[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4482 Introduced in House (IH)]







107th CONGRESS
  2d Session
                                H. R. 4482

  To amend the Internal Revenue Code of 1986 to provide for Universal 
     Retirement Savings Accounts in lieu of the various individual 
                           retirement plans.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 18, 2002

 Mr. Gephardt introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
  To amend the Internal Revenue Code of 1986 to provide for Universal 
     Retirement Savings Accounts in lieu of the various individual 
                           retirement plans.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    (a) Short Title.--This Act may be cited as the ``Universal and 
Portable Pension Act of 2002''.
    (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. UNIVERSAL RETIREMENT SAVINGS ACCOUNTS.

    (a) Deduction for Contributions.--
            (1) In general.--Part VII of subchapter B of chapter 1 
        (relating to additional itemized deductions for individuals) is 
        amended by inserting after section 219 the following new 
        section:

``SEC. 219A. CONTRIBUTIONS TO UNIVERSAL RETIREMENT SAVINGS ACCOUNTS.

    ``(a) Allowance of Deduction.--In the case of an individual, there 
shall be allowed as a deduction an amount equal to the qualified 
universal retirement contributions of the individual for the taxable 
year.
    ``(b) Maximum Amount of Deduction.--
            ``(1) In general.--The amount allowable as a deduction 
        under subsection (a) to any individual for any taxable year 
        shall not exceed the lesser of--
                    ``(A) the deductible amount, or
                    ``(B) an amount equal to the compensation 
                includible in the individual's gross income for such 
                taxable year.
            ``(2) Deductible amount.--For purposes of paragraph (1)(A), 
        the deductible amount shall be determined in accordance with 
        the following table:

        ``For taxable years beginning
                                                         The deductible
          in calendar year--
                                                            amount is--
            2002, 2003, or 2004............................  $3,000    
            2005, 2006, or 2007............................  $4,000    
            2008 or thereafter............................. $5,000.    

