I 
108TH CONGRESS 
1ST SESSION H. R. 2101
To provide additional protections for participants and beneficiaries under 
employee pension benefit plans. 
IN THE HOUSE OF REPRESENTATIVES 
MAY 14, 2003
Mr. GEORGE MILLER of California (for himself, Ms. DELAURO, Mr. KILDEE, 
Mr. BISHOP of New York, Mr. GRIJALVA, Mr. RYAN of Ohio, Mr. 
KUCINICH, Mr. OWENS, Mr. TIERNEY, Ms. MCCOLLUM, Mr. DAVIS of Il-
linois, Mr. CASE, Mr. PAYNE, Mr. BELL, Mr. LYNCH, Ms. BALDWIN, 
Mrs. MALONEY, Mr. MEEHAN, Mr. SCOTT of Georgia, Mr. STARK, Ms. 
WOOLSEY, Ms. LEE, Ms. SOLIS, Mr. BLUMENAUER, Mr. BROWN of Ohio, 
Mr. FARR, Mr. VAN HOLLEN, Ms. NORTON, Mr. MILLER of North Caro-
lina, Ms. SCHAKOWSKY, and Ms. ROYBAL-ALLARD) introduced the fol-
lowing bill; which was referred to the Committee on Education and the 
Workforce, and in addition to the Committees on Ways and Means, the 
Judiciary, and Financial Services, for a period to be subsequently deter-
mined by the Speaker, in each case for consideration of such provisions 
as fall within the jurisdiction of the committee concerned 
A BILL 
To provide additional protections for participants and 
beneficiaries under employee pension benefit plans.
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 
‘‘Pension Fairness Act of 2003’’.
(b) TABLE OF CONTENTS.—The table of contents is 
as follows:
Sec. 1. Short title and table of contents. 
TITLE I—IMPROVEMENTS IN DISCLOSURE 
Sec. 101. Pension benefit information. 
Sec. 102. Immediate warning of excessive stock holdings. 
Sec. 103. Report to participants and beneficiaries of trades in employer securi-
ties. 
Sec. 104. Enforcement of information and disclosure requirements. 
Sec. 105. Revision of accounting standard required. 
TITLE II—FREEDOM TO MAKE INVESTMENT DECISIONS WITH 
PLAN ASSETS. 
Sec. 201. Amendments to the Internal Revenue Code of 1986. 
Sec. 202. Amendments to the Employee Retirement Income Security Act of 
1974. 
Sec. 203. Recommendations relating to non-publicly traded stock. 
Sec. 204. Effective date of title. 
TITLE III—EMPLOYEE REPRESENTATION 
Sec. 301. Participation of participants in trusteeship of individual account 
plans. 
TITLE IV—INCREASED ACCOUNTABILITY 
Sec. 401. Bonding or insurance adequate to protect interest of participants and 
beneficiaries. 
Sec. 402. Liability for breach of fiduciary duty. 
Sec. 403. Preservation of rights or claims. 
Sec. 404. Office of pension participant advocacy. 
Sec. 405. Study regarding insurance system for individual account plans. 
Sec. 406. Excise tax on failure of pension plans to provide notice of transaction 
restriction periods. 
TITLE V—INVESTMENT ADVICE FOR PARTICIPANTS AND 
BENEFICIARIES 
Sec. 501. Independent investment advice. 
Sec. 502. Tax treatment of qualified retirement planning services. 
TITLE VI—PARITY IN EMPLOYEE BENEFITS 
Sec. 601. Inclusion in gross income of funded deferred compensation of cor-
porate insiders if corporation funds defined contribution plan 
with employer stock. 
Sec. 602. Performance-based compensation exception to $1,000,000 limitation 
on deductible compensation not to apply in certain cases. 
TITLE VII—PROTECTION OF RETIREMENT EXPECTATIONS 
Sec. 701. Protection of participants from conversions to hybrid defined benefit 
plans.
TITLE VIII—TREATMENT OF CORPORATE INSIDERS 
Sec. 801. Special rules for executive perks and retirement benefits. 
Sec. 802. Golden parachute excise tax to apply to deferred compensation paid 
by corporation after major decline in stock value or corporation 
declares bankruptcy. 
Sec. 803. Adequate disclosure regarding executive compensation packages. 
TITLE IX—ADDITIONAL PROTECTIONS FOR EMPLOYEES OF 
BANKRUPT EMPLOYERS 
Sec. 901. Avoidance of certain transfers; alternate prosecution of action. 
Sec. 902. Limitation on retention bonuses, severance pay, and certain other 
payments. 
Sec. 903. Priorities. 
Sec. 904. Effective date of title. 
TITLE X—MISCELLANEOUS PROVISIONS 
Sec. 1001. Corporate deduction for reinvested ESOP dividends subject to de-
ductible limits. 
Sec. 1002. Credit for elective deferrals and IRA contributions by certain indi-
viduals made permanent (saver’s tax credit). 
TITLE XI—GENERAL PROVISIONS 
Sec. 1101. General effective date. 
Sec. 1102. Plan amendments.
TITLE I—IMPROVEMENTS IN 
DISCLOSURE 
SEC. 101. PENSION BENEFIT INFORMATION. 
(a) PENSION BENEFIT STATEMENTS REQUIRED ON 
PERIODIC BASIS.—
(1) IN
GENERAL.—Subsection (a) of section 
105 of the Employee Retirement Income Security 
Act of 1974 (29 U.S.C. 1025) is amended— 
(A) by striking ‘‘shall furnish to any plan 
participant or beneficiary who so requests in 
writing,’’ and inserting ‘‘shall furnish at least 
once every 3 years, in the case of a participant 
in a defined benefit plan who has attained age
35, and annually, in the case of an individual 
account plan, to each plan participant, and 
shall furnish to any plan participant or bene-
ficiary who so requests,’’, and 
(B) by adding at the end the following 
flush sentence: 
‘‘Information furnished under the preceding sentence to 
a participant in a defined benefit plan (other than at the 
request of the participant) may be based on reasonable 
estimates determined under regulations prescribed by the 
Secretary.’’. 
(2) MODEL STATEMENT.—Section 105 of such 
Act (29 U.S.C. 1025) is amended by adding at the 
end the following new subsection: 
‘‘(e)(1) The Secretary of Labor shall develop a model 
benefit statement which shall be used by plan administra-
tors in complying with the requirements of subsection (a). 
Such statement shall include—
‘‘(A) the amount of nonforfeitable accrued ben-
efits as of the statement date which is payable at 
normal retirement age under the plan, 
‘‘(B) the amount of accrued benefits which are 
forfeitable but which may become nonforfeitable 
under the terms of the plan,
‘‘(C) the amount or percentage of any reduction 
due to integration of the benefit with the partici-
pant’s Social Security benefits or similar govern-
mental benefits, 
‘‘(D) information on early retirement benefit 
and joint and survivor annuity reductions, 
‘‘(E) in the case of an individual account plan, 
the percentage of the net return on investment of 
plan assets for the preceding plan year (or, with re-
spect to investments directed by the participant, the 
net return on investment of plan assets for such 
year so directed), itemized with respect to each type 
of investment, and, stated separately, the adminis-
trative and transaction fees incurred in connection 
with each such type of investment, and 
‘‘(F) in the case of an individual account plan, 
the amount and percentage of assets in the indi-
vidual account that consists of employer securities 
and employer real property (as defined in para-
graphs (1) and (2), respectively, of section 407(d)), 
as determined as of the most recent valuation date 
of the plan. 
‘‘(2) The Secretary shall also develop a separate no-
tice, which shall be included by the plan administrator 
with the information furnished pursuant to subsection (a),
which advises participants and beneficiaries of generally 
accepted investment principles, including principles of risk
management and diversification for long-term retirement 
security and the risks of holding substantial assets in a 
single asset such as employer securities.’’. 
