128
(1) within 90 days after the date of enactment
of this Act, propose, and
(2) within 270 days after such date, prescribe,
rules to implement this section.
(k) EFFECTIVE DATE; TRANSITION PROVISIONS.—
(1) EFFECTIVE DATE.—Except as provided in
paragraph (2), subsection (a) of this section shall be
effective with respect to any certified financial state-
ment for any fiscal year that ends more than one
year after the Commission recognizes a public regu-
latory organization pursuant to this section.
(2) DELAY IN ESTABLISHMENT OF BOARD.—If
the Commission has failed to recognize any public
regulatory organization pursuant to this section
within one year after the date of enactment of this
Act, the Commission shall perform the duties of
such organization with respect to any certified finan-
cial statement for any fiscal year that ends before
one year after any such board is recognized by the
Commission.
SEC. 422. IMPROPER INFLUENCE ON CONDUCT OF AUDITS.
(a) RULES TO PROHIBIT.—It shall be unlawful in
contravention of such rules or regulations as the Commis-
sion shall prescribe as necessary and appropriate in the
public interest or for the protection of investors for any
129
officer, director, or affiliated person of an issuer of any
security registered under section 12 of the Securities Ex-
change Act of 1934 (15 U.S.C. 78l) to take any action
to fraudulently influence, coerce, manipulate, or mislead
any independent public or certified accountant engaged in
the performance of an audit of the financial statements
of such issuer for the purpose of rendering such financial
statements materially misleading. In any civil proceeding,
the Commission shall have exclusive authority to enforce
this section and any rule or regulation hereunder.
(b) NO PREEMPTION OF OTHER LAW.—The provi-
sions of subsection (a) shall be in addition to, and shall
not supersede or preempt, any other provision of law or
any rule or regulation thereunder.
(c) DEADLINE FOR RULEMAKING.—The Commission
shall—
(1) within 90 days after the date of enactment
of this Act, propose, and
(2) within 270 days after such date, prescribe,
the rules or regulations required by this section.
SEC. 423. ENHANCED OVERSIGHT OF PERIODIC DISCLO-
SURES BY ISSUERS.
(a) REGULAR AND SYSTEMATIC REVIEW.—The Secu-
rities and Exchange Commission shall review disclosures
made by issuers pursuant to the Securities Exchange Act
130
of 1934 (including reports filed on form 10–K) on a basis
that is more regular and systematic than that in practice
on the date of enactment on this Act. Such review shall
include a review of an issuer’s financial statements.
(b) RISK RATING SYSTEM.—For purposes of the re-
views required by subsection (a), the Commission shall es-
tablish a risk rating system whereby issuers receive a risk
rating by the Commission, which shall be used to deter-
mine the frequency of such reviews. In designing such a
risk rating system the Commission shall consider, among
other factors the following:
(1) Emerging companies with disparities in
price to earning ratios.
(2) Issuers with the largest market capitaliza-
tion.
(3) Issuers whose operations significantly im-
pact any material sector of the economy.
(4) Systemic factors such as the effect on niche
markets or important subsectors of the economy.
(5) Issuers that experience significant volatility
in their stock price as compared to other issuers.
(6) Any other factor the Commission may con-
sider relevant.
131
(c) MINIMUM REVIEW PERIOD.—In no event shall an
issuer be reviewed less than once every three years by the
Commission.
(d) PROHIBITION OF DISCLOSURE OF RISK RAT-
ING.—Notwithstanding any other provision of law, the
Commission shall not disclose the risk rating of any issuer
described in subsection (b).
SEC. 424. RETENTION OF RECORDS.
(a) DUTY TO RETAIN RECORDS.—Any independent
public or certified accountant who certifies a financial
statement as required by the securities laws or any rule
or regulation thereunder shall prepare and maintain for
a period of no less than 7 years, final audit work papers
and other information related to any accountants report
on such financial statements in sufficient detail to support
the opinion or assertion reached in such accountants re-
port. The Commission may prescribe rules specifying the
application and requirements of this section.
(b) ACCOUNTANT’S REPORT.—For purposes of sub-
section (a), the term ‘‘accountant’s report’’ means a docu-
ment in which an accountant identifies a financial state-
ment and sets forth his opinion regarding such financial
statement or an assertion that an opinion cannot be ex-
pressed.
132
SEC. 425. AUTHORIZATION OF APPROPRIATIONS OF THE
SECURITIES AND EXCHANGE COMMISSION.
In addition to any other funds authorized to be ap-
propriated to the Securities and Exchange Commission,
there are authorized to be appropriated to carry out the
functions, powers, and duties of the Commission,
$776,000,000 for fiscal year 2003, of which—
(1) not less that $134,000,000 shall be avail-
able for the Division of Corporate Finance and for
the Office of Chief Accountant;
(2) not less than $326,000,000 shall be avail-
able for the Division of Enforcement; and
(3) not less than $76,000,000 shall be available
to implement section 8 of the Investor and Capital
Markets Fee Relief Act, relating to pay com-
parability.
SEC. 426. ENFORCEMENT OF AUDIT COMMITTEE GOVERN-
ANCE PRACTICES.
The Commission shall revise its regulations per-
taining to auditor independence to require that an ac-
countant shall not be considered to be independent for
purposes of certifying the financial statements or other
documents of an issuer required to be filed with the Com-
mission under the securities laws unless—
(1) an issuer’s auditor is appointed by and re-
ports directly to the audit committee of the board of
133
directors or, in the absence of an audit committee,
the board committee performing equivalent functions
or the entire board of directors;
(2) the audit committee meets with the ac-
countants engaged to perform such audit on a reg-
ular basis, at least quarterly; and
(3) the audit committee is provided with the op-
portunity to meet with such accountants without the
attendance at such meetings of any officer, director,
or other member of the issuer’s senior management.
