HELPER Act of 2019

II 116TH CONGRESS 1ST SESSION S. 2962 To amend the Internal Revenue Code of 1986 to permit withdrawals from certain retirement plans for repayment of student loan debt, and for other purposes. IN THE SENATE OF THE UNITED STATES DECEMBER 2, 2019 Mr. PAUL 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 permit withdrawals from certain retirement plans for repayment of student loan debt, 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 ‘‘Higher Education 4 Loan Payment and Enhanced Retirement Act of 2019’’ 5 or the ‘‘HELPER Act of 2019’’. 6 VerDate Sep 11 2014 21:12 Dec 03, 2019 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S2962.IS S2962 kjohnson on DSK79L0C42 with BILLS 2 •S 2962 IS SEC. 2. WITHDRAWALS FOR HIGHER EDUCATION EX- 1 PENSES. 2 (a) 401(k) PLANS.—Paragraph (14) of section 3 401(k) of the Internal Revenue Code of 1986 is amended 4 by adding at the end the following new subparagraph: 5 ‘‘(C) DISTRIBUTIONS FOR QUALIFIED 6 HIGHER EDUCATION EXPENSES.— 7 ‘‘(i) IN GENERAL.—A distribution 8 shall be treated as made upon hardship of 9 the employee to the extent that the aggre- 10 gate amount of such distributions during 11 the taxable year does not exceed the lesser 12 of— 13 ‘‘(I) the amount paid by the tax- 14 payer for qualified higher education 15 expenses during such taxable year, or 16 ‘‘(II) $5,250. 17 ‘‘(ii) DISTRIBUTION MUST BE OTHER- 18 WISE DISALLOWED.—Clause (i) shall not 19 apply to any distribution which is permis- 20 sible under paragraph (2)(B)(i) (including 21 distributions which would be treated as 22 made upon hardship of the employee with- 23 out regard to this subparagraph). 24 ‘‘(iii) NO REQUIREMENT TO DEM- 25 ONSTRATE HARDSHIP.—Clause (i) shall 26 VerDate Sep 11 2014 21:12 Dec 03, 2019 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S2962.IS S2962 kjohnson on DSK79L0C42 with BILLS 3 •S 2962 IS apply without regard to any requirement to 1 demonstrate financial need or hardship, or 2 to demonstrate that other assets are not 3 available to pay the qualified higher edu- 4 cation expenses. 5 ‘‘(iv) ADDITIONAL TAX UNDER SEC- 6 TION 72(t) NOT TO APPLY.—No tax shall 7 be imposed under section 72(t) on any 8 amount treated as a hardship distribution 9 by reason of clause (i). 10 ‘‘(v) QUALIFIED HIGHER EDUCATION 11 EXPENSES.—For purposes of this subpara- 12 graph, the term ‘qualified higher education 13 expenses’ has the meaning given such term 14 by section 72(t)(7).’’. 15 (b) 403(b) PLANS.—Paragraph (11) of section 16 403(b) of the Internal Revenue Code of 1986 is amended 17 by adding at the end the following: ‘‘Under rules similar 18 to the rules of section 401(k)(14)(C), a distribution shall 19 be treated as made upon hardship of the employee to the 20 extent that the aggregate amount of such distributions 21 during the taxable year does not exceed the lesser of the 22 amount paid by the taxpayer for qualified higher edu- 23 cation expenses during such taxable year, or $5,250.’’. 24 VerDate Sep 11 2014 21:12 Dec 03, 2019 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2962.IS S2962 kjohnson on DSK79L0C42 with BILLS 4 •S 2962 IS (c) 457 PLANS.—Paragraph (1) of section 457(d) of 1 the Internal Revenue Code of 1986 is amended by adding 2 at the end the following: ‘‘Under rules similar to the rules 3 of section 401(k)(14)(C) (and without regard to whether 4 the expenses are unforeseen), a distribution shall be treat- 5 ed as made by reason of unforeseen emergency to the ex- 6 tent that the aggregate amount of such distributions dur- 7 ing the taxable year does not exceed the lesser of the 8 amount paid by the taxpayer for qualified higher edu- 9 cation expenses during such taxable year, or $5,250.’’