I

103D CONGRESS

2D SESSION H. R. 5006

To amend the Internal Revenue Code of 1986 to encourage savings and

investment through individual retirement accounts, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

AUGUST 20, 1994

Mr. PICKLE (for himself, Mr. THOMAS of California, Mr. NEAL of Massachusetts, Mr. MAZZOLI, Mr. GEKAS, Mr. ANDREWS of Texas, Mrs. JOHNSON

of Connecticut, Mr. SUNDQUIST, Mr. CRANE, Mr. MCNULTY, Mr. HANCOCK, Mr. ACKERMAN, Mr. FIELDS of Texas, Mr. LIPINSKI, Mr. GENE

GREEN of Texas, Mr. HUTTO, Mr. WILSON, Ms. ESCHOO, Mr. LEVY, Mr.

FAZIO, Mr. JEFFERSON, Mr. MCCRERY, Mr. FISH, Mr. SARPALIUS, Mr.

HASTINGS, Mr. HAYES, Ms. EDDIE BERNICE JOHNSON of Texas, Mr.

BROWN of California, Mr. FROST, Mr. EMERSON, Mr. GREENWOOD, Mr.

PACKARD, Mr. LEWIS of California, Mr. HYDE, Mr. DOOLITTLE, Mr.

ROGERS, Mr. LEWIS of Florida, Mr. HEFNER, Mr. EVANS, Mr. RAHALL,

Mr. SWIFT, Mr. HANSEN, Mr. BRYANT, Mr. SPENCE, Mr. CALLAHAN,

Mr. CAMP, Mr. TORKILDSEN, Mr. CALVERT, Mr. BEVILL, Mr. SENSENBRENNER, Mr. HALL of Texas, Mr. ROMERO-BARCELO ́, Mr. LIVINGSTON,

Mr. PARKER, Mr. SAXTON, Mr. CHAPMAN, Mr. MARTINEZ, Mr. HERGER,

Mr. SAWYER, Mr. MINGE, and Mr. PETE GEREN of Texas) introduced

the following bill; which was referred to the Committee on Ways and

Means

A BILL

To amend the Internal Revenue Code of 1986 to encourage

savings and investment through individual retirement accounts, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

2 (a) SHORT TITLE.—This Act may be cited as the

3 ‘‘Savings and Investment Incentive Act of 1994’’.

4 (b) AMENDMENT OF 1986 CODE.—Except as other5 wise expressly provided, whenever in this Act an amend6 ment or repeal is expressed in terms of an amendment

7 to, or repeal of, a section or other provision, the reference

8 shall be considered to be made to a section or other provi9 sion of the Internal Revenue Code of 1986.

10 TITLE I—RETIREMENT SAVINGS

11 INCENTIVES

12 Subtitle A—Restoration of IRA

13 Deduction

14 SEC. 101. RESTORATION OF IRA DEDUCTION.

15 (a) IN GENERAL.—Section 219 (relating to deduction

16 for retirement savings) is amended by striking subsection

17 (g) and by redesignating subsection (h) as subsection (g).

18 (b) TECHNICAL AND CONFORMING AMENDMENTS.—

19 (1) Subsection (f) of section 219 is amended by

20 striking paragraph (7).

21 (2) Paragraph (5) of section 408(d) is amended

22 by striking the last sentence.

23 (3) Section 408(o) is amended by adding at the

24 end the following new paragraph:

25 ‘‘(5) TERMINATION.—This subsection shall not

26 apply to any designated nondeductible contribution
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1 for any taxable year beginning after December 31,

2 1994.’’.

3 (4) Subsection (b) of section 4973 is amended

4 by striking the last sentence.