SEC. 427. REVIEW OF CORPORATE GOVERNANCE PRAC-
TICES.
(a) STUDY OF CORPORATE PRACTICES.—The Com-
mission shall conduct a study and review of current cor-
porate governance standards and practices to determine
whether such standards and practices are serving the best
interests of shareholders. Such study and review shall in-
clude an analysis of—
(1) whether current standards and practices
promote full disclosure of relevant information to
shareholders;
(2) whether corporate codes of ethics are ade-
quate to protect shareholders, and to what extent
deviations from such codes are tolerated;
134
(3) to what extent conflicts of interests are ag-
gressively reviewed, and whether adequate means for
redressing such conflicts exist;
(4) to what extent sufficient legal protections
exist or should be adopted to ensure that any man-
ager who attempts to manipulate or unduly influence
an audit will be subject to appropriate sanction and
liability, including liability to investors or share-
holders pursuing a private cause of action for such
manipulation or undue influence;
(5) whether rules, standards, and practices re-
lating to determining whether independent directors
are in fact independent are adequate;
(6) whether rules, standards, and practices re-
lating to the independence of directors serving on
audit committees are uniformly applied and ade-
quate to protect investor interests; and
(7) what further or additional practices or
standards might best protect investors and promote
the interests of shareholders.
(b) PARTICIPATION
OF STATE REGULATORS.—In
conducting the study required under subsection (a), the
Commission shall seek the views of the securities and cor-
porate regulators of the various States.
135
(c) REPORT REQUIRED.—The Commission shall sub-
mit a report on the analysis required under subsection (a)
as a part of the Commission’s next annual report sub-
mitted after the date of enactment of this Act.
SEC. 428. STUDY OF ENFORCEMENT ACTIONS.
(a) STUDY REQUIRED.—The Commission shall re-
view and analyze all enforcement actions by the Commis-
sion involving violations of reporting requirements im-
posed under the securities laws, and restatements of finan-
cial statements, over the last five years to identify areas
of reporting that are most susceptible to fraud, inappro-
priate manipulation, or inappropriate earnings manage-
ment, such as revenue recognition and the accounting
treatment of off-balance sheet special purpose entities.
(b) REPORT REQUIRED.—The Commission shall re-
port its findings to the Committee on Financial Services
of the House of Representatives and the Committee on
Banking, Housing, and Urban Affairs of the Senate with-
in 180 days of the date of enactment of this Act and shall
use such findings to revise its rules and regulations, as
necessary. The report shall include a discussion of regu-
latory or legislative steps that are recommended or that
may be necessary to address concerns identified in the
study.
136
SEC. 429. STUDY OF CREDIT RATING AGENCIES.
(a) STUDY REQUIRED.—The Commission shall con-
duct a study of the role and function of credit rating agen-
cies in the operation of the securities market. Such study
shall examine—
(1) the role of the credit rating agencies in the
evaluation of issuers of securities;
(2) the importance of that role to investors and
the functioning of the securities markets;
(3) any impediments to the accurate appraisal
by credit rating agencies of the financial resources
and risks of issuers of securities;
(4) any measures which may be required to im-
prove the dissemination of information concerning
such resources and risks when credit rating agencies
announce credit ratings;
(5) any barriers to entry into the business of
acting as a credit rating agency, and any measures
needed to remove such barriers; and
(6) any conflicts of interest in the operation of
credit rating agencies and measures to prevent such
conflicts or ameliorate the consequences of such con-
flicts.
(b) REPORT REQUIRED.—The Commission shall sub-
mit a report on the analysis required by subsection (a)
to the President, the Committee on Financial Services of
137
the House of Representatives, and the Committee on
Banking, Housing, and Urban Affairs of the Senate with-
in 180 days after the date of enactment of this Act. The
report shall include a discussion of regulatory or legislative
steps that are recommended or that may be necessary to
address concerns identified in the study.
SEC. 430. STUDY OF INVESTMENT BANKS
(a) GAO STUDY.—The Comptroller General shall
conduct a study on whether investment banks and finan-
cial advisors assisted public companies in manipulating
their earnings and obfuscating their true financial condi-
tion. The study should address the role of the investment
banks—
(1) in the collapse of the Enron Corporation,
including with respect to the design and implementa-
tion of derivatives transactions, transactions involv-
ing special purpose vehicles, and other financing ar-
rangements that may have had the effect of altering
the company’s reported financial statements in ways
that obscured the true financial picture of the com-
pany;
(2) in the failure of Global Crossing, including
with respect to transactions involving swaps of fiber
optic cable capacity, in designing transactions that
may have had the effect of altering the company’s
138
reported financial statements in ways that obscured
the true financial picture of the company; and
(3) generally, in creating and marketing trans-
actions which may have been designed solely to en-
able companies to manipulate revenue streams, ob-
tain loans, or move liabilities off balance sheets with-
out altering the economic and business risks faced
by the companies or any other mechanism to obscure
a company’s financial picture.
(b) REPORT.—The General Accounting Office shall
report to the Congress within 180 days after the date of
enactment of this Act on the results of the study required
by this section. The report shall include a discussion of
regulatory or legislative steps that are recommended or
that may be necessary to address concerns identified in
the study.
SEC. 431. STUDY OF MODEL RULES FOR ATTORNEYS OF
ISSUERS.
