§ 3405. Special rules for pensions, annuities, and certain other deferred income

Legislative history

Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.

1. 1982

   Pub. L. 97–248 title III § 334(a) · 96 Stat. 324

   Enacted · 26 U.S.C. § 3405

   Added Pub. L. 97–248, title III, § 334(a), Sept. 3, 1982, 96 Stat. 623

   Source evidence

   Code source credit
   Added Pub. L. 97–248, title III, § 334(a), Sept. 3, 1982, 96 Stat. 623

   Enacted provision · exact public law section
   (a) In General.— Chapter 24 (relating to collection of income tax at source on wages) is amended by adding at the end thereof the following new section: “SEC. 3405. SPECIAL RULES FOR PENSIONS, ANNUITIES. AND CERTAIN OTHER DEFERRED INCOME. “(a) Pensions, Annuities, Etc.— “(1) Withholding as if payment were wages.— The payor of any periodic payment (as defined in subsection (d)(2)) shall withhold from such payment the amount which would be required to be withheld from such payment if such payment were a payment of wages by an employer to an employee for the appropriate payroll period. “(2) Election of no withholding.— An individual may elect to have paragraph (1) not apply with respect to periodic payments made to such individual. Such an election shall remain in effect until revoked by such individual. “(3) When election takes effect.— Any election under this subsection (and any revocation of such an election) shall take effect as provided by subsection (f)(3) of section 3402 for withholding exemption certificates. “(4) Amount withheld where no withholding exemption certificate in effect.— In the case of any payment with respect to which a withholding exemption certificate is not in effect, the amount withheld under paragraph (1) shall be determined by treating the payee as a married individual claiming 3 withholding exemptions. “(b) Nonperiodic Distribution.— “(1) Withholding.— The payor of any nonperiodic distribution (as defined in subsection (d)(3)) shall withhold from such distribution the amount determined under paragraph (2). “(2) Amount of withholding.— “(A) Distributions which are not qualified total distributions.— In the case of any nonperiodic distribution which is not a qualified total distribution, the amount withheld under paragraph (1) shall be the amount determined by multiplying such distribution by 10 percent. “(B) Qualified total distributions.— In the case of any nonperiodic distribution which is a qualified total distribution, the amount withheld under paragraph (1) shall be determined under tables (or other computational procedures) prescribed by the Secretary which are based on the amount of tax which would be imposed on such distribution under section 402(e) if the recipient elected to treat such distribution as a lump-sum distribution (within the meaning of section 402(e)(4)(A)). “(C) Special rule for distributions by reasons of death.— In the case of any distribution described in subparagraph (B) from or under any plan or contract described in section 401(a), 403(a), or 403(b) which is made by reason of a participant ’s death, the Secretary, in prescribing tables or procedures under paragraph (1), shall take into account the exclusion from gross income provided by section 101(b) (whether or not allowable). “(3) Election of no withholding.— “(A) In general.— An individual may elect not to have paragraph (1) apply with respect to any nonperiodic distribution. “(B) Scope of election.— An election under subparagraph (A)— “(i) except as provided in clause (ii), shall be on a distribution-by-distribution basis, or “(ii) to the extent provided in regulations, may apply to subsequent nonperiodic distributions made by the payor to the payee under the same arrangement. “(c) Liability for Withholding.— “(1) In general.— Except as provided in paragraph (2), the payor of a designated distribution (as defined in subsection (d)(1)) shall withhold, and be liable for, payment of the tax required to be withheld under this section. “(2) Plan administrator liable in certain cases.— “(A) In general.— In the case of any plan to which this paragraph applies, paragraph (1) shall not apply and the plan administrator shall withhold, and be liable for, payment of the tax unless the plan administrator— “(i) directs the payor to withhold such tax, and “(ii) provides the payor with such information as the Secretary may require by regulations. “(B) Plans to which paragraph applies.— This paragraph applies to any plan described in, or which at any time has been determined to be described in— “(i) section 401(a), “(ii) section 403(a), or “(iii) section 301(d) of the Tax Reduction Act of 1975. 26 USC 46 note. “(d) Definitions and Special Rules.— For purposes of this section— “(1) Designated distribution.— “(A) In general.— Except as provided in subparagraph (B), the term ‘designated distribution’ means any distribution or payment from or under— “(i) an employer deferred compensation plan, “(ii) an individual retirement plan (as defined in section 7701(a)(37)), or “(iii) a commercial annuity. “(B) Exceptions.— The term ‘designated distribution’ shall not include— “(i) any amount which is wages without regard to this section, and “(ii) the portion of a distribution or payment which it is reasonable to beheve is not includible in gross income. “(2) Periodic payment.— The term ‘periodic payment’ means a designated distribution which is an annuity or similar periodic payment. “(3) Nonperiodic distribution.— The term ‘nonperiodic distribution’ means any designated distribution which is not a periodic payment. “(4) Qualified total distribution.— “(A) In general.— The term ‘qualified total distribution’ means any distribution which— “(i) is a designated distribution, “(ii) it is reasonable to believe is made within 1 taxable year of the recipient, “(iii) is made under a plan described in section 401(a), or 403(a), and “(iv) consists of the balance to the credit of the employee under such plan. “(B) Special rule for accumulated deductible employee contributions.— For purposes of subparagraph (A), accumulated deductible employee contributions (within the meaning of section 72(o)(5)(B)) shall be treated separately 95 Stat. 278. in determining if there has been a qualified total distribution. “(5) Employer deferred compensation plan.— The term ‘employer deferred compensation plan’ means any pension, annuity, profit-sharing, or stock bonus plan or other plan deferring the receipt of compensation. “(6) Commercial annuity.— The term ‘commercial annuity’ means an annuity, endowment, or life insurance contract issued by an insurance company licensed to do business under the laws of any State. “(7) Plan administrator.— The term ‘plan administrator’ has the meaning given such term by section 414(g). “(8) Maximum amount withheld.— The maximum amount to be withheld under this section on any designated distribution shall not exceed the sum of the amount of money and the fair market value of other property (other than employer securities of the employer corporation (within the meaning of section 402(a)(3))) received in the distribution. “(9) Separate arrangements to be treated separately.— If the payor has more than 1 arrangement under which designated distributions may be made to any individual, each such arrangement shall be treated separately. “(10) Time and manner of election.— “(A) In general.— Any election and any revocation under this section shall be made at such time and in such manner as the Secretary shall prescribe. “(B) Payor required to notify payee of rights to elect.— “(i) Periodic payments.— The payor of any periodic payment— “(I) shall transmit to the payee notice of the right to make an election under subsection (a) not earlier than 6 months before the first of such payments and not later than when making the first of such payments, “(II) if such a notice is not transmitted under subclause (I) when making such first payment, shall transmit such a notice when making such first payment, and “(III) shall transmit to payees, not less frequently than once each calendar year, notice of their rights to make elections under subsection (a) and to revoke such elections, “(ii) Nonperiodic distributions.— The payor of any nonperiodic distribution shall transmit to the payee notice of the right to make any election provided in subsection (b) at the time of the distribution (or at such earlier time as may be provided in regulations). “(iii) Notice.— Any notice transmitted pursuant to this subparagraph shall be in such form and contain such information as the Secretary shall prescribe. “(11) Withholding includes deduction.— The terms ‘withholding’, ‘withhold’, and ‘withheld’ include ‘deducting’, ‘deduct’, and ‘deducted’. “(e) Withholding to be Treated as Wage Withholding Under Section 3402 for Other Purposes.— For purposes of this chapter (and so much of subtitle F as relates to this chapter)— “(1) any designated distribution (whether or not an election under this section applies to such distribution) shall be treated as if it were wages paid by an employer to an employee with respect to which there has been withholding under section 3402, and “(2) in the case of any designated distribution not subject to withholding under this section by reason of an election under this section, the amount withheld shall be treated as zero.”

2. 1984

   Tax Reform Act of 1984

   Pub. L. 98–369 § 714(j)(1) · 98 Stat. 494

   1. Substituted · 26 U.S.C. § 3405(b)(2)(C)

      Pub. L. 98–369, § 714(j)(1), substituted “nonperiodic distribution” for “distribution described in subparagraph (B)”

   2. Substituted · 26 U.S.C. § 3405(b)(2)(C)

      Pub. L. 98–369, § 714(j)(1), substituted “subparagraph (A) or (B) (as the case may be) shall be applied by taking into account” for “the Secretary, in prescribing tables or procedures under paragraph (1), shall take into account”

   3. Amended · 26 U.S.C. § 3405(b)(2)(C)

      Pub. L. 98–369, § 714(j)(1), designated phrase “which is made by reason of a participant’s death” as cl. (i)

   4. Added · 26 U.S.C. § 3405(b)(2)(C)

      Pub. L. 98–369, § 714(j)(1), added cl. (ii)

   Source evidence

   Code amendment note
   Subsec. (b)(2)(C). Pub. L. 98–369, § 714(j)(1), substituted “nonperiodic distribution” for “distribution described in subparagraph (B)” and “subparagraph (A) or (B) (as the case may be) shall be applied by taking into account” for “the Secretary, in prescribing tables or procedures under paragraph (1), shall take into account”, designated phrase “which is made by reason of a participant’s death” as cl. (i) and added cl. (ii).

   Enacted provision · exact public law section
   (1) Clarification that death benefit exclusion applies to distributions under section 403 (b).— Subparagraph (C) of section 26 USC 3405. 3405(b)(2) (relating to special rule for distributions by reason of death) is amended to read as follows: “(C) Special rule for distributions by reason of death.— In the case of any nonperiodic distribution from or under any plan or contract described in section 401(a), 403(a), or 403(b)— “(i) which is made by reason of a participant’s death, and “(ii) with respect to which the requirements of clauses (ii) and (iv) of subsection (d)(4)(A) are met, subparagraph (A) or (B) (as the case may be) shall be applied by taking into account the exclusion from gross income provided by section 101(b) (whether or not allowable).”

