To amend title I of the Employee Retirement Income Security Act and the Internal Revenue Code to allow for alienation of benefits to satisfy court judgments, decrees, or orders requiring restitution for embezzlement of State or local government funds.

Summary: Public Employer's Restitution Act of 2003 - Amends the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code to allow alienation of an individual's benefits under certain pension plans in order to satisfy, in part or whole, court judgments, decrees, or orders requiring restitution for embezzlement of State or local government funds (qualified embezzlement restitution orders).

Gives priority, before payment of such benefits to a State or local government under such an order, to their payment to any other aggrieved State or local government under a previously determined qualified: (1) embezzlement restitution order; or (2) domestic relations order that has such government as an alternate payee.

SECTION 1. SHORT TITLE.

     This Act may be cited as the ``Public Employer's Restitution Act 
of 2003'' .

SEC. 2. ALIENATION OF PENSION PLAN BENEFITS TO SATISFY COURT JUDGMENTS, 
              DECREES, OR ORDERS REQUIRING RESTITUTION FOR EMBEZZLEMENT 
              OF STATE OR LOCAL GOVERNMENT FUNDS.

    (a) Amendment to the Employee Retirement Income Security Act of 
1974.--
            (1) In general.--Section 206(d) of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1056(d)) is amended by 
        adding at the end the following new paragraph:
    ``(6)(A) Paragraph (1) shall apply to the creation, assignment, or 
recognition of a right to any benefit payable with respect to a 
participant pursuant to an embezzlement restitution order, except that 
paragraph (1) shall not apply if the order is determined to be a 
qualified embezzlement restitution order. Each pension plan shall 
provide for the payment of benefits in accordance with the applicable 
requirements of any qualified embezzlement restitution order.
    ``(B) For purposes of this paragraph--
            ``(i) the term `qualified embezzlement restitution order' 
        means an embezzlement restitution order--
                    ``(I) which creates or recognizes the existence of 
                an aggrieved State or local government's right to, or 
                assigns to an aggrieved State or local government the 
                right to, receive all or a portion of the benefits 
                payable with respect to a participant under a plan, and
                    ``(II) with respect to which the requirements of 
                subparagraphs (C) and (D) are met, and
            ``(ii) the term `embezzlement restitution order' means an 
        order arising under a judgment of conviction of an individual 
        by a court of competent jurisdiction of the crime of 
        embezzlement in violation of the applicable laws of the United 
        States or of any State or political subdivision thereof, which 
        provides for restitution to the government of any State or 
        political subdivision thereof of losses sustained by such 
        government in connection with embezzlement of the funds of such 
        government by such individual.
    ``(C) A qualified embezzlement restitution order meets the 
requirements of this subparagraph only if such order clearly 
specifies--
            ``(i) the name and the last known mailing address (if any) 
        of the participant and the name and mailing address of each 
        aggrieved State or local government covered by the order,
            ``(ii) the amount or percentage of the participant's 
        benefits to be paid by the plan to each such aggrieved State or 
        local government, or the manner in which such amount or 
        percentage is to be determined,
            ``(iii) the number of payments or period to which such 
        order applies, and
            ``(iv) each plan to which such order applies.
    ``(D) A qualified embezzlement restitution order meets the 
requirements of this subparagraph only if such order--
            ``(i) does not require a plan to provide any type or form 
        of benefit, or any option, not otherwise provided under the 
        plan,
            ``(ii) does not require the plan to provide increased 
        benefits (determined on the basis of actuarial value), and
            ``(iii) does not require the payment of benefits to the 
        government of any State or political subdivision thereof which 
        are required to be paid to any other entity--
                    ``(I) as an aggrieved State or local government 
                under another order previously determined to be a 
                qualified embezzlement restitution order, or
                    ``(II) as an alternate payee under an order 
                previously determined to be a qualified domestic 
                relations order (as defined in paragraph (3)(B)(i)).
    ``(E) The provisions of subparagraphs (E), (G), (H), (I), and (M) 
of paragraph (3) shall apply for purposes of this paragraph in the same 
manner and to the same extent as such subparagraphs apply for purposes 
of paragraph (3), except that--
            ``(i) any reference to a `qualified domestic relations 
        order` or a `domestic relations order' shall be deemed a 
