A bill to amend the Internal Revenue Code of 1954 to permit tax-free rollovers of distributions from employee retirement plans in the event of plan termination.
PL 94-267 (H.R.12725), enacted 04/15/1976

PUBLIC LAW 94-267—APR. 15, 1976 
90 STAT. 365 
Public Law 94-267 
94th Congress 
An Act 
Internal Revenue 
Code of 1954, 
amendments. 
26 u s e 402. 
To amend the Internal Revenue Code of 1954 to permit tax-free rollovers 
Apr. 15, 1976 
of distributions from employee retirement plans in the event of plan 
[H.R. 12725] 
termination. 
Be it enacted hy the Senate and House of Representatives of the 
United States of America in Congress assemhled, That— 
(a) TERMINATION OF EMPLOYEE TRUST, ETC.—Section 402(a) of the 
Internal Revenue Code of 1954 (relating to taxability of beneficiaries 
of exempt trusts) is amended— 
(1) by striking out paragraph (5) (A) and inserting in lieu 
thereof the following: 
"(A) the balance to the credit of an employee is paid to 
him— 
" (i) within one taxable year of the employee on account 
of a termination of the plan of which the trust is a part 
or, in the case of a profit-sharing or stock bonus plan, a 
complete discontinuance of contributions under such 
plan, or 
"(ii) in one or more distributions which constitute a 
^ 
lump-sum distribution within the meaning of subsection 
(e) (4) (A) (determined without reference to subsection 
(e)(4)(B)),", 
(2) by striking out "the lump-sum distribution" in the last 
sentence of paragraph (5) and inserting in lieu thereof "a 
payment", and 
(3) by adding at the end thereof the following paragraph: 
"(6) SPECIAL ROLLOVER RULES.—For purposes of paragraph 
( 5 ) ( A ) m -
"(A) TIME OF TERMINATION.—A complete discontinuance 
of contributions under a profit-sharing or stock bonus plan 
shall be deemed to occur on the day the plan administrator 
notifies the Secretary or his delegate (in accordance with 
regulations prescribed by the Secretary or his delegate) that 
all contributions to the plan have been completely discon-
tinued. For purposes of section 411(d) (3), the plan shall be 26 USC 411. 
considered to be terminated no later than the day such notice 
is filed with the Secretary or his delegate. 
" ( B ) 
S A L E o r SUBSIDIARY OR ASSETS.— 
"(i) A payment of the balance to the credit of an 
employee of a corporation (hereinafter referred to as the 
employer corporation) which is a subsidiary corporation 
(withm the meaning of section 425(f)) or which is a 26 USC 425. 
member of a controlled group of corporations (within 
the meaning of section 1563(a), determined by substi- 26 USC 1563. 
^ 
tuting '50 percent' for '80 percent' each place it appears 
therein) in connection with the liquidation, sale, or other 
means of terminating the parent-subsidiary or controlled 
group relationship of the employer corporation with the 
parent corporation or controlled group, or 
"(ii) a payment of the balance to the credit of an 
employee of a corporation (hereinafter referred to as the 
acquiring corporation) in connection with the sale or 
90 STAT. 366 
PUBLIC LAW 94-267—APR. 15, 1976 
other transfer to the acquiring corporation of all or 
substantially all of the assets used by the previous 
employer of the employee (hereinafter referred to as the 
selling corporation) in a trade or business conducted by 
the selling corporation, 
shall be treated as a payment or distribution on account of the 
' 
termination of the plan with respect to such employee if the 
employees of the employer corporation or the acquiring cor-
poration (whichever applies) are not active participants in 
• 
such plan at the time of such payment or distribution. For 
purposes of this subparagraph, in no event shall a payment 
or distribution be deemed to be in connection with a sale or 
other transfer of assets, or a liquidation, sale, or other means 
of terminating such parent-subsidiary or controlled group 
relationship, if such payment or distribution is made later 
than the end of the second calendar year after the calendar 
year in which occurs such sale or other transfer of assets, 
or such liquidation, sale, or other means of terminating such 
parent-subsidiary or controlled group relationship.". 
26 use 403. 
(b) TERMINATION OF ANNUITY PLAN.—Section 403(a) 
(relating 
to rollover amounts) is amended— 
(1) by striking out subparagraph (4) (A) and inserting in 
lieu thereof the following: 
" ( A ) the balance to the credit of an employee is paid to 
him— 
"(i) within one taxable year of the employee on 
account of a termination of the plan of which such trust 
is a part or, in the case of a profit-sharing plan, a com-
plete discontinuance of contributions under such plan, or 
"(ii) in one or more distributions which constitutes a 
lump-sum distribution within the meaning of section 402 
26 use 402. 
( e ) ( 4 ) ( A ) (determined without reference to section 402 
(e)(4)(B)),'', 
(2) by striking out "the lump-sum distribution" in the last sen-
tence of paragraph (4) and inserting in lieu thereof "a payment", 
and 
(3) by adding at the end thereof the following paragraph: 
"(5) SPECIAL ROLLOVER RULES.—For purposes of paragraph (4) 
. 