3. 1984

   Tax Reform Act of 1984

   Pub. L. 98–369 § 714(j)(4) · 98 Stat. 494

   Added · 26 U.S.C. § 3405(d)(1)(B)(iii)

   Pub. L. 98–369, § 714(j)(4), added cl. (iii) relating to amounts subject to withholding under subchapter A of chapter 3

   Source evidence

   Code amendment note
   Subsec. (d)(1)(B)(iii). Pub. L. 98–369, § 714(j)(4), added cl. (iii) relating to amounts subject to withholding under subchapter A of chapter 3.

   Enacted provision · exact public law section
   (4) Exception for amounts paid to nonresident aliens.— Subparagraph (B) of section 3405(d)(1) (relating to exceptions) is 26 USC 3405. Ante, p. 891. amended by striking out “and” at the end of clause (i), by striking out the period at the end of clause (ii) and inserting in lieu thereof “, and”, and by adding at the end thereof the following new clause: “(iii) any amount which is subject to withholding under subchapter A of chapter 3 (relating to withholding 26 USC 1441. of tax on nonresident aliens and foreign corporations) by the person paying such amount or which would be so subject but for a tax treaty.”

4. 1984

   Tax Reform Act of 1984

   Pub. L. 98–369 § 542(c) · 98 Stat. 494

   1. Struck · 26 U.S.C. § 3405(d)(1)(B)(iii)

      Pub. L. 98–369, § 542(c), added cl. (iii) relating to distributions described in section 404(k)(2). Directory language that section (d)(1)(B) be amended by striking out “and” at end of cl. (i)

   2. Substituted · 26 U.S.C. § 3405(d)(1)(B)(iii)

      Pub. L. 98–369, § 542(c), substituting “, or” for the period at end of cl. (ii) could not be executed in view of prior amendment by section 714(j)(4) of Pub. L. 98–369, which struck out “and” at end of cl. (i)

   3. Substituted · 26 U.S.C. § 3405(d)(1)(B)(iii)

      Pub. L. 98–369, § 542(c), substituted “, and” for the period at end of cl. (ii)

   Target inherited from the preceding amendment note.

   Source evidence

   Code amendment note
   Pub. L. 98–369, § 542(c), added cl. (iii) relating to distributions described in section 404(k)(2). Directory language that section (d)(1)(B) be amended by striking out “and” at end of cl. (i) and substituting “, or” for the period at end of cl. (ii) could not be executed in view of prior amendment by section 714(j)(4) of Pub. L. 98–369, which struck out “and” at end of cl. (i) and substituted “, and” for the period at end of cl. (ii).

   Enacted provision · exact public law section
   (c) No Withholding on Dividend Distribution.— Subparagraph (B) of section 3405(d)(1) (relating to designated distributions) is Post. p. 963. amended— (1) by striking out “and” at the end of clause (i), (2) by striking out the period at the end of clause (ii) and inserting in lieu thereof “, or”, and (3) by adding at the end thereof the following new clause: “(iii) any distribution described in section 404(k)(2).”

5. 1984

   Tax Reform Act of 1984

   Pub. L. 98–369 § 714(j)(5) · 98 Stat. 494

   Amended · 26 U.S.C. § 3405(d)(8)

   Pub. L. 98–369, § 714(j)(5), freed from withholding requirement any designated distribution which consists only of employer securities of the employer corporation (within the meaning of section 402(a)(3)) and cash (not in excess of $200) in lieu of fractional shares

   Source evidence

   Code amendment note
   Subsec. (d)(8). Pub. L. 98–369, § 714(j)(5), freed from withholding requirement any designated distribution which consists only of employer securities of the employer corporation (within the meaning of section 402(a)(3)) and cash (not in excess of $200) in lieu of fractional shares.

   Enacted provision · exact public law section
   (5) Clarification of amount withheld where employer security distributed.— Paragraph (8) of section 3405(d) (relating to maximum amount withheld) is amended by adding at the end thereof the following new sentence: “No amount shall be required to be withheld under this section in the case of any designated distribution which consists only of employer securities of the employer corporation (within the meaning of section 402(a)(3)) and cash (not in excess of $200) in lieu of fractional shares.”

6. 1984

   Tax Reform Act of 1984

   Pub. L. 98–369 § 722(h)(4) · 98 Stat. 494

   Added · 26 U.S.C. § 3405(d)(12)

   Pub. L. 98–369, § 722(h)(4), added par. (12)

   Source evidence

   Code amendment note
   Subsec. (d)(12). Pub. L. 98–369, § 722(h)(4), added par. (12).

   Enacted provision · exact public law section
   (4) Coordination of pension and back-up withholding.— (A) Section 3405(d) (relating to definitions and special rules) is amended by adding at the end thereof the following new paragraph: “(12) Failure to provide correct tin.— If— “(A) a payee fails to furnish his TIN to the payor in the manner required by the Secretary, or “(B) the Secretary notifies the payor before any payment or distribution that the TIN furnished by the payee is incorrect, no election under subsection (a)(2) or (b)(3) shall be treated as in effect and subsection (a)(4) shall not apply to such payee.” (B) Section 6041(a) (relating to information at source) is amended by inserting “6047(e),” after “6044(a)(1),”.

7. 1986

   Tax Reform Act of 1986

   Pub. L. 99–514 § 1102(e)(1) · 100 Stat. 2085

   Inserted · 26 U.S.C. § 3405(d)(1)(B)

   Pub. L. 99–514, § 1102(e)(1), inserted last sentence for “For purposes of clause (ii), any distribution or payment from or under an individual retirement plan shall be treated as includible in gross income.”

   Source evidence

   Code amendment note
   Subsec. (d)(1)(B). Pub. L. 99–514, § 1102(e)(1), inserted last sentence for “For purposes of clause (ii), any distribution or payment from or under an individual retirement plan shall be treated as includible in gross income.”

   Enacted provision · exact public law section
   (1) Withholding.— Subparagraph (B) of section 3405(d)(1) (relating to exceptions) is amended by adding at the end thereof the following new flush sentence: “For purposes of clause (ii), any distribution or payment from or under an individual retirement plan shall be treated as includible in gross income.”

8. 1986

   Tax Reform Act of 1986

   Pub. L. 99–514 § 1875(c)(10) · 100 Stat. 2085

   Changed · 26 U.S.C. § 3405(d)(1)(B)(iii); 26 U.S.C. § 3405(d)(1)(B)(iv)

   Pub. L. 99–514, § 1875(c)(10), reenacted cl. (iii) relating to amounts subject to withholding under subchapter A of chapter 3 as cl. (iii) and reenacted cl. (iii) relating to distribution described in section 404(k)(2) as cl. (iv)

   Source evidence

   Code amendment note
   Subsec. (d)(1)(B)(iii), (iv). Pub. L. 99–514, § 1875(c)(10), reenacted cl. (iii) relating to amounts subject to withholding under subchapter A of chapter 3 as cl. (iii) and reenacted cl. (iii) relating to distribution described in section 404(k)(2) as cl. (iv).

   Enacted provision · exact public law section
   (10) Subparagraph (B) of section 3405(d)(1) is amended by striking out “or” at the end of clause (ii), and by striking out the material following clause (ii) and inserting in lieu thereof the following: “(iii) any amount which is subject to withholding under subchapter A of chapter 3 (relating to withholding of tax on nonresident aliens and foreign corporations) by the person paying such amount or which would be so subject but for a tax treaty, or “(iv) any distribution described in section 404(k)(2).”

9. 1986

   Tax Reform Act of 1986

   Pub. L. 99–514 § 1234(b)(1) · 100 Stat. 2085

   Added · 26 U.S.C. § 3405(d)(13)

   Pub. L. 99–514, § 1234(b)(1), added par. (13)

   Source evidence

   Code amendment note
   Subsec. (d)(13). Pub. L. 99–514, § 1234(b)(1), added par. (13).

   Enacted provision · exact public law section
   (1) In general.— Subsection (d) of section 3405 (relating to definitions and special rules) is amended by adding at the end thereof the following new paragraph: “(13) Election may not be made with respect to certain payments outside the united states.— “(A) In general.— Except as provided in subparagraph (B), in the case of any periodic payment or nonperiodic distribution which is to be delivered outside of the United States, no election may be made under subsection (a)(2) or (b)(3) with respect to such payment. “(B) Exception.— Subparagraph (A) shall not apply if the recipient certifies to the payor, in such manner as the Secretary may prescribe, that such person is not— “(i) a United States citizen who is a bona fide resident of a foreign country, or “(ii) an individual to whom section 877 applies.”

10. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 § 1012(bb)(2)(C) · 102 Stat. 3342

    Substituted · 26 U.S.C. § 3405(d)(13)

    Pub. L. 100–647, § 1012(bb)(2)(C), substituted “United States or its possessions” for “United States” in heading

    Source evidence

    Code amendment note
    Subsec. (d)(13). Pub. L. 100–647, § 1012(bb)(2)(C), substituted “United States or its possessions” for “United States” in heading.

    Enacted provision · exact public law section
    (C) The heading of paragraph (13) of section 3405(d) of the 1986 Code is amended by striking out “united states” and inserting in lieu thereof “united states or its possessions”.

11. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 § 1012(bb)(2)(A) · 102 Stat. 3342

    Substituted · 26 U.S.C. § 3405(d)(13)(A)

    Pub. L. 100–647, § 1012(bb)(2)(A), substituted “the United States and any possession of the United States” for “the United States”

    Source evidence

    Code amendment note
    Subsec. (d)(13)(A). Pub. L. 100–647, § 1012(bb)(2)(A), substituted “the United States and any possession of the United States” for “the United States”.

    Enacted provision · exact public law section
    (A) Subparagraph (A) of section 3405(d)(13) of the 1986 Code is amended by striking out “the United States” and inserting in lieu thereof “the United States and any possession of the United States”.

