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portion of an applicable individual’s account at-
tributable to employee contributions and elective
deferrals which is invested in employer securities
or employer real property, a plan meets the re-
quirements of this subparagraph if the applicable
individual may elect to direct the plan to divest
any such securities or real property and to rein-
vest an equivalent amount in other investment
options meeting the requirements of subpara-
graph (D).
‘‘(C) EMPLOYER CONTRIBUTIONS INVESTED
IN
EMPLOYER
SECURITIES
OR
REAL
PROP-
ERTY.—In the case of the portion of the account
attributable to employer contributions other than
elective deferrals which is invested in employer
securities or employer real property, a plan
meets the requirements of this subparagraph if
each applicable individual who—
‘‘(i) is a participant who has com-
pleted at least 3 years of service, or
‘‘(ii) is a beneficiary of a participant
described in clause (i) or of a deceased par-
ticipant,
may elect to direct the plan to divest any such
securities or real property and to reinvest an
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equivalent amount in other investment options
meeting the requirements of subparagraph (D).
‘‘(D) INVESTMENT OPTIONS.—
‘‘(i) IN
GENERAL.—The requirements
of this subparagraph are met if the plan of-
fers not less than 3 investment options,
other than employer securities or employer
real property, to which an applicable indi-
vidual may direct the proceeds from the di-
vestment of employer securities or employer
real property pursuant to this paragraph,
each of which is diversified and has materi-
ally different risk and return characteris-
tics.
‘‘(ii) TREATMENT
OF
CERTAIN
RE-
STRICTIONS AND CONDITIONS.—
‘‘(I) TIME
FOR
MAKING
INVEST-
MENT CHOICES.—A plan shall not be
treated as failing to meet the require-
ments of this subparagraph merely be-
cause the plan limits the time for di-
vestment and reinvestment to periodic,
reasonable opportunities occurring no
less frequently than quarterly.
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‘‘(II) CERTAIN RESTRICTIONS AND
CONDITIONS NOT ALLOWED.—Except as
provided in regulations, a plan shall
not meet the requirements of this sub-
paragraph if the plan imposes restric-
tions or conditions with respect to the
investment of employer securities or
employer real property which are not
imposed on the investment of other as-
sets of the plan. This subclause shall
not apply to any restrictions or condi-
tions imposed by reason of the applica-
tion of securities laws.
‘‘(E) APPLICABLE DEFINED CONTRIBUTION
PLAN.—For purposes of this paragraph—
‘‘(i) IN GENERAL.—The term ‘applica-
ble defined contribution plan’ means any
defined contribution plan which holds any
publicly traded employer securities.
‘‘(ii) 
EXCEPTION
FOR
CERTAIN
ESOPS.—Such term does not include an em-
ployee stock ownership plan if—
‘‘(I) there are no contributions to
such plan (or earnings thereunder)
which are held within such plan and
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are subject to subsection (k) or (m),
and
‘‘(II) such plan is a separate plan
for purposes of section 414(l) with re-
spect to any other defined benefit plan
or defined contribution plan main-
tained by the same employer or em-
ployers.
‘‘(iii) EXCEPTION
FOR
ONE
PARTICI-
PANT PLANS.—Such term does not include a
one-participant retirement plan.
‘‘(iv) ONE-PARTICIPANT
RETIREMENT
PLAN.—For purposes of clause (iii), the
term 
‘one-participant 
retirement 
plan’
means a retirement plan that—
‘‘(I) on the first day of the plan
year covered only one individual (or
the individual and the individual’s
spouse) and the individual owned 100
percent of the plan sponsor (whether or
not incorporated), or covered only one
or more partners (or partners and
their spouses) in the plan sponsor,
‘‘(II) meets the minimum coverage
requirements of section 410(b) without
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being combined with any other plan of
the business that covers the employees
of the business,
‘‘(III) does not provide benefits to
anyone except the individual (and the
individual’s spouse) or the partners
(and their spouses),
‘‘(IV) does not cover a business
that is a member of an affiliated serv-
ice group, a controlled group of cor-
porations, or a group of businesses
under common control, and
‘‘(V) does not cover a business
that uses the services of leased employ-
ees (within the meaning of section
414(n)).
For purposes of this clause, the term ‘part-
ner’ includes a 2-percent shareholder (as de-
fined in section 1372(b)) of an S corpora-
tion.
