I 

110TH CONGRESS 

1ST SESSION H. R. 2205 

To amend the Internal Revenue Code of 1986 to encourage guaranteed 

lifetime income payments from annuities and similar payments of life 

insurance proceeds at dates later than death by excluding from income 

a portion of such payments. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 8, 2007 

Mrs. JONES of Ohio (for herself, Mr. ENGLISH of Pennsylvania, Mr. GORDON

of Tennessee, Mrs. CAPITO, Mr. CROWLEY, Mr. RAMSTAD, Mr. LEWIS of 

Kentucky, Mr. SHAYS, Mr. TERRY, Ms. ROS-LEHTINEN, Mr. ANDREWS, 

Ms. BERKLEY, Mr. COLE of Oklahoma, Ms. SCHWARTZ, Mr. MURPHY of 

Connecticut, Ms. PRYCE of Ohio, Mrs. BIGGERT, Ms. GINNY BROWNWAITE of Florida, Mr. BURTON of Indiana, Mr. DAVIS of Alabama, Mr. 

PORTER, Ms. DELAURO, Mr. PENCE, Mr. SAM JOHNSON of Texas, Mr. 

EMANUEL, Mr. COURTNEY, Mr. PAUL, Mr. CANTOR, Mr. GERLACH, and 

Mr. LARSON of Connecticut) introduced the following bill; which was referred to the Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to encourage 

guaranteed lifetime income payments from annuities and 

similar payments of life insurance proceeds at dates later 

than death by excluding from income a portion of such 

payments. 

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


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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘Retirement Security 

3 for Life Act of 2007’’. 

4 SEC. 2. FINDINGS. 

5 The Congress finds the following: 

6 (1) Just over half of all United States workers 

7 actively participate in tax-deferred retirement sav8 ings plans which are comprised of assets of nearly 

9 $5,600,000,000,000. 

10 (2) Congress has historically promoted policies 

11 that will encourage greater private savings for retire12 ment, but has not devoted the same attention to de13 veloping policies that will help people manage the 

14 savings once they reach retirement age. 

15 (3) Qualified retirement savings plans are the 

16 product of such policies and provide Americans with 

17 valuable resources for their later years. 

18 (4) Non-qualified plans provide an additional 

19 retirement benefit. 

20 (5) 77,000,000 members of the baby boom gen21 eration are approaching retirement age and demo22 graphic data indicate that members of this genera23 tion can expect to live on average an additional 20 

24 to 30 years after retirement. 

25 (6) The commitment of Congress to creating in26 centives to promote private savings and to manage 


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1 accumulated savings does not supercede the respon2 sibility of Congress to reduce the national debt and 

3 bring the Federal budget back into balance. 

4 (7) Failure to address long term savings issues 

5 will only serve to increase the strain on Federal pro6 grams such as Social Security, Medicare, and Med7 icaid. 

8 (8) The national debt and annual budget defi9 cits pose a significant risk not only to national secu10 rity but also to the long-term solvency of the Social 

11 Security and Medicare programs. 

12 (9) Encouraging the prudent management of 

13 accumulated savings and personal responsibility for 

14 retirement income security will reduce the potential 

15 financial threat to well-established entitlement pro16 grams for senior citizens. 

17 (10) The budget impact of this Act will be miti18 gated through the legislative process so that the en19 actment of this Act will not add to the $8.8 trillion 

20 national debt. 

21 SEC. 3. EXCLUSION FOR LIFETIME ANNUITY PAYMENTS. 

22 (a) LIFETIME ANNUITY PAYMENTS UNDER ANNUITY

23 CONTRACTS.—Section 72(b) of the Internal Revenue Code 

24 of 1986 (relating to exclusion ratio) is amended by adding 

25 at the end the following new paragraph: 


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1 ‘‘(5) EXCLUSION FOR LIFETIME ANNUITY PAY2 MENTS.— 

3 ‘‘(A) IN GENERAL.—In the case of lifetime 

4 annuity payments received under one or more 

5 annuity contracts in any taxable year, gross in6 come shall not include 50 percent of the portion 

7 of lifetime annuity payments otherwise includ8 ible (without regard to this paragraph) in gross 

9 income under this section. For purposes of the 

10 preceding sentence, the amount excludable from 

11 gross income in any taxable year shall not ex12 ceed $20,000. 

