Enhancing Emergency and Retirement Savings Act of 2021

II 117TH CONGRESS 1ST SESSION S. 1870 To amend the Internal Revenue Code of 1986 to provide for penalty-free withdrawals from retirement accounts for certain emergency expenses, and for other purposes. IN THE SENATE OF THE UNITED STATES MAY 27, 2021 Mr. LANKFORD (for himself and Mr. BENNET) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to provide for penalty-free withdrawals from retirement accounts for certain emergency expenses, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Enhancing Emergency 4 and Retirement Savings Act of 2021’’. 5 VerDate Sep 11 2014 04:55 Jun 12, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1870.IS S1870 kjohnson on DSK79L0C42PROD with BILLS 2 •S 1870 IS SEC. 2. WITHDRAWALS FOR CERTAIN EMERGENCY EX- 1 PENSES. 2 (a) IN GENERAL.—Paragraph (2) of section 72(t) of 3 the Internal Revenue Code of 1986 is amended by adding 4 at the end the following new subparagraph: 5 ‘‘(I) DISTRIBUTIONS FOR CERTAIN EMER- 6 GENCY EXPENSES.— 7 ‘‘(i) IN GENERAL.—Any emergency 8 personal expense distribution. 9 ‘‘(ii) ANNUAL LIMITATION.—Not more 10 than 1 distribution per calendar year may 11 be treated as an emergency personal ex- 12 pense distribution by any individual. 13 ‘‘(iii) DOLLAR LIMITATION.—The 14 amount which may be treated as an emer- 15 gency personal expense distribution by any 16 individual in any calendar year shall not 17 exceed the lesser of $1,000 or an amount 18 equal to the excess of— 19 ‘‘(I) the individual’s total non- 20 forfeitable accrued benefit under the 21 plan (the individual’s total interest in 22 the plan in the case of an individual 23 retirement plan), determined as of the 24 date of each such distribution, over 25 ‘‘(II) $1,000. 26 VerDate Sep 11 2014 04:55 Jun 12, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1870.IS S1870 kjohnson on DSK79L0C42PROD with BILLS 3 •S 1870 IS ‘‘(iv) EMERGENCY PERSONAL EX- 1 PENSE DISTRIBUTION.—For purposes of 2 this subparagraph, the term ‘emergency 3 personal expense distribution’ means any 4 distribution from an applicable eligible re- 5 tirement plan (as defined in subparagraph 6 (H)(vi)(I)) to an individual for purposes of 7 meeting unforeseeable or immediate finan- 8 cial needs relating to necessary personal or 9 family emergency expenses. The adminis- 10 trator of an applicable eligible retirement 11 plan may rely on an employee’s certifi- 12 cation that the employee satisfies the con- 13 ditions of the preceding sentence in deter- 14 mining whether any distribution is an 15 emergency personal expense distribution. 16 ‘‘(v) TREATMENT OF PLAN DISTRIBU- 17 TIONS.—If a distribution to an individual 18 would (without regard to clause (iii)) be an 19 emergency personal expense distribution, a 20 plan shall not be treated as failing to meet 21 any requirement of this title merely be- 22 cause the plan treats the distribution as an 23 emergency personal expense distribution, 24 unless the aggregate amount of such dis- 25 VerDate Sep 11 2014 04:55 Jun 12, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1870.IS S1870 kjohnson on DSK79L0C42PROD with BILLS 4 •S 1870 IS tributions from all plans maintained by the 1 employer (and any member of any con- 2 trolled group which includes the employer, 3 determined as provided in subparagraph 4 (H)(iv)(II)) to such individual exceeds the 5 limitation determined under clause (iii). 6 ‘‘(vi) AMOUNT DISTRIBUTED MAY BE 7 REPAID.— 8 ‘‘(I) IN GENERAL.—Any indi- 9 vidual who receives an emergency per- 10 sonal expense distribution may, at any 11 time during the 3-year period begin- 12 ning on the day after the date on 13 which such distribution was received, 14 make one or more contributions in an 15 aggregate amount not to exceed the 16 amount of such distribution to an ap- 17 plicable eligible retirement plan of 18 which such individual is a beneficiary 19 and to which a rollover contribution of 20 such distribution could be made under 21 section 402(c), 403(a)(4), 403(b)(8), 22 408(d)(3), or 457(e)(16), as the case 23 may be. 24 VerDate Sep 11 2014 04:55 Jun 12, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1870.IS S1870 kjohnson on DSK79L0C42PROD with BILLS 5 •S 1870 IS ‘‘(II) LIMITATION ON CONTRIBU- 1 TIONS TO APPLICABLE ELIGIBLE RE- 2 TIREMENT PLANS OTHER THAN 3 IRAS.