[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 2583 Introduced in Senate (IS)]
<DOC>
117th CONGRESS
1st Session
S. 2583
To amend the Internal Revenue Code of 1986 to provide for rules for the
use of retirement funds in connection with federally declared
disasters.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
August 3, 2021
Mr. Cassidy (for himself and Mr. Menendez) introduced the following
bill; which was read twice and referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to provide for rules for the
use of retirement funds in connection with federally declared
disasters.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SPECIAL RULES FOR USE OF RETIREMENT FUNDS IN CONNECTION WITH
QUALIFIED FEDERALLY DECLARED DISASTERS.
(a) Tax-Favored Withdrawals From Retirement Plans.--
(1) In general.--Paragraph (2) of section 72(t) of the
Internal Revenue Code of 1986 is amended by adding at the end
the following new subparagraph:
``(I) Distributions from retirement plans in
connection with federally declared disasters.--Any
qualified disaster recovery distribution.''.
(2) Qualified disaster recovery distribution.--Section
72(t) of such Code is amended by adding at the end the
following new paragraph:
``(11) Qualified disaster recovery distribution.--For
purposes of paragraph (2)(I)--
``(A) In general.--Except as provided in
subparagraph (B), the term `qualified disaster recovery
distribution' means any distribution made--
``(i) on or after the first day of the
incident period of a qualified disaster and
before the date that is 180 days after the
applicable date with respect to such disaster,
and
``(ii) to an individual whose principal
place of abode at any time during the incident
period of such qualified disaster is located in
the qualified disaster area with respect to
such qualified disaster and who has sustained
an economic loss by reason of such qualified
disaster.
``(B) Aggregate dollar limitation.--
``(i) In general.--For purposes of this
subsection, the aggregate amount of
distributions received by an individual which
may be treated as qualified disaster recovery
distributions with respect to any qualified
disaster shall not exceed the excess (if any)
of--
``(I) $100,000, over
``(II) the sum of aggregate amounts
treated as qualified disaster recovery
distributions with respect to such
qualified disaster received by such
individual.
``(ii) Treatment of plan distributions.--If
a distribution to an individual would (without
regard to clause (i)) be a qualified disaster
recovery distribution, a plan shall not be
treated as violating any requirement of this
title merely because the plan treats such
distribution as a qualified disaster recovery
distribution, unless the aggregate amount of
such distributions from all plans maintained by
the employer (and any member of any controlled
group which includes the employer) to such
individual exceeds $100,000 with respect to the
same qualified disaster.
``(iii) Controlled group.--For purposes of
clause (ii), the term `controlled group' means
any group treated as a single employer under
subsection (b), (c), (m), or (o) of section
414.
``(iv) Special rule for individuals
affected by more than one disaster.--The
limitation of clause (i) shall be applied
separately with respect to distributions made
with respect to each qualified disaster.
``(C) Amount distributed may be repaid.--
``(i) In general.--Any individual who
receives a qualified disaster recovery
distribution may, at any time during the 3-year
period beginning on the day after the date on
which such distribution was received, make one
or more contributions in an aggregate amount
not to exceed the amount of such distribution
to an eligible retirement plan of which such
individual is a beneficiary and to which a
rollover contribution of such distribution
could be made under section 402(c), 403(a)(4),
403(b)(8), 408(d)(3), or 457(e)(16), as the
case may be.
``(ii) Treatment of repayments of
distributions from eligible retirement plans
other than iras.--For purposes of this title,
if a contribution is made pursuant to clause
(i) with respect to a qualified disaster
recovery distribution from a plan other than an
individual retirement plan, then the taxpayer
shall, to the extent of the amount of the
contribution, be treated as having received the
qualified disaster recovery distribution in an
eligible rollover distribution (as defined in
section 402(c)(4)) and as having transferred
the amount to the eligible retirement plan in a
direct trustee to trustee transfer within 60
days of the distribution.