12. 1988

    Technical and Miscellaneous Revenue Act of 1988

    Pub. L. 100–647 § 1012(bb)(2)(B) · 102 Stat. 3342

    1. Amended · 26 U.S.C. § 3405(d)(13)(B)(i)

       Pub. L. 100–647, § 1012(bb)(2)(B), amended cl. (i) generally

    2. Substituted · 26 U.S.C. § 3405(d)(13)(B)(i)

       Pub. L. 100–647, § 1012(bb)(2)(B), substituting “or a resident alien of the United States” for “who is a bona fide resident of a foreign country”

    Source evidence

    Code amendment note
    Subsec. (d)(13)(B)(i). Pub. L. 100–647, § 1012(bb)(2)(B), amended cl. (i) generally, substituting “or a resident alien of the United States” for “who is a bona fide resident of a foreign country”.

    Enacted provision · exact public law section
    (B) Clause (i) of section 3405(d)(13)(B) of the 1986 Code is amended to read as follows: “(i) a United States citizen or a resident alien of the United States, or”.

13. 1992

    Unemployment Compensation Amendments of 1992

    Pub. L. 102–318 § 521(b)(36) · 106 Stat. 290

    Substituted · 26 U.S.C. § 3405(a)

    Pub. L. 102–318, § 521(b)(36), substituted “Periodic payments” for “Pensions, annuities, etc.” in heading

    Source evidence

    Code amendment note
    Subsec. (a). Pub. L. 102–318, § 521(b)(36), substituted “Periodic payments” for “Pensions, annuities, etc.” in heading.

    Enacted provision · exact public law section
    (36) Subsection (a) of section 3405 is amended by striking “Pensions, Annuities, Etc.—”from the heading thereof and inserting “Periodic Payments.—”.

14. 1992

    Unemployment Compensation Amendments of 1992

    Pub. L. 102–318 § 522(b)(2)(A) · 106 Stat. 290

    Substituted · 26 U.S.C. § 3405(a)(1)

    Pub. L. 102–318, § 522(b)(2)(A), substituted “subsection (e)(2)” for “subsection (d)(2)”

    Source evidence

    Code amendment note
    Subsec. (a)(1). Pub. L. 102–318, § 522(b)(2)(A), substituted “subsection (e)(2)” for “subsection (d)(2)”.

    Enacted provision · exact public law section
    (A) Section 3405(a)(1) is amended by striking “subsection (d)(2)” and inserting “subsection (e)(2)”.

15. 1992

    Unemployment Compensation Amendments of 1992

    Pub. L. 102–318 title V · 106 Stat. 290

    1. Substituted · 26 U.S.C. § 3405(b)(1)

       Pub. L. 102–318, §§ 521(b)(37)(A), 522(b)(2)(B), substituted “subsection (e)(3)” for “subsection (d)(3)”

    2. Substituted · 26 U.S.C. § 3405(b)(1)

       Pub. L. 102–318, §§ 521(b)(37)(A), 522(b)(2)(B), substituted “an amount equal to 10 percent of such distribution” for “the amount determined under paragraph (2)”

    Source evidence

    Code amendment note
    Subsec. (b)(1). Pub. L. 102–318, §§ 521(b)(37)(A), 522(b)(2)(B), substituted “subsection (e)(3)” for “subsection (d)(3)” and “an amount equal to 10 percent of such distribution” for “the amount determined under paragraph (2)”.