‘‘(F) CERTAIN PLANS TREATED AS HOLDING
PUBLICLY TRADED EMPLOYER SECURITIES.—
‘‘(i) IN GENERAL.—Except as provided
in regulations or in clause (ii), a plan hold-
ing employer securities which are not pub-
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licly traded employer securities shall be
treated as holding publicly traded employer
securities if any employer corporation, or
any member of a controlled group of cor-
porations which includes such employer cor-
poration, has issued a class of stock which
is a publicly traded employer security.
‘‘(ii) EXCEPTION
FOR
CERTAIN
CON-
TROLLED GROUPS WITH PUBLICLY TRADED
SECURITIES.—Clause (i) shall not apply to
a plan if—
‘‘(I) no employer corporation, or
parent corporation of an employer cor-
poration, has issued any publicly trad-
ed employer security, and
‘‘(II) no employer corporation, or
parent corporation of an employer cor-
poration, has issued any special class
of stock which grants particular rights
to, or bears particular risks for, the
holder or issuer with respect to any
corporation described in clause (i)
which has issued any publicly traded
employer security.
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‘‘(iii) DEFINITIONS.—For purposes of
this subparagraph, the term—
‘‘(I) ‘controlled group of corpora-
tions’ has the meaning given such term
by section 1563(a), except that ‘50 per-
cent’ shall be substituted for ‘80 per-
cent’ each place it appears,
‘‘(II) 
‘employer 
corporation’
means a corporation which is an em-
ployer maintaining the plan, and
‘‘(III) ‘parent corporation’ has the
meaning given such term by section
424(e).
‘‘(G) OTHER
DEFINITIONS.—For purposes
of this paragraph—
‘‘(i) 
APPLICABLE
INDIVIDUAL.—The
term ‘applicable individual’ means—
‘‘(I) any participant in the plan,
and
‘‘(II) any beneficiary who has an
account under the plan with respect to
which the beneficiary is entitled to ex-
ercise the rights of a participant.
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‘‘(ii) ELECTIVE DEFERRAL.—The term
‘elective deferral’ means an employer con-
tribution described in section 402(g)(3)(A).
‘‘(iii) 
EMPLOYER
SECURITY.—The
term ‘employer security’ has the meaning
given such term by section 407(d)(1) of the
Employee Retirement Income Security Act
of 1974.
‘‘(iv) EMPLOYER
REAL
PROPERTY.—
The term ‘employer real property’ has the
meaning given such term by section
407(d)(2) of the Employee Retirement In-
come Security Act of 1974.
‘‘(v) EMPLOYEE
STOCK
OWNERSHIP
PLAN.—The term ‘employee stock ownership
plan’ has the meaning given such term by
section 4975(e)(7).
‘‘(vi) PUBLICLY
TRADED
EMPLOYER
SECURITIES.—The term ‘publicly traded
employer securities’ means employer securi-
ties which are readily tradable on an estab-
lished securities market.
‘‘(vii) YEAR
OF
SERVICE.—The term
‘year of service’ has the meaning given such
term by section 411(a)(5).
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‘‘(H) TRANSITION
RULE
FOR
SECURITIES
OR
REAL
PROPERTY
ATTRIBUTABLE
TO
EM-
PLOYER CONTRIBUTIONS.—
‘‘(i) RULES
PHASED
IN
OVER
YEARS.—
‘‘(I) IN GENERAL.—In the case of
the portion of an account to which sub-
paragraph (C) applies and which con-
sists of employer securities or employer
real property acquired in a plan year
beginning before January 1, 2006, sub-
paragraph (C) shall only apply to the
applicable percentage of such securities
or real property. This subparagraph
shall be applied separately with respect
to each class of securities and employer
real property.
‘‘(II) EXCEPTION
FOR
CERTAIN
PARTICIPANTS
AGED
OR
OVER.—
Subclause (I) shall not apply to an ap-
plicable individual who is a partici-
pant who has attained age 55 and
completed at least 3 years of service be-
fore the first plan year beginning after
December 31, 2005.
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‘‘(ii) APPLICABLE PERCENTAGE.—For
purposes of clause (i), the applicable per-
centage shall be determined as follows:
Plan year to which
The applicable
subparagraph (C) applies:
percentage is:
1st ....................................................................................................
2d ....................................................................................................
3d and following ............................................................................
100.’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 401(a)(28)(B) of such Code (re-
lating to additional requirements relating to em-
ployee stock ownership plans) is amended by
adding at the end the following new clause:
‘‘(v) EXCEPTION.—This subparagraph
shall not apply to an applicable defined
contribution plan (as defined in paragraph
(35)(E)).’’
(B) Section 409(h)(7) of such Code is
amended by inserting ‘‘or subparagraph (B) or
(C) of section 401(a)(35)’’ before the period at
the end.
(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.’’