(3) RULE FOR MULTIEMPLOYER PLANS.—Sub-
section (d) of section 105 of such Act (29 U.S.C. 
1025) is amended to read as follows: 
‘‘(d) Each administrator of a plan to which more than 
1 unaffiliated employer is required to contribute shall fur-
nish to any plan participant or beneficiary who so requests 
in writing, a statement described in subsection (a).’’. 
(b) DISCLOSURE OF BENEFIT CALCULATIONS.—
(1) IN GENERAL.—Section 105 of such Act (as 
amended by subsection (a)) is amended further—
(A) by redesignating subsections (b), (c), 
(d), and (e) as subsections (c), (d), (e), and (f), 
respectively; and 
(B) by inserting after subsection (a) the 
following new subsection: 
‘‘(b)(1) In the case of a participant or beneficiary who 
is entitled to a distribution of a benefit under an employee 
pension benefit plan, the administrator of such plan shall 
provide to the participant or beneficiary the information
described in paragraph (2) upon the written request of 
the participant or beneficiary. 
‘‘(2) The information described in this paragraph in-
cludes—
‘‘(A) a worksheet explaining how the amount of 
the distribution was calculated and stating the as-
sumptions used for such calculation, 
‘‘(B) upon written request of the participant or 
beneficiary, any documents relating to the calcula-
tion (if available), and 
‘‘(C) such other information as the Secretary 
may prescribe.
Any information provided under this paragraph shall be 
in a form calculated to be understood by the average plan 
participant.’’. 
(2) CONFORMING AMENDMENTS.—
(A) Section 101(a)(2) of such Act (29 
U.S.C. 1021(a)(2)) is amended by striking 
‘‘105(a) and (c)’’ and inserting ‘‘105(a), (b), 
and (d)’’. 
(B) Section 105(c) of such Act (as redesig-
nated by paragraph (1)(A) of this subsection) is 
amended by inserting ‘‘or (b)’’ after ‘‘subsection 
(a)’’.
(C) Section 106(b) of such Act (29 U.S.C. 
1026(b)) is amended by striking ‘‘sections 
105(a) and 105(c)’’ and inserting ‘‘subsections 
(a), (b), and (d) of section 105’’.
(c) AMENDMENTS TO INTERNAL REVENUE CODE OF 
1986.—
(1) IN GENERAL.—Chapter 43 of the Internal 
Revenue Code of 1986 (relating to qualified pension, 
etc., plans) is amended by adding at the end the fol-
lowing new section: 
‘‘SEC. 4980G. FAILURE OF APPLICABLE PLANS TO PROVIDE 
NOTICE OF GENERALLY ACCEPTED INVEST-
MENT PRINCIPLES. 
‘‘(a) IMPOSITION OF TAX.—There is hereby imposed 
a tax on the failure of any applicable pension plan to meet 
the requirements of subsection (e) with respect to any ap-
plicable individual. 
‘‘(b) AMOUNT OF TAX.—The amount of the tax im-
posed by subsection (a) on any failure with respect to any 
applicable individual shall be $100 for each day in the 
noncompliance period with respect to such failure. 
‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—
‘‘(1) TAX NOT TO APPLY TO FAILURES COR-
RECTED WITHIN 30 DAYS.—No tax shall be imposed 
by subsection (a) on any failure if—
‘‘(A) any person subject to liability for the 
tax under subsection (d) exercised reasonable 
diligence to meet the requirements of subsection 
(e), and 
‘‘(B) such person provides the notice de-
scribed in subsection (e) during the 30-day pe-
riod beginning on the first date such person 
knew, or exercising reasonable diligence should 
have known, that such failure existed. 
‘‘(2) OVERALL
LIMITATION
FOR
UNINTEN-
TIONAL FAILURES.—
‘‘(A) IN GENERAL.—If the person subject 
to liability for tax under subsection (d) exer-
cised reasonable diligence to meet the require-
ments of subsection (e) and paragraph (1) is 
not otherwise applicable, the tax imposed by 
subsection (a) for failures during the taxable 
year of the employer (or, in the case of a multi-
employer plan, the taxable year of the trust 
forming part of the plan) shall not exceed 
$500,000. For purposes of the preceding sen-
tence, all multiemployer plans of which the 
same trust forms a part shall be treated as 1 
plan.
‘‘(B) TAXABLE
YEARS
IN
THE
CASE
OF 
CERTAIN CONTROLLED GROUPS.—For purposes 
of this paragraph, if all persons who are treated 
as a single employer for purposes of this section 
do not have the same taxable year, the taxable 
years taken into account shall be determined 
under principles similar to the principles of sec-
tion 1561. 
‘‘(3) WAIVER BY SECRETARY.—In the case of a 
failure which is due to reasonable cause and not to 
willful neglect, the Secretary may waive part or all 
of the tax imposed by subsection (a) to the extent 
that the payment of such tax would be excessive or 
otherwise inequitable relative to the failure involved. 
‘‘(d) LIABILITY FOR TAX.—The following shall be lia-
ble for the tax imposed by subsection (a): 
‘‘(1) In the case of a plan other than a multi-
employer plan, the employer. 
‘‘(2) In the case of a multiemployer plan, the 
plan. 
‘‘(e) NOTICE
OF GENERALLY ACCEPTED INVEST-
MENT PRINCIPLES.—
‘‘(1) IN GENERAL.—The plan administrator of 
an applicable pension plan shall provide notice of 
generally accepted investment principles, including
principles of risk management and diversification, to 
each applicable individual.
‘‘(2) NOTICE.—The notice required by para-
graph (1) shall be written in a manner calculated to 
be understood by the average plan participant and 
shall provide sufficient information (as determined 
in accordance with rules or other guidance adopted 
by the Secretary) to allow applicable individuals to 
understand generally accepted investment principles, 
including principles of risk management and diver-
sification. 
‘‘(3) TIMING OF NOTICE.—The notice required 
by paragraph (1) shall be provided upon enrollment 
of the applicable individual in such plan and at least 
once per plan year thereafter. 
‘‘(4) FORM AND MANNER OF NOTICE.—The no-
tice required by paragraph (1) shall be in writing, 
except that such notice may be in electronic or other 
form to the extent that such form is reasonably ac-
cessible to the applicable individual. 
‘‘(f ) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) APPLICABLE INDIVIDUAL.—The term ‘ap-
plicable individual’ means with respect to an applica-
ble pension plan—
‘‘(A) any participant in the applicable pen-
sion plan, 
‘‘(B) any beneficiary who is an alternate 
payee (within the meaning of section 414(p)(8)) 
under an applicable qualified domestic relations 
order 
(within 
the 
meaning 
of 
section 
414(p)(1)(A)), and 
‘‘(C) any beneficiary of a deceased partici-
pant or alternate payee described in subpara-
graph (A) or (B), as the case may be, 
who has an accrued benefit under the plan and who 
is entitled to direct the investment (or hypothetical 
investment) of some or all of such accrued benefit. 
‘‘(2) APPLICABLE
PENSION
PLAN.—The term 
‘applicable pension plan’ means—
‘‘(A) 
a 
plan 
described 
in 
section 
219(g)(5)(A) (other than in clause (iii) thereof), 
and 
‘‘(B) an eligible deferred compensation 
plan (as defined in section 457(b)) of an eligible 
employer described in section 457(e)(1)(A), 
which permits any participant to direct the invest-
ment of some or all of his account in the plan or 
under which the accrued benefit of any participant
depends in whole or in part on hypothetical invest-
ments directed by the participant.’’. 
