Requires individual account plan administrators to give 30 days notice (except in specified circumstances) to plan participants and beneficiaries before a period (lockdown, blackout) in which their ability to divest or diversify assets control over their account assets will be limited. Provides that, during such lockdown periods, employers are not exempt from liability for failing in fiduciary duty with respect to individual account plan investments; but states that this loss of exemption from liability is not triggered by any limitations or restrictions on employee ability to divest or diversify assets, if such limitations or restrictions are disclosed to participants and beneficiaries through summary plan description or materials describing specific investment alternatives under the plan.
Amends ERISA and IRC to prohibit individual account plans from acquiring or holding employer securities with respect to which there is any restriction on divestment by a participant or beneficiary after the participant has completed three years of plan participation. Exempts employee stock ownership plans (ESOPS) from this prohibition.
Allows ERISA prohibited transaction exemptions under specified conditions to: (1) a fiduciary adviser's providing certain investment advice to an employee benefit plan or to a participant or beneficiary of such plan; (2) sale, acquisition, or holding of securities or other property (including any lending of money or other extension of credit associated with these) pursuant to such advice; and (3) direct or indirect receipt of fees or other compensation by the fiduciary adviser or an affiliate in connection with providing such advice.
Amends the Securities Exchange Act of 1934 to prohibit certain insider trading during pension plan transaction suspension periods.
[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 1969 Introduced in Senate (IS)]
107th CONGRESS
2d Session
S. 1969
To amend title I of the Employee Retirement Income Security Act of 1974
and the Internal Revenue Code of 1986 to provide additional protections
to participants and beneficiaries in individual account plans from
excessive investment in employer securities and to promote the
provision of retirement investment advice to workers managing their
retirement income assets, and to amend the Securities Exchange Act of
1934 to prohibit insider trades during any suspension of the ability of
plan participants or beneficiaries to direct investment away from
equity securities of the plan sponsor.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
February 26, 2002
Mr. Hutchinson (for himself, Mr. Lott, and Mr. Gregg) introduced the
following bill; which was read twice and referred to the Committee on
Health, Education, Labor, and Pensions
_______________________________________________________________________
A BILL
To amend title I of the Employee Retirement Income Security Act of 1974
and the Internal Revenue Code of 1986 to provide additional protections
to participants and beneficiaries in individual account plans from
excessive investment in employer securities and to promote the
provision of retirement investment advice to workers managing their
retirement income assets, and to amend the Securities Exchange Act of
1934 to prohibit insider trades during any suspension of the ability of
plan participants or beneficiaries to direct investment away from
equity securities of the plan sponsor.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Pension Security Act of 2002''.
SEC. 2. IMPROVED DISCLOSURE OF PENSION BENEFIT INFORMATION BY
INDIVIDUAL ACCOUNT PLANS.
(a) Pension Benefit Statements Required on Periodic Basis.--
(1) In general.--Subsection (a) of section 105 of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1025) is amended by inserting ``and, in the case of an
applicable individual account plan, shall furnish at least
quarterly to each plan participant (and to each beneficiary
with a right to direct investments),'' after ``who so requests
in writing,''.
(2) Information required from individual account plans.--
Section 105 of such Act (29 U.S.C. 1025) is amended by adding
at the end the following new subsection:
``(e)(1) The quarterly statements required under subsection (a)
shall include (together with the information required in subsection
(a)) the following:
``(A) the value of investments allocated to the individual
account, including the value of any assets held in the form of
employer securities, without regard to whether such securities
were contributed by the plan sponsor or acquired at the
direction of the plan or of the participant or beneficiary, and
an explanation of any limitations or restrictions on the right
of the participant or beneficiary to direct an investment; and
``(B) an explanation, written in a manner calculated to be
understood by the average plan participant, of the importance,
for the long-term retirement security of participants and
beneficiaries, of a well-balanced and diversified investment
portfolio, including a discussion of the risk of holding
substantial portions of a portfolio in the security of any one
entity, such as employer securities.''.
