[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 8787 Introduced in House (IH)]
<DOC>
116th CONGRESS
2d Session
H. R. 8787
To amend the Internal Revenue Code of 1986 to permit withdrawals from
certain retirement plans for repayment of student loan debt, and for
other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
November 19, 2020
Mrs. Lesko introduced the following bill; which was referred to the
Committee on Ways and Means, and in addition to the Committee on
Education and Labor, for a period to be subsequently determined by the
Speaker, in each case for consideration of such provisions as fall
within the jurisdiction of the committee concerned
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to permit withdrawals from
certain retirement plans for repayment of student loan debt, 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 ``Student Aid and Tax Advantaged
Accounts Reform Act of 2020'' or the ``STAR Act of 2020''.
SEC. 2. TREATMENT OF CERTAIN QUALIFIED EDUCATION BENEFITS FOR FINANCIAL
AID PURPOSES.
Section 480(f) of the Higher Education Act of 1965 (20 U.S.C.
1087vv(f)) is amended--
(1) by amending subparagraph (B) of paragraph (3) to read
as follows:
``(B) the parent if the student is a dependent
student, regardless of whether the owner of the account
is the student or the parent, except that the value of
a qualified education benefit with a designated
beneficiary other than the dependent student applying
for aid under this title shall not be considered an
asset of the parent.''; and
(2) in paragraph (4)--
(A) in subparagraph (A), by striking ``and'' at the
end; and
(B) by striking subparagraph (B) inserting the
following:
``(B) in the case of a program in which
contributions are made to an account that is
established for the purpose of meeting the qualified
higher education expenses of an independent student who
is the designated beneficiary of the account, the
current balance of such account; and
``(C) in the case of a program in which
contributions are made to an account that is
established for the purpose of meeting the qualified
higher education expenses of a dependent student who is
the designated beneficiary of the account, the highest
monthly balance of such account in the period of four
years preceding the date of application for aid under
this title.''.
SEC. 3. WITHDRAWALS FOR HIGHER EDUCATION EXPENSES.
(a) 401(k) Plans.--Paragraph (14) of section 401(k) of the Internal
Revenue Code of 1986 is amended by adding at the end the following new
subparagraph:
``(C) Distributions for qualified higher education
expenses.--
``(i) In general.--A distribution shall be
treated as made upon hardship of the employee
to the extent that the aggregate amount of such
distributions during the taxable year does not
exceed the lesser of--
``(I) the amount paid by the
taxpayer for qualified higher education
expenses during such taxable year, or
``(II) $5,250.
``(ii) Distribution must be otherwise
disallowed.--Clause (i) shall not apply to any
distribution which is permissible under
paragraph (2)(B)(i) (including distributions
which would be treated as made upon hardship of
the employee without regard to this
subparagraph).
``(iii) No requirement to demonstrate
hardship.--Clause (i) shall apply without
regard to any requirement to demonstrate
financial need or hardship, or to demonstrate
that other assets are not available to pay the
qualified higher education expenses.
``(iv) Additional tax under section 72(t)
not to apply.--No tax shall be imposed under
section 72(t) on any amount treated as a
hardship distribution by reason of clause (i).
``(v) Qualified higher education
expenses.--For purposes of this subparagraph,
the term `qualified higher education expenses'
has the meaning given such term by section
72(t)(7).''.
(b) 403(b) Plans.--Paragraph (11) of section 403(b) of the Internal
Revenue Code of 1986 is amended by adding at the end the following:
``Under rules similar to the rules of section 401(k)(14)(C), a
distribution shall be treated as made upon hardship of the employee to
the extent that the aggregate amount of such distributions during the
taxable year does not exceed the lesser of the amount paid by the
taxpayer for qualified higher education expenses during such taxable
year, or $5,250.''.