            ``(3) Cost-of-living adjustment.--
                    ``(A) In general.--In the case of any taxable year 
                beginning in a calendar year after 2008, the $5,000 
                amount in paragraph (2) 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 2007' 
                        for `calendar year 1992' in subparagraph (B) 
                        thereof.
                    ``(B) Rounding.--If any amount after adjustment 
                under clause (i) is not a multiple of $500, such amount 
                shall be rounded to the next lower multiple of $500.
    ``(c) Limitation Based on Adjusted Gross Income.--
            ``(1) In general.--The deductible amount otherwise 
        applicable under subsection (b) for any taxable year shall be 
        reduced (but not below zero) by the amount determined under 
        paragraph (2).
            ``(2) Amount of reduction.--
                    ``(A) In general.--The amount determined under this 
                paragraph with respect to any dollar limitation shall 
                be the amount which bears the same ratio to such 
                limitation as--
                            ``(i) the excess of--
                                    ``(I) the taxpayer's adjusted gross 
                                income for such taxable year, over
                                    ``(II) $50,000 ($100,000 in the 
                                case of a joint return), bears to
                            ``(ii) $50,000 ($60,000 in the case of a 
                        joint return).
                    ``(B) No reduction below $200 until complete phase-
                out.--No dollar limitation shall be reduced below $200 
                under paragraph (1) unless (without regard to this 
                subparagraph) such limitation is reduced to zero.
                    ``(C) Rounding.--Any amount determined under this 
                paragraph which is not a multiple of $10 shall be 
                rounded to the next lowest $10.
            ``(3) Adjusted gross income.--For purposes of this 
        subsection, adjusted gross income of any taxpayer shall be 
        determined--
                    ``(A) after application of sections 86, 219, and 
                469, and
                    ``(B) without regard to sections 135, 137, 221, 
                222, and 911 or the deduction allowable under this 
                section.
            ``(4) Married individuals filing separate returns.--
                    ``(A) In general.--In the case of a married 
                individual filing a separate return, the amount 
                applicable under paragraph (2)(A)(i)(II) is zero.
                    ``(B) Special rule for married individuals filing 
                separately and living apart.--A husband and wife who--
                            ``(i) file separate returns for any taxable 
                        year, and
                            ``(ii) live apart at all times during such 
                        taxable year,
                shall not be treated as married individuals for 
                purposes of this subsection.
    ``(d) Special Rules for Certain Married Individuals.--
            ``(1) In general.--In the case of an individual to whom 
        this paragraph applies for the taxable year, the limitation of 
        paragraph (1) of subsection (b) shall be equal to the lesser 
        of--
                    ``(A) the dollar amount in effect under subsection 
                (b)(1)(A) for the taxable year, or
                    ``(B) the sum of--
                            ``(i) the compensation includible in such 
                        individual's gross income for the taxable year, 
                        plus
                            ``(ii) the compensation includible in the 
                        gross income of such individual's spouse for 
                        the taxable year reduced by the amount allowed 
                        as a deduction under subsection (a) to such 
                        spouse for such taxable year.
            ``(2) Individuals to whom paragraph (1) applies.--Paragraph 
        (1) shall apply to any individual if--
                    ``(A) such individual files a joint return for the 
                taxable year, and
                    ``(B) the amount of compensation (if any) 
                includible in such individual's gross income for the 
                taxable year is less than the compensation includible 
                in the gross income of such individual's spouse for the 
                taxable year.
    ``(e) Qualified Universal Retirement Contributions.--For purposes 
of this section, the term `qualified universal retirement contribution' 
means any amount paid in cash for the taxable year by or on behalf of 
an individual to a Universal Retirement Savings Account for such 
individual's benefit.
    ``(f) Other Limitations and Restrictions.--
            ``(1) Beneficiary must be under age
        70\1/2\.--No deduction shall be allowed under this section with 
        respect to any qualified retirement contribution for the 
        benefit 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.
            ``(2) Recontributed amounts.--No deduction shall be allowed 
        under this section with respect to a rollover contribution to a 
        Universal Retirement Savings Account.
            ``(3) Denial of deduction for amount contributed to 
        inherited accounts.--No deduction shall be allowed under this 
        section with respect to any amount paid to an inherited 
        Universal Retirement Savings Account.
    ``(g) Other Definitions and Special Rules.--
            ``(1) Compensation.--For purposes of this section, the term 
        `compensation' has the meaning given to such term by section 
        219(f)(1).
            ``(2) 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.
            ``(3) Time when contributions deemed made.--For purposes of 
        this section, a taxpayer shall be deemed to have made a 
        contribution to a Universal 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).
            ``(4) Employer payments.--For purposes of this title, any 
        amount paid by an employer to a Universal Retirement Savings 
        Account shall be treated as payment of compensation to the 
        employee (other than a self-employed individual who is an 
        employee within the meaning of section 401(c)(1)) includible in 
        the employee's gross income in the taxable year for which the 
        amount was contributed, whether or not a deduction for such 
        payment is allowable under this section to the employee.
            ``(5) Excess contributions treated as contribution made 
        during subsequent year for which there is an unused 
        limitation.--A rule similar to the rule of section 219(f)(5) 
        shall apply for purposes of this section.''
            (2) Deduction allowed whether or not taxpayer itemizes 
        deductions.--Subsection (a) of section 62 is amended by 
        inserting after paragraph (18) the following new paragraph:
            ``(19) Contributions to Universal Retirement Savings 
        Accounts.--The deduction allowed by section 219A.''
            (3) Technical amendments.--
                    (A) Subparagraph (B) of section 135(c)(4) is 
                amended by striking ``and 219'' and inserting ``219, 
                and 219A''.
                    (B) Subparagraph (B) of section 137(b)(3) is 
                amended by inserting ``219A,'' after ``219,''.
                    (C) Clause (ii) of section 219(g)(3)(A) is amended 
                by inserting ``219A,'' after ``137,''.
                    (D) Clause (ii) of section 221(b)(2)(C) is amended 
                by inserting ``219A,'' after ``219,''.
                    (E) Clause (ii) of section 222(b)(2)(C) is amended 
                by inserting ``219A,'' after ``219,''.
                    (F) Clause (iii) of section 469(i)(3)(F) is amended 
                by inserting ``219A,'' after ``219,''.
                    (G) Subsection (c) of section 4974 is amended by 
                striking ``or'' at the end of paragraph (4), by 
                striking the period at the end of paragraph (5) and 
                inserting ``, or'', and by inserting after paragraph 
                (5) the following new paragraph:
            ``(6) a Universal Retirement Savings Account described in 
        section 408B.''
            (4) Clerical amendment.--The table of sections for part VII 
        of subchapter B of chapter 1 is amended by inserting after the 
        item relating to section 219 the following new item:

                              ``Sec. 219A. Contributions to Universal 
                                        Retirement Savings Accounts.''
    (b) Universal Retirement Savings Accounts.--
            (1) In general.--Subpart A of part I of subchapter D of 
        chapter 1 is amended by inserting after section 408A the 
        following new section:

``SEC. 408B. UNIVERSAL RETIREMENT SAVINGS ACCOUNTS.

