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[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 3716 Introduced in Senate (IS)]

<DOC>

118th CONGRESS
  2d Session
                                S. 3716

To create children's lifetime savings accounts, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                            January 31, 2024

    Mr. Casey (for himself, Mr. Wyden, Mr. Schumer, Ms. Smith, Mr. 
Fetterman, and Mr. Blumenthal) introduced the following bill; which was 
          read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL

 
To create children's lifetime savings accounts, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``401Kids Savings Account Act of 
2024''.

SEC. 2. 401KIDS ACCOUNT PROGRAMS.

    (a) In General.--Section 529 of the Internal Revenue Code of 1986 
is amended by redesignating subsection (f) as subsection (g) and by 
inserting after subsection (e) the following new subsection:
    ``(f) 401Kids Account Programs.--
            ``(1) In general.--A qualified tuition program shall not be 
        treated as failing to meet the requirements of this section 
        solely because such program includes a 401Kids Account Program.
            ``(2) 401kids account program.--For purposes of this 
        section--
                    ``(A) In general.--The term `401Kids Account 
                Program' means a program established and maintained by 
                a State or agency or instrumentality thereof which--
                            ``(i) establishes a savings account 
                        (referred to in this subsection as a `401Kids 
                        Savings Account') which meets the requirements 
                        of this subsection on behalf of every eligible 
                        individual as of the later of--
                                    ``(I) birth or naturalization, or
                                    ``(II) establishment of the program 
                                under this section,
                        including eligible individuals who are in 
                        foster care, in coordination with the 
                        applicable State agency, and notifies such 
                        individuals of the establishment of such 
                        accounts,
                            ``(ii) requires the assets of each 401Kids 
                        Savings Account established under the program 
                        to be held by a person designated by the State 
                        or agency or instrumentality,
                            ``(iii) within the limitations of paragraph 
                        (3), permits contributions to be made 
                        periodically to such 401Kids Savings Accounts 
                        by direct deposit through payroll deduction or 
                        by electronic means, and by methods that 
                        provide access for people with limited access 
                        to the financial system,
                            ``(iv) provides for the annual deposit 
                        under section 3(b)(4) of the 401Kids Savings 
                        Account Act of 2024 and the matching 
                        contributions under section 3(b)(5) of such Act 
                        to be made to such 401Kids Savings Accounts, if 
                        applicable,
                            ``(v) permits distributions and rollovers 
                        from such 401Kids Savings Accounts as provided 
                        in paragraph (4),
                            ``(vi) except as provided in the second 
                        sentence of this subparagraph, prohibits 
                        multiple accounts from being established for 
                        the same individual, and includes--
                                    ``(I) procedures to consolidate 
                                multiple accounts established for the 
                                same individual and return excess 
                                contributions on an annual basis, with 
                                notice provided to the parent or 
                                guardian of the individual (or, if 
                                appropriate, to the individual) and a 
                                procedure for resolution of disputes, 
                                and
                                    ``(II) procedures by which all 
                                accounts established are reported to 
                                the Secretary to ensure compliance with 
                                this clause,
                            ``(vii) permits, not less frequently than 
                        once per year, for an account to be moved from 
                        one State program to another or between a State 
                        program and the Federal 401Kids Account 
                        Program, and
                            ``(viii) ensures that such 401Kids Savings 
                        Accounts are invested in accordance with 
                        prudent investment strategies which are in the 
                        best interest of eligible individuals.
                    ``(B) Collective account.--For purposes of 
                subparagraph (A), a State may establish a collective 
                account for all eligible individuals in the State which 
                is owned by the State, but only if--
                            ``(i) the State program provides for 
                        separate accounting for each such individual,
                            ``(ii) allows such account to receive 
                        contributions described in subparagraph 
                        (A)(iv), and
                            ``(iii) if such account does not permit 
                        contributions by persons other than the State 
                        or the Secretary, permits for the establishment 
                        of a linked account under the program which 
                        accepts contributions by such other persons as 
                        provided in subparagraph (A)(iii) and which is 
                        aggregated for purposes of any limitation under 
                        this section with the amounts credited to the 
                        eligible individual in the State collective 
                        account.
                    ``(C) Certification.--A program of a State shall 
                not be treated as a 401Kids Account Program unless such 
                program is certified by the Secretary as meeting the 
                requirements of this subsection.
            ``(3) Limitations.--
                    ``(A) Contribution minimum.--A 401Kids Account 
                Program may establish minimum amounts for initial and 
                additional contributions to a 401Kids Savings Account, 