(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 subsection:
``(42) 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 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 section 401 of
the Internal Revenue Code of 1986.''.
(b) Civil Penalties for Failure To Provide Quarterly Benefit
Statements.--Section 502 of such Act (29 U.S.C. 1132) is amended--
(1) in subsection (a)(6), by striking ``(5), or (6)'' and
inserting ``(5), (6), or (7)'';
(2) by redesignating paragraph (7) of subsection (c) as
paragraph (8); and
(3) by inserting after paragraph (6) of subsection (c) the
following new paragraph:
``(7) The Secretary may assess a civil penalty against any plan
administrator of up to $1,000 a day from the date of such plan
administrator's failure or refusal to provide participants or
beneficiaries with a benefit statement on at least a quarterly basis in
accordance with section 105(a).''.
SEC. 3. PROTECTION FROM SUSPENSIONS, LIMITATIONS, OR RESTRICTIONS ON
ABILITY OF PARTICIPANT OR BENEFICIARY TO DIRECT OR
DIVERSIFY PLAN ASSETS.
(a) In General.--Section 101 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1021) is amended--
(1) by redesignating the second subsection (h) as
subsection (j); and
(2) by inserting after the first subsection (h) the
following new subsection:
``(i) Notice of Suspension, Limitation, or Restriction on Ability
of Participant or Beneficiary To Direct Investments in Individual
Account Plan.--
``(1) In general.--In the case of an applicable individual
account plan, the administrator shall notify participants and
beneficiaries of any action that would have the affect of
suspending, limiting, or restricting the ability of
participants or beneficiaries to direct or diversify assets
credited to their accounts.
``(2) Notice requirements.--
``(A) In general.--The notices described in
paragraph (1) shall--
``(i) be written in a manner calculated to
be understood by the average plan participant
and shall include the reasons for the
suspension, limitation, or restriction, an
identification of the investments affected, and
the expected period of the suspension,
limitation, or restriction, and
``(ii) be furnished at least 30 days in
advance of the action suspending, limiting, or
restricting the ability of the participants or
beneficiaries to direct or diversify assets.
``(B) Exception to 30-day notice requirement.--In
any case in which--
``(i) a fiduciary of the plan determines,
in writing, that a deferral of the suspension,
limitation, or restriction would violate the
requirements of subparagraph (A) or (B) of
section 404(a)(1), or
``(ii) the inability to provide the 30-day
advance notice is due to circumstances beyond
the reasonable control of the plan
administrator,
subparagraph (A)(ii) shall not apply, and the notice
shall be furnished as soon as reasonably possible under
the circumstances.
``(3) Changes in expected period of suspension, limitation,
or restriction.--If, following the furnishing of the notice
pursuant to this subsection, there is a change in the expected
period of the suspension, limitation, or restriction on the
right of a participant or beneficiary to direct or diversify
assets, the administrator shall provide affected participants
and beneficiaries advance notice of the change. Such notice
shall meet the requirements of paragraph (2)(A)(i) in relation
to the extended suspension, limitation, or restriction.''.
(b) Civil Penalties for Failure To Provide Notice.--Section 502 of
such Act (as amended by section 2(b)) is amended--
(1) in subsection (a)(6), by striking ``(6), or (7)'' and
inserting ``(6), (7), or (8)'';
(2) by redesignating paragraph (8) of subsection (c) as
paragraph (9); and
(3) by inserting after paragraph (7) of subsection (c) the
following new paragraph:
``(8) The Secretary may assess a civil penalty against any person
of up to $100 a day from the date of the person's failure or refusal to
provide notice to participants and beneficiaries in accordance with
section 101(i). For purposes of this paragraph, each violation with
respect to any single participant or beneficiary, shall be treated as a
separate violation.''.