(c) 457 Plans.--Paragraph (1) of section 457(d) of the Internal
Revenue Code of 1986 is amended by adding at the end the following:
``Under rules similar to the rules of section 401(k)(14)(C) (and
without regard to whether the expenses are unforeseen), a distribution
shall be treated as made by reason of unforeseen emergency to the
extent that the aggregate amount of such distributions during the
taxable year does not exceed the lesser of the amount paid by the
taxpayer for qualified higher education expenses during such taxable
year, or $5,250.''.
(d) Effective Date.--The amendment made by this section shall apply
to distributions made after the date of the enactment of this Act.
SEC. 4. PENALTY-FREE WITHDRAWALS FROM IRAS FOR STUDENT LOAN EXPENSES OF
TAXPAYERS, SPOUSES, CHILDREN, AND GRANDCHILDREN.
(a) In General.--Paragraph (7) of section 72(t) of the Internal
Revenue Code of 1986 is amended by adding at the end the following new
subparagraph:
``(C) Student loans.--Such term shall include
amounts paid in repayment of any loan made to an
individual described in subparagraph (A) to assist the
individual in attending an educational organization
described in section 170(b)(1)(A)(ii).''.
(b) Effective Date.--The amendment made by this section shall apply
to distributions made after the date of the enactment of this Act.
SEC. 5. EXCLUSION OF DISTRIBUTIONS FOR EDUCATIONAL EXPENSES.
(a) In General.--Section 402 of the Internal Revenue Code of 1986
is amended by adding at the end the following new subsection:
``(m) Distributions for Qualified Higher Education Expenses.--
``(1) In general.--Gross income for the taxable year does
not include--
``(A) any distribution from a qualified cash or
deferred arrangement (as defined in section 401(k)(2)),
an annuity contract described in section 403(b), or an
eligible deferred compensation plan described in
section 457(b) which is maintained by an eligible
employer described in section 457(e)(1)(A), which is
treated as made upon hardship of the employee by reason
of section 401(k)(14)(C), the last sentence of section
403(b)(11), or the last sentence of section 457(d)(1),
or
``(B) any distribution from an individual
retirement account (as defined in section 408(a)) to
which section 72(t)(2)(E) applies.
``(2) Distributions must otherwise be includible.--
``(A) In general.--An amount shall be treated as
described in paragraph (1) only to the extent that such
amount would be includible in gross income without
regard to such paragraph.
``(B) Application of section 72.--In determining
whether a distribution would be includible in gross
income but for this subsection, rules similar to the
rules of subsection (l)(3)(B) shall apply (by taking
into account all retirement plans in which the taxpayer
is a participant).''.
(b) Coordination With Deductions and Credits.--
(1) Coordination with american opportunity and lifetime
learning credits.--
(A) In general.--Paragraph (2) of section 25A(g) of
the Internal Revenue Code of 1986 is amended by
redesignating subparagraph (C) as subparagraph (D), by
striking ``and'' at the end of subparagraph (B), and by
inserting after subparagraph (B) the following new
subparagraph:
``(C) a distribution from a qualified cash or
deferred arrangement (as defined in section 401(k)(2)),
an annuity contract described in section 403(b), an
eligible deferred compensation plan described in
section 457(b) which is maintained by an eligible
employer described in section 457(e)(1)(A), or an
individual retirement account (as defined in section
408(a)) which is excluded from gross income of the
distributee under section 402(m) (other than any
portion of such a distribution which is attributable to
the repayment of a loan described in section
72(t)(7)(C)), and''.
(B) Coordination with waiver of penalty.--
Subparagraph (B) of section 72(t)(7) is amended by
inserting ``(without regard to subparagraph (C)
thereof)'' before the period.
(2) Deduction for interest on education loans.--Paragraph
(1) of section 221(e) of such Code is amended by inserting
before the period at the end the following: ``, or for any
amount paid with a distribution which is excluded from gross
income under section 402(m)''.
(c) Effective Date.--The amendment made by this section shall apply
to distributions made after the date of the enactment of this Act.
