To amend the Internal Revenue Code of 1986 to allow deductible contributions to individual retirement plans designated as Retirement Years Savings Accounts.

Summary: Amends the Internal Revenue Code to allow a deduction for contributions made by an individual who is younger than the age of 40 to an individual retirement plan designated as a Retirement Years Savings Account (RYS). Prohibits any rollover contribution to an RYS account unless:  (1) such contribution is from another RYS account; or (2) such contribution is from another individual retirement plan (other than an RYS account) and is made before January 1998.

SECTION 1. RETIREMENT YEARS 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 
408 the following new section:

``SEC. 408A. RETIREMENT YEARS SAVINGS ACCOUNTS.

    ``(a) General Rule.--Except as provided in this section, a 
Retirement Years Savings Account shall be treated for purposes of this 
title in the same manner as an individual retirement plan.
    ``(b) Retirement Years Savings Account.--For purposes of this 
title, the term `Retirement Years Savings Account' or `RYS Account' 
means an individual retirement plan which is designated at the time of 
the establishment of the plan as a Retirement Years Savings Account. 
Such designation shall be made in such manner as the Secretary may 
prescribe.
    ``(c) Contribution Rules.--
            ``(1) Deduction allowed for years before individual attains 
        age 40.--Section 219(g) shall not apply to any contribution to 
        an RYS Account for any taxable year before the taxable year 
        during which the individual attains age 40.
            ``(2) Denial of deduction for years after individual 
        attains age 40.--No deduction shall be allowed under section 
        219 for a contribution to an RYS account for the taxable year 
        in which the individual attains age 40 or any taxable year 
        thereafter.
            ``(3) Increased spousal contribution.--
                    ``(A) In general.--In the case of an individual to 
                whom this paragraph applies for the taxable year, in 
                lieu of applying section 219(c), the limitation under 
                section 219(b)(1)(B) shall be equal to 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 of the 
                        limitation under section 219(b)(1) applicable 
                        to such spouse for such taxable year.
                    ``(B) Individuals to whom paragraph applies.--This 
                paragraph shall apply to any individual if--
                            ``(i) such individual files a joint return 
                        for the taxable year, and
                            ``(ii) 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.
            ``(4) Tax on excess contributions.--Section 4973 shall be 
        applied separately with respect to individual retirement plans 
        which are RYS Accounts and individual retirement plans which 
        are not RYS Accounts; except that, for purposes of applying 
        such section with respect to individual retirement plans which 
        are RYS Accounts, the limitation under paragraph (3) shall be 
        taken into account.
            ``(5) Limitations on rollover contributions.--No rollover 
        contribution may be made to an RYS Account unless--
                    ``(A) such contribution is from another RYS 
                Account, or
                    ``(B) such contribution is from an individual 
                retirement plan (other than an RYS Account) and is made 
                before January 1, 1998.
    ``(d) Distribution Rules.--For purposes of this title--
            ``(1) Exclusion from gross income; no penalty tax.--No 
        portion of a qualified distribution from an RYS Account shall 
        be includible in gross income.
            ``(2) Qualified distribution.--For purposes of this 
        subsection, the term `qualified distribution' means any payment 
        or distribution--
                    ``(A) made on or after the date on which the 
                individual attains age 59\1/2\,
                    ``(B) made to a beneficiary (or to the estate of 
                the individual) on or after the death of the 
                individual, or
                    ``(C) attributable to the individual's being 
                disabled (within the meaning of section 72(m)(7)).
    ``(e) Other Definitions.--For purposes of this section--
            ``(1) Rollover contributions.--The term `rollover 
        contributions' means contributions described in sections 
        402(c), 403(a)(4), 403(b)(8), or 408(d)(3).
            ``(2) Compensation.--The term `compensation' has the 
        meaning given such term by section 219(f).''
    (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 408 the following new 
item:

                              ``Sec. 408A. Retirement Years Savings 
                                        Accounts.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.