Keep Student Loans Affordable Act of 2013

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Keep Student Loans Affordable Act of 
2013''.

SEC. 2. INTEREST RATE EXTENSION.

    Section 455(b)(7)(D) of the Higher Education Act of 1965 (20 U.S.C. 
1087e(b)(7)(D)) is amended--
            (1) in the matter preceding clause (i), by striking ``and 
        before July 1, 2013,'' and inserting ``and before July 1, 
        2014,''; and
            (2) in clause (v), by striking ``and before July 1, 2013,'' 
        and inserting ``and before July 1, 2014,''.

SEC. 3. MODIFICATIONS OF REQUIRED DISTRIBUTION RULES FOR PENSION PLANS.

    (a) In General.--Section 401(a)(9)(B) of the Internal Revenue Code 
of 1986 is amended to read as follows:
                    ``(B) Required distributions where employee dies 
                before entire interest is distributed.--
                            ``(i) 5-year general rule.--A trust shall 
                        not constitute a qualified trust under this 
                        section unless the plan provides that, if an 
                        employee dies before the distribution of the 
                        employee's interest (whether or not such 
                        distribution has begun in accordance with 
                        subparagraph (A)), the entire interest of the 
                        employee will be distributed within 5 years 
                        after the death of such employee.
                            ``(ii) Exception for eligible designated 
                        beneficiaries.--If--
                                    ``(I) any portion of the employee's 
                                interest is payable to (or for the 
                                benefit of) an eligible designated 
                                beneficiary,
                                    ``(II) such portion will be 
                                distributed (in accordance with 
                                regulations) over the life of such 
                                eligible designated beneficiary (or 
                                over a period not extending beyond the 
                                life expectancy of such beneficiary), 
                                and
                                    ``(III) such distributions begin 
                                not later than 1 year after the date of 
                                the employee's death or such later date 
                                as the Secretary may by regulations 
                                prescribe,
                        then, for purposes of clause (i) and except as 
                        provided in clause (iv) or subparagraph 
                        (E)(iii), the portion referred to in subclause 
                        (I) shall be treated as distributed on the date 
                        on which such distributions begin.
                            ``(iii) Special rule for surviving spouse 
                        of employee.--If the eligible designated 
                        beneficiary referred to in clause (ii)(I) is 
                        the surviving spouse of the employee--
                                    ``(I) the date on which the 
                                distributions are required to begin 
                                under clause (ii)(III) shall not be 
                                earlier than the date on which the 
                                employee would have attained age 70\1/
                                2\, and
                                    ``(II) if the surviving spouse dies 
                                before the distributions to such spouse 
                                begin, this subparagraph shall be 
                                applied as if the surviving spouse were 
                                the employee.
                            ``(iv) Rules upon death of eligible 
                        designated beneficiary.--If an eligible 
                        designated beneficiary dies before the portion 
                        of an employee's interest described in clause 
                        (ii) is entirely distributed, clause (ii) shall 
                        not apply to any beneficiary of such eligible 
                        designated beneficiary and the remainder of 
                        such portion shall be distributed within 5 
                        years after the death of such beneficiary.''.
    (b) Definition of Eligible Designated Beneficiary.--Section 
401(a)(9)(E) of the Internal Revenue Code of 1986 is amended to read as 
follows:
                    ``(E) Definitions and rules relating to designated 
                beneficiary.--For purposes of this paragraph--
                            ``(i) Designated beneficiary.--The term 
                        `designated beneficiary' means any individual 
                        designated as a beneficiary by the employee.
                            ``(ii) Eligible designated beneficiary.--
                        The term `eligible designated beneficiary' 
                        means, with respect to any employee, any 
                        designated beneficiary who, as of the date of 
                        death of the employee, is--
                                    ``(I) the surviving spouse of the 
                                employee,
                                    ``(II) subject to clause (iii), a 
                                child of the employee who has not 
                                reached majority (within the meaning of 
                                subparagraph (F)),
                                    ``(III) disabled (within the 
                                meaning of section 72(m)(7)),
                                    ``(IV) a chronically ill individual 
                                (within the meaning of section 
                                7702B(c)(2), except that the 
                                requirements of subparagraph (A)(i) 
                                thereof shall only be treated as met if 
                                there is a certification that, as of 
                                such date, the period of inability 
                                described in such subparagraph with 
                                respect to the individual is an 
                                indefinite one that is reasonably 
                                expected to be lengthy in nature), or
                                    ``(V) an individual not described 
                                in any of the preceding subparagraphs 
                                who is not more than 10 years younger 
                                than the employee.
