Comprehensive Retirement Reform Bill Would Have Minor Impact on ESOPs

The "Pension Preservation and Savings Expansion Act of 2003" (H.R. 1776), introduced by retirement plan reform leaders Rob Portman (R-OH) and Benjamin Cardin (D-MD), would make sweeping changes in retirement plan law, but most of the changes would affect pension plans and employee savings plans, not ESOPs. The bill is given a good chance of passage and has already attracted wide support. The only provisions that would directly affect ESOPs are:

1. Vesting must be completed either 100% after three years or gradually over six years.
2. The minimum distribution rule would be amended so that distribution rules start at age 75, not 75½.
3. The bill incorporates the diversification rules for company stock in 401(k) plans, including those combined with ESOPs in public companies, that are in H.R. 1000, the pension reform bill that recently passed the House Education and the Workforce Committee.