Sec. 232. Penalty-free withdrawals from retirement plans for individuals in case of birth of child or adoption
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Section 72(t)(2) is amended by adding at the end the following new subparagraph: Any qualified birth or adoption distribution. The aggregate amount which may be treated as qualified birth or adoption distributions by any individual with respect to any birth or adoption shall not exceed $7,500. For purposes of this subparagraph— The term qualified birth or adoption distribution means any distribution from an applicable eligible retirement plan to an individual if made during the 1-year period beginning on the date on which a child of the individual is born or on which the legal adoption by the individual of an eligible child is finalized.
The term eligible child means any individual (other than a child of the taxpayer’s spouse) who has not attained age 18 or is physically or mentally incapable of self-support. If a distribution to an individual would (without regard to clause (ii)) be a qualified birth or adoption distribution, a plan shall not be treated as failing to meet any requirement of this title merely because the plan treats the distribution as a qualified birth or adoption distribution, unless the aggregate amount of such distributions from all plans maintained by the employer (and any member of any controlled group which includes the employer) to such individual exceeds $7,500.
For purposes of subclause (I), the term controlled group means any group treated as a single employer under subsection (b), (c), (m), or
(o)of section 414. Any individual who receives a qualified birth or adoption distribution may make one or more contributions in an aggregate amount not to exceed the amount of such distribution to an applicable eligible retirement plan of which such individual is a beneficiary and to which a rollover contribution of such distribution could be made under section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16), as the case may be. IRA s The aggregate amount of contributions made by an individual under subclause
(I)to any applicable eligible retirement plan which is not an individual retirement plan shall not exceed the aggregate amount of qualified birth or adoption distributions which are made from such plan to such individual. Subclause
(I)shall not apply to contributions to any applicable eligible retirement plan which is not an individual retirement plan unless the individual is eligible to make contributions (other than those described in subclause (I)) to such applicable eligible retirement plan. IRA s If a contribution is made under subclause
(I)with respect to a qualified birth or adoption distribution from an applicable eligible retirement plan other than an individual retirement plan, then the taxpayer shall, to the extent of the amount of the contribution, be treated as having received such distribution in an eligible rollover distribution (as defined in section 402(c)(4)) and as having transferred the amount to the applicable eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution. If a contribution is made under subclause
(I)with respect to a qualified birth or adoption distribution from an individual retirement plan, then, to the extent of the amount of the contribution, such distribution shall be treated as a distribution described in section 408(d)(3) and as having been transferred to the applicable eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution. For purposes of this subparagraph— The term applicable eligible retirement plan means an eligible retirement plan (as defined in section 402(c)(8)(B)) other than a defined benefit plan. For purposes of sections 401(a)(31), 402(f), and 3405, a qualified birth or adoption distribution shall not be treated as an eligible rollover distribution. A distribution shall not be treated as a qualified birth or adoption distribution with respect to any child or eligible child unless the taxpayer includes the name, age, and TIN of such child or eligible child on the taxpayer’s return of tax for the taxable year. Any qualified birth or adoption distribution shall be treated as meeting the requirements of sections 401(k)(2)(B)(i), 403(b)(7)(A)(ii), 403(b)(11), and 457(d)(1)(A). . The amendments made by this section shall apply to distributions made after December 31, 2018.