13 ‘‘(B) COST-OF-LIVING ADJUSTMENT.—In 

14 the case of taxable years beginning after De15 cember 31, 2008, the $20,000 amount in sub16 paragraph (A) shall be increased by an amount 

17 equal to— 

18 ‘‘(i) such dollar amount, multiplied by 

19 ‘‘(ii) the cost-of-living adjustment de20 termined under section 1(f)(3) for the cal21 endar year in which the taxable year be22 gins, determined by substituting ‘calendar 

23 year 2007’ for ‘calendar year 1992’ in sub24 paragraph (B) thereof. 


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1 If any amount as increased under the preceding 

2 sentence is not a multiple of $500, such amount 

3 shall be rounded to the next lower multiple of 

4 $500. 

5 ‘‘(C) APPLICATION OF PARAGRAPH.—Sub6 paragraph (A) shall not apply to— 

7 ‘‘(i) any amount received under an eli8 gible deferred compensation plan (as de9 fined in section 457(b)) or under a quali10 fied retirement plan (as defined in section 

11 4974(c)), 

12 ‘‘(ii) any amount paid under an annu13 ity contract that is received by the bene14 ficiary under the contract— 

15 ‘‘(I) after the death of the annu16 itant in the case of payments de17 scribed in subsection (c)(5)(A)(ii)(III), 

18 unless the beneficiary is the surviving 

19 spouse of the annuitant, or 

20 ‘‘(II) after the death of the annu21 itant and joint annuitant in the case 

22 of payments described in subsection 

23 (c)(5)(A)(ii)(IV), unless the bene24 ficiary is the surviving spouse of the 


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1 last to die of the annuitant and the 

2 joint annuitant, or 

3 ‘‘(iii) any annuity contract that is a 

4 qualified funding asset (as defined in sec5 tion 130(d)), but without regard to wheth6 er there is a qualified assignment. 

7 ‘‘(D) INVESTMENT IN THE CONTRACT.— 

8 For purposes of this section, the investment in 

9 the contract shall be determined without regard 

10 to this paragraph.’’. 

11 (b) DEFINITIONS.—Subsection (c) of section 72 of 

12 the Internal Revenue Code of 1986 is amended by adding 

13 at the end the following new paragraph: 

14 ‘‘(5) LIFETIME ANNUITY PAYMENT.— 

15 ‘‘(A) IN GENERAL.—For purposes of sub16 section (b)(5), the term ‘lifetime annuity pay17 ment’ means any amount received as an annu18 ity under any portion of an annuity contract, 

19 but only if— 

20 ‘‘(i) the only person (or persons in the 

21 case of payments described in subclause 

22 (II) or (IV) of clause (ii)) legally entitled 

23 (by operation of the contract, a trust, or 

24 other legally enforceable means) to receive 

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1 itant or joint annuitant is such annuitant 

2 or joint annuitant, and 

3 ‘‘(ii) such amount is part of a series 

4 of substantially equal periodic payments 

5 made not less frequently than annually 

6 over— 

7 ‘‘(I) the life of the annuitant, 

8 ‘‘(II) the lives of the annuitant 

9 and a joint annuitant, but only if the 

10 annuitant is the spouse of the joint 

11 annuitant as of the annuity starting 

12 date or the difference in age between 

13 the annuitant and joint annuitant is 

14 15 years or less, 

15 ‘‘(III) the life of the annuitant 

16 with a minimum period of payments 

17 or with a minimum amount that must 

18 be paid in any event, or 

19 ‘‘(IV) the lives of the annuitant 

20 and a joint annuitant with a minimum 

21 period of payments or with a min22 imum amount that must be paid in 

23 any event, but only if the annuitant is 

24 the spouse of the joint annuitant as of 

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1 ference in age between the annuitant 

2 and joint annuitant is 15 years or 

3 less. 