    Enacted provision · exact public law
    TITLE V— REVENUE PROVISIONS SEC. 501. AMENDMENT OF 1986 CODE. Except as otherwise expressly provided, whenever in this title an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986. Subtitle A— Extension of Phaseout of Personal Exemptions; Corporate Estimated Tax Provisions SEC. 511. EXTENSION OF PHASEOUT OF PERSONAL EXEMPTIONS. 26 USC 151. Subparagraph (E) of section 151(d)(3) (relating to termination of phaseout) is amended by striking “December 31, 1995” and inserting “December 31, 1996”. SEC. 512. CORPORATE ESTIMATED TAX PROVISIONS. (a) General Rule.— Subsection (d) of section 6655 (relating to amount of required installments) is amended— (1) by striking “90 percent” each place it appears in paragraph (1)(B)(i) and inserting “91 percent”, (2) by striking “90 percent” in the heading of paragraph (2) and inserting “91 percent”, and (3) by striking paragraph (3) and inserting the following new paragraph: “(3) Temporary increase in amount of installment based on current year tax.— In the case of any taxable year beginning after June 30, 1992, and before 1997— “(A) paragraph (1)(B)(i) and subsection (e)(3)(A)(i) shall be applied by substituting ‘97 percent’ for ‘91 percent’ each place it appears, and “(B) the table contained in subsection (e)(2)(B)(ii) shall be applied by substituting ‘24.25’, ‘48.50’, ‘72.75’, and ‘97’ for ‘22.75’, ‘45.50’, ‘68.25’, and ‘91.00’, respectively.” (b) Conforming Amendments.— (1) Clause (ii) of section 6655(e)(2)(B) is amended by striking the table contained therein and inserting the following new table: “In the case of the following required installments: The applicable percentage is: 1st 22.75 2nd 45.50 3rd 68.25 4th 91.00.” (2) Clause (i) of section 6655(E)(3)(A) is amended by striking “90 percent” and inserting “91 percent”. (c) Effective Date.— The amendments made by this section shall apply to taxable years beginning after June 30, 1992. Subtitle B— Pension Distributions SEC. 521. TAXABILITY OF BENEFICIARY OF QUALIFIED PLAN. (a) In General.— So much of section 402 (relating to taxability of beneficiary of employees’ trust) as precedes subsection (g) thereof is amended to read as follows: “SEC. 402. TAXABILITY OF BENEFICIARY OF EMPLOYEES’ TRUST. “(a) Taxability of Beneficiary of Exempt Trust.— Except as otherwise provided in this section, any amount actually distributed to any distributee by any employees’ trust described in section 401(a) which is exempt from tax under section 501(a) shall be taxable to the distributee, in the taxable year of the distributee in which distributed, under section 72 (relating to annuities). “(b) Taxability of Beneficiary of Nonexempt Trust.— “(1) Contributions.— Contributions to an employees’ trust made by an employer during a taxable year of the employer which ends with or within a taxable year of the trust for which the trust is not exempt from tax under section 501(a) shall be included in the gross income of the employee in accordance with section 83 (relating to property transferred in connection with performance of services), except that the value of the employee’s interest in the trust shall be substituted for the fair market value of the property for purposes of applying such section. “(2) Distributions.— The amount actually distributed or made available to any distributee by any trust described in paragraph (1) shall be taxable to the distributee, in the taxable year in which so distributed or made available, under section 72 (relating to annuities), except that distributions of income of such trust before the annuity starting date (as defined in section 72(c)(4)) shall be included in the gross income of the employee without regard to section 72(e)(5) (relating to amounts not received as annuities). “(3) Grantor trusts.— A beneficiary of any trust described in paragraph (1) shall not be considered the owner of any portion of such trust under subpart E of part I of subchapter J (relating to grantors and others treated as substantial owners). “(4) Failure to meet requirements of section 410(b).— “(A) Highly compensated employees.— If 1 of the reasons a trust is not exempt from tax under section 501(a) is the failure of the plan of which it is a part to meet the requirements of section 401(a)(26) or 410(b), then a highly compensated employee shall, in lieu of the amount determined under paragraph (1) or (2) include in gross income for the taxable year with or within which the taxable year of the trust ends an amount equal to the vested accrued benefit of such employee (other than the employee’s investment in the contract) as of the close of such taxable year of the trust. “(B) Failure to meet coverage tests.— If a trust is not exempt from tax under section 501(a) for any taxable year solely because such trust is part of a plan which fails to meet the requirements of section 401(a)(26) or 410(b), paragraphs (1) and (2) shall not apply by reason of such failure to any employee who was not a highly compensated employee during— “(i) such taxable year, or “(ii) any preceding period for which service was creditable to such employee under the plan. “(C) Highly compensated employee.— For purposes of this paragraph, the term ‘highly compensated employee’ has the meaning given such term by section 414(q). “(c) Rules Applicable to Rollovers From Exempt Trusts.— “(1) Exclusion from income.— If— “(A) any portion of the balance to the credit of an employee in a qualified trust is paid to the employee in an eligible rollover distribution, “(B) the distributee transfers any portion of the property received in such distribution to an eligible retirement plan, and “(C) 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. “(2) Maximum amount which may be rolled over.— In the case of any eligible rollover distribution, the maximum amount transferred to which paragraph (1) applies shall not exceed the portion of such distribution which is includible in gross income (determined without regard to paragraph (1)). “(3) Transfer must be made within 60 days of receipt.— Paragraph (1) shall not apply to any transfer of a distribution made after the 60th day following the day on which the distributee received the property distributed. “(4) Eligible rollover distribution.— For purposes of this subsection, the term ‘eligible rollover distribution’ means any distribution to an employee of all or any portion of the balance to the credit of the employee in a qualified trust; except that such term shall not include— “(A) any distribution which is one of a series of substantially equal periodic payments (not less frequently than annually) made— “(i) for the life (or life expectancy) of the employee or the joint lives (or joint life expectancies) of the employee and the employee’s designated beneficiary, or “(ii) for a specified period of 10 years or more, and “(B) any distribution to the extent such distribution is required under section 401(a)(9). “(5) Transfer treated as rollover contribution under section 408.— For purposes of this title, a transfer to an eligible retirement plan described in clause (i) or (ii) of paragraph (8)(B) resulting in any portion of a distribution being excluded from gross income under paragraph (1) shall be treated as a rollover contribution described in section 408(d)(3). “(6) Sales of distributed property.— For purposes of this subsection— “(A) Transfer of proceeds from sale of distributed property treated as transfer of distributed property.— The transfer of an amount equal to any portion of the proceeds from the sale of property received in the distribution shall be treated as the transfer of property received in the distribution. “(B) Proceeds attributable to increase in value.— The excess of fair market value of property on sale over its fair market value on distribution shall be treated as property received in the distribution. “(C) Designation where amount of distribution exceeds rollover contribution.— In any case where part or all of the distribution consists of property other than money— “(i) the portion of the money or other property which is to be treated as attributable to amounts not included in gross income, and “(ii) the portion of the money or other property which is to be treated as included in the rollover contribution, shall be determined on a ratable basis unless the taxpayer designates otherwise. Any designation under this subparagraph for a taxable year shall be made not later them the time prescribed by law for filing the return for such taxable year (including extensions thereof). Any such designation, once made, shall be irrevocable. “(D) Nonrecognition of gain or loss.— No gain or loss shall be recognized on any sale described in subparagraph (A) to the extent that an amount equal to the proceeds is transferred pursuant to paragraph (1). “(7) Special rule for frozen deposits.— “(A) In general.— The 60-day period described in paragraph (3) shall not— “(i) include any period during which the amount transferred to the employee is a frozen deposit, or “(ii) end earlier than 10 days after such amount ceases to be a frozen deposit. “(B) Frozen deposits.— For purposes of this subparagraph, the term ‘frozen deposit’ means any deposit which may not be withdrawn because of— “(i) the bankruptcy or insolvency of any financial institution, or “(ii) any requirement imposed by the State in which such institution is located by reason of the bankruptcy or insolvency (or threat thereof) of 1 or more financial institutions in such State. A deposit shall not be treated as a frozen deposit unless on at least 1 day during the 60-day period described in paragraph (3) (without regard to this paragraph) such deposit is described in the preceding sentence. “(8) Definitions.— For purposes of this subsection— “(A) Qualified trust.— The term ‘qualified trust’ means an employees’ trust described in section 401(a) which is exempt from tax under section 501(a). “(B) Eligible retirement plan.— The term ‘eligible retirement plan’ means— “(i) an individual retirement account described in section 408(a), “(ii) an individual retirement annuity described in section 408(b) (other than an endowment contract), “(iii) a qualified trust, and “(iv) an annuity plan described in section 403(a). “(9) Rollover where spouse receives distribution after death of employee.— If any distribution attributable to an employee is paid to the spouse of the employee after the employee’s death, the preceding provisions of this subsection shall apply to such distribution in the same manner as if the spouse were the employee; except that a trust or plan described in clause (iii) or (iv) of paragraph (8)(B) shall not be treated as an eligible retirement plan with respect to such distribution. “(10) Denial of averaging for subsequent distributions.— If paragraph (1) applies to any distribution paid to any employee, paragraphs (1) and (3) of subsection (d) shall not apply to any distribution (paid after such distribution) of the balance to the credit of the employee under the plan under which the preceding distribution was made (or under any other plan which, under subsection (d)(4)(C), would be aggregated with such plan). “(d) Tax on Lump Sum Distributions.— “(1) Imposition of separate tax on lump sum distributions.— “(A) Separate tax.— There is hereby imposed a tax (in the amount determined under subparagraph (B)) on a lump sum distribution. “(B) Amount of tax.— The amount of tax imposed by subparagraph (A) for any taxable year is an amount equal to 5 times the tax which would be imposed by subsection (c) of section 1 if the recipient were an individual referred to in such subsection and the taxable income were an amount equal to ⅕ of the excess of— “(i) the total taxable amount of the lump sum distribution for the taxable year, over “(ii) the minimum distribution allowance. “(C) Minimum distribution allowance.— For purposes of this paragraph, the minimum distribution allowance for any taxable year is an amount equal to— “(i) the lesser of $10,000 or one-half of the total taxable amount of the lump sum distribution for the taxable year, reduced (but not below zero) by “(ii) 20 percent of the amount (if any) by which such total taxable amount exceeds $20,000. “(D) Liability for tax.— The recipient shall be liable for the tax imposed by this paragraph. “(2) Distributions of annuity contracts.— “(A) In general.— In the case of any recipient of a lump sum distribution for any taxable year, if the distribution (or any part thereof) is an annuity contract, the total taxable amount of the distribution shall be aggregated for purposes of computing the tax imposed by paragraph (1)(A), except that the amount of tax so computed shall be reduced (but not below zero) by that portion of the tax on the aggregate total taxable amount which is attributable to annuity contracts. “(B) Beneficiaries.— For purposes of this paragraph, a beneficiary of a trust to which a lump sum distribution is made shall be treated as the recipient of such distribution if the beneficiary is an employee (including an employee within the meaning of section 401(c)(1)) with respect to the plan under which the distribution is made or if the beneficiary is treated as the owner of such trust for purposes of subpart E of part I of subchapter J. “(C) Annuity contracts.— For purposes of this paragraph, in the case of the distribution of an annuity contract, the taxable amount of such distribution shall be deemed to be the current actuarial value of the contract, determined on the date of such distribution. “(D) Trusts.— In the case of a lump sum distribution with respect to any individual which is made only to 2 or more trusts, the tax imposed by paragraph (1)(A) shall be computed as if such distribution was made to a single trust, but the liability for such tax shall be apportioned among such trusts according to the relative amounts received by each. “(E) Regulations.— The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this paragraph. “(3) Allowance of deduction.— The total taxable amount of a lump sum distribution for any taxable year shall be allowed as a deduction from gross income for such taxable year, but only to the extent included in the taxpayer’s gross income for such taxable year. “(4) Definitions and special rules.— “(A) Lump sum distribution.— For purposes of this section and section 403, the term ‘lump sum distribution’ means the distribution or payment within 1 taxable year of the recipient of the balance to the credit of an employee which becomes payable to the recipient— “(i) on account of the employee’s death, “(ii) after the employee attains age 59½, “(iii) on account of the employee’s separation from the service, or “(iv) after the employee has become disabled (within the meaning of section 72(m)(7)), from a trust which forms a part of a plan described in section 401(a) and which is exempt from tax under section 501 or from a plan described in section 403(a). Clause (iii) of this subparagraph shall be applied only with respect to an individual who is an employee without regard to section 401(c)(1), and clause (iv) shall be applied only with respect to an employee within the meaning of section 401(c)(1). A distribution of an annuity contract from a trust or annuity plan referred to in the first sentence of this subparagraph shall be treated as a lump sum distribution. For purposes of this subparagraph, a distribution to 2 or more trusts shall be treated as a distribution to 1 recipient. For purposes of this subsection, the balance to the credit of the employee does not include the accumulated deductible employee contributions under the plan (within the meaning of section 72(o)(5)). “(B) Averaging to apply to 1 lump sum distribution after age 59½.— Paragraph (1) shall apply to a lump sum distribution with respect to an employee under subparagraph (A) only if— “(i) such amount is received on or after the date on which the employee has attained age 5914, and “(ii) the taxpayer elects for the taxable year to have all such amounts received during such taxable year so treated. Not more than 1 election may be made under this subparagraph by any taxpayer with respect to any employee. No election may be made under this subparagraph by any taxpayer other than an individual, an estate, or a trust. In the case of a lump sum distribution made with respect to an employee to 2 or more trusts, the election under this subparagraph shall be made by the personal representative of the taxpayer. “(C) Aggregation of certain trusts and plans.