(a) IN GENERAL.—The Comptroller General shall
conduct a study of the Model Rules of Professional Con-
duct promulgated by the American Bar Association and
rules of professional conduct applicable to attorneys estab-
lished by the Commission to determine—
(1) whether such rules provide sufficient guid-
ance to attorneys representing corporate clients who
139
are issuers required to file periodic disclosures under
section 13 or 15 of the Securities Exchange Act of
1934 (15 U.S.C. 78m, 78o), as to the ethical re-
sponsibilities of such attorneys to—
(A) warn clients of possible fraudulent or
illegal activities of such clients and possible con-
sequences of such activities;
(B) disclose such fraudulent or illegal ac-
tivities to appropriate regulatory or law enforce-
ment authorities; and
(C) manage potential conflicts of interests
with clients; and
(2) whether such rules provide sufficient protec-
tion to corporate shareholders, especially with re-
gards to conflicts of interest between attorneys and
their corporate clients.
(b) REPORT REQUIRED.—The Comptroller General
shall report to the Committee on Financial Services of the
House of Representatives and the Committee on Banking,
Housing, and Urban Affairs of the Senate on the results
of the study required by this section. Such report shall
include any recommendations of the General Accounting
Office with regards to—
(1) possible changes to the Model Rules and the
rules of professional conduct applicable to attorneys
140
established by the Commission to provide increased
protection to shareholders;
(2) whether restrictions should be imposed to
require that an attorney, having represented a cor-
poration or having been employed by a firm which
represented a corporation, may not be employed as
general counsel to that corporation until a certain
period of time has expired; and
(3) regulatory or legislative steps that are rec-
ommended or that may be necessary to address con-
cerns identified in the study.
Subtitle C—General Provisions
SEC. 441. ENFORCEMENT AUTHORITY.
(a) REGULATORY ACTION.—The Commission shall
promulgate such rules and regulations, as may be nec-
essary or appropriate in the public interest or for the pro-
tection of investors, and in furtherance of this title.
(b) ENFORCEMENT.—
(1) IN GENERAL.—A violation by any person of
this title, any rule or regulation of the Commission
issued under this title, or any rule of the public reg-
ulatory organization established under section 421,
shall be treated for all purposes in the same manner
as a violation of the Securities Exchange Act of
1934 (15 U.S.C. 78a et seq.) or the rules and regu-
141
lations issued thereunder, consistent with the provi-
sions of this title, and any such person shall be sub-
ject to the same penalties, and to the same extent,
as for a violation of that Act or such rules or regula-
tions.
(2) INVESTIGATIONS, INJUNCTIONS, AND PROS-
ECUTION OF OFFENSES.—Section 21 of the Securi-
ties Exchange Act of 1934 (15 U.S.C. 78u) is
amended
(A) in subsection (a)(1), by inserting ‘‘the
rules of the public regulatory organization es-
tablished under section 421 of the Investors’
and Employees’ Bill of Rights Act of 2002, of
which such person is a registered public ac-
counting firm or a person associated with such
a firm,’’ after ‘‘is a participant,’’;
(B) in subsection (d)(1), by inserting ‘‘the
rules of the public regulatory organization es-
tablished under section 421 of the Investors’
and Employees’ Bill of Rights Act of 2002, of
which such person is a registered public ac-
counting firm or a person associated with such
a firm,’’ after ‘‘is a participant,’’;
(C) in subsection (e), by inserting ‘‘the
rules of the public regulatory organization es-
142
tablished under section 421 of the Investors’
and Employees’ Bill of Rights Act of 2002, of
which such person is a registered public ac-
counting firm or a person associated with such
a firm,’’ after ‘‘is a participant,’’; and
(D) in subsection (f), by inserting ‘‘the
public regulatory organization established under
section 421 of the Investors’ and Employees’
Bill of Rights Act of 2002’’ after ‘‘self-regu-
latory organization’’ each place that term ap-
pears.
(3) CEASE-AND-DESIST PROCEEDINGS.—Section
21C(c)(2) of the Securities Exchange Act of 1934
(15 U.S.C. 78u–3(c)(2)) is amended by inserting
‘‘registered public accounting firm (under section
421(d) of the Investors’ and Employees’ Bill of
Rights Act of 2002),’’ after ‘‘government securities
dealer,’’.
(c) EFFECT ON COMMISSION AUTHORITY.—Nothing
in this title or the rules of the public regulatory organiza-
tion established under section 421 shall be construed to
impair or limit—
(1) the authority of the Commission to regulate
the accounting profession, accounting firms, or per-
143
sons associated with such firms for purposes of en-
forcement of the securities laws;
(2) the authority of the Commission to set
standards for accounting or auditing practices or
auditor independence, derived from other provisions
of the securities laws or the rules or regulations
thereunder, for purposes of the preparation and
issuance of any audit report, or otherwise under ap-
plicable law; or
(3) the ability of the Commission to take, on
the initiative of the Commission, legal, administra-
tive, or disciplinary action against any registered
public accounting firm or any associated person
thereof.
SEC. 442. EXCLUSION FOR INVESTMENT COMPANIES.
Sections 401, 402, 403, 405, and 421 of this title
shall not apply to an investment company registered under
section 8 of the Investment Company Act of 1940 (15
U.S.C. 80a–8).
SEC. 443. DEFINITIONS.
As used in this title:
(1) BLACKOUT PERIOD.—The term ‘‘blackout
period’’ with respect to the equity securities of any
issuer—
144
(A) means any period during which the
ability of at least fifty percent of the partici-
pants or beneficiaries under all applicable indi-
vidual account plans maintained by the issuer
to purchase (or otherwise acquire) or sell (or
otherwise transfer) an interest in any equity of
such issuer is suspended by the issuer or a fidu-
ciary of the plan; but
(B) does not include—
(i) a period in which the employees of
an issuer may not allocate their interests
in the individual account plan due to an
express investment restriction—
(I) incorporated into the indi-
vidual account plan; and
(II) timely disclosed to employees
before joining the individual account
plan or as a subsequent amendment
to the plan; or
(ii) any suspension described in sub-
paragraph (A) that is imposed solely in
connection with persons becoming partici-
pants or beneficiaries, or ceasing to be par-
ticipants or beneficiaries, in an applicable
individual account plan by reason of a cor-
145
porate merger, acquisition, divestiture, or
similar transaction.
