II 110th CONGRESS 2d Session S. 3278 IN THE SENATE OF THE UNITED STATES July 17, 2008 Mr. Schumer (for himself, Mr. Kohl, and Mr. Smith) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to provide that no loan may be made from a qualified employer plan using a credit card or other intermediary and to limit the number of loans that may be made from a qualified employer plan to a participant or beneficiary.

1.

Qualified employer plans prohibited from making loans through credit cards and other intermediaries

(a)

In general

Subsection (a) of section 401 of the Internal Revenue Code of 1986 is amended by inserting after paragraph (36) the following new paragraph: (37)

Prohibition of loans through credit cards and other intermediaries

A trust shall not constitute a qualified trust under this section if the plan makes any loan to any beneficiary under the plan through the use of any credit card or any other intermediary. (b)

Application to employee annuities

(1)

In general

Section 404(a)(2) of the Internal Revenue Code of 1986 (relating to employees' annuities) is amended by striking and (31) and inserting (31), and (37). (2)

Section 403(b) annuity contracts

Section 403(b)(1) of such Code is amended by striking and at the end of subparagraph (D), by inserting and at the end of subparagraph (E), and by inserting after subparagraph (E) the following new subparagraph: (F)the requirements of section 401(a)(37) are met with respect to the contract and any plan under which the contract is purchased, . (c)

Effective date

The amendments made by this section shall apply to plan years beginning after the date of the enactment of this Act.

2.

Limitation on number of loans from qualified employer plans which may be outstanding with respect to any participant or beneficiary

(a)

In general

Paragraph (2) of section 72(p) of the Internal Revenue Code of 1986 (relating to loans treated as distributions) is amended by redesignating subparagraph (D) as subparagraph (E) and by inserting after subparagraph (C) the following new subparagraph: (D)

Exception only to apply to 3 loans

(i)

In general

Subparagraph (A) shall not apply to any loan made after the date of the enactment of this subparagraph if, immediately after such loan is made, the number of outstanding loans from the plan to the participant or beneficiary exceeds 3. (ii)

Refinancings

If any loan made after the date of the enactment of this subparagraph refinances 1 or more outstanding loans from the plan to the participant or beneficiary, the number of loans taken into account under subparagraph (A) with respect to such loan shall be equal to 1 plus the number of loans refinanced by such loan. . (b)

Effective date

The amendments made by this section shall apply to loans made after the date of the enactment of this Act.