[Congressional Record Volume 141, Number 157 (Wednesday, October 11, 1995)]
[Senate]
[Pages S15035-S15038]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY
  S. 1310. A bill to amend the Internal Revenue Code of 1986 to expand 
the availability of individual retirement accounts, and for other 
purposes; to the Committee on Finance.


            the savings and investment incentive act of 1995

  Mr. KERRY. Mr. President, in these difficult budgetary times 
we not only 

[[Page S 15036]]
have a fiscal deficit that we must address, but we also have a savings 
deficit in this country that requires creative and innovative 
approaches to helping people save and plan for their retirements.
  That is why I am offering the Savings and Investment Incentive Act of 
1995 which will expand deductible IRA's, create a special nondeductible 
IRA program, allow penalty-free withdrawals for specific reasons; and 
it appeals to our sense of fairness by targeting the middle class.
  What does this mean? It means that any individual who is not an 
active participant in a an employee-sponsored plan would be eligible 
for a deductible IRA, regardless of income.
  It means that income levels for participants in the IRA program would 
be doubled for those who participate in employer-provided pension 
plans.
  It means that all middle-income Americans who earn up to $50,000, and 
couples who earn up to $80,000, indexed for inflation, could fully 
deduct IRA contributions.
  It means that people eligible for traditional IRAs could now set up a 
special IRA that would provide a new saving vehicle that encourages 
middle-income Americans to save by allowing an incentive tax-free 
withdrawal without draining the Treasury.
  I did cosponsor, along with 60 of my colleagues, a more ambitious 
proposal authored by my friend from Delaware, Senator Roth, and my 
friend from Louisiana, Senator Breaux, but, given our budgetary 
constraints, I respectfully suggest that this bill is, perhaps, more 
realistic.

  While contributions to the new special IRA's, under this proposal, 
would not be deductible, if funds remain in the account for at least 5 
years withdrawals would be tax free. Individuals in the upper end of 
the new income brackets would be able to convert balances in their 
traditional deductible IRA accounts to the ``Special IRA'' accounts 
without being subject to penalty.
  The amount transferred from the existing contribution-deductible IRA 
to the special IRA would be subject to ordinary income tax in the year 
of the transfer.
  But, this legislation recognizes people's real needs in the real 
world. Under this plan withdrawals of earnings for the ``Special 
IRA's'' within 5 years would be subject to ordinary income tax and a 
10-percent penalty unless the withdrawals are for education expenses, a 
first-time home purchase, unemployment, or medical care.
  Mr. President, we need to invest more. We need to save more. We need 
to be fair and recognize the difficult economic times that middle-class 
Americans are suffering. We need to help them save for their future and 
find innovative creative ways to do it.
  This bill has the approval of the Treasury Department and does 
everything the Roth-Breaux ``Super-IRA'' proposal does in a way that 
does not inflate the deficit.
  I believe, Mr. President, that the Savings and Investment Incentive 
Act of 1995 is a moderate, fair, common-sense approach that doubles the 
income levels for participation; allows non penalty deductions for a 
variety of real life situations; and it will work for working Americans 
without busting the Treasury.
  Mr. President, I ask unanimous consent that the bill appear in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1310

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

     SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

       (a) Short Title.--This Act may be cited as the ``Savings 
     and Investment Incentive Act of 1995''.
       (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.
                 TITLE I--RETIREMENT SAVINGS INCENTIVES
                       Subtitle A--IRA Deduction

     SEC. 101. INCREASE IN INCOME LIMITATIONS.

       (a) In General.--Subparagraph (B) of section 219(g)(3) is 
     amended--
       (1) by striking ``$40,000'' in clause (i) and inserting 
     ``$80,000'', and
       (2) by striking ``$25,000'' in clause (ii) and inserting 
     ``$50,000''.
       (b) Phase-Out of Limitations.--Clause (ii) of section 
     219(g)(2)(A) is amended by striking ``$10,000'' and inserting 
     ``an amount equal to 10 times the dollar amount applicable 
     for the taxable year under subsection (b)(1)(A)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 102. INFLATION ADJUSTMENT FOR DEDUCTIBLE AMOUNT AND 
                   INCOME LIMITATIONS.

