I 

116TH CONGRESS 

2D SESSION H. R. 8606 

To defer the tax of certain sales of employer stock and reduce certain 

retirement-related excise taxes, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

OCTOBER 16, 2020 

Mr. KIND (for himself, Mr. KELLY of Pennsylvania, and Mr. SMITH of Missouri) introduced the following bill; which was referred to the Committee 

on Ways and Means, and in addition to the Committee on Education and 

Labor, for a period to be subsequently determined by the Speaker, in 

each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To defer the tax of certain sales of employer stock and 

reduce certain retirement-related excise taxes, 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. DEFERRAL OF TAX FOR CERTAIN SALES OF EM4 PLOYER STOCK TO EMPLOYEE STOCK OWN5 ERSHIP PLAN SPONSORED BY S CORPORA6 TION. 

7 (a) IN GENERAL.—Section 1042(c)(1)(A) of the In8 ternal Revenue Code of 1986 is amended by striking ‘‘doVerDate Sep 11 2014 01:39 Nov 05, 2020 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H8606.IH H8606

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1 mestic C corporation’’ and inserting ‘‘domestic corpora2 tion’’. 

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

4 this section shall apply to sales after the date of the enact5 ment of this Act. 

6 SEC. 2. REDUCTION IN EXCISE TAX ON CERTAIN ACCUMU7 LATIONS IN QUALIFIED RETIREMENT PLANS. 

8 (a) IN GENERAL.—Subsection (a) of section 4974 of 

9 the Internal Revenue Code of 1986 is amended by striking 

10 ‘‘50 percent’’ and inserting ‘‘25 percent’’. 

11 (b) EFFECTIVE DATE.—The amendment made by 

12 this section shall apply to taxable years beginning after 

13 December 31, 2019. 

14 SEC. 3. REDUCTION IN EXCISE TAX ON FAILURES TO TAKE 

15 REQUIRED MINIMUM DISTRIBUTIONS. 

16 (a) IN GENERAL.—Section 4974 of the Internal Rev17 enue Code of 1986, as amended by section 2 of this Act, 

18 is further amended by adding at the end the following new 

19 subsection: 

20 ‘‘(e) REDUCTION OF TAX IN CERTAIN CASES.— 

21 ‘‘(1) REDUCTION.—In the case of a taxpayer 

22 who— 

23 ‘‘(A) corrects, during the correction win24 dow, a shortfall of distributions from an indiVerDate Sep 11 2014 01:39 Nov 05, 2020 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H8606.IH H8606

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1 vidual retirement plan which resulted in imposi2 tion of a tax under subsection (a), and 

3 ‘‘(B) submits a return, during the correc4 tion window, reflecting such tax (as modified by 

5 this subsection), 

6 the first sentence of subsection (a) shall be applied 

7 by substituting ‘10 percent’ for ‘25 percent’. 

8 ‘‘(2) CORRECTION WINDOW.—For purposes of 

9 this subsection, the term ‘correction window’ means 

10 the period of time beginning on the date on which 

11 the tax under subsection (a) is imposed with respect 

12 to a shortfall of distributions from an individual re13 tirement plan, and ending on the earlier of— 

14 ‘‘(A) the date on which the Secretary initi15 ates an audit, or otherwise demands payment, 

16 with respect to the shortfall of distributions, or 

17 ‘‘(B) the last day of the second taxable 

18 year that begins after the end of the taxable 

19 year in which the tax under subsection (a) is 

20 imposed.’’. 

21 (b) EFFECTIVE DATE.—The amendment made by 

22 this section shall apply to taxable years beginning after 

23 the date of the enactment of this Act. 


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1 SECTION 4. MULTIPLE EMPLOYER 403(b) PLANS. 

2 (a) IN GENERAL.—Section 403(b) of the Internal 

3 Revenue Code of 1986 is amended by adding at the end 

4 the following new paragraph: 

5 ‘‘(15) MULTIPLE EMPLOYER PLANS.— 

6 ‘‘(A) IN GENERAL.—Except in the case of 

7 a church plan, this subsection shall not be 

8 treated as failing to apply to an annuity con9 tract solely by reason of such contract being 

10 purchased under a plan maintained by more 

11 than 1 employer. 

12 ‘‘(B) TREATMENT OF EMPLOYERS FAILING

13 TO MEET REQUIREMENTS OF PLAN.— 

14 ‘‘(i) IN GENERAL.—In the case of a 

15 plan maintained by more than 1 employer, 

16 this subsection shall not be treated as fail17 ing to apply to an annuity contract held 

18 under such plan merely because of one or 

19 more employers failing to meet the require20 ments of this subsection if such plan satis21 fies rules similar to the rules of section 

22 413(e)(2) with respect to any such em23 ployer failure. 

