To amend the Internal Revenue Code of 1986 to allow distributions from qualified cash or deferred arrangements in the event that the employer files for chapter 11 bankruptcy and the employee is not regularly scheduled for work or paid.

I 116TH CONGRESS 1ST SESSION H. R. 4181 To amend the Internal Revenue Code of 1986 to allow distributions from qualified cash or deferred arrangements in the event that the employer files for chapter 11 bankruptcy and the employee is not regularly sched- uled for work or paid. IN THE HOUSE OF REPRESENTATIVES AUGUST 9, 2019 Mr. GRIFFITH 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 allow dis- tributions from qualified cash or deferred arrangements in the event that the employer files for chapter 11 bank- ruptcy and the employee is not regularly scheduled for work or paid. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 VerDate Sep 11 2014 02:38 Aug 16, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H4181.IH H4181 kjohnson on DSK79L0C42 with BILLS 2 •HR 4181 IH SECTION 1. DISTRIBUTIONS FROM QUALIFIED CASH OR DE- 1 FERRED ARRANGEMENTS ALLOWED IN CHAP- 2 TER 11 BANKRUPTCY IF EMPLOYEE NOT REG- 3 ULARLY SCHEDULED FOR WORK OR PAID. 4 (a) IN GENERAL.—Section 401(k)(2)(B)(i) of the In- 5 ternal Revenue Code of 1986 is amended by striking ‘‘or’’ 6 at the end of subclause (IV), by striking ‘‘and’’ at the end 7 of subclause (V) and inserting ‘‘, or’’, and by inserting 8 after subclause (V) the following new subclause: 9 ‘‘(VI) in the case of a qualified 10 bankruptcy reorganization delay dis- 11 tribution (as defined in paragraph 12 (15)), the beginning of the period de- 13 scribed in paragraph (15)(A)(iii), 14 and’’. 15 (b) QUALIFIED BANKRUPTCY REORGANIZATION 16 DELAY DISTRIBUTION.—Section 401(k) of such Code is 17 amended by adding at the end the following new para- 18 graph: 19 ‘‘(15) QUALIFIED BANKRUPTCY REORGANIZA- 20 TION DELAY DISTRIBUTION.— 21 ‘‘(A) IN GENERAL.—For purposes of para- 22 graph (2)(B)(i)(VI), the term ‘qualified bank- 23 ruptcy reorganization delay distribution’ means 24 any distribution to an employee if— 25 VerDate Sep 11 2014 02:38 Aug 16, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H4181.IH H4181 kjohnson on DSK79L0C42 with BILLS 3 •HR 4181 IH ‘‘(i) the employer has filed a case 1 under chapter 11 of title 11, United States 2 Code, and is under the jurisdiction of the 3 court in such case, 4 ‘‘(ii) such employee, at any time after 5 the filing of such case, is not scheduled to 6 work for at least the number of hours that 7 such employee is customarily scheduled to 8 work or is not paid on or before the time 9 that such employee is customarily paid, 10 and 11 ‘‘(iii) such distribution is made during 12 the period beginning with the first time 13 which is described in clause (ii) with re- 14 spect to such employee and ending on the 15 first date thereafter on which such em- 16 ployee is scheduled to work for at least the 17 number of hours that such employee is 18 customarily scheduled to work and is paid 19 at the time such employee is customarily 20 paid (or, if earlier, ending on the date of 21 severance from employment). 22 ‘‘(B) LIMITATION ON DISTRIBUTIONS.— 23 The aggregate amount of distributions received 24 by any employee which may be treated as quali- 25 VerDate Sep 11 2014 02:38 Aug 16, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H4181.IH H4181 kjohnson on DSK79L0C42 with BILLS 4 •HR 4181 IH fied bankruptcy reorganization delay distribu- 1 tions with respect to any case described in sub- 2 paragraph (A)(i) shall not exceed the amount 3 which bears the same proportion to such em- 4 ployee’s annual salary as the period beginning 5 with the beginning of the period described in 6 subparagraph (A)(iii) and ending on the date of 7 the distribution bears to a calendar year.’’. 8 (c) EFFECTIVE DATE.— 9 (1) IN GENERAL.—The amendments made by 10 this section shall apply to distributions made after 11 the date of the enactment of this Act. 12 (2) TRANSITION.—During the 2-year period be- 13 ginning with the date of the enactment of this Act, 14 a plan shall not fail to satisfy any provision of the 15 Internal Revenue Code of 1986 merely because the 16 terms of the plan do not provide for making quali- 17 fied bankruptcy reorganization delay distributions 18 (as defined in section 401(k)(15) of such Code, as 19 added by this section) but such plan nonetheless 20 provides for such distributions. 21 Æ VerDate Sep 11 2014 02:38 Aug 16, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6301 E:\BILLS\H4181.IH H4181 kjohnson on DSK79L0C42 with BILLS