Comprehensive Retirement Security and Pension Reform Act of 2001

H.R. 10 ~ Comprehensive Retirement Security and Pension Reform

Act of 2001 Part 4

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H.R.10

Comprehensive Retirement Security and Pension Reform Act of 2001 (Engrossed in House )

(ii) by striking `the distribution of the employee's interest has begun in accordance with subparagraph (A)(ii)' and inserting `his entire interest has been distributed to him'.

(B) Clause (ii) of section 401(a)(9)(B) (as so redesignated) is amended by striking `clause (ii)' and inserting `clause (i)'.

(i) by striking `clause (iii)(I)' and inserting `clause (ii)(I)';

(ii) by striking `clause (iii)(III)' in subclause (I) and inserting `clause (ii)(III)';

(iii) by striking `the date on which the employee would have attained age 70 1/2 ,' in subclause (I) and inserting `April 1 of the calendar year following the calendar year in which the spouse attains 70 1/2 ,'; and

(iv) by striking `the distributions to such spouse begin,' in subclause (II) and inserting `his entire interest has been distributed to him,'.

(3) EFFECTIVE DATE-

(A) IN GENERAL- Except as provided in subparagraph (B), the amendments made by this subsection shall apply to years beginning after December 31, 2001.

(B) DISTRIBUTIONS TO SURVIVING SPOUSE-

(i) IN GENERAL- In the case of an employee described in clause (ii), distributions to the surviving spouse of the employee shall not be required to commence prior to the date on which such distributions would have been required to begin under section 401(a)(9)(B) of the Internal Revenue Code of 1986 (as in effect on the day before the date of the enactment of this Act).

(ii) CERTAIN EMPLOYEES- An employee is described in this clause if such employee dies before--

(I) the date of the enactment of this Act, and

(II) the required beginning date (within the meaning of section 401(a)(9)(C) of the Internal Revenue Code of 1986) of the employee.

(1) IN GENERAL- Subsection (a) of section 4974 is amended by striking `50 percent' and inserting `10 percent'.

(2) EFFECTIVE DATE- The amendment made by this subsection shall apply to years beginning after December 31, 2001.

SEC. 305. CLARIFICATION OF TAX TREATMENT OF DIVISION OF SECTION 457 PLAN BENEFITS UPON DIVORCE.

(a) IN GENERAL- Section 414(p)(11) (relating to application of rules to governmental and church plans) is amended--

(1) by inserting `or an eligible deferred compensation plan (within the meaning of section 457(b))' after `subsection (e))'; and

(2) in the heading, by striking `GOVERNMENTAL AND CHURCH PLANS' and inserting `CERTAIN OTHER PLANS'.

(b) WAIVER OF CERTAIN DISTRIBUTION REQUIREMENTS- Paragraph (10) of section 414(p) is amended by striking `and section 409(d)' and inserting `section 409(d), and section 457(d)'.

(c) TAX TREATMENT OF PAYMENTS FROM A SECTION 457 PLAN- Subsection (p) of section 414 is amended by redesignating paragraph (12) as paragraph (13) and inserting after paragraph (11) the following new paragraph:

`(12) TAX TREATMENT OF PAYMENTS FROM A SECTION 457 PLAN- If a distribution or payment from an eligible deferred compensation plan described in section 457(b) is made pursuant to a qualified domestic relations order, rules similar to the rules of section 402(e)(1)(A) shall apply to such distribution or payment.'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to transfers, distributions, and payments made after December 31, 2001.

SEC. 306. PROVISIONS RELATING TO HARDSHIP DISTRIBUTIONS.

(a) SAFE HARBOR RELIEF-

(1) IN GENERAL- The Secretary of the Treasury shall revise the regulations relating to hardship distributions under section 401(k)(2)(B)(i)(IV) of the Internal Revenue Code of 1986 to provide that the period an employee is prohibited from making elective and employee contributions in order for a distribution to be deemed necessary to satisfy financial need shall be equal to 6 months.

(2) EFFECTIVE DATE- The revised regulations under this subsection shall apply to years beginning after December 31, 2001.