    ``(a) In General.--For purposes of this title, the term `Universal 
Retirement Savings Account' means a trust created or organized in the 
United States for the exclusive benefit of an individual or such 
individual's beneficiaries, but only if the written governing 
instrument creating the trust meets the following requirements:
            ``(1) Except in the case of a rollover contribution 
        described in subsection (b)(3), in section 402(c), 403(a)(4), 
        403(b)(8), or 457(e)(16), 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 
        the deductible amount in effect for such taxable year under 
        section 219A(b)(2).
            ``(2) The trustee is a bank (as defined in section 408(n)) 
        or such other person who demonstrates to the satisfaction of 
        the Secretary that the manner in which such other person will 
        administer the trust will be consistent with the requirements 
        of this section.
            ``(3) No part of the trust funds will be invested in life 
        insurance contracts.
            ``(4) The interest of an individual in the balance in such 
        individual's account is nonforfeitable.
            ``(5) The assets of the trust will not be commingled with 
        other property except in a common trust fund or common 
        investment fund.
            ``(6) Under regulations prescribed by the Secretary, rules 
        similar to the rules of section 401(a)(9) and the incidental 
        death benefit requirements of section 401(a) shall apply to the 
        distribution of the entire interest of an individual for whose 
        benefit the trust is maintained.
    ``(b) Tax Treatment of Distributions.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, any amount distributed out of a Universal 
        Retirement Savings Account shall be included in gross income by 
        the distributee without regard to basis.
            ``(2) Exception for immediate annuities.--If any 
        distribution is a part of a series of substantially equal 
        periodic payments (not less frequently than annually) made for 
        the life (or life expectancy) of the distributee or the joint 
        lives (or joint life expectancies) of such distributee and such 
        distributee's designated beneficiary, the amount includible in 
        gross income under paragraph (1) shall be determined in the 
        manner provided under section 72. The rules of section 
408(d)(2) shall apply for purposes of the preceding sentence.
            ``(3) Exception for rollovers.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                any amount distributed out of a Universal Retirement 
                Savings Account to the individual for whose benefit the 
                account is maintained if the entire amount received 
                (including money and any other property) is paid into a 
                Universal Retirement Savings Account (other than an 
                endowment contract) for the benefit of such individual 
                not later than the 60th day after the day on which the 
                individual receives the distribution.
                    ``(B) Limitation.--This paragraph does not apply to 
                any amount described in subparagraph (A) received by an 
                individual from a Universal Retirement Savings Account 
                if at any time during the 1-year period ending on the 
                day of such receipt such individual received any other 
                amount described in that subparagraph from a Universal 
                Retirement Savings Account which was not includible in 
                such individual's gross income because of the 
                application of this paragraph.
                    ``(C) Special rules.--Rules similar to the rules of 
                subparagraphs (C), (D), (E), (F), and (I) of section 
                408(d)(3) shall apply for purposes of this paragraph.
            ``(4) Exception for qualified distributions.--
                    ``(A) Distributions for higher education 
                expenses.--Paragraph (1) shall not apply to 
                distributions to an individual to the extent such 
                distributions do not exceed the qualified higher 
                education expenses (as defined in section 72(t)(7)) of 
                the taxpayer for the taxable year.
                    ``(B) Distributions for first home purchases.--
                Paragraph (1) shall not apply to distributions to an 
                individual which are qualified first-time homebuyer 
                distributions (as defined in section 72(t)(8)).
            ``(5) Other distributions.--Rules similar to the rules of 
        paragraphs (4) and (6) of section 408(d) shall apply for 
        purposes of this subsection.
    ``(c) Tax Treatment of Accounts.--
            ``(1) Exemption from tax.--Any Universal Retirement Savings 
        Account is exempt from taxation under this subtitle unless such 
        account has ceased to be a Universal Retirement Savings Account 
        by reason of paragraph (2). Notwithstanding the preceding 
        sentence, any such account is subject to the taxes imposed by 
        section 511 (relating to imposition of tax on unrelated 
        business income of charitable, etc. organizations).
            ``(2) Loss of exemption for prohibited transaction.--Rules 
        similar to the rules of section 408(e)(2) shall apply for 
        purposes of this subsection.
            ``(3) Effect of pledging account as security; purchase of 
        endowment contract; commingling amounts in certain common trust 
        funds and common investment funds.--Rules similar to the rules 
        of paragraphs (4), (5), and (6) of section 408(e) shall apply 
        for purposes of this subsection.
    ``(d) Employers Required To Offer Salary Reduction Contributions to 
Universal Retirement Savings Accounts for Certain Employees.--
            ``(1) In general.--Every employer shall provide a qualified 
        salary reduction arrangement which meets the requirements of 
        paragraphs (3), (4), and (5).
            ``(2) Qualified salary reduction arrangement.--For purposes 
        of this subsection, the term `qualified salary reduction 
        arrangement' means a written arrangement of an employer under 
        which--
                    ``(A) an employee eligible to participate in the 
                arrangement may elect to have the employer make 
                payments--
                            ``(i) as elective employer contributions to 
                        a Universal Retirement Savings Account on 
                        behalf of the employee, or
                            ``(ii) to the employee directly in cash,
                    ``(B) the employer may make other contributions as 
                provided in paragraph (6),
                    ``(C) the amount which an employee may elect under 
                subparagraph (A) for any year may not exceed a the 
                deductible amount (as defined in section 219A(b)) for 
                such year, and
                    ``(D) no contributions may be made other than 
                contributions described in subparagraph (A) or (B).