5 (c) EFFECTIVE DATE.—The amendments made by

6 this section shall apply to taxable years beginning after

7 December 31, 1994.

8 SEC. 102. INFLATION ADJUSTMENT FOR DEDUCTIBLE

9 AMOUNT.

10 (a) IN GENERAL.—Section 219, as amended by sec11 tion 101, is amended by redesignating subsection (g) as

12 subsection (h) and by inserting after subsection (f) the

13 following new subsection:

14 ‘‘(g) COST-OF-LIVING ADJUSTMENTS.—

15 ‘‘(1) DEDUCTION AMOUNT.—

16 ‘‘(A) IN GENERAL.—In the case of any

17 taxable year beginning in a calendar year after

18 1995, the $2,000 amount under subsection

19 (b)(1)(A) shall be increased by an amount equal

20 to the product of $2,000 and the cost-of-living

21 adjustment for the calendar year.

22 ‘‘(B) ROUNDING TO NEXT LOWEST $500.—

23 If the amount to which $2,000 would be in24 creased under subparagraph (A) is not a mul-
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1 tiple of $500, such amount shall be rounded to

2 the next lowest multiple of $500.

3 ‘‘(2) RELATED AMOUNTS.—Each of the dollar

4 amounts contained in subsection (c)(2) shall be in5 creased at the same time, and by the same amount,

6 as the increase under paragraph (1).

7 ‘‘(3) COST-OF-LIVING ADJUSTMENT.—For pur8 poses of this subsection:

9 ‘‘(A) IN GENERAL.—The cost-of-living ad10 justment for any calendar year is the percent11 age (if any) by which—

12 ‘‘(i) the CPI for such calendar year,

13 exceeds

14 ‘‘(ii) the CPI for 1994.

15 ‘‘(B) CPI FOR ANY CALENDAR YEAR.—The

16 CPI for any calendar year shall be determined

17 in the same manner as under section 1(f)(4).’’.

18 (b) CONFORMING AMENDMENTS.—

19 (1) Section 408(a)(1) is amended by striking

20 ‘‘in excess of $2,000 on behalf of any individual’’

21 and inserting ‘‘on behalf of any individual in excess

22 of the amount in effect for such taxable year under

23 section 219(b)(1)(A)’’.
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1 (2) Section 408(b)(2)(B) is amended by strik2 ing ‘‘$2,000’’ and inserting ‘‘the dollar amount in

3 effect under section 219(b)(1)(A)’’.

4 (3) Section 408(j) is amended by striking

5 ‘‘$2,000’’.

6 SEC. 103. HOMEMAKERS ELIGIBLE FOR FULL IRA DEDUC7 TION.

8 (a) SPOUSAL IRA COMPUTED ON BASIS OF COM9 PENSATION OF BOTH SPOUSES.—Subsection (c) of section

10 219 (relating to special rules for certain married individ11 uals) is amended to read as follows:

12 ‘‘(c) SPECIAL RULES FOR CERTAIN MARRIED INDI13 VIDUALS.—

14 ‘‘(1) IN GENERAL.—In the case of an individual

15 to whom this paragraph applies for the taxable year,

16 the limitation of paragraph (1) of subsection (b)

17 shall be equal to the lesser of—

18 ‘‘(A) $2,000, or

19 ‘‘(B) the sum of—

20 ‘‘(i) the compensation includible in

21 such individual’s gross income for the tax22 able year, plus

23 ‘‘(ii) the compensation includible in

24 the gross income of such individual’s

25 spouse for the taxable year reduced by the
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1 amount allowable as a deduction under

2 subsection (a) to such spouse for such tax3 able year.

4 ‘‘(2) INDIVIDUALS TO WHOM PARAGRAPH (1)

5 APPLIES.—Paragraph (1) shall apply to any individ6 ual if—

7 ‘‘(A) such individual files a joint return for

8 the taxable year, and

9 ‘‘(B) the amount of compensation (if any)

10 includible in such individual’s gross income for

11 the taxable year is less than the compensation

12 includible in the gross income of such individ13 ual’s spouse for the taxable year.’’.

14 (b) CONFORMING AMENDMENTS.—

15 (1) Paragraph (2) of section 219(f) (relating to

16 other definitions and special rules) is amended by

17 striking ‘‘subsections (b) and (c)’’ and inserting

18 ‘‘subsection (b)’’.

