AUTOMATIC ROLLOVERS OF CERTAIN MANDATORY DISTRIBUTIONS.

SEC. 657. AUTOMATIC ROLLOVERS OF CERTAIN MANDATORY DISTRIBUTIONS. (a) Direct Transfers of Mandatory Distributions.— (1) In general.—Section 401(a)(31) (relating to optional direct transfer of eligible rollover distributions), as amended by section 643, is amended by redesignating subparagraphs (B), (C), and (D) as subparagraphs (C), (D), and (E), respectively, and by inserting after subparagraph (A) the following new subparagraph: “(B) Certain mandatory distributions.— “(i) In general.—In case of a trust which is part of an eligible plan, such trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part provides that if—115 STAT. 136 “(I) a distribution described in clause (ii) in excess of $1,000 is made, and “(II) the distributee does not make an election under subparagraph (A) and does not elect to receive the distribution directly, the plan administrator shall make such transfer to an individual retirement plan of a designated trustee or issuer and shall notify the distributee in writing (either separately or as part of the notice under section 402(f)) that the distribution may be transferred to another individual retirement plan. “(ii) Eligible plan.—For purposes of clause (i), the term ‘eligible plan’ means a plan which provides that any nonforfeitable accrued benefit for which the present value (as determined under section 411(a)(11)) does not exceed $5,000 shall be immediately distributed to the participant.”. (2) Conforming amendments.— (A) The heading of section 401(a)(31) is amended by striking “Optional direct” and inserting “Direct”. (B) Section 401(a)(31)(C), as redesignated by paragraph (1), is amended by striking “Subparagraph (A)” and inserting “Subparagraphs (A) and (B)”. (b) Notice Requirement.—Subparagraph (A) of section 402(f)(1) is amended by inserting before the comma at the end the following: “and that the automatic distribution by direct, transfer applies to certain distributions in accordance with section 401(a)(31)(B)”. (c) Fiduciary Rules.— (1) In general.—Section 404(c) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1104(c)) is amended by adding at the end the following new paragraph: “(3) In the case of a pension plan which makes a transfer to an individual retirement account or annuity of a designated trustee or issuer under section 401(a)(31)(B) of the Internal Revenue Code of 1986, the participant or beneficiary shall, for purposes of paragraph (1), be treated as exercising control over the assets in the account or annuity upon— “(A) the earlier of the earlier of— “(i) a rollover of all or a portion of the amount to another individual retirement account or annuity; or “(ii) one year after the transfer is made; or “(B) if the transfer is made in a manner consistent with guidance provided by the Secretary.”. (2) Regulations.— (A) Automatic rollover safe harbor.—Not later than 3 years after the date of enactment of this Act, the Secretary of Labor shall prescribe regulations providing for safe harbors under which the designation of an institution and investment of funds in accordance with section 401(a)(31)(B) of the Internal Revenue Code of 1986 is deemed to satisfy the fiduciary requirements of section 404(a) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1104(a)). (B) Use of low-cost individual retirement plans.—The Secretary of the Treasury and the Secretary of Labor 115 STAT. 137may provide, and shall give consideration to providing, special relief with respect to the use of low-cost individual retirement plans for purposes of transfers under section 401(a)(31)(B) of the Internal Revenue Code of 1986 and for other uses that promote the preservation of assets for retirement income purposes. (d) Effective Date.—The amendments made by this section shall apply to distributions made after final regulations implementing subsection (c)(2)(A) are prescribed.