. 
( A ) ( i ) -
" ( A ) T I M E or TERMINATION.—A complete discontinuance 
of contributions under a profit-sharing plan shall be deemed 
to occur on the day the plan administrator notifies the Secre-
tary or his delegate (in accordance with regulations prescribed 
by the Secretary or his delegate) that all contributions to the 
plan have been completely discontinued. For purposes of 
26 use 411. 
section 411(d) (3), the plan shall be considered to be termi-
nated no later than the day such notice is filed with the 
Secretary or his delegate. 
" ( B ) 
SALE or SUBSIDIARY O
R ASSETS.— 
"(i) A payment of the balance to the credit of an 
employee of a corporation (hereinafter referred to as 
the employer corporation) which is a subsidiary corpora-
26 use 425. 
tion (within the meaning of section 425(f)) or which is 
a member of a controlled group of corporations (within 
26 use 1563. 
the meaning of section 1563(a), determined by substi-
tuting '50 percent' for '80 percent' each place it appears 
therein) in connection with the liquidation, sale, or other 
PUBLIC LAW 94-267—APR. 15, 1976 
90 STAT. 367 
means of terminating the parent-subsidiary or controlled 
group relationship of the employer corporation with the 
parent corporation or controlled group, or 
"(ii) A payment of the balance to the credit of an 
employee of a corporation (hereinafter referred to as 
the acquiring corporation) in connection with the sale 
or other transfer to the acquiring corporation of all or 
substantially all of the assets used by the previous 
employer of the employee (hereinafter referred to as the 
selling corporation) in a trade or business conducted by 
the selling corporation, 
shall be treated as a payment or distribution on account of 
the the termination of the plan with respect to such 
employee if the employees of the employer corporation or the 
acquiring corporation (whichever applies) are not active 
participants in such plan at the time of such payment or dis-
tribution. For purposes of this subparagraph, in no event 
shall a payment or distribution be deemed to be in accordance 
with a sale or other transfer of assets, or a liquidation, sale, 
or other means of terminating such parent-subsidiary or con-
trolled group relationship, if such payment or distribution 
is made later than the end of the second calendar year after 
the calendar year in which occurs such sale or other transfer 
of assets, or such liquidation, sale, or other means of 
terminating such parent-subsidiary 
or controlled 
group 
relationship.". 
(c) CONFORMING AMENDMENTS.— 
(1) Section 401(a) of such Code (relating to requirements for 
qualification) is amended by adding after paragraph (19) the 
following: 
" (20) A trust forming part of a pension plan shall not be treated 
as failing to constitute a qualified trust under this section merely 
because the pension plan of which such trust is a part makes a pay-
ment or distribution described in section 402(a) (5) (A) (i) or 403 
(a) (4) (A) (i). This paragraph shall not apply to a defined benefit 
plan unless the employer maintaining such plan files a notice with 
the Pension Benefit Guaranty Corporation (at the time and in 
the manner prescribed by the Pension Benefit Guaranty Corpora-
tion) notifying the Corporation of such payment or distribution 
and the Corporation has approved such payment or distribution 
or, within 90 days after the date on which such notice was filed, 
has failed to disapprove such payment or distribution.". 
(2) The last sentence of section 401 (a) of such Code is amended 
by striking out "and (19)" and inserting in lieu thereof " (19), and 
(20)". 
(3) Section 404(a) (2) of such Code (relating to employee 
annuities) is amended by striking out "and (19)" and inserting 
in lieu thereof ", (19), and (20)". 
(4) Section 805(d) (1) (C) of such Code (relating to pension 
plan reserves) is amended by striking out "and (19)" and insert-
ing in lieu thereof " (19), and (20)". 
(d) 
TRANSITIONAL RULES.— 
(1) I N GENERAL. 
(A) 
PERIOD FOR ROLLOVER CONTRIBUTION.—^In the case of a 
payment described in section 402(a)(5)(A) 
(other than a 
payment described in section 402(a) (5) (A) as in effect on 
the day before the date of the enactment of this Act) or 
section 403(a)(4)(A) 
(other than a payment described in 
Qualification 
requirements. 
26 use 401. 
Ante, p. 365. 
Ante, p. 366. 
26 use 404. 
26 use 805. 
26 use 402 note. 
89-194 O—78—pt. 1 
27 
90 STAT. 368 
, 
PUBLIC LAW 94-267--APR. 15, 1976 
section 403(a) (4) (A) as in effect on the day before the date 
of the enactment of this Act) of the Internal Revenue Code 
26 use 403. 
of 1954 (relating to distributions of the balance to the credit 
of the employee) which is contributed by an employee after 
the date of the enactment of this Act to a trust, plan, 
account, annuity, or bond described in section 402(a) (5) (B) 
26 use 402. 
or 403 (a) (4) (B) of such Code, the applicable period specified 
in section 402(a)(5)(B) or 403(a)(4)(B) of such Code 
(relating to rollover distributions to another plan or retire-
ment account) shall not expire before December 31, 1976. 
