SENATE UNEMPLOYMENT INSURANCE LEGISLATION WOULD REQUIRE WITHHOLDING ON CERTAIN NONPERIODIC DISTRIBUTIONS

June 25, 1992 TO: PENSION MEMBERS NO. 15-92 RE: SENATE UNEMPLOYMENT INSURANCE LEGISLATION WOULD REQUIRE WITHHOLDING ON CERTAIN NONPERIODIC DISTRIBUTIONS __________________________________________________________ Attached is a copy of the revenue provisions of H.R. 5260, as passed by the U.S. Senate on June 19, and the related portion of the Senate Finance Committee Report accompanying the bill. Sections 511 and 512(a) of the bill would liberalize the rollover rules and require qualified plans and section 403(b) arrangements to permit employees to elect to transfer their interests directly to eligible transferee plans, including IRAs. These provisions are similar to those contained in H.R. 4210, the tax legislation vetoed by the President earlier this year. ( See Institute Memorandum to Pension Members No. 5-92, dated March 27, 1992.) However, section 512(b) of the Senate version of H.R. 5260 would require qualified plans and section 403(b) arrangements to withhold at a rate of 20 percent from any distribution not transferred directly to an eligible transferee plan, notwithstanding the fact that such distribution would not be taxable if rolled over into an IRA within 60 days. We will keep you informed of further developments. Kathy D. Ireland Associate Counsel - Pension Attachments KDI:bmb