24 ‘‘(ii) ADDITIONAL REQUIREMENTS IN

25 CASE OF NON-GOVERNMENTAL PLANS.—A 

26 plan shall not be treated as meeting the reVerDate Sep 11 2014 01:39 Nov 05, 2020 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H8606.IH H8606

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1 quirements of this subparagraph unless the 

2 plan meets the requirements of subpara3 graph (A) or (B) of section 413(e)(1), ex4 cept in the case of a multiple employer 

5 plan maintained solely by any of the fol6 lowing: A State, a political subdivision of a 

7 State, or an agency or instrumentality of 

8 any one or more of the foregoing.’’. 

9 (b) ANNUAL REGISTRATION FOR 403(b) MULTIPLE

10 EMPLOYER PLAN.—Section 6057 of such Code is amend11 ed by redesignating subsection (g) as subsection (h) and 

12 by inserting after subsection (f) the following new sub13 section: 

14 ‘‘(g) 403(b) MULTIPLE EMPLOYER PLANS TREATED

15 AS ONE PLAN.—In the case of annuity contracts to which 

16 this section applies and to which section 403(b) applies 

17 by reason of the plan under which such contracts are pur18 chased meeting the requirements of paragraph (15) there19 of, such plan shall be treated as a single plan for purposes 

20 of this section.’’. 

21 (c) ANNUAL INFORMATION RETURNS FOR 403(b) 

22 MULTIPLE EMPLOYER PLAN.—Section 6058 of the Inter23 nal Revenue Code of 1986 is amended by redesignating 

24 subsection (f) as subsection (g) and by inserting after sub25 section (e) the following new subsection: 


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1 ‘‘(f) 403(b) MULTIPLE EMPLOYER PLANS TREATED

2 AS ONE PLAN.—In the case of annuity contracts to which 

3 this section applies and to which section 403(b) applies 

4 by reason of the plan under which such contracts are pur5 chased meeting the requirements of paragraph (15) there6 of, such plan shall be treated as a single plan for purposes 

7 of this section.’’. 

8 (d) AMENDMENTS TO EMPLOYEE RETIREMENT AND

9 INCOME SECURITY ACT OF 1974.— 

10 (1) TREATED AS POOLED EMPLOYER PLAN.— 

11 (A) IN GENERAL.—Section 3(43)(A) of the 

12 Employee Retirement and Income Security Act 

13 of 1974 is amended— 

14 (i) in clause (ii), by striking ‘‘section 

15 501(a) of such Code or’’ and inserting 

16 ‘‘501(a) of such Code, a plan that consists 

17 of contracts described in section 403(b) of 

18 such Code, or’’; and 

19 (ii) in the flush text at the end, by 

20 striking ‘‘the plan.’’ and inserting ‘‘the 

21 plan, but such term shall include any pro22 gram (other than a governmental plan) 

23 maintained for the benefit of the employees 

24 of more than 1 employer that consists of 

25 contracts described in section 403(b) of 


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1 such Code and that meets the require2 ments of subparagraph (A) or (B) of sec3 tion 413(e)(1) of such Code.’’. 

4 (B) CONFORMING AMENDMENTS.—Sec5 tions 3(43)(B)(v)(II) and 3(44)(A)(i)(I) of such 

6 Act are each amended by striking ‘‘section 

7 401(a) of such Code or’’ and inserting ‘‘401(a) 

8 of such Code, a plan that consists of contracts 

9 described in section 403(b) of such Code, or’’. 

10 (2) FIDUCIARIES.—Section 3(43)(B)(ii) of such 

11 Act is amended— 

12 (A) by striking ‘‘trustees meeting the re13 quirements of section 408(a)(2) of the Internal 

14 Revenue Code of 1986’’ and inserting ‘‘trustees 

15 (or other fiduciaries in the case of a plan that 

16 consists of contracts described in section 403(b) 

17 of the Internal Revenue Code of 1986) meeting 

18 the requirements of section 408(a)(2) of such 

19 Code’’, and 

20 (B) by striking ‘‘holding’’ and inserting 

21 ‘‘holding (or causing to be held under the terms 

22 of a plan consisting of such contracts)’’. 

23 (e) REGULATIONS RELATING TO PLAN TERMI24 NATION.—The Secretary of the Treasury (or the Sec25 retary’s designee) shall prescribe such regulations as may 


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1 be necessary to clarify the treatment of a plan termination 

2 by an employer in the case of plans to which section 

3 403(b)(15) of such Code applies. 