            ``(3) Vesting requirements.--The requirements of this 
        paragraph are met if the employee's rights to any contribution 
        to the Universal Retirement Savings Account are nonforfeitable. 
        For purposes of this paragraph, rules similar to the rules of 
        section 408(k)(4) shall apply.
            ``(4) Participation requirements.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to any Universal 
                Retirement Savings Account for a year only if, under 
                the qualified salary reduction arrangement, all 
                nonexcludable employees of the employer are eligible to 
                make the election under paragraph (2).
                    ``(B) Nonexcludable employees.--For purposes of 
                subparagraph (A), the term `nonexcludable employee' 
                means any employee of an employer unless such employee 
                is eligible to participate in a qualified plan 
                maintained by the employer. For purposes of the 
                preceding sentence, the term `qualified plan' means a 
                plan, contract, pension, or trust described in 
                subparagraph (A) or (B) of section 219(g)(5).
            ``(5) Administrative requirements.--The requirements of 
        this paragraph are met with respect to any Universal Retirement 
        Savings Account if, under the qualified salary reduction 
        arrangement--
                    ``(A) an employer must--
                            ``(i) make the elective employer 
                        contributions under paragraph (2) not later 
                        than the close of the 30-day period following 
                        the last day of the month with respect to which 
                        the contributions are to be made, and
                            ``(ii) make the contributions under 
                        paragraph (6) (if any) not later than the date 
                        described in section 404(m)(2)(B),
                    ``(B) an employee may elect to terminate 
                participation in such arrangement at any time during 
                the year, except that if an employee so terminates, the 
                arrangement may provide that the employee may not elect 
                to resume participation until the beginning of the next 
                year, and
                    ``(C) each employee eligible to participate may 
                elect, during the 60-day period before the beginning of 
                any year (and the 60-day period before the first day 
                such employee is eligible to participate), to 
                participate in the arrangement, or to modify the 
                amounts subject to such arrangement, for such year.
            ``(6) Employer contributions.--
                    ``(A) In general.--If an employer elects to make 
                contributions to a Universal Retirement Savings 
                Account, such contributions meet the requirements of 
                this paragraph if the employer elects to make 
                nonelective contributions of 1 percent of compensation 
                for each employee  who is eligible to participate in 
the arrangement.
                    ``(B) Compensation limitation.--The compensation 
                taken into account under subparagraph (A) for any year 
                shall not exceed the limitation in effect for such year 
                under section 401(a)(17).
            ``(7) Exception for certain employers.--This subsection 
        shall not apply for any calendar year to an employer--
                    ``(A) which had no more than 20 employees on a 
                typical business day during the preceding calendar 
                year, and
                    ``(B) which elects not to have this subsection 
                apply for such year.
            ``(8) Exclusion from income for salary reductions.--
        Contributions made by an employer on behalf of an employee to a 
        Universal Retirement Savings Account pursuant to a qualified 
        salary reduction arrangement which meets the requirements of 
        this subsection shall not be treated as distributed or made 
        available to the employee or as contributions made by the 
        employee.
            ``(9) Use of designated financial institution.--An employer 
        shall not be treated as failing to satisfy the requirements of 
        this subsection or any other provision of this title merely 
        because the employer makes all contributions to the Universal 
        Retirement Savings Accounts of a designated trustee or issuer. 
        The preceding sentence shall not apply unless each participant 
        is notified in writing that the participant's balance may be 
        transferred without cost or penalty to another Universal 
        Retirement Savings Account in accordance with subsection 
        (b)(3).
            ``(10) Special rules for acquisitions, etc.--Rules similar 
        to the rules of section 408(p)(10) shall apply for purposes of 
        this subsection.
            ``(11) Summary description; employer notification.--
                    ``(A) Summary description.--The trustee of any 
                Universal Retirement Savings Account established 
                pursuant to a qualified salary reduction arrangement 
                under this subsection shall provide to the employer 
                maintaining the arrangement, each year a description 
                containing the following information:
                            ``(i) The name and address of the employer 
                        and the trustee or issuer.
                            ``(ii) The requirements for eligibility for 
                        participation.
                            ``(iii) The benefits provided with respect 
                        to the arrangement.
                            ``(iv) The time and method of making 
                        elections with respect to the arrangement.
                            ``(v) The procedures for, and effects of, 
                        withdrawals (including rollovers) from the 
                        arrangement.
                    ``(B) Employee notification.--The employer shall 
                notify each employee immediately before the period for 
                which an election described in paragraph (5)(C) may be 
                made of the employee's opportunity to make such 
                election. Such notice shall include a copy of the 
                description described in subparagraph (A).
    ``(e) Rollovers Permitted From IRA's, etc.--Solely for purposes of 
determining whether any rollover may be made to a Universal Retirement 
Savings Account, a Universal Retirement Savings Account shall be 
treated as if it were an individual retirement plan. No amount may be 
distributed in a rollover other than to a Universal Retirement Savings 
Account.
    ``(f) Special Rules.--
            ``(1) Community property laws.--This section shall be 
        applied without regard to any community property laws.
            ``(2) Custodial accounts.--Rules similar to the rules of 
        section 408(g) shall apply for purposes of this subsection.
