Keep Student Loans Affordable Act of 2013

To amend the Higher Education Act of 1965 to extend the current reduced interest rate for undergraduate Federal Direct Stafford Loans for 1 year, to modify required distribution rules for pension plans, and for other purposes. 1. Short title This Act may be cited as the Keep Student Loans Affordable Act of 2013 2. Interest rate extension Section 455(b)(7)(D) of the Higher Education Act of 1965 ( 20 U.S.C. 1087e(b)(7)(D) (1) in the matter preceding clause (i), by striking and before July 1, 2013, and before July 1, 2014, (2) in clause (v), by striking and before July 1, 2013, and before July 1, 2014, 3. Modifications of required distribution rules for pension plans (a) In general Section 401(a)(9)(B) (B) Required distributions where employee dies before entire interest is distributed (i) 5-year general rule A trust shall not constitute a qualified trust under this section unless the plan provides that, if an employee dies before the distribution of the employee's interest (whether or not such distribution has begun in accordance with subparagraph (A)), the entire interest of the employee will be distributed within 5 years after the death of such employee. (ii) Exception for eligible designated beneficiaries If— (I) any portion of the employee's interest is payable to (or for the benefit of) an eligible designated beneficiary, (II) such portion will be distributed (in accordance with regulations) over the life of such eligible designated beneficiary (or over a period not extending beyond the life expectancy of such beneficiary), and (III) such distributions begin not later than 1 year after the date of the employee's death or such later date as the Secretary may by regulations prescribe, then, for purposes of clause (i) and except as provided in clause (iv) or subparagraph (E)(iii), the portion referred to in subclause (I) shall be treated as distributed on the date on which such distributions begin. (iii) Special rule for surviving spouse of employee If the eligible designated beneficiary referred to in clause (ii)(I) is the surviving spouse of the employee— (I) the date on which the distributions are required to begin under clause (ii)(III) shall not be earlier than the date on which the employee would have attained age 70½, and (II) if the surviving spouse dies before the distributions to such spouse begin, this subparagraph shall be applied as if the surviving spouse were the employee. (iv) Rules upon death of eligible designated beneficiary If an eligible designated beneficiary dies before the portion of an employee's interest described in clause (ii) is entirely distributed, clause (ii) shall not apply to any beneficiary of such eligible designated beneficiary and the remainder of such portion shall be distributed within 5 years after the death of such beneficiary. . (b) Definition of eligible designated beneficiary Section 401(a)(9)(E) of the Internal Revenue Code of 1986 is amended to read as follows: (E) Definitions and rules relating to designated beneficiary For purposes of this paragraph— (i) Designated beneficiary The term designated beneficiary (ii) Eligible designated beneficiary The term eligible designated beneficiary (I) the surviving spouse of the employee, (II) subject to clause (iii), a child of the employee who has not reached majority (within the meaning of subparagraph (F)), (III) disabled (within the meaning of section 72(m)(7)), (IV) a chronically ill individual (within the meaning of section 7702B(c)(2), except that the requirements of subparagraph (A)(i) thereof shall only be treated as met if there is a certification that, as of such date, the period of inability described in such subparagraph with respect to the individual is an indefinite one that is reasonably expected to be lengthy in nature), or (V) an individual not described in any of the preceding subparagraphs who is not more than 10 years younger than the employee. (iii) Special rule for children Subject to subparagraph (F), an individual described in clause (ii)(II) shall cease to be an eligible designated beneficiary as of the date the individual reaches majority and the requirement of subparagraph (B)(i) shall not be treated as met with respect to any remaining portion of an employee's interest payable to the individual unless such portion is distributed within 5 years after such date. . (c) Required beginning date Section 401(a)(9)(C) of the Internal Revenue Code of 1986 is amended by adding at the end the following new clause: (v) Employees becoming 5-percent owners after age 70 1/2 If an employee becomes a 5-percent owner (as defined in section 416) with respect to a plan year ending in a calendar year after the calendar year in which the employee attains age 70 1/2 . (d) Effective dates (1) In general Except as provided in this subsection, the amendments made by this section shall apply to distributions with respect to employees who die after December 31, 2013. (2) Required beginning date (A) In general The amendment made by subsection (c) shall apply to employees becoming a 5-percent owner with respect to plan years ending in calendar years beginning before, on, or after the date of the enactment of this Act. (B) Special rule If— (i) an employee became a 5-percent owner with respect to a plan year ending in a calendar year which began before January 1, 2013, and (ii) the employee has not retired before calendar year 2014, such employee shall be treated as having become a 5-percent owner with respect to a plan year ending in 2013 for purposes of applying section 401(a)(9)(C)(v) of the Internal Revenue Code of 1986 (as added by the amendment made by subsection (c)). (3) Exception for certain beneficiaries If a designated beneficiary of an employee who dies before January 1, 2014, dies after December 31, 2013— (A) the amendments made by this section shall apply to any beneficiary of such designated beneficiary, and (B) the designated beneficiary shall be treated as an eligible designated beneficiary for purposes of applying section 401(a)(9)(B)(iv) of such Code (as in effect after the amendments made by this section). (4) Exception for certain existing annuity contracts (A) In general The amendments made by this section shall not apply to a qualified annuity which is a binding annuity contract in effect on the date of the enactment of this Act and at all times thereafter. (B) Qualified annuity contract For purposes of this paragraph, the term qualified annuity (i) which is a commercial annuity (as defined in section 3405(e)(6) of such Code) or payable by a defined benefit plan, (ii) under which the annuity payments are substantially equal periodic payments (not less frequently than annually) over the lives of such employee and a designated beneficiary (or over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated beneficiary) in accordance with the regulations described in section 401(a)(9)(A)(ii) of such Code (as in effect before such amendments) and which meets the other requirements of this section 401(a)(9) of such Code (as so in effect) with respect to such payments, and (iii) with respect to which— (I) annuity payments to the employee have begun before January 1, 2014, and the employee has made an irrevocable election before such date as to the method and amount of the annuity payments to the employee or any designated beneficiaries, or (II) if subclause (I) does not apply, the employee has made an irrevocable election before the date of the enactment of this Act as to the method and amount of the annuity payments to the employee or any designated beneficiaries.

Summary: Keep Student Loans Affordable Act of 2013 - Amends title IV (Student Assistance) of the Higher Education Act of 1965 to extend the 3.4% interest rate on Direct Stafford loans first disbursed to undergraduate students between July 1, 2011, and July 1, 2013, to Direct Stafford loans first disbursed to undergraduate students between July 1, 2011, and July 1, 2014. Amends the Internal Revenue Code to modify rules for required distributions from tax-exempt pension plans to an employee who dies before such employee's entire interest is distributed to require such interest to be distributed within five years after the death of such employee, subject to exceptions for an eligible designated beneficiary and surviving spouse of such employee. Defines "eligible designated beneficiary" to include a disabled or chronically-ill individual. Exempts from such modification a binding annuity contract in effect on the enactment date of this Act.