4 (f) MODIFICATION OF MODEL PLAN LANGUAGE.— 

5 (1) PLAN NOTIFICATIONS.—The Secretary of 

6 the Treasury (or the Secretary’s designee) shall 

7 modify the model plan language published under sec8 tion 413(e)(5) of the Internal Revenue Code of 1986 

9 to include language which notifies participating em10 ployers which are exempt from tax under section 

11 501(a) of such Code that the plan is subject to the 

12 Employee Retirement and Income Security Act of 

13 1974 and that such employer is a plan sponsor with 

14 respect to its employees participating in the multiple 

15 employer plan and, as such, has certain fiduciary 

16 duties with respect to the plan and to its employees. 

17 (2) MODEL PLANS FOR MULTIPLE EMPLOYER

18 403(b) NON-GOVERNMENTAL PLANS.—For plans to 

19 which section 403(b)(15)(A) of the Internal Revenue 

20 Code of 1986 applies (other than a plan maintained 

21 for its employees by a State, a political subdivision 

22 of a State, or an agency or instrumentality of any 

23 one or more of the foregoing) the Secretary shall 

24 publish model plan language similar to model plan 


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1 language published under section 413(e)(5) of such 

2 Code. 

3 (g) NO INFERENCE WITH RESPECT TO CHURCH

4 PLANS.—Regarding any application of section 403(b) of 

5 the Internal Revenue Code of 1986 to an annuity contract 

6 purchased under a church plan (as defined in section 

7 414(e) of such Code) maintained by more than 1 em8 ployer, or to any application of rules similar to section 

9 413(e) of such Code to such a plan, no inference shall 

10 be made from section 403(b)(15)(A) of such Code (as 

11 added by this Act) not applying to such plans. 

12 (h) EFFECTIVE DATE.— 

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

14 this section shall apply to plan years beginning after 

15 December 31, 2020. 

16 (2) RULE OF CONSTRUCTION.—Nothing in the 

17 amendments made by subsection (a) shall be con18 strued as limiting the authority of the Secretary of 

19 the Treasury or the Secretary’s delegate (determined 

20 without regard to such amendment) to provide for 

21 the proper treatment of a failure to meet any re22 quirement applicable under such Code with respect 

23 to one employer (and its employees) in the case of 

24 a plan to which section 403(b)(15) applies. 


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1 SEC. 5. APPLICATION OF CREDIT FOR SMALL EMPLOYER 

2 PENSION PLAN STARTUP COSTS TO EMPLOY3 ERS WHICH JOIN AN EXISTING PLAN. 

4 (a) IN GENERAL.—Section 45E(d)(3)(A) of the In5 ternal Revenue Code of 1986 is amended by striking ‘‘ef6 fective’’ and inserting ‘‘effective with respect to the eligible 

7 employer’’. 

8 (b) EFFECTIVE DATE.—The amendment made by 

9 this section shall apply to eligible employer plans which 

10 become effective with respect to the eligible employer after 

11 the date of the enactment of this Act. 

12 SEC. 6. HARMONIZATION OF TREATMENT OF IRAS WITH 

13 EMPLOYER PLANS. 

14 (a) STATUTE OF LIMITATIONS.—Section 6501(l) of 

15 the Internal Revenue Code of 1986 is amended— 

16 (1) in paragraph (1), by inserting ‘‘(other than 

17 with respect to an individual retirement plan)’’ after 

18 ‘‘section 4975’’, and 

19 (2) by adding at the end the following new 

20 paragraph: 

21 ‘‘(4) INDIVIDUAL RETIREMENT PLANS.—For 

22 purposes of any tax imposed by section 4973, 4974, 

23 or 4975 in connection with an individual retirement 

24 plan, the return referred to in this section shall be 

25 the income tax return filed by the person on whom 

26 the tax under such section is imposed for the year 


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1 in which the act (or failure to act) giving rise to the 

2 liability for such tax occurred. In the case of a per3 son who is not required to file an income tax return 

4 for such year— 

5 ‘‘(A) the return referred to in this section 

6 shall be the income tax return that such person 

7 would have been required to file but for the fact 

8 that such person was not required to file such 

9 return, and 

10 ‘‘(B) the 3-year period referred to in sub11 section (a) with respect to the return shall be 

12 deemed to begin on the date by which the re13 turn would have been required to be filed (ex14 cluding any extension thereof).’’. 

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

16 this section shall apply to plan years beginning after De17 cember 31, 2020. 

Æ 


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