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-
mined without regard to this clause) in
connection with such securities shall be re-
duced to the extent necessary to account
for the amount to which such election ap-
plied.
‘‘(H) REGULATIONS.—The Secretary shall
prescribe regulations under this paragraph in
consultation with the Secretary of Labor.’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 401(a)(28) of such Code is
amended by adding at the end the following
new subparagraph:
‘‘(D) APPLICATION.—This paragraph shall
not apply to a plan to which paragraph (35) ap-
plies.’’.
(B) Section 409(h)(7) of such Code is
amended by inserting before the period at the
end ‘‘or subparagraph (B) or (C) of section
401(a)(35)’’.
(C) Section 4980(c)(3)(A) of such Code is
amended by striking ‘‘if—’’ and all that follows
and inserting ‘‘if the requirements of subpara-
graphs (B), (C), and (D) are met.’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2) and section 108, the amendments made by
this section shall apply to plan years beginning after
December 31, 2003, and with respect to employer
securities allocated to accounts before, on, or after
the date of the enactment of this Act.
(2) EXCEPTION.—The amendments made by
this section shall not apply to employer securities
held by an employee stock ownership plan which are
acquired before January 1, 1987.
SEC. 105. PROHIBITED TRANSACTION EXEMPTION FOR THE
PROVISION OF INVESTMENT ADVICE.
(a) AMENDMENTS TO THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974.—
(1) EXEMPTION
FROM
PROHIBITED
TRANS-
ACTIONS.—Section 408(b) of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C.
1108(b)) is amended by adding at the end the fol-
lowing 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 investment of assets of the plan is
subject to the direction of plan participants or
beneficiaries,
‘‘(ii) the advice is provided to the plan or
a participant or beneficiary of the plan by a fi-
duciary adviser in connection with any sale, ac-
quisition, or holding of a security or other prop-
erty for purposes of investment of plan assets,
and
‘‘(iii) the requirements of subsection (g)
are met in connection with the provision of the
advice.
‘‘(B) The transactions described in this sub-
paragraph are the following:
‘‘(i) the provision of the advice to the plan,
participant, 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 or in connection with a sale,
acquisition, or holding of a security or other
property pursuant to the advice.’’.
(2) REQUIREMENTS.—Section 408 of such Act
is amended further by adding at the end the fol-
lowing new subsection:
‘‘(g) REQUIREMENTS RELATING TO PROVISION OF
INVESTMENT ADVICE BY FIDUCIARY ADVISERS.—
‘‘(1) IN GENERAL.—The requirements of this
subsection are met in connection with the provision
of 
investment 
advice 
referred 
to 
in 
section
3(21)(A)(ii), provided to an employee benefit plan or
a participant or beneficiary of an employee benefit
plan by a fiduciary adviser with respect to the plan
in connection with any sale, acquisition, or holding
of a security or other property for purposes of in-
vestment of amounts held by the plan, if—
‘‘(A) in the case of the initial provision of
the advice with regard to the security or other
property by the fiduciary adviser to the plan,
participant, or beneficiary, the fiduciary adviser
provides to the recipient of the advice, at a time
reasonably contemporaneous with the initial
provision of the advice, a written notification
(which may consist of notification by means of
electronic communication)—
‘‘(i) of all fees or other compensation
relating to the advice 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,
‘‘(ii) of any material affiliation or con-
tractual relationship of the fiduciary ad-
viser or affiliates thereof in the security or
other property,
‘‘(iii) of any limitation placed on the
scope of the investment advice to be pro-
vided by the fiduciary adviser with respect
to any such sale, acquisition, or holding of
a security or other property,
‘‘(iv) of the types of services provided
by the fiduciary adviser in connection with
the provision of investment advice by the
fiduciary adviser,
‘‘(v) that the adviser is acting as a fi-
duciary of the plan in connection with the
provision of the advice, and
‘‘(vi) that a recipient of the advice
may separately arrange for the provision of
advice by another adviser, that could have
no material affiliation with and receive no
fees or other compensation in connection
with the security or other property,
‘‘(B) the fiduciary adviser provides appro-
priate disclosure, in connection with the sale,
acquisition, or holding of the security or other
property, in accordance with all applicable secu-
rities laws,
‘‘(C) the sale, acquisition, or holding oc-
curs solely at the direction of the recipient of
the advice,
‘‘(D) the compensation received by the fi-
duciary adviser and affiliates thereof in connec-
tion with the sale, acquisition, or holding of the
security or other property is reasonable, and
‘‘(E) the terms of the sale, acquisition, or
holding of the security or other property are at
least as favorable to the plan as an arm’s
length transaction would be.
‘‘(2) STANDARDS FOR PRESENTATION OF IN-
FORMATION.—
‘‘(A) IN
GENERAL.—The notification re-
quired to be provided to participants and bene-
ficiaries under paragraph (1)(A) shall be writ-
ten in a clear and conspicuous manner and in
a manner calculated to be understood by the av-
erage plan participant and shall be sufficiently
accurate and comprehensive to reasonably ap-
prise such participants and beneficiaries of the
information required to be provided in the noti-
fication.
‘‘(B) MODEL FORM FOR DISCLOSURE OF
FEES AND OTHER COMPENSATION.—The Sec-
retary shall issue a model form for the disclo-
sure of fees and other compensation required in
paragraph (1)(A)(i) which meets the require-
ments of subparagraph (A).
‘‘(3) EXEMPTION CONDITIONED ON MAKING RE-
QUIRED
INFORMATION
AVAILABLE
ANNUALLY, ON
REQUEST, 
AND
IN
THE
EVENT
OF
MATERIAL
CHANGE.—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) to the plan, participant,
or beneficiary if, at any time during the provision of
advisory services to the plan, participant, or bene-
ficiary, the fiduciary adviser fails to maintain the in-
formation described in clauses (i) through (iv) of
subparagraph (A) in currently accurate form and in
the manner described in paragraph (2) or fails—
‘‘(A) to provide, without charge, such cur-
rently accurate information to the recipient of
the advice no less than annually,
‘‘(B) to make such currently accurate in-
formation available, upon request and without
charge, to the recipient of the advice, or
‘‘(C) in the event of a material change to
the information described in clauses (i) through
(iv) of paragraph (1)(A), to provide, without
charge, such currently accurate information to
the recipient of the advice at a time reasonably
contemporaneous to the material change in in-
formation.
‘‘(4) MAINTENANCE FOR 6 YEARS OF EVIDENCE
OF COMPLIANCE.—A fiduciary adviser referred 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 advice, maintain
any records necessary for determining whether the
requirements of the preceding provisions of this sub-
section 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 beyond the con-
trol of the fiduciary adviser.
‘‘(5) EXEMPTION FOR PLAN SPONSOR AND CER-
TAIN OTHER FIDUCIARIES.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (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 re-
quirements of this part solely by reason of the
provision of investment advice referred to in
section 3(21)(A)(ii) (or solely by reason of con-
tracting for or otherwise arranging for the pro-
vision of the 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 invest-
ment advice referred to in such section,
‘‘(ii) the terms of the arrangement re-
quire compliance by the fiduciary adviser
with the requirements of this subsection,
and
‘‘(iii) the terms of the arrangement
include a written acknowledgment by the
fiduciary adviser that the fiduciary adviser
is a fiduciary of the plan with respect to
the provision of the advice.
