I 
109TH CONGRESS 
1ST SESSION 
H. R. 819
To amend the Internal Revenue Code of 1986 to encourage guaranteed 
lifetime income payments from annuities and similar payments of life 
insurance proceeds at dates later than death by excluding from income 
a portion of such payments. 
IN THE HOUSE OF REPRESENTATIVES 
FEBRUARY 15, 2005
Mrs. JOHNSON of Connecticut (for herself, Mr. TANNER, Mr. ENGLISH of 
Pennsylvania, Mrs. JONES of Ohio, Mr. RAMSTAD, Ms. HART, Mr. PAUL, 
Mr. GORDON, Mr. SAM JOHNSON of Texas, Mr. MCNULTY, Mr. JEFFER-
SON, Mr. ANDREWS, Mr. SIMMONS, Mr. LARSON of Connecticut, and Mr. 
LEWIS of Kentucky) 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 encourage 
guaranteed lifetime income payments from annuities and 
similar payments of life insurance proceeds at dates later 
than death by excluding from income a portion of such 
payments.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Retirement Security 
for Life Act of 2005’’.
SEC. 2. FINDINGS. 
The Congress finds the following: 
(1) Just over half of all United States workers 
actively participate in tax-deferred retirement sav-
ings plans which are comprised of assets of nearly 
$5,000,000,000,000. 
(2) Congress has historically promoted policies 
that will encourage greater private savings for retire-
ment, but has not devoted the same attention to de-
veloping policies that will help people manage the 
savings once they reach retirement age; 
(3) Qualified retirement savings plans are the 
product of such policies and provide Americans with 
valuable resources for their later years. 
(4) Non-qualified plans provide an additional 
retirement benefit. 
(5) 77,000,000 members of the baby boom gen-
eration are approaching retirement age and demo-
graphic data indicate that members of this genera-
tion can expect to live on average an additional 20 
to 30 years after retirement. 
(6) The commitment of Congress to creating in-
centives to promote private savings and to manage 
accumulated savings does not supercede the respon-
sibility of Congress to reduce the national debt and 
bring the Federal budget back into balance.
(7) Failure to address long term savings issues 
will only serve to increase the strain on Federal pro-
grams such as social security, medicare, and med-
icaid. 
(8) The national debt and annual budget defi-
cits pose a significant risk not only to national secu-
rity but also to the long-term solvency of the social 
security and medicare programs. 
(9) Encouraging the prudent management of 
accumulated savings and personal responsibility for 
retirement income security will reduce the potential 
financial threat to well-established entitlement pro-
grams for senior citizens. 
(10) The budget impact of this Act will be miti-
gated through the legislative process so that the en-
actment of this Act will not add to the $7.2 trillion 
national debt. 
SEC. 3. EXCLUSION FOR LIFETIME ANNUITY PAYMENTS. 
(a) LIFETIME ANNUITY PAYMENTS UNDER ANNUITY 
CONTRACTS.—Subsection (b) of section 72 of the Internal 
Revenue Code (relating to annuities) is amended by add-
ing at the end thereof the following new paragraph: 
‘‘(5) EXCLUSION FOR LIFETIME ANNUITY PAY-
MENTS.—
‘‘(A) IN GENERAL.—In the case of lifetime 
annuity payments received under one or more 
annuity contracts in any taxable year, gross in-
come shall not include 50 percent of the portion 
of lifetime annuity payments otherwise includ-
ible (without regard to this paragraph) in gross 
income under this section. For purposes of the 
preceding sentence, the amount excludible from 
gross income in any taxable year shall not ex-
ceed $20,000. 
‘‘(B) COST-OF-LIVING
ADJUSTMENT.—In 
the case of taxable years beginning after De-
cember 31, 2006, the $20,000 amounts in sub-
paragraph (A) shall be increased by an amount 
equal to—
‘‘(i) such dollar amount, multiplied by 
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for the cal-
endar year in which the taxable year be-
gins, determined by substituting ‘calendar 
year 2005’ for ‘calendar year 1992’ in sub-
paragraph (B) thereof. 
If any amount as increased under the preceding 
sentence is not a multiple of $500, such amount
shall be rounded to the next lower multiple of 
$500. 
‘‘(C) APPLICATION OF PARAGRAPH.—Sub-
paragraph (A) shall not apply to—
‘‘(i) any amount received under an eli-
gible deferred compensation plan (as de-
fined in section 457(b)) or under a quali-
fied retirement plan (as defined in section 
4974(c)), 
‘‘(ii) any amount paid under an annu-
ity contract that is received by the bene-
ficiary under the contract—
‘‘(I) after the death of the annu-
itant in the case of payments de-
scribed in subsection (c)(5)(A)(ii)(III), 
unless the beneficiary is the surviving 
spouse of the annuitant, or 
‘‘(II) after the death of the annu-
itant and joint annuitant in the case 
of payments described in subsection 
(c)(5)(A)(ii)(IV), unless the bene-
ficiary is the surviving spouse of the 
last to die of the annuitant and the 
joint annuitant, or
‘‘(iii) any annuity contract that is a 
qualified funding asset (as defined in sec-
tion 130(d)), but without regard to wheth-
er there is a qualified assignment. 
