To amend the Internal Revenue Code of 1986 to allow penalty-free distributions from qualified retirement plans on account of the death or disability of the participant's spouse.

January 7, 2003

Mrs. EMERSON introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to allow penalty-free distributions from qualified retirement plans on account of the death or disability of the participant's spouse.

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

SECTION 1. DISTRIBUTIONS FROM QUALIFIED RETIREMENT PLANS ON ACCOUNT OF DEATH OR DISABILITY OF PARTICIPANT'S SPOUSE.

(a) Distributions Permitted-

(1) 401(k) Plans- Subclause (I) of section 401(k)(2)(B)(i) of the Internal Revenue Code of 1986 (defining qualified cash or deferred arrangement) is amended by striking `, death or disability' and inserting `or the death or disability of the participant or the participant's spouse'.

(2) 403(b) Annuities-

(A) Clause (ii) of section 403(b)(7)(A) of such Code is amended by inserting `(or, if earlier, the employee's spouse dies or becomes disabled (as do defined)' after `section 72(m)(7))'.

(B) Subparagraph (A) of section 403(b)(11) of such Code is amended by inserting before the comma at the end `or when the spouse of the employee dies or becomes disabled (as so defined)'.

(3) ROTH IRAS- Subparagraph (A) of section 408A(d)(2) of such Code is amended--

(A) by inserting before the comma at the end of clause (ii) `or made to the individual on or after the death of the individual's spouse', and

(B) by striking clause (iii) and inserting the following new clause:

`(iii) attributable to the disability (within the meaning of section 72(m)(7)) of the individual or the individual's spouse, or'.

(b) PENALTY-FREE WITHDRAWALS- Subparagraph (A) of section 72(t)(2) of such Code is amended--

(1) by inserting before the comma at the end of clause (ii) `or made to the employee on or after the death of the employee's spouse', and

(2) by striking clause (iii) and inserting the following new clause:

`(iii) attributable to the disability (within the meaning of subsection (m)(7)) of the employee or the employee's spouse,'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to distributions after December 31, 2001.

END