       (a) In General.--Section 219 is amended by redesignating 
     subsection (h) as subsection (i) and by inserting after 
     subsection (g) the following new subsection:
       ``(h) Cost-of-Living Adjustments.--
       ``(1) In general.--In the case of any taxable year 
     beginning in a calendar year after 1996, each dollar amount 
     to which this subsection applies 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 1995' 
     for `calendar year 1992' in subparagraph (B) thereof.
       ``(2) Dollar amounts to which subsection applies.--This 
     subsection shall apply to--
       ``(A) the $2,000 amounts under subsection (b)(1)(A) and 
     (c), and
       ``(B) the applicable dollar amounts under subsection 
     (g)(3)(B).
       ``(3) Rounding rules.--
       ``(A) Deduction amounts.--If any amount referred to in 
     paragraph (2)(A) as adjusted under paragraph (1) is not a 
     multiple of $500, such amount shall be rounded to the next 
     lowest multiple of $500.
       ``(B) Applicable dollar amounts.--If any amount referred to 
     in paragraph (2)(B) as adjusted under paragraph (1) is not a 
     multiple of $5,000, such amount shall be rounded to the next 
     lowest multiple of $5,000.''
       (b) Conforming Amendments.--
       (1) Clause (i) of section 219(c)(2)(A) is amended to read 
     as follows:
       ``(i) the sum of $250 and the dollar amount in effect for 
     the taxable year under subsection (b)(1)(A), or''.
       (2) Section 408(a)(1) is amended by striking ``in excess of 
     $2,000 on behalf of any individual'' and inserting ``on 
     behalf of any individual in excess of the amount in effect 
     for such taxable year under section 219(b)(1)(A)''.
       (3) Section 408(b)(2)(B) is amended by striking ``$2,000'' 
     and inserting ``the dollar amount in effect under section 
     219(b)(1)(A)''.
       (4) Subparagraph (A) of section 408(d)(5) is amended by 
     striking ``$2,250'' and inserting ``the dollar amount in 
     effect for the taxable year under section 219(c)(2)(A)(i)''.
       (5) Section 408(j) is amended by striking ``$2,000''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 103. COORDINATION OF IRA DEDUCTION LIMIT WITH ELECTIVE 
                   DEFERRAL LIMIT.

       (a) In General.--Section 219(b) (relating to maximum amount 
     of deduction) is amended by adding at the end the following 
     new paragraph:
       ``(4) Coordination with elective deferral limit.--The 
     amount determined under paragraph (1) or subsection (c)(2) 
     with respect to any individual for any taxable year shall not 
     exceed the excess (if any) of--
       ``(A) the limitation applicable for the taxable year under 
     section 402(g)(1), over
       ``(B) the elective deferrals (as defined in section 
     402(g)(3)) of such individual for such taxable year.''
       (b) Conforming Amendment.--Section 219(c) is amended by 
     adding at the end the following new paragraph:
       ``(3) Cross Reference.--

  ``For reduction in paragraph (2) amount, see subsection (b)(4).''

       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.
                Subtitle B--Nondeductible Tax-Free IRA's

     SEC. 111. ESTABLISHMENT OF NONDEDUCTIBLE TAX-FREE INDIVIDUAL 
                   RETIREMENT ACCOUNTS.

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

     ``SEC. 408A. SPECIAL INDIVIDUAL RETIREMENT ACCOUNTS.

       ``(a) General Rule.--Except as provided in this chapter, a 
     special individual retirement account shall be treated for 
     purposes of this title in the same manner as an individual 
     retirement plan.
       ``(b) Special Individual Retirement Account.--For purposes 
     of this title, the term `special individual retirement 
     account' means an individual retirement plan which is 
     designated at the time of establishment of the plan as a 
     special individual retirement account.
       ``(c) Treatment of Contributions.--
       ``(1) No deduction allowed.--No deduction shall be allowed 
     under section 219 for a contribution to a special individual 
     retirement account.
       ``(2) Contribution limit.--The aggregate amount of 
     contributions for any taxable year to all special individual 
     retirement accounts maintained for the benefit of an 
     individual shall not exceed the excess (if any) of--
       ``(A) the maximum amount allowable as a deduction under 
     section 219 with respect to such individual for such taxable 
     year, over

