To allow employees of a commercial passenger airline carrier who receive payments in a bankruptcy proceeding to roll over such payments into an individual retirement plan, and for other purposes.

Summary: Allows employees of commercial passenger airlines who receive payments from a bankruptcy case filed between September 11, 2001, and January 1, 2007, as compensation for lost pension plan benefits to rollover such payments into an individual retirement account (IRA), except for a Roth IRA, without tax or tax penalty.

SECTION 1. ROLLOVER OF AMOUNTS RECEIVED IN AIRLINE CARRIER BANKRUPTCY 
              TO ELIGIBLE RETIREMENT PLANS.

    (a) General Rule.--If--
            (1) a qualified airline employee receives any eligible 
        rollover amount, and
            (2) the qualified airline employee transfers any portion of 
        such amount to an individual retirement plan (as defined in 
        section 7701(a)(37) of the Internal Revenue Code of 1986) 
        within 180 days of receipt of such amount (or, if later, within 
        180 days of the date of the enactment of this Act),
then, except as provided in subsection (b), such amount (to the extent 
so transferred) shall not be includible in gross income for the taxable 
year in which paid.
    (b) Transfers to Roth IRAs.--
            (1) In general.--If a transfer described in subsection (a) 
        is made to a Roth IRA (as defined in section 408A of the 
        Internal Revenue Code of 1986), then--
                    (A) 50 percent of the portion of any eligible 
                rollover amount so transferred shall be includible in 
                gross income in the first taxable year following the 
                taxable year in which the eligible rollover amount was 
                paid, and
                    (B) 50 percent of such portion shall be includible 
                in gross income in the second taxable year following 
                the taxable year in which the eligible rollover amount 
                was paid.
            (2) Election to include in income in year of payment.--
        Notwithstanding paragraph (1), a qualified airline employee may 
        elect to include any portion so transferred in gross income in 
        the taxable year in which the eligible rollover amount was 
        paid.
            (3) Income limitations not to apply.--The limitations 
        described in section 408A(c)(3) of the Internal Revenue Code of 
        1986 shall not apply to a transfer to which paragraph (1) or 
        (2) applies.
    (c) Treatment of Eligible Rollover Amounts and Transfers.--
            (1) Treatment of eligible rollover amounts for employment 
        taxes.--For purposes of chapter 21 of the Internal Revenue Code 
        of 1986 and section 209 of the Social Security Act, an eligible 
        rollover amount shall not fail to be treated as a payment of 
        wages by the commercial passenger airline carrier to the 
        qualified airline employee in the taxable year of payment 
        because such amount is not includible in gross income by reason 
        of subsection (a) or is includible in income in a subsequent 
        taxable year by reason of subsection (b).
            (2) Treatment of rollovers.--A transfer under subsection 
        (a) shall be treated as a rollover contribution described in 
        section 408(d)(3) of the Internal Revenue Code of 1986, except 
        that in the case of a transfer to which subsection (b) applies, 
        the transfer shall be treated as a qualified rollover 
        contribution described in section 408A(e) of such Code.
    (d) Definitions and Special Rules.--For purposes of this section--
            (1) Eligible rollover amount.--
                    (A) In general.--The term ``eligible rollover 
                amount'' means any payment of any money or other 
                property which is payable by a commercial passenger 
                airline carrier to a qualified airline employee--
                            (i) under the approval of an order of a 
                        Federal bankruptcy court in a case filed after 
                        September 11, 2001, and before January 1, 2007, 
                        and
                            (ii) in respect of the qualified airline 
                        employee's interest in a bankruptcy claim 
                        against the carrier, any note of the carrier 
                        (or amount paid in lieu of a note being 
                        issued), or any other fixed obligation of the 
                        carrier to pay a lump sum amount.
                    (B) Exception.--An eligible rollover amount shall 
                not include any amount payable on the basis of the 
                carrier's future earnings or profits.
            (2) Qualified airline employee.--The term ``qualified 
        airline employee'' means an employee or former employee of a 
        commercial passenger airline carrier who was a participant in a 
        defined benefit plan maintained by the carrier which--
                    (A) is a plan described in section 401(a) of the 
                Internal Revenue Code of 1986 which includes a trust 
                exempt from tax under section 501(a) of such Code, and
                    (B) was terminated or became subject to the 
                restrictions contained in paragraphs (2) and (3) of 
                section 402(b) of the Pension Protection Act of 2006.
            (3) Reporting requirements.--If a commercial passenger 
        airline carrier pays 1 or more eligible rollover amounts, the 
        carrier shall, within 90 days of such payment (or, if later, 
        within 90 days of the date of the enactment of this Act), 
        report--
                    (A) to the Secretary of the Treasury, the names of 
                the qualified airline employees to whom such amounts 
                were paid, and
                    (B) to the Secretary and to such employees, the 
                years and the amounts of the payments.
        Such reports shall be in such form, and contain such additional 
        information, as the Secretary may prescribe.
    (e) Effective Date.--This section shall apply to transfers made 
after the date of the enactment of this Act with respect to eligible 
rollover amounts paid before, on, or after such date.