148
Such rules shall only permit such contributions or defer-
rals with respect to payments of bona fide accumulated 
sick leave, accumulated vacation pay, severance, or back 
pay. The Secretary may apply such other conditions on 
such contributions or deferrals as are necessary or appro-
priate to carry out the purposes of this section. 
(b) TREATMENT OF DEFERRALS.—Except as other-
wise determined by the Secretary to be necessary to carry 
out the purposes of this section, the rules described in sub-
section (a) shall provide that the contributions or deferrals 
shall, for purposes of section 457 of such Code and sub-
chapter D of chapter 1 of subtitle A of such Code, be 
treated as contributions or deferrals made on behalf of ac-
tive employees, not on behalf of former employees. 
(c) EFFECTIVE DATE.—The provisions of this section 
shall take effect on the date of enactment of this Act. 
SEC. 515. REFORM OF THE MINIMUM PARTICIPATION RULE. 
(a) IN
GENERAL.—Subparagraph (I) of section 
401(a)(26) of the Internal Revenue Code of 1986 (relating 
to additional participation requirements) is amended by 
adding at the end the following: ‘‘Not later than December 
31, 2006, the Secretary shall issue final regulations under 
which this paragraph may be applied separately to bona 
fide separate subsidiaries or divisions.’’.
149
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall take effect on the date of enactment 
of this Act. 
TITLE VI—IMPROVEMENTS IN 
PENSION SECURITY 
SEC. 601. PERIODIC PENSION BENEFITS STATEMENTS. 
(a) AMENDMENTS TO THE EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974.—
(1) REQUIREMENTS.—
(A) IN GENERAL.—Section 105(a) of the 
Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1025(a)) is amended to read 
as follows: 
‘‘(a)(1)(A) The administrator of an individual ac-
count plan shall furnish a pension benefit statement—
‘‘(i) to each plan participant at least annually, 
‘‘(ii) to each plan beneficiary upon written re-
quest, and 
‘‘(iii) in the case of an applicable individual ac-
count plan, to each individual who is a plan partici-
pant or beneficiary and who has a right to direct in-
vestments, at least quarterly. 
‘‘(B) The administrator of a defined benefit plan 
shall furnish a pension benefit statement—
150
‘‘(i) at least once every 3 years to each partici-
pant with a nonforfeitable accrued benefit who is 
employed by the employer maintaining the plan at 
the time the statement is furnished to participants, 
and 
‘‘(ii) to a plan participant or plan beneficiary of 
the plan upon written request. 
Information furnished under clause (i) to a participant 
may be based on reasonable estimates determined under 
regulations prescribed by the Secretary, in consultation 
with the Pension Benefit Guaranty Corporation. 
‘‘(2) A pension benefit statement under paragraph 
(1)—
‘‘(A) shall indicate, on the basis of the latest 
available information—
‘‘(i) the total benefits accrued, and 
‘‘(ii) the nonforfeitable pension benefits, if 
any, which have accrued, or the earliest date on 
which benefits will become nonforfeitable, 
‘‘(B) shall be written in a manner calculated to 
be understood by the average plan participant, and 
‘‘(C) may be provided in written form or in 
electronic or other appropriate form to the extent 
that such form is reasonably accessible to the recipi-
ent.
151
‘‘(3)(A) In the case of a defined benefit plan, the re-
quirements of paragraph (1)(B)(i) shall be treated as met 
with respect to a participant if the administrator, at least 
once each year, provides the participant with notice, at 
the participant’s last known address, of the availability of 
the pension benefit statement and the ways in which the 
participant may obtain such statement. Such notice shall 
be provided in written, electronic, or other appropriate 
form, and may be included with other communications to 
the participant if done in a manner reasonably designed 
to attract the attention of the participant. 
‘‘(B) The Secretary may provide that years in which 
no employee or former employee benefits (within the 
meaning of section 410(b) of the Internal Revenue Code 
of 1986) under the plan need not be taken into account 
in determining the 3-year period under paragraph 
(1)(B)(i).’’. 
