II 

Calendar No. 124 

113TH CONGRESS 

1ST SESSION S. 1238 

To amend the Higher Education Act of 1965 to extend the current reduced 

interest rate for undergraduate Federal Direct Stafford Loans for 1 

year, to modify required distribution rules for pension plans, and for 

other purposes. 

IN THE SENATE OF THE UNITED STATES 

JUNE 27, 2013 

Mr. REED (for himself, Mrs. HAGAN, Mr. FRANKEN, Mr. HARKIN, Ms. STABENOW, Ms. WARREN, Mrs. MURRAY, Mr. REID, Ms. LANDRIEU, Mr. 

PRYOR, Mr. DURBIN, Mr. WHITEHOUSE, Mr. UDALL of New Mexico, Ms. 

KLOBUCHAR, Mr. BROWN, Mr. MENENDEZ, Mr. LEAHY, Mr. SANDERS, 

Mrs. SHAHEEN, Mr. SCHATZ, Mr. LEVIN, Ms. HIRONO, Mrs. MCCASKILL, Mr. MURPHY, Mr. BLUMENTHAL, Ms. BALDWIN, Mr. BEGICH, Mr. 

HEINRICH, Mrs. GILLIBRAND, Mr. CARDIN, Mr. MERKLEY, Mr. ROCKEFELLER, Mr. WYDEN, Mrs. BOXER, Ms. MIKULSKI, Mr. NELSON, Mr. 

JOHNSON of South Dakota, Mr. CASEY, and Mr. COONS) introduced the 

following bill; which was read twice and ordered placed on the calendar 

A BILL 

To amend the Higher Education Act of 1965 to extend 

the current reduced interest rate for undergraduate Federal Direct Stafford Loans for 1 year, to modify required 

distribution rules for pension plans, 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, 


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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘Keep Student Loans 

3 Affordable Act of 2013’’. 

4 SEC. 2. INTEREST RATE EXTENSION. 

5 Section 455(b)(7)(D) of the Higher Education Act of 

6 1965 (20 U.S.C. 1087e(b)(7)(D)) is amended— 

7 (1) in the matter preceding clause (i), by strik8 ing ‘‘and before July 1, 2013,’’ and inserting ‘‘and 

9 before July 1, 2014,’’; and 

10 (2) in clause (v), by striking ‘‘and before July 

11 1, 2013,’’ and inserting ‘‘and before July 1, 2014,’’. 

12 SEC. 3. MODIFICATIONS OF REQUIRED DISTRIBUTION 

13 RULES FOR PENSION PLANS. 

14 (a) IN GENERAL.—Section 401(a)(9)(B) of the Inter15 nal Revenue Code of 1986 is amended to read as follows: 

16 ‘‘(B) REQUIRED DISTRIBUTIONS WHERE

17 EMPLOYEE DIES BEFORE ENTIRE INTEREST IS

18 DISTRIBUTED.— 

19 ‘‘(i) 5-YEAR GENERAL RULE.—A trust 

20 shall not constitute a qualified trust under 

21 this section unless the plan provides that, 

22 if an employee dies before the distribution 

23 of the employee’s interest (whether or not 

24 such distribution has begun in accordance 

25 with subparagraph (A)), the entire interest 


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1 of the employee will be distributed within 

2 5 years after the death of such employee. 

3 ‘‘(ii) EXCEPTION FOR ELIGIBLE DES4 IGNATED BENEFICIARIES.—If— 

5 ‘‘(I) any portion of the employ6 ee’s interest is payable to (or for the 

7 benefit of) an eligible designated bene8 ficiary, 

9 ‘‘(II) such portion will be distrib10 uted (in accordance with regulations) 

11 over the life of such eligible des12 ignated beneficiary (or over a period 

13 not extending beyond the life expect14 ancy of such beneficiary), and 

15 ‘‘(III) such distributions begin 

16 not later than 1 year after the date of 

17 the employee’s death or such later 

18 date as the Secretary may by regula19 tions prescribe, 

20 then, for purposes of clause (i) and except 

21 as provided in clause (iv) or subparagraph 

22 (E)(iii), the portion referred to in sub23 clause (I) shall be treated as distributed on 

24 the date on which such distributions begin. 