4 ‘‘(iii) EXCEPTIONS.—For purposes of 

5 clause (ii), annuity payments shall not fail 

6 to be treated as part of a series of substan7 tially equal periodic payments— 

8 ‘‘(I) because the amount of the 

9 periodic payments may vary in accord10 ance with investment experience, re11 allocations among investment options, 

12 actuarial gains or losses, cost of living 

13 indices, a constant percentage applied 

14 not less frequently than annually, or 

15 similar fluctuating criteria, 

16 ‘‘(II) due to the existence of, or 

17 modification of the duration of, a pro18 vision in the contract permitting a 

19 lump sum withdrawal after the annu20 ity starting date, 

21 ‘‘(III) because the period between 

22 each such payment is lengthened or 

23 shortened, but only if at all times 

24 such period is no longer than one cal25 endar year, or 


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1 ‘‘(IV) because, in the case of an 

2 annuity payable over the life of an an3 nuitant and a joint annuitant, the 

4 amounts paid to the surviving annu5 itant after the death of the first annu6 itant are less than the amounts pay7 able during the joint lives of the two 

8 annuitants. 

9 ‘‘(B) ANNUITY CONTRACT.—For purposes 

10 of subparagraph (A) and subsections (b)(5) and 

11 (x), the term ‘annuity contract’ means a com12 mercial annuity (as defined by section 

13 3405(e)(6)), other than an endowment or life 

14 insurance contract. 

15 ‘‘(C) MINIMUM PERIOD OF PAYMENTS.— 

16 For purposes of subparagraph (A), the term 

17 ‘minimum period of payments’ means a guaran18 teed term of payments that does not exceed the 

19 greater of 10 years or— 

20 ‘‘(i) the life expectancy of the annu21 itant as of the annuity starting date, in the 

22 case of lifetime annuity payments de23 scribed in subparagraph (A)(ii)(III), or 

24 ‘‘(ii) the life expectancy of the annu25 itant and joint annuitant as of the annuity 


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1 starting date, in the case of lifetime annu2 ity payments described in subparagraph 

3 (A)(ii)(IV). 

4 For purposes of this subparagraph, life expect5 ancy shall be computed with reference to the ta6 bles prescribed by the Secretary under para7 graph (3). For purposes of subsection 

8 (x)(1)(C)(ii), the permissible minimum period of 

9 payments shall be determined as of the annuity 

10 starting date and reduced by one for each sub11 sequent year. 

12 ‘‘(D) MINIMUM AMOUNT THAT MUST BE

13 PAID IN ANY EVENT.—For purposes of subpara14 graph (A), the term ‘minimum amount that 

15 must be paid in any event’ means an amount 

16 payable to the designated beneficiary under an 

17 annuity contract that is in the nature of a re18 fund and does not exceed the greater of the 

19 amount applied to produce the lifetime annuity 

20 payments under the contract or the amount, if 

21 any, available for withdrawal under the contract 

22 on the date of death.’’. 

23 (c) RECAPTURE TAX FOR LIFETIME ANNUITY PAY24 MENTS.—Section 72 of the Internal Revenue Code of 

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1 section (y) and by inserting after subsection (w) the fol2 lowing new subsection: 

3 ‘‘(x) RECAPTURE TAX FOR MODIFICATIONS TO OR

4 REDUCTIONS IN LIFETIME ANNUITY PAYMENTS.— 

5 ‘‘(1) IN GENERAL.—If any amount received 

6 under an annuity contract is excluded from income 

7 by reason of subsection (b)(5) (relating to lifetime 

8 annuity payments), and— 

9 ‘‘(A) the series of payments under such 

10 contract is subsequently modified so any future 

11 payments are not lifetime annuity payments, 

12 ‘‘(B) after the date of receipt of the first 

13 lifetime annuity payment under the contract an 

14 annuitant receives a lump sum and thereafter is 

15 to receive annuity payments in a reduced 

16 amount under the contract, or 

17 ‘‘(C) after the date of receipt of the first 

18 lifetime annuity payment under the contract the 

19 dollar amount of any subsequent annuity pay20 ment is reduced and a lump sum is not paid in 

21 connection with the reduction, unless such re22 duction is— 

23 ‘‘(i) due to an event described in sub24 section (c)(5)(A)(iii), or 


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1 ‘‘(ii) due to the addition of, or in2 crease in, a minimum period of payments 

3 within the meaning of subsection (c)(5)(C) 

4 or a minimum amount that must be paid 

5 in any event (within the meaning of sub6 section (c)(5)(D)), 

7 then gross income for the first taxable year in 

8 which such modification or reduction occurs 

9 shall be increased by the recapture amount. 