19 (2) Paragraph (2) of section 219(g), as added

20 by section 102, is amended by striking ‘‘Each of the

21 dollar amounts’’ and inserting ‘‘The dollar amount’’.

22 (3) Section 408(d)(5) is amended by striking

23 ‘‘$2,250’’ and inserting ‘‘$2,000’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 1994.

4 Subtitle B—Nondeductible Tax5 Free IRAs

6 SEC. 111. ESTABLISHMENT OF NONDEDUCTIBLE TAX-FREE

7 INDIVIDUAL RETIREMENT ACCOUNTS.

8 (a) IN GENERAL.—Subpart A of part I of subchapter

9 D of chapter 1 (relating to pension, profit-sharing, stock

10 bonus plans, etc.) is amended by inserting after section

11 408 the following new section:

12 ‘‘SEC. 408A. IRA PLUS ACCOUNTS.

13 ‘‘(a) GENERAL RULE.—Except as provided in this

14 section, an IRA Plus account shall be treated for purposes

15 of this title in the same manner as an individual retire16 ment plan.

17 ‘‘(b) IRA PLUS ACCOUNT.—For purposes of this

18 title, the term ‘IRA Plus account’ means an individual re19 tirement plan which is designated at the time of establish20 ment of the plan as an IRA Plus account.

21 ‘‘(c) TREATMENT OF CONTRIBUTIONS.—

22 ‘‘(1) NO DEDUCTION ALLOWED.—No deduction

23 shall be allowed under section 219 for a contribution

24 to an IRA Plus account.
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1 ‘‘(2) CONTRIBUTION LIMIT.—The aggregate

2 amount of contributions for any taxable year to all

3 IRA Plus accounts maintained for the benefit of an

4 individual shall not exceed the excess (if any) of—

5 ‘‘(A) the maximum amount allowable as a

6 deduction under section 219 with respect to

7 such individual for such taxable year, over

8 ‘‘(B) the amount so allowed.

9 ‘‘(3) ROLLOVER CONTRIBUTIONS.—

10 ‘‘(A) IN GENERAL.—No rollover contribu11 tion may be made to an IRA Plus account un12 less such contribution consists of a payment or

13 distribution out of another IRA Plus account.

14 ‘‘(B) COORDINATION WITH LIMIT.—A roll15 over contribution shall not be taken into ac16 count for purposes of paragraph (2).

17 ‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.—

18 ‘‘(1) IN GENERAL.—Except as provided in this

19 subsection, any amount paid or distributed out of an

20 IRA Plus account shall not be included in the gross

21 income of the distributee.

22 ‘‘(2) EXCEPTION FOR EARNINGS ON CONTRIBU23 TIONS HELD LESS THAN 5 YEARS.—

24 ‘‘(A) IN GENERAL.—Any amount distrib25 uted out of an IRA Plus account which consists
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1 of earnings allocable to contributions made to

2 the account during the 5-year period ending on

3 the day before such distribution shall be in4 cluded in the gross income of the distributee for

5 the taxable year in which the distribution oc6 curs.

7 ‘‘(B) CROSS REFERENCE.—

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

8 ‘‘(C) ORDERING RULE.—

9 ‘‘(i) FIRST-IN, FIRST-OUT RULE.—

10 Distributions from an IRA Plus account

11 shall be treated as having been made—

12 ‘‘(I) first from the earliest con13 tribution (and earnings allocable

14 thereto) remaining in the account at

15 the time of the distribution, and

16 ‘‘(II) then from other contribu17 tions (and earnings allocable thereto)

18 in the order in which made.

19 ‘‘(ii) ALLOCATIONS BETWEEN CON20 TRIBUTIONS AND EARNINGS.—Any portion

21 of a distribution allocated to a contribution

22 (and earnings allocable thereto) shall be

23 treated as allocated first to the earnings

24 and then to the contribution.
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1 ‘‘(iii) ALLOCATION OF EARNINGS.—

2 Earnings shall be allocated to a contribu3 tion in such manner as the Secretary may

4 by regulations prescribe.