(c) Inapplicability of Relief From Fiduciary Liability During
Suspension of Ability of Participant or Beneficiary To Direct
Investments.--Section 404(c)(1) of such Act (29 U.S.C. 1104(c)(1)) is
amended--
(1) in subparagraph (B), by inserting before the period the
following: ``, except that this subparagraph shall not apply
for any period during which the ability of a participant or
beneficiary to direct the investment of assets in his or her
individual account is suspended by a plan sponsor or
fiduciary''; and
(2) by adding at the end the following:
``Any limitation or restriction that may govern the frequency of
transfers between investment vehicles shall not be treated as a
suspension referred to in subparagraph (B) to the extent such
limitation or restriction is disclosed to participants or beneficiaries
through the summary plan description or materials describing specific
investment alternatives under the plan.''.
SEC. 4. LIMITATIONS ON RESTRICTIONS OF INVESTMENTS IN EMPLOYER
SECURITIES.
(a) Amendments to the Employee Retirement Income Security Act of
1974.--Section 407 of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1107) is amended by adding at the end the following new
subsection:
``(g)(1) An applicable individual account plan may not acquire or
hold any employer securities with respect to which there is any
restriction on divestment by a participant or beneficiary on or after
the date on which the participant has completed 3 years of
participation (as defined in section 204(b)(4)) under the plan or (if
the plan so provides) 3 years of service (as defined in section
203(b)(2)) with the employer.
``(2) For purposes of paragraph (1), the term `restriction on
divestment' includes--
``(A) any failure to offer at least 3 diversified
investment options in which a participant or beneficiary may
direct the proceeds from the divestment of employer securities,
and
``(B) any restriction on the ability of a participant or
beneficiary to choose from all otherwise available investment
options in which such proceeds may be so directed.''.
(b) Amendments to the Internal Revenue Code of 1986.--
(1) In general.--Subsection (a) of section 401 of the
Internal Revenue Code of 1986 (relating to requirements for
qualification) is amended by inserting after paragraph (34) the
following new paragraph:
``(35) Limitations on restrictions under applicable defined
contribution plans on investments in employer securities.--
``(A) In general.--A trust forming a part of an
applicable defined contribution plan shall not
constitute a qualified trust under this subsection if
the plan acquires or holds any employer securities with
respect to which there is any restriction on divestment
by a participant or beneficiary on or after the date on
which the participant has completed 3 years of
participation (as defined in section 411(b)(4)) under
the plan or (if the plan so provides) 3 years of
service (as defined in section 411(a)(5)) with the
employer.
``(B) Definitions.--For purposes of subparagraph
(A)--
``(i) Applicable defined contribution
plan.--The term `applicable defined
contribution plan' means any defined
contribution plan, except that such term does
not include an employee stock ownership plan
(as defined in section 4975(e)(7)) unless there
are any contributions to such plan (or earnings
thereunder) held within such plan that are
subject to subsections (k)(3) or (m)(2).
``(ii) Restriction on divestment.--The term
`restriction on divestment' includes--
``(I) any failure to offer at least
3 diversified investment options in
which a participant or beneficiary may
direct the proceeds from the divestment
of employer securities, and
``(II) any restriction on the
ability of a participant or beneficiary
to choose from all otherwise available
investment options in which such
proceeds may be so directed.''.
(2) Conforming amendment.--Section 401(a)(28)(B) of such
Code (relating to diversification of investments) is amended by
adding at the end the following new clause:
``(v) Exception.--This subparagraph shall
not apply to an applicable defined contribution
plan (as defined in paragraph (35)(B)(i)).''.
SEC. 5. PROHIBITED TRANSACTION EXEMPTION FOR THE PROVISION OF
INVESTMENT ADVICE.
(a) Amendments to the Employee Retirement Income Security Act of
1974.--
(1) Exemption from prohibited transactions.--Section 408(b)
of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1108(b)) is amended by adding at the end the following
new paragraph:
``(14)(A) Any transaction described in subparagraph (B) in
connection with the provision of investment advice described in
section 3(21)(A)(ii), in any case in which--
``(i) the investment of assets of the plan is
subject to the direction of plan participants or
beneficiaries,
``(ii) the advice is provided to the plan or a
participant or beneficiary of the plan by a fiduciary
adviser in connection with any sale, acquisition, or
holding of a security or other property for purposes of
investment of plan assets, and
``(iii) the requirements of subsection (g) are met
in connection with the provision of the advice.