(b) HARDSHIP DISTRIBUTIONS NOT TREATED AS ELIGIBLE ROLLOVER DISTRIBUTIONS-

(1) MODIFICATION OF DEFINITION OF ELIGIBLE ROLLOVER- Subparagraph (C) of section 402(c)(4) (relating to eligible rollover distribution) is amended to read as follows:

`(C) any distribution which is made upon hardship of the employee.'.

(2) EFFECTIVE DATE- The amendment made by this subsection shall apply to distributions made after December 31, 2001.

SEC. 307. WAIVER OF TAX ON NONDEDUCTIBLE CONTRIBUTIONS FOR DOMESTIC OR SIMILAR WORKERS.

(a) IN GENERAL- Section 4972(c)(6) (relating to exceptions to nondeductible contributions), as amended by section 502, is amended by striking `or' at the end of subparagraph (A), by striking the period and inserting `, and' at the end of subparagraph (B), and by inserting after subparagraph (B) the following new subparagraph:

`(C) so much of the contributions to a simple retirement account (within the meaning of section 408(p)) or a simple plan (within the meaning of section 401(k)(11)) which are not deductible when contributed solely because such contributions are not made in connection with a trade or business of the employer.'.

(b) EXCLUSION OF CERTAIN CONTRIBUTIONS- Section 4972(c)(6) is amended by adding at the end the following new sentence: `Subparagraph (C) shall not apply to contributions made on behalf of the employer or a member of the employer's family (as defined in section 447(e)(1)).'.

(c) NO INFERENCE- Nothing in the amendments made by this section shall be construed to infer the proper treatment of nondeductible contributions under the laws in effect before such amendments.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2001.

TITLE IV--INCREASING PORTABILITY FOR PARTICIPANTS

SEC. 401. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF PLANS.

(a) ROLLOVERS FROM AND TO SECTION 457 PLANS-

(1) ROLLOVERS FROM SECTION 457 PLANS-

(A) IN GENERAL- Section 457(e) (relating to other definitions and special rules) is amended by adding at the end the following:

`(16) ROLLOVER AMOUNTS-

`(A) GENERAL RULE- In the case of an eligible deferred compensation plan established and maintained by an employer described in subsection (e)(1)(A), if--

`(i) any portion of the balance to the credit of an employee in such plan is paid to such employee in an eligible rollover distribution (within the meaning of section 402(c)(4) without regard to subparagraph (C) thereof),

`(ii) the employee transfers any portion of the property such employee receives in such distribution to an eligible retirement plan described in section 402(c)(8)(B), and

`(iii) in the case of a distribution of property other than money, the amount so transferred consists of the property distributed,

then such distribution (to the extent so transferred) shall not be includible in gross income for the taxable year in which paid.

`(B) CERTAIN RULES MADE APPLICABLE- The rules of paragraphs (2) through (7) (other than paragraph (4)(C)) and (9) of section 402(c) and section 402(f) shall apply for purposes of subparagraph (A).

`(C) REPORTING- Rollovers under this paragraph shall be reported to the Secretary in the same manner as rollovers from qualified retirement plans (as defined in section 4974(c)).'.

(B) DEFERRAL LIMIT DETERMINED WITHOUT REGARD TO ROLLOVER AMOUNTS- Section 457(b)(2) (defining eligible deferred compensation plan) is amended by inserting `(other than rollover amounts)' after `taxable year'.

(C) DIRECT ROLLOVER- Paragraph (1) of section 457(d) is amended by striking `and' at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting `, and', and by inserting after subparagraph (B) the following:

`(C) in the case of a plan maintained by an employer described in subsection (e)(1)(A), the plan meets requirements similar to the requirements of section 401(a)(31).

Any amount transferred in a direct trustee-to-trustee transfer in accordance with section 401(a)(31) shall not be includible in gross income for the taxable year of transfer.'.

(D) WITHHOLDING-

(i) Paragraph (12) of section 3401(a) is amended by adding at the end the following:

`(E) under or to an eligible deferred compensation plan which, at the time of such payment, is a plan described in section 457(b) maintained by an employer described in section 457(e)(1)(A); or'.

(ii) Paragraph (3) of section 3405(c) is amended to read as follows:

`(3) ELIGIBLE ROLLOVER DISTRIBUTION- For purposes of this subsection, the term `eligible rollover distribution' has the meaning given such term by section 402(f)(2)(A).'.

