To amend the Internal Revenue Code of 1986 to allow penalty-free withdrawals from pension plans for unemployed individuals who have exhausted their rights to unemployment compensation.

Summary: Unemployed Worker Assistance Act of 2011 - Amends the Internal Revenue Code to allow unemployed individuals who have exhausted all rights to unemployment compensation under federal or state law to make penalty-free withdrawals from tax-exempt pension and retirement plans.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Unemployed Worker Assistance Act of 
2011''.

SEC. 2. PENALTY-FREE WITHDRAWALS FOR THE UNEMPLOYED WHO HAVE EXHAUSTED 
              THEIR RIGHTS TO UNEMPLOYMENT COMPENSATION.

    (a) In General.--Paragraph (2) of section 72(t) of the Internal 
Revenue Code of 1986 (relating to subsection not to apply to certain 
distributions) is amended by adding at the end the following new 
subparagraph:
                    ``(H) Distributions to unemployed individuals who 
                have exhausted their rights to unemployment 
                compensation.--
                            ``(i) In general.--Distributions to an 
                        individual after separation from employment 
                        if--
                                    ``(I) such individual exhausted all 
                                rights to unemployment compensation 
                                under any Federal or State unemployment 
                                compensation law with respect to such 
                                separation, and
                                    ``(II) such distribution is made 
                                while such rights are exhausted and 
                                before reemployment or self-employment.
                            ``(ii) Amount distributed may be repaid.--
                                    ``(I) In general.--Any individual 
                                who receives a qualified distribution 
                                may, at any time during the 5-year 
                                period beginning on the day after the 
                                date on which such distribution was 
                                received, make one or more 
                                contributions in an aggregate amount 
                                not to exceed the amount of such 
                                distribution to an eligible retirement 
                                plan of which such individual is a 
                                beneficiary and to which a rollover 
                                contribution of such distribution could 
                                be made under section 402(c), 
                                403(a)(4), 403(b)(8), 408(d)(3), or 
                                457(e)(16), as the case may be.
                                    ``(II) Treatment of repayments of 
                                distributions from eligible retirement 
                                plans other than iras.--For purposes of 
                                this title, if a contribution is made 
                                pursuant to subclause (I) with respect 
                                to a qualified distribution from an 
                                eligible retirement plan other than an 
                                individual retirement plan, then the 
                                taxpayer shall, to the extent of the 
                                amount of the contribution, be treated 
                                as having received the qualified 
                                distribution in an eligible rollover 
                                distribution (as defined in section 
                                402(c)(4)) and as having transferred 
                                the amount to the eligible retirement 
                                plan in a direct trustee to trustee 
                                transfer within 60 days of the 
                                distribution.
                                    ``(III) Treatment of repayments for 
                                distributions from iras.--For purposes 
                                of this title, if a contribution is 
                                made pursuant to subclause (I) with 
                                respect to a qualified distribution 
                                from an individual retirement plan (as 
                                defined by section 7701(a)(37)), then, 
                                to the extent of the amount of the 
                                contribution, the qualified 
                                distribution shall be treated as a 
                                distribution described in section 
                                408(d)(3) and as having been 
                                transferred to the eligible retirement 
                                plan in a direct trustee to trustee 
                                transfer within 60 days of the 
                                distribution.
                            ``(iii) Special rules.--
                                    ``(I) Qualified distributions 
                                treated as meeting plan distribution 
                                requirements.--For purposes of this 
                                title, a qualified distribution shall 
                                be treated as meeting the requirements 
                                of sections 401(k)(2)(B)(i), 
                                403(b)(7)(A)(ii), 403(b)(11), and 
                                457(d)(1)(A).
                                    ``(II) Exemption of distributions 
                                from trustee to trustee transfer and 
                                withholding rules.--For purposes of 
                                sections 401(a)(31), 402(f), and 3405, 
                                qualified distributions shall not be 
                                treated as eligible rollover 
                                distributions.
                            ``(iv) Definitions.--For purposes of this 
                        subparagraph--
                                    ``(I) Qualified distribution.--The 
                                term `qualified distribution' means any 
                                distribution meeting the requirements 
                                of clause (i).
                                    ``(II) Eligible retirement plan.--
                                The term `eligible retirement plan' has 
                                the meaning given such term by section 
                                402(c)(8)(B).
                            ``(v) Reemployment and self-employment.--
                        Rules similar to the rules of clauses (ii) and 
                        (iii) of subparagraph (D) shall apply for 
                        purposes of this subparagraph.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to distributions made after the date of the enactment of this 
Act.