Sec. 501. Modifications of required distribution rules for defined contribution accounts and plans
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Section 401(a)(9) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph: In the case of distributions from a defined contribution plan, a trust forming part of such plan shall not constitute a qualified trust under this section unless the plan provides that, if an employee dies before the distribution of the employee’s interest (whether or not such distribution has begun in accordance with subparagraph (A)), so much of the entire interest of any designated beneficiary of the employee as exceeds $400,000 (as of the date of the death of the employee) will be distributed within 5 years after the death of such employee.
If a person is a designated beneficiary under more than 1 defined contribution plan during any calendar year, the limitation under clause (i)— shall only apply with respect to interests acquired by such beneficiary during the calendar year by reason of the death of another individual, shall be applied by aggregating each such interest as of the date of the death of the individual who designated such beneficiary, and shall be allocated among each such interest on a pro rata basis determined by the relative size of each such plan or account, or as otherwise provided in regulations prescribed by the Secretary.
The method of distribution and period of time over which any portion of the interest of the designated beneficiary to which clause
(i)does not apply is distributed shall be determined without regard to the portion of the designated beneficiary’s interest distributed under clause (i). If— any portion of the employee’s interest is payable to (or for the benefit of) an eligible designated beneficiary, such portion will be distributed (in accordance with regulations) over the life of such eligible designated beneficiary (or over a period not extending beyond the life expectancy of such beneficiary), and such distributions begin not later than 1 year after the date of the employee’s death or such later date as the Secretary may by regulations prescribe, for purposes of clause (i), the portion referred to in subclause
(I)shall be treated as distributed on the date on which such distributions begin. If the eligible designated beneficiary is the surviving spouse of the employee— the date on which the distributions are required to begin under clause (iv)(III) shall not be earlier than the date on which the employee would have attained age 70½, and if the surviving spouse dies before the distributions to such spouse begin, this subparagraph shall be applied as if the surviving spouse were the employee. If an eligible designated beneficiary dies before the portion of the employee’s interest to which clause
(i)applies which is payable to (or for the benefit of) such eligible designated beneficiary is entirely distributed, the exception under clause
(iv)shall not apply to any beneficiary of such eligible designated beneficiary and the remainder of such portion shall be distributed within 5 years after the death of such eligible designated beneficiary. A defined contribution plan shall not be treated as failing to meet the requirements of this paragraph in the case of any failure to make a required minimum distribution for a calendar year if— the aggregate value of a designated beneficiary’s entire interest acquired by such beneficiary during the calendar year under all such plans of the employer by reason of the death of the employee does not exceed the dollar amount in effect for such year under clause (i), and the designated beneficiary certifies, within 1 year after the death of the employee from whom the beneficiary acquired the interest, that the aggregate value of the designated beneficiary’s entire interest acquired by such beneficiary during the calendar year under all defined contribution plans by reason of the death of another individual does not exceed the dollar amount in effect for such year under clause (i). For purposes of this clause, the value of any interest shall be determined as of the date of the death of the individual from whom the beneficiary acquired such interest, and all employers treated as a single employer under subsection (b), (c), (m), or
(o)of section 414 shall be treated as a single employer. For purposes of applying the provisions of this subparagraph and subsections (a)(6) and (b)(3) of section 408, all eligible retirement plans (as defined in section 402(c)(8)(B)) other than defined benefit plans shall be treated as defined contribution plans in determining the aggregate account balances to the credit of the designated beneficiary under all defined contribution plans and the amount required to be distributed to each beneficiary under such provisions. In the case of any taxable year beginning after 2020, the $400,000 amount in clause
(i)shall be increased by an amount equal to— such dollar amount, multiplied by the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2019 for calendar year 2016 in subparagraph (A)(ii) thereof. If any amount as adjusted under the preceding sentence is not a multiple of $500, such amount shall be rounded to the next lowest multiple of $500. . Section 401(a)(9)(E) of such Code is amended to read as follows: For purposes of this paragraph— The term designated beneficiary means any individual designated as a beneficiary by the employee. The term eligible designated beneficiary means, with respect to any employee, any designated beneficiary who is— the surviving spouse of the employee, subject to clause (iii), a child of the employee who has not reached majority (within the meaning of subparagraph (F)), disabled (within the meaning of section 72(m)(7)), a chronically ill individual (within the meaning of section 7702B(c)(2), except that the requirements of subparagraph (A)(i) thereof shall only be treated as met if there is a certification that, as of such date, the period of inability described in such subparagraph with respect to the individual is an indefinite one which is reasonably expected to be lengthy in nature), or an individual not described in any of the preceding subclauses who is not more than 10 years younger than the employee. Subject to subparagraph (F), an individual described in clause (ii)(II) shall cease to be an eligible designated beneficiary as of the date the individual reaches majority and any remainder of the portion of the interest described in subparagraph (H)(iv) which exceeds the amount in effect under subparagraph (H)(i) as of such date shall be distributed within 5 years after such date. The determination of whether a designated beneficiary is an eligible designated beneficiary shall be made as of the date of death of the employee. . Clause
(ii)of section 401(a)(9)(B) of the Internal Revenue Code of 1986 is amended by striking A trust and inserting Except as provided in subparagraph (H), a trust . Section 402(c)(11)(A)(iii) of such Code is amended by striking section 401(a)(9)(B) (other than clause
(iv)thereof) and inserting subparagraphs
(B)(other than clause
(iv)thereof) and
(H)(other than clause
(v)thereof) of section 401(a)(9) . Except as provided in this paragraph and paragraphs
