SIMPLIFIED METHOD FOR TAXING ANNUITY DISTRIBUTIONS UNDER CERTAIN EMPLOYER PLANS.

SEC. 1403. SIMPLIFIED METHOD FOR TAXING ANNUITY DISTRIBUTIONS UNDER CERTAIN EMPLOYER PLANS. (a) General Rule.— Subsection (d) of section 72 (relating to annuities; certain proceeds of endowment and life insurance contracts) is amended to read as follows: “(d) Special Rules for Qualified Employer Retirement Plans.— “(1) Simplified method of taxing annuity payments.— “(A) In general.— In the case of any amount received as an annuity under a qualified employer retirement plan— “(i) subsection (b) shall not apply, and “(ii) the investment in the contract shall be recovered as provided in this paragraph. “(B) Method of recovering investment in contract.— “(i) In general.— Gross income shall not include so much of any monthly annuity payment under a qualified employer retirement plan as does not exceed the amount obtained by dividing— “(I) the investment in the contract (as of the annuity starting date), by “(II) the number of anticipated payments determined under the table contained in clause (iii) (or, in the case of a contract to which subsection (c)(3)(B) applies, the number of monthly annuity payments under such contract). “(ii) Certain rules made applicable.— Rules similar to the rules of paragraphs (2) and (3) of subsection (b) shall apply for purposes of this paragraph. “(iii) Number of anticipated payments.— “If the age of the primary annuitant on the annuity starting date is: The number of anticipated payments is: Not more than 55 360 More than 55 but not more than 60 310 More than 60 but not more than 65 260 More than 65 but not more than 70 210 More than 70 160. “(C) Adjustment for refund feature not applicable.— For purposes of this paragraph, investment in the contract shall be determined under subsection (c)(1) without regard to subsection (c)(2). “(D) Special rule where lump sum paid in connection with commencement of annuity payments.— If, in connection with the commencement of annuity payments under any qualified employer retirement plan, the taxpayer receives a lump-sum payment— 110 STAT. 1791 “(i) such payment shall be taxable under subsection (e) as if received before the annuity starting date, and “(ii) the investment in the contract for purposes of this paragraph shall be determined as if such payment had been so received. “(E) Exception.— This paragraph shall not apply in any case where the primary annuitant has attained age 75 on the annuity starting date unless there are fewer than 5 years of guaranteed payments under the annuity. “(F) Adjustment where annuity payments not on monthly basis.— In any case where the annuity payments are not made on a monthly basis, appropriate adjustments in the application of this paragraph shall be made to take into account the period on the basis of which such payments are made. “(G) Qualified employer retirement plan.— For purposes of this paragraph, the term ‘qualified employer retirement plan’ means any plan or contract described in paragraph (1),(2), or (3) of section 4974(c). “(2) Treatment of employee contributions under defined contribution plans.— For purposes of this section, employee contributions (and any income allocable thereto) under a defined contribution plan may be treated as a separate contract.”. (b) Effective Date.— The amendment made by this section shall apply in cases where the annuity starting date is after the 90th day after the date of the enactment of this Act.