Title: LOSAP CAP Act
Policy area: Taxation

Summary:
Length of Service Award Program Cap Adjustment Priority Act or the LOSAP CAP Act
This bill amends the Internal Revenue Code, with respect to deferred compensation plans, to increase the limit on accruals that is required for length of service award plans (LOSAPs) for bona fide volunteers to be exempt from treatment as a deferred compensation plan.
(Under current law, plans paying solely length of service awards to bona fide volunteers or their beneficiaries on the account of firefighting and prevention services, emergency medical services, and ambulance services performed by the volunteers are not treated as deferred compensation plans if they meet certain requirements. One of the requirements is a limit on the aggregate amount of length of service awards that may accrue with respect to any year of service for any bona fide volunteer.)
The bill modifies the limit on accruals to: (1) increase the limit from $3,000 to $6,000; (2) provide for a cost-of-living adjustment to the limit after 2017; and (3) specify that, in the case of LOSAPs that are defined benefit plans, the limit applies to the actuarial present value of the aggregate amount of length of service awards accruing with respect to any year of service.

[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1720 Introduced in House (IH)]

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115th CONGRESS
  1st Session
                                H. R. 1720

    To amend the Internal Revenue Code of 1986 to modify the rules 
              applicable to length of service award plans.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 24, 2017

  Mr. King of New York (for himself and Mr. Pascrell) 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 modify the rules 
              applicable to length of service award plans.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Length of Service Award Program Cap 
Adjustment Priority Act'' or the ``LOSAP CAP Act''.

SEC. 2. MODIFICATION OF RULES APPLICABLE TO LENGTH OF SERVICE AWARD 
              PLANS.

    (a) Maximum Deferral Amount.--Clause (ii) of section 457(e)(11)(B) 
of the Internal Revenue Code of 1986 is amended by striking ``$3,000'' 
and inserting ``$6,000''.
    (b) Cost of Living Adjustment.--Subparagraph (B) of section 
457(e)(11) of such Code is amended by adding at the end the following:
                            ``(iii) Cost of living adjustment.--In the 
                        case of taxable years beginning after December 
                        31, 2017, the Secretary shall adjust the $6,000 
                        amount under clause (ii) at the same time and 
                        in the same manner as under section 415(d), 
                        except that the base period shall be the 
                        calendar quarter beginning July 1, 2016, and 
                        any increase under this paragraph that is not a 
                        multiple of $500 shall be rounded to the next 
                        lowest multiple of $500.''.
    (c) Application of Limitation on Accruals.--Subparagraph (B) of 
section 457(e)(11) of such Code, as amended by subsection (b), is 
amended by adding at the end the following:
                            ``(iv) Special rule for application of 
                        limitation on accruals for certain plans.--In 
                        the case of a length of service award plan that 
                        is a defined benefit plan (as defined in 
                        section 414(j)), the limitation on the annual 
                        deferral under clause (ii) shall apply to the 
                        actuarial present value of the aggregate amount 
                        of length of service awards accruing with 
                        respect to any year of service. Such actuarial 
                        present value shall be calculated using 
                        reasonable actuarial assumptions and methods 
                        assuming payment shall be made under the most 
                        valuable form of payment of the length of 
                        service award under the program with payment 
                        commencing at the later of the earliest age at 
                        which unreduced benefits are payable under the 
                        program or the participant's current age.''.
    (d) Effective Date.--The amendments made by this Act shall apply to 
taxable years beginning after December 31, 2017.
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