(2) 
BOARDS
OF
ACCOUNTANCY
OF
THE
STATES.—The term ‘‘boards of accountancy of the
States’’ means any organization or association char-
tered or approved under the law of any State with
responsibility for the registration, supervision, or
regulation of accountants.
(3) COMMISSION.—The term ‘‘Commission’’
means the Securities and Exchange Commission.
(4) INDIVIDUAL
ACCOUNT
PLAN.—The term
‘‘individual account plan’’ has the meaning provided
such term in section 3(34) of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C.
1002(34)).
(5) ISSUER.—The term ‘‘issuer’’ shall have the
meaning set forth in section 2(a)(4) of the Securities
Act of 1933 (15 U.S.C. 77b(a)(4)).
(6) PERSON ASSOCIATED WITH AN ACCOUNT-
ANT.—The term ‘‘person associated with an ac-
countant’’ means any partner, officer, director, or
manager of such accountant (or any person occu-
pying a similar status or performing similar func-
tions), any person directly or indirectly controlling,
controlled by, or under common control with such
146
accountant, or any employee of such accountant who
performs a supervisory role in the auditing process.
(7) PUBLIC REGULATORY ORGANIZATION.—The
term ‘‘public regulatory organization’’ means the
public regulatory organization established by the
Commission under subsection (b) of section 421.
(8) SECURITIES LAWS.—The term ‘‘securities
laws’’ means the Securities Act of 1933 (15 U.S.C.
77a et seq.), the Securities Exchange Act of 1934
(15 U.S.C. 78a et seq.), the Trust Indenture Act of
1939 (15 U.S.C. 77aaa et seq.), the Investment
Company Act of 1940 (15 U.S.C. 80a–1 et seq.), the
Investment Advisers Act of 1940 (15 U.S.C. 80b et
seq.), and the Securities Investor Protection Act of
1970 (15 U.S.C. 78aaa et seq.), notwithstanding
any contrary provision of any such Act.
TITLE V—ENHANCING PENSION
PROTECTION FOR EMPLOYEES
Subtitle A—Improvements in
Disclosure
SEC. 501. PENSION BENEFIT INFORMATION.
(a) PENSION BENEFIT STATEMENTS REQUIRED ON
PERIODIC BASIS.—
147
(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-
148
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, and
‘‘(E) the percentage of the net return on invest-
ment of plan assets for the preceding plan year (or,
with respect to investments directed by the partici-
pant, 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 ad-
ministrative and transaction fees incurred in connec-
tion 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
149
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
150
(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
includes—
‘‘(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
151
‘‘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) EXCISE TAX ON FAILURE OF DEFINED CON-
TRIBUTION
PLANS
TO
PROVIDE
NOTICE
OF
GEN-
ERALLY
ACCEPTED
INVESTMENT
PRINCIPLES.—
Chapter 43 of the Internal Revenue Code of 1986
(relating to qualified pension, etc., plans) is amend-
ed by adding at the end the following new section:
‘‘SEC. 4980I. FAILURE OF DEFINED CONTRIBUTION PLANS
TO PROVIDE NOTICE OF GENERALLY AC-
CEPTED INVESTMENT PRINCIPLES.
‘‘(a) IMPOSITION OF TAX.—There is hereby imposed
a tax on the failure of any defined contribution plan to
meet the requirements of subsection (e) with respect to
any participant or beneficiary.
152
‘‘(b) AMOUNT OF TAX.—The amount of the tax im-
posed by subsection (a) on any failure with respect to any
participant or beneficiary shall be $1,000 for each day on
which such failure is not corrected.
‘‘(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), the tax imposed by
subsection (a) for failures during the taxable
153
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.
154
‘‘(2) In the case of a multiemployer plan, the
plan.
‘‘(e) REQUIREMENTS RELATING TO NOTICE OF GEN-
ERALLY ACCEPTED INVESTMENT PRINCIPLES.—The plan
administrator of any defined contribution plan shall pro-
vide annually a separate notice which advises participants
and beneficiaries of generally accepted investment prin-
ciples, including principles of risk management and diver-
sification for long-term retirement security and the risks
of holding substantial assets in a single asset such as em-
ployer securities.’’.
(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. 4980I. Failure of defined contribution plans to provide no-
tice of generally accepted investment principles.’’.
SEC. 502. 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 501 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-
155
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
156
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. 503. ADDITIONAL FIDUCIARY PROTECTIONS RELAT-
ING TO LOCKDOWNS.
(a) AMENDMENT TO EMPLOYEE RETIREMENT IN-
COME SECURITY ACT OF 1974.—Section 404 of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1104) is amended by adding at the end the fol-
lowing new subsection:
‘‘(e)(1) In the case of any eligible individual account
plan (as defined in section 407(d)(3)) no lockdown may
take effect until at least 30 days after written notice of
such lockdown is provided by the plan administrator to
such participant or beneficiary (and to each employee or-
ganization representing any such participant).
‘‘(2) Subject to such regulations as the Secretary may
prescribe, the requirements of paragraph (1) shall not
apply in cases of emergency.