SEC. 6. INCLUSION OF EMPLOYER STUDENT LOAN PAYMENTS IN EDUCATIONAL
ASSISTANCE PROGRAMS.
(a) In General.--Paragraph (1) of section 127(c) of the Internal
Revenue Code of 1986 is amended--
(1) by striking ``and'' at the end of subparagraph (A),
(2) by adding ``and'' at the end of subparagraph (B), and
(3) by inserting after subparagraph (B) the following new
subparagraph:
``(C) the payment, by an employer, of amounts in
repayment of any loan made to the employee to assist
the employee in attending an educational organization
described in section 170(b)(1)(A)(ii),''.
(b) Denial of Double Benefit.--Paragraph (1) of section 221(e) of
the Internal Revenue Code of 1986, as amended by section 4, is further
amended by inserting ``which is excluded from gross income under
section 127 or is'' after ``or for any amount''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
SEC. 7. REPEAL OF CAP ON DEDUCTION FOR INTEREST ON EDUCATION LOANS.
(a) In General.--Section 221 of the Internal Revenue Code of 1986
is amended by striking subsections (b) and (f).
(b) Carryover of Excess Interest.--Section 221 of the Internal
Revenue Code of 1986, as so amended, is amended by inserting after
subsection (a) the following new subsection:
``(b) Carryover.--If the amount of the deduction allowable under
subsection (a) exceeds the taxable income of the taxpayer for the
taxable year (determined without regard to this section), then an
amount equal to such excess shall be treated as interest paid by the
taxpayer in the succeeding taxable year on a qualified education
loan.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
SEC. 8. EMPLOYER ROTH CONTRIBUTIONS.
(a) In General.--Subsection (a) of section 402A of the Internal
Revenue Code of 1986 is amended--
(1) by striking ``and'' at the end of paragraph (1),
(2) by redesignating paragraph (2) as paragraph (3), and
(3) by inserting after paragraph (1) the following new
paragraph:
``(2) in the case of a qualified cash or deferred
arrangement (as defined in section 401(k)(2)), any designated
Roth employer contribution made pursuant to the arrangement
shall be treated for purposes of this chapter in the same
manner as contributions described in section 401(k)(3)(D)(ii),
except that such contribution shall not be excludable from
gross income, and''.
(b) Conforming Amendments.--
(1) Paragraph (1) of section 402A(b) of the Internal
Revenue Code of 1986 is amended--
(A) by striking ``may elect to make'' and inserting
``may elect--
``(A) to make'',
(B) by striking the period at the end and inserting
``, and'', and
(C) by adding at the end the following new
subparagraph:
``(B) in the case of a qualified cash or deferred
arrangement (as defined in section 401(k)(2)), to have
the employee's employer make designated Roth employer
contributions in lieu of all or a portion of the
matching or nonelective contributions the employee is
otherwise eligible to receive under the arrangement.''.
(2) Paragraph (2)(A) of section 402A(b) of such Code is
amended by striking ``of each employee'' and inserting ``and
designated Roth employer contributions with respect to each
employee''.
(3) Subparagraph (B) of section 402A(d)(2) of such Code is
amended by inserting ``, or elected to have made a designated
Roth employer contribution,'' after ``designated Roth
contribution'' both places it appears in clauses (i) and (ii).
(c) Designated Roth Employer Contribution.--Subsection (c) of
section 402A of the Internal Revenue Code of 1986 is amended--
(1) by inserting ``and Designated Roth Employer
Contributions'' after ``Designated Roth Contributions'' in the
heading, and
(2) by adding at the end the following new paragraph:
``(5) Designated roth employer contribution.--
``(A) In general.--The term `designated Roth
employer contribution' means any contribution described
in subparagraph (B) made under a qualified cash or
deferred arrangement (as defined in section 401(k)(2))
which--
``(i) is excludable from gross income of an
employee without regard to this section, and
``(ii) the employee designates (at such
time and in such manner as the Secretary may
prescribe) as not being so excludable.