        reference to a qualified embezzlement restitution order or an 
        embezzlement restitution order, respectively, and
            ``(ii) any reference to an `alternate payee' shall be 
        deemed a reference to an aggrieved State or local government.
    ``(F) Notwithstanding subparagraph (A), paragraph (1) shall apply 
with respect to the creation, assignment, or recognition of a right to 
any benefit payable with respect to a participant pursuant to any 
embezzlement restitution order if the requirements of paragraph (4)(C) 
are met with respect to the plan. In applying paragraph (4)(C) and 
paragraph (5) for purposes of this subparagraph--
            ``(i) any reference to an `offset' shall be deemed a 
        reference to the creation, assignment, or recognition of a 
        right to any benefit payable with respect to the participant 
        pursuant to an embezzlement restitution order,
            ``(ii) any reference to a `judgment, order, decree, or 
        settlement' to pay an amount to the plan shall be deemed a 
        reference to the embezzlement restitution order, and
            ``(iii) any reference to a `violation of part 4' of 
        subtitle B shall be deemed a reference to embezzlement in 
        violation of the applicable laws of the United States or of any 
        State or political subdivision thereof.
    ``(G) For purposes of this paragraph, the term `aggrieved State or 
local government' means, with respect to any plan participant, the 
government of a State or a political subdivision thereof that is 
recognized by an embezzlement restitution order as having a right to 
receive as restitution all, or a portion of, the benefits payable under 
the plan with respect to such participant.
    ``(H) This paragraph shall not apply to any plan to which paragraph 
(1) does not apply.
    ``(I) In prescribing regulations under this paragraph, the 
Secretary shall consult with the Secretary of the Treasury.''.
            (2) Clarification of preemption provision.--Paragraph (7) 
        of section 514(b) of such Act (29 U.S.C. 1144(b)(7)) is amended 
        by inserting ``qualified embezzlement restitution orders 
        (within the meaning of section 206(d)(6)(B)(i)),'' after 
        ``section 206(d)(3)(B)(i)),''.
    (b) Amendments to the Internal Revenue Code of 1986.--
            (1) In general.--Paragraph (13) of section 401(a) of the 
        Internal Revenue Code of 1986 (relating to assignment and 
        alienation) is amended by adding at the end the following new 
        subparagraph:
                    ``(E) Special rules for qualified embezzlement 
                restitution orders.--Subparagraph (A) shall not apply 
                with respect to the creation, assignment, or 
                recognition of a right to any benefit payable with 
                respect to a participant pursuant to an embezzlement 
                restitution order, except that subparagraph (A) shall 
                not apply if the order is determined to be a qualified 
                embezzlement restitution order.''.
            (2) Qualified embezzlement restitution order defined.--
        Section 414 of such Code (relating to definitions and special 
        rules) is amended by adding at the end the following new 
        subsection:
    ``(w) Qualified Embezzlement Restitution Order Defined.--For 
purposes of this subsection and section 401(a)(13)--
            ``(1) In general.--
                    ``(A) Qualified embezzlement restitution order.--
                The term `qualified embezzlement restitution order' 
                means an embezzlement restitution order--
                            ``(i) which creates or recognizes the 
                        existence of an aggrieved State or local 
                        government's right to, or assigns to an 
                        aggrieved State or local government the right 
                        to, receive all or a portion of the benefits 
                        payable with respect to a participant under a 
                        plan, and
                            ``(ii) with respect to which the 
                        requirements of paragraphs (2) and (3) are met.
                    ``(B) Embezzlement restitution order.--The term 
                `embezzlement restitution order' means an order arising 
                under a judgment of conviction of an individual by a 
                court of competent jurisdiction of the crime of 
                embezzlement in violation of the applicable laws of the 
                United States or of any State or political subdivision 
                thereof, which provides for restitution to the 
                government of any State or political subdivision 
                thereof of losses sustained by such government in 
                connection with the embezzlement of the funds of such 
                government by such individual.
            ``(2) Order must clearly specify certain facts.--A 
        qualified embezzlement restitution order meets the requirements 
        of this paragraph only if such order clearly specifies--
                    ``(A) the name and the last known mailing address 
                (if any) of the participant and the name and mailing 
                address of each aggrieved State or local government 
