ELIMINATING A PENALTY ON PARTIAL ANNUITIZATION.

SEC. 204. ELIMINATING A PENALTY ON PARTIAL ANNUITIZATION.(a) Eliminating a Penalty on Partial Annuitization.—The Secretary of the Treasury (or the Secretary’s delegate) shall amend the regulations under section 401(a)(9) of the Internal Revenue Code of 1986 to provide that if an employee’s benefit is in the form of an individual account under a defined contribution plan, the plan may allow the employee to elect to have the amount required to be distributed from such account under such section for a year to be calculated as the excess of the total required amount for such year over the annuity amount for such year. (b) Definitions.—For purposes of this section—(1) Total required amount.—The term “total required amount”, with respect to a year, means the amount which would be required to be distributed under Treas. Reg. section 1.401(a)(9)–5 (or any successor regulation) for the year, determined by treating the account balance as of the last valuation date in the immediately preceding calendar year as including the value on that date of all annuity contracts which were purchased with a portion of the account and from which payments are made in accordance with Treas. Reg. section 1.401(a)(9)–6. (2) Annuity amount.—The term “annuity amount”, with respect to a year, is the total amount distributed in the year from all annuity contracts described in paragraph (1). (c) Conforming Regulatory Amendments.—The Secretary of the Treasury (or the Secretary’s delegate) shall amend the regulations under sections 403(b)(10), 408(a)(6), 408(b)(3), and 457(d)(2) of the Internal Revenue Code of 1986 to conform to the amendments described in subsection (a). Such conforming amendments shall treat all individual retirement plans (as defined in section 7701(a)(37) of such Code) which an individual holds as the owner, or which an individual holds as a beneficiary of the same decedent, as one such plan for purposes of the amendments described in subsection (a). Such conforming amendments shall also treat all contracts described in section 403(b) of such Code which an individual holds as an employee, or which an individual holds as a beneficiary of the same decedent, as one such contract for such purposes. (d) Effective Date.—The modifications and amendments required under subsections (a) and (c) shall be deemed to have been made as of the date of the enactment of this Act, and as of such date—(1) all applicable laws shall be applied in all respects as though the actions which the Secretary of the Treasury (or the Secretary’s delegate) is required to take under such subsections had been taken, and136 STAT. 5335 (2) until such time as such actions are taken, taxpayers may rely upon their reasonable good faith interpretations of this section.