(2) CLERICAL AMENDMENT.—The table of sec-
tions for chapter 43 of such Code is amended by 
adding at the end the following new item:
‘‘Sec. 4980G. Failure of applicable plans to provide notice of gen-
erally accepted investment principles.’’.
(3) EFFECTIVE DATE.—
(A) IN GENERAL.—The amendments made 
by this subsection shall take effect 60 days 
after the adoption of rules or other guidance to 
carry out the amendments made by this sub-
section, which shall include a model notice of 
generally accepted investment principles, includ-
ing principles of risk management and diver-
sification. 
(B) MODEL
INVESTMENT
PRINCIPLES.—
For purposes of subparagraph (A), not later 
than 120 days after the date of the enactment 
of this Act, the Secretary of the Treasury, in 
consultation with the Secretary of Labor, shall 
issue rules or other guidance and a model no-
tice which meets the requirements of section 
4980G of the Internal Revenue Code of 1986 
(as added by this section).
SEC. 102. IMMEDIATE WARNING OF EXCESSIVE STOCK 
HOLDINGS. 
Section 105 of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1025) (as amended by sec-
tion 101 of this Act) is amended further by adding at the 
end the following new subsection: 
‘‘(g)(1) Upon receipt of information by the plan ad-
ministrator of an individual account plan indicating that 
the individual account of any participant which had not 
been excessively invested in employer securities is exces-
sively invested in such securities (or that such account, 
as initially invested, is excessively invested in employer se-
curities), the plan administrator shall immediately provide 
to the participant a separate, written statement—
‘‘(A) indicating that the participant’s account 
has become excessively invested in employer securi-
ties, 
‘‘(B) setting forth the notice described in sub-
section (e)(7), and 
‘‘(C) referring the participant to investment 
education materials and investment advice which 
shall be made available by or under the plan. 
In any case in which such a separate, written statement 
is required to be provided to a participant under this para-
graph, each statement issued to such participant pursuant 
to subsection (a) thereafter shall also contain such sepa-
rate, written statement until the plan administrator is 
made aware that such participant’s account has ceased to 
be excessively invested in employer securities or the em-
ployee, in writing, waives the receipt of the notice and ac-
knowledges understanding the importance of diversifica-
tion. 
‘‘(2) Each notice required under this subsection shall 
be provided in a form and manner which shall be pre-
scribed in regulations of the Secretary. Such regulations 
shall provide for inclusion in the notice a prominent ref-
erence to the risks of large losses in assets available for 
retirement from excessive investment in employer securi-
ties. 
‘‘(3) For purposes of paragraph (1), a participant’s 
account is ‘excessively invested’ in employer securities if 
more than 10 percent of the balance in such account is 
invested in employer securities (as defined in section 
407(d)(1)).’’.
SEC. 103. REPORT TO PARTICIPANTS AND BENEFICIARIES 
OF TRADES IN EMPLOYER SECURITIES. 
(a) IN GENERAL.—Section 104 of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 1024) 
is amended—
(1) by redesignating subsection (d) as sub-
section (e); and
(2) by inserting after subsection (c) the fol-
lowing new subsection: 
‘‘(d)(1) In any case in which assets in the individual 
account of a participant or beneficiary under an individual 
account plan include employer securities, if any person en-
gages in a transaction constituting a direct or indirect 
purchase or sale of employer securities and—
‘‘(A) such transaction is required under section 
16 of the Securities Exchange Act of 1934 to be re-
ported by such person to the Securities and Ex-
change Commission, or 
‘‘(B) such person is a named fiduciary of the 
plan, 
such person shall comply with the requirements of para-
graph (2). 
‘‘(2) A person described in paragraph (1) complies 
with the requirements of this paragraph in connection 
with a transaction described in paragraph (1) if such per-
son provides to the plan administrator of the plan a writ-
ten notification of the transaction not later than 1 busi-
ness day after the date of the transaction. 
‘‘(3)(A) If the plan administrator is made aware, on 
the basis of notifications received pursuant to paragraph 
(2) or otherwise, that the proceeds from any transaction 
described in paragraph (1), constituting direct or indirect
sales of employer securities by any person described in 
paragraph (1), exceed $100,000, the plan administrator 
of the plan shall provide to each participant and bene-
ficiary a notification of such transaction. Such notification 
shall be in writing, except that such notification may be 
in electronic or other form to the extent that such form 
is reasonably accessible to the participant or beneficiary. 
‘‘(B) In any case in which the proceeds from any 
transaction described in paragraph (1) (with respect to 
which a notification has not been provided pursuant to 
this paragraph), together with the proceeds from any 
other such transaction or transactions described in para-
graph (1) occurring during the preceding one-year period, 
constituting direct or indirect sales of employer securities 
by any person described in paragraph (1), exceed (in the 
aggregate) $100,000, such series of transactions by such 
person shall be treated as a transaction described in sub-
paragraph (A) by such person. 
‘‘(C) Each notification required under this paragraph 
shall be provided as soon as practicable, but not later than 
3 business days after receipt of the written notification 
or notifications indicating that the transaction (or series 
of transactions) requiring such notice has occurred. 
‘‘(4) Each notification required under paragraph (2) 
or (3) shall be made in such form and manner as may
be prescribed in regulations of the Secretary and shall in-
clude the number of shares involved in each transaction 
and the price per share, and the notification required 
under paragraph (3) shall be written in language designed 
to be understood by the average plan participant. The Sec-
retary may provide by regulation, in consultation with the 
Securities and Exchange Commission, for exemptions 
from the requirements of this subsection with respect to 
specified types of transactions to the extent that such ex-
emptions are consistent with the best interests of plan par-
ticipants and beneficiaries. Such exemptions may relate to 
transactions involving reinvestment plans, stock splits, 
stock dividends, qualified domestic relations orders, and 
similar matters. 
‘‘(5) For purposes of this subsection, the term ‘em-
ployer security’ has the meaning provided in section 
407(d)(1).’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to transactions occur-
ring after 90 days after the date of the enactment of this 
Act.
SEC. 104. ENFORCEMENT OF INFORMATION AND DISCLO-
SURE REQUIREMENTS. 
(a) IN GENERAL.—Section 502(c) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 
1132(c)) is amended—
(1) by redesignating paragraph (7) as para-
graph (8); and 
(2) by inserting after paragraph (6) the fol-
lowing new paragraph: 
‘‘(7) The Secretary may assess a civil penalty against 
any person required to provide any notification under the 
provisions of section 104(d), any statement under the pro-
visions of subsection (a), (d), or (f) of section 105, any 
information under the provisions of section 404(c)(4), or 
any notice under the provisions of section 404(e)(1) of up 
to $1,000 a day from the date of any failure by such per-
son to provide such notification, statement, information, 
or notice in accordance with such provisions.’’. 
(b) CONFORMING AMENDMENT.—Section 502(a)(6) 
of such Act (29 U.S.C. 1132(a)(6)) (as amended by sec-
tion 102(b)) is amended further by striking ‘‘(5), or (6)’’ 
and inserting ‘‘(5), (6), or (7)’’. 
SEC. 105. REVISION OF ACCOUNTING STANDARD RE-
QUIRED. 
The Securities and Exchange Commission shall not 
treat as authoritative for purposes of compliance with sec-
tion 13 of the Securities Exchange Act of 1934 (15 U.S.C. 
78m) any accounting statement of the standard setting 
body recognized by the Commission under section 19(b) 
of the Securities Act of 1933 (15 U.S.C. 77s(b)) that re-
lates to the accounting by an issuer for single-employer 
defined benefit pension plans unless such standard is 
modified to prevent the investment gains of such plan 
from being treated as income to such issuer. 
