[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 546 Introduced in Senate (IS)]
109th CONGRESS
1st Session
S. 546
To amend the Internal Revenue Code of 1986 to provide for retirement
savings accounts, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
March 8, 2005
Mr. Thomas (for himself and Mr. Kyl) introduced the following bill;
which was read twice and referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to provide for retirement
savings accounts, 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, ETC.
(a) Short Title.--This Act may be cited as the ``Retirement Savings
Account Act''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other provision,
the reference shall be considered to be made to a section or other
provision of the Internal Revenue Code of 1986.
SEC. 2. RETIREMENT SAVINGS ACCOUNTS.
(a) In General.--Section 408A (relating to Roth IRAs) is amended to
read as follows:
``SEC. 408A. RETIREMENT SAVINGS ACCOUNTS.
``(a) In General.--Except as provided in this section, a retirement
savings account shall be treated for purposes of this title in the same
manner as an individual retirement plan.
``(b) Retirement Savings Account.--For purposes of this title, the
term `retirement savings account' means an individual retirement plan
(as defined in section 7701(a)(37)) which--
``(1) is designated (in such manner as the Secretary may
prescribe) at the time of establishment of the plan as a
retirement savings account, and
``(2) does not accept any contribution (other than a
qualified rollover contribution) which is not in cash.
``(c) Treatment of Contributions.--
``(1) Contribution limit.--Notwithstanding subsections
(a)(1) and (b)(2)(A) of section 408, the aggregate amount of
contributions for any taxable year to all retirement savings
accounts maintained for the benefit of an individual shall not
exceed the lesser of--
``(A) $5,000, or
``(B) the amount of compensation includible in the
individual's gross income for such taxable year.
``(2) Special rule for certain married individuals.--In the
case of any individual who files a joint return for the taxable
year, the amount taken into account under paragraph (1)(B)
shall be increased by the excess (if any) of--
``(A) the compensation includible in the gross
income of such individual's spouse for the taxable
year, over
``(B) the aggregate amount of contributions for the
taxable year to all retirement savings accounts
maintained for the benefit of such spouse.
``(3) Contributions permitted after age 70\1/2\.--
Contributions to a retirement savings account may be made even
after the individual for whom the account is maintained has
attained age 70\1/2\.
``(4) Mandatory distribution rules not to apply before
death.--Notwithstanding subsections (a)(6) and (b)(3) of
section 408 (relating to required distributions), the following
provisions shall not apply to any retirement savings account:
``(A) Section 401(a)(9)(A).
``(B) The incidental death benefit requirements of
section 401(a).
``(5) Rollover contributions.--
``(A) In general.--No rollover contribution may be
made to a retirement savings account unless it is a
qualified rollover contribution.
``(B) Coordination with limit.--A qualified
rollover contribution shall not be taken into account
for purposes of paragraph (1).
``(6) Rollovers from plans with taxable distributions.--
``(A) In general.--Notwithstanding sections 402(c),
403(a)(4), 403(b)(8), 408(d)(3), and 457(e)(16), in the
case of any contribution to which this paragraph
applies--
``(i) there shall be included in gross
income any amount which would be includible
were it not part of a qualified rollover
contribution,
``(ii) section 72(t) shall not apply, and
``(iii) unless the taxpayer elects not to
have this clause apply for any taxable year,
any amount required to be included in gross
income for such taxable year by reason of this
paragraph for any contribution before January
1, 2007, shall be so included ratably over the
4-taxable year period beginning with such
taxable year.
Any election under clause (iii) for any contributions
during a taxable year may not be changed after the due
date (including extensions of time) for filing the
taxpayer's return for such taxable year.
``(B) Contributions to which paragraph applies.--
This paragraph shall apply to any qualified rollover
contribution to a retirement savings account (other
than a rollover contribution from another such
account).
``(C) Conversions of iras.--The conversion of an
individual retirement plan (other than a retirement
savings account) to a retirement savings account shall
be treated for purposes of this paragraph as a
contribution to which this paragraph applies.
``(D) Additional reporting requirements.--Trustees
and plan administrators of eligible retirement plans
(as defined in section 402(c)(8)(B)) and retirement
savings accounts shall report such information as the
Secretary may require to ensure that amounts required
to be included in gross income under subparagraph (A)
are so included. Such reports shall be made at such
time and in such form and manner as the Secretary may
require. The Secretary may provide that such
information be included as additional information in
reports required under section 408(i) or 6047.
