II 

108TH CONGRESS 

2D SESSION S. 2835 

To amend the Internal Revenue Code of 1986 to allow penalty free withdrawals from retirement plans for victims of federally declared natural 

disasters. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 23, 2004 

Mr. GRAHAM of Florida (for himself and Mr. NELSON of Florida) 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 allow penalty free withdrawals from retirement plans for victims 

of federally declared natural disasters. 

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

3 SECTION 1. PENALTY FREE WITHDRAWALS FROM RETIRE4 MENT PLANS FOR VICTIMS OF FEDERALLY 

5 DECLARED NATURAL DISASTERS. 

6 (a) IN GENERAL.—Paragraph (2) of section 72(t) of 

7 the Internal Revenue Code of 1986 (relating to 10-percent 

8 additional tax on early distributions from qualified retire-
2 

•S 2835 IS 

1 ment plans) is amended by adding at the end the following 

2 new subparagraph: 

3 ‘‘(G) DISTRIBUTIONS FROM RETIREMENT

4 PLANS TO VICTIMS OF FEDERALLY DECLARED

5 NATURAL DISASTERS.— 

6 ‘‘(i) IN GENERAL.—Any qualified dis7 aster-relief distribution. 

8 ‘‘(ii) AMOUNT DISTRIBUTED MAY BE

9 REPAID.—Any individual who receives a 

10 qualified disaster-relief distribution may, at 

11 any time during the 5-year period begin12 ning on the day after the date on which 

13 such distribution was made, make one or 

14 more contributions to an individual retire15 ment plan of such individual in an aggre16 gate amount not to exceed the amount of 

17 such distribution. The dollar limitations 

18 otherwise applicable to contributions to in19 dividual retirement plans shall not apply to 

20 any contribution made pursuant to the 

21 preceding sentence. No deduction shall be 

22 allowed for any contribution pursuant to 

23 this clause. 

24 ‘‘(iii) QUALIFIED DISASTER-RELIEF

25 DISTRIBUTION.—For purposes of this sub-
3 

•S 2835 IS 

1 paragraph, the term ‘qualified disaster-re2 lief distribution’ means any distribution to 

3 an individual who has sustained a loss in 

4 excess of $100 as a result of a major dis5 aster declared under the Robert T. Staf6 ford Disaster Relief and Emergency Assist7 ance Act— 

8 ‘‘(I) if such distribution is made 

9 during the 1-year period beginning on 

10 the date such declaration is made, and 

11 ‘‘(II) to the extent such distribu12 tion does not exceed the amount of 

13 such loss and is not compensated for 

14 by insurance or otherwise. 

15 For purposes of subclause (II), the amount 

16 of any loss shall be determined using the 

17 greater of the fair market value of the 

18 property on the day before the date of such 

19 disaster or the adjusted basis of the prop20 erty as provided in section 1011.’’. 

21 (b) EXEMPTION OF DISTRIBUTIONS FROM WITH22 HOLDING.—Paragraph (4) of section 402(c) of the Inter23 nal Revenue Code of 1986 (relating to eligible rollover dis24 tribution) is amended by striking ‘‘and’’ at the end of sub25 paragraph (B), by striking the period at the end of sub-
4 

•S 2835 IS 

1 paragraph (C) and inserting ‘‘, and’’, and by inserting at 

2 the end the following new subparagraph: 

3 ‘‘(D) any qualified disaster-relief distribu4 tion (within the meaning of section 

5 72(t)(2)(G)).’’. 

6 (c) CONFORMING AMENDMENTS.— 

7 (1) Section 401(k)(2)(B)(i) of the Internal Rev8 enue Code of 1986 is amended by striking ‘‘or’’ at 

9 the end of subclause (III), by striking ‘‘and’’ at the 

10 end of subclause (IV) and inserting ‘‘or’’, and by in11 serting after subclause (IV) the following new sub12 clause: 

13 ‘‘(V) the date on which a period 

14 referred to in section 

15 72(t)(2)(G)(iii)(I) begins (but only to 

16 the extent provided in section 

17 72(t)(2)(G)), and’’. 

18 (2) Section 403(b)(7)(A)(ii) of such Code is 

19 amended by inserting ‘‘sustains a loss as a result of 

20 a major disaster declared under the Robert T. Staf21 ford Disaster Relief and Emergency Assistance Act 

22 (but only to the extent provided in section 

23 72(t)(2)(G)),’’ before ‘‘or’’. 

24 (3) Section 403(b)(11) of such Code is amend25 ed by striking ‘‘or’’ at the end of subparagraph (A), 
5 

•S 2835 IS 

1 by striking the period at the end of subparagraph 

2 (B) and inserting ‘‘, or’’, and by inserting after sub3 paragraph (B) the following new subparagraph: 

4 ‘‘(C) for distributions to which section 

5 72(t)(2)(G) applies.’’. 

6 (d) EFFECTIVE DATE.—The amendments made by 

7 this section shall apply to distributions received in taxable 

8 years beginning after December 31, 2003. 

Æ