Treat certain price protection payments as eligible rollover distributions

Section 402(c)(4) of the Internal Revenue Code of 1986 is amended—

(1) by striking For purposes of and inserting—

For purposes of

(2) by striking If all or any portion and all that follows through the period and inserting—

If all or any portion

(2) , and

(3) by adding at the end the following new subparagraphs:

In the case of a price protection payment made after December 12, 2019, with respect to a plan year ending before January 1, 2025, such payment will be treated as an eligible rollover distribution if such payment is made pursuant to a price protection agreement which provides a payment to a participant (or beneficiary of such participant) who separates from service with an employer due to retirement, death or disability.

In the case of a price protection payment made with respect to a plan year ending after December 31, 2024, such payment will be treated as an eligible rollover distribution if such payment is made pursuant to a price protection agreement which—

(I) is offered as part of an employee stock ownership plan,

(II) covers any separation of service of a plan participant regardless of the reason for such separation, and

(III) pays price protection payments upon commencement of plan distributions under section 409(o)(1)(A)(i).

For purposes of this paragraph—

The term price protection agreement means an agreement between an employer maintaining an employee stock ownership plan and the trustee of such plan, pursuant to which a participant or beneficiary receives a price protection payment for stock distributions from such plan following an exempt loan taken on by the employer.

The term price protection payment means an amount paid to a plan participant or beneficiary pursuant to a price protection agreement if such agreement provides that price protection payments will be made—

(I) within a specified period of time, not to exceed the shorter of 5 years or the life of an exempt loan, following the purchase of employer securities with such loan, and

(II) in an amount equal to the excess, if any, of—

(aa) the fair market value of the shares of employer securities at the time of the distribution determined without regard to such exempt loan, over

(bb) the fair market value of the employer securities at the time of distribution.

The term employee stock ownership plan has the meaning given such term in section 4975(e)(7).

The term exempt loan means a loan described in section 4975(d)(3).

Section 401(a)(5) of such Code is amended by adding at the end the following new subparagraph:

A plan shall not be considered discriminatory within the meaning of paragraph (4) merely because the plan is subject to a price protection agreement (as defined in section 402(c)(4)(D)(ii)) which favors highly compensated employees.

Section 404 of such Code is amended by adding at the end the following new subsection:

Price protection payments (as defined in section 402(c)(4)(D)(i)) shall not be subject to any limitation contained in subsection (a)(3).

(1) The amendments made by subsection (a) shall apply to amounts paid after December 12, 2019.

(2) The amendments made by subsections (b) and (c) shall apply to amounts paid in plan years ending after December 31, 2024.