157
‘‘(3) A plan described in paragraph (1) shall provide
that each participant and beneficiary required to receive
a notice under paragraph (1)(A) is entitled to direct the
plan to divest within 3 business days (but in no event later
than the beginning of the lockdown) any security or other
property in which any assets allocated to the account of
such individual are invested and to reinvest such assets
in any other investment option offered under the plan.
‘‘(4) For purposes of this subsection, the term
‘lockdown’ means any temporary lockdown, blackout, or
freeze with respect to, suspension of, or similar limitation
on the ability of a participant or beneficiary to exercise
control over the assets in his or her account as otherwise
generally provided under the plan (as determined under
regulations of the Secretary), including the ability to di-
rect investments, obtain loans, or obtain distributions.’’.
(b) AMENDMENTS TO INTERNAL REVENUE CODE OF
1986.—
(1) EXCISE TAX ON FAILURES WITH RESPECT
TO LOCKDOWNS.—Chapter 43 of the Internal Rev-
enue Code of 1986 (relating to qualified pension,
etc., plans) is amended by adding at the end the fol-
lowing new section:
158
‘‘SEC. 4980G. FAILURE OF DEFINED CONTRIBUTION PLANS
WITH RESPECT TO LOCKDOWNS.
‘‘(a) IMPOSITION OF TAX.—There is hereby imposed
a tax on the failure of any defined contribution plan to
meet the requirements of subsection (e) with respect to
any participant or beneficiary.
‘‘(b) AMOUNT OF TAX.—The amount of the tax im-
posed by subsection (a) on any failure with respect to any
participant or beneficiary shall be $100.
‘‘(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 meets the requirements
of subsection (e) as soon as reasonably prac-
ticable 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.—
159
‘‘(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), 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
160
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) REQUIREMENTS RELATING TO LOCKDOWNS.—
‘‘(1) IN GENERAL.—In the case of any defined
contribution plan no lockdown may take effect until
at least 30 days after written notice of such
lockdown is provided by the plan administrator to
each participant or beneficiary (and to each em-
ployee organization representing any such partici-
pant).
‘‘(2) EXCEPTION FOR EMERGENCY.—Subject to
such regulations as the Secretary may prescribe, the
requirements of paragraph (1) shall not apply in
cases of emergency.
‘‘(3) REQUIREMENT
RELATING
TO
DIVEST-
MENT.—A plan described in paragraph (1) shall pro-
vide that each participant and beneficiary required
to receive a notice under paragraph (1)(A) is enti-
tled to direct the plan to divest within 3 business
161
days (but in no event later than the beginning of the
lockdown) any security or other property in which
any assets allocated to the account of such indi-
vidual are invested and to reinvest such assets in
any other investment option offered under the plan.
‘‘(4) LOCKDOWN
DEFINED.—For purposes of
this subsection, the term ‘lockdown’ means any tem-
porary lockdown, blackout, or freeze with respect to,
suspension of, or similar limitation on the ability of
a participant or beneficiary to exercise control over
the assets in his or her account as otherwise gen-
erally provided under the plan (as determined under
regulations of the Secretary), including the ability to
direct investments, obtain loans, or obtain distribu-
tions.’’.
(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 defined contribution plans with respect
to lockdowns.’’.
SEC. 504. 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—
162
(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
163
(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.
164
‘‘(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 on or after October 1, 2002.
165
SEC. 
505. 
PROVISION 
TO 
PARTICIPANTS 
AND 
BENE-
FICIARIES OF MATERIAL INVESTMENT IN-
FORMATION IN ACCURATE FORM.
Section 404(c) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1104(c)) is amended by
adding at the end the following new paragraph:
‘‘(4) The plan sponsor and plan administrator of a
pension plan described in paragraph (1) shall have a fidu-
ciary duty to ensure that each participant and beneficiary
under the plan, in connection with the investment by the
participant or beneficiary of plan assets in the exercise of
his or her control over assets in his account, is provided
with all material investment information regarding invest-
ment of such assets to the extent that the provision of
such information is generally required to be disclosed by
the plan sponsor to investors in connection with such an
investment under applicable securities laws. The provision
by the plan sponsor or plan administrator of any mis-
leading investment information shall be treated as a viola-
tion of this paragraph.’’.
SEC. 506. 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—
166
(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(f)(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 502(b) of this Act) is amended further by striking
‘‘(5), or (6)’’ and inserting ‘‘(5), (6), or (7)’’.
Subtitle B—Diversification
Requirements
SEC. 511. FREEDOM TO MAKE INVESTMENT DECISIONS
WITH PLAN ASSETS.
(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) (as amended by section 503 of this Act) is
167
amended further by adding at the end the following new
subsection:
‘‘(f)(1)(A)(i) Subject to clause (ii), an individual ac-
count plan under which a participant or beneficiary is per-
mitted to exercise control over assets in his or her account
shall provide that—
‘‘(I) any such participant or beneficiary has the
right to allocate all assets in his or her account (and
any portion thereof) attributable to employee con-
tributions to any investment option provided under
the plan, and
‘‘(II) any such participant who has completed 3
years of service (as defined in section 203(b)(2))
with the employer, or any such beneficiary of such
a participant, has the right to allocate all assets in
his or her account (and any portion thereof) attrib-
utable to employer contributions to any investment
option provided under the plan.
The application of any penalty or any restriction based
on age or years of service in connection with any exercise
of such right as provided under this clause shall be con-
strued as a violation of this clause.
‘‘(ii) Clause (i) shall apply only to so much of a non-
forfeitable accrued benefit as consists of employer securi-
168
ties which are readily tradable on an established securities
market.
‘‘(B)(i) Except as provided in clause (ii), within 5
days after the date of any election by a participant or ben-
eficiary allocating his or her nonforfeitable accrued benefit
to any investment option provided under the plan, the plan
administrator shall take such actions as are necessary to
effectuate such allocation.