``(B) The transactions described in this subparagraph are
the following:
``(i) The provision of the advice to the plan,
participant, or beneficiary.
``(ii) The sale, acquisition, or holding of a
security or other property (including any lending of
money or other extension of credit associated with the
sale, acquisition, or holding of a security or other
property) pursuant to the advice.
``(iii) The direct or indirect receipt of fees or
other compensation by the fiduciary adviser or an
affiliate thereof (or any employee, agent, or
registered representative of the fiduciary adviser or
affiliate) in connection with the provision of the
advice or in connection with a sale, acquisition, or
holding of a security or other property pursuant to the
advice.''.
(2) Requirements.--Section 408 of such Act is amended by
adding at the end the following new subsection:
``(g) Requirements Relating to Provision of Investment Advice by
Fiduciary Advisers.--
``(1) In general.--The requirements of this subsection are
met in connection with the provision of investment advice
referred to in section 3(21)(A)(ii), provided to an employee
benefit plan or a participant or beneficiary of an employee
benefit plan by a fiduciary adviser with respect to the plan in
connection with any sale, acquisition, or holding of a security
or other property for purposes of investment of amounts held by
the plan, if--
``(A) in the case of the initial provision of the
advice with regard to the security or other property by
the fiduciary adviser to the plan, participant, or
beneficiary, the fiduciary adviser provides to the
recipient of the advice, at a time reasonably
contemporaneous with the initial provision of the
advice, a written notification (which may consist of
notification by means of electronic communication)--
``(i) of all fees or other compensation
relating to the advice that the fiduciary
adviser or any affiliate thereof is to receive
(including compensation provided by any third
party) in connection with the provision of the
advice or in connection with the sale,
acquisition, or holding of the security or
other property,
``(ii) of any material affiliation or
contractual relationship of the fiduciary
adviser or affiliates thereof in the security
or other property,
``(iii) of any limitation placed on the
scope of the investment advice to be provided
by the fiduciary adviser with respect to any
such sale, acquisition, or holding of a
security or other property,
``(iv) of the types of services provided by
the fiduciary adviser in connection with the
provision of investment advice by the fiduciary
adviser, and
``(v) that the adviser is acting as a
fiduciary of the plan in connection with the
provision of the advice,
``(B) the fiduciary adviser provides appropriate
disclosure, in connection with the sale, acquisition,
or holding of the security or other property, in
accordance with all applicable securities laws,
``(C) the sale, acquisition, or holding occurs
solely at the direction of the recipient of the advice,
``(D) the compensation received by the fiduciary
adviser and affiliates thereof in connection with the
sale, acquisition, or holding of the security or other
property is reasonable, and
``(E) the terms of the sale, acquisition, or
holding of the security or other property are at least
as favorable to the plan as an arm's length transaction
would be.
``(2) Standards for presentation of information.--The
notification required to be provided to participants and
beneficiaries under paragraph (1)(A) shall be written in a
clear and conspicuous manner and in a manner calculated to be
understood by the average plan participant and shall be
sufficiently accurate and comprehensive to reasonably apprise
such participants and beneficiaries of the information required
to be provided in the notification.
``(3) Exemption conditioned on continued availability of
required information on request for 1 year.--The requirements
of paragraph (1)(A) shall be deemed not to have been met in
connection with the initial or any subsequent provision of
advice described in paragraph (1) to the plan, participant, or
beneficiary if, at any time during the provision of advisory
services to the plan, participant, or beneficiary, the
fiduciary adviser fails to maintain the information described
in clauses (i) through (iv) of subparagraph (A) in currently
accurate form and in the manner described in paragraph (2) or
fails--
``(A) to provide, without charge, such currently
accurate information to the recipient of the advice no
less than annually,
``(B) to make such currently accurate information
available, upon request and without charge, to the
recipient of the advice, or
``(C) in the event of a material change to the
information described in clauses (i) through (iv) of
paragraph (1)(A), to provide, without charge, such
currently accurate information to the recipient of the
advice at a time reasonably contemporaneous to the
material change in information.