5 ‘‘(iv) CONTRIBUTIONS IN SAME

6 YEAR.—Under regulations, all contribu7 tions made during the same taxable year

8 may be treated as 1 contribution for pur9 poses of this subparagraph.

10 ‘‘(3) ROLLOVERS.—

11 ‘‘(A) IN GENERAL.—Paragraph (2) shall

12 not apply to any distribution which is trans13 ferred to another IRA Plus account.

14 ‘‘(B) CONTRIBUTION PERIOD.—For pur15 poses of paragraph (2), the IRA Plus account

16 to which any contributions are transferred from

17 another IRS Plus account shall be treated as

18 having held such contributions during any pe19 riod such contributions were held (or are treat20 ed as held under this subparagraph) by the ac21 count from which transferred.’’.

22 (b) EARLY WITHDRAWAL PENALTY.—Section 72(t),

23 as amended by section 201(c), is amended by adding at

24 the end the following new paragraph:
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1 ‘‘(8) RULES RELATING TO IRA PLUS AC2 COUNTS.—In the case of an IRA Plus account under

3 section 408A—

4 ‘‘(A) this subsection shall only apply to

5 distributions out of such account which consist

6 of earnings allocable to contributions made to

7 the account during the 5-year period ending on

8 the day before such distribution, and

9 ‘‘(B) paragraph (2)(A)(i) shall not apply to

10 any distribution described in subparagraph

11 (A).’’.

12 (c) EXCESS CONTRIBUTIONS.—Section 4973(b) is

13 amended by adding at the end the following new sentence:

14 ‘‘For purposes of paragraphs (1)(B) and (2)(C), the

15 amount allowable as a deduction under section 219 shall

16 be computed without regard to section 408A.’’

17 (d) CONFORMING AMENDMENT.—The table of sec18 tions for subpart A of part I of subchapter D of chapter

19 1 is amended by inserting after the item relating to section

20 408 the following new item:

‘‘Sec. 408A. IRA Plus accounts.’’.

21 (e) EFFECTIVE DATE.—The amendments made by

22 this section shall apply to taxable years beginning after

23 December 31, 1994.
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1 TITLE II—PENALTY-FREE

2 DISTRIBUTIONS

3 SEC. 201. DISTRIBUTIONS FROM CERTAIN PLANS MAY BE

4 USED WITHOUT PENALTY TO PURCHASE

5 FIRST HOMES OR TO PAY HIGHER EDU6 CATION OR FINANCIALLY DEVASTATING

7 MEDICAL EXPENSES.

8 (a) IN GENERAL.—Paragraph (2) of section 72(t)

9 (relating to exceptions to 10-percent additional tax on

10 early distributions from qualified retirement plans) is

11 amended by adding at the end the following new subpara12 graph:

13 ‘‘(D) DISTRIBUTIONS FROM CERTAIN PLANS

14 FOR FIRST HOME PURCHASES OR EDUCATIONAL EX15 PENSES.—Distributions to an individual from an in16 dividual retirement plan, or from amounts attrib17 utable to employer contributions made pursuant to

18 elective deferrals described in subparagraph (A) or

19 (C) of section 402(g)(3) or section

20 501(c)(18)(D)(iii)—

21 ‘‘(i) which are qualified first-time home22 buyer distributions (as defined in paragraph

23 (6)), or

24 ‘‘(ii) to the extent such distributions do not

25 exceed the qualified higher education expenses
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1 (as defined in paragraph (7)) of the taxpayer

2 for the taxable year.’’.

3 (b) FINANCIALLY DEVASTATING MEDICAL EX4 PENSES.—

5 (1) IN GENERAL.—Section 72(t)(3)(A) is

6 amended by striking ‘‘(B),’’.