‘‘(ii) In any case in which the plan provides for elec-
tions periodically during prescribed periods, the 5-day pe-
riod described in clause (i) shall commence at the end of
each such prescribed period.
‘‘(C) Nothing in this paragraph 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 in-
vested in employer securities to the extent that any such
limitation is consistent with this title and not more restric-
tive than is permitted under this title.
‘‘(2) Not later than 30 days prior to the date on
which the right of a participant under an individual ac-
count plan to his or her accrued benefit becomes non-
forfeitable, the plan administrator shall provide to such
participant and his or her beneficiaries a written notice—
‘‘(A) setting forth their rights under this sec-
tion with respect to the accrued benefit, and
169
‘‘(B) describing the importance of diversifying
the investment of account assets.’’.
(b) AMENDMENTS
TO
THE INTERNAL REVENUE
CODE OF 1986.—
(1) EXCISE TAX ON FAILURE TO PERMIT DI-
VERSIFICATION OF EMPLOYER SECURITIES.—Chap-
ter 43 of the Internal Revenue Code of 1986 (relat-
ing to qualified pension, etc., plans) is amended by
adding at the end the following new section:
‘‘SEC. 4980H. FAILURE OF DEFINED CONTRIBUTION PLANS
TO PERMIT DIVERSIFICATION OF EMPLOYER
SECURITIES.
‘‘(a) IMPOSITION OF TAX.—There is hereby imposed
a tax on the failure of any defined contribution plan to
meet the requirements of subsection (e) with respect to
any participant or beneficiary.
‘‘(b) AMOUNT OF TAX.—The amount of the tax im-
posed by subsection (a) on any failure with respect to any
participant or beneficiary shall be $1,000 for each day for
which the failure is not corrected.
‘‘(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—
170
‘‘(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 meets the requirements
of subsection (e) as soon as reasonably prac-
ticable 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), 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
171
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) REQUIREMENTS RELATING
TO DIVERSIFICA-
TION OF EMPLOYER SECURITY.—
‘‘(1) IN GENERAL.—The requirements of this
subsection are the requirements of paragraphs (2),
(3), and (4).
‘‘(2) RIGHT TO DIRECT INVESTMENTS.—
172
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), a plan meets the requirements of
this paragraph if, under the plan—
‘‘(i) any participant or beneficiary
who is permitted to exercise control over
assets in his or her account has the right
to allocate all assets in his or her account
(and any portion thereof) attributable to
employee contributions to any investment
option provided under the plan, and
‘‘(ii) any such participant who has
completed 3 years of service (as defined in
section 411(a)(5)) with the employer, or
any such beneficiary of such a participant,
has the right to allocate all assets in his or
her account (and any portion thereof) at-
tributable to employer contributions to any
investment option provided under the plan.
The application of any penalty or any restric-
tion based on age or years of service in connec-
tion with any exercise of such right as provided
under this clause shall be construed as a viola-
tion of this clause.
‘‘(B) LIMITATION TO READILY TRADABLE
EMPLOYER
SECURITIES.—Subparagraph 
(A)
173
shall apply only to so much of a nonforfeitable
accrued benefit as consists of employer securi-
ties which are readily tradable on an established
securities market.
‘‘(3) 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 if the plan provides
that, within 5 days after the date of any elec-
tion by a participant or beneficiary allocating
his or her nonforfeitable accrued benefit to any
investment option provided under the plan, the
plan administrator shall take such actions as
are necessary to effectuate 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.
‘‘(4) 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
174
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.
‘‘(5) 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.’’.
(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. 4980H. Failure of defined contribution plans to permit di-
versification of employer securities.’’.
(c) 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 Education and the Workforce and the Com-
mittee on Ways and Means of the House of Representa-
tives and the Committee on Health, Education, Labor,
175
and Pensions and the Committee on Finance of the Senate
their recommendations regarding legislative changes relat-
ing to treatment, under section 404(e) of the Employee
Retirement Income Security Act of 1974 and section
401(a)(35) of the Internal Revenue Code of 1986 (as
added by this section), of individual account plans under
which a participant or beneficiary is permitted to exercise
control over assets in his or her account, in cases in which
such assets do not include employer securities which are
readily tradable under an established securities market.
SEC. 512. EFFECTIVE DATE OF SUBTITLE.
(a) IN GENERAL.—Subject to subsection (b), the
amendments made by this subtitle shall apply with respect
to plan years beginning on or after January 1, 2003.
(b) DELAYED EFFECTIVE DATE
FOR EXISTING
HOLDINGS.—In any case in which a portion of the non-
forfeitable 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 Se-
curity Act of 1974) immediately before the first date of
the first plan year to which the amendments made by this
subtitle apply, such portion shall be taken into account
only with respect to plan years beginning on or after Janu-
ary 1, 2004.
176
Subtitle C—Employee
Representation
SEC. 521. 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
177
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
178
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.
Subtitle D—Executive Parity
SEC. 531. INSIDER TRADES DURING PENSION FUND BLACK-
OUT PERIODS PROHIBITED.
(a) PROHIBITION.—It shall be unlawful for any per-
son who is directly or indirectly the beneficial owner of
more than 10 percent of any class of any equity security
(other than an exempted security) which is registered
under section 12 of the Securities Exchange Act of 1934
(15 U.S.C. 78l) or who is a director or an officer of the
issuer of such security, directly or indirectly, to purchase
(or otherwise acquire) or sell (or otherwise transfer) any
equity security of any issuer (other than an exempted se-
curity), during any blackout period with respect to such
equity security.