(B) CONFORMING AMENDMENTS.—
(i) Section 105 of the Employee Re-
tirement Income Security Act of 1974 (29 
U.S.C. 1025) is amended by striking sub-
section (d). 
(ii) Section 105(b) of such Act (29 
U.S.C. 1025(b)) is amended to read as fol-
lows:
152
‘‘(b) In no case shall a participant or beneficiary of 
a plan be entitled to more than one statement described 
in clause (i) or (ii) of subsection (a)(1)(A) or clause (i) 
or (ii) of subsection (a)(1)(B), whichever is applicable, in 
any 12-month period. If such report is required under sub-
section (a) to be furnished at least quarterly, the require-
ments of the preceding sentence shall be applied with re-
spect to each quarter in lieu of the 12-month period.’’. 
(2) INFORMATION
REQUIRED
FROM
APPLICA-
BLE INDIVIDUAL ACCOUNT PLANS.—Section 105 of 
such Act (as amended by paragraph (1)) is amended 
further by adding at the end the following new sub-
section: 
‘‘(d)(1) The statements required to be provided at 
least quarterly under subsection (a)(1)(A)(iii) in the case 
of applicable individual account plans shall include (to-
gether with the information required in subsection (a)) the 
following: 
‘‘(A) the value of each investment to which as-
sets in the individual account have been allocated, 
determined as of the most recent valuation date 
under the plan, including the value of any assets 
held in the form of employer securities, without re-
gard to whether such securities were contributed by
153
the plan sponsor or acquired at the direction of the 
plan or of the participant or beneficiary, 
‘‘(B) an explanation, written in a manner cal-
culated to be understood by the average plan partici-
pant, of any limitations or restrictions on the right 
of the participant or beneficiary to direct an invest-
ment, and 
‘‘(C) an explanation, written in a manner cal-
culated to be understood by the average plan partici-
pant, of the importance, for the long-term retire-
ment security of participants and beneficiaries, of a 
well-balanced and diversified investment portfolio, 
including a discussion of the risk of holding more 
than 25 percent of a portfolio in the security of any 
one entity, such as employer securities. 
‘‘(2) The Secretary shall issue guidance and model 
notices which meet the requirements of this subsection.’’. 
(3) DEFINITION
OF
APPLICABLE
INDIVIDUAL 
ACCOUNT PLAN.—Section 3 of such Act (29 U.S.C. 
1002) is amended by adding at the end the following 
new paragraph: 
‘‘(42)(A) The term ‘applicable individual account 
plan’ means any individual account plan, except that such 
term does not include an employee stock ownership plan 
(within the meaning of section 4975(e)(7) of the Internal
154
Revenue Code of 1986) unless there are any contributions 
to such plan (or earnings thereunder) held within such 
plan that are subject to subsection (k)(3) or (m)(2) of sec-
tion 401 of the Internal Revenue Code of 1986. Such term 
shall not include a one-participant retirement plan. 
‘‘(B) The term ‘one-participant retirement plan’ 
means a pension plan with respect to which the following 
requirements are met: 
‘‘(i) on the first day of the plan year—
‘‘(I) the plan 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 
‘‘(II) the plan covered only one or more 
partners (or partners and their spouses) in the 
plan sponsor; 
‘‘(ii) the plan meets the minimum coverage re-
quirements of section 410(b) of the Internal Rev-
enue Code of 1986 (as in effect on the date of the 
enactment of this paragraph) without being com-
bined with any other plan of the business that covers 
the employees of the business; 
‘‘(iii) the plan does not provide benefits to any-
one except the individual (and the individual’s 
spouse) or the partners (and their spouses);
155
‘‘(iv) 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 
‘‘(v) the plan does not cover a business that 
leases employees.’’. 