``(E) Special rules for contributions to which a 4-
year averaging applies.--In the case of a qualified
rollover contribution to which subparagraph (A)(iii)
applied, the following rules shall apply:
``(i) Acceleration of inclusion.--
``(I) In general.--The amount
required to be included in gross income
for each of the first 3 taxable years
in the 4-year period under subparagraph
(A)(iii) shall be increased by the
aggregate distributions from retirement
savings accounts for such taxable year
which are allocable under subsection
(d)(3) to the portion of such qualified
rollover contribution required to be
included in gross income under
subparagraph (A)(i).
``(II) Limitation on aggregate
amount included.--The amount required
to be included in gross income for any
taxable year under subparagraph
(A)(iii) shall not exceed the aggregate
amount required to be included in gross
income under subparagraph (A)(iii) for
all taxable years in the 4-year period
(without regard to subclause (I))
reduced by amounts included for all
preceding taxable years.
``(ii) Death of distributee.--
``(I) In general.--If the
individual required to include amounts
in gross income under such subparagraph
dies before all of such amounts are
included, all remaining amounts shall
be included in gross income for the
taxable year which includes the date of
death.
``(II) Special rule for surviving
spouse.--If the spouse of the
individual described in subclause (I)
acquires the individual's entire
interest in any retirement savings
account to which such qualified
rollover contribution is properly
allocable, the spouse may elect to
treat the remaining amounts described
in subclause (I) as includible in the
spouse's gross income in the taxable
years of the spouse ending with or
within the taxable years of such
individual in which such amounts would
otherwise have been includible. Any
such election may not be made or
changed after the due date (including
extensions of time) for filing the
spouse's return for the taxable year
which includes the date of death.
``(F) 5-year holding period rules.--If--
``(i) any portion of a distribution from a
retirement savings account is properly
allocable to a qualified rollover contribution
with respect to which an amount is includible
in gross income under subparagraph (A)(i),
``(ii) such distribution is made during the
5-taxable year period beginning with the
taxable year for which such contribution was
made, and
``(iii) such distribution is not described
in clause (i), (ii), or (iii) of subsection
(d)(2)(A),
then section 72(t) shall be applied as if such portion
were includible in gross income.
``(7) Time when contributions made.--For purposes of this
section, a taxpayer shall be deemed to have made a contribution
to a retirement savings account on the last day of the
preceding taxable year if the contribution is made on account
of such taxable year and is made not later than the time
prescribed by law for filing the return for such taxable year
(not including extensions thereof).
``(8) Cost-of-living adjustment.--
``(A) In general.--In the case of any taxable year
beginning in a calendar year after 2006, the $5,000
amount under paragraph (1)(A) shall be increased by an
amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment
determined under section 1(f)(3) for the
calendar year in which the taxable year begins,
determined by substituting `calendar year 2005'
for `calendar year 1992' in subparagraph (B)
thereof.
``(B) Rounding rules.--If any amount after
adjustment under subparagraph (A) is not a multiple of
$500, such amount shall be rounded to the next lower
multiple of $500.
``(d) Distribution Rules.--For purposes of this title--
``(1) Exclusion.--Any qualified distribution from a
retirement savings account shall not be includible in gross
income.
``(2) Qualified distribution.--For purposes of this
subsection--
``(A) In general.--The term `qualified
distribution' means any payment or distribution--
``(i) made on or after the date on which
the individual attains age 58,
``(ii) made to a beneficiary (or to the
estate of the individual) on or after the death
of the individual,
``(iii) attributable to the individual's
being disabled (within the meaning of section
72(m)(7)), or
``(iv) to which section 72(t)(2)(F) applies
(if such payment or distribution is made before
January 1, 2009).
``(B) Distributions of excess contributions and
earnings.--The term `qualified distribution' shall not
include any distribution of any contribution described
in section 408(d)(4) and any net income allocable to
the contribution.
``(3) Ordering rules.--For purposes of applying this
section and section 72 to any distribution from a retirement
savings account, such distribution shall be treated as made--
``(A) from contributions to the extent that the
amount of such distribution, when added to all previous
distributions from the retirement savings account, does
not exceed the aggregate contributions to the
retirement savings account, and
``(B) from such contributions in the following
order:
``(i) Contributions other than qualified
rollover contributions with respect to which an
amount is includible in gross income under
subsection (c)(6)(A)(i).