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1 ‘‘(iii) SPECIAL RULE FOR SURVIVING

2 SPOUSE OF EMPLOYEE.—If the eligible 

3 designated beneficiary referred to in clause 

4 (ii)(I) is the surviving spouse of the em5 ployee— 

6 ‘‘(I) the date on which the dis7 tributions are required to begin under 

8 clause (ii)(III) shall not be earlier 

9 than the date on which the employee 

would have attained age 701 10 ⁄2, and 

11 ‘‘(II) if the surviving spouse dies 

12 before the distributions to such spouse 

13 begin, this subparagraph shall be ap14 plied as if the surviving spouse were 

15 the employee. 

16 ‘‘(iv) RULES UPON DEATH OF ELIGI17 BLE DESIGNATED BENEFICIARY.—If an el18 igible designated beneficiary dies before the 

19 portion of an employee’s interest described 

20 in clause (ii) is entirely distributed, clause 

21 (ii) shall not apply to any beneficiary of 

22 such eligible designated beneficiary and the 

23 remainder of such portion shall be distrib24 uted within 5 years after the death of such 

25 beneficiary.’’. 


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1 (b) DEFINITION OF ELIGIBLE DESIGNATED BENE2 FICIARY.—Section 401(a)(9)(E) of the Internal Revenue 

3 Code of 1986 is amended to read as follows: 

4 ‘‘(E) DEFINITIONS AND RULES RELATING

5 TO DESIGNATED BENEFICIARY.—For purposes 

6 of this paragraph— 

7 ‘‘(i) DESIGNATED BENEFICIARY.—The 

8 term ‘designated beneficiary’ means any 

9 individual designated as a beneficiary by 

10 the employee. 

11 ‘‘(ii) ELIGIBLE DESIGNATED BENE12 FICIARY.—The term ‘eligible designated 

13 beneficiary’ means, with respect to any em14 ployee, any designated beneficiary who, as 

15 of the date of death of the employee, is— 

16 ‘‘(I) the surviving spouse of the 

17 employee, 

18 ‘‘(II) subject to clause (iii), a 

19 child of the employee who has not 

20 reached majority (within the meaning 

21 of subparagraph (F)), 

22 ‘‘(III) disabled (within the mean23 ing of section 72(m)(7)), 

24 ‘‘(IV) a chronically ill individual 

25 (within the meaning of section 


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1 7702B(c)(2), except that the require2 ments of subparagraph (A)(i) thereof 

3 shall only be treated as met if there is 

4 a certification that, as of such date, 

5 the period of inability described in 

6 such subparagraph with respect to the 

7 individual is an indefinite one that is 

8 reasonably expected to be lengthy in 

9 nature), or 

10 ‘‘(V) an individual not described 

11 in any of the preceding subparagraphs 

12 who is not more than 10 years young13 er than the employee. 

14 ‘‘(iii) SPECIAL RULE FOR CHIL15 DREN.—Subject to subparagraph (F), an 

16 individual described in clause (ii)(II) shall 

17 cease to be an eligible designated bene18 ficiary as of the date the individual reaches 

19 majority and the requirement of subpara20 graph (B)(i) shall not be treated as met 

21 with respect to any remaining portion of 

22 an employee’s interest payable to the indi23 vidual unless such portion is distributed 

24 within 5 years after such date.’’. 


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1 (c) REQUIRED BEGINNING DATE.—Section 

2 401(a)(9)(C) of the Internal Revenue Code of 1986 is 

3 amended by adding at the end the following new clause: 

4 ‘‘(v) EMPLOYEES BECOMING 5-PERCENT OWNERS AFTER AGE 701 5 ⁄2.—If an 

6 employee becomes a 5-percent owner (as 

7 defined in section 416) with respect to a 

8 plan year ending in a calendar year after 

9 the calendar year in which the employee 

attains age 701 10 ⁄2, then clause (i)(II) shall 

11 be applied by substituting the calendar 

12 year in which the employee became such 

13 an owner for the calendar year in which 

14 the employee retires.’’. 