10 ‘‘(2) RECAPTURE AMOUNT.— 

11 ‘‘(A) IN GENERAL.—For purposes of this 

12 subsection, the recapture amount shall be the 

13 amount, determined under rules prescribed by 

14 the Secretary, equal to the sum of— 

15 ‘‘(i) the excess of— 

16 ‘‘(I) the amount that was ex17 cluded from the taxpayer’s gross in18 come under subsection (b)(5) for all 

19 taxable years prior to the modification 

20 or reduction described in paragraph 

21 (1), over 

22 ‘‘(II) the amount that would have 

23 been excludable under such subsection 

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1 fications or reductions been in effect 

2 at all times, plus 

3 ‘‘(ii) interest for the deferral period at 

4 the underpayment rate established by sec5 tion 6621. 

6 ‘‘(B) DEFERRAL PERIOD.—For purposes 

7 of this subsection, the term ‘deferral period’ 

8 means the period beginning with the taxable 

9 year in which (without regard to subsection 

10 (b)(5)) the payment would have been includible 

11 in gross income and ending with the taxable 

12 year in which the modification described in 

13 paragraph (1) occurs. 

14 ‘‘(3) EXCEPTIONS TO RECAPTURE TAX.—Para15 graph (1) shall not apply in the case of any modi16 fication or reduction that occurs because an annu17 itant— 

18 ‘‘(A) dies or becomes disabled (within the 

19 meaning of subsection (m)(7)), 

20 ‘‘(B) becomes a chronically ill individual 

21 within the meaning of section 7702B(c)(2), or 

22 ‘‘(C) encounters hardship.’’. 

23 (d) LIFETIME DISTRIBUTIONS OF LIFE INSURANCE

24 DEATH BENEFITS.— 


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1 (1) IN GENERAL.—Section 101(d) of the Inter2 nal Revenue Code of 1986 (relating to payment of 

3 life insurance proceeds at a date later than death) 

4 is amended by adding at the end the following new 

5 paragraph: 

6 ‘‘(4) EXCLUSION FOR LIFETIME ANNUITY PAY7 MENTS.— 

8 ‘‘(A) IN GENERAL.—In the case of 

9 amounts to which this subsection applies, gross 

10 income shall not include the lesser of— 

11 ‘‘(i) 50 percent of the portion of life12 time annuity payments otherwise includible 

13 in gross income under this section (deter14 mined without regard to this paragraph), 

15 or 

16 ‘‘(ii) the amount in effect under sec17 tion 72(b)(5). 

18 ‘‘(B) RULES OF SECTION 72(b)(5) TO

19 APPLY.—For purposes of this paragraph, rules 

20 similar to the rules of section 72(b)(5) and sec21 tion 72(x) shall apply, substituting the term 

22 ‘beneficiary of the life insurance contract’ for 

23 the term ‘annuitant’ wherever it appears, and 

24 substituting the term ‘life insurance contract’ 


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1 for the term ‘annuity contract’ wherever it ap2 pears.’’. 

3 (2) CONFORMING AMENDMENT.—Section 

4 101(d)(1) of such Code is amended by inserting ‘‘or 

5 paragraph (4)’’ after ‘‘to the extent not excluded by 

6 the preceding sentence’’. 

7 (e) EFFECTIVE DATE.— 

8 (1) IN GENERAL.—The amendments made by 

9 this section shall apply to amounts received in cal10 endar years beginning after the date of the enact11 ment of this Act. 

12 (2) SPECIAL RULE FOR EXISTING CON13 TRACTS.—In the case of a contract in force on the 

14 date of the enactment of this Act that does not sat15 isfy the requirements of section 72(c)(5)(A) of the 

16 Internal Revenue Code of 1986 (as added by this 

17 section), or requirements similar to such section 

18 72(c)(5)(A) in the case of a life insurance contract, 

19 any modification to such contract (including a 

20 change in ownership) or to the payments thereunder 

21 that is made to satisfy the requirements of such sec22 tion (or similar requirements) shall not result in the 

23 recognition of any gain or loss, any amount being in24 cluded in gross income, or any addition to tax that 

25 otherwise might result from such modification, but 


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1 only if the modification is completed prior to the 

2 date that is 2 years after the date of the enactment 

3 of this Act. 

Æ 


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