— For purposes of determining the balance to the credit of an employee under subparagraph (A)— “(i) all trusts which are part of a plan shall be treated as a single trust, all pension plans maintained by the employer shall be treated as a single plan, all profit-sharing plans maintained by the employer shall be treated as a single plan, and all stock bonus plans maintained by the employer shall be treated as a single plan, and “(ii) trusts which are not qualified trusts under section 401(a) and annuity contracts which do not satisfy the requirements of section 404(a)(2) shall not be taken into account. “(D) Total taxable amount.— For purposes of this section and section 403, the term ‘total taxable amount’ means, with respect to a lump sum distribution, the amount of such distribution which exceeds the sum of— “(i) the amounts considered contributed by the employee (determined by applying section 72(f)), reduced by any amounts previously distributed which were not includible in gross income, and “(ii) the net unrealized appreciation attributable to that part of the distribution which consists of the securities of the employer corporation so distributed. “(E) Community property laws.— The provisions of this subsection, other than paragraph (3), shall be applied without regard to community property laws. “(F) Minimum period of service.— For purposes of this subsection, no amount distributed to an employee from or under a plan may be treated as a lump sum distribution under subparagraph (A) unless the employee has been a participant in the plan for 5 or more taxable years before the taxable year in which such amounts are distributed. “(G) Amounts subject to penalty.— This subsection shall not apply to amounts described in subparagraph (A) of section 72(m)(5) to the extent that section 72(m)(5) applies to such amounts. “(H) Balance to credit of employee not to include amounts payable under qualified domestic relations order.— For purposes of this subsection, the balance to the credit of an employee shall not include any amount payable to an alternate payee under a qualified domestic relations order (within the meaning of section 414(p)). “(I) Transfers to cost-of-living arrangement not treated as distribution.— For purposes of this subsection, the balance to the credit of an employee under a defined contribution plan shall not include any amount transferred from such defined contribution plan to a qualified cost-of-living arrangement (within the meaning of section 415(k)(2)) under a defined benefit plan. “(J) Lump sum distributions of alternate payees.— If any distribution or payment of the balance to the credit of an employee would be treated as a lump sum distribution, then, for purposes of this subsection, the payment under a qualified domestic relations order (within the meaning of section 414(p)) of the balance to the credit of an alternate payee who is the spouse or former spouse of the employee shall be treated as a lump sum distribution. For purposes of this subparagraph, the balance to the credit of the alternate payee shall not include any amount payable to the employee. “(K) Treatment of portion not rolled over.— If any portion of a lump sum distribution is transferred in a transfer to which subsection (c) applies, paragraphs (1) and (3) shall not apply with respect to the distribution. “(L) Securities.— For purposes of this subsection, the terms ‘securities’ and ‘securities of the employer corporation’ have the respective meanings provided by subsection (e)(4)(E). “(5) Special rule where portions of lump sum distribution attributable to rollover of bond purchased under qualified bond purchase plan.— If any portion of a lump sum distribution is attributable to a transfer described in section 405(d)(3)(A)(ii) (as in effect before its repeal by the Tax Reform Act of 1984), paragraphs (1) and (3) of this subsection shall not apply to such portion. “(6) Treatment of potential future vesting.— “(A) In general.— For purposes of determining whether any distribution which becomes payable to the recipient on account of the employee’s separation from service is a lump sum distribution, the balance to the credit of the employee shall be determined without regard to any increase in vesting which may occur if the employee is reemployed by the employer. “(B) Recapture in certain cases.— If— “(i) an amount is treated as a lump sum distribution by reason of subparagraph (A), “(ii) special lump sum treatment applies to such distribution, “(iii) the employee is subsequently reemployed by the employer, and “(iv) as a result of services performed after being so reemployed, there is an increase in the employee’s vesting for benefits accrued before the separation referred to in subparagraph (A), under regulations prescribed by the Secretary, the tax imposed by this chapter for the taxable year (in which the increase in vesting first occurs) shall be increased by the reduction in tax which resulted from the special lump sum treatment (and any election under paragraph (4)(B) shall not be taken into account for purposes of determining whether the employee may make another election under paragraph (4)(B)). “(C) Special lump sum treatment.— For purposes of this paragraph, special lump sum treatment applies to any distribution if any portion of such distribution is taxed under the subsection by reason of an election under paragraph (4)(B). “(D) Vesting.— For purposes of this paragraph, the term ‘vesting’ means the portion of the accrued benefits derived from employer contributions to which the participant has a nonforfeitable right. “(7) Coordination with foreign tax credit limitations.— Subsections (a), (b), and (c) of section 904 shall be applied separately with respect to any lump sum distribution on which tax is imposed under paragraph (1), and the amount of such distribution shall be treated as the taxable income for purposes of such separate application. “(e) Other Rules Applicable to Exempt Trusts.— “(1) Alternate payees.— “(A) Alternate payee treated as distributee.— For purposes of subsection (a) and section 72, an alternate payee who is the spouse or former spouse of the participant shall be treated as the distributee of any distribution or payment made to the alternate payee under a qualified domestic relations order (as defined in section 414(p)). “(B) Rollovers.— If any amount is paid or distributed to an alternate payee who is the spouse or former spouse of the participant by reason of any qualified domestic relations order (within the meaning of section 414(p)), sub-section (c) shall apply to such distribution in the same manner as if such alternate payee were the employee. “(2) Distributions by united states to nonresident aliens.— The amount includible under subsection (a) in the gross income of a nonresident alien with respect to a distribution made by the United States in respect of services performed by an employee of the United States shall not exceed an amount which bears the same ratio to the amount includible in gross income without regard to this paragraph as— “(A) the aggregate basic pay paid by the United States to such employee for such services, reduced by the amount of such basic pay which was not includible in gross income by reason of being from sources without the United States, bears to “(B) the aggregate basic pay paid by the United States to such employee for such services. In the case of distributions under the civil service retirement laws, the term ‘basic pay’ shall have the meaning provided in section 8331(3) of title 5, United States Code. “(3) Cash or deferred arrangements.— For purposes of this title, contributions made by an employer on behalf of an employee to a trust which is a part of a qualified cash or deferred arrangement (as defined in section 401(k)(2)) shall not be treated as distributed or made available to the employee nor as contributions made to the trust by the employee merely because the arrangement includes provisions under which the employee has an election whether the contribution will be made to the trust or received by the employee in cash. “(4) Net unrealized appreciation.— “(A) Amounts attributable to employee contributions.— For purposes of subsection (a) and section 72, in the case of a distribution other than a lump sum distribution, the amount actually distributed to any distributee from a trust described in subsection (a) shall not include any net unrealized appreciation in securities of the employer corporation attributable to amounts contributed by the employee (other than deductible employee contributions within the meaning of section 72(o)(5)). This subparagraph shall not apply to a distribution to which subsection (c) applies. “(B) Amounts attributable to employer contributions.— For purposes of subsection (a) and section 72, in the case of any lump sum distribution which includes securities of the employer corporation, there shall be excluded from gross income the net unrealized appreciation attributable to that part of the distribution which consists of securities of the employer corporation. In accordance with rules prescribed by the Secretary, a taxpayer may elect, on the return of tax on which a lump sum distribution is required to be included, not to have this subparagraph apply to such distribution. “(C) Determination of amounts and adjustments.— For purposes of subparagraphs (A) and (B), net unrealized appreciation and the resulting adjustments to basis shall be determined in accordance with regulations prescribed by the Secretary. “(D) Lump sum distribution.— For purposes of this paragraph, the term ‘lump sum distribution’ has the meaning given such term by subsection (d)(4)(A) (without regard to subsection (d)(4)(F)). “(E) Definitions relating to securities.— For purposes of this paragraph— “(i) Securities.— The term ‘securities’ means only shares of stock and bonds or debentures issued by a corporation with interest coupons or in registered form. “(ii) Securities of the employer.— The term ‘securities of the employer corporation’ includes securities of a parent or subsidiary corporation (as defined in subsections (e) and (f) of section 424) of the employer corporation. “(5) Taxability of beneficiary of certain foreign situs trusts.— For purposes of subsections (a), (b), and (c), a stock bonus, pension, or profit-sharing trust which would qualify for exemption from tax under section 501(a) except for the fact that it is a trust created or organized outside the United States shall be treated as if it were a trust exempt from tax under section 501(a). “(f) Written Explanation to Recipients of Distributions Eligible for Rollover Treatment.— “(1) In general.— The plan administrator of any plan shall, within a reasonable period of time before making an eligible rollover distribution from an eligible retirement plan, provide a written explanation to the recipient— “(A) of the provisions under which the recipient may have the distribution directly transferred to another eligible retirement plan, “(B) of the provision which requires the withholding of tax on the distribution if it is not directly transferred to another eligible retirement plan, “(C) of the provisions under which the distribution will not be subject to tax if transferred to an eligible retirement plan within 60 days after the date on which the recipient received the distribution, and “(D) if applicable, of the provisions of subsections (d) and (e) of this section. “(2) Definitions.— For purposes of this subsection— “(A) Eligible rollover distribution.— The term ‘eligible rollover distribution’ has the same meaning as when used in subsection (c) of this section or paragraph (4) of section 403(a). “(B) Eligible retirement plan.— The term ‘eligible retirement plan’ has the meaning given such term by subsection (c)(8)(B).” (b) Conforming Amendments.— (1) Paragraph (1) of section 55(c) is amended by striking “section 402(e)” and inserting “section 402(d)”. (2) Paragraph (8) of section 62(a) (relating to certain portion of lump-sum distributions from pension plans taxed under section 402(e)) is amended by striking “402(e)” in the text and heading and inserting “402(d)”. (3) Paragraph (4) of section 72(o) (relating to special rule for treatment of rollover amount) is amended by striking “sections 402(a)(5), 402(a)(7)” and inserting “sections 402(c)”. (4) Paragraph (2) of section 219(d) (relating to recontributed amount) is amended by striking “section 402(a)(5), 402(a)(7)” and inserting “section 402(c)”. (5) Paragraph (20) of section 401(a) is amended— (A) by striking “a qualified total distribution described in section 402(a)(5)(E)(i)(I)” and inserting “1 or more distributions within 1 taxable year to a distributee on account of a termination of the plan of which the trust is a part, or in the case of a profit-sharing or stock bonus plan, a complete discontinuance of contributions under such plan”, and (B) by adding at the end the following new sentence: “For purposes of this paragraph, rules similar to the rules of section 402(a)(6)(B) (as in effect before its repeal by section 211 of the Unemployment Compensation Amendments of 1992) shall apply.” (6) Clause (v) of section 401(a)(28)(B) (relating to coordination with distribution rules) is amended to read as follows: “(v) Coordination with distribution rules.— Any distribution required by this subparagraph shall not be taken into account in determining whether a subsequent distribution is a lump sum distribution under section 402(d)(4)(A) or in determining whether section 402(c)(10) applies.” (7) Subclause (IV) of section 401(k)(2)(B)(i) is amended by striking “section 402(a)(8)” and inserting “section 402(e)(3)”. (8) Subparagraph (B)(ii) of section 401(k)(10) (relating to distributions that must be lump-sum distributions) is amended— (A) by striking “section 402(e)(4)” and inserting “section 402(d)(4)”, and (B) by striking “subparagraph (H)” and inserting “subparagraph (F)”. (9) Section 402(g)(1) is amended by striking “subsections (a)(8)” and inserting “subsections (e)( (3)”. (10) Section 402(i) is amended by striking “subsection (e)(4)” and inserting “subsection (d)(4)”. (11) Subsection (j) of section 402 is amended by striking 26 USC 402. “(a)(1) or (e)(4)(J)” and inserting “(e)(4)”. (12) (A) Clause (i) of section 403(a)(4)(A) is amended by inserting 26 USC 403. “in an eligible rollover distribution (within the meaning of section 402(c)(4))” before the comma at the end thereof (B) Subparagraph (B) of section 403(a)(4) is amended to read as follows: “(B) Certain rules made applicable.— Rules similar to the rules of paragraphs (2) through (7) of section 402(c) shall apply for purposes of subparagraph (A).” (13) (A) Clause (i) of section 403(b)(8)(A) is amended by inserting “in an eligible rollover distribution (within the meaning of section 402(c)(4))” before the comma at the end thereof (B) Paragraph (8) of section 403(b) is amended by striking subparagraphs (B), (C), and (D) and inserting the following: “(B) Certain rules made applicable.