15 (d) EFFECTIVE DATES.— 

16 (1) IN GENERAL.—Except as provided in this 

17 subsection, the amendments made by this section 

18 shall apply to distributions with respect to employees 

19 who die after December 31, 2013. 

20 (2) REQUIRED BEGINNING DATE.— 

21 (A) IN GENERAL.—The amendment made 

22 by subsection (c) shall apply to employees be23 coming a 5-percent owner with respect to plan 

24 years ending in calendar years beginning before, 


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1 on, or after the date of the enactment of this 

2 Act. 

3 (B) SPECIAL RULE.—If— 

4 (i) an employee became a 5-percent 

5 owner with respect to a plan year ending 

6 in a calendar year which began before Jan7 uary 1, 2013, and 

8 (ii) the employee has not retired be9 fore calendar year 2014, 

10 such employee shall be treated as having be11 come a 5-percent owner with respect to a plan 

12 year ending in 2013 for purposes of applying 

13 section 401(a)(9)(C)(v) of the Internal Revenue 

14 Code of 1986 (as added by the amendment 

15 made by subsection (c)). 

16 (3) EXCEPTION FOR CERTAIN BENE17 FICIARIES.—If a designated beneficiary of an em18 ployee who dies before January 1, 2014, dies after 

19 December 31, 2013— 

20 (A) the amendments made by this section 

21 shall apply to any beneficiary of such des22 ignated beneficiary, and 

23 (B) the designated beneficiary shall be 

24 treated as an eligible designated beneficiary for 

25 purposes of applying section 401(a)(9)(B)(iv) of 


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1 such Code (as in effect after the amendments 

2 made by this section). 

3 (4) EXCEPTION FOR CERTAIN EXISTING ANNU4 ITY CONTRACTS.— 

5 (A) IN GENERAL.—The amendments made 

6 by this section shall not apply to a qualified an7 nuity which is a binding annuity contract in ef8 fect on the date of the enactment of this Act 

9 and at all times thereafter. 

10 (B) QUALIFIED ANNUITY CONTRACT.—For 

11 purposes of this paragraph, the term ‘‘qualified 

12 annuity’’ means, with respect to an employee, 

13 an annuity— 

14 (i) which is a commercial annuity (as 

15 defined in section 3405(e)(6) of such 

16 Code) or payable by a defined benefit plan, 

17 (ii) under which the annuity payments 

18 are substantially equal periodic payments 

19 (not less frequently than annually) over the 

20 lives of such employee and a designated 

21 beneficiary (or over a period not extending 

22 beyond the life expectancy of such em23 ployee or the life expectancy of such em24 ployee and a designated beneficiary) in ac25 cordance with the regulations described in 


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1 section 401(a)(9)(A)(ii) of such Code (as 

2 in effect before such amendments) and 

3 which meets the other requirements of this 

4 section 401(a)(9) of such Code (as so in 

5 effect) with respect to such payments, and 

6 (iii) with respect to which— 

7 (I) annuity payments to the em8 ployee have begun before January 1, 

9 2014, and the employee has made an 

10 irrevocable election before such date 

11 as to the method and amount of the 

12 annuity payments to the employee or 

13 any designated beneficiaries, or 

14 (II) if subclause (I) does not 

15 apply, the employee has made an ir16 revocable election before the date of 

17 the enactment of this Act as to the 

18 method and amount of the annuity 

19 payments to the employee or any des20 ignated beneficiaries. 


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Calendar No. 124 

113TH CONGRESS 

1ST SESSION S. 1238 

A BILL 

To amend the Higher Education Act of 1965 to expension plans, and for other purposes. year, to modify required distribution rules for graduate Federal Direct Stafford Loans for 1 tend the current reduced interest rate for underJUNE 27, 2013 

Read twice and ordered placed on the calendar 


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