[[Page S 15037]]

       ``(B) the amount so allowed.
       ``(3) Special rules for qualified transfers.--
       ``(A) In general.--No rollover contribution may be made to 
     a special individual retirement account unless it is a 
     qualified transfer.
       ``(B) Limit not to apply.--The limitation under paragraph 
     (2) shall not apply to a qualified transfer to a special 
     individual retirement account.
       ``(d) Tax Treatment of Distributions.--
       ``(1) In general.--Except as provided in this subsection, 
     any amount paid or distributed out of a special individual 
     retirement account shall not be included in the gross income 
     of the distributee.
       ``(2) Exception for earnings on contributions held less 
     than 5 years.--
       ``(A) In general.--Any amount distributed out of a special 
     individual retirement account which consists of earnings 
     allocable to contributions made to the account during the 5-
     year period ending on the day before such distribution shall 
     be included in the gross income of the distributee for the 
     taxable year in which the distribution occurs.
       ``(B) Ordering rule.--
       ``(i) First-in, first-out rule.--Distributions from a 
     special individual retirement account shall be treated as 
     having been made--

       ``(I) first from the earliest contribution (and earnings 
     allocable thereto) remaining in the account at the time of 
     the distribution, and
       ``(II) then from other contributions (and earnings 
     allocable thereto) in the order in which made.

       ``(ii) Allocations between contributions and earnings.--Any 
     portion of a distribution allocated to a contribution (and 
     earnings allocable thereto) shall be treated as allocated 
     first to the earnings and then to the contribution.
       ``(iii) Allocation of earnings.--Earnings shall be 
     allocated to a contribution in such manner as the Secretary 
     may by regulations prescribe.
       ``(iv) Contributions in same year.--Except as provided in 
     regulations, all contributions made during the same taxable 
     year may be treated as 1 contribution for purposes of this 
     subparagraph.
       ``(C) Cross reference.--

  ``For additional tax for early withdrawal, see section 72(t).

       ``(3) Qualified transfer.--
       ``(A) In general.--Paragraph (2) shall not apply to any 
     distribution which is transferred in a qualified transfer to 
     another special individual retirement account.
       ``(B) Contribution period.--For purposes of paragraph (2), 
     the special individual retirement account to which any 
     contributions are transferred shall be treated as having held 
     such contributions during any period such contributions were 
     held (or are treated as held under this subparagraph) by the 
     special individual retirement account from which transferred.
       ``(4) Special rules relating to certain transfers.--
       ``(A) In general.--Notwithstanding any other provision of 
     law, in the case of a qualified transfer to a special 
     individual retirement account from an individual retirement 
     plan which is not a special individual retirement account--
       ``(i) there shall be included in gross income any amount 
     which, but for the qualified transfer, would be includible in 
     gross income, but
       ``(ii) section 72(t) shall not apply to such amount.
       ``(B) Time for inclusion.--In the case of any qualified 
     transfer which occurs before January 1, 1997, any amount 
     includible in gross income under subparagraph (A) with 
     respect to such contribution shall be includible ratably over 
     the 4-taxable year period beginning in the taxable year in 
     which the amount was paid or distributed out of the 
     individual retirement plan.
       ``(e) Qualified Transfer.--For purposes of this section
       ``(1) In general.--The term `qualified transfer' means a 
     transfer to a special individual retirement account from 
     another such account or from an individual retirement plan 
     but only if such transfer meets the requirements of section 
     408(d)(3).
       ``(2) Limitation.--A transfer otherwise described in 
     paragraph (1) shall not be treated as a qualified transfer if 
     the taxpayer's adjusted gross income for the taxable year of 
     the transfer exceeds the sum of--
       ``(A) the applicable dollar amount, plus
       ``(B) the dollar amount applicable for the taxable year 
     under section 219(g)(2)(A)(ii).