(b) AMENDMENTS OF ERISA.—
(1) IN GENERAL.—Section 204 of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
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1054) is amended by redesignating subsection (j) as
subsection (k) and by inserting after subsection (i) the
following new subsection:
‘‘(j) DIVERSIFICATION REQUIREMENTS FOR CERTAIN
INDIVIDUAL ACCOUNT PLANS.—
‘‘(1) IN GENERAL.—An applicable individual ac-
count plan shall meet the diversification requirements
of paragraphs (2), (3), and (4).
‘‘(2) EMPLOYEE CONTRIBUTIONS AND ELECTIVE
DEFERRALS INVESTED IN EMPLOYER SECURITIES OR
REAL PROPERTY.—In the case of the portion of an
applicable individual’s account attributable to em-
ployee contributions and elective deferrals which is
invested in employer securities or employer real prop-
erty, a plan meets the requirements of this paragraph
if the applicable individual may elect to direct the
plan to divest any such securities or real property
and to reinvest an equivalent amount in other invest-
ment options meeting the requirements of paragraph
(4).
‘‘(3) EMPLOYER
CONTRIBUTIONS
INVESTED
IN
EMPLOYER SECURITIES OR REAL PROPERTY.—In the
case of the portion of the account attributable to em-
ployer contributions other than elective deferrals
which is invested in employer securities or employer
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real property, a plan meets the requirements of this
paragraph if each applicable individual who—
‘‘(A) is a participant who has completed at
least 3 years of service, or
‘‘(B) is a beneficiary of a participant de-
scribed in subparagraph (A) or of a deceased
participant,
may elect to direct the plan to divest any such securi-
ties or real property and to reinvest an equivalent
amount in other investment options meeting the re-
quirements of paragraph (4).
‘‘(4) INVESTMENT OPTIONS.—
‘‘(A) IN
GENERAL.—The requirements of
this paragraph are met if the plan offers not less
than 3 investment options, other than employer
securities or employer real property, to which an
applicable individual may direct the proceeds
from the divestment of employer securities or em-
ployer real property pursuant to this subsection,
each of which is diversified and has materially
different risk and return characteristics.
‘‘(B) TREATMENT
OF
CERTAIN
RESTRIC-
TIONS AND CONDITIONS.—
‘‘(i) TIME
FOR
MAKING
INVESTMENT
CHOICES.—A plan shall not be treated as
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failing to meet the requirements of this
paragraph merely because the plan limits
the time for divestment and reinvestment to
periodic, reasonable opportunities occurring
no less frequently than quarterly.
‘‘(ii) CERTAIN RESTRICTIONS AND CON-
DITIONS
NOT
ALLOWED.—Except as pro-
vided in regulations, a plan shall not meet
the requirements of this paragraph if the
plan imposes restrictions or conditions with
respect to the investment of employer securi-
ties or employer real property which are not
imposed on the investment of other assets of
the plan. This subparagraph shall not
apply to any restrictions or conditions im-
posed by reason of the application of securi-
ties laws.
‘‘(5) APPLICABLE INDIVIDUAL ACCOUNT PLAN.—
For purposes of this subsection—
‘‘(A) IN
GENERAL.—The term ‘applicable
individual account plan’ means any individual
account plan (as defined in section 3(34)) which
holds any publicly traded employer securities.
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‘‘(B) EXCEPTION
FOR
CERTAIN
ESOPS.—
Such term does not include an employee stock
ownership plan if—
‘‘(i) there are no contributions to such
plan (or earnings thereunder) which are
held within such plan and are subject to
subsection (k) or (m) of section 401 of the
Internal Revenue Code of 1986, and
‘‘(ii) such plan is a separate plan (for
purposes of section 414(l) of such Code)
with respect to any other defined benefit
plan or individual account plan main-
tained by the same employer or employers.
‘‘(C) EXCEPTION
FOR
ONE
PARTICIPANT
PLANS.—Such term shall not include a one-par-
ticipant retirement plan (as defined in section
101(i)(8)(B)).
‘‘(D) CERTAIN PLANS TREATED AS HOLDING
PUBLICLY TRADED EMPLOYER SECURITIES.—
‘‘(i) IN GENERAL.—Except as provided
in regulations or in clause (ii), a plan hold-
ing employer securities which are not pub-
licly traded employer securities shall be
treated as holding publicly traded employer
securities if any employer corporation, or
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any member of a controlled group of cor-
porations which includes such employer cor-
poration, has issued a class of stock which
is a publicly traded employer security.
