article: SECTION 1. SHORT TITLE. This Act may be cited as the ``Pension Protection and Diversification Act of 2001''. SEC. 2. 20-PERCENT LIMITATION ON EMPLOYER STOCK AND REAL PROPERTY HELD BY PARTICIPANT IN CERTAIN INDIVIDUAL ACCOUNT PLANS. (a) In General.--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: ``(g) Diversification Requirements Applicable to Certain Individual Account Plans.-- ``(1) In general.--An applicable individual account plan shall not be treated as an eligible individual account plan (as defined in subsection (d)(3)) unless the plan meets-- ``(A) the acquisition and holding requirements of paragraph (2), and ``(B) the divestment requirement of paragraph (3). ``(2) Acquisition and holding requirements.--A plan meets the requirements of this paragraph only if-- ``(A) the plan may not acquire qualifying employer securities or qualifying employer real property to the extent that, immediately after the acquisition, the fair market value of all qualifying employer securities and qualifying employer real property allocated (or to be allocated) to any participant or beneficiary would exceed 20 percent of the fair market value of all assets allocated (or to be allocated) to such participant or beneficiary under the plan, and ``(B) as of the last day of any calendar quarter, the fair market value of all qualifying employer securities and qualifying employer real property allocated (or to be allocated) to any participant or beneficiary does not exceed 20 percent of the fair market value of all assets allocated (or to be allocated) to such participant or beneficiary. ``(3) Opportunity for employee to divest employer securities.--A plan meets the requirements of this paragraph if each employee who has a nonforfeitable right to 100 percent of the employee's accrued benefit derived from employer contributions may, at any time after the 90th day following the allocation of any qualifying employer securities or qualifying employer real property to the employee under the plan, direct the plan to divest the employee's account of such securities or property and reinvest an equivalent amount in other assets. ``(4) Divestiture.-- ``(A) In general.--The Secretary shall prescribe regulations under which-- ``(i) a plan is given a reasonable period of time to divest itself of qualifying employer securities and qualifying employer real property in order to meet the requirements of this subsection, and ``(ii) in the case of a plan in which a participant or beneficiary exercises control over assets in an account, the participant is given reasonable notice of the requirement, and a reasonable period of time, to make such divestiture. ``(B) Waiver in de minimis cases.--The Secretary may by regulations waive the application of paragraph (2)(B) in cases where the failure with respect to any participant or beneficiary is de minimis and due solely to market fluctuation. ``(5) Definitions and special rules.--For purposes of this subsection-- ``(A) Applicable individual account plan.--The term `applicable individual account plan' means an individual account plan other than an employee stock ownership plan as defined in section 4975(e)(7) of the Internal Revenue Code of 1986. ``(B) Aggregation.--All applicable individual account plans (other than multiemployer plans) maintained by the same employer shall be treated as a single plan. ``(6) Transition rules.-- ``(A) In general.--If, as of December 31, 2002, the fair market value of qualifying employer securities and qualifying employer real property allocated (or to be allocated) under any plan to any one participant or beneficiary exceeds 20 percent of the fair market value of all assets so allocated (or to be allocated), the plan shall be treated as meeting the requirements of paragraph (2)(B). This subparagraph shall cease to apply if any such securities or property are allocated after December 31, 2002, to the participant or beneficiary without the requirements of paragraph (2)(A) or subparagraph (B) being met. ``(B) Contractual requirements.--If qualifying employer securities or qualifying employer real property are acquired after December 31, 2002, pursuant to a contract in effect on the date of enactment of this subsection and at all times thereafter, the fair market value of such securities or property as of December 31, 2002, shall be taken into account under subparagraph (A).'' (b) Conforming Amendment.--Section 407(b)(1) of such Act (29 U.S.C. 1107(b)(1)) is amended by striking ``Subsection (a)'' and inserting ``Subject to subsection (g), subsection (a)''. SEC. 3. IMPROVEMENTS IN ABILITY OF EMPLOYEES TO DIVERSIFY ASSETS IN ESOPS. (a) In General.--Subparagraph (B)(iii) of section 401(a)(28) of the Internal Revenue Code of 1986 (relating to additional requirements for employee stock ownerships plans) is amended-- (1) by striking ``10 years'' and inserting ``5 years'', and (2) by striking ``age 55'' and inserting ``age 35''. (b) Trustee-to-Trustee Transfer Required.--Clause (ii) of section 401(a)(28)(B) of such Code is amended by adding at the end the following new flush sentence: ``In the case of a qualified participant who has not attained the age of 55 on or before the date of any distribution described in subclause (I), a plan shall be treated as meeting the requirements of subclause (I) only if such distribution is made in the form of a direct trustee-to-trustee transfer to an eligible retirement plan (as defined in paragraph (31)(D)) specified by the participant.'' SEC. 4. REDUCTION IN DEDUCTION FOR EMPLOYER MATCHING CONTRIBUTIONS TO DEFINED CONTRIBUTION PLANS MADE IN EMPLOYER SECURITIES. Section 404(a) of the Internal Revenue Code of 1986 (relating to deduction for contributions of an employer to an employee trust, etc.) is amended by adding at the end the following: ``(12) Limitations on deductions for employer matching contributions made in employer securities.--In the case of an employer matching contribution of employer securities (as defined in section 409(l)) to a defined contribution plan other than an employee stock ownership plan (as defined in section 4975(e)(7)), the amount of the deduction allowed shall be equal to 50 percent of the amount allowable without regard to this paragraph.'' SEC. 5. EFFECTIVE DATES. (a) In General.--The amendments made by this Act shall apply to years beginning after December 31, 2002. (b) Collective Bargaining Agreements.--In the case of a plan maintained pursuant to one or more collective bargaining agreements between employee representatives and one or more employers ratified by the date of the enactment of this Act, the amendments made by this Act shall not apply with respect to employees covered by any such agreement for plan years beginning before the earlier of-- (1) the later of-- (A) the date on which the last of such collective bargaining agreements terminates (determined without regard to any extension thereof on or after such date of enactment), or (B) January 1, 2003, or (2) January 1, 2005.
summary: Pension Protection and Diversification Act of 2001 - Amends the Employee Retirement Income Security Act of 1974 (ERISA) to: (1) limit to 20 percent the portion of funds which may be invested in the employer's stock and real property by an employee's individual account plans under section 401(k) of the Internal Revenue Code; and (2) allow an employee to direct the plan to divest the employee's account of such employer securities or property and to reinvest an equal amount in other assets, at any time after 90 days following allocation of employer securities or real property to the employee's individual account plan. Exempts employee stock ownership plans (ESOPS) from these new ERISA provisions.Amends Internal Revenue Code to: (1) allow employees to diversify assets in ESOPS after five years, and after they've reached age 35 (but requires a trustee-to-trustee transfer for those under age 55); and (2) reduce by 50 percent the allowable deduction for employer matching contributions to defined contribution plans made in employer securities.