‘‘(B) CONTINUED DUTY OF PRUDENT SE-
LECTION OF ADVISER AND PERIODIC REVIEW.—
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 periodic review of
a fiduciary adviser with whom the plan sponsor
or other person enters into an arrangement for
the provision of advice referred to in section
3(21)(A)(ii). The plan sponsor or other person
who is a fiduciary has no duty under this part
to monitor the specific investment advice given
by the fiduciary adviser to any particular recipi-
ent of the advice.
‘‘(C) AVAILABILITY OF PLAN ASSETS FOR
PAYMENT FOR ADVICE.—Nothing in this part
shall be construed to preclude the use of plan
assets to pay for reasonable expenses in pro-
viding investment advice referred to in section
3(21)(A)(ii).
‘‘(6) DEFINITIONS.—For purposes of this sub-
section and subsection (b)(14)—
‘‘(A) FIDUCIARY ADVISER.—The term ‘fi-
duciary adviser’ means, with respect to a plan,
a person who is a fiduciary of the plan by rea-
son of the provision of investment advice by the
person to the plan or to a participant or bene-
ficiary and who is—
‘‘(i) registered as an investment ad-
viser under the Investment Advisers Act of
1940 (15 U.S.C. 80b–1 et seq.) or under
the laws of the State in which the fiduciary
maintains its principal office and place of
business,
‘‘(ii) a bank or similar financial insti-
tution referred to in section 408(b)(4) or a
savings association (as defined in section
3(b)(1) of the Federal Deposit Insurance
Act (12 U.S.C. 1813(b)(1))), but only if
the advice is provided through a trust de-
partment of the bank or similar financial
institution or savings association which is
subject to periodic examination and review
by Federal or State banking authorities,
‘‘(iii) an insurance company qualified
to do business under the laws of a State,
‘‘(iv) a person registered as a broker
or dealer under the Securities Exchange
Act of 1934 (15 U.S.C. 78a et seq.),
‘‘(v) an affiliate of a person described
in any of clauses (i) through (iv), or
‘‘(vi) an employee, agent, or registered
representative of a person described in any
of clauses (i) through (v) who satisfies the
requirements 
of 
applicable 
insurance,
banking, and securities laws relating to the
provision of the advice.
‘‘(B) AFFILIATE.—The term ‘affiliate’ of
another entity means an affiliated person of the
entity (as defined in section 2(a)(3) of the In-
vestment 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 the
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
the entity for the investment adviser referred to
in such section).’’.
(b) AMENDMENTS
TO
THE INTERNAL REVENUE
CODE OF 1986.—
(1) EXEMPTION
FROM
PROHIBITED
TRANS-
ACTIONS.—Subsection (d) of section 4975 of the In-
ternal Revenue Code of 1986 (relating to exemptions
from tax on prohibited transactions) is amended—
(A) in paragraph (14), by striking ‘‘or’’ at
the end;
(B) in paragraph (15), by striking the pe-
riod at the end and inserting ‘‘; or’’; and
(C) by adding at the end the following new
paragraph:
‘‘(16) any transaction described in subsection
(f)(7)(A) in connection with the provision of invest-
ment advice described in subsection (e)(3)(B)(i), in
any case in which—
‘‘(A) the investment of assets of the plan
is subject to the direction of plan participants
or beneficiaries,
‘‘(B) the advice is provided to the plan or
a participant or beneficiary of the plan by a fi-
duciary adviser in connection with any sale, ac-
quisition, or holding of a security or other prop-
erty for purposes of investment of plan assets,
and
‘‘(C) 
the 
requirements 
of 
subsection
(f)(7)(B) are met in connection with the provi-
sion of the advice.’’.
(2) ALLOWED
TRANSACTIONS
AND
REQUIRE-
MENTS.—Subsection (f) of such section 4975 (relat-
ing to other definitions and special rules) is amended
by adding at the end the following new paragraph:
‘‘(7) PROVISIONS
RELATING
TO
INVESTMENT
ADVICE PROVIDED BY FIDUCIARY ADVISERS.—
‘‘(A) TRANSACTIONS ALLOWABLE IN CON-
NECTION WITH INVESTMENT ADVICE PROVIDED
BY FIDUCIARY ADVISERS.—The transactions re-
ferred to in subsection (d)(16), in connection
with the provision of investment advice by a fi-
duciary adviser, are the following:
‘‘(i) the provision of the advice to the
plan, participant, or beneficiary;
‘‘(ii) the sale, acquisition, or holding
of a security or other property (including
any lending of money or other extension of
credit associated with the sale, acquisition,
or holding of a security or other property)
pursuant to the advice; and
‘‘(iii) the direct or indirect receipt of
fees or other compensation by the fiduciary
adviser or an affiliate thereof (or any em-
ployee, agent, or registered representative
of the fiduciary adviser or affiliate) in con-
nection with the provision of the advice or
in connection with a sale, acquisition, or
holding of a security or other property pur-
suant to the advice.
‘‘(B) REQUIREMENTS RELATING TO PROVI-
SION OF INVESTMENT ADVICE BY FIDUCIARY
ADVISERS.—The requirements of this subpara-
graph (referred to in subsection (d)(16)(C)) are
met in connection with the provision of invest-
ment advice referred to in subsection (e)(3)(B),
provided to a plan or a participant or bene-
ficiary of a plan by a fiduciary adviser with re-
spect to the plan in connection with any sale,
acquisition, or holding of a security or other
property for purposes of investment of amounts
held by the plan, if—
‘‘(i) in the case of the initial provision
of the advice with regard to the security or
other property by the fiduciary adviser to
the plan, participant, or beneficiary, the fi-
duciary adviser provides to the recipient of
the advice, at a time reasonably contem-
poraneous with the initial provision of the
advice, a written notification (which may
consist of notification by means of elec-
tronic communication)—
‘‘(I) of all fees or other com-
pensation relating to the advice that
the fiduciary adviser or any affiliate
thereof is to receive (including com-
pensation 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,
‘‘(II) of any material affiliation
or contractual relationship of the fidu-
ciary adviser or affiliates thereof in
the security or other property,
‘‘(III) of any limitation placed on
the scope of the investment advice to
be provided by the fiduciary adviser
with respect to any such sale, acquisi-
tion, or holding of a security or other
property,
‘‘(IV) of the types of services
provided by the fiduciary adviser in
connection with the provision of in-
vestment advice by the fiduciary ad-
viser,
‘‘(V) that the adviser is acting as
a fiduciary of the plan in connection
with the provision of the advice, and
‘‘(VI) that a recipient of the ad-
vice may separately arrange for the
provision of advice by another adviser,
that could have no material affiliation
with and receive no fees or other com-
pensation in connection with the secu-
rity or other property,
‘‘(ii) the fiduciary adviser provides ap-
propriate disclosure, in connection with the
sale, acquisition, or holding of the security
or other property, in accordance with all
applicable securities laws,
‘‘(iii) the sale, acquisition, or holding
occurs solely at the direction of the recipi-
ent of the advice,
‘‘(iv) the compensation received by the
fiduciary adviser and affiliates thereof in
connection with the sale, acquisition, or
holding of the security or other property is
reasonable, and
‘‘(v) the terms of the sale, acquisition,
or holding of the security or other property
are at least as favorable to the plan as an
arm’s length transaction would be.