‘‘(D) INVESTMENT IN THE CONTRACT.—
For purposes of this section, the investment in 
the contract shall be determined without regard 
to this paragraph.’’. 
(b) DEFINITIONS.—Subsection (c) of section 72 of 
such Code is amended by adding at the end thereof the 
following new paragraph: 
‘‘(5) LIFETIME ANNUITY PAYMENT.—
‘‘(A) IN GENERAL.—For purposes of sub-
section (b)(5), the term ‘lifetime annuity pay-
ment’ means any amount received as an annu-
ity under any portion of an annuity contract, 
but only if—
‘‘(i) the only person (or persons in the 
case of payments described in subclause 
(II) or (IV) of clause (ii)) legally entitled 
(by operation of the contract, a trust, or 
other legally enforceable means) to receive 
such amount during the life of the annu-
itant or joint annuitant is such annuitant 
or joint annuitant, and
‘‘(ii) such amount is part of a series 
of substantially equal periodic payments 
made not less frequently than annually 
over—
‘‘(I) the life of the annuitant, 
‘‘(II) the lives of the annuitant 
and a joint annuitant, but only if the 
annuitant is the spouse of the joint 
annuitant as of the annuity starting 
date or the difference in age between 
the annuitant and joint annuitant is 
15 years or less, 
‘‘(III) the life of the annuitant 
with a minimum period of payments 
or with a minimum amount that must 
be paid in any event, or 
‘‘(IV) the lives of the annuitant 
and a joint annuitant with a minimum 
period of payments or with a min-
imum amount that must be paid in 
any event, but only if the annuitant is 
the spouse of the joint annuitant as of 
the annuity starting date or the dif-
ference in age between the annuitant
and joint annuitant is 15 years or 
less. 
‘‘(iii) EXCEPTIONS.—For purposes of 
clause (ii), annuity payments shall not fail 
to be treated as part of a series of substan-
tially equal periodic payments—
‘‘(I) because the amount of the 
periodic payments may vary in accord-
ance with investment experience, re-
allocations among investment options, 
actuarial gains or losses, cost of living 
indices, a constant percentage applied 
not less frequently than annually, or 
similar fluctuating criteria, 
‘‘(II) due to the existence of, or 
modification of the duration of, a pro-
vision in the contract permitting a 
lump sum withdrawal after the annu-
ity starting date, or 
‘‘(III) because the period between 
each such payment is lengthened or 
shortened, but only if at all times 
such period is no longer than one cal-
endar year.
‘‘(B) ANNUITY CONTRACT.—For purposes 
of subparagraph (A) and subsections (b)(5) and 
(x), the term ‘annuity contract’ means a com-
mercial 
annuity 
(as 
defined 
by 
section 
3405(e)(6)), other than an endowment or life 
insurance contract. 
‘‘(C) MINIMUM PERIOD OF PAYMENTS.—
For purposes of subparagraph (A), the term 
‘minimum period of payments’ means a guaran-
teed term of payments that does not exceed the 
greater of 10 years or—
‘‘(i) the life expectancy of the annu-
itant as of the annuity starting date, in the 
case of lifetime annuity payments de-
scribed in subparagraph (A)(ii)(III), or 
‘‘(ii) the life expectancy of the annu-
itant and joint annuitant as of the annuity 
starting date, in the case of lifetime annu-
ity payments described in subparagraph 
(A)(ii)(IV). 
For purposes of this subparagraph, life expect-
ancy shall be computed with reference to the ta-
bles prescribed by the Secretary under para-
graph 
(3). 
For 
purposes 
of 
subsection 
(x)(1)(C)(ii), the permissible minimum period of
payments shall be determined as of the annuity 
starting date and reduced by one for each sub-
sequent year. 
‘‘(D) MINIMUM AMOUNT THAT MUST BE 
PAID IN ANY EVENT.—For purposes of subpara-
graph (A), the term ‘minimum amount that 
must be paid in any event’ means an amount 
payable to the designated beneficiary under an 
annuity contract that is in the nature of a re-
fund and does not exceed the greater of the 
amount applied to produce the lifetime annuity 
payments under the contract or the amount, if 
any, available for withdrawal under the contract 
on the date of death.’’. 
