A bill to amend the Internal Revenue Code of 1954 to treat certain distributions of part of an employee's balance in a pension plan as lump-sum distributions if the entire amount of such balance is not distributed because of pending litigation.

Provides, under the Internal Revenue Code, that in the case of any employee's tax exempt trust or any qualified tax exempt pension plan, the balance to the credit of an employee does not include any amount not paid or distributed during the taxable year of any recipient solely by reason of any potential liability of the trust or plan arising from any court action which is pending at the close of such taxable year.

Provides that if any payment or distribution from a trust or plan is treated as a lump sum distribution by reason of this Act and if, after the completion of the court action referred to in this Act, there is a subsequent distribution or payment from such trust or plan within one taxable year of the recipient of the remaining balance to the credit of the employee, such subsequent distribution or payment shall be treated as a lump sum distribution.

States that no gain or loss shall be recognized for income tax purposes with respect to the sale or exchange of employer securities if the proceeds are transferred by an employee to an individual retirement account, retirement annuity or retirement bond as provided by the Code.