Portability of lifetime income and managed account options

(a)

In general

Subsection (a) of section 401 of the Internal Revenue Code of 1986 is amended by inserting after paragraph (37) the following new paragraph:

(38)

Portability of lifetime income and managed account options

(A)

In general

A trust forming part of a defined contribution plan shall not be treated as failing to constitute a qualified trust under this section solely by reason of allowing— (i)qualified distributions of a lifetime income investment or a managed account investment, or (ii)distributions of a lifetime income investment in the form of a qualified plan distribution annuity contract,

on or after the date that is 90 days prior to the date on which such lifetime income investment or such managed account investment is no longer authorized to be held as an investment option under the plan except as may otherwise be provided by regulations.

(B)

Definitions

For purposes of this subsection— (i)the term qualified distribution means a direct trustee-to-trustee transfer to an eligible retirement plan (as defined in section 402(c)(8)(B)), as described in section 401(a)(31)(A), and in the case of a managed account investment, the eligible retirement plan must be maintained by the account manager of such managed account investment, (ii)the term lifetime income investment means an investment option that is designed to provide an employee with election rights— (I)that are not uniformly available with respect to other investment options under the plan, and (II)that are to a lifetime income feature available through a contract or other arrangement offered under the plan or under another eligible retirement plan (as defined in section 402(c)(8)(B)) through a direct trustee-to-trustee transfer to such other eligible retirement plan under section 401(a)(31)(A), (iii)the term lifetime income feature means— (I)a feature that guarantees a minimum level of income annually (or more frequently) for at least the remainder of the life of the employee or the joint lives of the employee and the employee’s designated beneficiary, or (II)an annuity payable on behalf of the employee under which payments are made in substantially equal periodic payments (not less frequently than annually) over the life of the employee or the joint lives of the employee and the employee’s designated beneficiary, (iv)the term qualified plan distribution annuity contract means an annuity contract purchased for a participant and distributed to the participant by a plan described in subparagraph (B) of section 402(c)(8) (without regard to clauses (i) and (ii) thereof), (v)the term managed account investment means an investment option under which the assets of the employee’s individual account are managed by an account manager, applying generally accepted investment theories, to achieve varying degrees of long-term appreciation and capital preservation based on the employee’s age, target retirement date or life expectancy, (vi)the term account manager means an investment manager (within the meaning of section 3(38) of the Employee Retirement Income Security Act), and (vii)a lifetime income investment or managed account investment is treated as no longer authorized to be held as an investment under the plan if such treatment applies to all plan participants or to a class of such participants, as determined in any reasonable manner.

(b)

Cash or deferred arrangement

Clause (i) of section 401(k)(2)(B) of such Code is amended by striking or at the end of subclause (IV), by striking and at the end of subclause (V) and inserting or, and by adding at the end of clause (i) the following:

(VI)with respect to amounts invested in a lifetime income investment (as defined in section 401(a)(38)(B)(ii)) or a managed account investment (as defined in section 401(a)(38)(B)(v)), the date that is 90 days prior to the date that such lifetime income investment or such managed account investment may no longer be held as an investment option under the plan (within the meaning of section 401(a)(38)(B)(vii)), provided that any distribution under this subclause must be in the form of a qualified distribution (as defined in section 401(a)(38)(B)(i)) or, in the case of a lifetime income investment, a qualified plan distribution annuity contract (as defined in section 401(a)(38)(B)(iv)), and

(c)

Section 403(b) plans

(1)

Annuity contracts

Paragraph (11) of section 403(b) of such Code is amended by striking or at the end of subparagraph (B), by striking the period at the end of subparagraph (C), and by inserting , or, and by adding at the end the following:

(D)with respect to amounts invested in a lifetime income investment (as defined in section 401(a)(38)(B)(ii)) or a managed account investment (as defined in section 401(a)(38)(B)(v)), the date that is 90 days prior to the date that such lifetime income investment or such managed account investment may no longer be held as an investment option under the plan (within the meaning of section 401(a)(38)(B)(vii)), provided that any distribution under this subparagraph must be in the form of a qualified distribution (as defined in section 401(a)(38)(B)(i)) or, in the case of a lifetime income investment, a qualified plan distribution annuity contract (as defined in section 401(a)(38)(B)(iv)).

(2)

Custodial accounts

Clause (ii) of section 403(b)(7)(A) of such Code is amended to read as follows:

(ii)under the custodial account, no such amounts may be paid or made available to any distributee (unless such amount is a distribution to which section 72(t)(2)(G) applies) before— (I)the employee dies, (II)the employee attains age 59½, (III)the employee has a severance from employment, (IV)the employee becomes disabled (within the meaning of section 72(m)(7)), (V)in the case of contributions made pursuant to a salary reduction agreement (within the meaning of section 3121(a)(5)(D)), the employee encounters financial hardship, or (VI)with respect to amounts invested in a lifetime income investment (as defined in section 401(a)(38)(B)(ii)) or a managed account investment (as defined in section 401(a)(38)(B)(v)), the date that is 90 days prior to the date that such lifetime income investment or such managed account investment may no longer be held as an investment option under the plan (within the meaning of section 401(a)(38)(B)(vii)), provided that any distribution under this subparagraph must be in the form of a qualified distribution (as defined in section 401(a)(38)(B)(i)) or, in the case of a lifetime income investment, a qualified plan distribution annuity contract (as defined in section 401(a)(38)(B)(iv)).

(d)

Eligible deferred compensation plans

Subparagraph (A) of section 457(d)(1) of such Code is amended by striking or at the end of clause (ii), by inserting or at the end of clause (iii), and by adding after clause (iii) the following:

(iv)with respect to amounts invested in a lifetime income investment (as defined in section 401(a)(38)(B)(ii)) or a managed account investment (as defined in section 401(a)(38)(B)(v)), the date that is 90 days prior to the date that such lifetime income investment or such managed account investment may no longer be held as an investment option under the plan (within the meaning of section 401(a)(38)(B)(vii)), provided that any distribution under this subparagraph must be in the form of a qualified distribution (as defined in section 401(a)(38)(B)(i)) or, in the case of a lifetime income investment, a qualified plan distribution annuity contract (as defined in section 401(a)(38)(B)(iv)),

(e)

Effective date

The amendments made by this section shall apply to plan years beginning after December 31, 2017.