To amend the Internal Revenue Code of 1986 to treat certain price protection payments as eligible rollover distributions, and for other purposes.

To amend the Internal Revenue Code of 1986 to treat certain price protection payments as eligible rollover distributions, and for other purposes. 1. Price protection payments treated as eligible rollover distributions (a) In general Section 402(c)(4) (1) by striking For purposes of (A) In general For purposes of , (2) by striking If all or any portion (B) Special rule for 2020 If all or any portion , and (3) by adding at the end the following new subparagraphs: (C) Certain price protection payments treated as eligible rollover distributions (i) Distributions prior to 2023 In the case of a price protection payment made after December 12, 2019, with respect to a plan year ending before January 1, 2023, such payment will be treated as an eligible rollover distribution if such payment is made pursuant to a price protection agreement which provides a payment to a participant (or beneficiary of such participant) who separates from service with an employer due to retirement, death or disability. (ii) Distributions after 2022 In the case of a price protection payment made with respect to a plan year ending after December 31, 2022, such payment will be treated as an eligible rollover distribution if such payment is made pursuant to a price protection agreement which— (I) is offered as part of an employee stock ownership plan, (II) covers any separation of service of a plan participant regardless of the reason for such separation, and (III) pays price protection payments upon commencement of plan distributions under section 409(o)(1)(A)(i). (D) Definitions For purposes of this paragraph— (i) Price protection agreement The term price protection agreement (ii) Price protection payment The term price protection payment (I) within a specified period of time, not to exceed the shorter of 5 years or the life of an exempt loan, following the purchase of employer securities with such loan, and (II) in an amount equal to the excess, if any, of— (aa) the fair market value of the shares of employer securities at the time of the distribution determined without regard to such exempt loan, over (bb) the fair market value of the employer securities at the time of distribution. (iii) Employee stock ownership plan The term employee stock ownership plan (iv) Exempt loan The term exempt loan . (b) Price protection agreements not considered discriminatory Section 401(a)(5) of such Code is amended by adding at the end the following new subparagraph: (H) Price protection agreements A plan shall not be considered discriminatory within the meaning of paragraph (4) merely because the plan is subject to a price protection agreement (as defined in section 402(c)(4)(D)(ii)) which favors highly compensated employees. . (c) Price protection payments not taken into account for purposes of deduction limits Section 404 of such Code is amended by adding at the end the following new subsection: (p) Price protection payments not taken into account for purposes of deduction limits Price protection payments (as defined in section 402(c)(4)(D)(i)) shall not be subject to any limitation contained in subsection (a)(3). . (d) Effective dates (1) The amendments made by subsection (a) shall apply to amounts paid after December 12, 2019. (2) The amendments made by subsections (b) and (c) shall apply to amounts paid in plan years ending after December 31, 2022.

Summary: This bill treats certain price protection payments from Employee Stock Ownership Plans (ESOPs) as eligible rollover distributions (i.e., tax-free distributions from a qualified retirement plan to another eligible plan). Price protection payments are made under a price protection agreement and provide a guaranteed minimum price for shares that may temporarily decline in value as a result of loans to the ESOP to purchase shares. The bill treats price protection payments made after December 12, 2019, for plan years ending before January 1, 2023, as eligible rollover distributions if payments were made pursuant to a price protection agreement for distributions due to separation from service, retirement, death or disability. For plan years beginning after 2022, payments made under a price protection agreement as a result of any separation of service of a plan participant (regardless of the reason for such separation) would be eligible for rollover.