H.R. 3762 - Pension Security Act of 2002

COMMITTEE ACTION: REPORTED BY VOICE VOTE on Wednesday, April 10, 2002. Report filed by Mr. Sessions.
FLOOR ACTION: ADOPTED 215-209 on Thursday, April 11, 2002, after AGREEING TO THE PREVIOUS QUESTION 218-208.
MANAGERS: LINDER/FROST
107th Congress
2nd Session

H.R. 3762 - Pension Security Act of 2002

1. Modified Closed rule.

2. Provides two hours of debate in the House equally divided among and controlled by the chairmen and ranking minority members of the Committees on Education and the Workforce and Ways and Means.

3. Waives all points of order against consideration of the bill.

4. Provides that in lieu of the amendment recommended by the Committee on Education and the Workforce now printed in the bill, the amendment in the nature of a substitute printed in part A of the Rules Committee report accompanying this resolution shall be considered as adopted.

5. Waives all points of order against the bill, as amended.

6. Makes in order the amendment printed in part B of the report, if offered by Representative George Miller of California or Representative Rangel of New York or a designee, which shall be considered as read, and shall be separately debatable for one hour equally divided and controlled by the proponent and an opponent.

7. Waives all points of order against the amendment printed in part B of the report.

8. Provides one motion to recommit with or without instructions.

---------

RESOLUTION

Resolved, That upon the adoption of this resolution it shall be in order without intervention of any point of order to consider in the House the bill (H.R. 3762) 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. The bill shall be considered as read for amendment. In lieu of the amendment recommended by the Committee on Education and the Workforce now printed in the bill, the amendment in the nature of a substitute printed in part A of the report of the Committee on Rules accompanying this resolution shall be considered as adopted. All points of order against the bill, as amended, are waived. The previous question shall be considered as ordered on the bill, as amended, and on any further amendment thereto to final passage without intervening motion except: (1) two hours of debate on the bill, as amended, equally divided among and controlled by the chairmen and ranking minority members of the Committees on Education and the Workforce and Ways and Means; (2) the further amendment printed in part B of the report of the Committee on Rules, if offered by Representative George Miller of California or Representative Rangel of New York or a designee, which shall be in order without intervention of any point of order, shall be considered as read, and shall be separately debatable for one hour equally divided and controlled by the proponent and an opponent; and (3) one motion to recommit with or without instructions.


PART A
SUMMARY OF AMENDMENT TO BE CONSIDERED AS ADOPTED

Managers' Amendment (Boehner/Thomas) -

Investment Education and Benefit Statement:

    · The bill requires the plan administrator to provide a quarterly notice to plan participants and beneficiaries of the value of investments allocated to their individual account, including their rights to diversify any assets held in employer securities.
    · The notice will also include an explanation of the importance of a diversified investment portfolio including a risk of holding substantial portions of a portfolio in any one security, such as employer securities.
    · The Secretary shall issue guidance and model notices that include the value of investments, the rights of employees to diversify any employer securities and an explanation of the importance of a diversified investment portfolio. Initial guidance will be no later than January 1, 2003. The Secretary may also issue interim model guidance.
    · Notice may be electronic if reasonably accessible to the recipient.
    · Current law provides for an annual notice of benefits and no investment education.

Blackout Notices:

    · The bill requires a new notice 30 days prior to any suspension of participant and beneficiaries ability to direct or diversify assets. The notice must contain the reasons for the suspension, as well as a statement that the administrator has evaluated the reasonableness of the expected period, and a statement that the participant should evaluate the appropriateness of their current investment decisions in light of their inability to direct or diversify assets during the expected period of suspension.
    · The bill requires that plan administrators shall determine prior to distributing notice that any suspension, limitation or restriction is reasonable.
    · The bill clarifies that notice is required only for suspensions longer than three consecutive calendar days and provides for specific exceptions to the 30 day rule. In the event of a qualified domestic relations order, or a blackout period caused by a merger or acquisition, only those employees who are impacted by the event will receive the notice.
    · The bill provides that the Secretary shall issue guidance and model notices that include the above factors and such other provisions the Secretary may specify. Initial guidance will be no later than January 1, 2003. The Secretary may issue interim model guidance.
    · The bill clarifies that notice may be electronic if reasonably accessible to the recipient.
    · The bill provides that the Secretary may provide for additional exceptions to the requirements that are in the interest of participants and beneficiaries.