            ``(3) Investment in collectibles treated as 
        distributions.--The acquisition by a Universal Retirement 
        Savings Account of any collectible (as defined in section 
        408(m)) shall be treated (for purposes of this section and 
        section 402) as a distribution from such account in an amount 
        equal to the cost to such account of such collectible.
    ``(g) Reports.--The trustee of a Universal Retirement Savings 
Account shall make such reports regarding such Account to the Secretary 
and to the individuals for whom the Account is, or is to be, maintained 
with respect to contributions (and the years to which they relate), 
distributions, aggregating $10 or more in any calendar year and such 
other matters as the Secretary may require. The reports required by 
this subsection--
            ``(1) shall be filed at such time and in such manner as the 
        Secretary prescribes, and
            ``(2) shall be furnished to individuals--
                    ``(A) not later than January 31 of the calendar 
                year following the calendar year to which such reports 
                relate, and
                    ``(B) in such manner as the Secretary prescribes.''
            (2) Technical amendments.--
                    (A) Excess contributions.--
                            (i) In general.--Subsection (a) of section 
                        4973 is amended by redesignating paragraphs 
                        (2), (3), and (4) as paragraphs (3), (4), and 
                        (5), respectively, and by inserting after 
                        paragraph (1) the following new paragraph:
            ``(2) a Universal Retirement Savings Account (as defined in 
        section 408B),''.
                    (ii) Determination of excess.--Section 4973 is 
                amended by adding at the end the following new 
                subsection:
    ``(g) Excess Contributions to Universal Retirement Savings 
Accounts.--Rules similar to the rules under subsection (b) shall apply 
to any Universal Retirement Savings Account (as defined in section 
408B).''
                    (B) Early withdrawal penalty, etc.--Subsection (c) 
                of section 4974 is amended by striking ``or'' at the 
                end of paragraph (4), by striking the period at the end 
                of paragraph (5) and inserting ``, or'', and by 
                inserting after paragraph (5) the following new 
                paragraph:
            ``(6) a Universal Retirement Savings Account described in 
        section 408B.''
                    (C) Prohibited transactions.--
                            (i) In general.--Paragraph (1) of section 
                        4975(e) is amended by redesignating 
                        subparagraphs (D), (E), and (F) as 
                        subparagraphs (E), (F), and (G), respectively, 
                        and by inserting after subparagraph (C) the 
                        following new subparagraph:
                    ``(D) a Universal Retirement Savings Account 
                described in section 408B,''.
                            (ii) Exception.--Subsection (c) of section 
                        4975 is amended by adding at the end the 
                        following new paragraph:
            ``(5) Special rule for universal retirement savings 
        accounts.--An individual for whose benefit a Universal 
        Retirement Savings Account is established shall be exempt from 
        the tax imposed by this section with respect to any transaction 
        concerning such Account (which would otherwise be  taxable 
under this section) if section 408B(d)(2) applies with respect to such 
transaction.''
                    (D) Failure to provide reports.--Paragraph (2) of 
                section 6693(a) (relating to failure to provide reports 
                on individual retirement accounts or annuities) is 
                amended by redesignating subparagraphs (C) and (D) as 
                subparagraphs (D) and (E), respectively, and by 
                inserting after subparagraph (B) the following new 
                subparagraph:
                    ``(C) a Universal Retirement Savings Account 
                described in section 408B,''.
                    (E) W-2 reporting.--Subsection (a) of section 6051 
                is amended by striking ``and'' at the end of paragraph 
                (10), by striking the period at the end of paragraph 
                (11) and inserting ``, and'', and by inserting after 
                paragraph (11) the following new paragraph:
            ``(12) the total amount of elective employer contributions 
        under section 408B(d)(2)(A).''
                    (F) Other technical amendments.--The following 
                provisions are each amended by inserting ``408B(d),'' 
                after ``408(p),'':
                            (i) Subsections (b) and (c) of section 414.
                            (ii) Section 414(m)(4)(B).
                            (iii) Section 414(n)(3)(B).
                            (iv) Section 414(u)(1)(C).
                    (G) Elective contributions subject to fica and 
                futa.--
                            (i) Paragraph (5) of section 3121(a) is 
                        amended by striking ``or'' at the end of 
                        subparagraph (H), by striking the semicolon at 
                        the end of subparagraph (I) and inserting ``, 
                        or'', and by adding at the end the following 
                        new subparagraph:
                    ``(J) under an arrangement to which section 408B(d) 
                applies, other than any elective contributions under 
                paragraph (2)(A) thereof;''.
                            (ii) Paragraph (4) of section 209(a) of the 
                        Social Security Act is amended by adding at the 
                        end ``or (J) under an arrangement to which 
                        section 408B(d) of such Code applies, other 
                        than any elective contributions under paragraph 
                        (2)(A) thereof;''.
                            (iii) Paragraph (5) of section 3306(b) is 
                        amended by striking ``or'' at the end of 
                        subparagraph (G), by striking the semicolon at 
                        the end of subparagraph (H) and inserting ``, 
                        or'', and by adding at the end the following 
                        new subparagraph:
                    ``(I) under an arrangement to which section 408B(d) 
                applies, other than any elective contributions under 
                paragraph (2)(A) thereof;''.
                            (iv) Paragraph (12) of section 3401(a) is 
                        amended by adding at the end the following new 
                        subparagraph:
                    ``(F) under an arrangement to which section 408B(d) 
                applies; or''.
            (3) Clerical amendment.--The table of sections for subpart 
        A of part I of subchapter D of chapter 1 is amended by 
        inserting after the item relating to section 408A the following 
        new item:

                              ``Sec. 408B. Universal Retirement Savings 
                                        Accounts.''
    (c) Termination of Contributions to Individual Retirement Plans, 
Including Roth IRA's.--
            (1) Subsection (a) of section 408 is amended by adding at 
        the end the following new paragraph:
            ``(7) No contribution (other than a rollover contribution 
        referred to in paragraph (1)) shall be accepted for any taxable 
        year beginning after December 31, 2002, unless such account is 
        a simplified employee pension or a simple retirement account.''
            (2) Subsection (b) of section 408 is amended by inserting 
        after paragraph (4) the following new paragraph:
            ``(5) No contribution shall be accepted for any taxable 
        year beginning after December 31, 2002, unless such annuity is 
        a simplified employee pension or a simple retirement account.''
    (d) Credit for Small Employers Maintaining Salary Reduction 
Arrangements for Universal Retirement Savings Accounts.--
            (1) In general.--Subpart D of part IV of subchapter A of 
        chapter 1 (relating to business related credits) is amended by 
        adding at the end the following new section:

``SEC. 45G. SMALL EMPLOYER UNIVERSAL RETIREMENT SAVINGS ACCOUNT COSTS.

    ``(a) General Rule.--For purposes of section 38, in the case of an 
eligible employer, the small employer Universal Retirement Savings 
Account cost credit determined under this section for any taxable year 
is the aggregate of the amount determined under subsection (b) for each 
employee participating in an arrangement meeting the requirements of 
section 408B(d).
    ``(b) Amount of Credit.--The amount of the credit determined under 
this section for any taxable year with respect to an employee shall 
be--
            ``(1) $50 for the taxable year which includes the date that 
        the arrangement referred to subsection (a) becomes effective,
            ``(2) $20 for each of the 3 taxable years following the 
        taxable year described in paragraph (1), and
            ``(3) zero for any other taxable year.
    ``(c) Eligible Employer.--For purposes of this section, the term 
`eligible employer' means, with respect to any taxable year, an 
employer which had no more than 100 employees on a typical business day 
during the most recent calendar year ending before such taxable year. 
For purposes of the preceding sentence, all persons treated as a single 
employer under subsection (a) or (b) of section 52, or subsection (n) 
or (o) of section 414, shall be treated as one person.''
            (2) Credit allowed as part of general business credit.--
        Section 38(b) (defining current year business credit) is 
        amended by striking ``plus'' at the end of paragraph (14), by 
        striking the period at the end of paragraph (15) and inserting 
        ``, plus'', and by adding at the end the following new 
        paragraph:
            ``(16) in the case of an eligible employer (as defined in 
        section 45G(c)), the small employer Universal Retirement 
        Savings Account cost credit determined under section 45G(a).''.
            (3) Clerical amendment.--The table of sections for subpart 
        D of part IV of subchapter A of chapter 1 is amended by adding 
        at the end the following new item:

