Short title

This Act may be cited as the

Worker Savings Account Act of 2008

Worker savings accounts

(a)

In general

Subpart A of part I of subchapter D of chapter 1 of the Internal Revenue Code of 1986 (relating to pension, profit-sharing, stock bonus plans, etc.) is amended by inserting after section 408A the following new section:

408B.

Worker savings accounts

(a)

In general

(1)

Treated in same manner as IRA

Except as provided in this section, a worker savings account shall be treated for purposes of this title in the same manner as an individual retirement plan. (2)

Separate application of rules

Rules made applicable by reason of this paragraph shall be applied separately with respect to worker savings accounts and individual retirement plans of the individual. (b)

Worker savings account

For purposes of this title, the term worker savings account means an individual retirement plan (as defined in section 7701(a)(37)) which is designated (in such manner as the Secretary may prescribe) at the time of establishment of the plan as a worker savings account. (c)

Contributions

(1)

Employer contributions

For purposes of this section, the amount in effect under section 219(b)(5)(A), with respect to an individual for a taxable year, shall be increased by the lesser of— (A)$5,000, or (B)the amounts contributed for the taxable year to the individual’s worker savings account by all employers of the individual. (2)

Worker savings account refund payment

Section 408(a)(1) shall not apply with respect to a payment under section 6431. (3)

Contributions after receipt of social security benefits

Except in the case of a rollover contribution described in subsection (e)(1), no contributions may be made to an individual’s worker savings account during calendar years beginning after the first month such individual begins receiving amounts by reason of entitlement to a monthly benefit under title II of the Social Security Act. (d)

Treatment of distributions

(1)

In general

Any amounts distributed from a worker savings account shall be included in gross income, unless such amount is a qualified unemployment distribution. (2)

Qualified unemployment distribution

For purposes of this section— (A)

In general

The term qualified unemployment distribution means any amount distributed— (i)during a period of unemployment of the account beneficiary which is by reason of termination of employment (other than for gross misconduct of the account beneficiary), or (ii)not earlier than the first month the account beneficiary receives an amount by reason of entitlement to a monthly benefit under title II of the Social Security Act. (3)

Disability distribution

Paragraph (1) shall not apply to any amount paid or distributed on or after disability (within the meaning of section 72(m)(7)) of the account beneficiary. (4)

Other distribution rules

(A)

Excess contributions; transfer of account incident to divorce

Rules similar to the rules of paragraphs (4) through (6) of section 408(d) shall apply for purposes of this section. (B)

No minimum distribution requirement prior to death

Notwithstanding subsections (a)(6) and (b)(6), section 401(a)(9) and the incidental death benefit requirement of section 401(a) shall not apply for purposes of this subsection. (C)

Treatment after death of account beneficiary

Rules similar to the rules of paragraph (8) of section 223(f) shall apply for purposes of this section. (e)

Definitions and special rules

For purposes of this section— (1)

Rollover contributions

An amount is described in this paragraph as a rollover contribution if it meets the requirements of clauses (i) and (ii). (A)

In general

Paragraph (1) shall not apply to any amount paid or distributed from a worker savings account to the account holder to the extent— (i)the entire amount received is paid into a worker savings account for the benefit of such holder not later than the 60th day after the day on which the holder receives the payment or distribution, or (ii)the entire amount received is paid into an eligible retirement plan (as defined in section 408(d)(3)) for the benefit of such holder not later than the 60th day after the day on which the holder receives the payment or distribution, except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross income (determined without regard to this paragraph). (B)

Limitation

This paragraph shall not apply to any amount described in paragraph (A) received by an individual from a worker 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 subparagraph (A) from a worker savings account which was not includible in the individual's gross income because of the application of this paragraph. (2)

Account beneficiary

The term account beneficiary means the individual on whose behalf the worker savings account is established. (f)

Inflation adjustment

In the case of any taxable year beginning in a calendar year after 2009, the dollar amount contained in subsection (c)(1) shall be increased by an amount equal to— (1)such dollar amount, multiplied by (2)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 2008 for calendar year 1992 in subparagraph (B) thereof.

Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $100.

(b)

Clerical amendment

The table of sections for subpart A of part I of subchapter D of chapter 1 of such Code is amended by inserting after the item relating to section 408A the following new item:

Sec. 408B. Worker savings accounts.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2008.

Portion of saver’s credit refundable

(a)

In general

Section 25B of such Code (relating to elective deferrals and IRA contributions by certain individuals) is amended by adding at the end the following new subsection:

(h)

Portion of credit refundable

(1)

In general

The aggregate credits allowed to a taxpayer under subpart C shall be increased by the lesser of— (A)$1,000, or (B)the amount of the credit attributable to qualified retirement savings contributions made by the individual to worker savings accounts which would be allowed under this section (without regard to this subsection and the limitation under section 26(a)(2) or subsection (g), as the case may be).

The amount of the credit allowed under this subsection shall not be treated as a credit allowed under this subpart and shall reduce the amount of credit otherwise allowable under subsection (a) without regard to section 26(a)(2) or subsection (g), as the case may be.

(2)

Limitation

The amount of the credit allowed under this section for any taxable year shall not exceed an amount equal to the excess (if any) of— (A)$5,000, over (B)the aggregate amount of credits allowed under this subsection for all prior taxable years. (3)

Inflation adjustment

In the case of any taxable year beginning in a calendar year after 2009, each of the dollar amounts contained in paragraphs (1) and (2) shall be increased by an amount equal to— (A)such dollar amount, multiplied by (B)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 2008 for calendar year 1992 in subparagraph (B) thereof.

Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $100.

(b)

Refund payable to worker savings account

(1)

In general

Subchapter B of chapter 65 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

6431.

Worker savings account refund payment

(a)

In general

In the case of a credit allowed to an individual which is attributable to an increase under section 25B(h), the Secretary shall pay the amount of such credit into the designated retirement account of the individual. (b)

Designated retirement account

The term designated retirement account means any worker savings account of the individual— (1)which is designated (in such form and manner as the Secretary may provide) on the individual’s return of tax for the taxable year to receive the payment under subsection (a), and (2)which, under the terms of the account, accepts the payment described in paragraph (1).

(2)

Clerical amendment

The table of sections for subchapter B of chapter 65 of such Code is amended by adding at the end the following new item:

Sec. 6431. Worker savings account refund payment.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2008.

No inference as to State and Federal unemployment compensation

No provision of this Act (including the amendments made thereby) shall be construed to— (1)diminish an employer’s obligation to pay any applicable State and Federal unemployment taxes (or any other amount required under State or Federal law to be paid into an unemployment fund), or (2)reduce the amount of unemployment compensation (as defined in section 85(b) of the Internal Revenue Code of 1986) to which an individual is entitled.