To amend the Internal Revenue Code of 1986 to increase the annual limitation on deductible contributions to individual retirement accounts to $5,000, and for other purposes.

Summary: Increased Individual Retirement Accounts for All Act of 2001 - Amends the Internal Revenue Code to: (1) increase the annual limitation on deductible contributions to individual retirement accounts (IRAs) to $5,000 and provide a cost-of-living adjustment to such amount; (2) provide for increased "catch-up" contributions for individuals aged 50 or older; and (3) until December 31, 2005, allow a nonrefundable credit to certain individuals for elective deferrals and IRA contributions.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Increased Individual Retirement 
Accounts for All Act of 2001''.

SEC. 2. INCREASE IN AMOUNT OF MAXIMUM CONTRIBUTIONS ALLOWABLE TO 
              DEDUCTIBLE, TRADITIONAL, AND ROTH IRAS.

    (a) In General.--Subparagraph (A) of section 219(b)(1) of the 
Internal Revenue Code of 1986 (relating to maximum amount of deduction) 
is amended by striking ``$2,000'' and inserting ``$5,000''.
    (b) Catch-Up Contributions for Individuals 50 or Older.--Subsection 
(b) of section 219 of such Code is amended by adding at the end the 
following new paragraph:
            ``(5) Catch-up contributions for individuals 50 or older.--
        In the case of an individual who has attained the age of 50 
        before the close of the taxable year, paragraph (1)(A) shall be 
        applied by substituting `$7,500' for the dollar amount in 
        effect under such paragraph. This paragraph shall not apply for 
        any taxable year in which the dollar amount in effect under 
        paragraph (1)(A) is equal to or greater than $7,500.''.
    (c) Cost-of-Living Adjustment.--Subsection (b) of section 219 of 
such Code is amended by adding at the end the following new paragraph:
            ``(6) Cost-of-living adjustment.--
                    ``(A) In general.--In the case of any taxable year 
                beginning in a calendar year after 2001, the $5,000 
                amount under paragraph (1) 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 2000' 
                        for `calendar year 1992' in subparagraph (B) 
                        thereof.
                            ``(ii) Rounding rules.--If any amount after 
                        adjustment under clause (i) is not a multiple 
                        of $500, such amount shall be rounded to the 
                        next higher multiple of $500.''.
    (d) Conforming Amendments.--
            (1) Section 408(a)(1) of such Code 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)''.
            (2) Section 408(b)(2)(B) of such Code is amended by 
        striking ``$2,000'' and inserting ``the dollar amount in effect 
        under section 219(b)(1)(A)''.
            (3) Section 408(b) of such Code is amended by striking 
        ``$2,000'' in the matter following paragraph (4) and inserting 
        ``the dollar amount in effect under section 219(b)(1)(A)''.
            (4) Section 408(j) of such Code is amended by striking 
        ``$2,000''.
            (5) Section 408(p)(8) of such Code is amended by striking 
        ``$2,000'' and inserting ``the dollar amount in effect under 
        section 219(b)(1)(A)''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2000.

SEC. 3. NONREFUNDABLE CREDIT TO CERTAIN INDIVIDUALS FOR ELECTIVE 
              DEFERRALS AND IRA CONTRIBUTIONS.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to nonrefundable 
credits) is amended by inserting after section 25A the following new 
section:

``SEC. 25B. ELECTIVE DEFERRALS AND IRA CONTRIBUTIONS BY CERTAIN 
              INDIVIDUALS.

    ``(a) Allowance of Credit.--
            ``(1) In general.--In the case of an eligible individual, 
        there shall be allowed as a credit against the tax imposed by 
        this subtitle for the taxable year an amount equal to the 
        applicable percentage of so much of the qualified retirement 
        savings contributions of the eligible individual for the 
        taxable year as do not exceed the dollar amount in effect for 
        such taxable year under section 219(b)(1)(A).
            ``(2) Reduction for receipt of certain retirement 
        distributions.--
                    ``(A) In general.--The amount allowed as a credit 
                under paragraph (1) shall be reduced (but not below 
                zero) by the amount the eligible individual received, 
                with respect to the taxable year, during the testing 
                period in--
                            ``(i) any distribution from a qualified 
                        retirement plan (as defined in section 
                        4974(c)), or from an eligible deferred 
                        compensation plan (as defined in section 
                        457(b)), which is includible in gross income, 
                        or
                            ``(ii) any distribution from a Roth IRA 
                        which is not a qualified rollover contribution 
                        (as defined in section 408A(e)) to a Roth IRA.
                    ``(B) Testing period.--For purposes of subparagraph 
                (A), the testing period, with respect to a taxable 
                year, is the period which includes--
                            ``(i) such taxable year,
                            ``(ii) the 2 preceding taxable years, and
                            ``(iii) the period after such taxable year 
                        and before the due date (without extensions) 
                        for filing the return of tax for such taxable 
                        year.
    ``(b) Applicable Percentage.--For purposes of this section, the 
applicable percentage is the percentage determined in accordance with 
the following table:

