II

104TH CONGRESS

1ST SESSION S. 501

To amend the Internal Revenue Code of 1986 to permit the tax-free rollover

of certain payments made by employers to separated employees.

IN THE SENATE OF THE UNITED STATES

MARCH 6, 1995

Mr. BREAUX (for himself and Mr. JOHNSTON) 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 permit

the tax-free rollover of certain payments made by employers to separated employees.

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

3 SECTION 1. TAX-FREE ROLLOVER OF CERTAIN SEPARA4 TION PAYMENTS.

5 (a) GENERAL RULE.—Part III of subchapter B of

6 chapter 1 of the Internal Revenue Code of 1986 (relating

7 to items specifically excluded from gross income) is

8 amended by redesignating section 137 as section 138 and

9 by inserting after section 136 the following new section:
2

S 501 IS

1 ‘‘SEC. 137. TAX-FREE ROLLOVER OF CERTAIN SEPARATION

2 PAYMENTS.

3 ‘‘(a) GENERAL RULE.—If—

4 ‘‘(1) an individual receives a qualified separa5 tion payment, and

6 ‘‘(2) within 60 days after the date on which

7 such individual receives such payment, such individ8 ual transfers any portion of such payment to an in9 dividual retirement account,

10 then such payment (to the extent so transferred) shall not

11 be included in gross income for the taxable year in which

12 received.

13 ‘‘(b) QUALIFIED SEPARATION PAYMENT.—For pur14 poses of this section, the term ‘qualified separation pay15 ment’ means any payment received by an individual if—

16 ‘‘(1) such payment was voluntarily paid by such

17 individual’s employer on account of such individual’s

18 separation from employment before attainment of

19 normal retirement age, and

20 ‘‘(2) such separation was in connection with a

21 substantial reduction in the work force of the em22 ployer.

23 ‘‘(c) TRANSFER TREATED AS ROLLOVER CONTRIBU24 TION.—For purposes of this title, a transfer to an individ25 ual retirement account which results in an amount being

26 excluded from gross income under subsection (a) shall be
3

S 501 IS

1 treated as a rollover contribution described in section

2 408(d)(3).’’.

3 (b) TECHNICAL AMENDMENTS.—Sections 219(d)(2),

4 408(a)(1) and 4973(b)(2)(A) of such Code are each

5 amended by striking ‘‘402(c)’’ and inserting ‘‘137,

6 402(c)’’.

7 (c) CLERICAL AMENDMENT.—The table of sections

8 for part III of subchapter B of chapter 1 of such Code

9 is amended by striking the item relating to section 137

10 and inserting the following:

‘‘Sec. 137. Tax-free rollover of certain separation payments.

‘‘Sec. 138. Cross-references to other Acts.’’.

11 (d) EFFECTIVE DATE.—

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

13 this section shall apply to payments received on or

14 after January 1, 1993.

15 (2) TRANSITIONAL RULE.—In the case of any

16 payment received on or after January 1, 1993, and

17 before the date of the enactment of this Act, the 60-

18 day period referred to in section 137(a)(2) of the In19 ternal Revenue Code of 1986 (as added by this sec20 tion) shall not expire before the date 60 days after

21 the date of the enactment of this Act.

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