                covered by the order,
                    ``(B) the amount or percentage of the participant's 
                benefits to be paid by the plan to each such aggrieved 
                State or local government, or the manner in which such 
                amount or percentage is to be determined,
                    ``(C) the number of payments or period to which 
                such order applies, and
                    ``(D) each plan to which such order applies.
            ``(3) Order may not alter amount, form, etc., of 
        benefits.--A qualified embezzlement restitution order meets the 
        requirements of this paragraph only if such order--
                    ``(A) does not require a plan to provide any type 
                or form of benefit, or any option, not otherwise 
                provided under the plan,
                    ``(B) does not require the plan to provide 
                increased benefits (determined on the basis of 
                actuarial value), and
                    ``(C) does not require the payment of benefits to 
                the government of any State or political subdivision 
                thereof which are required to be paid to any other 
                entity--
                            ``(i) as an aggrieved State or local 
                        government under another order previously 
                        determined to be a qualified embezzlement 
                        restitution order, or
                            ``(ii) as an alternate payee under an order 
                        previously determined to be a qualified 
                        domestic relations order (as defined in 
                        subsection (p)(1)(A)).
            ``(4) Application of certain provisions.--The provisions of 
        paragraphs (4), (6), (7), (10), (11), and (12) of subsection 
        (p) shall apply for purposes of this subsection and section 
        401(a)(13) in the same manner and to the same extent as such 
        paragraphs apply for purposes of subsection (p) and section 
        401(a)(13), except that--
                    ``(A) any reference to a `qualified domestic 
                relations order` or a `domestic relations order' shall 
                be deemed a reference to a qualified embezzlement 
                restitution order or an embezzlement restitution order, 
                respectively, and
                    ``(B) any reference to an `alternate payee' shall 
                be deemed a reference to an aggrieved State or local 
                government.
            ``(5) Inapplicability of embezzlement restitution orders in 
        the case of certain survivor annuity requirements applicable to 
        spouse.--Notwithstanding section 401(a)(13)(E), section 
        401(a)(13)(A) shall apply with respect to the creation, 
        assignment, or recognition of a right to any benefit payable 
        with respect to a participant pursuant to any embezzlement 
        restitution order if the requirements of section 
        401(a)(13)(C)(iii) are met with respect to the plan. In 
        applying subparagraphs (C)(iii) and (D) of section 401(a)(13) 
        for purposes of this paragraph--
                    ``(A) any reference to an `offset' shall be deemed 
                a reference to the creation, assignment, or recognition 
                of a right to any benefit payable with respect to the 
                participant pursuant to an embezzlement restitution 
                order,
                    ``(B) to pay an amount to the plan shall be deemed 
                a reference to the embezzlement restitution order, and
                    ``(C) any reference to a `violation of part 4' of 
                subtitle B of title I of the Employee Retirement Income 
                Security Act of 1974 shall be deemed a reference to 
                embezzlement in violation of the applicable laws of the 
                United States or of any State or political subdivision 
                thereof.
            ``(6) Aggrieved state or local government.--The term 
        `aggrieved State or local government' means, with respect to 
        any plan participant, the government of any State or political 
        subdivision thereof that is recognized by an embezzlement 
        restitution order as having a right to receive as restitution 
        all, or a portion of, the benefits payable under the plan with 
        respect to such participant.
            ``(7) Subsection not to apply to plans to which section 
        401(a)(13) does not apply.--This subsection shall not apply to 
        any plan to which section 401(a)(13) does not apply. For 
        purposes of this title, except as provided in regulations, any 
        distribution from an annuity contract under section 403(b) 
        pursuant to a qualified embezzlement restitution order shall be 
        treated in the same manner as a distribution from a plan to 
        which section 401(a)(13) applies.
            ``(8) Consultation with the secretary.--In prescribing 
        regulations under this subsection and section 401(a)(13), the 
        Secretary of Labor shall consult with the Secretary.''.
    (c) Effective Date.--The amendments made by this Act shall take 
effect January 1, 2004.