ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF PLANS.

SEC. 641. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF PLANS. (a) Rollovers From and to Section 457 Plans.— (1) Rollovers from section 457 plans.— (A) In general.—Section 457(e) (relating to other definitions and special rules) is amended by adding at the end the following: “(16) Rollover amounts.— “(A) General rule.—In the case of an eligible deferred compensation plan established and maintained by an employer described in subsection (e)(1)(A), if— “(i) any portion of the balance to the credit of an employee in such plan is paid to such employee in an eligible rollover distribution (within the meaning of section 402(c)(4)), “(ii) the employee transfers any portion of the property such employee receives in such distribution to an eligible retirement plan described in section 402(c)(8)(B), and “(iii) in the case of a distribution of property other than money, the amount so transferred consists of the property distributed, then such distribution (to the extent so transferred) shall not be includible in gross income for the taxable year in which paid. “(B) Certain rules made applicable.—The rules of paragraphs (2) through (7) and (9) of section 402(c) and 115 STAT. 119section 402(f) shall apply for purposes of subparagraph (A). “(C) Reporting.—Rollovers under this paragraph shall be reported to the Secretary in the same manner as roll-overs from qualified retirement plans (as defined in section 4974(c)).”. (B) Deferral limit determined without regard to rollover amounts.—Section 457(b)(2) (defining eligible deferred compensation plan) is amended by inserting “(other than rollover amounts)” after “taxable year”. (C) Direct rollover.—Paragraph (1) of section 457(d) is amended by striking “and” at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting “, and”, and by inserting after subparagraph (B) the following: “(C) in the case of a plan maintained by an employer described in subsection (e)(1)(A), the plan meets requirements similar to the requirements of section 401(a)(31). Any amount transferred in a direct trustee-to-trustee transfer in accordance with section 401(a)(31) shall not be includible in gross income for the taxable year of transfer.”. (D) Withholding.— (i) Paragraph (12) of section 3401(a) is amended by adding at the end the following: “(E) under or to an eligible deferred compensation plan which, at the time of such payment, is a plan described in section 457(b) which is maintained by an eligible employer described in section 457(e)(1)(A), or”. (ii) Paragraph (3) of section 3405(c) is amended to read as follows: “(3) Eligible rollover distribution.—For purposes of this subsection, the term ‘eligible rollover distribution’ has the meaning given such term by section 402(f )(2)(A).”. (iii) Liability for withholding.—Subparagraph (B) of section 3405(d)(2) is amended by striking “or” at the end of clause (ii), by striking the period at the end of clause (iii) and inserting or", and by adding at the end the following: “(iv) section 457(b) and which is maintained by an eligible employer described in section 457(e)(1)(A).”. (2) Rollovers to section 457 plans.— (A) In general.—Section 402(c)(8)(B) (defining eligible retirement plan) is amended by striking “and” at the end of clause (iii), by striking the period at the end of clause (iv) and inserting “, and”, and by inserting after clause (iv) the following new clause: “(v) an eligible deferred compensation plan described in section 457(b) which is maintained by an eligible employer described in section 457(e)(1)(A).”. (B) Separate accounting.—Section 402(c) is amended by adding at the end the following new paragraph: “(10) Separate accounting.—Unless a plan described in clause (v) of paragraph (8)(B) agrees to separately account for amounts rolled into such plan from eligible retirement plans not described in such clause, the plan described in such clause may not accept transfers or rollovers from such retirement plans.”115 STAT. 120 (C) 10 percent additional tax.—Subsection (t) of section 72 (relating to 10-percent additional tax on early distributions from qualified retirement plans) is amended by adding at the end the following new paragraph: “(9) Special rule for rollovers to section 457 plans.