(B) T I M E OF CONTKEBUTIGN.— 
(i) GENERAL RULE.—If the initial portion of a pay-
ment the applicable period for which is determined under 
subparagraph (A) is contributed before December 31, 
1976, by an individual to a trust, plan, account, annuity, 
or bond described in subparagraph (A) and the remain-
ing portion of such payment is contributed by such indi-
vidual to such a trust, plan, account, annuity, or bond not 
later than 30 days after the date a credit or refund is 
allowed by the Secretary of the Treasury or his delegate 
26 use 6402. 
under section 6402 of the Internal Revenue Code of 1954 
with respect to the contribution, then, for purposes of 
subparagraph (A) and sections 402(a)(5) and 403(a) 
(4) of such Code, at the election of the individual (made 
in accordance with regulations prescribed by the Secre-
^ 
tary or his delegate), such remaining portion shall be 
considered to have been contributed on the date the initial 
portion of the payment was contributed. For purposes 
of this subparagraph, the initial portion of a payment is 
the amount by which such payment exceeds the amount of 
the tax imposed on such payment by. chapter 1 of such 
26 use 1. 
Code (determined without regard to this subparagraph). 
(ii) 
REGULATIONS.—For purposes of this subpara-
graph, the tax imposed on a payment by chapter 1 of the 
Internal Revenue Code of 1954, and the date a credit 
or refund is allowed by the Secretary of the Treasury 
or his delegate under section 6402 with respect to a con-
tribution, shall be determined under regulations pre-
scribed by the Secretary of the Treasury or his delegate. 
(C) PERIOD or LIMITATIONS.—If an individual has made 
the election provided by subparagraph (B), then— 
(i) the period provided by the Internal Revenue Code 
26 use 1 et seq. 
of 1954 for the assessment of any deficiency for the tax-
able year in which the payment described in subpara-
grapn (A) was made and each subsequent taxable year 
-* 
for which tax is determined by reference to the treatment 
of such payment under such Code or the status under 
such Code of any trust, plan, account, annuity, or bond 
'•' 
described in subparagraph (A) shall, to the extent attrib-
utable to such treatment, not expire before the expiration 
of 3 years from the date the Secretary of the Treasury or 
his delegate is notified by the individual (in such manner 
as the Secretary of the Treasury or his delegate may 
prescribe) that such individual has made (or failed to 
make) the contribution of the remaining portion of the 
payment within the period specified in subparagraph 
( B ) ( i ) , a n d 
•Mr ', S{ 
PUBLIC LAW 94-267—APR. 15, 1976 
90 STAT. 369 
(ii) such deficiency may be assessed before the expira-
tion of such 3-year period notwithstanding the provisions 
of section 6212(c) of such Code or the provisions of any 26 USC 6212. 
other law or rule of law which would otherwise prevent 
such assessment. 
(2) 
ROLLOVER CONTRIBUTION FOR CERTAIN PROPERTY SOLD.— 
Sections 402(a) (5) (C) and 403(a) (4) (C) of the Internal Reve-
nue Code of 1954 (relating to the requirement that rollover 26 USC 402, 
amount must consist of property received in a distribution) shall 403. 
^ 
not apply with respect to that portion of the property received 
in a payment described in section 402(a) (5) (A) (other than a 
payment described in section 402(a) (5) (A) as in effect on the 
day before the date of the enactment of this Act) or 403(a) (4) 
(A) (other than a payment described in section 403(a) (4) (A) -^nte, p. 366. 
as in effect on the day before the date of the enactment of 
this Act) of such Code which is sold or exchanged by the 
employee on or before the date of the enactment of this Act, if 
' ;. 
the employee transfers an amount of cash equal to the proceeds 
'" 
received from the sale or exchange of such property in excess of 
the amount considered contributed by the employee (within the 
meaning of section 402 (a)(4)(D)(i) of such Code). 
(3) NoNRECOGNiTioN O
F GAIN O
R LOSS.—For purposcs of the 
Internal Revenue Code of 1954, no gain or loss shall be recognized 
with respect to the sale or exchange of property described in 
paragraph (2) if the proceeds of such sale or exchange are trans-
ferred by an employee in accordance with this subsection and the 
applicable provisions of section 402(a) (5) or 40^ (a) (4) of such 
Code. 
(e) EFFECTIVE DATE.—The amendments made by this Act shall 26 USC 401 note, 
apply with respect to payments made to an employee on or after 
July 4, 1974. 
Approved April 15, 1976. 
LEGISLATIVE HISTORY: 
HOUSE REPORT No. 94-1020 (Coram, on Ways and Means). 
CONGRESSIONAL RECORD, Vol. 122 (1976): 
Apr. 13, considered and passed House. 
Apr. 14, considered and passed Senate.