‘‘(ii) EXCEPTION
FOR
CERTAIN
CON-
TROLLED GROUPS WITH PUBLICLY TRADED
SECURITIES.—Clause (i) shall not apply to
a plan if—
‘‘(I) no employer corporation, or
parent corporation of an employer cor-
poration, has issued any publicly trad-
ed employer security, and
‘‘(II) no employer corporation, or
parent corporation of an employer cor-
poration, has issued any special class
of stock which grants particular rights
to, or bears particular risks for, the
holder or issuer with respect to any
corporation described in clause (i)
which has issued any publicly traded
employer security.
‘‘(iii) DEFINITIONS.—For purposes of
this subparagraph, the term—
‘‘(I) ‘controlled group of corpora-
tions’ has the meaning given such term
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by section 1563(a) of the Internal Rev-
enue Code of 1986, except that ‘50 per-
cent’ shall be substituted for ‘80 per-
cent’ each place it appears,
‘‘(II) 
‘employer 
corporation’
means a corporation which is an em-
ployer maintaining the plan, and
‘‘(III) ‘parent corporation’ has the
meaning given such term by section
424(e) of such Code.
‘‘(6) OTHER DEFINITIONS.—For purposes of this
paragraph—
‘‘(A) APPLICABLE
INDIVIDUAL.—The term
‘applicable individual’ means—
‘‘(i) any participant in the plan, and
‘‘(ii) any beneficiary who has an ac-
count under the plan with respect to which
the beneficiary is entitled to exercise the
rights of a participant.
‘‘(B) ELECTIVE DEFERRAL.—The term ‘elec-
tive deferral’ means an employer contribution
described in section 402(g)(3)(A) of the Internal
Revenue Code of 1986.
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‘‘(C) EMPLOYER SECURITY.—The term ‘em-
ployer security’ has the meaning given such term
by section 407(d)(1).
‘‘(D) EMPLOYER
REAL
PROPERTY.—The
term ‘employer real property’ has the meaning
given such term by section 407(d)(2).
‘‘(E) 
EMPLOYEE
STOCK
OWNERSHIP
PLAN.—The term ‘employee stock ownership
plan’ has the meaning given such term by sec-
tion 4975(e)(7) of such Code.
‘‘(F) PUBLICLY TRADED EMPLOYER SECURI-
TIES.—The term ‘publicly traded employer secu-
rities’ means employer securities which are read-
ily tradable on an established securities market.
‘‘(G) YEAR OF SERVICE.—The term ‘year of
service’ has the meaning given such term by sec-
tion 203(b)(2).
‘‘(7) TRANSITION
RULE
FOR
SECURITIES
OR
REAL PROPERTY ATTRIBUTABLE TO EMPLOYER CON-
TRIBUTIONS.—
‘‘(A) RULES PHASED IN OVER 3 YEARS.—
‘‘(i) IN GENERAL.—In the case of the
portion of an account to which paragraph
(3) applies and which consists of employer
securities or employer real property ac-
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quired in a plan year beginning before Jan-
uary 1, 2006, paragraph (3) shall only
apply to the applicable percentage of such
securities or real property. This subpara-
graph shall be applied separately with re-
spect to each class of securities and em-
ployer real property.
‘‘(ii) EXCEPTION
FOR
CERTAIN
PAR-
TICIPANTS AGED 55 OR OVER.—Clause (i)
shall not apply to an applicable individual
who is a participant who has attained age
55 and completed at least 3 years of service
before the first plan year beginning after
December 31, 2005.
‘‘(B) APPLICABLE PERCENTAGE.—For pur-
poses of subparagraph (A), the applicable per-
centage shall be determined as follows:
Plan year to which
The applicable
paragraph (3) applies:
percentage is:
1st ....................................................................................................
2d ....................................................................................................
3d and following ............................................................................
100.’’.
(2) 
CONFORMING
AMENDMENT.—Section
407(b)(3) of such Act (29 U.S.C. 1107(b)(3)) is
amended by adding at the end the following:
‘‘(D) For diversification requirements for quali-
fying employer securities and qualifying real prop-
erty held in certain individual account plans, see
section 204(j).’’
(c) EFFECTIVE DATES.—
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(1) IN GENERAL.—Except as provided in para-
graphs (2) and (3), the amendments made by this sec-
tion shall apply to plan years beginning after Decem-
ber 31, 2005.