     This paragraph shall not apply to a transfer from a special 
     individual retirement account to another special individual 
     retirement account.
       ``(3) Definitions.--For purposes of this subsection, the 
     terms `adjusted gross income' and `applicable dollar amount' 
     have the meanings given such terms by section 219(g)(3), 
     except subparagraph (A)(ii) thereof shall be applied without 
     regard to the phrase `or the deduction allowable under this 
     section'.''
       (b) Early Withdrawal Penalty.--Section 72(t) is amended by 
     adding at the end the following new paragraph:
       ``(6) Rules relating to special individual retirement 
     accounts.--In the case of a special individual retirement 
     account under section 408A--
       ``(A) this subsection shall only apply to distributions out 
     of such account which consist of earnings allocable to 
     contributions made to the account during the 5-year period 
     ending on the day before such distribution, and
       ``(B) paragraph (2)(A)(i) shall not apply to any 
     distribution described in subparagraph (A).''
       (c) Excess Contributions.--Section 4973(b) is amended by 
     adding at the end the following new sentence: ``For purposes 
     of paragraphs (1)(B) and (2)(C), the amount allowable as a 
     deduction under section 219 shall be computed without regard 
     to section 408A.''
       (d) Conforming 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 408 the 
     following new item:

``Sec. 408A. Special individual retirement accounts.''

       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.
                  TITLE II--PENALTY-FREE DISTRIBUTIONS

     SEC. 201. DISTRIBUTIONS FROM CERTAIN PLANS MAY BE USED 
                   WITHOUT PENALTY TO PURCHASE FIRST HOMES, TO PAY 
                   HIGHER EDUCATION OR FINANCIALLY DEVASTATING 
                   MEDICAL EXPENSES, OR BY THE UNEMPLOYED.

       (a) In General.--Paragraph (2) of section 72(t) (relating 
     to exceptions to 10-percent additional tax on early 
     distributions from qualified retirement plans) is amended by 
     adding at the end the following new subparagraph:
       ``(D) Distributions from certain plans for first home 
     purchases or educational expenses.--Distributions to an 
     individual from an individual retirement plan--
       ``(i) which are qualified first-time homebuyer 
     distributions (as defined in paragraph (7)); or
       ``(ii) to the extent such distributions do not exceed the 
     qualified higher education expenses (as defined in paragraph 
     (8)) of the taxpayer for the taxable year.''
       (b) Financially Devastating Medical Expenses.--
       (1) In general.--Section 72(t)(3)(A) is amended by striking 
     ``(B),''.
       (2) Certain lineal descendants and ancestors treated as 
     dependents and long-term care services treated as medical 
     care.--Subparagraph (B) of section 72(t)(2) is amended by 
     striking ``medical care'' and all that follows and inserting 
     ``medical care determined--
       ``(i) without regard to whether the employee itemizes 
     deductions for such taxable year, and
       ``(ii) in the case of an individual retirement plan--

       ``(I) by treating such employee's dependents as including 
     all children, grandchildren and ancestors of the employee or 
     such employee's spouse and
       ``(II) by treating qualified long-term care services (as 
     defined in paragraph (9)) as medical care for purposes of 
     this subparagraph (B).''

       (3) Conforming amendment.--Subparagraph (B) of section 
     72(t)(2) is amended by striking ``or (C)'' and inserting ``, 
     (C) or (D)''.
       (c) Definitions.--Section 72(t), as amended by this Act, is 
     amended by adding at the end the following new paragraphs:
       ``(7) Qualified first-time homebuyer distributions.--For 
     purposes of paragraph (2)(D)(i)--
       ``(A) In general.--The term `qualified first-time homebuyer 
     distribution' means any payment or distribution received by 
     an individual to the extent such payment or distribution is 
     used by the individual before the close of the 60th day after 
     the day on which such payment or distribution is received to 
     pay qualified acquisition costs with respect to a principal 
     residence of a first-time homebuyer who is such individual or 
     the spouse, child (as defined in section 151(c)(3)), or 
     grandchild of such individual.
       ``(B) Qualified acquisition costs.--For purposes of this 
     paragraph, the term `qualified acquisition costs' means the 
     costs of acquiring, constructing, or reconstructing a 
     residence. Such term includes any usual or reasonable 
     settlement, financing, or other closing costs.
       ``(C) First-time homebuyer; other definitions.--For 
     purposes of this paragraph--
       ``(i) First-time homebuyer.--The term `first-time 
     homebuyer' means any individual if--