‘‘(C) STANDARDS FOR PRESENTATION OF
INFORMATION.—The notification required to be
provided to participants and beneficiaries under
subparagraph (B)(i) shall be written in a clear
and conspicuous manner and in a manner cal-
culated to be understood by the average plan
participant and shall be sufficiently accurate
and comprehensive to reasonably apprise such
participants and beneficiaries of the information
required to be provided in the notification.
‘‘(D) EXEMPTION CONDITIONED ON MAK-
ING REQUIRED INFORMATION AVAILABLE ANNU-
ALLY, ON REQUEST, AND IN THE EVENT OF MA-
TERIAL
CHANGE.—The requirements of sub-
paragraph (B)(i) shall be deemed not to have
been met in connection with the initial or any
subsequent provision of advice described in sub-
paragraph (B) to the plan, participant, or bene-
ficiary if, at any time during the provision of
advisory services to the plan, participant, or
beneficiary, the fiduciary adviser fails to main-
tain the information described in subclauses (I)
through (IV) of subparagraph (B)(i) in cur-
rently accurate form and in the manner re-
quired by subparagraph (C), or fails—
‘‘(i) to provide, without charge, such
currently accurate information to the re-
cipient of the advice no less than annually,
‘‘(ii) to make such currently accurate
information available, upon request and
without charge, to the recipient of the ad-
vice, or
‘‘(iii) in the event of a material
change to the information described in
subclauses (I) through (IV) of subpara-
graph (B)(i), to provide, without charge,
such currently accurate information to the
recipient of the advice at a time reasonably
contemporaneous to the material change in
information.
‘‘(E) MAINTENANCE FOR 6 YEARS OF EVI-
DENCE OF COMPLIANCE.—A fiduciary adviser
referred to in subparagraph (B) who has pro-
vided advice referred to in such subparagraph
shall, for a period of not less than 6 years after
the provision of the advice, maintain any
records necessary for determining whether the
requirements of the preceding provisions of this
paragraph and of subsection (d)(16) have been
met. A transaction prohibited under subsection
(c)(1) 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 cir-
cumstances beyond the control of the fiduciary
adviser.
‘‘(F) EXEMPTION FOR PLAN SPONSOR AND
CERTAIN OTHER FIDUCIARIES.—A plan sponsor
or other person who is a fiduciary (other than
a fiduciary adviser) shall not be treated as fail-
ing to meet the requirements of this section
solely by reason of the provision of investment
advice referred to in subsection (e)(3)(B) (or
solely by reason of contracting for or otherwise
arranging for the provision of the 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 invest-
ment advice referred to in such section,
‘‘(ii) the terms of the arrangement re-
quire compliance by the fiduciary adviser
with the requirements of this paragraph,
‘‘(iii) the terms of the arrangement
include a written acknowledgment by the
fiduciary adviser that the fiduciary adviser
is a fiduciary of the plan with respect to
the provision of the advice, and
‘‘(iv) the requirements of part 4 of
subtitle B of title I of the Employee Re-
tirement Income Security Act of 1974 are
met in connection with the provision of
such advice.
‘‘(G) DEFINITIONS.—For purposes of this
paragraph and subsection (d)(16)—
‘‘(i) FIDUCIARY ADVISER.—The term
‘fiduciary adviser’ means, with respect to a
plan, a person who is a fiduciary of the
plan by reason of the provision of invest-
ment advice by the person to the plan or
to a participant or beneficiary and who
is—
‘‘(I) registered as an investment
adviser under the Investment Advisers
Act of 1940 (15 U.S.C. 80b–1 et seq.)
or under the laws of the State in
which the fiduciary maintains its prin-
cipal office and place of business,
‘‘(II) a bank or similar financial
institution referred to in subsection
(d)(4) or a savings association (as de-
fined in section 3(b)(1) of the Federal
Deposit Insurance Act (12 U.S.C.
1813(b)(1))), but only if the advice is
provided through a trust department
of the bank or similar financial insti-
tution or savings association which is
subject to periodic examination and
review by Federal or State banking
authorities,
‘‘(III) an insurance company
qualified to do business under the
laws of a State,
‘‘(IV) a person registered as a
broker or dealer under the Securities
Exchange Act of 1934 (15 U.S.C. 78a
et seq.),
‘‘(V) an affiliate of a person de-
scribed in any of subclauses (I)
through (IV), or
‘‘(VI) an employee, agent, or reg-
istered representative of a person de-
scribed in any of subclauses (I)
through (V) who satisfies the require-
ments of applicable insurance, bank-
ing, and securities laws relating to the
provision of the advice.
‘‘(ii) AFFILIATE.—The term ‘affiliate’
of another entity means an affiliated per-
son of the entity (as defined in section
2(a)(3) of the Investment Company Act of
1940 (15 U.S.C. 80a–2(a)(3))).
‘‘(iii) 
REGISTERED
REPRESENTA-
TIVE.—The term ‘registered representa-
tive’ of another entity means a person de-
scribed in section 3(a)(18) of the Securi-
ties Exchange Act of 1934 (15 U.S.C.
78c(a)(18)) (substituting the entity for the
broker or dealer referred to in such sec-
tion) or a person described in section
202(a)(17) of the Investment Advisers Act
of 1940 (15 U.S.C. 80b–2(a)(17)) (sub-
stituting the entity for the investment ad-
viser referred to in such section).’’.
SEC. 106. STUDY REGARDING IMPACT ON RETIREMENT
SAVINGS 
OF 
PARTICIPANTS 
AND 
BENE-
FICIARIES BY REQUIRING CONSULTANTS TO
ADVISE PLAN FIDUCIARIES OF INDIVIDUAL
ACCOUNT PLANS.
(a) STUDY.—As soon as practicable after the date of
the enactment of this Act, the Secretary of Labor shall
undertake a study of the costs and benefits to participants
and beneficiaries of requiring independent consultants to
advise plan fiduciaries in connection with individual ac-
count plans. In conducting such study, the Secretary shall
consider—
(1) the benefits to plan participants and bene-
ficiaries of engaging independent advisers to provide
investment and other advice regarding the assets of
the plan to persons who have fiduciary duties with
respect to the management or disposition of such as-
sets,
(2) the extent to which independent advisers
are currently retained by plan fiduciaries,
(3) the availability of assistance to fiduciaries
from appropriate Federal agencies,
(4) the availability of qualified independent con-
sultants to serve the needs of individual account
plan fiduciaries in the United States,
(5) the impact of the additional fiduciary duty
of an independent advisor on the strict fiduciary ob-
ligations of plan fiduciaries,
(6) the impact of new requirements (consulting
fees, reporting requirements, and new plan duties to
prudently identify and contract with qualified inde-
pendent consultants) on the availability of individual
account plans, and
(7) the impact of a new requirement on the
plan administration costs per participant for small
and mid-size employers and the pension plans they
sponsor.
