[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.
                                 <all>