—The aggregate amount of con- 4 tributions made by an individual 5 under subclause (I) to any applicable 6 eligible retirement plan which is not 7 an individual retirement plan shall not 8 exceed the aggregate amount of emer- 9 gency personal expense distributions 10 which are made from such plan to 11 such individual. Subclause (I) shall 12 not apply to contributions to any ap- 13 plicable eligible retirement plan which 14 is not an individual retirement plan 15 unless the individual is eligible to 16 make contributions (other than those 17 described in subclause (I)) to such ap- 18 plicable eligible retirement plan. 19 ‘‘(III) TREATMENT OF REPAY- 20 MENTS OF DISTRIBUTIONS FROM AP- 21 PLICABLE ELIGIBLE RETIREMENT 22 PLANS OTHER THAN IRAS.—If a con- 23 tribution is made under subclause (I) 24 with respect to an emergency personal 25 VerDate Sep 11 2014 04:55 Jun 12, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1870.IS S1870 kjohnson on DSK79L0C42PROD with BILLS 6 •S 1870 IS expense distribution from an applica- 1 ble eligible retirement plan other than 2 an individual retirement plan, then 3 the taxpayer shall, to the extent of the 4 amount of the contribution, be treated 5 as having received such distribution in 6 an eligible rollover distribution (as de- 7 fined in section 402(c)(4)) and as 8 having transferred the amount to the 9 applicable eligible retirement plan in a 10 direct trustee to trustee transfer with- 11 in 60 days of the distribution. 12 ‘‘(IV) TREATMENT OF REPAY- 13 MENTS FOR DISTRIBUTIONS FROM 14 IRAS.—If a contribution is made 15 under subclause (I) with respect to an 16 emergency personal expense distribu- 17 tion from an individual retirement 18 plan, then, to the extent of the 19 amount of the contribution, such dis- 20 tribution shall be treated as a dis- 21 tribution described in section 22 408(d)(3) and as having been trans- 23 ferred to the applicable eligible retire- 24 ment plan in a direct trustee to trust- 25 VerDate Sep 11 2014 04:55 Jun 12, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1870.IS S1870 kjohnson on DSK79L0C42PROD with BILLS 7 •S 1870 IS ee transfer within 60 days of the dis- 1 tribution. 2 ‘‘(vii) LIMITATION ON SUBSEQUENT 3 DISTRIBUTIONS.—If a distribution is treat- 4 ed as an emergency personal expense dis- 5 tribution in any calendar year with respect 6 to a plan, no amount may be treated as 7 such a distribution in any subsequent cal- 8 endar year with respect to such plan un- 9 less— 10 ‘‘(I) such previous distribution is 11 fully repaid pursuant to clause (vi) to 12 such plan, or 13 ‘‘(II) the aggregate of the elective 14 deferrals and employee contributions 15 to the plan (the total amounts con- 16 tributed to the plan in the case of an 17 individual retirement plan) subsequent 18 to such previous distribution is at 19 least equal to the amount of such pre- 20 vious distribution which has not been 21 so repaid. 22 ‘‘(viii) SPECIAL RULES.—Rules simi- 23 lar to the rules of subclauses (II) and (IV) 24 VerDate Sep 11 2014 04:55 Jun 12, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1870.IS S1870 kjohnson on DSK79L0C42PROD with BILLS 8 •S 1870 IS of subparagraph (H)(vi) shall apply to any 1 emergency personal expense distribution.’’. 2 (b) EFFECTIVE DATE.—The amendments made by 3 this section shall apply to distributions made after Decem- 4 ber 31, 2021. 5 Æ VerDate Sep 11 2014 04:55 Jun 12, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6301 E:\BILLS\S1870.IS S1870 kjohnson on DSK79L0C42PROD with BILLS