text: 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.
target: 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.
feat_title: A bill to amend the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986 to ensure that individual account plans protect workers by limiting the amount of employer stock each worker may hold and encouraging diversification of investment of plan assets, and for other purposes.