser have complied
with the requirements of this subsection.
‘‘(C) EXTENT
OF
VIOLATIONS.—The ex-
tent to which any violations of fiduciary duties
have occurred in connection with the provision
of the advice.
‘‘(D) 
EXTENT
OF
REPORTED
COM-
PLAINTS.—The extent to which complaints to
relevant agencies have been made in connection
with the provision of the advice.
Any proprietary information obtained by the Sec-
retary shall be treated as confidential.
‘‘(7) DUTY
OF
CONFLICTED
FIDUCIARY
AD-
VISER
TO
PROVIDE
FOR
ALTERNATIVE
INDE-
PENDENT ADVICE.—
‘‘(A) IN
GENERAL.—In connection with
any qualified investment advice provided by a
fiduciary adviser to a participant or beneficiary
regarding any security or other property, if the
fiduciary adviser—
‘‘(i) has an interest in the security or
other property, or
‘‘(ii) has an affiliation or contractual
relationship with any third party that has
an interest in the security or other prop-
erty,
the requirements of paragraph (1) shall be
treated as not met in connection with the advice
unless the fiduciary adviser has arranged, as an
alternative to the advice that would otherwise
be provided by the fiduciary advisor, for quali-
fied investment advice with respect to the secu-
rity or other property provided by at least one
alternative investment adviser meeting the re-
quirements of subparagraph (B).
‘‘(B) INDEPENDENCE
AND
QUALIFICA-
TIONS
OF
ALTERNATIVE
INVESTMENT
AD-
VISER.—Any alternative investment adviser
whose qualified investment advice is arranged
for by a fiduciary adviser pursuant to subpara-
graph (A)—
‘‘(i) shall have no material interest in,
and no material affiliation or contractual
relationship with any third party having a
material interest in, the security or other
property with respect to which the invest-
ment adviser is providing the advice, and
‘‘(ii) shall meet the requirements of a
fiduciary adviser under paragraph (8)(A),
except that an alternative investment ad-
viser may not be a fiduciary of the plan
other than in connection with the provision
of the advice.
‘‘(C) SCOPE AND FEES OF ALTERNATIVE
INVESTMENT
ADVICE.—Any qualified invest-
ment advice provided pursuant to this para-
graph by an alternative investment adviser shall
be of the same type and scope, and provided
under the same terms and conditions (including
no additional charge to the participant or bene-
ficiary), as apply with respect to the qualified
investment advice to be provided by the fidu-
ciary adviser.
‘‘(8) FIDUCIARY ADVISER DEFINED.—For pur-
poses of this subsection and subsection (b)(14)—
‘‘(A) IN
GENERAL.—The term ‘fiduciary
adviser’ means, with respect to a plan, a person
who—
‘‘(i) is a fiduciary of the plan by rea-
son of the provision of qualified investment
advice by such person to a participant or
beneficiary,
‘‘(ii) meets the qualifications of sub-
paragraph (B), and
‘‘(iii) meets the additional require-
ments of subparagraph (C).
‘‘(B) QUALIFICATIONS.—A person meets
the qualifications of this subparagraph if such
person—
‘‘(i) is registered as an investment ad-
viser under the Investment Advisers Act of
1940 (15 U.S.C. 80b–1 et seq.),
‘‘(ii) if not registered as an invest-
ment adviser under such Act by reason of
section 203A(a)(1) of such Act (15 U.S.C.
80b–3a(a)(1)), is registered under the laws
of the State in which the fiduciary main-
tains its principal office and place of busi-
ness, and, at the time the fiduciary last
filed the registration form most recently
filed by the fiduciary with such State in
order to maintain the fiduciary’s registra-
tion under the laws of such State, also
filed a copy of such form with the Sec-
retary,
‘‘(iii) is registered as a broker or deal-
er under the Securities Exchange Act of
1934 (15 U.S.C. 78a et seq.),
‘‘(iv) is a bank or similar financial in-
stitution referred to in section 408(b)(4),
‘‘(v) is an insurance company quali-
fied to do business under the laws of a
State, or
‘‘(vi) is any other comparable entity
which satisfies such criteria as the Sec-
retary determines appropriate.
‘‘(C) ADDITIONAL
REQUIREMENTS
WITH
RESPECT TO CERTAIN EMPLOYEES OR OTHER
AGENTS
OF
CERTAIN
ADVISERS.—A person
meets the additional requirements of this sub-
paragraph if every individual who is employed
(or otherwise compensated) by such person and
whose scope of duties includes the provision of
qualified investment advice on behalf of such
person to any participant or beneficiary is—
‘‘(i) a registered representative of
such person,
‘‘(ii) an individual described in sub-
clause (I), (II), or (III) of subparagraph
(A)(ii), or
‘‘(iii) such other comparable qualified
individual as may be designated in regula-
tions of the Secretary.