       ``(I) such individual (and if married, such individual's 
     spouse) had no present ownership interest in a principal 
     residence during the 3-year period ending on the date of 
     acquisition of the principal residence to which this 
     paragraph applies, and
       ``(II) subsection (h) or (k) of section 1034 did not 
     suspend the running of any period of time specified in 
     section 1034 with respect to such individual on the day 
     before the date the distribution is applied pursuant to 
     subparagraph (A).

     In the case of an individual described in section 
     143(i)(1)(C) for any year, an ownership interest shall not 
     include any interest under a contract of deed described in 
     such section. An individual who loses an ownership interest 
     in a principal residence incident to a divorce or legal 
     separation is deemed for purposes of this subparagraph to 
     have had no ownership interest in such principal residence 
     within the period referred to in subparagraph (A)(II).
       ``(ii) Principal residence.--The term `principal residence' 
     has the same meaning as when used in section 1034.

[[Page S 15038]]

       ``(iii) Date of acquisition.--The term `date of 
     acquisition' means the date--

       ``(I) on which a binding contract to acquire the principal 
     residence to which subparagraph (A) applies is entered into, 
     or
       ``(II) on which construction or reconstruction of such a 
     principal residence is commenced.

       ``(D) Special rule where delay in acquisition.--If any 
     distribution from any individual retirement plan fails to 
     meet the requirements of subparagraph (A) solely by reason of 
     a delay or cancellation of the purchase or construction of 
     the residence, the amount of the distribution may be 
     contributed to an individual retirement plan as provided in 
     section 408(d)(3)(A)(i) (determined by substituting `120 
     days' for `60 days' in such section), except that--
       ``(i) section 408(d)(3)(B) shall not be applied to such 
     contribution, and
       ``(ii) such amount shall not be taken into account in 
     determining whether section 408(d)(3)(A)(i) applies to any 
     other amount.
       ``(8) Qualified higher education expenses.--For purposes of 
     paragraph (2)(D)(ii)--
       ``(A) In general.--The term `qualified higher education 
     expenses' means tuition and fees required for the enrollment 
     or attendance of--
       ``(i) the taxpayer,
       ``(ii) the taxpayer's spouse,
       ``(iii) a dependent of the taxpayer with respect to whom 
     the taxpayer is allowed a deduction under section 151, or
       ``(iv) the taxpayer's child (as defined in section 
     151(c)(3)) or grandchild,
     as an eligible student at an institution of higher education 
     (as defined in paragraphs (1)(D) and (2) of section 220(c)).
       ``(B) Exceptions.--The term `qualified higher education 
     expenses' does not include expenses described in 
     subparagraphs (B) and (C) of section 220(c)(1).
       ``(C) Coordination with savings bond provisions.--The 
     amount of qualified higher education expenses for any taxable 
     year shall be reduced by any amount excludable from gross 
     income under section 135.
       ``(9) Qualified long-term care services.--For purposes of 
     paragraph (2)(B)--
       ``(A) In general.--The term `qualified long-term care 
     services' means necessary diagnostic, curing, mitigating, 
     treating, preventive, therapeutic, and rehabilitative 
     services, and maintenance and personal care services (whether 
     performed in a residential or nonresidential setting) which--
       ``(i) are required by an individual during any period the 
     individual is an incapacitated individual (as defined in 
     subparagraph (B)),
       ``(ii) have as their primary purpose--

       ``(I) the provision of needed assistance with 1 or more 
     activities of daily living (as defined in subparagraph (C)), 
     or
       ``(II) protection from threats to health and safety due to 
     severe cognitive impairment, and

       ``(iii) are provided pursuant to a continuing plan of care 
     prescribed by a licensed professional (as defined in 
     subparagraph (D)).
       ``(B) Incapacitated individual.--The term `incapacitated 
     individual' means any individual who--
       ``(i) is unable to perform, without substantial assistance 
     from another individual (including assistance involving 
     cueing or substantial supervision), at least 2 activities of 
     daily living as defined in subparagraph (C), or
       ``(ii) has severe cognitive impairment as defined by the 
     Secretary in consultation with the Secretary of Health and 
     Human Services.