(b) REPORT.—Not later than 1 year after the date
of the enactment of this Act, the Secretary of Labor shall
report the results of the study undertaken pursuant to this
section, together with any recommendations for legislative
changes, to the Committee on Education and the Work-
force of the House of Representatives and the Committee
on Health, Education, Labor, and Pensions of the Senate.
SEC. 107. TREATMENT OF QUALIFIED RETIREMENT PLAN-
NING SERVICES.
(a) IN GENERAL.—Subsection (m) of section 132 of
the Internal Revenue Code of 1986 (defining qualified re-
tirement services) is amended by adding at the end the
following new paragraph:
‘‘(4) NO CONSTRUCTIVE RECEIPT.—No amount
shall be included in the gross income of any em-
ployee solely because the employee may choose be-
tween any qualified retirement planning services pro-
vided by a qualified investment advisor and com-
pensation which would otherwise be includible in the
gross income of such employee. The preceding sen-
tence shall apply to highly compensated employees
only if the choice described in such sentence is avail-
able on substantially the same terms to each mem-
ber of the group of employees normally provided
education and information regarding the employer’s
qualified employer plan.’’.
(b) CONFORMING AMENDMENTS.—
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 ‘‘the general effective date’’ the date of the commence-
ment of the first plan year beginning on or after the ear-
lier of—
(1) the later of—
(A) the date which is 1 year after the gen-
eral effective date, 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) the date which is 2 years after the general
effective date.
(d) AMENDMENTS RELATING TO INVESTMENT AD-
VICE.—The amendments made by section 105 shall apply
with respect to advice referred to in section 3(21)(A)(ii)
of the Employee Retirement Income Security Act of 1974
or section 4975(c)(3)(B) of the Internal Revenue Code of
1986 provided on or after January 1, 2005.
TITLE II—OTHER PROVISIONS
RELATING TO PENSIONS
SEC. 201. AMENDMENTS TO RETIREMENT 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-
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, 2002.
SEC. 202. REPORTING SIMPLIFICATION.
(a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR
OWNERS AND THEIR SPOUSES.—
(1) IN GENERAL.—The Secretary of the Treas-
ury and the Secretary of Labor shall modify the re-
quirements for filing annual returns with respect to
one-participant retirement plans to ensure that such
plans with assets of $250,000 or less as of the close
of the plan year need not file a return for that year.
(2) ONE-PARTICIPANT RETIREMENT PLAN DE-
FINED.—For purposes of this subsection, the term
‘‘one-participant retirement plan’’ means a retire-
ment plan with respect to which the following re-
quirements are met:
(A) on the first day of the plan year—
(i) the plan covered only one indi-
vidual (or the individual and the individ-
ual’s spouse) and the individual owned 100
percent of the plan sponsor (whether or
not incorporated), or
(ii) the plan covered only one or more
partners (or partners and their spouses) in
the plan sponsor;
(B) the plan meets the minimum coverage
requirements of section 410(b) of the Internal
Revenue Code of 1986 without being combined
with any other plan of the business that covers
the employees of the business;
(C) the plan does not provide benefits to
anyone except the individual (and the individ-
ual’s spouse) or the partners (and their
spouses);
(D) the plan does not cover a business that
is a member of an affiliated service group, a
controlled group of corporations, or a group of
businesses under common control; and
(E) the plan does not cover a business that
leases employees.
(3) OTHER DEFINITIONS.—Terms used in para-
graph (2) which are also used in section 414 of the
Internal Revenue Code of 1986 shall have the re-
spective meanings given such terms by such section.
(4) EFFECTIVE DATE.—The provisions of this
subsection shall apply to plan years beginning on or
after January 1, 2003.
(b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR
PLANS WITH FEWER THAN 25 EMPLOYEES.—In the case
of plan years beginning after December 31, 2004, the Sec-
retary of the Treasury and the Secretary of Labor shall
provide for the filing of a simplified annual return for any
retirement plan which covers less than 25 employees on
the first day of a plan year and which meets the require-
ments described in subparagraphs (B), (D), and (E) of
subsection (a)(2).
SEC. 203. IMPROVEMENT OF EMPLOYEE PLANS COMPLI-
ANCE RESOLUTION SYSTEM.
The Secretary of the Treasury shall continue to up-
date and improve the Employee Plans Compliance Resolu-
tion System (or any successor program) giving special at-
tention to—
(1) increasing the awareness and knowledge of
small employers concerning the availability and use
of the program;
(2) taking into account special concerns and
circumstances that small employers face with respect
to compliance and correction of compliance failures;
(3) extending the duration of the self-correction
period under the Self-Correction Program for signifi-
cant compliance failures;
(4) expanding the availability to correct insig-
nificant compliance failures under the Self-Correc-
tion Program during audit; and
(5) assuring that any tax, penalty, or sanction
that is imposed by reason of a compliance failure is
not excessive and bears a reasonable relationship to
the nature, extent, and severity of the failure.
The Secretary of the Treasury shall have full authority
to effectuate the foregoing with respect to the Employee
Plans Compliance Resolution System (or any successor
program) and any other employee plans correction poli-
cies, including the authority to waive income, excise, or
other taxes to ensure that any tax, penalty, or sanction
is not excessive and bears a reasonable relationship to the
nature, extent, and severity of the failure.
SEC. 204. FLEXIBILITY IN NONDISCRIMINATION, COV-
ERAGE, AND LINE OF BUSINESS RULES.
(a) NONDISCRIMINATION.—
(1) IN GENERAL.—The Secretary of the Treas-
ury shall, by regulation, provide that a plan shall be
deemed to satisfy the requirements of section
401(a)(4) of the Internal Revenue Code of 1986 if
such plan satisfies the facts and circumstances test
under section 401(a)(4) of such Code, as in effect
before January 1, 1994, but only if—
(A) the plan satisfies conditions prescribed
by the Secretary to appropriately limit the
availability of such test; and
(B) the plan is submitted to the Secretary
for a determination of whether it satisfies such
test.
Subparagraph (B) shall only apply to the extent pro-
vided by the Secretary.
(2) EFFECTIVE DATES.—
(A) REGULATIONS.—The regulation re-
quired by paragraph (1) shall apply to years be-
ginning after December 31, 2004.
(B) CONDITIONS OF AVAILABILITY.—Any
condition of availability prescribed by the Sec-
retary under paragraph (1)(A) shall not apply
before the first year beginning not less than
120 days after the date on which such condition
is prescribed.
(b) COVERAGE TEST.—
(1) IN GENERAL.—Section 410(b)(1) of the In-
ternal Revenue Code of 1986 (relating to minimum
coverage requirements) is amended by adding at the
end the following:
‘‘(D) In the case that the plan fails to
meet the requirements of subparagraphs (A),
(B) and (C), the plan—
‘‘(i) satisfies subparagraph (B), as in
effect immediately before the enactment of
the Tax Reform Act of 1986,
‘‘(ii) is submitted to the Secretary for
a determination of whether it satisfies the
requirement described in clause (i), and
‘‘(iii) satisfies conditions prescribed by
the Secretary by regulation that appro-
priately limit the availability of this sub-
paragraph.
Clause (ii) shall apply only to the extent pro-
vided by the Secretary.’’.
(2) EFFECTIVE DATES.—
(A) IN GENERAL.—The amendment made
by paragraph (1) shall apply to years beginning
after December 31, 2004.