                              ``Sec. 45G. Small employer Universal 
                                        Retirement Savings Account 
                                        costs.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2002.

SEC. 3. EXPANSION OF RETIREMENT SAVINGS CREDIT.

    (a) Credit To Be Refundable; Expansion of Eligibility; Credit Made 
Permanent.--Subpart C of part IV of subchapter A of chapter 1 (relating 
to refundable credits) is amended by redesignating section 35 as 
section 36 and by inserting after section 34 the following new section:

``SEC. 35. ELECTIVE DEFERRALS AND UNIVERSAL RETIREMENT SAVINGS ACCOUNT 
              CONTRIBUTIONS BY CERTAIN INDIVIDUALS.

    ``(a) Allowance of Credit.--In the case of an eligible individual, 
there shall be allowed as a credit against the tax imposed by this 
subtitle for the taxable year an amount equal to the applicable 
percentage of so much of the qualified retirement savings contributions 
of the eligible individual for the taxable year as do not exceed 
$2,000.
    ``(b) Applicable Percentage.--For purposes of this section, the 
applicable percentage is the percentage determined in accordance with 
the following table:


------------------------------------------------------------------------
                    Adjusted Gross Income
-------------------------------------------------------------
    Joint return           Head of a        All other cases   Applicable
---------------------      household     -------------------- percentage
                     --------------------
   Over     Not over    Over    Not over    Over    Not over
------------------------------------------------------------------------
           $60,000    ........  $45,000   ........  $30,000          50
 60,000     70,000     45,000    52,500    30,000    35,000          20
 70,000     80,000     52,500    60,000    35,000    40,000          10
 80,000    .........   60,000   ........   40,000   ........          0
------------------------------------------------------------------------