``(4) Maintenance for 6 years of evidence of compliance.--A
fiduciary adviser referred to in paragraph (1) who has provided
advice referred to in such paragraph shall, for a period of not
less than 6 years after the provision of the advice, maintain
any records necessary for determining whether the requirements
of the preceding provisions of this subsection and of subsection
(b)(14) have been met. A transaction prohibited under section 406 shall
not be considered to have occurred solely because the records are lost
or destroyed prior to the end of the 6-year period due to circumstances
beyond the control of the fiduciary adviser.
``(5) Exemption for plan sponsor and certain other
fiduciaries.--
``(A) In general.--Subject to subparagraph (B), a
plan sponsor or other person who is a fiduciary (other
than a fiduciary adviser) shall not be treated as
failing to meet the requirements of this part solely by
reason of the provision of investment advice referred
to in section 3(21)(A)(ii) (or solely by reason of
contracting for or otherwise arranging for the
provision of the advice), if--
``(i) the advice is provided by a fiduciary
adviser pursuant to an arrangement between the
plan sponsor or other fiduciary and the
fiduciary adviser for the provision by the
fiduciary adviser of investment advice referred
to in such section,
``(ii) the terms of the arrangement require
compliance by the fiduciary adviser with the
requirements of this subsection, and
``(iii) the terms of the arrangement
include a written acknowledgment by the
fiduciary adviser that the fiduciary adviser is
a fiduciary of the plan with respect to the
provision of the advice.
``(B) Continued duty of prudent selection of
adviser and periodic review.--Nothing in subparagraph
(A) shall be construed to exempt a plan sponsor or
other person who is a fiduciary from any requirement of
this part for the prudent selection and periodic review
of a fiduciary adviser with whom the plan sponsor or
other person enters into an arrangement for the
provision of advice referred to in section
3(21)(A)(ii). The plan sponsor or other person who is a
fiduciary has no duty under this part to monitor the
specific investment advice given by the fiduciary
adviser to any particular recipient of the advice.
``(C) Availability of plan assets for payment for
advice.--Nothing in this part shall be construed to
preclude the use of plan assets to pay for reasonable
expenses in providing investment advice referred to in
section 3(21)(A)(ii).
``(6) Definitions.--For purposes of this subsection and
subsection (b)(14)--
``(A) Fiduciary adviser.--The term `fiduciary
adviser' means, with respect to a plan, a person who is
a fiduciary of the plan by reason of the provision of
investment advice by the person to the plan or to a
participant or beneficiary and who is--
``(i) registered as an investment adviser
under the Investment Advisers Act of 1940 (15
U.S.C. 80b-1 et seq.) or under the laws of the
State in which the fiduciary maintains its
principal office and place of business,
``(ii) a bank or similar financial
institution referred to in section 408(b)(4),
``(iii) an insurance company qualified to
do business under the laws of a State,
``(iv) a person registered as a broker or
dealer under the Securities Exchange Act of
1934 (15 U.S.C. 78a et seq.),
``(v) an affiliate of a person described in
any of clauses (i) through (iv), or
``(vi) an employee, agent, or registered
representative of a person described in any of
clauses (i) through (v) who satisfies the
requirements of applicable insurance, banking,
and securities laws relating to the provision
of the advice.
``(B) Affiliate.--The term `affiliate' of another
entity means an affiliated person of the entity (as
defined in section 2(a)(3) of the Investment Company
Act of 1940 (15 U.S.C. 80a-2(a)(3))).
``(C) Registered representative.--The term
`registered representative' of another entity means a
person described in section 3(a)(18) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a)(18))
(substituting the entity for the broker or dealer
referred to in such section) or a person described in
section 202(a)(17) of the Investment Advisers Act of
1940 (15 U.S.C. 80b-2(a)(17)) (substituting the entity
for the investment adviser referred to in such
section).''.