(B) CONDITIONS OF AVAILABILITY.—Any
condition of availability prescribed by the Sec-
retary under regulations prescribed by the Sec-
retary under section 410(b)(1)(D) of the Inter-
nal Revenue Code of 1986 shall not apply be-
fore the first year beginning not less than 120
days after the date on which such condition is
prescribed.
(c) LINE OF BUSINESS RULES.—The Secretary of
the Treasury shall, on or before December 31, 2004, mod-
ify the existing regulations issued under section 414(r) of
the Internal Revenue Code of 1986 in order to expand
(to the extent that the Secretary determines appropriate)
the ability of a pension plan to demonstrate compliance
with the line of business requirements based upon the
facts and circumstances surrounding the design and oper-
ation of the plan, even though the plan is unable to satisfy
the mechanical tests currently used to determine compli-
ance.
SEC. 205. EXTENSION TO ALL GOVERNMENTAL PLANS OF
MORATORIUM ON APPLICATION OF CERTAIN
NONDISCRIMINATION RULES APPLICABLE TO
STATE AND LOCAL PLANS.
(a) IN GENERAL.—
(1) Subparagraph (G) of section 401(a)(5) of
the Internal Revenue Code of 1986 and subpara-
graph (H) of section 401(a)(26) of such Code are
each amended by striking ‘‘section 414(d))’’ and all
that follows and inserting ‘‘section 414(d)).’’.
(2) Subparagraph (G) of section 401(k)(3) of
the Internal Revenue Code of 1986 and paragraph
(2) of section 1505(d) of the Taxpayer Relief Act of
1997 (26 U.S.C. 401 note) are each amended by
striking ‘‘maintained by a State or local government
or political subdivision thereof (or agency or instru-
mentality thereof)’’.
(b) CONFORMING AMENDMENTS.—
(1) The heading for subparagraph (G) of sec-
tion 401(a)(5) of such Code is amended to read as
follows: ‘‘GOVERNMENTAL PLANS.—’’.
(2) The heading for subparagraph (H) of sec-
tion 401(a)(26) of such Code is amended to read as
follows: 
‘‘EXCEPTION
FOR
GOVERNMENTAL
PLANS.—’’.
(3) Subparagraph (G) of section 401(k)(3) of
such Code is amended by inserting ‘‘GOVERN-
MENTAL PLANS.—’’ after ‘‘(G)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 2003.
SEC. 206. NOTICE AND CONSENT PERIOD REGARDING DIS-
TRIBUTIONS.
(a) EXPANSION OF PERIOD.—
(1) AMENDMENT
OF
INTERNAL
REVENUE
CODE.—
(A) IN
GENERAL.—Subparagraph (A) of
section 417(a)(6) of the Internal Revenue Code
of 1986 is amended by striking ‘‘90-day’’ and
inserting ‘‘180-day’’.
(B) MODIFICATION
OF
REGULATIONS.—
The Secretary of the Treasury shall modify the
regulations under sections 402(f), 411(a)(11),
and 417 of the Internal Revenue Code of 1986
to substitute ‘‘180 days’’ for ‘‘90 days’’ each
place it appears in Treasury Regulations sec-
tions 1.402(f)–1, 1.411(a)–11(c), and 1.417(e)–
1(b).
(2) AMENDMENT OF ERISA.—
(A) IN GENERAL.—Section 205(c)(7)(A) of
the Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1055(c)(7)(A)) is amended
by striking ‘‘90-day’’ and inserting ‘‘180-day’’.
(B) MODIFICATION
OF
REGULATIONS.—
The Secretary of the Treasury shall modify the
regulations under part 2 of subtitle B of title
I of the Employee Retirement Income Security
Act of 1974 to the extent that they relate to
sections 203(e) and 205 of such Act to sub-
stitute ‘‘180 days’’ for ‘‘90 days’’ each place it
appears.
(3) EFFECTIVE DATE.—The amendments made
by paragraphs (1)(A) and (2)(A) and the modifica-
tions required by paragraphs (1)(B) and (2)(B)
shall apply to years beginning after December 31,
2003.
(b) CONSENT REGULATION INAPPLICABLE TO CER-
TAIN DISTRIBUTIONS.—
(1) IN GENERAL.—The Secretary of the Treas-
ury shall modify the regulations under section
411(a)(11) of the Internal Revenue Code of 1986
and under section 205 of the Employee Retirement
Income Security Act of 1974 to provide that the de-
scription of a participant’s right, if any, to defer re-
ceipt of a distribution shall also describe the con-
sequences of failing to defer such receipt.
(2) EFFECTIVE DATE.—
(A) IN GENERAL.—The modifications re-
quired by paragraph (1) shall apply to years be-
ginning after December 31, 2003.
(B) REASONABLE NOTICE.—In the case of
any description of such consequences made be-
fore the date that is 90 days after the date on
which the Secretary of the Treasury issues a
safe harbor description under paragraph (1), a
plan shall not be treated as failing to satisfy the
requirements of section 411(a)(11) of such
Code or section 205 of such Act by reason of
the failure to provide the information required
by the modifications made under paragraph (1)
if the Administrator of such plan makes a rea-
sonable attempt to comply with such require-
ments.
SEC. 207. ANNUAL REPORT DISSEMINATION.
(a) REPORT AVAILABLE THROUGH ELECTRONIC
MEANS.—Section 104(b)(3) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1024(b)(3)) is
amended by adding at the end the following new sentence:
‘‘The requirement to furnish information under the pre-
vious sentence with respect to an employee pension benefit
plan shall be satisfied if the administrator makes such in-
formation reasonably available through electronic means
or other new technology.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to reports for years beginning after
December 31, 2003.
SEC. 208. TECHNICAL CORRECTIONS TO SAVER ACT.
Section 517 of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1147) is amended—
(1) in subsection (a), by striking ‘‘2001 and
2005 on or after September 1 of each year involved’’
and inserting ‘‘2006 and 2010’’;
(2) in subsection (e)(2)—
(A) by striking ‘‘Committee on Labor and
Human Resources’’ in subparagraph (D) and
inserting ‘‘Committee on Health, Education,
Labor, and Pensions’’;
(B) by striking subparagraph (F) and in-
serting the following:
‘‘(F) the Chairman and Ranking Member
of the Subcommittee on Labor, Health and
Human Services, and Education of the Com-
mittee on Appropriations of the House of Rep-
resentatives and the Chairman and Ranking
Member of the Subcommittee on Labor, Health
and Human Services, and Education of the
Committee on Appropriations of the Senate;’’;
(C) by redesignating subparagraph (G) as
subparagraph (J); and
(D) by inserting after subparagraph (F)
the following new subparagraphs:
‘‘(G) the Chairman and Ranking Member
of the Committee on Finance of the Senate;
‘‘(H) the Chairman and Ranking Member
of the Committee on Ways and Means of the
House of Representatives;
‘‘(I) the Chairman and Ranking Member
of the Subcommittee on Employer-Employee
Relations of the Committee on Education and
the Workforce of the House of Representatives;
and’’;
(3) in subsection (e)(3)(B), by striking ‘‘Janu-
ary 31, 1998’’ and inserting ‘‘2 months before the
convening of each summit’’;
(4) in subsection (f)(1)(C), by inserting ‘‘, no
later than 60 days prior to the date of the com-
mencement of the National Summit,’’ after ‘‘com-
ment’’;
(5) in subsection (i)—
(A) by striking ‘‘for fiscal years beginning
on or after October 1, 1997,’’; and
(B) by adding at the end the following new
paragraph:
‘‘(3) RECEPTION
AND
REPRESENTATION
AU-
THORITY.—The Secretary is hereby granted recep-
tion and representation authority limited specifically
to the events at the National Summit. The Secretary
shall use any private contributions accepted in con-
nection with the National Summit prior to using
funds appropriated for purposes of the National
Summit pursuant to this paragraph.’’; and
(6) in subsection (k)—
(A) by striking ‘‘shall enter into a contract
on a sole-source basis’’ and inserting ‘‘may
enter into a contract on a sole-source basis’’;
and
(B) by striking ‘‘in fiscal year 1998’’.