TITLE II—FREEDOM TO MAKE 
INVESTMENT 
DECISIONS 
WITH PLAN ASSETS 
SEC. 201. AMENDMENTS TO THE INTERNAL REVENUE CODE 
OF 1986. 
(a) IN GENERAL.—Subsection (a) of section 401 of 
the Internal Revenue Code of 1986 (relating to require-
ments for qualification) is amended by adding at the end 
the following new paragraph: 
‘‘(35) DIVERSIFICATION
REQUIREMENTS
FOR 
DEFINED
CONTRIBUTION
PLANS
THAT
HOLD
EM-
PLOYER SECURITIES.—
‘‘(A) IN GENERAL.—In the case of a de-
fined contribution plan described in this sub-
section that includes a trust which is exempt 
from tax under section 501(a) and which holds 
employer securities that are readily tradable on
an established securities market, such trust 
shall not constitute a qualified trust under this 
section unless such plan meets the requirements 
of subparagraphs (B) and (C). 
‘‘(B) ELECTIVE DEFERRALS INVESTED IN 
EMPLOYER SECURITIES.—
‘‘(i) IN GENERAL.—In the case of the 
portion of the account attributable to elec-
tive deferrals which is invested in employer 
securities, a plan meets the requirements 
of this subparagraph if each applicable in-
dividual in such plan may elect to direct 
the plan to divest any portion of such secu-
rities in the individual’s account and to re-
invest an equivalent amount in other in-
vestment options which meet the require-
ments of subparagraph (D). The preceding 
sentence shall apply to the extent that the 
amount attributable to reinvested portion 
exceeds the amount to which a prior elec-
tion under this subparagraph or paragraph 
(28) applies. 
‘‘(ii) APPLICABLE
INDIVIDUAL.—For 
purposes of this subparagraph, the term 
‘applicable individual’ means—
‘‘(I) any participant in the plan, 
‘‘(II) any beneficiary who is an 
alternate payee (within the meaning 
of section 414(p)(8)) under an appli-
cable 
qualified 
domestic 
relations 
order (within the meaning of section 
414(p)(1)(A)), and 
‘‘(III) any beneficiary of a de-
ceased participant or alternate payee. 
‘‘(C) 
OTHER
EMPLOYER
CONTRIBU-
TIONS.—
‘‘(i) IN GENERAL.—In the case of the 
portion of the account attributable to em-
ployer contributions (other than elective 
deferrals) which is invested in employer se-
curities, a plan meets the requirements of 
this subparagraph if each qualified partici-
pant in the plan may elect to direct the 
plan to divest any portion of such securi-
ties in the participant’s account and to re-
invest an equivalent amount in other in-
vestment options which meet the require-
ments of subparagraph (E). The preceding 
sentence shall apply to the extent that the 
amount attributable to such reinvested
portion exceeds the amount to which a 
prior election under this subparagraph or 
paragraph (28) applies. 
‘‘(ii) QUALIFIED
PARTICIPANT.—For 
purposes of this subparagraph, the term 
‘qualified participant’ means—
‘‘(I) any participant in the plan 
who has completed at least 3 years of 
service (as determined under section 
411(a)) under the plan, 
‘‘(II) any beneficiary who, with 
respect to a participant who met the 
service requirement in subclause (I), 
is an alternate payee (within the 
meaning of section 414(p)(8)) under 
an applicable qualified domestic rela-
tions order (within the meaning of 
section 414(p)(1)(A)), and 
‘‘(III) any beneficiary of a de-
ceased participant who met the service 
requirement in subclause (I) or alter-
nate payee described in subclause (II). 
‘‘(D) INVESTMENT OPTIONS.—The require-
ments of this subparagraph are met if the plan 
offers not less than 3 investment options (not
inconsistent with regulations prescribed by the 
Secretary) other than employer securities. 
‘‘(E) PRESERVATION
OF
AUTHORITY
OF 
PLAN TO LIMIT INVESTMENT.—Nothing in this 
paragraph shall be construed to limit the au-
thority of a plan to impose limitations on the 
portion of plan assets in any account which 
may be invested in employer securities. 
‘‘(F) OTHER DEFINITIONS AND RULES.—
For purposes of this paragraph—
‘‘(i) 
EMPLOYER
SECURITIES.—The 
term ‘employer securities’ shall have the 
meaning given such term by section 
407(d)(1) of the Employee Retirement In-
come Security Act of 1974. 
‘‘(ii) 
ELECTIVE
DEFERRALS.—For 
purposes of this subparagraph, the term 
‘elective deferrals’ means an employer con-
tribution described in section 402(g)(3)(A) 
and any employee contribution. 
‘‘(iii) 
ELECTION.—Elections 
under 
this paragraph shall be not less frequently 
than quarterly. 
‘‘(iv) EMPLOYEE
STOCK
OWNERSHIP 
PLAN.—The term ‘employee stock owner-
ship plan’ shall have the same meaning 
given to such term by section 4975(e)(7).’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 401(a)(28) of such Code is amended 
by adding at the end the following new subpara-
graph: 
‘‘(D) APPLICATION.—This paragraph shall 
not apply with respect to employer securities 
which are readily tradable on an established se-
curities market.’’. 
(2) Section 409(h)(7) of such Code is amended 
by inserting at the end ‘‘or subparagraph (B) or (C) 
of section 401(a)(35)’’. 
(3) Section 4975(e)(7) of such Code is amended 
by adding at the end the following new sentence: ‘‘A 
plan shall not fail to be treated as an employee stock 
ownership plan merely because the plan meets the 
requirements of section 401(a)(35) (or provides 
greater diversification rights) or because participants 
in such plan exercise diversification rights under 
such section (or greater diversification rights avail-
able under the plan).’’. 
(4) Section 4980(c)(3)(A) of such Code is 
amended by striking ‘‘if—’’ and all that follows and
inserting ‘‘if the requirements of subparagraphs (B) 
and (C) are met.’’. 
(5) Section 407 of the Employee Retirement In-
come Security Act of 1974 (29 U.S.C. 1107) is 
amended by adding at the end the following new 
subsection: 
‘‘(g) Notwithstanding section 408(e) or any other 
provision of this title, an individual account plan may not 
include provisions that do not meet the requirements of 
section 401(a)(35)(B) of the Internal Revenue Code of 
1986.’’.
SEC. 202. AMENDMENTS TO THE EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974. 
(a) AMENDMENTS TO THE EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974.—Section 404 of the 
Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1104) is amended by adding at the end the fol-
lowing new subsection: 
‘‘(e) DIVERSIFICATION OF INVESTMENT OF ACCOUNT 
ASSETS HELD UNDER INDIVIDUAL ACCOUNT PLANS.—
‘‘(1) IN GENERAL.—In the case of an individual 
account plan under which a participant or bene-
ficiary is permitted to exercise control over assets in 
his or her account, with respect to the assets in the 
account to which the participant or beneficiary has
a nonforfeitable right and which consist of employer 
securities which are readily tradable on an estab-
lished securities market, the plan shall meet the re-
quirements of paragraphs (2), (3), (4), (5), (6), and 
(7). 
‘‘(2) ASSETS
ATTRIBUTABLE
TO
EMPLOYEE 
CONTRIBUTIONS.—In the case of any portion of the 
account assets described in paragraph (1) which is 
attributable to employee contributions, there shall be 
no restrictions on the right of a participant or bene-
ficiary to allocate the assets in such portion to any 
investment option provided under the plan. 
