[Congressional Record Volume 143, Number 2 (Thursday, January 9, 1997)]
[Extensions of Remarks]
[Page E92]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




    INTRODUCTION OF INDIVIDUAL RETIREMENT ACCOUNT [IRA] LEGISLATION

                                 ______
                                 

                         HON. WILLIAM M. THOMAS

                             of california

                    in the house of representatives

                       Thursday, January 9, 1997

  Mr. THOMAS. Mr. Speaker, today I am introducing the 105th Congress 
version of the Super IRA legislation we expect to restore real savings 
incentives to the Internal Revenue Code. This year's bill, the Savings 
and Investment Incentive Act of 1997, represents the best selection of 
options for restoring and improving the Individual Retirement Accounts 
that have been so popular with taxpayers. All taxpayers will ultimately 
be able to choose between having an Individual Retirement Account that 
allows them to deduct contributions for their retirement savings and an 
IRA Plus account allowing them to earn tax-free income.
  An outline of the bill follows. In addition, I want to note that 
Senate Finance Chairman Roth and Senator Breaux, with whom I have 
worked closely in developing the bill, will be introducing the Savings 
and Investment Incentive Act later this month. All of us agree that 
taxpayers need and deserve the savings incentives this bill provides.
  It is obvious that the American taxpayer needs and wants the savings 
incentives this bill will provide. Studies indicate that today's ``baby 
boomer'' workers are only saving 36 percent of the funds they will need 
to maintain their standards of living after retirement. In fact, people 
aged 60 to 64, those closest to retirement, only have about $1,700 in 
financial assets in the form of savings, checking, and similar kinds of 
accounts. We need to give taxpayers control of their funds so they can 
better prepare for the future.
  The Super IRA bill makes critical changes in the law so taxpayers 
will have plenty of options to choose from in saving for their future. 
The income caps that prevent many people from making deductible 
contributions to IRA's are eliminated over a 5-year period. A new kind 
of account called an IRA Plus account would be offered so taxpayers 
could earn tax-free income. The bill makes all IRA's easier for 
taxpayers to use because it eliminates the need to coordinate 
contributions with other kinds of retirement arrangements. This bill 
gives taxpayers the liquidity they want. Funds could be withdrawn from 
either type of IRA to fund family needs such as education, the purchase 
of a first home, or family support during periods of long-term 
unemployment.
  IRA's enjoy a good deal of popularity among taxpayers. A number of 
surveys show just how popular they are. One poll found 74 percent of 
the respondents would increase their savings if they had tax incentives 
to do so, precisely what the Super IRA bill provides. Another survey 
conducted in 1995 found that 77 percent of those contacted supported 
letting everyone have deductible IRA's while 69 percent like the idea 
of penalty-free withdrawals for purchasing a first home, to provide 
education, or meet family needs during extended unemployment.
  IRA's are a savings incentive that everyone can support. Republicans 
and Democrats can support this bill and I hope my House colleagues will 
join me in seeking to have the Savings and Investment Incentive Act 
enacted this year.

            Super Individual Retirement Account Legislation


                       description of provisions

     Makes tax deductible IRAs available to all Americans
       Under the legislation, all Americans would be eligible for 
     fully deductible IRAs by the year 2001. Current law only 
     allows those taxpayers who are not covered by any other 
     pension arrangement and whose income does not exceed $40,000 
     ($25,000 for singles) to be eligible for a fully deductible 
     IRA. These income limits would be gradually eliminated over a 
     four year period beginning 1997.
       The $2,000 contribution limit would be indexed for 
     inflation in $500 increments.
       Homemakers and other workers without employer pensions 
     would be permitted to make up to a $2,000 tax deductible IRA 
     contribution regardless of whether their spouses have an 
     employer pension. This provision builds on the homemaker IRA 
     provisions in the ``Small Business Job Protection Act of 
     1996'' signed into law in 1996.
     New kind of IRA--``IRA Plus Account''
       Taxpayers will be offered a new IRA choice called the ``IRA 
     Plus Account.'' Under the IRA Plus Account, contributions 
     would not be tax deductible. However, earnings on IRA Plus 
     Account assets can be withdrawn tax-free if the account is 
     open for at least 5 years and the IRA holder is at least age 
     59\1/2\. A 10% penalty would apply to early withdrawals 
     unless they meet one of three special purpose distributions 
     described below.
       Taxpayers can contribute up to $2,000 to either a tax 
     deductible IRA or a non-tax deductible IRA Plus Account. They 
     can also allocate any portion of the $2,000 limit between 
     these two IRA accounts, (e.g., $1,000 to a tax deductible IRA 
     and $1,000 to the IRA Plus Account).
     Penalty-free IRA withdrawals for special purposes
       The 10% penalty on early withdrawals would be waived if the 
     funds are used to buy a first home, to pay educational 
     expenses or to cover any expense during periods of 
     unemployment (after collecting unemployment compensation for 
     at least 12 weeks). Participants in 401(k) plans and 403(b) 
     annuities could also receive penalty-free withdrawals for 
     these purposes under the legislation. Taxpayers will still be 
     liable for the income tax due on the withdrawal, but no 
     penalty tax would apply. Note: penalty-free withdrawals from 
     IRAs for medical expenses were provided under the ``Health 
     Insurance Portability and Accountability Act of 1996'' signed 
     into law in 1996.
     Conversion of IRAs into IRA Plus Accounts
       Taxpayers will be allowed to ``convert'' their old IRA 
     savings into IRA Plus Accounts without incurring an early 
     withdrawal penalty or an excess distribution penalty. 
     However, individuals must pay income tax on previously 
     deducted contributions and corresponding earnings. If the 
     conversion is made before January 1, 1999, the taxpayer can 
     spread the tax payments over a four-year period.
     Other features of the Thomas/Neal legislation
       IRA and 401(k) contributions would not have to be 
     coordinated.
       IRA funds could be invested in certain coins and bullion.
       
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