7 (2) CERTAIN LINEAL DESCENDANTS AND AN8 CESTORS TREATED AS DEPENDENTS.—Subpara9 graph (B) of section 72(t)(2) is amended by striking

10 ‘‘medical care’’ and all that follows and inserting

11 ‘‘medical care determined—

12 ‘‘(i) without regard to whether the

13 employee itemizes deductions for such tax14 able year, and

15 ‘‘(ii) by treating such employee’s de16 pendents as including—

17 ‘‘(I) all children and grand18 children of the employee or such em19 ployee’s spouse, and

20 ‘‘(II) all ancestors of the em21 ployee or such employee’s spouse.’’.

22 (3) CONFORMING AMENDMENT.—Subparagraph

23 (B) of section 72(t)(2) is amended by striking ‘‘or

24 (C)’’ and inserting ‘‘, (C) or (D)’’.
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1 (c) DEFINITIONS.—Section 72(t) is amended by add2 ing at the end the following new paragraphs:

3 ‘‘(6) QUALIFIED FIRST-TIME HOMEBUYER DIS4 TRIBUTIONS.—For purposes of paragraph (2)(D)(i):

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

6 first-time homebuyer distribution’ means any

7 payment or distribution received by an individ8 ual to the extent such payment or distribution

9 is used by the individual before the close of the

10 60th day after the day on which such payment

11 or distribution is received to pay qualified ac12 quisition costs with respect to a principal resi13 dence of a first-time homebuyer who is such in14 dividual, the spouse of such individual, or any

15 child, grandchild, or ancestor of such individual

16 or the individual’s spouse.

17 ‘‘(B) QUALIFIED ACQUISITION COSTS.—

18 For purposes of this paragraph, the term

19 ‘qualified acquisition costs’ means the costs of

20 acquiring, constructing, or reconstructing a res21 idence. Such term includes any usual or reason22 able settlement, financing, or other closing

23 costs.

24 ‘‘(C) FIRST-TIME HOMEBUYER; OTHER

25 DEFINITIONS.—For purposes of this paragraph:
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1 ‘‘(i) FIRST-TIME HOMEBUYER.—The

2 term ‘first-time homebuyer’ means any in3 dividual if—

4 ‘‘(I) such individual (and if mar5 ried, such individual’s spouse) had no

6 present ownership interest in a prin7 cipal residence during the 2-year pe8 riod ending on the date of acquisition

9 of the principal residence to which

10 this paragraph applies, and

11 ‘‘(II) subsection (a)(6), (h), or

12 (k) of section 1034 did not suspend

13 the running of any period of time

14 specified in section 1034 with respect

15 to such individual on the day before

16 the date the distribution is applied

17 pursuant to subparagraph (A)(ii).

18 ‘‘(ii) PRINCIPAL RESIDENCE.—The

19 term ‘principal residence’ has the same

20 meaning as when used in section 1034.

21 ‘‘(iii) DATE OF ACQUISITION.—The

22 term ‘date of acquisition’ means the date—

23 ‘‘(I) on which a binding contract

24 to acquire the principal residence to
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1 which subparagraph (A) applies is en2 tered into, or

3 ‘‘(II) on which construction or re4 construction of such a principal resi5 dence is commenced.

6 ‘‘(D) SPECIAL RULE WHERE DELAY IN AC7 QUISITION.—If any distribution from any indi8 vidual retirement plan fails to meet the require9 ments of subparagraph (A) solely by reason of

10 a delay or cancellation of the purchase or con11 struction of the residence, the amount of the

12 distribution may be contributed to an individual

13 retirement plan as provided in section

14 408(d)(3)(A)(i) (determined by substituting

15 ‘120 days’ for ‘60 days’ in such section), except

16 that—

17 ‘‘(i) section 408(d)(3)(B) shall not be

18 applied to such contribution, and

19 ‘‘(ii) such amount shall not be taken

20 into account in determining whether sec21 tion 408(d)(3)(A)(i) applies to any other

22 amount.

