II 

110TH CONGRESS 

2D SESSION S. 3278 

To amend the Internal Revenue Code of 1986 to provide that no loan 

may be made from a qualified employer plan using a credit card or 

other intermediary and to limit the number of loans that may be made 

from a qualified employer plan to a participant or beneficiary. 

IN THE SENATE OF THE UNITED STATES 

JULY 17, 2008 

Mr. SCHUMER (for himself, Mr. KOHL, and Mr. SMITH) 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 provide 

that no loan may be made from a qualified employer 

plan using a credit card or other intermediary and to 

limit the number of loans that may be made from a 

qualified employer plan to a participant or beneficiary. 

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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•S 3278 IS

1 SECTION 1. QUALIFIED EMPLOYER PLANS PROHIBITED 

2 FROM MAKING LOANS THROUGH CREDIT 

3 CARDS AND OTHER INTERMEDIARIES. 

4 (a) IN GENERAL.—Subsection (a) of section 401 of 

5 the Internal Revenue Code of 1986 is amended by insert6 ing after paragraph (36) the following new paragraph: 

7 ‘‘(37) PROHIBITION OF LOANS THROUGH CRED8 IT CARDS AND OTHER INTERMEDIARIES.—A trust 

9 shall not constitute a qualified trust under this sec10 tion if the plan makes any loan to any beneficiary 

11 under the plan through the use of any credit card 

12 or any other intermediary.’’ 

13 (b) APPLICATION TO EMPLOYEE ANNUITIES.— 

14 (1) IN GENERAL.—Section 404(a)(2) of the In15 ternal Revenue Code of 1986 (relating to employees’ 

16 annuities) is amended by striking ‘‘and (31)’’ and 

17 inserting ‘‘(31), and (37)’’. 

18 (2) SECTION 403(b) ANNUITY CONTRACTS.— 

19 Section 403(b)(1) of such Code is amended by strik20 ing ‘‘and’’ at the end of subparagraph (D), by in21 serting ‘‘and’’ at the end of subparagraph (E), and 

22 by inserting after subparagraph (E) the following 

23 new subparagraph: 

24 ‘‘(F) the requirements of section 

25 401(a)(37) are met with respect to the contract 


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•S 3278 IS

1 and any plan under which the contract is pur2 chased,’’. 

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

4 this section shall apply to plan years beginning after the 

5 date of the enactment of this Act. 

6 SEC. 2. LIMITATION ON NUMBER OF LOANS FROM QUALI7 FIED EMPLOYER PLANS WHICH MAY BE OUT8 STANDING WITH RESPECT TO ANY PARTICI9 PANT OR BENEFICIARY. 

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

11 the Internal Revenue Code of 1986 (relating to loans 

12 treated as distributions) is amended by redesignating sub13 paragraph (D) as subparagraph (E) and by inserting after 

14 subparagraph (C) the following new subparagraph: 

15 ‘‘(D) EXCEPTION ONLY TO APPLY TO 3

16 LOANS.— 

17 ‘‘(i) IN GENERAL.—Subparagraph (A) 

18 shall not apply to any loan made after the 

19 date of the enactment of this subparagraph 

20 if, immediately after such loan is made, the 

21 number of outstanding loans from the plan 

22 to the participant or beneficiary exceeds 3. 

23 ‘‘(ii) REFINANCINGS.—If any loan 

24 made after the date of the enactment of 

25 this subparagraph refinances 1 or more 


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•S 3278 IS

1 outstanding loans from the plan to the 

2 participant or beneficiary, the number of 

3 loans taken into account under subpara4 graph (A) with respect to such loan shall 

5 be equal to 1 plus the number of loans re6 financed by such loan.’’. 

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

8 this section shall apply to loans made after the date of 

9 the enactment of this Act. 

Æ 


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