‘‘(9) ADDITIONAL DEFINITIONS.—For purposes
of this subsection and subsection (b)(14)—
‘‘(A) QUALIFIED INVESTMENT ADVICE.—
The term ‘qualified investment advice’ means,
in connection with a participant or beneficiary,
investment 
advice 
referred 
to 
in 
section
3(21)(A)(ii) which—
‘‘(i) consists of an individualized rec-
ommendation to the participant or bene-
ficiary with respect to the purchase, sale,
or retention of securities or other property
for the individual account of the partici-
pant or beneficiary, in accordance with
generally accepted investment management
principles, and
‘‘(ii) takes into account all investment
options under the plan.
‘‘(B) AFFILIATE.—The term ‘affiliate’ of
another entity means an affiliated person of
such entity (as defined in section 2(a)(3) of the
Investment Company Act of 1940 (15 U.S.C.
80a–2(a)(3))).
‘‘(C) 
REGISTERED
REPRESENTATIVE.—
The term ‘registered representative’ of another
entity means a person described in section
3(a)(18) of the Securities Exchange Act of
1934 (15 U.S.C. 78c(a)(18)) (substituting such
entity for the broker or dealer referred to in
such section) or a person described in section
202(a)(17) of the Investment Advisers Act of
1940 (15 U.S.C. 80b–2(a)(17)) (substituting
such entity for the investment adviser referred
to in such section).’’.
(b) ENFORCEMENT.—
(1) LIABILITY FOR BREACH.—
(A) LIABILITY IN CONNECTION WITH INDI-
VIDUAL ACCOUNT PLANS.—Section 409 of such
Act (29 U.S.C. 1109) is amended by adding at
the end the following new subsection:
‘‘(c)(1) In any case in which the provision by a fidu-
ciary adviser of qualified investment advice to a partici-
pant or beneficiary regarding any security or other prop-
erty consists of a breach described in subsection (a), the
fiduciary adviser shall be personally liable to make good
to the individual account of the participant or beneficiary
any losses to the individual account resulting from the
breach, and to restore to the individual account any profits
of the fiduciary adviser which have been made through use
of assets of the individual account by—
‘‘(A) the fiduciary adviser, or
‘‘(B) any other party with respect to whom a
material affiliation or contractual relationship of the
fiduciary adviser resulted in a violation of section
408(g)(1)(A) in connection with the advice.
‘‘(2) In the case of any action under this title by a
participant or beneficiary against a fiduciary adviser for
relief under this subsection in connection with the provi-
sion of any qualified investment advice—
‘‘(A) if the participant or beneficiary shows that
the fiduciary adviser had any interest in, or had any
affiliation or contractual relationship with a third
party having an interest in, the security or other
property, there shall be a presumption (rebuttable by
a preponderance of the evidence) that the fiduciary
adviser failed to meet the requirements of subpara-
graphs (A) and (B) of section 404(a)(1) in connec-
tion with the provision of the advice, and
‘‘(B) the dispute may be settled by arbitration,
but only pursuant to terms and conditions estab-
lished by agreement entered into voluntarily by both
parties after the commencement of the dispute.
‘‘(3) For purposes of this subsection, the terms ‘fidu-
ciary adviser’ and ‘qualified investment advice’ shall have
the meanings provided such terms in subparagraphs (A)
and (B), respectively, of section 406(g)(7).’’.
(B) LIMITATION ON EXEMPTION FROM LI-
ABILITY.—Section 403(c) of such Act (29
U.S.C. 1104(c)) is amended—
(i) by redesignating paragraph (2) as
paragraph (3) (and by adjusting the
margination of such paragraph to full
measure and adjusting the margination of
subparagraphs (A) through (B) thereof ac-
cordingly); and
(ii) by inserting after paragraph (1)
the following new paragraph:
‘‘(2)(A) In any case in which—
‘‘(i) a participant or beneficiary exercises con-
trol over the assets in his or her account by means
of a sale, acquisition, or holding of a security or
other property with regard to which qualified invest-
ment advice was provided by a fiduciary adviser, and
‘‘(ii) any transaction in connection with the ex-
ercise of such control is not a prohibited transaction
solely by reason of section 408(b)(14), paragraph
(1) shall not apply with respect to the fiduciary ad-
viser in connection with the provision of the advice.
‘‘(B) For purposes of this subsection, the terms ‘fidu-
ciary adviser’ and ‘qualified investment advice’ shall have
the meanings provided such terms in subparagraphs (A)
and (B), respectively, of section 408(g)(7).’’.