23 ‘‘(7) QUALIFIED HIGHER EDUCATION EX24 PENSES.—For purposes of paragraph (2)(D)(ii):
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1 ‘‘(A) IN GENERAL.—The term ‘qualified

2 higher education expenses’ means tuition, fees,

3 books, supplies, and equipment required for the

4 enrollment or attendance of—

5 ‘‘(i) the taxpayer,

6 ‘‘(ii) the taxpayer’s spouse, or

7 ‘‘(iii) any child (as defined in section

8 151(c)(3)), grandchild, or ancestor of the

9 taxpayer or the taxpayer’s spouse,

10 at an eligible educational institution (as defined

11 in section 135(c)(3)).

12 ‘‘(B) COORDINATION WITH SAVINGS BOND

13 PROVISIONS.—The amount of qualified higher

14 education expenses for any taxable year shall be

15 reduced by any amount excludable from gross

16 income under section 135.’’.

17 (d) PENALTY-FREE DISTRIBUTIONS FOR CERTAIN

18 UNEMPLOYED INDIVIDUALS.—Paragraph (2) of section

19 72(t) is amended by adding at the end the following new

20 subparagraph:

21 ‘‘(E) DISTRIBUTIONS TO UNEMPLOYED IN22 DIVIDUALS.—A distribution from an individual

23 retirement plan to an individual after separa24 tion from employment, if—
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1 ‘‘(i) such individual has received un2 employment compensation for 12 consecu3 tive weeks under any Federal or State un4 employment compensation law by reason of

5 such separation, and

6 ‘‘(ii) such distributions are made dur7 ing any taxable year during which such un8 employment compensation is paid or the

9 succeeding taxable year.

10 To the extent provided in regulations, a self-em11 ployed individual shall be treated as meeting

12 the requirements of clause (i) if, under Federal

13 or State law, the individual would have received

14 unemployment compensation but for the fact

15 the individual was self-employed.’’.

16 (e) CONFORMING AMENDMENTS.—

17 (1) Section 401(k)(2)(B)(i) is amended by

18 striking ‘‘or’’ at the end of subclause (III), by strik19 ing ‘‘and’’ at the end of subclause (IV) and inserting

20 ‘‘or’’, and by inserting after subclause (IV) the fol21 lowing new subclause:

22 ‘‘(V) the date on which qualified

23 first-time homebuyer distributions (as

24 defined in section 72(t)(6)) or dis25 tributions for qualified higher edu-
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1 cation expenses (as defined in section

2 72(t)(7)) are made, and’’.

3 (2) Section 403(b)(11) is amended by striking

4 ‘‘or’’ at the end of subparagraph (A), by striking the

5 period at the end of subparagraph (B) and inserting

6 ‘‘, or’’, and by inserting after subparagraph (B) the

7 following new subparagraph:

8 ‘‘(C) for qualified first-time homebuyer dis9 tributions (as defined in section 72(t)(6)) or for

10 the payment of qualified higher education ex11 penses (as defined in section 72(t)(7)).’’.

12 (f) EFFECTIVE DATE.—The amendments made by

13 this section shall apply to payments and distributions after

14 the date of the enactment of this Act.

15 TITLE III—AID TO FAMILIES

16 WITH DEPENDENT CHILDREN

17 SEC. 301. DISREGARD OF INCOME AND RESOURCES DES18 IGNATED FOR EDUCATION, TRAINING, AND

19 EMPLOYABILITY.

20 (a) DISREGARD AS RESOURCE.—Section

21 402(a)(7)(B) of the Social Security Act (42 U.S.C.

22 602(a)(7)(B)) is amended—

23 (1) by striking ‘‘or’’ before ‘‘(iv)’’, and

24 (2) by inserting ‘‘, or (v) at the option of the

25 State, in the case of a family receiving aid under the
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1 State plan (and a family not receiving such aid but

2 which received such aid in at least 1 of the preced3 ing 4 months or became ineligible for such aid dur4 ing the preceding 12 months because of excessive

5 earnings), any amount not to exceed $8,000 in a

6 qualified asset account (as defined in section 406(i))

7 of such family’’ before ‘‘; and’’.