``(ii) Qualified rollover contributions
with respect to which an amount is includible
in gross income under subsection (c)(6)(A)(i)
on a first-in, first-out basis.
Any distribution allocated to a qualified rollover contribution
under subparagraph (B)(ii) shall be allocated first to the
portion of such contribution required to be included in gross
income.
``(4) Aggregation rules.--Section 408(d)(2) shall be
applied separately with respect to retirement savings accounts
and other individual retirement plans.
``(e) Qualified Rollover Contribution.--
``(1) In general.--For purposes of this section, the term
`qualified rollover contribution' means--
``(A) a rollover contribution to a retirement
savings account of an individual from another such
account of such individual or such individual's spouse,
or from an individual retirement plan of such
individual, but only if such rollover contribution
meets the requirements of section 408(d)(3), and
``(B) a rollover contribution described in section
402(c), 402A(c)(3)(A), 403(a)(4), 403(b)(8), or
457(e)(16).
``(2) Coordination with limitation on ira rollovers.--For
purposes of section 408(d)(3)(B), there shall be disregarded
any qualified rollover contribution from an individual
retirement plan (other than a retirement savings account) to a
retirement savings account.
``(f) Individual Retirement Plan.--For purposes of this section--
``(1) a simplified employee pension or a simple retirement
account may not be designated as a retirement savings account,
and
``(2) contributions to any such pension or account shall
not be taken into account for purposes of subsection (c)(1).
``(g) Compensation.--For purposes of this section, the term
`compensation' includes earned income (as defined in section
401(c)(2)). Such term does not include any amount received as a pension
or annuity and does not include any amount received as deferred
compensation. Such term shall include any amount includible in the
individual's gross income under section 71 with respect to a divorce or
separation instrument described in section 71(b)(2)(A). For purposes of
this subsection, section 401(c)(2) shall be applied as if the term
trade or business for purposes of section 1402 included service
described in section 1402(c)(6).''.
(b) Roth IRAs Treated as Retirement Savings Accounts.--In the case
of any taxable year beginning after December 31, 2005, any Roth IRA (as
defined in section 408A(b) of the Internal Revenue Code of 1986, as in
effect on the day before the date of the enactment of this Act) shall
be treated for purposes of such Code as having been designated at the
time of the establishment of the plan as a retirement savings account
under section 408A(b) of such Code (as amended by this section).
(c) Contributions to Other Individual Retirement Plans
Prohibited.--
(1) Individual retirement accounts.--Paragraph (1) of
section 408(a) is amended to read as follows:
``(1) Except in the case of a simplified employee pension,
a simple retirement account, or a rollover contribution
described in subsection (d)(3) or in section 402(c), 403(a)(4),
403(b)(8), or 457(e)(16), no contribution will be accepted on
behalf of any individual for any taxable year beginning after
December 31, 2005. In the case of any simplified employee
pension or simple retirement account, no contribution will be
accepted unless it is in cash and contributions will not be
accepted for the taxable year on behalf of any individual in
excess of--
``(A) in the case of a simplified employee pension,
the amount of the limitation in effect under section
415(c)(1)(A), and
``(B) in the case of a simple retirement account,
the sum of the dollar amount in effect under subsection
(p)(2)(A)(ii) and the employer contribution required
under subparagraph (A)(iii) or (B)(i) of subsection
(p)(2).''.
(2) Individual retirement annuities.--Paragraph (2) of
section 408(b) is amended--
(A) by redesignating subparagraphs (A), (B), and
(C) as subparagraphs (B), (C), and (D), respectively,
and by inserting before subparagraph (B), as so
redesignated, the following new subparagraph:
``(A) except in the case of a simplified employee
pension, a simple retirement account, or a rollover
contribution described in subsection (d)(3) or in
section 402(c), 403(a)(4), 403(b)(8), or 457(e)(16), a
premium shall not be accepted on behalf of any
individual for any taxable year beginning after
December 31, 2005,'', and
(B) by amending subparagraph (C), as redesignated
by subparagraph (A), to read as follows:
``(C) the annual premium on behalf of any
individual will not exceed--
``(i) in the case of a simplified employee
pension, the amount of the limitation in effect
under section 415(c)(1)(A), and
``(ii) in the case of a simple retirement
account, the sum of the dollar amount in effect
under subsection (p)(2)(A)(ii) and the employer
contribution required under subparagraph
(A)(iii) or (B)(i) of subsection (p)(2), and''.