. 10 (d) EFFECTIVE DATE.—The amendment made by 11 this section shall apply to distributions made after Decem- 12 ber 31, 2019. 13 SEC. 3. PENALTY-FREE WITHDRAWALS FROM IRAS FOR 14 STUDENT LOAN EXPENSES. 15 (a) IN GENERAL.—Paragraph (7) of section 72(t) of 16 the Internal Revenue Code of 1986 is amended by adding 17 at the end the following new subparagraph: 18 ‘‘(C) STUDENT LOANS.—Such term shall 19 include amounts paid in repayment of any loan 20 made to an individual described in subpara- 21 graph (A) to assist the individual in attending 22 an educational organization described in section 23 170(b)(1)(A)(ii).’’. 24 VerDate Sep 11 2014 21:12 Dec 03, 2019 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2962.IS S2962 kjohnson on DSK79L0C42 with BILLS 5 •S 2962 IS (b) EFFECTIVE DATE.—The amendment made by 1 this section shall apply to distributions made after Decem- 2 ber 31, 2019. 3 SEC. 4. EXCLUSION OF DISTRIBUTIONS FOR EDUCATIONAL 4 EXPENSES. 5 (a) IN GENERAL.—Section 402 of the Internal Rev- 6 enue Code of 1986 is amended by adding at the end the 7 following new subsection: 8 ‘‘(m) DISTRIBUTIONS FOR QUALIFIED HIGHER EDU- 9 CATION EXPENSES.— 10 ‘‘(1) IN GENERAL.—Gross income for the tax- 11 able year does not include— 12 ‘‘(A) any distribution from a qualified cash 13 or deferred arrangement (as defined in section 14 401(k)(2)), an annuity contract described in 15 section 403(b), or an eligible deferred com- 16 pensation plan described in section 457(b) 17 which is maintained by an eligible employer de- 18 scribed in section 457(e)(1)(A), which is treated 19 as made upon hardship of the employee by rea- 20 son of section 401(k)(14)(C), the last sentence 21 of section 403(b)(11), or the last sentence of 22 section 457(d)(1), or 23 VerDate Sep 11 2014 21:12 Dec 03, 2019 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S2962.IS S2962 kjohnson on DSK79L0C42 with BILLS 6 •S 2962 IS ‘‘(B) any distribution from an individual 1 retirement account (as defined in section 2 408(a)) to which section 72(t)(2)(E) applies. 3 ‘‘(2) DISTRIBUTIONS MUST OTHERWISE BE IN- 4 CLUDIBLE.— 5 ‘‘(A) IN GENERAL.—An amount shall be 6 treated as described in paragraph (1) only to 7 the extent that such amount would be includible 8 in gross income without regard to such para- 9 graph. 10 ‘‘(B) APPLICATION OF SECTION 72.—In de- 11 termining whether a distribution would be in- 12 cludible in gross income but for this subsection, 13 rules similar to the rules of subsection (l)(3)(B) 14 shall apply (by taking into account all retire- 15 ment plans in which the taxpayer is a partici- 16 pant).’’. 17 (b) COORDINATION WITH DEDUCTIONS AND CRED- 18 ITS.— 19 (1) COORDINATION WITH AMERICAN OPPOR- 20 TUNITY AND LIFETIME LEARNING CREDITS.— 21 (A) IN GENERAL.—Paragraph (2) of sec- 22 tion 25A(g) of the Internal Revenue Code of 23 1986 is amended by redesignating subpara- 24 graph (C) as subparagraph (D), by striking 25 VerDate Sep 11 2014 21:12 Dec 03, 2019 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S2962.IS S2962 kjohnson on DSK79L0C42 with BILLS 7 •S 2962 IS ‘‘and’’ at the end of subparagraph (B), and by 1 inserting after subparagraph (B) the following 2 new subparagraph: 3 ‘‘(C) a distribution from a qualified cash 4 or deferred arrangement (as defined in section 5 401(k)(2)), an annuity contract described in 6 section 403(b), an eligible deferred compensa- 7 tion plan described in section 457(b) which is 8 maintained by an eligible employer described in 9 section 457(e)(1)(A), or an individual retire- 10 ment account (as defined in section 408(a)) 11 which is excluded from gross income of the dis- 12 tributee under section 402(m) (other than any 13 portion of such a distribution which is attrib- 14 utable to the repayment of a loan described in 15 section 72(t)(7)(C)), and’’. 