(2) ATTORNEY’S FEES.—Section 502(g) of such
Act (29 U.S.C. 1132(g)) is amended—
(A) in paragraph (1), by inserting ‘‘or (3)’’
after ‘‘paragraph (2)’’; and
(B) by adding at the end the following new
paragraph:
‘‘(3) In any action under this title by the participant
or beneficiary against a fiduciary adviser for relief under
section 409(c) in which the plaintiff prevails, the court
shall allow a reasonable attorney’s fee and costs of action
to the prevailing plaintiff.’’.
(3) APPLICABILITY OF STATE FRAUD LAWS.—
Section 514(b) of such Act (29 U.S.C. 1144(b)) is
amended—
(A) by redesignating paragraph (9) as
paragraph (10); and
(B) by inserting after paragraph (8) the
following new paragraph:
‘‘(9) Nothing in this title shall be construed to super-
sede any State action for fraud against a fiduciary adviser
for any act or failure to act by the fiduciary adviser consti-
tuting a violation of section 409(c).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to advice referred to
in section 3(21)(A)(ii) of the Employee Retirement In-
come Security Act of 1974 provided on or after January
1, 2002.
SEC. 303. PARTICIPATION OF PARTICIPANTS IN TRUSTEE-
SHIP OF DEFINED CONTRIBUTION PLANS.
(a) IN GENERAL.—Section 403(a) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1103(a)) is amended—
(1) by redesignating paragraphs (1) and (2) as
subparagraphs (A) and (B), respectively;
(2) by inserting ‘‘(1)’’ after ‘‘(a)’’; and
(3) by adding at the end the following new
paragraph:
‘‘(2)(A) Subject to subparagraph (B), the assets of
a single-employer plan which is a defined contribution plan
and under which some or all of the assets are derived from
employee contributions shall be held in trust by a joint
board of trustees, which shall consist of two or more trust-
ees representing on an equal basis the interests of the em-
ployer or employers maintaining the plan and the interests
of the participants and their beneficiaries.
‘‘(B) This paragraph shall apply for any plan year
only if a majority of the participants of the defined con-
tribution plan indicates to the plan administrator, in such
form and manner as shall be prescribed in regulations of
the Secretary, its intention to have this paragraph so
apply.
‘‘(C)(i) Except as provided in clause (ii), in any case
in which the plan is maintained pursuant to one or more
collective bargaining agreements between one or more em-
ployee organizations and one or more employers, the trust-
ees representing the interests of the participants and their
beneficiaries shall be designated by such employee organi-
zations.
‘‘(ii) Clause (i) shall not apply with respect to a plan
described in such clause if the employee organization (or
all employee organizations, if more than one) referred to
in such clause file with the Secretary, in such form and
manner as shall be prescribed in regulations of the Sec-
retary, a written waiver of their rights under clause (i).
‘‘(iii) In any case in which clause (i) does not apply
with respect to a single-employer plan because the plan
is not described in clause (i) or because of a waiver filed
pursuant to clause (ii), the trustee or trustees representing
the plan administrator shall furnish such informa-
tion in writing to such participant or beneficiary.
The administrator may make a reasonable charge to
cover the cost of furnishing such information.
‘‘(2) STANDARDS AND REVIEW.—The Secretary
shall by regulation prescribe—
‘‘(A) standards which must be met by re-
quests made pursuant to this subsection, in-
cluding standards relating to relevancy and
specificity of the information requested, the
specificity by which the investment must be
identified in the request, and the reasonableness
of charges made for furnishing the information,
and
‘‘(B) procedures by which plan administra-
tors may rely on such standards in declining re-
quests for information which fail to meet such
standards, including methods for obtaining
timely and binding determinations by the Sec-
retary regarding whether such standards are
being met by particular requests.’’.
(b) ENFORCEMENT.—Section 502(c)(1) of such Act
(29 U.S.C. 1132(c)(1)) is amended by striking ‘‘section
101(e)(1)’’ and inserting ‘‘subsection (e)(1) or (f)(1) of
section 101’’.
105
‘‘(A) which by its terms requires interest
on the loan to accrue not less frequently than
monthly,
‘‘(B) which by its terms requires—
‘‘(i) repayment to begin not later than
18 months after the date of the loan, and
‘‘(ii) repayment in full not later the
date which is 36 months after the date of
the loan, and
‘‘(C) which bears interest from the date of
the loan at a rate not less than 2 percentage
points below, and not more than 2 percentage
points above, the rate for comparable United
States Treasury obligations on such date.
‘‘(3) LIMITATION ON AMOUNT OF LOANS.—The
aggregate amount of borrowings for a plan year
shall not exceed the sum of the amount of accruals
(other than contributions) during the plan year prior
to the plan year in which the loan is made.
‘‘(4) LIMITATION ON NUMBER OF LOANS.—Not
more than 3 loans to an individual under this sub-
section may be outstanding at any time.
‘‘(5) DELINQUENCIES TREATED AS DISTRIBU-
TION.—Any amount required to be paid by a partici-
pant or beneficiary under paragraph (2)(B) during