— Rules similar to the rules of paragraphs (2) through (7) of section 402(c) shall apply for purposes of subparagraph (A).” (14) Section 406(c) (relating to termination of status as 26 USC 406. deemed employee not to be treated as separation from service for purposes of limitation of tax) is amended by striking “section 402(e)” and inserting “section 402(d)”. (15) Section 407(c) (relating to termination of status as 26 USC 407. deemed employee not to be treated as separation from service for purposes of limitation of tax) is amended by striking “section 402(e)” and inserting “section 402(d)”. (16) Paragraph (1) of section 408(a) is amended by striking 26 USC 408. “section 402(a)(5), 402(a)(7)” and inserting “section 402(c)”. (17) Clause (ii) of section 408(d)(3)(A) is amended to read as follows: “(ii) no amount in the account and no part of the value of the annuity is attributable to any source other than a rollover contribution (as defined in section 402) from an employee’s trust described in section 401(a) which is exempt from tax under section 501(a) or from an annuity plan described in section 403(a) (and any earnings on such contribution), and the entire amount received (including property and other money) is paid (for the benefit of such individual) into another such trust or annuity plan not later than the 60th day on which the individual receives the payment or the distribution; or”. (18) Subparagraph (B) of section 408(d)(3) (relating to limitations) is amended by striking the second sentence thereof. (19) Subparagraph (F) of section 408(d)(3) (relating to frozen deposits) is amended by striking “section 402(a)(6)(H)” and inserting “section 402(c)(7)”. (20) Subclause (I) of section 414(n)(5)(C)(iii) is amended by 26 USC 414. striking “section 402(a)(8)” and inserting “section 402(e)(3)”. (21) Clause (i) of section 414(q)(7)(B) is amended by striking “402(a)(8)” and inserting “402(e)(3)”. (22) Paragraph (2) of section 414(s) (relating to employer may elect to treat certain deferrals as compensation) is amended by striking “402(a)(8)” and inserting “402(e)(3)”. (23) Subparagraph (A) of section 415(b)(2) (relating to annual 26 USC 415. benefit in general) is amended by striking “sections 402(a)(5)” and inserting “sections 402(c)”. (24) Subparagraph (B) of section 415(b)(2) (relating to adjustment for certain other forms of benefit) is amended by striking “sections 402(a)(5)” and inserting “sections 402(c)”. (25) Paragraph (2) of section 415(c) (relating to annual addition) is amended by striking “sections 402(a)(5)” and inserting “sections 402(c)”. (26) Subparagraph (B) of section 457(c)(2) is amended by striking “section 402(a)(8)” in clause (i) thereof and inserting “section 402(e)(3)”. (27) Section 691(c) (relating to coordination with section 402(e)) is amended by striking “402(e)” in the text and heading and inserting “402(d)”. (28) Subparagraph (B) of section 871(a)(1) (relating to income other than capital gains) is amended by striking “402(a)(2), 403(a)(2), or”. (29) Paragraph (1) of section 871(b) (relating to imposition of tax) is amended by striking “402(e)(1)” and inserting “402(d)(1)”. (30) Paragraph (1) of section 871(k) is amended by striking “section 402(a)(4)” and inserting “section 402(e)(2)”. (31) Subsection (b) of section 877 (relating to alternative tax) is amended by striking “402(e)(1)” and inserting “402(d)(1)”. (32) Subsection (b) of section 1441 (relating to income items) is amended by striking “402(a)(2), 403(a)(2), or”. (33) Paragraph (5) of section 1441(c) (relating to special items) is amended by striking “402(a)(2), 403(a)(2), or”. (34) Subparagraph (A) of section 3121(v)(1) is amended by striking “section 402(a)(8)” and inserting “section 402(e)(3)”. (35) Subparagraph (A) of section 3306(r)(1) is amended by striking “section 402(a)(8)” and inserting “section 402(e)(3)”. (36) Subsection (a) of section 3405 is amended by striking “Pensions, Annuities, Etc.—”from the heading thereof and inserting “Periodic Payments.—”. (37) Subsection (b) of section 3405 (relating to nonperiodic distribution) is amended— (A) by striking “the amount determined under paragraph (2)” from paragraph (1) thereof and inserting “an amount equal to 10 percent of such distribution”; and (B) by striking paragraph (2) (relating to amount of withholding) and redesignating paragraph (3) as paragraph (2). (38) Paragraph (4) of section 3405(d) (relating to qualified total distributions) is hereby repealed. (39) Paragraph (8) of section 3405(d) (relating to maximum amounts withheld) is amended to read as follows: “(8) Maximum amount withheld.— The maximum amount to be withheld under this section on any designated distribution shall not exceed the sum of the amount of money and the fair market value of other property (other than securities of the employer corporation) received in the distribution. No amount shall be required to be withheld under this section in the case of any designated distribution which consists only of securities of the employer corporation and cash (not in excess of $200) in lieu of financial shares. For purposes of this paragraph, the term ‘securities of the employer corporation’ has the meaning given such term by section 402(e)(4)(E).” (40) Subparagraph (A) of section 3405(d)(13) is amended by 26 USC 3405. striking “(b)(3)” and inserting “(b)(2)”. (41) Subparagraph (A) of section 4973(b)(1) is amended by 26 USC 4973. striking “sections 402(a)(5), 402(a)(7)” and inserting “sections 402(c)”. (42) Paragraph (4) of section 4980A(c) (relating to special 26 USC 4980A. rule where taxpayer elects income averaging) is amended by striking “section 402(e)(4)(B)” and inserting “section 402(d)(4)(B)”. (43) Subparagraph (C) of section 7701(j)(1) is amended by 26 USC 7701. striking “section 402(a)(8)” and inserting “section 402(e)(3)”. (44) Section 411(d)(3) is amended by adding at the end the 26 USC 411. following new sentence: “For purposes of this paragraph, in the case of the complete discontinuance of contributions under a profit-sharing or stock bonus plan, such plan shall be treated as having terminated on the day on which the plan administrator notifies the Secretary (in accordance with regulations) of the discontinuance.” (d) Model Explanation.— The Secretary of the Treasury or his 26 USC 402 note. delegate shall develop a model explanation which a plan administrator may provide to a recipient in order to meet the requirements of section 402(f) of the Internal Revenue Code of 1986. (e) Effective Dates.— (1) In general.— The amendments made by this section shall apply to distributions after December 31, 1992. (2) Special rule for partial distributions.— For purposes of section 402(a)(5)(D)(i)(II) of the Internal Revenue Code of 1986 (as in effect before the amendments made by this section), a distribution before January 1, 1993, which is made before or at the same time as a series of periodic payments shall not be treated as one of such series if it is not substantially equal in amount to other payments in such series. SEC. 522. REQUIREMENT THAT QUALIFIED PLANS INCLUDE OPTIONAL TRUSTEE-TO-TRUSTEE TRANSFERS OF ELIGIBLE ROLLOVER DISTRIBUTIONS. (a) Optional Transfers.— (1) Qualified plans.— Subsection (a) of section 401 (relating 26 USC 401. to requirements for qualification) is amended by inserting after paragraph (30) the following new paragraph: “(31) Optional direct transfer of eligible rollover distributions.— “(A) In general.— A trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part provides that if the distributee of any eligible rollover distribution— “(i) elects to have such distribution paid directly to an eligible retirement plan, and “(ii) specifies the eligible retirement plan to which such distribution is to be paid (in such form and at such time as the plan administrator may prescribe), such distribution shall be made in the form of a direct trustee-to-trustee transfer to the eligible retirement plan so specified. “(B) Limitation.— Subparagraph (A) shall apply only to the extent that the eligible rollover distribution would be includible in gross income if not transferred as provided in subparagraph (A) (determined without regard to sections 402(c) and 403(a)(4)). “(C) Eligible rollover distribution.— For purposes of this paragraph, the term ‘eligible rollover distribution’ has the meaning given such term by section 402(f)(2)(A). “(D) Eligible retirement plan.— For purposes of this paragraph, the term ‘eligible retirement plan’ has the meaning given such term by section 402(c)(8)(B), except that a Qualified trust shall be considered an eligible retirement plan only if it is a defined contribution plan, the terms of which permit the acceptance of rollover distributions.” (2) Employee’s annuities.— Paragraph (2) of section 404(a) (relating to employee’s annuities) is amended by striking “and (27)” and inserting “(27), and (31)”. (3) Annuities purchased by charities and public schools.— Paragraph (10) of section 403(b) (relating to distribution requirements) is amended by striking “section 401(a)(9)” and inserting “sections 401(a)(9) and 401(a)(31)”. (b) Withholding on Eligible Rollover Distributions Which Are Not Rolled Over.— (1) In general.— Section 3405 (relating to special rules for pensions, annuities, and certain other deferred income) is amended by redesignating subsections (c), (d), and (e) as subsections (d), (e), and (f) and by inserting after subsection (b) the following new subsection: “(c) Eligible Rollover Distributions.— “(1) In general.— In the case of any designated distribution which is an eligible rollover distribution— “(A) subsections (a) and (b) shall not apply, and “(B) the payor of such distribution shall withhold from such distribution an amount equal to 20 percent of such distribution. “(2) Exception.— Paragraph (1)(B) shall not apply to any distribution if the distributee elects under section 401(a)(31)(A) to have such distribution paid directly to an eligible retirement plan. “(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) (or in the case of an annuity contract under section 403(b), a distribution from such contract described in section 402(f)(2)(A)).” (2) Conforming amendments.— (A) Section 3405(a)(1) is amended by striking “subsection (d)(2)” and inserting “subsection (e)(2)”. (B) Section 3405(b)(1) is amended by striking “subsection (d)(3)” and inserting “subsection (e)(3)”. (C) Section 3405(d)(l) (as redesignated by paragraph (1)) is amended by striking “subsection (d)(1)” and inserting “subsection (e)(1)”. (D) Sections 3402(o)(6) and 6047(d)(1) are each amended by striking “section 3405(d)(1)” and inserting “section 3405(e)(1)”. (E) Section 6047(d)(1)(A) is amended by striking “section 3405(d)(1)” and inserting “section 3405(d)(3)”. (F) Section 6652(h) is amended by striking “section 3405(d)(10)(B)” and inserting “section 3405(e)(10)(B)”. (c) Exclusion From Income.— (1) Qualified trusts.— Subsection (e) of section 402 (relating 26 USC 402. to taxability of beneficiary of employees’ trust), as amended by section 521, is amended by adding at the end the following new paragraph: “(6) Direct trustee-to-trustee transfers.— 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 such transfer.” (2) Employee annuities.— Subsection (a) of section 403 26 USC 403. is amended by adding at the end the following new paragraph: “(5) Direct trustee-to-trustee transfer.— 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 such transfer.” (3) Annuity contracts purchased by charities and public schools.— Section 403(b)(10) is amended by adding at the end the following new sentence: “Any amount transferred in an direct trustee-to-trustee transfer in accordance with section 401(a)(31) shall not be includible in gross income for the taxable year of the transfer.” (d) Effective Dates.— (1) In general.— Except as provided in paragraph (2), the amendments made by this section shall apply to distributions after December 31, 1992. (2) Transition rule for certain annuity contracts.— If, as of July 1, 1992, a State law prohibits a direct trustee-to-trustee transfer from an annuity contract described in section 403(b) of the Internal Revenue Code of 1986 which was purchased for an employee by an employer which is a State or a political subdivision thereof (or an agency or instrumentality of any 1 or more of either), the amendments made by this section shall not apply to distributions before the earlier of— (A) 90 days after the first day after July 1, 1992, on which such transfer is allowed under State law, or (B) January 1, 1994. SEC. 523. DATE FOR ADOPTION OF PLAN AMENDMENTS. If any amendment made by this subtitle requires an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after January 1, 1994, if— (1) during the period after such amendment takes effect and before such first plan year, the plan is operated in accordance with the requirements of such amendment, and (2) such plan amendment applies retroactively to such period. Subtitle C— Other Provisions SEC. 531. MODIFICATIONS TO FEDERAL UNEMPLOYMENT ACCOUNTS. (a) Modifications to Extended Unemployment Compensation Account.— (1) Transfers to account.— Paragraph (1) of section 905(b) 42 USC 1105. of the Social Security Act is amended to read as follows— “(b) (1) Except as provided in paragraph (3), the Secretary of the Treasury shall transfer (as of the close of each month), from the employment security administration account to the extended unemployment compensation account established by subsection (a), an amount determined by him to be equal to the sum of— “(A) 100 percent of the transfers to the employment security administration account pursuant to section 901(b)(2) during such month on account of liabilities referred to in section 901(b)(1)(B), plus “(B) 20 percent of the excess of the transfers to such account pursuant to section 901(b)(2) during such month on account of amounts referred to in section 901(b)(1)(A) over the payments during such month from the employment security administration account pursuant to section 901 (b)(3) and (d). If for any such month the payments referred to in subparagraph (B) exceed the transfers referred to in subparagraph (B), proper adjustments shall be made in the amounts subsequently transferred.” (2) Increase in ceiling.— Subparagraph (B) of section 42 USC 1105. 905(b)(2) of such Act is amended by striking “three-eighths of 1 percent” and inserting “0.5 percent”. (b) Reduction of Ceiling on Federal Unemployment Account.— Paragraph (2) of section 902(a) of such Act is amended by striking “five-eighths of 1 percent” and inserting “0.25 percent”. (c) Borrowing Between Federal Accounts.— Title IX of such Act is amended by adding at the end the following new section: “Sec. 910. “borrowing between federal accounts (a) In General.— Whenever the Secretary of the Treasury (after consultation with the Secretary of Labor) determines that— “(1) the amount in the employment security administration account, Federal unemployment account, or extended unemployment compensation account, is insufficient to meet the anticipated payments from the account, “(2) such insufficiency may cause such account to borrow from the general fund of the Treasury, and “(3) the amount in any other such account exceeds the amount necessary to meet the anticipated payments from such other account, the Secretary shall transfer to the account referred to in paragraph (1) from the account referred to paragraph (3) an amount equal to the insufficiency determined under paragraph (1) (or, if less, the excess determined under paragraph (3)). “(b) Treatment of Advance.— Any amount transferred under subsection (a)— “(1) shall be treated as a noninterestbearing repayable advance, and “(2) shall not be considered in computing the amount in any account for purposes of the application of sections 901(f)(2), 902(b), and 905(b). “(c) Repayment.— Whenever the Secretary of the Treasury (after consultation with the Secretary of Labor) determines that the amount in the account to which an advance is made under sub-section (a) exceeds the amount necessary to meet the anticipated payments from the account, the Secretary shall transfer from the account to the account from which the advance was made an amount equal to the lesser of the amount so advanced or such excess.” (d) Repeal of Expired Provisions.— (1) Paragraph (2) of section 901(f) of such Act is amended— (A) by striking “(A) Except as provided in subparagraph (B), the” and inserting “The”, and (B) by striking subparagraph (B). (2) Section 901 of such Act is amended by striking subsection (g). (3) Subsection (g) of section 904 is amended by striking 42 USC 1104. all of such subsection that follows the 1st sentence. (e) Effective Dates.— (1) In general.— Except as provided in paragraph (2), the amendments made by this section shall take effect on the date of the enactment of this Act. (2) Changes in ceiling amounts.— The amendments made by subsection (a)(2) and (b) shall apply to fiscal years beginning after September 30, 1993. SEC. 532. REQUIREMENT OF DEPOSITS BY FEDERAL AGENCIES FOR UNEMPLOYMENT BENEFITS. (a) General Rule.— Subsection (c) of section 8509 of title 5, United States Code, is amended by adding at the end thereof the following new paragraph: “(3) If any Federal agency does not deposit in the Federal Employees Compensation Account any amount before the date 30 days after the date on which the Secretary of Labor has notified such agency that it is required to so deposit such amount, the Secretary of Labor shall notify the Secretary of the Treasury of the failure to make such deposit and the Secretary of the Treasury shall transfer such amount to the Federal Employees Compensation Account from amounts otherwise appropriated to such Federal agency.” (b) Effective Date.— The amendment made by subsection (a) 5 USC 8509 note. shall apply to failures outstanding on the date of the enactment of this Act or at any time thereafter. SEC. 533. REPORT ON ALLOCATION OF ADMINISTRATIVE FUNDS. Subsection (a) of section 304 of the Emergency Unemployment 42 USC 502 note. Compensation Act of 1991 (Public Law 102–164, as amended) is amended by striking “within the 12-month period beginning on the date of the enactment of this Act” and inserting “before December 31, 1994”. SEC. 534. EXTENSION OF COMMISSION ON INTERSTATE CHILD SUP-PORT. (a) In General.— Section 126 of the Family Support Act of 1988 (42 U.S.C. 666 note; 102 Stat. 2355) is amended— (1) in subsection (d)(2), by striking “May” and inserting “August”; and (2) in subsection (f)(1), by striking “July 1” and inserting “September 30”. (b) Effective Date.— The amendments made by this section shall take effect on June 30, 1992.