(iii) LIABILITY FOR WITHHOLDING- Subparagraph (B) of section 3405(d)(2) is amended by striking `or' at the end of clause (ii), by striking the period at the end of clause (iii) and inserting `, or', and by adding at the end the following:

`(iv) section 457(b) and which is maintained by an eligible employer described in section 457(e)(1)(A).'.

(2) ROLLOVERS TO SECTION 457 PLANS-

(A) IN GENERAL- Section 402(c)(8)(B) (defining eligible retirement plan) is amended by striking `and' at the end of clause (iii), by striking the period at the end of clause (iv) and inserting `, and', and by inserting after clause (iv) the following new clause:

`(v) an eligible deferred compensation plan described in section 457(b) which is maintained by an eligible employer described in section 457(e)(1)(A).'.

(B) SEPARATE ACCOUNTING- Section 402(c) is amended by adding at the end the following new paragraph:

`(10) SEPARATE ACCOUNTING- Unless a plan described in clause (v) of paragraph (8)(B) agrees to separately account for amounts rolled into such plan from eligible retirement plans not described in such clause, the plan described in such clause may not accept transfers or rollovers from such retirement plans.'.

(C) 10 PERCENT ADDITIONAL TAX- Subsection (t) of section 72 (relating to 10-percent additional tax on early distributions from qualified retirement plans) is amended by adding at the end the following new paragraph:

`(9) SPECIAL RULE FOR ROLLOVERS TO SECTION 457 PLANS- For purposes of this subsection, a distribution from an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A) shall be treated as a distribution from a qualified retirement plan described in section 4974(c)(1) to the extent that such distribution is attributable to an amount transferred to an eligible deferred compensation plan from a qualified retirement plan (as defined in section 4974(c)).'.

(b) ALLOWANCE OF ROLLOVERS FROM AND TO 403(b) PLANS-

(1) ROLLOVERS FROM SECTION 403(b) PLANS- Section 403(b)(8)(A)(ii) (relating to rollover amounts) is amended by striking `such distribution' and all that follows and inserting `such distribution to an eligible retirement plan described in section 402(c)(8)(B), and'.

(2) ROLLOVERS TO SECTION 403(b) PLANS- Section 402(c)(8)(B) (defining eligible retirement plan), as amended by subsection (a), is amended by striking `and' at the end of clause (iv), by striking the period at the end of clause (v) and inserting `, and', and by inserting after clause (v) the following new clause:

`(vi) an annuity contract described in section 403(b).'.

(c) EXPANDED EXPLANATION TO RECIPIENTS OF ROLLOVER DISTRIBUTIONS- Paragraph (1) of section 402(f) (relating to written explanation to recipients of distributions eligible for rollover treatment) is amended by striking `and' at the end of subparagraph (C), by striking the period at the end of subparagraph (D) and inserting `, and', and by adding at the end the following new subparagraph:

`(E) of the provisions under which distributions from the eligible retirement plan receiving the distribution may be subject to restrictions and tax consequences which are different from those applicable to distributions from the plan making such distribution.'.

(d) SPOUSAL ROLLOVERS- Section 402(c)(9) (relating to rollover where spouse receives distribution after death of employee) is amended by striking `; except that' and all that follows up to the end period.

(e) CONFORMING AMENDMENTS-

(1) Section 72(o)(4) is amended by striking `and 408(d)(3)' and inserting `403(b)(8), 408(d)(3), and 457(e)(16)'.

(2) Section 219(d)(2) is amended by striking `or 408(d)(3)' and inserting `408(d)(3), or 457(e)(16)'.

(3) Section 401(a)(31)(B) is amended by striking `and 403(a)(4)' and inserting `, 403(a)(4), 403(b)(8), and 457(e)(16)'.

(4) Subparagraph (A) of section 402(f)(2) is amended by striking `or paragraph (4) of section 403(a)' and inserting `, paragraph (4) of section 403(a), subparagraph (A) of section 403(b)(8), or subparagraph (A) of section 457(e)(16)'.

(5) Paragraph (1) of section 402(f) is amended by striking `from an eligible retirement plan'.

(6) Subparagraphs (A) and (B) of section 402(f)(1) are amended by striking `another eligible retirement plan' and inserting `an eligible retirement plan'.