``(iii) Treatment of repayments for
distributions from iras.--For purposes of this
title, if a contribution is made pursuant to
clause (i) with respect to a qualified disaster
recovery distribution from an individual
retirement plan, then, to the extent of the
amount of the contribution, the qualified
disaster recovery distribution shall be treated
as a distribution described in section
408(d)(3) and as having been transferred to the
eligible retirement plan in a direct trustee to
trustee transfer within 60 days of the
distribution.
``(D) Income inclusion spread over 3-year period.--
``(i) In general.--In the case of any
qualified disaster recovery distribution,
unless the taxpayer elects not to have this
subparagraph apply for any taxable year, any
amount required to be included in gross income
for such taxable year shall be so included
ratably over the 3-taxable year period
beginning with such taxable year.
``(ii) Special rule.--For purposes of
clause (i), rules similar to the rules of
subparagraph (E) of section 408A(d)(3) shall
apply.
``(E) Qualified disaster.--For purposes of this
paragraph and paragraph (8), the term `qualified
disaster' means any disaster with respect to which a
major disaster has been declared by the President under
section 401 of the Robert T. Stafford Disaster Relief
and Emergency Assistance Act after December 31, 2020.
``(F) Other definitions.--For purposes of this
paragraph and paragraph (8)--
``(i) Qualified disaster area.--
``(I) In general.--The term
`qualified disaster area' means, with
respect to any qualified disaster, the
area with respect to which the major
disaster was declared under the Robert
T. Stafford Disaster Relief and
Emergency Assistance Act.
``(II) Exceptions.--Such term shall
not include any area which is a
qualified disaster area solely by
reason of section 301 of the Taxpayer
Certainty and Disaster Tax Relief Act
of 2020.
``(ii) Incident period.--The term `incident
period' means, with respect to any qualified
disaster, the period specified by the Federal
Emergency Management Agency as the period
during which such disaster occurred.
``(iii) Applicable date.--The term
`applicable date' means the latest of--
``(I) the date of the enactment of
this paragraph,
``(II) the first day of the
incident period with respect to the
qualified disaster, or
``(III) the date of the disaster
declaration with respect to the
qualified disaster.
``(iv) Eligible retirement plan.--The term
`eligible retirement plan' shall have the
meaning given such term by section
402(c)(8)(B).
``(G) Special rules.--
``(i) Exemption of distributions from
trustee to trustee transfer and withholding
rules.--For purposes of sections 401(a)(31),
402(f), and 3405, qualified disaster recovery
distributions shall not be treated as eligible
rollover distributions.
``(ii) Qualified disaster recovery
distributions treated as meeting plan
distribution requirements.--For purposes this
title, a qualified disaster recovery
distribution shall be treated as meeting the
requirements of sections 401(k)(2)(B)(i),
403(b)(7)(A)(ii), 403(b)(11), and
457(d)(1)(A).''.
(3) Effective date.--The amendments made by this subsection
shall apply to distributions with respect to disasters the
incident beginning date (as defined in section 72(t)(11)(F)(i)
of the Internal Revenue Code of 1986, as added by this
subsection) for which is after December 27, 2020.
(b) Recontributions of Withdrawals for Home Purchases.--
(1) Individual retirement plans.--Paragraph (8) of section
72(t) of the Internal Revenue Code of 1986 is amended by adding
at the end the following new subparagraph:
``(F) Recontributions.--
``(i) General rule.--
``(I) In general.--Any individual
who received a qualified distribution
may, during the applicable period, make
one or more contributions in an
aggregate amount not to exceed the
amount of such qualified distribution
to an eligible retirement plan (as
defined in section 402(c)(8)(B)) of
which such individual is a beneficiary
and to which a rollover contribution of
such distribution could be made under
section 402(c), 403(a)(4), 403(b)(8),
or 408(d)(3), as the case may be.