16 (B) COORDINATION WITH WAIVER OF PEN- 17 ALTY.—Subparagraph (B) of section 72(t)(7) is 18 amended by inserting ‘‘(without regard to sub- 19 paragraph (C) thereof)’’ before the period. 20 (2) DEDUCTION FOR INTEREST ON EDUCATION 21 LOANS.—Paragraph (1) of section 221(e) of such 22 Code is amended by inserting before the period at 23 the end the following: ‘‘, or for any amount paid 24 VerDate Sep 11 2014 21:12 Dec 03, 2019 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S2962.IS S2962 kjohnson on DSK79L0C42 with BILLS 8 •S 2962 IS with a distribution which is excluded from gross in- 1 come under section 402(m)’’. 2 (c) EFFECTIVE DATE.—The amendment made by 3 this section shall apply to distributions made after Decem- 4 ber 31, 2019. 5 SEC. 5. INCLUSION OF EMPLOYER STUDENT LOAN PAY- 6 MENTS IN EDUCATIONAL ASSISTANCE PRO- 7 GRAMS. 8 (a) IN GENERAL.—Paragraph (1) of section 127(c) 9 of the Internal Revenue Code of 1986 is amended— 10 (1) by striking ‘‘and’’ at the end of subpara- 11 graph (A); 12 (2) by adding ‘‘and’’ at the end of subpara- 13 graph (B); and 14 (3) by inserting after subparagraph (B) the fol- 15 lowing new subparagraph: 16 ‘‘(C) the payment, by an employer, of 17 amounts in repayment of any loan made to the 18 employee to assist the employee in attending an 19 educational organization described in section 20 170(b)(1)(A)(ii),’’. 21 (b) DENIAL OF DOUBLE BENEFIT.—Paragraph (1) 22 of section 221(e) of the Internal Revenue Code of 1986, 23 as amended by section 4, is further amended by inserting 24 VerDate Sep 11 2014 21:12 Dec 03, 2019 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S2962.IS S2962 kjohnson on DSK79L0C42 with BILLS 9 •S 2962 IS ‘‘which is excluded from gross income under section 127 1 or is’’ after ‘‘or for any amount’’. 2 (c) EFFECTIVE DATE.—The amendments made by 3 this section shall apply to taxable years beginning after 4 December 31, 2019. 5 SEC. 6. REPEAL OF CAP ON DEDUCTION FOR INTEREST ON 6 EDUCATION LOANS. 7 (a) IN GENERAL.—Section 221 of the Internal Rev- 8 enue Code of 1986 is amended by striking subsections (b) 9 and (f). 10 (b) CARRYOVER OF EXCESS INTEREST.—Section 221 11 of the Internal Revenue Code of 1986, as so amended, 12 is amended by inserting after subsection (a) the following 13 new subsection: 14 ‘‘(b) CARRYOVER.—If the amount of the deduction 15 allowable under subsection (a) exceeds the taxable income 16 of the taxpayer for the taxable year (determined without 17 regard to this section), then an amount equal to such ex- 18 cess shall be treated as interest paid by the taxpayer in 19 the succeeding taxable year on a qualified education 20 loan.’’. 21 (c) EFFECTIVE DATE.—The amendments made by 22 this section shall apply to taxable years beginning after 23 the date of the enactment of this Act. 24 VerDate Sep 11 2014 21:12 Dec 03, 2019 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S2962.IS S2962 kjohnson on DSK79L0C42 with BILLS 10 •S 2962 IS SEC. 7. EMPLOYER ROTH CONTRIBUTIONS. 1 (a) IN GENERAL.—Subsection (a) of section 402A of 2 the Internal Revenue Code of 1986 is amended— 3 (1) by striking ‘‘and’’ at the end of paragraph 4 (1); 5 (2) by redesignating paragraph (2) as para- 6 graph (3); and 7 (3) by inserting after paragraph (1) the fol- 8 lowing new paragraph: 9 ‘‘(2) in the case of a qualified cash or deferred 10 arrangement (as defined in section 401(k)(2)), any 11 designated Roth employer contribution made pursu- 12 ant to the arrangement shall be treated for purposes 13 of this chapter in the same manner as contributions 14 described in section 401(k)(3)(D)(ii), except that 15 such contribution shall not be excludable from gross 16 income, and’’. 