Inapplicability of Relief from Fiduciary Liability During Suspension of Ability of Participants to Direct Investments – 404(c):

    · The bill explains fiduciary duty during blackout period. It clarifies that fiduciaries are not liable for losses provided that fiduciaries satisfy the requirements of this title.
    · Relevant considerations in determining the satisfaction of fiduciary duty are also added, such as the provision of the blackout notice, the fiduciary's consideration of the reasonableness of the period of suspension, and the fiduciary's actions solely in the interest of participants and beneficiaries.

Diversification:

    · The bill ensures that all employee contributions to pension plans will be immediately diversifiable.
    · The bill provides for a five year transition rule for the allowable diversification of employer securities held in individual account plans as of the date of enactment.
    · The bill provides for the option of a rolling three-year diversification of employer securities. In this case employer securities may be diversified three years after the calendar quarter in which they were contributed.
    · The bill exempts individual account plans that do not hold employer securities that are readily tradable on an established securities market.

Investment Advice:

    · The bill includes the text of H.R. 2269, the Retirement Security Advice Act, which provides increased availability of investment advisors to assist plan participants in making good decisions about their retirement assets.
    · Employees will also be able to use pre-tax dollars to obtain their own investment advice.

Parity for Employees During Blackouts:

    · The bill amends Section 16 the Securities and Exchange Act of 1934 to prohibit company executives and insiders from purchasing or selling any employer securities while plan participants and beneficiaries are precluded from directing or diversifying their accounts during a “blackout” period.

Additional Provisions:

    · Extends the 30-year treasury funding relief to plan years 2001 through 2003.
    · Provides permanent funding relief for certain frozen pension plans maintained by intercity bus lines.
    · Includes "Byrd droppings" (ERISA only) from H.R. 10 (Portman-Cardin pension reform).

(summary of amendment provided by the amendment sponsors)

PART A - TEXT OF AMENDMENT TO BE CONSIDERED AS ADOPTED

(In .PDF Format)


PART B
SUMMARY OF AMENDMENT MADE IN ORDER UNDER THE RULE

Democrat Substitute (George Miller/Rangel) -

    Executive Accountability. Notice to employees when executives are dumping company stock. Requires plan participants to be notified of any significant sales of employer stock by executives or plan fiduciaries. Significant stock sales are sales of $100,000 or more either per transaction or in the aggregate.

    Honest, Accurate and Timely Information for Employees. Pension plans would be prohibited from giving misleading information; requires regular benefit statements to workers, including notice about the importance of diversification; provides at least 30-day advance notice of plan lockdowns, including the right to make investment changes that are implemented before a lockdown imposes civil penalties for failure to provide accurate information to employees. Require notice of the importance of diversification when more than 10% of an employee's account is invested in employer stock.

    Un-biased, Independent Investment Advice. Provides for independent financial advice for employees when company stock is offered as an investment option under the plan.

    Gives Employees a voice on Pension Boards. Requires pension plans to include rank and file employees on Pension Boards, where critical decisions about workers' retirement security are made.

    Lockout Restrictions. Prohibit executives from bailing out of employer stock they own if the rank and file employees are prohibited from selling their stock under the pension plan.

    Parity of Benefits for Executives and Rank and File workers. Closes current law loophole that provides special treatment for executive pension plans.

    Gives Employees Control Over Their Retirement Savings. Gives employees the right to diversify company-matched stock after 3 years of plan participation. This enables employees to safeguard against future losses.

    Additional Protections for Workers' pension Benefits. Requires plan fiduciaries to secure insurance in an amount sufficient to cover benefits under the plan; gives employees the right to be made whole in court for 401k plan abuses; prohibits companies from forcing workers to waive their right to bring a claim under ERISA; enhances Department of Labor assistance; protects whistleblowers, and provides for a study of defined contribution plans insurance system.

Tougher Criminal Enforcement. This substitute toughens criminal penalties for fiduciaries who violate workers' pension rights.

    (summary of amendment provided by the amendment sponsors)