I

105TH CONGRESS

1ST SESSION H. R. 615

To amend the Internal Revenue Code of 1986 to allow expanded penaltyfree withdrawals from certain retirement plans during periods of unemployment.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 5, 1997

Mr. MCDERMOTT (for himself, Mr. RANGEL, Mr. MATSUI, Mr. LEWIS of Georgia, Mr. DELLUMS, Mr. TORRES, Ms. NORTON, Mr. RUSH, Mr.

HINCHEY, Mr. FAZIO of California, Ms. LOFGREN, Mrs. CLAYTON, and

Mr. CANADY of Florida) introduced the following bill; which was referred

to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to allow expanded penalty-free withdrawals from certain retirement

plans during periods of unemployment.

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

3 SECTION 1. DISTRIBUTIONS FROM CERTAIN PLANS MAY BE

4 USED WITHOUT PENALTY DURING PERIODS

5 OF UNEMPLOYMENT.

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

7 the Internal Revenue Code of 1986 (relating to exceptions

8 to 10-percent additional tax on early distributions from
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1 qualified retirement plans) is amended by adding at the

2 end the following new subparagraph:

3 ‘‘(E) ADDITIONAL DISTRIBUTIONS TO UN4 EMPLOYED INDIVIDUALS.—

5 ‘‘(i) IN GENERAL.—Distributions from

6 an individual retirement plan, or from

7 amounts attributable to employer contribu8 tions made pursuant to elective deferrals

9 described in subparagraph (A) or (C) of

10 section 402(g)(3) or section

11 501(c)(18)(D)(iii), to an individual after

12 separation from employment if—

13 ‘‘(I) such individual has received

14 unemployment compensation for 12

15 consecutive weeks under any Federal

16 or State unemployment compensation

17 law by reason of such separation, and

18 ‘‘(II) such distributions are made

19 during the 1-year period beginning on

20 the date of such separation.

21 ‘‘(ii) DISTRIBUTIONS AFTER REEM22 PLOYMENT.—Clause (i) shall not apply to

23 any distribution made after the individual

24 has been employed for at least 60 days
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1 after the separation from employment to

2 which clause (i) applies.

3 ‘‘(iii) COORDINATION WITH SUBPARA4 GRAPH (D).—Distributions during the 1-

5 year period described in clause (i)(II) shall

6 not be taken into account in applying the

7 limitation under subparagraph

8 (D)(i)(III).’’

9 (b) CONFORMING AMENDMENTS.—

10 (1) Section 401(k)(2)(B)(i) of such Code is

11 amended by striking ‘‘or’’ at the end of subclause

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

13 and inserting ‘‘or’’, and by inserting after subclause

14 (IV) the following new subclause:

15 ‘‘(V) the date on which a period

16 referred to in section 72(t)(2)(E) be17 gins, and’’.

18 (2) Section 403(b)(11) of such Code is amend19 ed by striking ‘‘or’’ at the end of subparagraph (A),

20 by striking the period at the end of subparagraph

21 (B) and inserting ‘‘, or’’, and by inserting after sub22 paragraph (B) the following new subparagraph:

23 ‘‘(C) for distributions to which section

24 72(t)(2)(E) applies.’’
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to distributions after the date of

3 the enactment of this Act.

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