“To amend the Internal Revenue Code of 1986 to provide for in-service rollovers for individual retirement annuity purchases.”
No CRS summary available for this bill.
This section authorizes 401(k) plans to permit participants age 50 or older to elect a direct in-service rollover of all or a portion of their accrued benefit attributable to employer contributions (made pursuant to the participant's election) to an individual retirement annuity (i.e., an annuity contract under IRC §408(b)). (Currently, 401(k) plans generally prohibit in-service distributions prior to age 59½ or separation from service, absent limited exceptions such as hardships; a direct rollover preserves tax deferral by transferring funds to an IRA without distribution.) This section also establishes a safe harbor under IRC §402(f) for the written explanation provided to recipients of eligible rollover distributions, requiring 14 specified items in concise plain language (e.g., 30-day review period, 20% mandatory withholding on non-rollover distributions, 60-day indirect rollover option, and non-eligible distribution types such as required minimum distributions). The amendments apply to taxable years beginning after December 31, 2025.