17 (b) CONFORMING AMENDMENTS.— 18 (1) Paragraph (1) of section 402A(b) of the In- 19 ternal Revenue Code of 1986 is amended— 20 (A) by striking ‘‘may elect to make’’ and 21 inserting ‘‘may elect— 22 ‘‘(A) to make’’; 23 (B) by striking the period at the end and 24 inserting ‘‘, and’’; and 25 VerDate Sep 11 2014 21:12 Dec 03, 2019 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S2962.IS S2962 kjohnson on DSK79L0C42 with BILLS 11 •S 2962 IS (C) by adding at the end the following new 1 subparagraph: 2 ‘‘(B) in the case of a qualified cash or de- 3 ferred arrangement (as defined in section 4 401(k)(2)), to have the employee’s employer 5 make designated Roth employer contributions 6 in lieu of all or a portion of the matching or 7 nonelective contributions the employee is other- 8 wise eligible to receive under the arrange- 9 ment.’’. 10 (2) Paragraph (2)(A) of section 402A(b) of 11 such Code is amended by striking ‘‘of each em- 12 ployee’’ and inserting ‘‘and designated Roth em- 13 ployer contributions with respect to each employee’’. 14 (3) Subparagraph (B) of section 402A(d)(2) of 15 such Code is amended by inserting ‘‘, or elected to 16 have made a designated Roth employer contribu- 17 tion,’’ after ‘‘designated Roth contribution’’ both 18 places it appears in clauses (i) and (ii). 19 (c) DESIGNATED ROTH EMPLOYER CONTRIBU- 20 TION.—Subsection (c) of section 402A of the Internal 21 Revenue Code of 1986 is amended— 22 (1) by inserting ‘‘AND DESIGNATED ROTH EM- 23 PLOYER CONTRIBUTIONS’’ after ‘‘DESIGNATED 24 ROTH CONTRIBUTIONS’’ in the heading; and 25 VerDate Sep 11 2014 21:12 Dec 03, 2019 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S2962.IS S2962 kjohnson on DSK79L0C42 with BILLS 12 •S 2962 IS (2) by adding at the end the following new 1 paragraph: 2 ‘‘(5) DESIGNATED ROTH EMPLOYER CONTRIBU- 3 TION.— 4 ‘‘(A) IN GENERAL.—The term ‘designated 5 Roth employer contribution’ means any con- 6 tribution described in subparagraph (B) made 7 under a qualified cash or deferred arrangement 8 (as defined in section 401(k)(2)) which— 9 ‘‘(i) is excludable from gross income 10 of an employee without regard to this sec- 11 tion, and 12 ‘‘(ii) the employee designates (at such 13 time and in such manner as the Secretary 14 may prescribe) as not being so excludable. 15 ‘‘(B) CONTRIBUTIONS DESCRIBED.—The 16 contributions described in this subparagraph 17 are— 18 ‘‘(i) matching contributions (as de- 19 fined in section 401(m)(4)(A)) which meet 20 the requirements of subparagraphs (B) 21 and (C) of section 401(k)(2), and 22 ‘‘(ii) qualified nonelective contribu- 23 tions (within the meaning of section 24 401(m)(4)(C)). 25 VerDate Sep 11 2014 21:12 Dec 03, 2019 Jkt 099200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S2962.IS S2962 kjohnson on DSK79L0C42 with BILLS 13 •S 2962 IS ‘‘(C) DESIGNATION LIMITS.—The amount 1 of matching contributions and qualified nonelec- 2 tive contributions which an employee may des- 3 ignate under subparagraph (A) shall not exceed 4 the excess (if any) of— 5 ‘‘(i) the maximum amount of such 6 contributions excludable from gross income 7 of the employee for the taxable year (with- 8 out regard to this section), over 9 ‘‘(ii) the aggregate amount of such 1 [Text truncated for display. 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