‘‘(3) ELECTIVE DEFERRALS INVESTED IN EM-
PLOYER SECURITIES.—
‘‘(A) IN GENERAL.—In the case of the por-
tion of the account assets described in para-
graph (1) which is attributable to elective defer-
rals and is invested in employer securities, a 
plan meets the requirements of this paragraph 
if each applicable individual in such plan may 
elect to direct the plan to divest any portion of 
such securities in the individual’s account and 
to reinvest an equivalent amount in other in-
vestment options which meet the requirements 
of paragraph (5). The preceding sentence shall
apply to the extent that the amount attributable 
to such reinvested portion exceeds the amount 
to which a prior election under this paragraph 
or section 401(a)(28) of the Internal Revenue 
Code of 1986 applies. 
‘‘(B) APPLICABLE INDIVIDUAL.—For pur-
poses of this paragraph, the term ‘applicable in-
dividual’ means—
‘‘(i) any participant in the plan, 
‘‘(ii) any beneficiary who is an alter-
nate payee (within the meaning of section 
206(d)(3)(K)) under an applicable quali-
fied domestic relations order (within the 
meaning of section 206(d)(3)(B)(i)), and 
‘‘(iii) any beneficiary of a deceased 
participant or alternate payee. 
‘‘(4) OTHER EMPLOYER CONTRIBUTIONS.—
‘‘(A) IN GENERAL.—In the case of the por-
tion of the account assets described in para-
graph (1) which is attributable employer con-
tributions (other than elective deferrals) and is 
invested in employer securities, a plan meets 
the requirements of this paragraph if each 
qualified participant in the plan may elect to di-
rect the plan to divest any portion of such secu-
rities in the participant’s account and to rein-
vest an equivalent amount in other investment 
options which meet the requirements of para-
graph (6). The preceding sentence shall apply 
to the extent that the amount attributable to 
such reinvested portion exceeds the amount to 
which a prior election under this paragraph or 
section 401(a)(28) of such Code applies. 
‘‘(B) QUALIFIED PARTICIPANT.—For pur-
poses of this paragraph, the term ‘qualified par-
ticipant’ means—
‘‘(i) any participant in the plan who 
has completed at least 3 years of service 
(as determined under section 203(a)) 
under the plan, 
‘‘(ii) any beneficiary who, with respect 
to a participant who met the service re-
quirement in clause (i), is an alternate 
payee (within the meaning of section 
206(d)(3)(K)) under an applicable quali-
fied domestic relations order (within the 
meaning of section 206(d)(3)(B)(i)), and 
‘‘(iii) any beneficiary of a deceased 
participant who met the service require-
ment in clause (i) or alternate payee de-
scribed in clause (ii). 
‘‘(5) INVESTMENT OPTIONS.—The requirements 
of this paragraph are met if, with respect to the ac-
count assets described in paragraph (1), the plan of-
fers not less than 3 investment options (not incon-
sistent with regulations prescribed by the Secretary) 
other than employer securities. 
‘‘(6) PROMPT COMPLIANCE WITH DIRECTIONS 
TO ALLOCATE INVESTMENTS.—
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), a plan meets the require-
ments of this paragraph with respect to plan 
assets described in paragraph (1) if the plan 
provides that, within 5 days after the date of 
any election by a participant or beneficiary allo-
cating any such assets to any investment option 
provided under the plan, the plan administrator 
shall take such actions as are necessary to ef-
fectuate such allocation. 
‘‘(B) SPECIAL RULE FOR PERIODIC ELEC-
TIONS.—In any case in which the plan provides 
for elections periodically during prescribed peri-
ods, the 5-day period described in subparagraph
(A) shall commence at the end of each such 
prescribed period. 
‘‘(7) NOTICE OF RIGHTS AND OF IMPORTANCE 
OF
DIVERSIFICATION.—A plan meets the require-
ments of this paragraph if the plan provides that, 
not later than 30 days prior to the date on which 
the right of a participant under the plan to his or 
her accrued benefit becomes nonforfeitable, the plan 
administrator shall provide to such participant and 
his or her beneficiaries a written notice—
‘‘(A) setting forth their rights under this 
section with respect to the accrued benefit, and 
‘‘(B) describing the importance of diversi-
fying the investment of account assets. 
‘‘(8) PRESERVATION OF AUTHORITY OF PLAN 
TO LIMIT INVESTMENT.—Nothing in this subsection 
shall be construed to limit the authority of a plan to 
impose limitations on the portion of plan assets in 
any account which may be invested in employer se-
curities. 
‘‘(9) OTHER
DEFINITIONS
AND
RULES.—For 
purposes of this subsection—
‘‘(A) EMPLOYER
SECURITIES.—The term 
‘employer securities’ shall have the meaning 
given such term by section 407(d)(1) of the
Employee Retirement Income Security Act of 
1974. 
‘‘(B) ELECTIVE
DEFERRALS.—The term 
‘elective deferrals’ means an employer contribu-
tion described in section 402(g)(3)(A) of such 
Code and any employee contribution. 
‘‘(C) ELECTION.—Elections under this 
subsection shall be not less frequently than 
quarterly. 
‘‘(D) 
EMPLOYEE
STOCK
OWNERSHIP 
PLAN.—The term ‘employee stock ownership 
plan’ shall have the same meaning given to 
such term by section 4975(e)(7) of such Code. 
SEC. 203. RECOMMENDATIONS RELATING TO NON-PUB-
LICLY TRADED STOCK.
Within 1 year after the date of the enactment of this 
Act, the Secretary of Labor and the Secretary of the 
Treasury shall jointly transmit to the Committee on Edu-
cation and the Workforce and the Committee on Ways and 
Means of the House of Representatives and the Committee 
on Health, Education, Labor, and Pensions and the Com-
mittee on Finance of the Senate their recommendations 
regarding legislative changes relating to treatment, under 
section 404(e) of the Employee Retirement Income Secu-
rity Act of 1974 and section 401(a)(35) of the Internal
Revenue Code of 1986 (as added by this title), of indi-
vidual account plans under which a participant or bene-
ficiary is permitted to exercise control over assets in his 
or her account, in cases in which such assets do not in-
clude employer securities which are readily tradable under 
an established securities market. 
SEC. 204. EFFECTIVE DATE OF TITLE. 
(a) IN GENERAL.—Except as provided in subsection 
(b), the amendments made by this title shall apply with 
respect to plan years beginning after December 31, 2003. 
(b) EXCEPTION.—The amendments made by this sec-
tion shall not apply to employer securities held by an em-
ployee stock ownership plan which are not subject to sec-
tion 401(a)(28) of the Internal Revenue Code of 1986 by 
reason of section 1175(a)(2) of the Tax Reform Act of 
1986 (100 Stat. 2519). 
(c) DELAYED EFFECTIVE DATE OF EXISTING HOLD-
INGS.—In any case in which a portion of the nonforfeit-
able accrued benefit of a participant or beneficiary is held 
in the form of employer securities (as defined in section 
407(d)(1) of the Employee Retirement Income Security 
Act of 1974) immediately before the first date of the first 
plan year to which the amendments made by this title 
apply, such portion shall be taken into account only with
respect to plan years beginning on or after January 1, 
2005. 
TITLE III—EMPLOYEE 
REPRESENTATION
SEC. 301. PARTICIPATION OF PARTICIPANTS IN TRUSTEE-
SHIP OF INDIVIDUAL ACCOUNT 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) The assets of a single-employer plan which 
is an individual account 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 trustees representing on an 
equal basis the interests of the employer or employers 
maintaining the plan and the interests of the participants 
and their beneficiaries and having equal voting rights. 
‘‘(B)(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 interests of the participants and their beneficiaries 
shall be selected by the plan participants in accordance 
with regulations of the Secretary. 
‘‘(C) An individual shall not be treated as ineligible 
for selection as trustee solely because such individual is 
an employee of the plan sponsor, except that the employee 
so selected may not be a highly compensated employee (as 
defined in section 414(q) of the Internal Revenue Code 
of 1986). 
