ROLLOVERS OF AFTER-TAX CONTRIBUTIONS,

SEC. 643. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS, (a) Rollovers From Exempt Trusts.—Paragraph (2) of section 402(c) (relating to maximum amount which may be rolled over) is amended by adding at the end the following: “The preceding sentence shall not apply to such distribution to the extent— “(A) such portion is transferred in a direct trustee-to-trustee transfer to a qualified trust which is part of a plan which is a defined contribution plan and which agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible, or “(B) such portion is transferred to an eligible retirement plan described in clause (i) or (ii) of paragraph (8)(B).”. (b) Optional Direct Transfer of Eligible Rollover Distributions.—Subparagraph (B) of section 401(a)(31) (relating to limitation) is amended by adding at the end the following: “The preceding sentence shall not apply to such distribution if the plan to which such distribution is transferred— “(i) agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible, or “(ii) is an eligible retirement plan described in clause (i) or (ii) of section 402(c)(8)(B ).”. (c) Rules for Applying Section 72 to IRAS.—Paragraph (3) of section 408(d) (relating to special rules for applying section 72) is amended by inserting at the end the following: “(H) Application of section 72.— “(i) In general.—If—115 STAT. 123 “(I) a distribution is made from an individual retirement plan, and “(II) a rollover contribution is made to an eligible retirement plan described in section 402(c)(8)(B)(iii), (iv), (v), or (vi) with respect to all or part of such distribution, then, notwithstanding paragraph (2), the rules of clause (ii) shall apply for purposes of applying section 72. “(ii) Applicable rules.—In the case of a distribution described in clause (i)— “(I) section 72 shall be applied separately to such distribution, “(II) notwithstanding the pro rata allocation of income on, and investment in, the contract to distributions under section 72, the portion of such distribution rolled over to an eligible retirement plan described in clause (i) shall be treated as from income on the contract (to the extent of the aggregate income on the contract from all individual retirement plans of the distributee), and “(III) appropriate adjustments shall be made in applying section 72 to other distributions in such taxable year and subsequent taxable years.”. (d) Effective Date.—The amendments made by this section shall apply to distributions made after December 31, 2001.