16. 1992

    Unemployment Compensation Amendments of 1992

    Pub. L. 102–318 § 521(b)(37)(B) · 106 Stat. 290

    1. Redesignated · 26 U.S.C. § 3405(b)(2); 26 U.S.C. § 3405(b)(3)

       Pub. L. 102–318, § 521(b)(37)(B), redesignated par. (3) as (2)

    2. Struck · 26 U.S.C. § 3405(b)(2); 26 U.S.C. § 3405(b)(3)

       Pub. L. 102–318, § 521(b)(37)(B), struck out former par. (2) which related to amount of withholding

    Source evidence

    Code amendment note
    Subsec. (b)(2), (3). Pub. L. 102–318, § 521(b)(37)(B), redesignated par. (3) as (2) and struck out former par. (2) which related to amount of withholding.

    Enacted provision · exact public law section
    (B) by striking paragraph (2) (relating to amount of withholding) and redesignating paragraph (3) as paragraph (2).

17. 1992

    Unemployment Compensation Amendments of 1992

    Pub. L. 102–318 § 522(b)(1) · 106 Stat. 290

    Redesignated · 26 U.S.C. § 3405(c)

    Pub. L. 102–318, § 522(b)(1), added subsec. (c). Former subsec. (c) redesignated (d)

    Source evidence

    Code amendment note
    Subsec. (c). Pub. L. 102–318, § 522(b)(1), added subsec. (c). Former subsec. (c) redesignated (d).

    Enacted provision · exact public law section
    (1) In general.— Section 3405 (relating to special rules for pensions, annuities, and certain other deferred income) is amended by redesignating subsections (c), (d), and (e) as subsections (d), (e), and (f) and by inserting after subsection (b) the following new subsection: “(c) Eligible Rollover Distributions.— “(1) In general.— In the case of any designated distribution which is an eligible rollover distribution— “(A) subsections (a) and (b) shall not apply, and “(B) the payor of such distribution shall withhold from such distribution an amount equal to 20 percent of such distribution. “(2) Exception.— Paragraph (1)(B) shall not apply to any distribution if the distributee elects under section 401(a)(31)(A) to have such distribution paid directly to an eligible retirement plan. “(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) (or in the case of an annuity contract under section 403(b), a distribution from such contract described in section 402(f)(2)(A)).”

18. 1992

    Unemployment Compensation Amendments of 1992

    Pub. L. 102–318 § 522(b)(1) · 106 Stat. 290

    1. Redesignated · 26 U.S.C. § 3405(d)

       Pub. L. 102–318, § 522(b)(1), (2)(C), redesignated subsec. (c) as (d)

    2. Redesignated · 26 U.S.C. § 3405(d)

       Pub. L. 102–318, § 522(b)(1), (2)(C), substituted “subsection (e)(1)” for “subsection (d)(1)” in par. (1). Former subsec. (d) redesignated (e)

    Source evidence

    Code amendment note
    Subsec. (d). Pub. L. 102–318, § 522(b)(1), (2)(C), redesignated subsec. (c) as (d) and substituted “subsection (e)(1)” for “subsection (d)(1)” in par. (1). Former subsec. (d) redesignated (e).

    Enacted provision · exact public law section
    (1) In general.— Section 3405 (relating to special rules for pensions, annuities, and certain other deferred income) is amended by redesignating subsections (c), (d), and (e) as subsections (d), (e), and (f) and by inserting after subsection (b) the following new subsection: “(c) Eligible Rollover Distributions.— “(1) In general.— In the case of any designated distribution which is an eligible rollover distribution— “(A) subsections (a) and (b) shall not apply, and “(B) the payor of such distribution shall withhold from such distribution an amount equal to 20 percent of such distribution. “(2) Exception.— Paragraph (1)(B) shall not apply to any distribution if the distributee elects under section 401(a)(31)(A) to have such distribution paid directly to an eligible retirement plan. “(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) (or in the case of an annuity contract under section 403(b), a distribution from such contract described in section 402(f)(2)(A)).”