(d) Conforming Amendments.--
(1)(A) Section 219 is amended to read as follows:
``SEC. 219. CONTRIBUTIONS TO CERTAIN RETIREMENT PLANS ALLOWING ONLY
EMPLOYEE CONTRIBUTIONS.
``(a) Allowance of Deduction.--In the case of an individual, there
shall be allowed as a deduction the amount contributed on behalf of
such individual to a plan described in section 501(c)(18).
``(b) Maximum Amount of Deduction.--The amount allowable as a
deduction under subsection (a) to any individual for any taxable year
shall not exceed the lesser of--
``(1) $7,000, or
``(2) an amount equal to 25 percent of the compensation (as
defined in section 415(c)(3)) includible in the individual's
gross income for such taxable year.
``(c) Beneficiary Must Be Under Age 70\1/2\.--No deduction shall be
allowed under this section with respect to any contribution on behalf
of an individual if such individual has attained age 70\1/2\ before the
close of such individual's taxable year for which the contribution was
made.
``(d) Special Rules.--
``(1) Married individuals.--The maximum deduction under
subsection (b) shall be computed separately for each
individual, and this section shall be applied without regard to
any community property laws.
``(2) Reports.--The Secretary shall prescribe regulations
which prescribe the time and the manner in which reports to the
Secretary and plan participants shall be made by the plan
administrator of a qualified employer or government plan
receiving qualified voluntary employee contributions.
``(e) Cross Reference.--For failure to provide required reports,
see section 6652(g).''.
(B) Section 25B(d) is amended--
(i) in paragraph (1)(A), by striking ``(as defined
in section 219(e))'', and
(ii) by adding at the end the following new
paragraph:
``(3) Qualified retirement contribution.--The term
`qualified retirement contribution' means--
``(A) any amount paid in cash for the taxable year
by or on behalf of an individual to an individual
retirement plan for such individual's benefit, and
``(B) any amount contributed on behalf of any
individual to a plan described in section
501(c)(18).''.
(C) Section 86(f)(3) is amended by striking ``section
219(f)(1)'' and inserting ``section 408A(g)''.
(D) Section 132(m)(3) is amended by inserting ``(as in
effect on the day before the date of the enactment of the
Retirement Savings Account Act)'' after ``section 219(g)(5)''.
(E) Subparagraphs (A), (B), and (C) of section 220(d)(4)
are each amended by inserting ``, as in effect on the day
before the date of the enactment of the Retirement Savings
Account Act'' at the end.
(F) Section 408(b) is amended in the last sentence by
striking ``section 219(b)(1)(A)'' and inserting ``paragraph
(2)(C)''.
(G) Section 408(p)(2)(D)(ii) is amended by inserting ``(as
in effect on the day before the date of the enactment of the
Retirement Savings Account Act)'' after ``section 219(g)(5)''.
(H) Section 409A(d)(2) is amended by inserting ``(as in
effect on the day before the date of the enactment of the
Retirement Savings Account Act)'' after ``subparagraph
(A)(iii))''.
(I) Section 501(c)(18)(D)(i) is amended by striking
``section 219(b)(3)'' and inserting ``section 219(b)''.
(J) Section 6652(g) is amended by striking ``section
219(f)(4)'' and inserting ``section 219(d)(2)''.
(K) The table of sections for part VII of subchapter B of
chapter 1 is amended by striking the item relating to section
219 and inserting the following new item:
``Sec. 219. Contributions to certain retirement plans allowing
only employee contributions.''.
(2)(A) Section 408(d)(4)(B) is amended to read as follows:
``(B) no amount is excludable from gross income
under subsection (h) or (k) of section 402 with respect
to such contribution, and''.