—For purposes of this subsection, a distribution from an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A) shall be treated as a distribution from a qualified retirement plan described in 4974(c)(1) to the extent that such distribution is attributable to an amount transferred to an eligible deferred compensation plan from a qualified retirement plan (as defined in section 4974(c)).”. (b) Allowance of Rollovers From and to 403(b) Plans.— (1) Rollovers from section 403(b) plans.—Section 403(b)(8)(A)(ii) (relating to rollover amounts) is amended by striking “such distribution” and all that follows and inserting “such distribution to an eligible retirement plan described in section 402(c)(8)(B), and”. (2) Rollovers to section 403(b) plans.—Section 402(c)(8)(B) (defining eligible retirement plan), as amended by subsection (a), is amended by striking “and” at the end of clause (iv), by striking the period at the end of clause (v) and inserting and", and by inserting after clause (v) the following new clause: “(vi) an annuity contract described in section 403(b).”. (c) Expanded Explanation to Recipients of Rollover Distributions.—Paragraph (1) of section 402(f) (relating to written explanation to recipients of distributions eligible for rollover treatment) is amended by striking “and” at the end of subparagraph (C), by striking the period at the end of subparagraph (D) and inserting and", and by adding at the end the following new subparagraph; “(E) of the provisions under which distributions from the eligible retirement plan receiving the distribution may be subject to restrictions and tax consequences which are different from those applicable to distributions from the plan making such distribution.”. (d) Spousal Rollovers.—Section 402(c)(9) (relating to rollover where spouse receives distribution after death of employee) is amended by striking “; except that” and all that follows up to the end period. (e) Conforming Amendments.— (1) Section 72(o)(4) is amended by striking “and 408(d)(3)” and inserting “403(b)(8), 408(d)(3), and 457(e)(16)”. (2) Section 219(d)(2) is amended by striking “or 408(d)(3)” and inserting “408(d)(3), or 457(e)(16)”. (3) Section 401(a)(31)(B) is amended by striking “and 403(a)(4)” and inserting “, 403(a)(4), 403(b)(8), and 457(e)(16)”. (4) Subparagraph (A) of section 402(f)(2) is amended by striking “or paragraph (4) of section 403(a)” and inserting “, paragraph (4) of section 403(a), subparagraph (A) of section 403(b)(8), or subparagraph (A) of section 457(e)(16)”. (5) Paragraph (1) of section 402(f) is amended by striking “from an eligible retirement plan”.115 STAT. 121 (6) Subparagraphs (A) and (B) of section 402(f)(1) are amended by striking “another eligible retirement plan” and inserting “an eligible retirement plan”. (7) Subparagraph (B) of section 403(b)(8) is amended to read as follows: “(B) Certain rules made applicable.—The rules of paragraphs (2) through (7) and (9) of section 402(c) and section 402(f) shall apply for purposes of subparagraph (A), except that section 402(f) shall be applied to the payor in lieu of the plan administrator.”. (8) Section 408(a)(1) is amended by striking “or 403(b)(8),” and inserting “403(b)(8), or 457(e)(16)”. (9) Subparagraphs (A) and (B) of section 415(b)(2) are each amended by striking “and 408(d)(3)” and inserting “403(b)(8), 408(d)(3), and 457(e)(16)”. (10) Section 415(c)(2) is amended by striking “and 408(d)(3)” and inserting “408(d)(3), and 457(e)(16)”. (11) Section 4973(b)(1)(A) is amended by striking “or 408(d)(3)” and inserting “408(d)(3), or 457(e)(16)”. (f) Effective Date; Special Rule.— (1) Effective date.—The amendments made by this section shall apply to distributions after December 31, 2001. (2) Reasonable Notice.—No penalty shall be imposed on a plan for the failure to provide the information required by the amendment made by subsection (c) with respect to any distribution made before the date that is 90 days after the date on which the Secretary of the Treasury issues a safe harbor rollover notice after the date of the enactment of this Act, if the administrator of such plan makes a reasonable attempt to comply with such requirement. (3) Special rule.—Notwithstanding any other provision of law, subsections (h)(3) and (h)(5) of section 1122 of the Tax Reform Act of 1986 shall not apply to any distribution from an eligible retirement plan (as defined in clause (iii) or (iv) of section 402(c)(8)(B) of the Internal Revenue Code of 1986) on behalf of an individual if there was a rollover to such plan on behalf of such individual which is permitted solely by reason of any amendment made by this section.