``(II) Treatment of repayments.--
Rules similar to the rules of clauses
(ii) and (iii) of paragraph (11)(C)
shall apply for purposes of this
subsection.
``(ii) Qualified distribution.--For
purposes of this subparagraph, the term
`qualified distribution' means any
distribution--
``(I) which is a qualified first-
time homebuyer distribution,
``(II) which was to be used to
purchase or construct a principal
residence in a qualified disaster area,
but which was not so used on account of
the qualified disaster with respect to
such area, and
``(III) which was received during
the period beginning on the date which
is 180 days before the first day of the
incident period of such qualified
disaster and ending on the date which
is 30 days after the last day of such
incident period.
``(iii) Applicable period.--For purposes of
this subparagraph, the term `applicable period'
means, in the case of a principal residence in
a qualified disaster area with respect to any
qualified disaster, the period beginning on the
first day of the incident period of such
qualified disaster and ending on the date which
is 180 days after the applicable date with
respect to such disaster.''.
(2) Qualified plans.--Subsection (c) of section 402 of the
Internal Revenue Code of 1986 is amended by adding at the end
the following new paragraph:
``(12) Recontributions of withdrawals for home purchases.--
``(A) General rule.--
``(i) In general.--Any individual who
received a qualified distribution may, during
the applicable period, make one or more
contributions in an aggregate amount not to
exceed the amount of such qualified
distribution to an eligible retirement plan (as
defined in paragraph (8)(B)) of which such
individual is a beneficiary and to which a
rollover contribution of such distribution
could be made under subsection (c) or section
403(a)(4), 403(b)(8), or 408(d)(3), as the case
may be.
``(ii) Treatment of repayments.--Rules
similar to the rules of clauses (ii) and (iii)
of section 72(t)(11)(C) shall apply for
purposes of this subsection.
``(B) Qualified distribution.--For purposes of this
paragraph, the term `qualified distribution' means any
distribution--
``(i) described in section
401(k)(2)(B)(i)(IV), 403(b)(7)(A)(ii) (but only
to the extent such distribution relates to
financial hardship), or 403(b)(11)(B),
``(ii) which was to be used to purchase or
construct a principal residence in a qualified
disaster area, but which was not so used on
account of the qualified disaster with respect
to such area, and
``(iii) which was received during the
period beginning on the date which is 180 days
before the first day of the incident period of
such qualified disaster and ending on the date
which is 30 days after the last day of such
incident period.
``(C) Definitions.--For purposes of this
paragraph--
``(i) the terms `qualified disaster',
`qualified disaster area', and `incident
period' have the meaning given such terms under
section 72(t)(11), and
``(ii) the term `applicable period' has the
meaning given such term under section
72(t)(8)(F).''.
(3) Effective date.--The amendments made by this subsection
shall apply to distributions with respect to disasters the
incident beginning date (as defined in section 72(t)(11)(F)(i)
of the Internal Revenue Code of 1986, as added by subsection
(a)) for which is after December 27, 2020.
(c) Loans From Qualified Plans.--
(1) In general.--Subsection (p) of section 72 of the
Internal Revenue Code of 1986 is amended by adding at the end
the following new paragraph:
``(6) Increase in limit on loans not treated as
distributions.--
``(A) In general.--In the case of any loan from a
qualified employer plan to a qualified individual made
during the applicable period--
``(i) clause (i) of paragraph (2)(A) shall
be applied by substituting `$100,000' for
`$50,000', and
``(ii) clause (ii) of such paragraph shall
be applied by substituting `the present value
of the nonforfeitable accrued benefit of the
employee under the plan' for `one-half of the
present value of the nonforfeitable accrued
benefit of the employee under the plan'.