(b) REMEDY.—Any profit realized by such beneficial
owner, director, or officer from any purchase (or other ac-
quisition) or sale (or other transfer) in violation of this
section shall inure to and be recoverable by the issuer irre-
179
spective of any intention on the part of such beneficial
owner, director, or officer in entering into the transaction.
Suit to recover such profit may be instituted at law or
in equity in any court of competent jurisdiction by the
issuer, or by the owner of any security of the issuer in
the name and in behalf of the issuer if the issuer shall
fail or refuse to bring such suit within 60 days after re-
quest or shall fail diligently to prosecute the same there-
after; but no such suit shall be brought more than 2 years
after the date such profit was realized. This subsection
shall not be construed to cover any transaction where such
beneficial owner was not such both at the time of the pur-
chase and sale, or the sale and purchase, of the security
or security-based swap (as defined in section 206B of the
Gramm-Leach-Bliley Act) involved, or any transaction or
transactions which the Commission by rules and regula-
tions may exempt as not comprehended within the pur-
poses of this subsection.
(c) RULEMAKING
PERMITTED.—The Commission
may issue rules to clarify the application of this sub-
section, to ensure adequate notice to all persons affected
by this subsection, and to prevent evasion thereof.
(d) As used in this section:
(1) BENEFICIAL OWNER.—The term ‘‘beneficial
owner’’ has the meaning provided such term in rules
180
or regulations issued by the Commission under sec-
tion 16 of the Securities Exchange Act of 1934 (15
U.S.C. 78p).
(2) BLACKOUT PERIOD.—The term ‘‘blackout
period’’ with respect to the equity securities of any
issuer—
(A) means any period during which the
ability of at least fifty percent of the partici-
pants or beneficiaries under all applicable indi-
vidual account plans maintained by the issuer
to purchase (or otherwise acquire) or sell (or
otherwise transfer) an interest in any equity of
such issuer is suspended by the issuer or a fidu-
ciary of the plan; but
(B) does not include—
(i) a period in which the employees of
an issuer may not allocate their interests
in the individual account plan due to an
express investment restriction—
(I) incorporated into the indi-
vidual account plan; and
(II) timely disclosed to employees
before joining the individual account
plan or as a subsequent amendment
to the plan;
181
(ii) any suspension described in sub-
paragraph (A) that is imposed solely in
connection with persons becoming partici-
pants or beneficiaries, or ceasing to be par-
ticipants or beneficiaries, in an applicable
individual account plan by reason of a cor-
porate merger, acquisition, divestiture, or
similar transaction.
(3) COMMISSION.—The term ‘‘Commission’’
means the Securities and Exchange Commission.
(4) INDIVIDUAL
ACCOUNT
PLAN.—The term
‘‘individual account plan’’ has the meaning provided
such term in section 3(34) of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C.
1002(34)).
(5) ISSUER.—The term ‘‘issuer’’ shall have the
meaning set forth in section 2(a)(4) of the Securities
Act of 1933 (15 U.S.C. 77b(a)(4)).
182
Subtitle E—Increased
Accountability
SEC. 541. 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. 542. LIABILITY FOR BREACH OF FIDUCIARY DUTY.
(a) LIABILITY
FOR PARTICIPATING IN
OR CON-
CEALING FIDUCIARY BREACH.—
(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:
183
‘‘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
184
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 employer individual account plan that holds em-
ployer securities that are readily tradable on an estab-
lished securities market—
185
‘‘(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) to an individual account plan shall inure
to the individual accounts of the affected partici-
pants or beneficiaries, and
‘‘(B) 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.’’
186
(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)’’.
(b) 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
this section’’.
SEC. 543. 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
187
involved after the dispute has arisen or is pursuant to the
terms of a collective bargaining agreement.’’.
SEC. 544. OFFICE OF PENSION PARTICIPANT ADVOCACY.
(a) IN GENERAL.—Title III of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C. 3001 et
seq.) is amended by adding at the end the following:
‘‘Subtitle C—Pension Participant
Advocacy
‘‘OFFICE OF PENSION PARTICIPANT ADVOCACY
‘‘SEC. 3051. (a) ESTABLISHMENT OF OFFICE.—
‘‘(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-
188
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,
189
‘‘(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-
190
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 of the House of Rep-
resentatives and the Committee on Health, Edu-
cation, Labor, and Pensions of the Senate on its ac-
tivities 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
191
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 than 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—
192
‘‘(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 for title III of such Act is amended by adding at
the end the following:
‘‘Subtitle C—Pension Participant Advocacy
‘‘3051. Office of Pension Participant Advocacy.’’.
(c) EFFECTIVE DATE.—The amendment made by
this section shall take effect on January 1, 2003.
SEC. 545. ADDITIONAL CRIMINAL PENALTIES.
Section 501 of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1131) is amended—
(1) by inserting ‘‘(a)’’ after ‘‘SEC. 501.’’;
(2) 
by 
striking 
‘‘$5,000’’ 
and 
inserting
‘‘$50,000’’ and by striking ‘‘$100,000’’ and insert-
ing ‘‘$500,000’’;
(2) by adding at the end the following new sub-
section:
‘‘(b) Any person described in subsection (a) of section
532 of the Investors’ and Employees’ Bill of Rights Act
of 2002 who willfully violates such section or section
104(d) or causes an individual account plan to fail to meet
193
the requirements of section 409A of the Internal Revenue
Code of 1986 shall upon conviction be fined not more than
$500,000 or imprisoned not more than one year, or
both.’’.
SEC. 546. 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.
194
Subtitle F—Investment Advice for
Participants and Beneficiaries
SEC. 551. INDEPENDENT INVESTMENT ADVICE.