(b) Amendments to the Internal Revenue Code of 1986.--
(1) Exemption from prohibited transactions.--Subsection (d)
of section 4975 of the Internal Revenue Code of 1986 (relating
to exemptions from tax on prohibited transactions) is amended--
(A) in paragraph (14), by striking ``or'' at the
end;
(B) in paragraph (15), by striking the period at
the end and inserting ``; or''; and
(C) by adding at the end the following new
paragraph:
``(16) any transaction described in subsection (f)(7)(A) in
connection with the provision of investment advice described in
subsection (e)(3)(B), in any case in which--
``(A) the investment of assets of the plan is
subject to the direction of plan participants or
beneficiaries,
``(B) the advice is provided to the plan or a
participant or beneficiary of the plan by a fiduciary
adviser in connection with any sale, acquisition, or
holding of a security or other property for purposes of
investment of plan assets, and
``(C) the requirements of subsection (f)(7)(B) are
met in connection with the provision of the advice.''.
(2) Allowed transactions and requirements.--Subsection (f)
of such section 4975 (relating to other definitions and special
rules) is amended by adding at the end the following new
paragraph:
``(7) Provisions relating to investment advice provided by
fiduciary advisers.--
``(A) Transactions allowable in connection with
investment advice provided by fiduciary advisers.--The
transactions referred to in subsection (d)(16), in
connection with the provision of investment advice by a
fiduciary adviser, are the following:
``(i) the provision of the advice to the
plan, participant, or beneficiary;
``(ii) the sale, acquisition, or holding of
a security or other property (including any
lending of money or other extension of credit
associated with the sale, acquisition, or
holding of a security or other property)
pursuant to the advice; and
``(iii) the direct or indirect receipt of
fees or other compensation by the fiduciary
adviser or an affiliate thereof (or any
employee, agent, or registered representative
of the fiduciary adviser or affiliate) in
connection with the provision of the advice or
in connection with a sale, acquisition, or
holding of a security or other property
pursuant to the advice.
``(B) Requirements relating to provision of
investment advice by fiduciary advisers.--The
requirements of this subparagraph (referred to in
subsection (d)(16)(C)) are met in connection with the
provision of investment advice referred to in
subsection (e)(3)(B), provided to a plan or a
participant or beneficiary of a plan by a fiduciary
adviser with respect to the plan in connection with any
sale, acquisition, or holding of a security or other
property for purposes of investment of amounts held by
the plan, if--
``(i) in the case of the initial provision
of the advice with regard to the security or
other property by the fiduciary adviser to the
plan, participant, or beneficiary, the
fiduciary adviser provides to the recipient of
the advice, at a time reasonably
contemporaneous with the initial provision of
the advice, a written notification (which may
consist of notification by means of electronic
communication)--
``(I) of all fees or other
compensation relating to the advice
that the fiduciary adviser or any
affiliate thereof is to receive
(including compensation provided by any
third party) in connection with the
provision of the advice or in
connection with the sale, acquisition,
or holding of the security or other
property,
``(II) of any material affiliation
or contractual relationship of the
fiduciary adviser or affiliates thereof
in the security or other property,
``(III) of any limitation placed on
the scope of the investment advice to
be provided by the fiduciary adviser
with respect to any such sale,
acquisition, or holding of a security
or other property,
``(IV) of the types of services
provided by the fiduciary adviser in
connection with the provision of
investment advice by the fiduciary
adviser, and
``(V) that the adviser is acting as
a fiduciary of the plan in connection
with the provision of the advice,
``(ii) the fiduciary adviser provides
appropriate disclosure, in connection with the
sale, acquisition, or holding of the security
or other property, in accordance with all
applicable securities laws,
``(iii) the sale, acquisition, or holding
occurs solely at the direction of the recipient
of the advice,
``(iv) the compensation received by the
fiduciary adviser and affiliates thereof in
connection with the sale, acquisition, or
holding of the security or other property is
reasonable, and
``(v) the terms of the sale, acquisition,
or holding of the security or other property
are at least as favorable to the plan as an
arm's length transaction would be.