    ``(c) Eligible Individual.--For purposes of this section--
            ``(1) In general.--The term `eligible individual' means any 
        individual if such individual has attained the age of 18 as of 
        the close of the taxable year.
            ``(2) Dependents and full-time students not eligible.--The 
        term `eligible individual' shall not include--
                    ``(A) any individual with respect to whom a 
                deduction under section 151 is allowed to another 
                taxpayer for a taxable year beginning in the calendar 
                year in which such individual's taxable year begins, 
                and
                    ``(B) any individual who is a student (as defined 
                in section 151(c)(4)).
    ``(d) Credit for Contributions to Universal Retirement Savings 
Accounts of Dependents.--
            ``(1) In general.--In addition to the credit allowed by 
        subsection (a) for the taxable year, there shall be allowed as 
        a credit against the tax imposed by this subtitle an amount 
        equal to the applicable percentage of the amount paid in cash 
        by an eligible individual to a Universal Retirement Savings 
        Account for the benefit of an individual with respect to whom a 
        deduction under section 151(c) is allowed to the taxpayer for 
        such taxable year.
            ``(2) Maximum credit.--The credit allowed by this 
        subsection shall not exceed $200 with respect to each 
        individual for whose benefit an amount was so paid. The 
        preceding sentence shall be applied by substituting `$500' for 
        `$200' for the taxable year in which such individual is 
        assigned a TIN.
    ``(e) Qualified Retirement Savings Contributions.--For purposes of 
this section--
            ``(1) In general.--The term `qualified retirement savings 
        contributions' means, with respect to any taxable year, the sum 
        of--
                    ``(A) the amount of the qualified universal 
                retirement contributions (as defined in section 
                219A(e)) made by the eligible individual,
                    ``(B) the amount of--
                            ``(i) any elective deferrals (as defined in 
                        section 402(g)(3)) of such individual, and
                            ``(ii) any elective deferral of 
                        compensation by such individual under an 
                        eligible deferred compensation plan (as defined 
                        in section 457(b)) of an eligible employer 
                        described in section 457(e)(1)(A), and
                    ``(C) the amount of voluntary employee 
                contributions by such individual to any qualified 
                retirement plan (as defined in section 4974(c)).
            ``(2) Reduction for certain distributions.--
                    ``(A) In general.--The qualified retirement savings 
                contributions determined under paragraph (1) shall be 
                reduced (but not below zero) by the sum of--
                            ``(i) any distribution from a qualified 
                        retirement plan (as defined in section 
                        4974(c)), or from an eligible deferred 
                        compensation plan (as defined in section 
                        457(b)), received by the individual during the 
                        testing period which is includible in gross 
                        income, and
                            ``(ii) any distribution from a Roth IRA or 
                        a Roth account received by the individual 
                        during the testing period which is not a 
                        qualified rollover contribution (as defined in 
                        section 408A(e)) to a Roth IRA or a rollover 
                        under section 402(c)(8)(B) to a Roth account.
                    ``(B) Testing period.--For purposes of subparagraph 
                (A), the testing period, with respect to a taxable 
                year, is the period which includes--
                            ``(i) such taxable year,
                            ``(ii) the 2 preceding taxable years, and
                            ``(iii) the period after such taxable year 
                        and before the due date (including extensions) 
                        for filing the return of tax for such taxable 
                        year.
                    ``(C) Excepted distributions.--There shall not be 
                taken into account under subparagraph (A)--
                            ``(i) any distribution referred to in 
                        section 72(p), 401(k)(8), 401(m)(6), 402(g)(2), 
                        404(k), or 408(d)(4), and
                            ``(ii) any distribution to which section 
                        408A(d)(3) applies.
                    ``(D) Treatment of distributions received by spouse 
                of individual.--For purposes of determining 
                distributions received by an individual under 
                subparagraph (A) for any taxable year, any distribution 
                received by the spouse of such individual shall be 
                treated as received by such individual if such 
                individual and spouse file a joint return for such 
                taxable year and for the taxable year during which the 
                spouse receives the distribution.
    ``(f) Adjusted Gross Income.--For purposes of this section, 
adjusted gross income shall be determined without regard to sections 
911, 931, and 933.
    ``(g) Investment in the Contract.--Notwithstanding any other 
provision of law, a qualified retirement savings contribution shall not 
fail to be included in determining the investment in the contract for 
purposes of section 72 by reason of the credit under this section.''
    (b) Repeal of Nonrefundable Credit.--
            (1) Section 25B is hereby repealed.
            (2) Subparagraph (B) of section 25(b)(3) is amended by 
        striking ``and 25B''.
            (3) Subparagraph (C) of section 25(e)(1) is amended by 
        striking ``25B,''.
            (4) Sections 26(a)(1), 901(h), and 1400C are each amended 
        by striking ``24, and 25B'' and inserting ``and 24''.
            (5) The table of sections for subpart A of part IV of 
        subchapter A of chapter 1 is amended by striking the item 
        relating to section 25B.
    (c) Technical Amendments.--
            (1) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting before the period ``, or 
        from section 35 of such Code''.
            (2) The table of sections for subpart C of part IV of 
        subchapter A of chapter 1 is amended by striking the last item 
        and inserting the following new items:

                              ``Sec. 35. Elective deferrals and 
                                        universal retirement savings 
                                        account contributions by 
                                        certain individuals.
                              ``Sec. 36. Overpayments of tax.''
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2002.
                                 <all>