[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2458 Introduced in House (IH)]







108th CONGRESS
  1st Session
                                H. R. 2458

To amend the Internal Revenue Code of 1986 to exclude from gross income 
   a percentage of lifetime annuity payments, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             June 12, 2003

 Mr. Pomeroy (for himself, Mr. Isakson, Mr. English, and Mr. Andrews) 
 introduced the following bill; which was referred to the Committee on 
                             Ways and Means

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to exclude from gross income 
   a percentage of lifetime annuity payments, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Secure Annuity Income for Life Act 
of 2003''.

SEC. 2. EXCLUSION OF PERCENTAGE OF LIFETIME ANNUITY PAYMENTS.

    (a) Qualified Plans.--Subsection (e) of section 402 of the Internal 
Revenue Code of 1986 (relating to exempt trusts) is amended by adding 
at the end the following:
            ``(7) Exclusion of percentage of lifetime annuity 
        payments.--
                    ``(A) In general.--In the case of a lifetime 
                annuity payment from a qualified trust (within the 
                meaning of subsection (c)(8)(A)) to a qualified 
                distributee, gross income shall not include 15 percent 
                of the amount otherwise includible in gross income 
                (determined without regard to this paragraph).
                    ``(B) Definitions and special rules.--For purposes 
                of this paragraph--
                            ``(i) Lifetime annuity payment.--
                                    ``(I) In general.--The term 
                                `lifetime annuity payment' means a 
                                distribution which is a part of a 
                                series of substantially equal periodic 
                                payments (made not less frequently than 
                                annually) made over the life of the 
                                qualified distributee or the joint 
                                lives of the qualified distributee and 
                                the qualified distributee's designated 
                                beneficiary.
                                    ``(II) Exceptions.--Annuity 
                                payments shall not fail to be treated 
                                as part of a series of substantially 
                                equal periodic payments because the 
                                amount of the periodic payments may 
                                vary in accordance with investment 
                                experience, reallocations among 
                                investment options, actuarial gains or 
                                losses, cost of living indices, or 
                                similar fluctuating criteria. The 
                                availability of a commutation benefit, 
                                a minimum period of payments certain, 
                                or a minimum amount to be paid in any 
                                event shall not affect the treatment of 
                                a distribution as a lifetime annuity 
                                payment. In the case of lifetime 
                                annuity payments being made to a 
                                qualified trust, payments by the 
                                qualified trust to a qualified 
                                distributee of the entire amount 
                                received by the qualified trust with 
                                respect to the qualified distributee 
                                shall constitute lifetime annuity 
                                payments.
                            ``(ii) Qualified distributee.--The term 
                        `qualified distributee' means the employee, the 
                        surviving spouse of the employee, and an 
                        alternate payee who is the spouse or former 
                        spouse of the employee.
                            ``(iii) Limitation.--With respect to any 
                        qualified distributee, subparagraph (A) shall 
                        not apply to any lifetime annuity payment to 
                        the extent that such payments, when added to 
                        all previous payments under such annuity to 
                        such qualified distributee during the taxable 
                        year, exceed 50 percent of the applicable 
                        amount for such year under section 
                        415(c)(1)(A). For purposes of this clause, all 
                        lifetime annuity payments received by a 
                        qualified distributee shall be taken into 
                        account to the extent that such payments are 
                        subject to this paragraph or to rules similar 
                        to the rules of this paragraph.
                    ``(C) Recapture tax.--
                            ``(i) In general.--If--
                                    ``(I) a portion of a lifetime 
                                annuity payment is not includible in 
                                gross income by reason of subparagraph 
(A), and
                                    ``(II) the series of payments of 
                                which such payment is a part is 
                                subsequently modified (other than by 
                                reason of death or disability) so that 
                                some or all future payments are not 
                                lifetime annuity payments,
                        the qualified distributee's gross income for 
                        the first taxable year in which such 
                        modification occurs shall be increased by an 
                        amount, determined under rules prescribed by 
                        the Secretary, equal to the amount which (but 
                        for subparagraph (A)) would have been 
                        includible in the qualified distributee's gross 
                        income if the modification had been in effect 
                        at all times, plus interest for the deferral 
                        period.
                            ``(ii) Deferral period.--For purposes of 
                        clause (i), the term `deferral period' means 
                        the period beginning with the taxable year in 
                        which (without regard to subparagraph (A)) the 
                        payment would have been includible in gross 
                        income and ending with the taxable year in 
                        which the modification described in clause 
                        (i)(II) occurs.''.
    (b) Section 403(a) Plans.--Paragraph (4) of section 403(a) of such 
Code (relating to qualified annuity plans) is amended by adding at the 
end the following new subparagraph:
                    ``(C) Exclusion of percentage of lifetime annuity 
                payments.--Rules similar to the rules of section 
                402(e)(7) shall apply to distributions under any 
                annuity contract to which this subsection applies.''.
    (c) Section 403(b) Plans.--Section 403(b) of such Code (relating to 
purchased annuities) is amended by adding at the end the following new 
paragraph:
            ``(14) Exclusion of percentage of lifetime annuity 
        payments.--Rules similar to the rules of section 402(e)(7) 
        shall apply to distributions under any annuity contract to 
        which this subsection applies.''.
    (d) IRAs.--Section 408(d) of such Code (relating to tax treatment 
of distributions) is amended by adding at the end the following new 
paragraph:
            ``(8) Exclusion of percentage of lifetime annuity 
        payments.--Rules similar to the rules of section 402(e)(7) 
        shall apply to distributions out of an individual retirement 
        plan.''.
    (e) Section 457 Plans.--Section 457(e) of such Code (relating to 
special rules for deferred compensation plans) is amended by adding at 
the end the following new paragraph:
            ``(18) Exclusion of percentage of lifetime annuity 
        payments.--Rules similar to the rules of section 402(e)(7) 
        shall apply to distributions from an eligible deferred 
        compensation plan of an eligible employer described in 
        subsection (e)(1)(A).''.
    (f) Effective Date.--The amendments made by this section shall 
apply to distributions made after December 31, 2003.

SEC. 3. NOTICE OF EQUIVALENT ANNUITY.

    (a) In General.--Paragraph (1) of section 402(f) of the Internal 
Revenue Code of 1986 is amended by striking ``and'' at the end of 
subparagraph (D), by striking the period at the end of subparagraph (E) 
and inserting ``and'', and by inserting after subparagraph (E) the 
following new subparagraph:
                    ``(F) in the case of a participant receiving a 
                benefit to which section 401(a)(11)(A) does not apply, 
                in accordance with rules prescribed by the Secretary, 
                of the amount of a lifetime annuity payment (as defined 
                in section 402(e)(7)(D)) that is the actuarial 
                equivalent of account balances specified in such 
                rules.''.
    (b) Rules and Model Notice.--The Secretary of the Treasury shall, 
within 180 days of the date of enactment of this Act, issue rules and a 
model notice provision under section 402(f)(1)(F) of the Internal 
Revenue Code of 1986.
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions made after the date that is one year after the 
date of enactment of this Act.
                                 <all>