S 1657

S 1657 IS

To amend the Internal Revenue Code of 1986 to modify the exception from the 10 percent penalty for early withdrawals from governmental plans for qualified public safety employees.

September 9, 2009

Mr. NELSON of Florida introduced the following bill; which was read twice and referred to the Committee on Finance

To amend the Internal Revenue Code of 1986 to modify the exception from the 10 percent penalty for early withdrawals from governmental plans for qualified public safety employees.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. MODIFICATION OF EXCEPTION FROM 10 PERCENT EARLY WITHDRAWAL PENALTY FOR PUBLIC SAFETY EMPLOYEES.

(a) Repeal of Restriction to Defined Benefit Plans- Subparagraph (A) of section 72(t)(10)(A) of the Internal Revenue Code of 1986 is amended by striking ‘which is a defined benefit plan’.

(b) Application to Annuities Commencing Before the Pension Protection Act of 2006- Paragraph (10) of section 72(t) is amended by adding at the end the following new subparagraph:

‘(C) TRANSITIONAL RULE FOR ANNUITIES- Paragraph (4) shall not apply to any modification to a series of substantially equal periodic payments which are made with respect to a qualified public safety employee if such series of payments commenced--

‘(i) before the date of the enactment of the Pension Protection Act of 2006, and

‘(ii) after such qualified public safety employee’s separation from service after attainment of age 50.’.

(c) Effective Dates-

(1) REPEAL OF RESTRICTION TO DEFINED BENEFIT PLANS- The amendment made by subsection (a) shall apply to distributions made after the date of the enactment of the Pension Protection Act of 2006.

(2) TRANSITIONAL RULE FOR ANNUITIES- The amendment made by subsection (b) shall apply to modifications made after the date of the enactment of the Pension Protection Act of 2006.