II 

115TH CONGRESS 

1ST SESSION S. 940 

To amend the Internal Revenue Code of 1986 to modify the rules relating 

to loans made from a qualified employer plan, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

APRIL 25, 2017 

Mr. ENZI (for himself and Mr. NELSON) introduced the following bill; which 

was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to modify 

the rules relating to loans made from a qualified employer plan, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Shrinking Emergency 

5 Account Losses Act of 2017’’ or the ‘‘SEAL Act’’. 


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1 SEC. 2. EXTENDED ROLLOVER PERIOD FOR THE ROLLOVER 

2 OF PLAN LOAN OFFSET AMOUNTS IN CER3 TAIN CASES. 

4 (a) IN GENERAL.—Paragraph (3) of section 402(c) 

5 of the Internal Revenue Code of 1986 is amended by add6 ing at the end the following new subparagraph: 

7 ‘‘(C) ROLLOVER OF CERTAIN PLAN LOAN

8 OFFSET AMOUNTS.— 

9 ‘‘(i) IN GENERAL.—In the case of a 

10 qualified plan loan offset amount, para11 graph (1) shall not apply to any transfer 

12 of such amount made after the due date 

13 (including extensions) for filing the return 

14 of tax for the taxable year in which such 

15 amount is treated as distributed from a 

16 qualified employer plan. 

17 ‘‘(ii) QUALIFIED PLAN LOAN OFFSET

18 AMOUNT.—For purposes of this subpara19 graph, the term ‘qualified plan loan offset 

20 amount’ means a plan loan offset amount 

21 which is treated as distributed from a 

22 qualified employer plan to a participant or 

23 beneficiary solely by reason of— 

24 ‘‘(I) the termination of the quali25 fied employer plan, or 


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1 ‘‘(II) the failure to meet the re2 payment terms of the loan from such 

3 plan because of the severance from 

4 employment of the participant. 

5 ‘‘(iii) PLAN LOAN OFFSET AMOUNT.— 

6 For purposes of clause (ii), the term ‘plan 

7 loan offset amount’ means the amount by 

8 which the participant’s accrued benefit 

9 under the plan is reduced in order to repay 

10 a loan from the plan. 

11 ‘‘(iv) LIMITATION.—This subpara12 graph shall not apply to any plan loan off13 set amount unless such plan loan offset 

14 amount relates to a loan to which section 

15 72(p)(1) does not apply by reason of sec16 tion 72(p)(2). 

17 ‘‘(v) QUALIFIED EMPLOYER PLAN.— 

18 For purposes of this subsection, the term 

19 ‘qualified employer plan’ has the meaning 

20 given such term by section 72(p)(4).’’. 

21 (b) CONFORMING AMENDMENT.—Subparagraph (A) 

22 of section 402(c)(3) of the Internal Revenue Code of 1986 

23 is amended by striking ‘‘subparagraph (B)’’ and inserting 

24 ‘‘subparagraphs (B) and (C)’’. 


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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to transfers made after the date 

3 of the enactment of this Act. 

4 SEC. 3. MODIFICATION OF RULES GOVERNING HARDSHIP 

5 DISTRIBUTIONS. 

6 Not later than 1 year after the date of the enactment 

7 of this Act, the Secretary of the Treasury shall modify 

8 Treasury Regulation section 1.401(k)–1(d)(3)(iv)(E) to— 

9 (1) delete the prohibition imposed by paragraph 

10 (2) thereof, and 

11 (2) to make any other modifications necessary 

12 to carry out the purposes of section 

13 401(k)(2)(B)(i)(IV) of the Internal Revenue Code of 

14 1986. 

15 SEC. 4. QUALIFIED EMPLOYER PLANS PROHIBITED FROM 

16 MAKING LOANS THROUGH CREDIT CARDS 

17 AND OTHER SIMILAR ARRANGEMENTS. 

18 (a) IN GENERAL.—Paragraph (2) of section 72(p) of 

19 the Internal Revenue Code of 1986 is amended by redesig20 nating subparagraph (D) as subparagraph (E) and by in21 serting after subparagraph (C) the following new subpara22 graph: 

23 ‘‘(D) PROHIBITION OF LOANS THROUGH

24 CREDIT CARDS AND OTHER SIMILAR ARRANGE25 MENTS.—Subparagraph (A) shall not apply to 


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1 any loan which is made through the use of any 

2 credit card or any other similar arrangement.’’. 

3 (b) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to plan years beginning after the 

5 date which is 60 days after the date of the enactment of 

6 this Act. 

Æ 


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