     Such term shall not include any individual otherwise meeting 
     the requirements of the preceding sentence unless a licensed 
     professional within the preceding 12-month period has 
     certified that such individual meets such requirements.
       ``(C) Activities of daily living.--Each of the following is 
     an activity of daily living:
       ``(i) Eating.
       ``(ii) Toileting.
       ``(iii) Transferring.
       ``(iv) Bathing.
       ``(v) Dressing.
       ``(D) Licensed professional.--The term `licensed 
     professional' means--
       ``(i) a physician or registered professional nurse, or
       ``(ii) any other individual who meets such requirements as 
     may be prescribed by the Secretary after consultation with 
     the Secretary of Health and Human Services.
       ``(E) Certain services not included.--The term `qualified 
     long-term care services' shall not include any services 
     provided to an individual--
       ``(i) by a relative (directly or through a partnership, 
     corporation, or other entity) unless the relative is a 
     licensed professional with respect to such services, or
       ``(ii) by a corporation or partnership which is related 
     (within the meaning of section 267(b) or 707(b)) to the 
     individual.

     For purposes of this subparagraph, the term `relative' means 
     an individual bearing a relationship to the individual which 
     is described in paragraphs (1) through (8) of section 
     152(a).''
       (d) Penalty-Free Distributions for Certain Unemployed 
     Individuals.--Paragraph (2) of section 72(t) is amended by 
     adding at the end the following new subparagraph:
       ``(E) Distributions to unemployed individuals.--A 
     distribution from an individual retirement plan to an 
     individual after separation from employment, if--
       ``(i) such individual has received unemployment 
     compensation for 12 consecutive weeks under any Federal or 
     State unemployment compensation law by reason of such 
     separation, and
       ``(ii) such distributions are made during any taxable year 
     during which such unemployment compensation is paid or the 
     succeeding taxable year.''
       (e) Effective Date.--The amendments made by this section 
     shall apply to payments and distributions after December 31, 
     1995.

     SEC. 202. CONTRIBUTIONS MUST BE HELD AT LEAST 5 YEARS IN 
                   CERTAIN CASES.

       (a) In General.--Section 72(t), as amended by this Act, is 
     amended by adding at the end the following new paragraph:
       ``(10) Certain contributions must be held 5 years.--
       ``(A) In general.--Paragraph (2)(A)(i) shall not apply to 
     any amount distributed out of an individual retirement plan 
     (other than a special individual retirement account) which is 
     allocable to contributions made to the plan during the 5-year 
     period ending on the date of such distribution (and earnings 
     on such contributions).
       ``(B) Ordering rule.--For purposes of this paragraph, 
     distributions shall be treated as having been made--
       ``(i) first from the earliest contribution (and earnings 
     allocable thereto) remaining in the account at the time of 
     the distribution, and
       ``(ii) then from other contributions (and earnings 
     allocable thereto) in the order in which made.

     Earnings shall be allocated to contributions in such manner 
     as the Secretary may prescribe.
       ``(C) Special rule for rollovers.--
       ``(i) Pension plans.--Subparagraph (A) shall not apply to 
     distributions out of an individual retirement plan which are 
     allocable to rollover contributions to which section 402(c), 
     403(a)(4), or 403(b)(8) applied.
       ``(ii) Contribution period.--For purposes of subparagraph 
     (A), amounts shall be treated as having been held by a plan 
     during any period such contributions were held (or are 
     treated as held under this clause) by any individual 
     retirement plan from which transferred.
       ``(D) Special accounts.--For rules applicable to special 
     individual retirement accounts under section 408A, see 
     paragraph (8).''
       (b) Effective Date.--The amendment made by this section 
     shall apply to contributions (and earnings allocable thereto) 
     which are made after December 31, 1995.
                                 ______