(4) CIVIL PENALTIES FOR FAILURE TO PRO-
VIDE QUARTERLY BENEFIT STATEMENTS.—Section 
502 of such Act (29 U.S.C. 1132) is amended—
(A) in subsection (a)(6), by striking ‘‘(6), 
or (7)’’ and inserting ‘‘(6), (7), or (8)’’; 
(B) by redesignating paragraph (8) of sub-
section (c) as paragraph (9); and 
(C) by inserting after paragraph (7) of 
subsection (c) the following new paragraph: 
‘‘(8) The Secretary may assess a civil penalty against 
any plan administrator of up to $1,000 a day for each 
day on which the plan administrator has failed to comply 
with the requirements of clause (iii) of section 
105(a)(1)(A) and has not corrected such failure by pro-
viding the required pension benefit statements to the af-
fected participants and beneficiaries.’’. 
(5) MODEL
STATEMENTS.—The Secretary of 
Labor shall, not later than 180 days after the date 
of the enactment of this Act, issue initial guidance
156
and a model benefit statement, written in a manner 
calculated to be understood by the average plan par-
ticipant, that may be used by plan administrators in 
complying with the requirements of section 105 of 
the Employee Retirement Income Security Act of 
1974. Not later than 75 days after the date of the 
enactment of this Act, the Secretary shall promul-
gate interim final rules necessary to carry out the 
amendments made by this subsection. 
(b) AMENDMENTS
TO
THE INTERNAL REVENUE 
CODE OF 1986.—
(1) PROVISION
OF
INVESTMENT
EDUCATION 
NOTICES
TO
PARTICIPANTS
IN
CERTAIN
PLANS.—
Section 414 of the Internal Revenue Code of 1986 
(relating to definitions and special rules) is amended 
by adding at the end the following: 
‘‘(aa) PROVISION OF INVESTMENT EDUCATION NO-
TICES TO PARTICIPANTS IN CERTAIN PLANS.—
‘‘(1) IN GENERAL.—The plan administrator of 
an applicable pension plan shall provide to each ap-
plicable individual an investment education notice 
described in paragraph (2) at the time of the enroll-
ment of the applicable individual in the plan and not 
less often than annually thereafter.
157
‘‘(2) INVESTMENT EDUCATION NOTICE.—An in-
vestment education notice is described in this para-
graph if such notice contains—
‘‘(A) an explanation, for the long-term re-
tirement security of participants and bene-
ficiaries, of generally accepted investment prin-
ciples, including principles of risk management 
and diversification, and 
‘‘(B) a discussion of the risk of holding 
substantial portions of a portfolio in the secu-
rity of any one entity, such as employer securi-
ties. 
‘‘(3) UNDERSTANDABILITY.—Each notice re-
quired by paragraph (1) shall be written in a man-
ner calculated to be understood by the average plan 
participant and shall provide sufficient information 
(as determined in accordance with guidance provided 
by the Secretary) to allow recipients to understand 
such notice. 
‘‘(4) FORM AND MANNER OF NOTICES.—The 
notices required by this subsection shall be in writ-
ing, except that such notices may be in electronic or 
other form (or electronically posted on the plan’s 
website) to the extent that such form is reasonably 
accessible to the applicable individual.
158
‘‘(5) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) APPLICABLE INDIVIDUAL.—The term 
‘applicable individual’ means—
‘‘(i) any participant in the applicable 
pension plan, 
‘‘(ii) any beneficiary who is an alter-
nate payee (within the meaning of section 
414(p)(8)) under a qualified domestic rela-
tions order (within the meaning of section 
414(p)(1)(A)), and 
‘‘(iii) any beneficiary of a deceased 
participant or alternate payee. 
‘‘(B) APPLICABLE
PENSION
PLAN.—The 
term ‘applicable pension plan’ means—
‘‘(i) a plan described in clause (i), (ii), 
or (iv) of section 219(g)(5)(A), and 
‘‘(ii) 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 in-
vestment 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 hy-