To amend the Internal Revenue Code of 1986 to treat certain price protection payments as eligible rollover distributions, and for other purposes.
Bill: H.R.9286 | Sponsor: Rep. Kind, Ron (D-WI)
Policy area: Taxation

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.

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

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

SECTION 1. PRICE PROTECTION PAYMENTS TREATED AS ELIGIBLE ROLLOVER 
              DISTRIBUTIONS.

    (a) In General.--Section 402(c)(4) of the Internal Revenue Code of 
1986 is amended--
            (1) by striking ``For purposes of'' and inserting--
                    ``(A) In general.--For purposes of'',
            (2) by striking ``If all or any portion'' and all that 
        follows through the period and inserting--
                    ``(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' means an agreement 
                        between an employer maintaining an employee 
                        stock ownership plan and the trustee of such 
                        plan, pursuant to which a participant or 
                        beneficiary receives a price protection payment 
                        for stock distributions from such plan 
                        following an exempt loan taken on by the 
                        employer.
                            ``(ii) Price protection payment.--The term 
                        `price protection payment' means an amount paid 
                        to a plan participant or beneficiary pursuant 
                        to a price protection agreement if such 
                        agreement provides that price protection 
                        payments will be made--
                                    ``(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' has the 
                        meaning given such term in section 4975(e)(7).
                            ``(iv) Exempt loan.--The term `exempt loan' 
                        means a loan described in section 
                        4975(d)(3).''.
    (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.
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