II 

109TH CONGRESS 

1ST SESSION S. 2086 

To amend the Internal Revenue Code of 1986 to modify the definition 

of compensation for purposes of determining the limits on contributions 

to individual retirement accounts and annuities, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

DECEMBER 13, 2005 

Mr. LAUTENBERG (for himself and Mr. SMITH) 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 modify 

the definition of compensation for purposes of determining the limits on contributions to individual retirement accounts and annuities, 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, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘IRA Equity Act of 

5 2005’’. 
2 

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1 SEC. 2. COMPUTATION OF LIMITS ON IRA AND ROTH IRA 

2 CONTRIBUTIONS. 

3 (a) CERTAIN WAGE REPLACEMENT INCOME TREAT4 ED AS COMPENSATION.— 

5 (1) WAGE REPLACEMENT INCOME.—Section 

6 219(f) of the Internal Revenue Code of 1986 (relat7 ing to other definitions and special rules) is amended 

8 by adding at the end the following new paragraph: 

9 ‘‘(8) TREATMENT OF CERTAIN WAGE REPLACE10 MENT INCOME AS COMPENSATION.— 

11 ‘‘(A) IN GENERAL.—Notwithstanding para12 graph (1), applicable wage replacement income 

13 not otherwise treated as compensation shall be 

14 treated as compensation for purposes of this 

15 section. 

16 ‘‘(B) APPLICABLE WAGE REPLACEMENT

17 INCOME.—For purposes of this paragraph, the 

18 term ‘applicable wage replacement income’ 

19 means any amount received by an individual— 

20 ‘‘(i) as the result of the individual 

21 having become disabled, 

22 ‘‘(ii) as unemployment compensation 

23 (as defined in section 85(b)), 

24 ‘‘(iii) under workmen’s compensation 

25 acts, or 
3 

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1 ‘‘(iv) which constitutes wage replace2 ment income under regulations prescribed 

3 by the Secretary.’’ 

4 (2) CERTAIN EXCLUDABLE AMOUNTS MAY BE

5 TAKEN INTO ACCOUNT FOR PURPOSES OF ROTH

6 IRAS.—Section 408A(c)(2) of such Code (relating to 

7 contribution limit) is amended by adding at the end 

8 the following new flush sentence: 

9 ‘‘In determining the maximum amount under sub10 paragraph (A), subsections (b)(1)(B) and (c) of sec11 tion 219 shall be applied by taking into account 

12 compensation described in section 219(f)(8) without 

13 regard to whether it is includible in gross income.’’ 

14 (3) EFFECTIVE DATE.—The amendments made 

15 by this subsection shall apply to taxable years begin16 ning after December 31, 2004. 

17 (b) COMPUTATION OF MAXIMUM IRA DEDUCTION

18 FOR ROTH IRAS USING COMPENSATION FROM 2 PRE19 CEDING TAXABLE YEARS.— 

20 (1) IN GENERAL.—Section 408A(c) of the In21 ternal Revenue Code of 1986 (relating to treatment 

22 of contributions) is amended by adding at the end 

23 the following new paragraph: 

24 ‘‘(8) COMPENSATION FROM PRECEDING 2

25 YEARS MAY BE TAKEN INTO ACCOUNT.— 
4 

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1 ‘‘(A) IN GENERAL.—A taxpayer may elect 

2 for purposes of paragraph (2) to take into ac3 count any unused compensation from the 2 tax4 able years immediately preceding the taxable 

5 year. 

6 ‘‘(B) UNUSED COMPENSATION.—For pur7 poses of this paragraph, the term ‘unused com8 pensation’ means with respect to an individual 

9 for any taxable year the compensation includ10 ible in the individual’s gross income for the tax11 able year reduced by the sum of— 

12 ‘‘(i) the amount allowed as a deduc13 tion under 219(a) to such individual for 

14 such taxable year, 

15 ‘‘(ii) the amount of any designated 

16 nondeductible contribution (as defined in 

17 section 408(o)) on behalf of such individual 

18 for such taxable year, 

19 ‘‘(iii) the amount of any contribution 

20 on behalf of such individual to a Roth IRA 

21 under this section for such taxable year, 

22 and 

23 ‘‘(iv) the amount of compensation in24 cludible in such individual’s gross income 

25 for such taxable year taken into account 
5 

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1 under section 219(c) in determining the 

2 limitation under section 219 or paragraph 

3 (2) for the individual’s spouse. 

4 ‘‘(C) APPLICATION TO SPECIAL RULE FOR

5 MARRIED INDIVIDUALS.—Under rules pre6 scribed by the Secretary, in applying section 

7 219(c) for any taxable year for purposes of ap8 plying paragraph (2)(A), unused compensation 

9 of an individual or an individual’s spouse for 

10 the 2 taxable years immediately preceding the 

11 taxable year may be taken into account.’’ 

12 (2) EFFECTIVE DATE.—The amendment made 

13 by this subsection shall apply to taxable years begin14 ning after December 31, 2004, but unused com15 pensation for taxable years beginning before Janu16 ary 1, 2005, may be taken into account for taxable 

17 years beginning after December 31, 2004. 

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