------------------------------------------------------------------------
                    Adjusted Gross Income
-------------------------------------------------------------
    Joint return           Head of a        All other cases   Applicable
---------------------      household     -------------------- percentage
                     --------------------
   Over     Not over    Over    Not over    Over    Not over
------------------------------------------------------------------------
$0         $20,000    $0        $15,000   $0        $10,000          50
 20,000     25,000     15,000    18,750    10,000    12,500          30
 25,000     30,000     18,750    22,500    12,500    15,000          25
 30,000     35,000     22,500    26,250    15,000    17,500          20
 35,000     40,000     26,250    30,000    17,500    20,000          15
 40,000     45,000     30,000    33,750    20,000    22,500          10
 45,000     50,000     33,750    37,500    22,500    25,000           5
 50,000    .........   37,500   ........   25,000   ........          0
------------------------------------------------------------------------


    ``(c) Eligible Individual.--For purposes of this section--
            ``(1) In general.--The term `eligible individual' means any 
        individual if--
                    ``(A) such individual has attained the age of 18 as 
                of the close of the taxable year, and
                    ``(B) the compensation (as defined in section 
                219(f)(1)) includible in the gross income of the 
                individual (or, in the case of a joint return, of the 
                taxpayer) for such taxable year is at least $5,000.
            ``(2) Dependents and full-time students not eligible.--The 
        term `eligible individual' shall not include--
                    ``(A) any individual with respect to whom a 
                deduction under section 151 is allowable to another 
                taxpayer for a taxable year beginning in the calendar 
                year in which such individual's taxable year begins, 
                and
                    ``(B) any individual who is a student (as defined 
                in section 151(c)(4)).
    ``(d) Qualified Retirement Savings Contributions.--For purposes of 
this section, the term `qualified retirement savings contributions' 
means the sum of--
            ``(1) the amount of the qualified retirement contributions 
        (as defined in section 219(e)) for the benefit of the eligible 
        individual,
            ``(2) the amount of the elective deferrals (as defined in 
        section 414(u)(2)(C)) of such individual, and
            ``(3) the amount of voluntary employee contributions by 
        such individual to any qualified retirement plan (as defined in 
        section 4974(c)).
    ``(e) Special Rules.--
            ``(1) Treatment of distributions received by spouse of 
        individual.--For purposes of determining whether an individual 
        is an eligible individual for any taxable year and for the 
        reduction under subsection (a)(2), any distribution received by 
        the spouse of such individual shall be treated as received by 
        such individual if such individual and spouse file a joint 
        return for such taxable year and for the taxable year during 
        which the spouse receives the distribution.
            ``(2) Adjusted gross income.--For purposes of this section, 
        adjusted gross income shall be determined without regard to 
        sections 911, 931, and 933.
            ``(3) Investment in the contract.--Notwithstanding any 
        other provision of law, a qualified retirement savings 
        contribution shall not fail to be included in determining the 
        investment in the contract for purposes of section 72 by reason 
        of the credit under this section.
    ``(f) Termination.--This section shall not apply to taxable years 
beginning after December 31, 2005.''.
    (b) Conforming Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by inserting after the item relating to section 25A the 
following new item:

                              ``Sec. 25B. Elective deferrals and IRA 
                                        contributions by certain 
                                        individuals.''.
    (c) Reporting Requirements.--
            (1) Annual report required.--The Secretary of the Treasury 
        shall submit an annual report to the Committee on Ways and 
        Means of the House of Representatives and the Committee on 
        Finance of the Senate regarding the number of individuals who 
        claim the credit under section 25B of the Internal Revenue Code 
        of 1986 (as added by this section).
            (2) Effect of credit on pension coverage.--Not later than 4 
        years after the date of the enactment of this Act, the 
        Secretary of the Treasury shall submit a report to the 
        committees specified in paragraph (1) on the effect of the 
        credit under section 25B of the Internal Revenue Code of 1986 
        (as added by this section) on pension coverage of individuals 
        in the workforce, including expansion of coverage for low- and 
        moderate-income workers, levels of pension benefits, quality of 
        coverage, workers' access to and participation in plans, and 
        retirement security.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2000.