``(B) Contributions described.--The contributions
described in this subparagraph are--
``(i) matching contributions (as defined in
section 401(m)(4)(A)) which meet the
requirements of subparagraphs (B) and (C) of
section 401(k)(2), and
``(ii) qualified nonelective contributions
(within the meaning of section 401(m)(4)(C)).
``(C) Designation limits.--The amount of matching
contributions and qualified nonelective contributions
which an employee may designate under subparagraph (A)
shall not exceed the excess (if any) of--
``(i) the maximum amount of such
contributions excludable from gross income of
the employee for the taxable year (without
regard to this section), over
``(ii) the aggregate amount of such
contributions with respect to the employee for
the taxable year which the employee does not
designate under subparagraph (A).''.
(d) Effective Date.--The amendments made by this section shall
apply to contributions made in taxable years beginning after the date
of the enactment of this Act.
SEC. 9. MAXIMUM CONTRIBUTIONS.
(a) Elective Deferrals.--
(1) In general.--Subparagraph (B) of section 402(g)(1) of
the Internal Revenue Code of 1986 is amended by striking
``$15,000'' and inserting ``$25,000''.
(2) Cost-of-living adjustment.--Paragraph (4) of section
402(g) of such Code is amended--
(A) by striking ``$15,000'' and inserting
``$25,000'',
(B) by striking ``December 31, 2006'' and inserting
``December 31, 2020'', and
(C) by striking ``July 1, 2005'' and inserting
``July 1, 2019''.
(3) Conforming amendment.--Clause (ii) of section
402(g)(7)(A) of such Code is amended by striking ``$15,000''
and inserting ``$25,000''.
(b) 457 Plans.--
(1) In general.--Subparagraph (A) of section 457(e)(15) of
the Internal Revenue Code of 1986 is amended by striking
``$15,000'' and inserting ``$25,000''.
(2) Cost-of-living adjustment.--Subparagraph (B) of section
457(e)(15) of such Code is amended--
(A) by striking ``$15,000'' and inserting
``$25,000'',
(B) by striking ``December 31, 2006'' and inserting
``December 31, 2020'', and
(C) by striking ``July 1, 2005'' and inserting
``July 1, 2019''.
(c) Employed Individual 401(k)s.--Subsection (k) of section 401 of
the Internal Revenue Code of 1986 is amended by adding at the end the
following new paragraph:
``(15) Employed individual arrangement.--
``(A) In general.--A cash or deferred arrangement
shall not be treated as failing to meet any requirement
of this subsection solely because, under the
arrangement, an employee may elect to make additional
elective deferrals which are not subject to, and are
not taken into account under, paragraph (3) to a
separate account from other contributions made on
behalf of the employee under the arrangement, if--
``(i) all employees eligible to participate
in the arrangement are eligible to make such
election,
``(ii) the aggregate of all elective
deferrals made by the employee under the
arrangement does not exceed the limitation of
section 402(g), and
``(iii) no matching or nonelective
contributions may be made to such account or
with respect to elective deferrals contributed
to such account.
``(B) Distribution, etc. rules to apply.--The rules
of this subsection, other than paragraph (3), shall
apply to any account established under subparagraph
(A).
``(C) Elective deferral.--For purposes of this
paragraph, the term `elective deferral' means any
employer contribution under a qualified cash or
deferred arrangement to the extent not includible in
gross income for the taxable year under section
402(e)(3) (determined without regard to section
402(g)).''.
(d) Effective Date.--The amendments made by this section shall
apply to contributions made in taxable years beginning after the date
of the enactment of this Act.
<all>
STAR Act of 2020
#8787 | HR Congress #116
Policy Area: Taxation
Last Action: Referred to the Committee on Ways and Means, and in addition to the Committee on Education and Labor, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned. (11/19/2020)
Bill Text Source: Congress.gov
Summary and Impacts
Original Text