SEC. 209. MISSING PARTICIPANTS AND BENEFICIARIES.
(a) IN GENERAL.—Section 4050 of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 1350)
is amended by redesignating subsection (c) as subsection
(e) and by inserting after subsection (b) the following new
subsections:
‘‘(c) MULTIEMPLOYER
PLANS.—The corporation
shall prescribe rules similar to the rules in subsection (a)
for multiemployer plans covered by this title that termi-
nate under section 4041A.
‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.—
‘‘(1) TRANSFER TO CORPORATION.—The plan
administrator of a plan described in paragraph (4)
may elect to transfer the benefits of a missing par-
ticipant or beneficiary to the corporation upon ter-
mination of the plan.
‘‘(2) INFORMATION TO THE CORPORATION.—To
the extent provided in regulations, the plan adminis-
trator of a plan described in paragraph (4) shall,
upon termination of the plan, provide the corpora-
tion information with respect to benefits of a miss-
ing participant or beneficiary if the plan transfers
such benefits—
‘‘(A) to the corporation, or
‘‘(B) to an entity other than the corpora-
tion or a plan described in paragraph (4)(B)(ii).
‘‘(3) PAYMENT BY THE CORPORATION.—If ben-
efits of a missing participant or beneficiary were
transferred to the corporation under paragraph (1),
the corporation shall, upon location of the partici-
pant or beneficiary, pay to the participant or bene-
ficiary the amount transferred (or the appropriate
survivor benefit) either—
‘‘(A) in a single sum (plus interest), or
‘‘(B) in such other form as is specified in
regulations of the corporation.
‘‘(4) PLANS DESCRIBED.—A plan is described
in this paragraph if—
‘‘(A) the plan is a pension plan (within the
meaning of section 3(2))—
‘‘(i) to which the provisions of this
section do not apply (without regard to
this subsection), and
‘‘(ii) which is not a plan described in
paragraphs (2) through (11) of section
4021(b), and
‘‘(B) at the time the assets are to be dis-
tributed upon termination, the plan—
‘‘(i) has one or more missing partici-
pants or beneficiaries, and
‘‘(ii) has not provided for the transfer
of assets to pay the benefits of all missing
participants and beneficiaries to another
pension plan (within the meaning of sec-
tion 3(2)).
‘‘(5) CERTAIN PROVISIONS NOT TO APPLY.—
Subsections (a)(1) and (a)(3) shall not apply to a
plan described in paragraph (4).’’.
(b) CONFORMING AMENDMENTS.—Section 206(f) of
such Act (29 U.S.C. 1056(f)) is amended—
(1) by striking ‘‘title IV’’ and inserting ‘‘section
4050’’; and
(2) by striking ‘‘the plan shall provide that,’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to distributions made after final
regulations implementing subsections (c) and (d) of sec-
tion 4050 of the Employee Retirement Income Security
Act of 1974 (as added by subsection (a)), respectively, are
prescribed.
SEC. 210. REDUCED PBGC PREMIUM FOR NEW PLANS OF
SMALL EMPLOYERS.
(a) IN GENERAL.—Subparagraph (A) of section
4006(a)(3) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1306(a)(3)(A)) is amended—
(1) in clause (i), by inserting ‘‘other than a new
single-employer plan (as defined in subparagraph
(F)) maintained by a small employer (as so de-
fined),’’ after ‘‘single-employer plan,’’,
(2) in clause (iii), by striking the period at the
end and inserting ‘‘, and’’, and
(3) by adding at the end the following new
clause:
‘‘(iv) in the case of a new single-employer plan
(as defined in subparagraph (F)) maintained by a
small employer (as so defined) for the plan year, $5
for each individual who is a participant in such plan
during the plan year.’’.
(b) 
DEFINITION
OF
NEW
SINGLE-EMPLOYER
PLAN.—Section 4006(a)(3) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1306(a)(3)) is
amended by adding at the end the following new subpara-
graph:
‘‘(F)(i) For purposes of this paragraph, a single-em-
ployer plan maintained by a contributing sponsor shall be
treated as a new single-employer plan for each of its first
5 plan years if, during the 36-month period ending on the
date of the adoption of such plan, the sponsor or any
member of such sponsor’s controlled group (or any prede-
cessor of either) did not establish or maintain a plan to
which this title applies with respect to which benefits were
accrued for substantially the same employees as are in the
new single-employer plan.
‘‘(ii)(I) For purposes of this paragraph, the term
‘small employer’ means an employer which on the first day
of any plan year has, in aggregation with all members of
the controlled group of such employer, 100 or fewer em-
ployees.
‘‘(II) In the case of a plan maintained by two or more
contributing sponsors that are not part of the same con-
trolled group, the employees of all contributing sponsors
and controlled groups of such sponsors shall be aggregated
for purposes of determining whether any contributing
sponsor is a small employer.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to plans first effective after Decem-
ber 31, 2003.
SEC. 211. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR
NEW AND SMALL PLANS.
(a) NEW PLANS.—Subparagraph (E) of section
4006(a)(3) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1306(a)(3)(E)) is amended by
adding at the end the following new clause:
‘‘(v) In the case of a new defined benefit plan, the
amount determined under clause (ii) for any plan year
shall be an amount equal to the product of the amount
determined under clause (ii) and the applicable percent-
age. For purposes of this clause, the term ‘applicable per-
centage’ means—
‘‘(I) 0 percent, for the first plan year.
‘‘(II) 20 percent, for the second plan year.
‘‘(III) 40 percent, for the third plan year.
‘‘(IV) 60 percent, for the fourth plan year.
‘‘(V) 80 percent, for the fifth plan year.
For purposes of this clause, a defined benefit plan (as de-
fined in section 3(35)) maintained by a contributing spon-
sor shall be treated as a new defined benefit plan for each
of its first 5 plan years if, during the 36-month period
ending on the date of the adoption of the plan, the sponsor
and each member of any controlled group including the
sponsor (or any predecessor of either) did not establish
or maintain a plan to which this title applies with respect
to which benefits were accrued for substantially the same
employees as are in the new plan.’’.