‘‘(D) The Secretary shall provide by regulation for 
the appointment of a neutral individual, in accordance
with the procedures under section 203(f) of the Labor 
Management Relations Act, 1947 (29 U.S.C. 173(f)), to 
cast votes as necessary to resolve tie votes by the trust-
ees.’’. 
(b) REGULATIONS.—The Secretary of Labor shall 
prescribe the initial regulations necessary to carry out the 
provisions of the amendments made by this section not 
later than 90 days after the date of the enactment of this 
Act. 
TITLE IV—INCREASED 
ACCOUNTABILITY 
SEC. 401. BONDING OR INSURANCE ADEQUATE TO PRO-
TECT 
INTEREST 
OF 
PARTICIPANTS 
AND 
BENEFICIARIES. 
Section 412 of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1112) is amended by adding 
at the end the following new subsection: 
‘‘(f) Notwithstanding the preceding provisions of this 
section, each fiduciary of an individual account plan shall 
be bonded or insured, in accordance with regulations 
which shall be prescribed by the Secretary, in an amount 
sufficient to ensure coverage by the bond or insurance of 
financial losses due to any failure to meet the require-
ments of this part.’’.
SEC. 402. LIABILITY FOR BREACH OF FIDUCIARY DUTY. 
(a) ADDITIONAL EQUITABLE
OR REMEDIAL RE-
LIEF.—Section 409 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1109) is amended—
(1) by redesignating subsection (b) as sub-
section (c); 
(2) in subsection (a), by striking ‘‘, including 
removal of such fiduciary’’; and 
(3) by inserting after subsection (a) the fol-
lowing new subsection: 
‘‘(b) The equitable or remedial relief referred to in 
subsection (a) may include (but is not limited to) a court 
order removing the fiduciary from the plan referred to in 
subsection (a) and a court order prohibiting, conditionally 
or unconditionally, and permanently or for such period of 
time as the court shall determine, the fiduciary from serv-
ing—
‘‘(1) as an administrator, fiduciary, officer, 
trustee, custodian, counsel, agent, employee, or rep-
resentative in any capacity of any employee benefit 
plan, 
‘‘(2) as a consultant or adviser to an employee 
benefit plan, including but not limited to any entity 
whose activities are in whole or substantial part de-
voted to providing goods or services to any employee 
benefit plan, or
‘‘(3) in any capacity that involves decision-
making authority or custody or control of the mon-
eys, funds, assets, or property of any employee ben-
efit plan.’’. 
(b) LIABILITY
FOR PARTICIPATING
IN
OR CON-
CEALING FIDUCIARY BREACH IN CONNECTION WITH IN-
DIVIDUAL ACCOUNT PLANS.—
(1) APPLICATION TO PARTICIPANTS AND BENE-
FICIARIES OF 401(k) PLANS.—
(A) IN GENERAL.—Part 4 of subtitle B of 
title I of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1101 et seq.) is 
amended by adding after section 409 the fol-
lowing new section: 
‘‘SEC. 409A. LIABILITY FOR BREACH OF FIDUCIARY DUTY IN 
401(k) PLANS. 
‘‘(a) Any person who is a fiduciary with respect to 
an individual account plan that includes a qualified cash 
or deferred arrangement under section 401(k) of the In-
ternal Revenue Code of 1986 who breaches any of the re-
sponsibilities, obligations, or duties imposed upon fidu-
ciaries by this title shall be personally liable to make good 
to each participant and beneficiary of the plan any losses 
to such participant or beneficiary resulting from each such 
breach, and to restore to such participant or beneficiary
any profits of such fiduciary which have been made 
through use of assets of the plan by the fiduciary, and 
shall be subject to such other equitable or remedial relief 
as the court may deem appropriate, including removal of 
such fiduciary. A fiduciary may also be removed for a vio-
lation of section 411 of this Act. 
‘‘(b) The right of participants and beneficiaries under 
subsection (a) to sue for breach of fiduciary duty with re-
spect to an individual account plan that includes a quali-
fied cash or deferred arrangement under section 401(k) 
of such Code shall be in addition to all existing rights that 
participants and beneficiaries have under section 409, sec-
tion 502, and any other provision of this title, and shall 
not be construed to give rise to any inference that such 
rights do not already exist under section 409, section 502, 
or any other provision of this title. 
‘‘(c) No fiduciary shall be liable with respect to a 
breach of fiduciary duty under this title if such breach 
was committed before he or she became a fiduciary or 
after he or she ceased to be a fiduciary.’’
(B) 
CONFORMING
AMENDMENT.—The 
table of contents for part 4 of subtitle B of title 
I of such Act is amended by inserting the fol-
lowing new item after the item relating to sec-
tion 409:
‘‘Sec. 409A. Liability for breach of fiduciary duty in 401(k) 
plans.’’
(2) INSIDER LIABILITY.—
(A) IN GENERAL.—Section 409 of the Em-
ployee Retirement Income Security Act of 1974 
(29 U.S.C. 1109) is amended by redesignating 
subsection (b) as subsection (c) and by insert-
ing after subsection (a) the following new sub-
section: 
‘‘(b)(1)(A) If an insider with respect to the plan spon-
sor of an individual account plan that holds employer secu-
rities that are readily tradable on an established securities 
market—
‘‘(i) knowingly participates in a breach of fidu-
ciary responsibility to which subsection (a) applies, 
or 
‘‘(ii) knowingly undertakes to conceal such a 
breach, 
such insider shall be personally liable under this sub-
section for such breach in the same manner as the fidu-
ciary who commits such breach. 
‘‘(B) For purposes of subparagraph (A), the term ‘in-
sider’ means, with respect to any plan sponsor of a plan 
to which subparagraph (A) applies—
‘‘(i) any officer or director with respect to the 
plan sponsor, or
‘‘(ii) any independent qualified public account-
ant of the plan or of the plan sponsor. 
‘‘(3) Any relief provided under this subsection or sec-
tion 409A—
‘‘(A) if provided to an individual account plan, 
shall inure to the individual accounts of the affected 
participants or beneficiaries, and 
‘‘(B) if provided to a participant or beneficiary, 
shall be payable to the individual account plan on 
behalf of such participant or beneficiary unless such 
plan has been terminated.’’
(B) CONFORMING
AMENDMENT.—Section 
409(c) of such Act (29 U.S.C. 1109(c)), as re-
designated by subparagraph (A), is amended by 
inserting before the period the following: 
‘‘, unless such liability arises under subsection 
(b)’’. 
(c) MAINTENANCE OF FIDUCIARY LIABILITY.—Sec-
tion 404(c)(1)(B) of such Act (29 U.S.C. 1104(c)(1)(B)) 
is amended by inserting before the period the following: 
‘‘, except that this subparagraph shall not be construed 
to exempt any fiduciary from liability for any violation of 
subsection (e)’’.
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to breaches occurring 
on or after the date of the enactment of this Act. 
SEC. 403. PRESERVATION OF RIGHTS OR CLAIMS. 
Section 502 of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1132) is amended by adding 
at the end the following new subsection: 
‘‘(n)(1) The rights under this title (including the 
right to maintain a civil action) may not be waived, de-
ferred, or lost pursuant to any agreement not authorized 
under this title with specific reference to this subsection. 
‘‘(2) Paragraph (1) shall not apply to an agreement 
providing for arbitration or participation in any other non-
judicial procedure to resolve a dispute if the agreement 
is entered into knowingly and voluntarily by the parties 
involved after the dispute has arisen or is pursuant to the 
terms of a collective bargaining agreement.’’. 