(7) Subparagraph (B) of section 403(b)(8) is amended to read as follows:

`(B) CERTAIN RULES MADE APPLICABLE- The rules of paragraphs (2) through (7) and (9) of section 402(c) and section 402(f) shall apply for purposes of subparagraph (A), except that section 402(f) shall be applied to the payor in lieu of the plan administrator.'.

(8) Section 408(a)(1) is amended by striking `or 403(b)(8),' and inserting `403(b)(8), or 457(e)(16)'.

(9) Subparagraphs (A) and (B) of section 415(b)(2) are each amended by striking `and 408(d)(3)' and inserting `403(b)(8), 408(d)(3), and 457(e)(16)'.

(10) Section 415(c)(2) is amended by striking `and 408(d)(3)' and inserting `408(d)(3), and 457(e)(16)'.

(11) Section 4973(b)(1)(A) is amended by striking `or 408(d)(3)' and inserting `408(d)(3), or 457(e)(16)'.

(f) EFFECTIVE DATE; SPECIAL RULE-

(1) EFFECTIVE DATE- The amendments made by this section shall apply to distributions after December 31, 2001.

(2) REASONABLE NOTICE- No penalty shall be imposed on a plan for the failure to provide the information required by the amendment made by subsection (c) with respect to any distribution made before the date that is 90 days after the date on which the Secretary of the Treasury issues a safe harbor rollover notice after the date of the enactment of this Act, if the administrator of such plan makes a reasonable attempt to comply with such requirement.

(3) SPECIAL RULE- Notwithstanding any other provision of law, subsections (h)(3) and (h)(5) of section 1122 of the Tax Reform Act of 1986 shall not apply to any distribution from an eligible retirement plan (as defined in clause (iii) or (iv) of section 402(c)(8)(B) of the Internal Revenue Code of 1986) on behalf of an individual if there was a rollover to such plan on behalf of such individual which is permitted solely by reason of any amendment made by this section.

SEC. 402. ROLLOVERS OF IRAS INTO WORKPLACE RETIREMENT PLANS.

(a) IN GENERAL- Subparagraph (A) of section 408(d)(3) (relating to rollover amounts) is amended by adding `or' at the end of clause (i), by striking clauses (ii) and (iii), and by adding at the end the following:

`(ii) the entire amount received (including money and any other property) is paid into an eligible retirement plan for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received, except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross income (determined without regard to this paragraph).

For purposes of clause (ii), the term `eligible retirement plan' means an eligible retirement plan described in clause (iii), (iv), (v), or (vi) of section 402(c)(8)(B).'.

(b) CONFORMING AMENDMENTS-

(1) Paragraph (1) of section 403(b) is amended by striking `section 408(d)(3)(A)(iii)' and inserting `section 408(d)(3)(A)(ii)'.

(2) Clause (i) of section 408(d)(3)(D) is amended by striking `(i), (ii), or (iii)' and inserting `(i) or (ii)'.

(3) Subparagraph (G) of section 408(d)(3) is amended to read as follows:

`(G) SIMPLE RETIREMENT ACCOUNTS- In the case of any payment or distribution out of a simple retirement account (as defined in subsection (p)) to which section 72(t)(6) applies, this paragraph shall not apply unless such payment or distribution is paid into another simple retirement account.'.

(1) EFFECTIVE DATE- The amendments made by this section shall apply to distributions after December 31, 2001.

(2) SPECIAL RULE- Notwithstanding any other provision of law, subsections (h)(3) and (h)(5) of section 1122 of the Tax Reform Act of 1986 shall not apply to any distribution from an eligible retirement plan (as defined in clause (iii) or (iv) of section 402(c)(8)(B) of the Internal Revenue Code of 1986) on behalf of an individual if there was a rollover to such plan on behalf of such individual which is permitted solely by reason of the amendments made by this section.

SEC. 403. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.

(a) ROLLOVERS FROM EXEMPT TRUSTS- Paragraph (2) of section 402(c) (relating to maximum amount which may be rolled over) is amended by adding at the end the following: `The preceding sentence shall not apply to such distribution to the extent--

`(A) such portion is transferred in a direct trustee-to-trustee transfer to a qualified trust which is part of a plan which is a defined contribution plan and which agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible, or

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