(5)and (6), the amendments made by this subsection shall apply to distributions with respect to employees who die after December 31, 2019. In the case of a plan maintained pursuant to one or more collective bargaining agreements between employee representatives and one or more employers ratified before the date of the enactment of this Act, the amendments made by this subsection shall apply to distributions with respect to employees who die in calendar years beginning after the earlier of— the later of— the date on which the last of such collective bargaining agreements terminates (determined without regard to any extension thereof agreed to on or after the date of the enactment of this Act), or December 31, 2019, or December 31, 2021. For purposes of clause (i)(I), any plan amendment made pursuant to a collective bargaining agreement relating to the plan which amends the plan solely to conform to any requirement added by this section shall not be treated as a termination of such collective bargaining agreement. In the case of a governmental plan (as defined in section 414(d) of the Internal Revenue Code of 1986), subparagraph
(A)shall be applied by substituting December 31, 2021 for December 31, 2019 . The amendments made by this subsection shall not apply to a qualified annuity which is a binding annuity contract in effect on the date of enactment of this Act and at all times thereafter. For purposes of this paragraph, the term qualified annuity means, with respect to an employee, an annuity— which is a commercial annuity (as defined in section 3405(e)(6) of the Internal Revenue Code of 1986), under which the annuity payments are made over the life of the employee or over the joint lives of such employee and a designated beneficiary (or over a period not extending beyond the life expectancy of such employee or the joint life expectancy of such employee and a designated beneficiary) in accordance with the regulations described in section 401(a)(9)(A)(ii) of such Code (as in effect before such amendments) and which meets the other requirements of section 401(a)(9) of such Code (as so in effect) with respect to such payments, and with respect to which— annuity payments to the employee have begun before the date of the enactment of this Act, and the employee has made an irrevocable election before such date as to the method and amount of the annuity payments to the employee or any designated beneficiaries, or if subclause
(I)does not apply, the employee has made an irrevocable election before the date of the enactment of this Act as to the method and amount of the annuity payments to the employee or any designated beneficiaries. If an employee dies before the effective date, then, in applying the amendments made by this subsection to such employee's designated beneficiary who dies after such date— such amendments shall apply to any beneficiary of such designated beneficiary, and the designated beneficiary shall be treated as an eligible designated beneficiary for purposes of applying section 401(a)(9)(H)(iv) of the Internal Revenue Code of 1986 (as in effect after such amendments). For purposes of this paragraph, the term effective date means the first day of the first calendar year to which the amendments made by this subsection apply to a plan with respect to employees dying on or after such date. If this subsection applies to any plan amendment— such plan shall be treated as being operated in accordance with the terms of the plan during the period described in paragraph (2)(B)(i), and except as provided by the Secretary of the Treasury (or such Secretary's delegate), such plan shall not fail to meet the requirements of section 411(d)(6) of the Internal Revenue Code of 1986 and section 204(g) of the Employee Retirement Income Security Act of 1974 by reason of such amendment. This subsection shall apply to any amendment to any plan which is made— pursuant to any amendment made by this section or pursuant to any regulation issued by the Secretary of the Treasury (or delegate) under this section or such amendments, and on or before the last day of the first plan year beginning after December 31, 2021, or such later date as the Secretary of the Treasury (or delegate) may prescribe. In the case of a governmental or collectively bargained plan to which subparagraph
(B)or
(C)of subsection (a)(4) applies, clause
(ii)shall be applied by substituting the date which is 2 years after the date otherwise applied under such clause. This subsection shall not apply to any amendment unless— during the period— beginning on the date the legislative or regulatory amendment described in subparagraph (A)(i) takes effect (or in the case of a plan amendment not required by such legislative or regulatory amendment, the effective date specified by the plan), and ending on the date described in subparagraph (A)(ii) (or, if earlier, the date the plan amendment is adopted), the plan is operated as if such plan amendment were in effect; and such plan amendment applies retroactively for such period. Section 6047 of the Internal Revenue Code of 1986 is amended by redesignating subsection
(h)as subsection
(i)and by inserting after subsection
(g)the following new subsection: Not later than January 31 of each year, the plan administrator (as defined in section 414(g)) of each eligible retirement plan (as defined in section 402(c)(8)(B)) other than a defined benefit plan shall make a return to the Secretary with respect to each designated beneficiary of a deceased participant of such plan. Such return shall state the following: the name and plan number of the plan, the name and address of the plan administrator, the name, address, and taxpayer identification number of the designated beneficiary, the account balance (or portion of the interest therein) of such designated beneficiary as of the end of such preceding calendar year (and in the case such preceding year is the year of the death of the participant, as of the date of such death), and the amount of the account balance (or portion of the interest therein) described in subparagraph
(D)which is attributable to the portion of the account balance which did not exceed the amount in effect under section 401(a)(9)(H)(i) as of the date of such death, and the amount of such account balance (or portion of the interest therein), if any, which is attributable to the portion of the account balance which exceeded such amount as of the date of such death. Every person required to make a return under paragraph
(1)with respect to a designated beneficiary shall furnish a copy of such return to such designated beneficiary. In the case of an eligible retirement plan described in clause
(i)or
(ii)of section 402(c)(8)(B)— any reference in this subsection to the plan administrator shall be treated as a reference to the trustee or issuer, as the case may be, and any reference in this subsection to the participant shall be treated as a reference to the individual for whom such account or annuity is maintained. . The amendments made by this subsection shall apply to calendar years beginning after December 31, 2020, with respect to designated beneficiaries of participants whose date of death is after December 31, 2019.