S 2962 — HELPER Act of 2019

Summary

Higher Education Loan Payment and Enhanced Retirement Act of 2019 or the HELPER Act of 2019 This bill permits annual tax and penalty-free withdrawals of up to $5,250 from 401(k) plans for higher education expenses and penalty-free withdrawals from individual retirement accounts (IRAs) for student loan expenses. The bill also excludes from gross income, for income tax purposes, distributions up to $5,250 from employer-sponsored student loan and tuition payment plans. It repeals the limitation on the deduction of interest on student loans and increases from $15,000 to $25,000 (adjusted for inflation) the maximum contribution amounts for certain tax-preferred retirement plans. The bill allows employees an election to treat contributions to a 401(k) plan as Roth contributions (thus exempting withdrawals from such plans from tax at retirement).

Bill Text

• Introduced Introduced in Senate Current html December 02, 2019

AI-generated reading aid from the bill's amendatory text — verify against the official bill.

This bill allows certain retirement plan withdrawals for student loan repayments, removes penalties for using IRAs for student loans, and modifies tax treatment of employer contributions and education loan interest deductions.

• Section 401(k) of the Internal Revenue Code of 1986

  (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.

  Allows 401(k) plan withdrawals for qualified higher education expenses without demonstrating financial hardship.

• Section 403(b) of the Internal Revenue Code of 1986

  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.

  Extends similar withdrawal provisions for qualified higher education expenses to 403(b) plans.

• Section 457(d) of the Internal Revenue Code of 1986

  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.

  Applies similar withdrawal rules for higher education expenses to 457 plans as emergencies.

• Section 72(t) of the Internal Revenue Code of 1986

  (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).

  Includes student loan repayments as qualified distributions for penalty-free withdrawals from IRAs.

• Section 402 of the Internal Revenue Code of 1986

  (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.

  Excludes distributions for qualified higher education expenses from gross income.

• Section 127(c) of the Internal Revenue Code of 1986

  and → and

  Includes employer payments for employee student loans in educational assistance programs.

• Section 221 of the Internal Revenue Code of 1986

  subsections (b) and (f)

  Repeals the cap on the deduction for interest paid on education loans.

Action History

1. December 02, 2019

   Introduced in Senate

2. December 02, 2019

   Read twice and referred to the Committee on Finance.

Sponsors

• Rand Paul · Primary

Subjects