                            ``(iii) Special rule for children.--Subject 
                        to subparagraph (F), an individual described in 
                        clause (ii)(II) shall cease to be an eligible 
                        designated beneficiary as of the date the 
                        individual reaches majority and the requirement 
                        of subparagraph (B)(i) shall not be treated as 
                        met with respect to any remaining portion of an 
                        employee's interest payable to the individual 
                        unless such portion is distributed within 5 
                        years after such date.''.
    (c) Required Beginning Date.--Section 401(a)(9)(C) of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
clause:
                            ``(v) Employees becoming 5-percent owners 
                        after age 70\1/2\.--If an employee becomes a 5-
                        percent owner (as defined in section 416) with 
                        respect to a plan year ending in a calendar 
                        year after the calendar year in which the 
                        employee attains age 70\1/2\, then clause 
                        (i)(II) shall be applied by substituting the 
                        calendar year in which the employee became such 
                        an owner for the calendar year in which the 
                        employee retires.''.
    (d) Effective Dates.--
            (1) In general.--Except as provided in this subsection, the 
        amendments made by this section shall apply to distributions 
        with respect to employees who die after December 31, 2013.
            (2) Required beginning date.--
                    (A) In general.--The amendment made by subsection 
                (c) shall apply to employees becoming a 5-percent owner 
                with respect to plan years ending in calendar years 
                beginning before, on, or after the date of the 
                enactment of this Act.
                    (B) Special rule.--If--
                            (i) an employee became a 5-percent owner 
                        with respect to a plan year ending in a 
                        calendar year which began before January 1, 
                        2013, and
                            (ii) the employee has not retired before 
                        calendar year 2014,
                such employee shall be treated as having become a 5-
                percent owner with respect to a plan year ending in 
                2013 for purposes of applying section 401(a)(9)(C)(v) 
                of the Internal Revenue Code of 1986 (as added by the 
                amendment made by subsection (c)).
            (3) Exception for certain beneficiaries.--If a designated 
        beneficiary of an employee who dies before January 1, 2014, 
        dies after December 31, 2013--
                    (A) the amendments made by this section shall apply 
                to any beneficiary of such designated beneficiary, and
                    (B) the designated beneficiary shall be treated as 
                an eligible designated beneficiary for purposes of 
                applying section 401(a)(9)(B)(iv) of such Code (as in 
                effect after the amendments made by this section).
            (4) Exception for certain existing annuity contracts.--
                    (A) In general.--The amendments made by this 
                section shall not apply to a qualified annuity which is 
                a binding annuity contract in effect on the date of the 
                enactment of this Act and at all times thereafter.
                    (B) Qualified annuity contract.--For purposes of 
                this paragraph, the term ``qualified annuity'' means, 
                with respect to an employee, an annuity--
                            (i) which is a commercial annuity (as 
                        defined in section 3405(e)(6) of such Code) or 
                        payable by a defined benefit plan,
                            (ii) under which the annuity payments are 
                        substantially equal periodic payments (not less 
                        frequently than annually) over the lives of 
                        such employee and a designated beneficiary (or 
                        over a period not extending beyond the life 
                        expectancy of such employee or the life 
                        expectancy of such employee and a designated 
                        beneficiary) in accordance with the regulations 
                        described in section 401(a)(9)(A)(ii) of such 
                        Code (as in effect before such amendments) and 
                        which meets the other requirements of this 
                        section 401(a)(9) of such Code (as so in 
                        effect) with respect to such payments, and
                            (iii) with respect to which--
                                    (I) annuity payments to the 
                                employee have begun before January 1, 
                                2014, and the employee has made an 
                                irrevocable election before such date 
                                as to the method and amount of the 
                                annuity payments to the employee or any 
                                designated beneficiaries, or
                                    (II) if subclause (I) does not 
                                apply, the employee has made an 
                                irrevocable election before the date of 
                                the enactment of this Act as to the 
                                method and amount of the annuity 
                                payments to the employee or any 
                                designated beneficiaries.

Summary: Keep Student Loans Affordable Act of 2013 - Amends title IV of the Higher Education Act of 1965 to extend the 3.4 interest rate on Direct Stafford loans first disbursed to undergraduate students between July 1, 2011, and July 1, 2013, to Direct Stafford loans first disbursed to undergraduate students between July 1, 2011, and July 1, 2014. Amends the Internal Revenue Code to modify rules for required distributions from tax-exempt pension plans to an employee who dies before such employee's entire interest is distributed to require such interest to be distributed within five years after the death of such employee, subject to exceptions for an eligible designated beneficiary and surviving spouse of such employee. Defines eligible designated beneficiary to include a disabled or chronically-ill individual. Exempts from such modification a binding annuity contract in effect on the enactment date of this Act.