``(B) Delay of repayment.--In the case of a
qualified individual (with respect to any qualified
disaster) with an outstanding loan on or after the
applicable disaster date from a qualified employer
plan--
``(i) if the due date pursuant to
subparagraph (B) or (C) of paragraph (2) for
any repayment with respect to such loan occurs
during the period beginning on the first day of
the incident period of such qualified disaster
and ending on the date which is 180 days after
the last day of such incident period, such due
date may be delayed for 1 year,
``(ii) any subsequent repayments with
respect to any such loan may be appropriately
adjusted to reflect the delay in the due date
under clause (i) and any interest accruing
during such delay, and
``(iii) in determining the 5-year period
and the term of a loan under subparagraph (B)
or (C) of paragraph (2), the period described
in clause (i) may be disregarded.
``(C) Definitions.--For purposes of this
paragraph--
``(i) Qualified individual.--The term
`qualified individual' means any individual--
``(I) whose principal place of
abode at any time during the incident
period of any qualified disaster is
located in the qualified disaster area
with respect to such qualified
disaster, and
``(II) who has sustained an
economic loss by reason of such
qualified disaster.
``(ii) Applicable period.--The applicable
period with respect to any disaster is the
period--
``(I) beginning on the applicable
date with respect to such disaster, and
``(II) ending on the date that is
180 days after such applicable date.
``(iii) Other terms.--For purposes of this
paragraph--
``(I) the terms `applicable date',
`qualified disaster', `qualified
disaster area', and `incident period'
have the meaning given such terms under
subsection (t)(11), and
``(II) the term `applicable period'
has the meaning given such term under
subsection (t)(8).''.
(2) Hold harmless.--
(A) In general.--A person shall not be treated as
having violated the provisions of title I of the
Employee Retirement Income Security Act of 1974 solely
because--
(i) the person made a plan loan to a
qualified individual (as defined in section
72(p)(6) of the Internal Revenue Code of 1986,
as added by paragraph (1)) during the
applicable period (as defined in such section
72(p)(6)) in compliance with section 72(p)(6)
of such Code; or
(ii) a qualified individual (as so defined)
delayed making a plan loan repayment in
compliance with section 72(p)(6) of such Code.
(B) Prohibited transactions.--A person shall be
treated as being exempt from the requirements of
section 406 of the Employee Retirement Income Security
Act of 1974 pursuant to subparagraphs (A) and (E) of
section 408(b)(1) of such Act if the person meets the
requirements of clause (i) or (ii) of subparagraph (A).
(3) Effective date.--The amendment made by paragraph (1)
shall apply to loans made with respect to disasters the
incident beginning date (as defined in section 72(t)(11)(F)(i)
of the Internal Revenue Code of 1986, as added by subsection
(a)) for which is after December 27, 2020.
(d) Provisions Relating to Plan Amendments.--
(1) In general.--If this subsection applies to any
amendment to any plan or annuity contract, such plan or
contract shall be treated as being operated in accordance with
the terms of the plan during the period described in paragraph
(2)(B)(i).
(2) Amendments to which subsection applies.--
(A) In general.--This subsection shall apply to any
amendment to any plan or annuity contract which is
made--
(i) pursuant to any amendment made by this
section, or pursuant to any regulation issued
by the Secretary or the Secretary of Labor
under any amendment made by this section, and
(ii) on or before the last day of the
second calendar year beginning after the date
of the enactment of this Act, or such later
date as the Secretary may prescribe.
In the case of a governmental plan (as defined in
section 414(d)), clause (ii) shall be applied by
substituting the date which is 2 years after the date
otherwise applied under clause (ii).
(B) Conditions.--This subsection shall not apply to
any amendment unless--
(i) during the period--
(I) beginning on the date that the
amendments made by this section, or any
regulation described in subparagraph
(A)(i), take effect (or in the case of
a plan or contract amendment not
required by amendments made by this
section or such regulation, the
effective date specified by the plan),
and
(II) ending on the date described
in subparagraph (A)(ii) (or, if
earlier, the date the plan or contract
amendment is adopted),
the plan or contract is operated as if such plan or
contract amendment were in effect; and
(ii) such plan or contract amendment
applies retroactively for such period.
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