``(C) Standards for presentation of information.--
The notification required to be provided to
participants and beneficiaries under subparagraph
(B)(i) shall be written in a clear and conspicuous
manner and in a manner calculated to be understood by
the average plan participant and shall be sufficiently
accurate and comprehensive to reasonably apprise such
participants and beneficiaries of the information
required to be provided in the notification.
``(D) Exemption conditioned on making required
information available annually, on request, and in the
event of material change.--The requirements of
subparagraph (B)(i) shall be deemed not to have been
met in connection with the initial or any subsequent
provision of advice described in subparagraph (B) to
the plan, participant, or beneficiary if, at any time
during the provision of advisory services to the plan,
participant, or beneficiary, the fiduciary adviser
fails to maintain the information described in
subclauses (I) through (IV) of subparagraph (B)(i) in
currently accurate form and in the manner required by
subparagraph (C), or fails--
``(i) to provide, without charge, such
currently accurate information to the recipient
of the advice no less than annually,
``(ii) to make such currently accurate
information available, upon request and without
charge, to the recipient of the advice, or
``(iii) in the event of a material change
to the information described in subclauses (I)
through (IV) of subparagraph (B)(i), to
provide, without charge, such currently
accurate information to the recipient of the
advice at a time reasonably contemporaneous to
the material change in information.
``(E) Maintenance for 6 years of evidence of
compliance.--A fiduciary adviser referred to in
subparagraph (B) who has provided advice referred to in
such subparagraph shall, for a period of not less than
6 years after the provision of the advice, maintain any
records necessary for determining whether the
requirements of the preceding provisions of this
paragraph and of subsection (d)(16) have been met. A
transaction prohibited under subsection (c)(1) shall
not be considered to have occurred solely because the
records are lost or destroyed prior to the end of the
6-year period due to circumstances beyond the control
of the fiduciary adviser.
``(F) Exemption for plan sponsor and certain other
fiduciaries.--A plan sponsor or other person who is a
fiduciary (other than a fiduciary adviser) shall not be
treated as failing to meet the requirements of this
section solely by reason of the provision of investment
advice referred to in subsection (e)(3)(B) (or solely
by reason of contracting for or otherwise arranging for
the provision of the advice), if--
``(i) the advice is provided by a fiduciary
adviser pursuant to an arrangement between the
plan sponsor or other fiduciary and the
fiduciary adviser for the provision by the
fiduciary adviser of investment advice referred
to in such section,
``(ii) the terms of the arrangement require
compliance by the fiduciary adviser with the
requirements of this paragraph,
``(iii) the terms of the arrangement
include a written acknowledgment by the
fiduciary adviser that the fiduciary adviser is
a fiduciary of the plan with respect to the
provision of the advice, and
``(iv) the requirements of part 4 of
subtitle B of title I of the Employee
Retirement Income Security Act of 1974 are met
in connection with the provision of such
advice.
``(G) Definitions.--For purposes of this paragraph
and subsection (d)(16)--
``(i) Fiduciary adviser.--The term
`fiduciary adviser' means, with respect to a
plan, a person who is a fiduciary of the plan
by reason of the provision of investment advice
by the person to the plan or to a participant
or beneficiary and who is--
``(I) registered as an investment
adviser under the Investment Advisers
Act of 1940 (15 U.S.C. 80b-1 et seq.)
or under the laws of the State in which
the fiduciary maintains its principal
office and place of business,
``(II) a bank or similar financial
institution referred to in subsection
(d)(4),
``(III) an insurance company
qualified to do business under the laws
of a State,
``(IV) a person registered as a
broker or dealer under the Securities
Exchange Act of 1934 (15 U.S.C. 78a et
seq.),
``(V) an affiliate of a person
described in any of subclauses (I)
through (IV), or
``(VI) an employee, agent, or
registered representative of a person
described in any of subclauses (I)
through (V) who satisfies the
requirements of applicable insurance,
banking, and securities laws relating
to the provision of the advice.