19. 1992

    Unemployment Compensation Amendments of 1992

    Pub. L. 102–318 § 521(b)(40) · 106 Stat. 290

    Substituted · 26 U.S.C. § 3405(d)

    Pub. L. 102–318, § 521(b)(40), substituted “(b)(2)” for “(b)(3)” in par. (13)(A)

    Target inherited from the preceding amendment note.

    Source evidence

    Code amendment note
    Pub. L. 102–318, § 521(b)(40), substituted “(b)(2)” for “(b)(3)” in par. (13)(A).

    Enacted provision · exact public law section
    (40) Subparagraph (A) of section 3405(d)(13) is amended by 26 USC 3405. striking “(b)(3)” and inserting “(b)(2)”.

20. 1992

    Unemployment Compensation Amendments of 1992

    Pub. L. 102–318 § 521(b)(39) · 106 Stat. 290

    Amended · 26 U.S.C. § 3405(d)

    Pub. L. 102–318, § 521(b)(39), amended par. (8) generally. Prior to amendment, par. (8) read as follows: “The maximum amount to be withheld under this section on any designated distribution shall not exceed the sum of the amount of money and the fair market value of other property (other than employer securities of the employer corporation (within the meaning of section 402(a)(3))) received in the distribution. No amount shall be required to be withheld under this section in the case of any designated distribution which consists only of employer securities of the employer corporation (within the meaning of section 402(a)(3)) and cash (not in excess of $200) in lieu of fractional shares.”

    Target inherited from the preceding amendment note.

    Source evidence

    Code amendment note
    Pub. L. 102–318, § 521(b)(39), amended par. (8) generally. Prior to amendment, par. (8) read as follows: “The maximum amount to be withheld under this section on any designated distribution shall not exceed the sum of the amount of money and the fair market value of other property (other than employer securities of the employer corporation (within the meaning of section 402(a)(3))) received in the distribution. No amount shall be required to be withheld under this section in the case of any designated distribution which consists only of employer securities of the employer corporation (within the meaning of section 402(a)(3)) and cash (not in excess of $200) in lieu of fractional shares.”

    Enacted provision · exact public law section
    (39) Paragraph (8) of section 3405(d) (relating to maximum amounts withheld) is amended to read as follows: “(8) Maximum amount withheld.— The maximum amount to be withheld under this section on any designated distribution shall not exceed the sum of the amount of money and the fair market value of other property (other than securities of the employer corporation) received in the distribution. No amount shall be required to be withheld under this section in the case of any designated distribution which consists only of securities of the employer corporation and cash (not in excess of $200) in lieu of financial shares. For purposes of this paragraph, the term ‘securities of the employer corporation’ has the meaning given such term by section 402(e)(4)(E).”

21. 1992

    Unemployment Compensation Amendments of 1992

    Pub. L. 102–318 § 521(b)(38) · 106 Stat. 290

    Struck · 26 U.S.C. § 3405(d)

    Pub. L. 102–318, § 521(b)(38), struck out par. (4) which defined “qualified total distribution” and provided special rule for accumulated deductible employee contributions in determining qualified total distribution

    Target inherited from the preceding amendment note.

    Source evidence

    Code amendment note
    Pub. L. 102–318, § 521(b)(38), struck out par. (4) which defined “qualified total distribution” and provided special rule for accumulated deductible employee contributions in determining qualified total distribution.

    Enacted provision · exact public law section
    (38) Paragraph (4) of section 3405(d) (relating to qualified total distributions) is hereby repealed.

22. 1992

    Unemployment Compensation Amendments of 1992

    Pub. L. 102–318 § 522(b)(1) · 106 Stat. 290

    Redesignated · 26 U.S.C. § 3405(e); 26 U.S.C. § 3405(f)

    Pub. L. 102–318, § 522(b)(1), redesignated subsecs. (d) and (e) as (e) and (f), respectively

    Source evidence

    Code amendment note
    Subsecs. (e), (f). Pub. L. 102–318, § 522(b)(1), redesignated subsecs. (d) and (e) as (e) and (f), respectively.

    Enacted provision · exact public law section
    (1) In general.— Section 3405 (relating to special rules for pensions, annuities, and certain other deferred income) is amended by redesignating subsections (c), (d), and (e) as subsections (d), (e), and (f) and by inserting after subsection (b) the following new subsection: “(c) Eligible Rollover Distributions.— “(1) In general.— In the case of any designated distribution which is an eligible rollover distribution— “(A) subsections (a) and (b) shall not apply, and “(B) the payor of such distribution shall withhold from such distribution an amount equal to 20 percent of such distribution. “(2) Exception.— Paragraph (1)(B) shall not apply to any distribution if the distributee elects under section 401(a)(31)(A) to have such distribution paid directly to an eligible retirement plan. “(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) (or in the case of an annuity contract under section 403(b), a distribution from such contract described in section 402(f)(2)(A)).”

23. 1996

    Small Business Job Protection Act of 1996

    Pub. L. 104–188 title I § 1704(t)(71) · 110 Stat. 1755

    Substituted · 26 U.S.C. § 3405(e)(12)

    Pub. L. 104–188 substituted “(b)(2)” for “(b)(3)” in closing provisions

    Source evidence

    Code amendment note
    Subsec. (e)(12). Pub. L. 104–188 substituted “(b)(2)” for “(b)(3)” in closing provisions.

    Enacted provision · exact public law section
    (71) Paragraph (12) of section 3405(e) is amended by striking “(b)(3)” and inserting “(b)(2)”.

24. 2000

    Consolidated Appropriations Act, 2001

    Pub. L. 106–554 § 1(a)(7)(tIII)(s314)(b) · 114 Stat. 2763

    Inserted · 26 U.S.C. § 3405(e)(1)(B)

    Pub. L. 106–554 inserted “(other than a Roth IRA)” after “individual retirement plan” in concluding provisions

    Source evidence

    Code amendment note
    Subsec. (e)(1)(B). Pub. L. 106–554 inserted “(other than a Roth IRA)” after “individual retirement plan” in concluding provisions.

    Enacted provision · exact public law section
    (7) H.R. 5662, as introduced on December 14, 2000.

25. 2001

    Pub. L. 107–16 § 641(a)(1)(D)(ii) · 115 Stat. 38

    Amended · 26 U.S.C. § 3405(c)(3)

    Pub. L. 107–16, § 641(a)(1)(D)(ii), reenacted heading without change and amended text of par. (3) generally. Prior to amendment, text read as follows: “For purposes of this subsection, the term ‘eligible rollover distribution’ has the meaning given such term by section 402(f)(2)(A) (or in the case of an annuity contract under section 403(b), a distribution from such contract described in section 402(f)(2)(A)).”

    Source evidence

    Code amendment note
    Subsec. (c)(3). Pub. L. 107–16, § 641(a)(1)(D)(ii), reenacted heading without change and amended text of par. (3) generally. Prior to amendment, text read as follows: “For purposes of this subsection, the term ‘eligible rollover distribution’ has the meaning given such term by section 402(f)(2)(A) (or in the case of an annuity contract under section 403(b), a distribution from such contract described in section 402(f)(2)(A)).”

    Enacted provision · exact public law section
    (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).”.

26. 2001

    Pub. L. 107–16 § 641(a)(1)(D)(iii) · 115 Stat. 38

    Added · 26 U.S.C. § 3405(d)(2)(B)(iv)

    Pub. L. 107–16, § 641(a)(1)(D)(iii), added cl. (iv)

    Source evidence

    Code amendment note
    Subsec. (d)(2)(B)(iv). Pub. L. 107–16, § 641(a)(1)(D)(iii), added cl. (iv).

    Enacted provision · exact public law section
    (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).”.

27. 2017

    Pub. L. 115–97 § 11041(c)(2)(F) · 131 Stat. 2054

    Substituted · 26 U.S.C. § 3405(a)(3)

    Pub. L. 115–97, § 11041(c)(2)(F), substituted “allowance” for “exemption”

    Source evidence

    Code amendment note
    Subsec. (a)(3). Pub. L. 115–97, § 11041(c)(2)(F), substituted “allowance” for “exemption”.

    Enacted provision · exact public law section
    (F) Paragraphs (3) and (4) of section 3405(a) (and the heading for such paragraph (4)) 26 USC 3405. are each amended by striking “exemption” each place it appears and inserting “allowance”.

    Effective date note
    Amendment by Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 11041(f)(1) of Pub. L. 115–97, set out as a note under section 151 of this title.

28. 2017

    Pub. L. 115–97 title I § 11041(c)(2)(F) · 131 Stat. 2054

    1. Substituted · 26 U.S.C. § 3405(a)(4)

       Pub. L. 115–97, in heading, substituted “allowance” for “exemption” and in text

    2. Substituted · 26 U.S.C. § 3405(a)(4)

       Pub. L. 115–97, in heading, substituted “allowance” for “exemption”

    3. Substituted · 26 U.S.C. § 3405(a)(4)

       Pub. L. 115–97, in heading, substituted “shall be determined under rules prescribed by the Secretary” for “shall be determined by treating the payee as a married individual claiming 3 withholding exemptions”

    Source evidence

    Code amendment note
    Subsec. (a)(4). Pub. L. 115–97, in heading, substituted “allowance” for “exemption” and in text, substituted “allowance” for “exemption” and “shall be determined under rules prescribed by the Secretary” for “shall be determined by treating the payee as a married individual claiming 3 withholding exemptions”.

    Enacted provision · exact public law section
    (F) Paragraphs (3) and (4) of section 3405(a) (and the heading for such paragraph (4)) 26 USC 3405. are each amended by striking “exemption” each place it appears and inserting “allowance”.

    Effective date note
    Amendment by Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 11041(f)(1) of Pub. L. 115–97, set out as a note under section 151 of this title.

37 of 39 references resolved to an enrolled provision · 2 partial