(B) Section 408(d)(5)(A) is amended to read as follows:
``(A) In general.--In the case of any individual,
if the aggregate contributions (other than rollover
contributions) paid for any taxable year to an
individual retirement account or for an individual
retirement annuity do not exceed the dollar amount in
effect under subsection (a)(1) or (b)(2)(C), as the
case may be, paragraph (1) shall not apply to the
distribution of any such contribution to the extent
that such contribution exceeds the amount which is
excludable from gross income under subsection (h) or
(k) of section 402, as the case may be, for the taxable
year for which the contribution was paid--
``(i) if such distribution is received
after the date described in paragraph (4),
``(ii) but only to the extent that such
excess contribution has not been excluded from
gross income under subsection (h) or (k) of
section 402.''.
(C) Section 408(d)(5) is amended by striking the last
sentence.
(D) Section 408(d)(7) is amended to read as follows:
``(7) Certain transfers from simplified employee pensions
prohibited until deferral test met.--Notwithstanding any other
provision of this subsection or section 72(t), paragraph (1)
and section 72(t)(1) shall apply to the transfer or
distribution from a simplified employee pension of any
contribution under a salary reduction arrangement described in
subsection (k)(6) (or any income allocable thereto) before a
determination as to whether the requirements of subsection
(k)(6)(A)(iii) are met with respect to such contribution.''.
(E) Section 408 is amended by striking subsection (j).
(F)(i) Section 408 is amended by striking subsection (o).
(ii) Section 6693 is amended by striking subsection (b) and
by redesignating subsections (c) and (d) as subsections (b) and
(c), respectively.
(G) Section 408(p) is amended by striking paragraph (8) and
by redesignating paragraphs (9) and (10) as paragraphs (8) and
(9), respectively.
(3)(A) Section 4973(a)(1) is amended to read as follows:
``(1) an individual retirement plan,''.
(B) Section 4973(b) is amended to read as follows:
``(b) Excess Contributions to Simplified Employee Pensions and
Simple Retirement Accounts.--For purposes of this section, in the case
of simplified employee pensions or simple retirement accounts, the term
`excess contributions' means the sum of--
``(1) the excess (if any) of--
``(A) the amount contributed for the taxable year
to the pension or account, over
``(B) the amount applicable to the pension or
account under subsection (a)(1) or (b)(2) of section
408, and
``(2) the amount determined under this subsection for the
preceding taxable year, reduced by the sum of--
``(A) the distributions out of the account for the
taxable year which were included in the gross income of
the payee under section 408(d)(1),
``(B) the distributions out of the account for the
taxable year to which section 408(d)(5) applies, and
``(C) the excess (if any) of the maximum amount
excludable from gross income for the taxable year under
subsection (h) or (k) of section 402 over the amount
contributed to the pension or account for the taxable
year.
For purposes of this subsection, any contribution which is distributed
from a simplified employee pension or simple retirement account in a
distribution to which section 408(d)(4) applies shall be treated as an
amount not contributed.''.
(C) Section 4973 is amended by adding at the end the
following new subsection:
``(h) Excess Contributions to Certain Individual Retirement
Plans.--For purposes of this section, in the case of individual
retirement plans (other than retirement savings accounts, simplified
employee pensions, and simple retirement accounts), the term `excess
contribution' means the sum of--
``(1) the aggregate amount contributed for the taxable year
to the individual retirement plans, and
``(2) the amount determined under this subsection for the
preceding taxable year, reduced by the sum of--
``(A) the distributions out of the plans which were
included in gross income under section 408(d)(1), and
``(B) the distributions out of the plans for the
taxable year to which section 408(d)(5) applies.
For purposes of this subsection, any contribution which is distributed
from the plan in a distribution to which section 408(d)(4) applies
shall be treated as an amount not contributed.''.
(4)(A) Sections 402(c)(8)(B), 402A(c)(3)(A)(ii),
1361(c)(2)(A), 3405(e)(1)(B), and 4973(f) are each amended by
striking ``Roth IRA'' each place it appears and inserting
``retirement savings account''.
(B) Section 4973(f)(1)(A) is amended by striking ``Roth
IRAs'' and inserting ``retirement savings accounts''.
(C) Paragraphs (1)(B) and (2)(B) of section 4973(f) are
each amended by striking ``sections 408A(c)(2) and (c)(3)'' and
inserting ``section 408A(c)(1)''.
(D) Subsection (f) of section 4973 is amended in the
heading by striking ``Roth IRAs'' and inserting ``Retirement
Savings Accounts''.
(e) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2005.
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