(b) SMALL
PLANS.—Paragraph (3) of section
4006(a) of the Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1306(a)), as amended by section
210(b), is amended—
(1) by striking ‘‘The’’ in subparagraph (E)(i)
and inserting ‘‘Except as provided in subparagraph
(G), the’’, and
(2) by inserting after subparagraph (F) the fol-
lowing new subparagraph:
‘‘(G)(i) In the case of an employer who has 25 or
fewer employees on the first day of the plan year, the addi-
tional premium determined under subparagraph (E) for
each participant shall not exceed $5 multiplied by the
number of participants in the plan as of the close of the
preceding plan year.
‘‘(ii) For purposes of clause (i), whether an employer
has 25 or fewer employees on the first day of the plan
year is determined by taking into consideration all of the
employees of all members of the contributing sponsor’s
controlled group. In the case of a plan maintained by two
or more contributing sponsors, the employees of all con-
tributing sponsors and their controlled groups shall be ag-
gregated for purposes of determining whether the 25-or-
fewer-employees limitation has been satisfied.’’.
(c) EFFECTIVE DATES.—
(1) SUBSECTION (a).—The amendments made
by subsection (a) shall apply to plans first effective
after December 31, 2003.
(2) SUBSECTION (b).—The amendments made
by subsection (b) shall apply to plan years beginning
after December 31, 2003.
SEC. 212. AUTHORIZATION FOR PBGC TO PAY INTEREST ON
PREMIUM OVERPAYMENT REFUNDS.
(a) IN GENERAL.—Section 4007(b) of the Employ-
ment Retirement Income Security Act of 1974 (29 U.S.C.
1307(b)) is amended—
(1) by striking ‘‘(b)’’ and inserting ‘‘(b)(1)’’,
and
(2) by inserting at the end the following new
paragraph:
‘‘(2) The corporation is authorized to pay, subject to
regulations prescribed by the corporation, interest on the
amount of any overpayment of premium refunded to a des-
ignated payor. Interest under this paragraph shall be cal-
culated at the same rate and in the same manner as inter-
est is calculated for underpayments under paragraph
(1).’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to interest accruing for periods
beginning not earlier than the date of the enactment of
this Act.
SEC. 213. SUBSTANTIAL OWNER BENEFITS IN TERMINATED
PLANS.
(a) MODIFICATION OF PHASE-IN OF GUARANTEE.—
Section 4022(b)(5) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1322(b)(5)) is amended
to read as follows:
‘‘(5)(A) For purposes of this paragraph, the term
‘majority owner’ means an individual who, at any time
during the 60-month period ending on the date the deter-
mination is being made—
‘‘(i) owns the entire interest in an unincor-
porated trade or business,
‘‘(ii) in the case of a partnership, is a partner
who owns, directly or indirectly, 50 percent or more
of either the capital interest or the profits interest
in such partnership, or
‘‘(iii) in the case of a corporation, owns, directly
or indirectly, 50 percent or more in value of either
the voting stock of that corporation or all the stock
of that corporation.
For purposes of clause (iii), the constructive ownership
rules of section 1563(e) of the Internal Revenue Code of
1986 shall apply (determined without regard to section
1563(e)(3)(C)).
‘‘(B) In the case of a participant who is a majority
owner, the amount of benefits guaranteed under this sec-
tion shall equal the product of—
‘‘(i) a fraction (not to exceed 1) the numerator
of which is the number of years from the later of the
effective date or the adoption date of the plan to the
termination date, and the denominator of which is
10, and
‘‘(ii) the amount of benefits that would be guar-
anteed under this section if the participant were not
a majority owner.’’.
(b) MODIFICATION OF ALLOCATION OF ASSETS.—
(1) Section 4044(a)(4)(B) of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C.
1344(a)(4)(B)) is amended by striking ‘‘section
4022(b)(5)’’ and inserting ‘‘section 4022(b)(5)(B)’’.
(2) Section 4044(b) of such Act (29 U.S.C.
1344(b)) is amended—
(A) by striking ‘‘(5)’’ in paragraph (2) and
inserting ‘‘(4), (5),’’, and
(B) 
by 
redesignating 
paragraphs 
(3)
through (6) as paragraphs (4) through (7), re-
spectively, and by inserting after paragraph (2)
the following new paragraph:
‘‘(3) If assets available for allocation under
paragraph (4) of subsection (a) are insufficient to
satisfy in full the benefits of all individuals who are
described in that paragraph, the assets shall be allo-
cated first to benefits described in subparagraph (A)
of that paragraph. Any remaining assets shall then
be allocated to benefits described in subparagraph
(B) of that paragraph. If assets allocated to such
subparagraph (B) are insufficient to satisfy in full
the benefits described in that subparagraph, the as-
sets shall be allocated pro rata among individuals on
the basis of the present value (as of the termination
date) of their respective benefits described in that
subparagraph.’’.
(c) CONFORMING AMENDMENTS.—
(1) Section 4021 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1321) is
amended—
(A) in subsection (b)(9), by striking ‘‘as
defined in section 4022(b)(6)’’, and
(B) by adding at the end the following new
subsection:
‘‘(d) For purposes of subsection (b)(9), the term ‘sub-
stantial owner’ means an individual who, at any time dur-
ing the 60-month period ending on the date the determina-
tion is being made—
‘‘(1) owns the entire interest in an unincor-
porated trade or business,
‘‘(2) in the case of a partnership, is a partner
who owns, directly or indirectly, more than 10 per-
cent of either the capital interest or the profits inter-
est in such partnership, or
‘‘(3) in the case of a corporation, owns, directly
or indirectly, more than 10 percent in value of either
the voting stock of that corporation or all the stock
of that corporation.
For purposes of paragraph (3), the constructive ownership
rules of section 1563(e) of the Internal Revenue Code of
1986 shall apply (determined without regard to section
1563(e)(3)(C)).’’.
(2) Section 4043(c)(7) of such Act (29 U.S.C.
1343(c)(7)) is amended by striking ‘‘section 4022(b)(6)’’
and inserting ‘‘section 4021(d)’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to plan terminations—
(A) under section 4041(c) of the Employee
Retirement Income Security Act of 1974 (29
U.S.C. 1341(c)) with respect to which notices
of intent to terminate are provided under sec-
tion 4041(a)(2) of such Act (29 U.S.C.
1341(a)(2)) after December 31, 2003, and
(B) under section 4042 of such Act (29
U.S.C. 1342) with respect to which proceedings
are instituted by the corporation after such
date.
(2) CONFORMING AMENDMENTS.—The amend-
ments made by subsection (c) shall take effect on
January 1, 2004.
SEC. 214. BENEFIT SUSPENSION NOTICE.
(a) MODIFICATION OF REGULATION.—The Secretary
of Labor shall modify the regulation under subparagraph
(B) of section 203(a)(3) of the Employee Retirement In-
come Security Act of 1974 (29 U.S.C. 1053(a)(3)(B)) to
provide that the notification required by such regulation
in connection with any suspension of benefits described in
such subparagraph—
(1) in the case of an employee who returns to
service described in section 203(a)(3)(B)(i) or (ii) of
such Act after commencement of payment of bene-
fits under the plan, shall be made during the first
calendar month or the first 4 or 5-week payroll pe-
riod ending in a calendar month in which the plan
withholds payments, and
(2) in the case of any employee who is not de-
scribed in paragraph (1)—
(A) may be included in the summary plan
description for the plan furnished in accordance
with section 104(b) of such Act (29 U.S.C.