(a) IN GENERAL.—Section 404(c)(1) of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1104(c)(1)) (as amended by section 542(b) of this
Act) is amended further—
(1) by redesignating subparagraphs (A) and
(B) as clauses (i) and (ii), respectively, and by in-
serting ‘‘(A)’’ after ‘‘(c)(1)’’; and
(2) by adding at the end the following new sub-
paragraphs:
‘‘(B)(i) In the case of a pension plan described in sub-
paragraph (A) which provides investment in employer se-
curities as at least one option for investment of plan assets
at the direction of the participant or beneficiary, such plan
shall make available to the participant or beneficiary the
services of a qualified fiduciary adviser for purposes of
providing 
investment 
advice 
described 
in 
section
3(21)(A)(ii) regarding investment in such securities.
‘‘(ii) No person who is otherwise a fiduciary shall be
liable by reason of any investment advice provided by a
qualified fiduciary adviser pursuant to a request under
clause (i) if—
195
‘‘(I) the plan provides for selection and moni-
toring of such adviser in a prudent and effective
manner, and
‘‘(II) such adviser is a named fiduciary under
the plan in connection with the provision of such ad-
vice.
‘‘(iii) Subparagraph (A)(ii) shall not apply with re-
spect to a fiduciary of a plan in connection with the exer-
cise of control by a participant or beneficiary over the as-
sets in his account if—
‘‘(I) such exercise of control is undertaken pur-
suant to investment advice described in section
3(21)(A)(ii) provided by such fiduciary, or
‘‘(II) at the time of such exercise of control, the
plan fails to meet the requirements of clause (i).
‘‘(C) For purposes of subparagraph (B)—
‘‘(i) The term ‘qualified fiduciary adviser’
means, with respect to a plan, a person who—
‘‘(I) is a fiduciary of the plan by reason of
the provision of qualified investment advice by
such person to a participant or beneficiary,
‘‘(II) has no material interest in, and no
material affiliation or contractual relationship
with any third party having a material interest
196
in, the security or other property with respect
to which the person is providing the advice,
‘‘(III) meets the qualifications of clause
(ii), and
‘‘(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,
197
‘‘(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),
‘‘(V) is an insurance company quali-
fied to do business under the laws of a
State, or
‘‘(VI) is any other comparable entity
which satisfies such criteria as the Sec-
retary determines appropriate.
‘‘(iii) A person meets the additional re-
quirements of this clause if every individual who
is employed (or otherwise compensated) by such
person and whose scope of duties includes the
provision of qualified investment advice on be-
half of such person to any participant or bene-
ficiary is—
‘‘(I) a registered representative of
such person,
‘‘(II) an individual described in sub-
clause (I), (II), or (III) of clause (i), or
‘‘(III) such other comparable qualified
individual as may be designated in regula-
tions of the Secretary.’’.
198
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to investment advice
provided in plan years beginning on or after January 1,
2003.
SEC. 552. TAX TREATMENT OF QUALIFIED RETIREMENT
PLANNING SERVICES.
(a) IN GENERAL.—Subsection (m) of section 132 of
the Internal Revenue Code of 1986 (defining qualified re-
tirement services) is amended by adding at the end the
following new paragraph:
‘‘(4) NO CONSTRUCTIVE RECEIPT.—No amount
shall be included in the gross income of any em-
ployee solely because the employee may choose be-
tween any qualified retirement planning services pro-
vided by a qualified investment advisor and com-
pensation which would otherwise be includible in the
gross income of such employee. The preceding sen-
tence shall apply to highly compensated employees
only if the choice described in such sentence is avail-
able on substantially the same terms to each mem-
ber of the group of employees normally provided
education and information regarding the employer’s
qualified employer plan.’’.
(b) CONFORMING AMENDMENTS.—
199
(1) Section 403(b)(3)(B) of such Code is
amended 
by 
inserting 
‘‘132(m)(4),’’ 
after
‘‘132(f)(4),’’.
(2) Section 414(s)(2) of such Code is amended
by inserting ‘‘132(m)(4),’’ after ‘‘132(f)(4),’’.
(3) Section 415(c)(3)(D)(ii) of such Code is
amended 
by 
inserting 
‘‘132(m)(4),’’ 
after
‘‘132(f)(4),’’.
(c) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 2002.
Subtitle G—General Provisions
SEC. 561. GENERAL EFFECTIVE DATE OF TITLE.
(a) IN GENERAL.—Except as otherwise provided in
this title, the amendments made by this title shall apply
with respect to plan years beginning on or after January
1, 2003.
(b) SPECIAL RULE FOR COLLECTIVELY BARGAINED
PLANS.—In the case of a plan maintained pursuant to 1
or more collective bargaining agreements between em-
ployee representatives and 1 or more employers ratified
on or before the date of the enactment of this Act, sub-
section (a) shall be applied to benefits pursuant to, and
individuals covered by, any such agreement by substituting
200
for ‘‘January 1, 2003’’ the date of the commencement of
the first plan year beginning on or after the earlier of—
(1) the later of—
(A) January 1, 2004, or
(B) the date on which the last of such col-
lective bargaining agreements terminates (de-
termined without regard to any extension there-
of after the date of the enactment of this Act),
or
(2) January 1, 2005.
SEC. 562. PLAN AMENDMENTS.
If any amendment made by this title requires an
amendment to any plan, such plan amendment shall not
be required to be made before the first plan year beginning
on or after the effective date specified in section 561 of
this Act, if—
(1) during the period after such amendment
made by this title takes effect and before such first
plan year, the plan is operated in accordance with
the requirements of such amendment made by this
title, and
(2) such plan amendment applies retroactively
to the period after such amendment made by this
title takes effect and before such first plan year.
Æ