(2) SPECIAL
RULE
FOR
COLLECTIVELY
BAR-
GAINED AGREEMENTS.—In the case of a plan main-
tained pursuant to 1 or more collective bargaining
agreements between employee representatives and 1 or
more employers ratified on or before the date of the
enactment of this Act, paragraph (1) shall be applied
to benefits pursuant to, and individuals covered by,
any such agreement by substituting for ‘‘December 31,
2005’’ the earlier of—
(A) the later of—
(i) December 31, 2006, or
(ii) the date on which the last of such
collective bargaining agreements terminates
(determined without regard to any exten-
sion thereof after such date of enactment),
or
(B) December 31, 2007.
(3) SPECIAL RULE FOR CERTAIN EMPLOYER SE-
CURITIES HELD IN AN ESOP.—
(A) IN GENERAL.—In the case of employer
securities to which this paragraph applies, the
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amendments made by this section shall apply to
plan years beginning after the earlier of—
(i) December 31, 2006, or
(ii) the first date on which the fair
market value of such securities exceeds the
guaranteed minimum value described in
subparagraph (B)(ii).
(B) APPLICABLE SECURITIES.—This para-
graph shall apply to employer securities which
are attributable to employer contributions other
than elective deferrals, and which, on September
17, 2003—
(i) consist of preferred stock, and
(ii) are within an employee stock own-
ership 
plan 
(as 
defined 
in 
section
4975(e)(7) of the Internal Revenue Code of
1986), the terms of which provide that the
value of the securities cannot be less than
the guaranteed minimum value specified by
the plan on such date.
(C) 
COORDINATION
WITH
TRANSITION
RULE.—In applying section 401(a)(35)(H) of the
Internal Revenue Code of 1986 and section
204(j)(7) of the Employee Retirement Income Se-
curity Act of 1974 (as added by this section) to
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employer securities to which this paragraph ap-
plies, the applicable percentage shall be deter-
mined without regard to this paragraph.
SEC. 702. NOTICE OF FREEDOM TO DIVEST EMPLOYER SE-
CURITIES OR REAL PROPERTY.
(a) IN GENERAL.—Section 101 of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C. 1021), as
amended by this Act, is amended by redesignating sub-
section (m) as subsection (n) and by inserting after sub-
section (l) the following:
‘‘(m) NOTICE OF RIGHT TO DIVEST.—Not later than
30 days before the first date on which an applicable indi-
vidual of an applicable individual account plan is eligible
to exercise the right under section 204(j) to direct the pro-
ceeds from the divestment of employer securities or employer
real property with respect to any type of contribution, the
administrator shall provide to such individual a notice—
‘‘(1) setting forth such right under such section,
and
‘‘(2) describing the importance of diversifying
the investment of retirement account assets.
The notice required by this subsection shall be written in
a manner calculated to be understood by the average plan
participant and may be delivered in written, electronic, or
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other appropriate form to the extent that such form is rea-
sonably accessible to the recipient.’’
(b) PENALTIES.—Section 502(c)(7) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1132(c)(7)) is amended by striking ‘‘section 101(i)’’ and in-
serting ‘‘subsection (i) or (m) of section 101’’.
(c) MODEL NOTICE.—The Secretary of the Treasury
shall, within 180 days after the date of the enactment of
this subsection, prescribe a model notice for purposes of sat-
isfying the requirements of the amendments made by this
section.
(d) EFFECTIVE DATES.—
(1) IN
GENERAL.—The amendments made by
this section shall apply to plan years beginning after
December 31, 2005.
(2) TRANSITION RULE.—If notice under section
101(m) of the Employee Retirement Income Security
Act of 1974 (as added by this section) would otherwise
be required to be provided before the 90th day after
the date of the enactment of this Act, such notice shall
not be required to be provided until such 90th day.
SEC. 703. PERIODIC PENSION BENEFIT STATEMENTS.
(a) AMENDMENTS OF ERISA.—
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(1) IN GENERAL.—Section 105(a) of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1025(a)) is amended to read as follows:
‘‘(a) REQUIREMENTS TO PROVIDE PENSION BENEFIT
STATEMENTS.—
‘‘(1) REQUIREMENTS.—
‘‘(A) INDIVIDUAL ACCOUNT PLAN.—The ad-
ministrator of an individual account plan (other
than a one-participant retirement plan described
in section 101(i)(8)(B)) shall furnish a pension
benefit statement—
‘‘(i) at least once each calendar quarter
to a participant or beneficiary who has the
right to direct the investment of assets in
his or her account under the plan,
‘‘(ii) at least once each calendar year
to a participant or beneficiary who has his
or her own account under the plan but does
not have the right to direct the investment
of assets in that account, and
‘‘(iii) upon written request to a plan
beneficiary not described in clause (i) or
(ii).
‘‘(B) DEFINED
BENEFIT
PLAN.—The ad-
ministrator of a defined benefit plan (other than