1024(b)), rather than in a separate notice, and
(B) need not include a copy of the relevant
plan provisions.
(b) EFFECTIVE
DATE.—The modification made
under this section shall apply to plan years beginning after
December 31, 2003.
SEC. 215. STUDIES.
(a) MODEL
SMALL
EMPLOYER
GROUP
PLANS
STUDY.—As soon as practicable after the date of the en-
actment of this Act, the Secretary of Labor, in consulta-
tion with the Secretary of the Treasury, shall conduct a
study to determine—
(1) the most appropriate form or forms of—
(A) employee pension benefit plans which
would—
(i) be simple in form and easily main-
tained by multiple small employers, and
(ii) provide for ready portability of
benefits for all participants and bene-
ficiaries,
(B) alternative arrangements providing
comparable benefits which may be established
by employee or employer associations, and
(C) alternative arrangements providing
comparable benefits to which employees may
contribute in a manner independent of employer
sponsorship, and
(2) appropriate methods and strategies for
making pension plan coverage described in para-
graph (1) more widely available to American work-
ers.
(b) MATTERS TO BE CONSIDERED.—In conducting
the study under subsection (a), the Secretary of Labor
shall consider the adequacy and availability of existing em-
ployee pension benefit plans and the extent to which exist-
ing models may be modified to be more accessible to both
employees and employers.
(c) REPORT.—Not later than 18 months after the
date of the enactment of this Act, the Secretary of Labor
shall report the results of the study under subsection (a),
together with the Secretary’s recommendations, to the
Committee on Education and the Workforce and the Com-
mittee on Ways and Means of the House of Representa-
tives and the Committee on Health, Education, Labor,
and Pensions and the Committee on Finance of the Sen-
ate. Such recommendations shall include one or more
model plans described in subsection (a)(1)(A) and model
alternative 
arrangements 
described 
in 
subsections
(a)(1)(B) and (a)(1)(C) which may serve as the basis for
appropriate administrative or legislative action.
(d) STUDY ON EFFECT OF LEGISLATION.—Not later
than 5 years after the date of the enactment of this Act,
the Secretary of Labor shall submit to the Committee on
Education and the Workforce of the House of Representa-
tives and the Committee on Health, Education, Labor,
and Pensions of the Senate a report on the effect of the
provisions of this Act and title VI of the Economic Growth
and Tax Relief Reconciliation Act of 2001 on pension plan
coverage, including any change in—
(1) the extent of pension plan coverage for low
and middle-income workers,
(2) the levels of pension plan benefits generally,
(3) the quality of pension plan coverage gen-
erally,
(4) workers’ access to and participation in pen-
sion plans, and
(5) retirement security.
SEC. 216. INTEREST RATE RANGE FOR ADDITIONAL FUND-
ING REQUIREMENTS.
(a) IN
GENERAL.—Subclause (III) of section
412(l)(7)(C)(i) of the Internal Revenue Code of 1986 is
amended—
(1) by striking ‘‘2002 or 2003’’ in the text and
inserting ‘‘2001, 2002, or 2003’’, and
(2) by striking ‘‘2002 AND 2003’’ in the heading
and inserting ‘‘2001, 2002, AND 2003’’.
(b) SPECIAL
RULE.—Subclause (III) of section
302(d)(7)(C)(i) of the Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1082(d)(7)(C)(i)) is
amended—
(1) by striking ‘‘2002 or 2003’’ in the text and
inserting ‘‘2001, 2002, or 2003’’, and
(2) by striking ‘‘2002 AND 2003’’ in the heading
and inserting ‘‘2001, 2002, AND 2003’’.
(c) 
PBGC.—Subclause 
(IV) 
of 
section
4006(a)(3)(E)(iii) 
of 
such 
Act 
(29 
U.S.C.
1306(a)(3)(E)(iii)) is amended to read as follows—
‘‘(IV) In the case of plan years beginning after
December 31, 2001, and before January 1, 2004,
subclause (II) shall be applied by substituting ‘100
percent’ for ‘85 percent’ and by substituting ‘115
percent’ for ‘100 percent’. Subclause (III) shall be
applied for such years without regard to the pre-
ceding sentence. Any reference to this clause or this
subparagraph by any other sections or subsections
(other than sections 4005, 4010, 4011 and 4043)
shall be treated as a reference to this clause or this
subparagraph without regard to this subclause.’’.
(d) EFFECTIVE DATE.—
(1) GENERAL RULE.—Subject to paragraph (2),
the amendments made by this section shall take ef-
fect as if included in the amendments made by sec-
tion 405 of the Job Creation and Worker Assistance
Act of 2002.
(2) ELECTION.—The plan sponsor or plan ad-
ministrator of a plan may elect whether to have the
amendments made by subsections (a) and (b) apply.
Such election shall be made in such manner and at
such time as the Secretary of the Treasury or his
delegate may prescribe and, once made, may not be
revoked. An election to apply such amendments shall
not be treated as a prohibited change in actuarial
assumptions for purposes of reports required to be
filed with the Secretary of Labor, the Secretary of
Treasury, or the Pension Benefit Guaranty Corpora-
tion.
TITLE III—GENERAL
PROVISIONS
SEC. 301. PROVISIONS RELATING TO PLAN AMENDMENTS.
(a) IN GENERAL.—If this section applies to any pen-
sion plan or contract amendment—
(1) such pension plan or contract shall be treat-
ed as being operated in accordance with the terms
of the plan during the period described in subsection
(b)(2)(A), and
(2) except as provided by the Secretary of the
Treasury, such pension plan shall not fail to meet
the requirements of section 411(d)(6) of the Internal
Revenue Code of 1986 and section 204(g) of the
Employee Retirement Income Security Act of 1974
by reason of such amendment.
(b) AMENDMENTS TO WHICH SECTION APPLIES.—
(1) IN GENERAL.—This section shall apply to
any amendment to any pension plan or annuity con-
tract which is made—
(A) pursuant to any amendment made by
this Act or by title VI of the Economic Growth
and Tax Relief Reconciliation Act of 2001, or
pursuant to any regulation issued by the Sec-
retary of the Treasury or the Secretary of
Labor under this Act or such title VI, and
(B) on or before the last day of the first
plan year beginning on or after January 1,
2006.
In the case of a governmental plan (as defined in
section 414(d) of the Internal Revenue Code of
1986), this paragraph shall be applied by sub-
stituting ‘‘2008’’ for ‘‘2006’’.
(2) CONDITIONS.—This section shall not apply
to any amendment unless—
(A) during the period—
(i) beginning on the date the legisla-
tive or regulatory amendment described in
paragraph (1)(A) takes effect (or in the
case of a plan or contract amendment not
required by such legislative or regulatory
amendment, the effective date specified by
the plan), and
(ii) ending on the date described in
paragraph (1)(B) (or, if earlier, the date
the plan or contract amendment is adopt-
ed),
the plan or contract is operated as if such plan
or contract amendment were in effect; and
(B) such plan or contract amendment ap-
plies retroactively for such period.
Passed the House of Representatives May 14, 2003.
Attest:
Clerk.