II 

109TH CONGRESS 

2D SESSION S. 2585 

To amend the Internal Revenue Code of 1986 to permit military death 

gratuities to be contributed to certain tax-favored accounts. 

IN THE SENATE OF THE UNITED STATES 

APRIL 6, 2006 

Mr. SMITH (for himself and Mr. KERRY) introduced the following bill; which 

was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to permit 

military death gratuities to be contributed to certain 

tax-favored accounts. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Fallen Heroes Family 

5 Savings Act’’. 

6 SEC. 2. CONTRIBUTIONS OF MILITARY DEATH GRATUITIES 

7 TO CERTAIN TAX-FAVORED ACCOUNTS. 

8 (a) ROTH IRAS.—Subsection (e) of section 408A of 

9 the Internal Revenue Code of 1986 (relating to qualified 

10 rollover contribution) is amended to read as follows: 


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•S 2585 IS

1 ‘‘(e) QUALIFIED ROLLOVER CONTRIBUTION.—For 

2 purposes of this section— 

3 ‘‘(1) IN GENERAL.—The term ‘qualified rollover 

4 contribution’ means a rollover contribution to a Roth 

5 IRA from another such account, or from an indi6 vidual retirement plan, but only if such rollover con7 tribution meets the requirements of section 

8 408(d)(3). Such term includes a rollover contribu9 tion described in section 402A(c)(3)(A). For pur10 poses of section 408(d)(3)(B), there shall be dis11 regarded any qualified rollover contribution from an 

12 individual retirement plan (other than a Roth IRA) 

13 to a Roth IRA. 

14 ‘‘(2) MILITARY DEATH GRATUITY.— 

15 ‘‘(A) IN GENERAL.—The term ‘qualified 

16 rollover contribution’ includes a contribution to 

17 a Roth IRA maintained for the benefit of an in18 dividual to the extent that such contribution 

19 does not exceed the amount received by such in20 dividual under section 1477 of title 10, United 

21 States Code, or under section 1967 of title 38 

22 of such Code, if such contribution is made not 

23 later than 1 year after the day on which such 

24 individual receives such amount. 


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•S 2585 IS

1 ‘‘(B) ANNUAL LIMIT ON NUMBER OF

2 ROLLOVERS NOT TO APPLY.—Section 

3 408(d)(3)(B) shall not apply with respect to 

4 amounts treated as a rollover by the subpara5 graph (A). 

6 ‘‘(C) APPLICATION OF SECTION 72.—For 

7 purposes of applying section 72 in the case of 

8 a distribution which is not a qualified distribu9 tion, the amount treated as a rollover by the 

10 subparagraph (A) shall be treated as invest11 ment in the contract.’’. 

12 (b) HEALTH SAVINGS ACCOUNTS AND ARCHER

13 MSAS.—Sections 220(f)(5) and 223(f)(5) of such Code 

14 are both amended by adding at the end the following flush 

15 sentence: ‘‘For purposes of subparagraphs (A) and (B), 

16 rules similar to the rules of section 408A(e)(2) (relating 

17 to rollover treatment for contributions of military death 

18 gratuity) shall apply.’’. 

19 (c) EDUCATION SAVINGS ACCOUNTS.—Section 

20 530(d)(5) of such Code is amended by adding at the end 

21 the following new sentence: ‘‘For purposes of this para22 graph, rules similar to the rules of section 408A(e)(2) (re23 lating to rollover treatment for contributions of military 

24 death gratuity) shall apply.’’. 

25 (d) EFFECTIVE DATES.— 


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•S 2585 IS

1 (1) IN GENERAL.—Except as provided by para2 graph (2), the amendments made by this section 

3 shall apply with respect to deaths from injuries oc4 curring on or after the date of the enactment of this 

5 Act. 

6 (2) APPLICATION OF AMENDMENTS TO DEATHS

7 FROM INJURIES OCCURRING ON OR AFTER OCTOBER

8 7, 2001, AND BEFORE ENACTMENT.—The amend9 ments made by this section shall apply to any con10 tribution made pursuant to section 408A(e)(2), 

11 220(f)(5), 223(f)(5), or 530(d)(5) of the Internal 

12 Revenue Code of 1986, as amended by this Act, with 

13 respect to amounts received under section 1477 of 

14 title 10, United States Code, or under section 1967 

15 of title 38 of such Code, for deaths from injuries oc16 curring on or after October 7, 2001, and before the 

17 date of the enactment of this Act if such contribu18 tion is made not later than 1 year after the date of 

19 the enactment of this Act. 

Æ 


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