``(ii) Affiliate.--The term `affiliate' of
another entity means an affiliated person of
the entity (as defined in section 2(a)(3) of
the Investment Company Act of 1940 (15 U.S.C.
80a-2(a)(3))).
``(iii) Registered representative.--The
term `registered representative' of another
entity means a person described in section
3(a)(18) of the Securities Exchange Act of 1934
(15 U.S.C. 78c(a)(18)) (substituting the entity
for the broker or dealer referred to in such
section) or a person described in section
202(a)(17) of the Investment Advisers Act of
1940 (15 U.S.C. 80b-2(a)(17)) (substituting the
entity for the investment adviser referred to
in such section).''.
SEC. 6. INSIDER TRADES DURING PENSION PLAN SUSPENSION PERIODS
PROHIBITED.
Section 16 of the Securities Exchange Act of 1934 (15 U.S.C. 78p)
is amended by adding at the end the following new subsection:
``(h) Insider Trades During Pension Plan Suspension Periods
Prohibited.--
``(1) Prohibition.--It shall be unlawful for any such
beneficial owner, director, or officer of an issuer, directly
or indirectly, to purchase (or otherwise acquire) or sell (or
otherwise transfer) any equity security of such issuer (other
than an exempted security), during any pension plan suspension
period with respect to such equity security.
``(2) Remedy.--Any profit realized by such beneficial
owner, director, or officer from any purchase (or other
acquisition) or sale (or other transfer) in violation of this
subsection shall inure to and be recoverable by the issuer
irrespective of any intention on the part of such beneficial
owner, director, or officer in entering into the transaction.
``(3) Rulemaking permitted.--The Commission may issue rules
to clarify the application of this subsection, to ensure
adequate notice to all persons affected by this subsection, and
to prevent evasion thereof.
``(4) Definitions.--For purposes of this subsection--
``(A) Pension plan suspension period.--The term
`pension plan suspension period' means, with respect to
an equity security, any period during which the ability
of a participant or beneficiary under an applicable
individual account plan maintained by the issuer to
direct the investment of assets in his or her
individual account away from such equity security is
suspended by the issuer or a fiduciary of the plan.
Such term does not include any limitation or
restriction that may govern the frequency of transfers
between investment vehicles to the extent such
limitation and restriction is disclosed to participants
and beneficiaries through the summary plan description
or materials describing specific investment
alternatives under the plan.
``(B) Applicable individual account plan.--The term
`applicable individual account plan' has the meaning
provided such term in section 3(42) of the Employee
Retirement Income Security Act of 1974.''.
SEC. 7. EFFECTIVE DATES AND RELATED RULES.
(a) In General.--Except as provided in subsection (b), the
amendments made by sections 2, 3, 4, and 6 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 employee representatives and 1 or more employers
ratified on or before the date of the enactment of this Act, subsection
(a) shall be applied to benefits pursuant to, and individuals covered
by, any such agreement by substituting 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 collective
bargaining agreements terminates (determined without
regard to any extension thereof after the date of the
enactment of this Act), or
(2) January 1, 2005.
(c) Plan Amendments.--If the amendments made by sections 2, 3, and
4 of this Act require an amendment to any plan, such plan amendment
shall not be required to be made before the first plan year beginning
on or after January 1, 2005, if--
(1) during the period after such amendments made by this
Act take effect and before such first plan year, the plan is
operated in accordance with the requirements of such amendments
made by this Act, and
(2) such plan amendment applies retroactively to the period
after such amendments made by this Act take effect and before
such first plan year.
(d) Amendments Relating to Investment Advice.--The amendments made
by section 5 shall apply with respect to advice referred to in section
3(21)(A)(ii) of the Employee Retirement Income Security Act of 1974 or
section 4975(c)(3)(B) of the Internal Revenue Code of 1986 provided on
or after January 1, 2003.
<all>
Introduced in Senate
Sponsor introductory remarks on measure. (CR S1212-1213)
Read twice and referred to the Committee on Health, Education, Labor, and Pensions. (text of measure as introduced: CR S1213-1216)
Sponsor introductory remarks on measure. (CR S1248)
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