SEC. 404. OFFICE OF PENSION PARTICIPANT ADVOCACY. 
(a) IN GENERAL.—Subtitle A of title III of the Em-
ployee Retirement Income Security Act of 1974 (29 
U.S.C. 3001 et seq.) is amended by inserting after section 
3004 the following new section: 
‘‘OFFICE OF PENSION PARTICIPANT ADVOCACY 
‘‘SEC. 3005. (a) ESTABLISHMENT.—
‘‘(1) IN GENERAL.—There is established in the 
Department of Labor an office to be known as the 
‘Office of Pension Participant Advocacy’. 
‘‘(2) PENSION
PARTICIPANT
ADVOCATE.—The 
Office of Pension Participant Advocacy shall be 
under the supervision and direction of an official to 
be known as the ‘Pension Participant Advocate’ who 
shall—
‘‘(A) have demonstrated experience in the 
area of pension participant assistance, and 
‘‘(B) be selected by the Secretary after 
consultation with pension participant advocacy 
organizations. 
The Pension Participant Advocate shall report di-
rectly to the Secretary and shall be entitled to com-
pensation at the same rate as the highest rate of 
basic pay established for the Senior Executive Serv-
ice under section 5382 of title 5, United States 
Code. 
‘‘(b) FUNCTIONS OF OFFICE.—It shall be the func-
tion of the Office of Pension Participant Advocacy to—
‘‘(1) evaluate the efforts of the Federal Govern-
ment, business, and financial, professional, retiree, 
labor, women’s, and other appropriate organizations
in assisting and protecting pension plan participants, 
including—
‘‘(A) serving as a focal point for, and ac-
tively seeking out, the receipt of information 
with respect to the policies and activities of the 
Federal Government, business, and such organi-
zations which affect such participants, 
‘‘(B) identifying significant problems for 
pension plan participants and the capabilities of 
the Federal Government, business, and such or-
ganizations to address such problems, and 
‘‘(C) developing proposals for changes in 
such policies and activities to correct such prob-
lems, and communicating such changes to the 
appropriate officials, 
‘‘(2) promote the expansion of pension plan cov-
erage and the receipt of promised benefits by in-
creasing the awareness of the general public of the 
value of pension plans and by protecting the rights 
of pension plan participants, including—
‘‘(A) enlisting the cooperation of the public 
and private sectors in disseminating informa-
tion, and
‘‘(B) forming private-public partnerships 
and other efforts to assist pension plan partici-
pants in receiving their benefits, 
‘‘(3) advocating for the full attainment of the 
rights of pension plan participants, including by 
making pension plan sponsors and fiduciaries aware 
of their responsibilities, 
‘‘(4) giving priority to the special needs of low 
and moderate income participants, 
‘‘(5) developing needed information with respect 
to pension plans, including information on the types 
of existing pension plans, levels of employer and em-
ployee contributions, vesting status, accumulated 
benefits, benefits received, and forms of benefits, 
and 
‘‘(6) pursuing claims on behalf of participants 
and beneficiaries and providing appropriate assist-
ance in the resolution of disputes between partici-
pants and beneficiaries and pension plans, including 
assistance in obtaining settlement agreements. 
‘‘(c) REPORTS.—
‘‘(1) ANNUAL REPORT.—Not later than Decem-
ber 31 of each calendar year, the Pension Partici-
pant Advocate shall report to the Committee on 
Education and the Workforce and the Committee on
Ways and Means of the House of Representatives 
and the Committee on Health, Education, Labor, 
and Pensions and the Committee on Finance of the 
Senate on its activities during the fiscal year ending 
in the calendar year. Such report shall—
‘‘(A) identify significant problems the Ad-
vocate has identified, 
‘‘(B) include specific legislative and regu-
latory changes to address the problems, and 
‘‘(C) identify any actions taken to correct 
problems identified in any previous report. 
The Advocate shall submit a copy of such report to 
the Secretary and any other appropriate official at 
the same time it is submitted to the committees of 
Congress. 
‘‘(2) SPECIFIC REPORTS.—The Pension Partici-
pant Advocate shall report to the Secretary or any 
other appropriate official any time the Advocate 
identifies a problem which may be corrected by the 
Secretary or such official. 
‘‘(3) REPORTS TO BE SUBMITTED DIRECTLY.—
The report required under paragraph (1) shall be 
provided directly to the committees of Congress 
without any prior review or comment by the Sec-
retary or any other Federal officer or employee.
‘‘(d) SPECIFIC POWERS.—
‘‘(1) RECEIPT
OF
INFORMATION.—Subject to 
such confidentiality requirements as may be appro-
priate, the Secretary and other Federal officials 
shall, upon request, provide such information (in-
cluding plan documents) as may be necessary to en-
able the Pension Participant Advocate to carry out 
the Advocate’s responsibilities under this section. 
‘‘(2) APPEARANCES.—The Pension Participant 
Advocate may represent the views and interests of 
pension plan participants before any Federal agency, 
including, upon request of a participant, in any pro-
ceeding involving the participant. 
‘‘(3) CONTRACTING
AUTHORITY.—In carrying 
out responsibilities under subsection (b)(5), the Pen-
sion Participant Advocate may, in addition to any 
other authority provided by law—
‘‘(A) contract with any person to acquire 
statistical information with respect to pension 
plan participants, and 
‘‘(B) conduct direct surveys of pension 
plan participants.’’
(b) CONFORMING AMENDMENT.—The table of con-
tents in section 1 of such Act is amended by inserting
after the item relating to section 3004 the following new 
item:
‘‘Sec. 3051. Office of Pension Participant Advocacy.’’.
(c) EFFECTIVE DATE.—The amendment made by 
this section shall take effect on January 1, 2004. 
SEC. 405. STUDY REGARDING INSURANCE SYSTEM FOR IN-
DIVIDUAL ACCOUNT PLANS. 
(a) STUDY.—As soon as practicable after the date of 
the enactment of this Act, the Pension Benefit Guaranty 
Corporation shall contract to carry out a study relating 
to the establishment of an insurance system for individual 
account plans. In conducting such study, the Corporation 
shall consider—
(1) the feasibility and impact of such a system, 
and 
(2) options for developing such a system. 
(b) REPORT.—Not later than 3 years after the date 
of the enactment of this Act, the Corporation shall report 
the results of its study, together with any recommenda-
tions for legislative changes, to the Committee on Edu-
cation and the Workforce and the Committee on Ways and 
Means of the House of Representatives and the Committee 
on Health, Education, Labor, and Pensions and the Com-
mittee on Finance of the Senate.
SEC. 406. EXCISE TAX ON FAILURE OF PENSION PLANS TO 
PROVIDE NOTICE OF TRANSACTION RESTRIC-
TION PERIODS. 
(a) IN GENERAL.—Chapter 43 of the Internal Rev-
enue Code of 1986 (relating to qualified pension, etc., 
plans) is amended by adding at the end the following new 
section: 
‘‘SEC. 4980H. FAILURE OF APPLICABLE PLANS TO PROVIDE 
NOTICE OF TRANSACTION RESTRICTION PE-
RIODS. 
‘‘(a) IMPOSITION OF TAX.—There is hereby imposed 
a tax on the failure of any applicable pension plan to meet 
the requirements of subsection (e) with respect to any ap-
plicable individual. 
‘‘(b) AMOUNT OF TAX.—The amount of the tax im-
posed by subsection (a) on any failure with respect to any 
applicable individual shall be $100 for each day in the 
noncompliance period with respect to such failure. 
‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—
‘‘(1) TAX NOT TO APPLY TO FAILURES COR-
RECTED AS SOON AS REASONABLY PRACTICABLE.—
No tax shall be imposed by subsection (a) on any 
failure if—
‘‘(A) any person subject to liability for the 
tax under subsection (d) exercised reasonable
diligence to meet the requirements of subsection 
(e), and 
‘‘(B) such person provides the notice de-
scribed in subsection (e) as soon as reasonably 
practicable after the first date such person 
knew, or exercising reasonable diligence should 
have known, that such failure existed. 
‘‘(2) OVERALL
LIMITATION
FOR
UNINTEN-
TIONAL FAILURES.—
‘‘(A) IN GENERAL.—If the person subject 
to liability for tax under subsection (d) exer-
cised reasonable diligence to meet the require-
ments of subsection (e) and paragraph (1) is 
not otherwise applicable, the tax imposed by 
subsection (a) for failures during the taxable 
year of the employer (or, in the case of a multi-
employer plan, the taxable year of the trust 
forming part of the plan) shall not exceed 
$500,000. For purposes of the preceding sen-
tence, all multiemployer plans of which the 
same trust forms a part shall be treated as 1 
plan. 
‘‘(B) TAXABLE
YEARS
IN
THE
CASE
OF 
CERTAIN CONTROLLED GROUPS.—For purposes 
of this paragraph, if all persons who are treated
as a single employer for purposes of this section 
do not have the same taxable year, the taxable 
years taken into account shall be determined 
under principles similar to the principles of sec-
tion 1561. 
‘‘(3) WAIVER BY SECRETARY.—In the case of a 
failure which is due to reasonable cause and not to 
willful neglect, the Secretary may waive part or all 
of the tax imposed by subsection (a) to the extent 
that the payment of such tax would be excessive or 
otherwise inequitable relative to the failure involved. 
‘‘(d) LIABILITY FOR TAX.—The following shall be lia-
ble for the tax imposed by subsection (a): 
‘‘(1) In the case of a plan other than a multi-
employer plan, the employer. 
‘‘(2) In the case of a multiemployer plan, the 
plan. 
‘‘(e) NOTICE OF TRANSACTION RESTRICTION PERI-
ODS.—
‘‘(1) DUTIES
OF
PLAN
ADMINISTRATOR.—In 
advance of the commencement of any transaction re-
striction period with respect to an applicable pension 
plan, the plan administrator shall notify the plan 
participants and beneficiaries who are affected by 
such action in accordance with this subsection.
‘‘(2) NOTICE REQUIREMENTS.—
‘‘(A) IN GENERAL.—The notices described 
in paragraph (1) shall be written in a manner 
calculated to be understood by the average plan 
participant and shall include—
‘‘(i) the reasons for the transaction 
restriction period, 
‘‘(ii) an identification of the invest-
ments and other rights affected, 
‘‘(iii) the expected beginning date and 
length of the transaction restriction period, 
‘‘(iv) in the case of investments af-
fected, a statement that the applicable in-
dividual should evaluate the appropriate-
ness of their current investment decisions 
in light of their inability to direct or diver-
sify assets credited to their accounts dur-
ing the transaction restriction period, and 
‘‘(v) such other matters as the Sec-
retary may require by regulation. 
‘‘(B) NOTICE
TO
PARTICIPANTS
AND 
BENEFICIARIES.—Except as otherwise provided 
in this subsection, notices described in para-
graph (1) shall be furnished to all participants 
and beneficiaries under the plan to whom the
transaction restriction period applies at least 30 
days in advance of the transaction restriction 
period. 
‘‘(C) EXCEPTION TO 30-DAY NOTICE RE-
QUIREMENT.—In any case in which—
‘‘(i) a deferral of the transaction re-
striction period would violate the require-
ments of subparagraph (A) or (B) of sec-
tion 404(a)(1) of the Employee Retirement 
Income Security Act of 1974, and a fidu-
ciary (within the meaning of section 3(21) 
of such Act) of the plan reasonably so de-
termines in writing, or 
‘‘(ii) the inability to provide the 30-
day advance notice is due to events that 
were unforeseeable or circumstances be-
yond the reasonable control of the plan ad-
ministrator, and a fiduciary of the plan 
reasonably so determines in writing, 
subparagraph (B) shall not apply, and the no-
tice shall be furnished to all participants and 
beneficiaries under the plan to whom the trans-
action restriction period applies as soon as rea-
sonably possible under the circumstances unless 
such a notice in advance of the termination of
the transaction restriction period is impracti-
cable. 
‘‘(D) WRITTEN
NOTICE.—The notice re-
quired to be provided under this subsection 
shall be in writing, except that such notice may 
be in electronic or other form to the extent that 
such form is reasonably accessible to the recipi-
ent. 
‘‘(E) NOTICE TO ISSUERS OF EMPLOYER 
SECURITIES
SUBJECT
TO
TRANSACTION
RE-
STRICTION PERIOD.—In the case of any trans-
action restriction period in connection with an 
applicable pension plan, the plan administrator 
shall provide timely notice of such transaction 
restriction period to the issuer of any employer 
securities subject to such transaction restriction 
period. 
‘‘(3) EXCEPTION FOR TRANSACTION RESTRIC-
TION PERIODS WITH LIMITED APPLICABILITY.—In 
any case in which the transaction restriction period 
applies to 1 or more participants or beneficiaries in 
connection with a merger, acquisition, divestiture, or 
similar transaction involving the plan or plan spon-
sor and occurs solely in connection with becoming or 
ceasing to be an applicable individual under the plan
by reason of such merger, acquisition, divestiture, or 
transaction, the requirement of this subsection that 
the notice be provided to all participants and bene-
ficiaries shall be treated as met if the notice required 
under paragraph (1) is provided to such participants 
or beneficiaries to whom the transaction restriction 
period applies as soon as reasonably practicable. 
‘‘(4) CHANGES
IN
LENGTH
OF
TRANSACTION 
RESTRICTION PERIOD.—If, following the furnishing 
of the notice pursuant to this subsection, there is a 
change in the beginning date or length of the trans-
action restriction period (specified in such notice 
pursuant to paragraph (2)(A)(iii)), the administrator 
shall provide affected participants and beneficiaries 
notice of the change as soon as reasonably prac-
ticable. In relation to the extended transaction re-
striction period, such notice shall meet the require-
ments of paragraph (2)(D) and shall specify any 
material change in the matters referred to in clauses 
(i) through (v) of paragraph (2)(A). 
‘‘(5) REGULATORY
EXCEPTIONS.—The Sec-
retary may provide by regulation for additional ex-
ceptions to the requirements of this subsection which 
the Secretary determines are in the interests of par-
ticipants and beneficiaries.
‘‘(6) GUIDANCE
AND
MODEL
NOTICES.—The 
Secretary shall issue guidance and model notices 
which meet the requirements of this subsection. 
‘‘(7) TRANSACTION RESTRICTION PERIOD.—For 
purposes of this subsection—
‘‘(A) IN GENERAL.—The term ‘transaction 
restriction period’ means, in connection with an 
applicable pension plan, any period for which 
any ability of participants or beneficiaries under 
the plan, which is otherwise available under the 
terms of such plan, to direct or diversify assets 
credited to their accounts, to obtain loans from 
the plan, or to obtain distributions from the 
plan is temporarily suspended, limited, or re-
stricted, if such suspension, limitation, or re-
striction is for any period of more than 3 con-
secutive business days. 
‘‘(B) EXCLUSIONS.—The term ‘transaction 
restriction period’ does not include a suspen-
sion, limitation, or restriction—
‘‘(i) which occurs by reason of the ap-
plication of the securities laws (as defined 
in section 3(a)(47) of the Securities Ex-
change Act of 1934),
‘‘(IV) meets the additional requirements of 
clause (iii). 
‘‘(ii) 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 
dealer 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),