(c) RECAPTURE TAX FOR LIFETIME ANNUITY PAY-
MENTS.—Section 72 of such Code is amended by redesig-
nating subsection (x) as subsection (y) and inserting after 
subsection (w) the following new subsection: 
‘‘(x) RECAPTURE TAX FOR MODIFICATIONS TO OR 
REDUCTIONS IN LIFETIME ANNUITY PAYMENTS.—
‘‘(1) IN
GENERAL.—If any amount received 
under an annuity contract is excluded from income 
by reason of subsection (b)(5) (relating to lifetime 
annuity payments), and—
‘‘(A) the series of payments under such 
contract is subsequently modified so any future 
payments are not lifetime annuity payments, 
‘‘(B) after the date of receipt of the first 
lifetime annuity payment under the contract an 
annuitant receives a lump sum and thereafter is 
to receive annuity payments in a reduced 
amount under the contract, or 
‘‘(C) after the date of receipt of the first 
lifetime annuity payment under the contract the 
dollar amount of any subsequent annuity pay-
ment is reduced and a lump sum is not paid in 
connection with the reduction, unless such re-
duction is—
‘‘(i) due to an event described in sub-
section (c)(5)(A)(iii), or 
‘‘(ii) due to the addition of, or in-
crease in, a minimum period of payments 
within the meaning of subsection (c)(5)(C) 
or a minimum amount that must be paid 
in any event (within the meaning of sub-
section (c)(5)(D)), 
then gross income for the first taxable year in 
which such modification or reduction occurs 
shall be increased by the recapture amount.
‘‘(2) RECAPTURE AMOUNT.—
‘‘(A) IN GENERAL.—For purposes of this 
subsection, the recapture amount shall be the 
amount, determined under rules prescribed by 
the Secretary, equal to the amount that (but for 
subsection (b)(5)) would have been includible in 
the taxpayer’s gross income if the modification 
or reduction described in paragraph (1) had 
been in effect at all times, plus interest for the 
deferral period at the underpayment rate estab-
lished by section 6621. 
‘‘(B) DEFERRAL
PERIOD.—For purposes 
of this subsection, the term ‘deferral period’ 
means the period beginning with the taxable 
year in which (without regard to subsection 
(b)(5)) the payment would have been includible 
in gross income and ending with the taxable 
year in which the modification described in 
paragraph (1) occurs. 
‘‘(3) EXCEPTIONS TO RECAPTURE TAX.—Para-
graph (1) shall not apply in the case of any modi-
fication or reduction that occurs because an annu-
itant—
‘‘(A) dies or becomes disabled (within the 
meaning of subsection (m)(7)),
‘‘(B) becomes a chronically ill individual 
within the meaning of section 7702B(c)(2), or 
‘‘(C) encounters hardship.’’. 
(d) LIFETIME DISTRIBUTIONS OF LIFE INSURANCE 
DEATH BENEFITS.—
(1) IN
GENERAL.—Subsection (d) of section 
101 of such Code (relating to life insurance pro-
ceeds) is amended by adding at the end thereof the 
following new paragraph: 
‘‘(4) EXCLUSION FOR LIFETIME ANNUITY PAY-
MENTS.—
‘‘(A) 
IN
GENERAL.—In 
the 
case 
of 
amounts to which this subsection applies, gross 
income shall not include the lesser of—
‘‘(i) 50 percent of the portion of life-
time annuity payments otherwise includible 
in gross income under this section (deter-
mined without regard to this paragraph), 
or 
‘‘(ii) the amount in effect under sec-
tion 72(b)(5). 
‘‘(B) RULES
OF
SECTION
72(B)(5)
TO 
APPLY.—For purposes of this paragraph, rules 
similar to the rules of section 72(b)(5) and sec-
tion 72(x) shall apply, substituting the term
‘beneficiary of the life insurance contract’ for 
the term ‘annuitant’ wherever it appears, and 
substituting the term ‘life insurance contract’ 
for the term ‘annuity contract’ wherever it ap-
pears.’’. 
(2) CONFORMING AMENDMENT.—Paragraph (1) 
of subsection (d) of section 101 of such Code is 
amended by adding ‘‘or paragraph (4)’’ after ‘‘to the 
extent not excluded by the preceding sentence’’. 
(e) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by 
this section shall apply to amounts received in cal-
endar years beginning after the date of the enact-
ment of this Act. 
(2) 
SPECIAL
RULE
FOR
EXISTING
CON-
TRACTS.—In the case of a contract in force on the 
date of the enactment of this Act that does not sat-
isfy the requirements of section 72(c)(5)(A) of the 
Internal Revenue Code of 1986 (as added by this 
section), or requirements similar to such section 
72(c)(5)(A) in the case of a life insurance contract), 
any modification to such contract (including a 
change in ownership) or to the payments thereunder 
that is made to satisfy the requirements of such sec-
tion (or similar requirements) shall not result in the
recognition of any gain or loss, any amount being in-
cluded in gross income, or any addition to tax that 
otherwise might result from such modification, but 
only if the modification is completed prior to the 
date that is 2 years after the date of the enactment 
of this Act.
Æ