8 (b) DISREGARD AS INCOME.—

9 (1) IN GENERAL.—Section 402(a)(8)(A) of such

10 Act (42 U.S.C. 602(a)(8)(A)) is amended—

11 (A) by striking ‘‘and’’ at the end of clause

12 (vii), and

13 (B) by inserting after clause (viii) the fol14 lowing new clause:

15 ‘‘(ix) shall disregard any interest or

16 income earned on a qualified asset account

17 (as defined in section 406(i)); and’’.

18 (2) NONRECURRING LUMP SUM EXEMPT FROM

19 LUMP SUM RULE.—Section 402(a)(17) of such Act

20 (42 U.S.C. 602(a)(17)) is amended by adding at the

21 end the following: ‘‘; and that this paragraph shall

22 not apply to earned or unearned income received in

23 a month on a nonrecurring basis to the extent that

24 such income is placed in a qualified asset account

25 (as defined in section 406(i)) the total amount in
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1 which, after such placement, does not exceed

2 $8,000;’’.

3 (3) TREATMENT AS INCOME.—Section

4 402(a)(7) of such Act (42 U.S.C. 602(a)(7)) is

5 amended—

6 (A) by striking ‘‘and’’ at the end of sub7 paragraph (B),

8 (B) by striking the semicolon at the end of

9 subparagraph (C) and inserting ‘‘; and’’, and

10 (C) by adding at the end the following new

11 subparagraph:

12 ‘‘(D) shall treat as income any distribu13 tions from a qualified asset account (as defined

14 in section 406(i)(1)) which do not meet the def15 inition of a qualified distribution under section

16 406(i)(2);’’.

17 (c) QUALIFIED ASSET ACCOUNTS.—Section 406 of

18 such Act (42 U.S.C. 606) is amended by adding at the

19 end the following:

20 ‘‘(i)(1) The term ‘qualified asset account’ means a

21 mechanism approved by the State (such as individual re22 tirement accounts, escrow accounts, or savings bonds) that

23 allows savings of a family receiving aid to families with

24 dependent children to be used for qualified distributions.
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1 ‘‘(2) The term ‘qualified distributions’ means dis2 tributions for expenses directly related to one or more of

3 the following purposes:

4 ‘‘(A) The attendance of a member of the family

5 at any education or training program.

6 ‘‘(B) The improvement of the employability (in7 cluding self-employment) of a member of the family

8 (such as through the purchase of an automobile).

9 ‘‘(C) The purchase of a home for the family.

10 ‘‘(D) A change of the family residence.’’.

11 (d) STUDY OF USE OF QUALIFIED ASSET ACCOUNTS;

12 REPORT.—The Secretary of Health and Human Services

13 shall conduct a study of the use of qualified asset accounts

14 established pursuant to the amendments made by this sec15 tion, and shall report on such study and any recommenda16 tions for modifications of such amendments to the Com17 mittee on Finance of the Senate and the Committee on

18 Ways and Means of the House of Representatives not later

19 than January 1, 1998.

20 (e) REPORT ON AFDC ASSET LIMIT ON AUTO21 MOBILES.—Within 3 months after the date of the enact22 ment of this section, the Secretary of Health and Human

23 Services shall submit to the Congress a report on—

24 (1) the need to revise the limitation, established

25 in regulations pursuant to section 402(a)(7)(B)(i) of
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1 the Social Security Act, on the value of a family

2 automobile required to be disregarded by a State in

3 determining the eligibility of the family for aid to

4 families with dependent children under the State

5 plan approved under part A of title IV of such Act,

6 and

7 (2) the extent to which such a revision would

8 increase the employability of recipients of such aid.

9 (f) EFFECTIVE DATE.—The amendments made by

10 this section shall take effect on October 1, 1995, with re11 spect to accounts approved on or after such date and be12 fore October 1, 1998.

Æ