                not to exceed $10.
                    ``(B) Contribution limitation.--
                            ``(i) In general.--Contributions to a 
                        401Kids Savings Account under a 401Kids Account 
                        Program during any taxable year (other than 
                        contributions made under section 3(b)(4) or 
                        3(b)(5) of the 401Kids Savings Account Act of 
                        2024) shall not be accepted to the extent such 
                        contributions exceed $2,500.
                            ``(ii) Inflation adjustment.--In the case 
                        of any calendar year after 2024, the $2,500 
                        amount in clause (i) 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, 
                                determined by substituting `calendar 
                                year 2023' for `calendar year 2016' in 
                                subparagraph (A)(ii) thereof.
                        If any dollar amount as increased under the 
                        preceding sentence is not a multiple of $5, 
                        such dollar amount shall be rounded to the 
                        nearest multiple of $5.
                    ``(C) Limitation on participation.--Within a 
                reasonable amount of time before the date an eligible 
                individual attains age 17, the program shall provide 
                notice to the eligible individual and the parent or 
                guardian of the eligible individual that--
                            ``(i) no deposits under paragraph (4) or 
                        (5) of section 3(b) of the 401Kids Savings 
                        Account Act of 2024 will be made for calendar 
                        years after the year in which the individual 
                        attains age 18,
                            ``(ii) any contributions made by any person 
                        after the date the individual attains age 18 
                        will be taken into account as provided in 
                        subparagraph (F), and
                            ``(iii) the individual may elect to have 
                        the account balance rolled over or distributed 
                        as provided, and at the time specified, in 
                        paragraph (4).
                    ``(D) State contributions.--The State establishing 
                or maintaining a 401Kids Account Program may make 
                contributions under such program to accounts 
                established or maintained thereunder. Such 
                contributions--
                            ``(i) shall not be taken into account for 
                        purposes of subparagraph (B), and
                            ``(ii) may be limited to eligible 
                        individuals residing in the State at the time 
                        the contribution is made.
                    ``(E) Coordination with amounts contributed for 
                qualified higher education expenses.--
                            ``(i) In general.--Contributions to a 
                        qualified tuition program which are not 
                        contributed to a 401Kids Account Program shall 
                        not be taken into account under subparagraph 
                        (B), and contributions to a 401Kids Account 
                        Program shall not be taken into account for 
                        purposes of subsection (b)(6).
                            ``(ii) Transfers from qualified tuition 
                        program.--Amounts contributed to a qualified 
                        tuition program (other than to a 401Kids 
                        Account Program which is part of such qualified 
                        tuition program) may be transferred to a 
                        401Kids Savings Account established under a 
                        401Kids Account Program on behalf of the 
                        designated beneficiary, subject to the 
                        limitation of subparagraph (B). For purposes of 
                        such limitation, any such transfer in a taxable 
                        year shall be aggregated with any other 
                        contributions to such 401Kids Account program 
                        (other than contributions made under section 
                        3(b)(4) or 3(b)(5) of the 401Kids Savings 
                        Account Act of 2024).
                    ``(F) Amounts contributed after age 18.--Any 
                contribution by any person to a 401Kids Savings Account 
                after the date the individual on whose behalf the 
                account is established attains age 18 shall be treated 
                for purposes of section 408A(c)(2) as a contribution to 
                a Roth IRA maintained for the benefit of the 
                individual, and no such contribution shall be accepted 
                to the extent such contribution, when aggregated with 
                all contributions for the taxable year to all Roth IRAs 
                maintained for the benefit of the individual, exceeds 
                the limitation of section 408A(c)(2).
            ``(4) Distributions.--
                    ``(A) In general.--Amounts in a 401Kids Savings 
                Account under a 401Kids Account Program--
                            ``(i) if such amounts are held in a 
                        collective account owned by the State, may be 
                        rolled over into a linked account under the 
                        program which accepts contributions by persons 
                        other than the State, or merged with such an 
                        account previously established, after the date 
                        the individual on whose behalf the account was 
                        established attains age 18 (or earlier as 
                        permitted by the State program), and
                            ``(ii) after the date the individual on 
                        whose behalf the account was established 
                        attains age 18, may be--
                                    ``(I) distributed to such 
                                individual in cash,
                                    ``(II) transferred directly to an 
                                eligible educational institution, 
                                mortgagee, lender, or guarantor with 
                                respect to an expense described in 
                                subparagraph (E)(i), or
                                    ``(III) contributed in a direct 
                                transfer to an ABLE account (as defined 
                                in section 529A(e)(6)) or a Roth IRA of 
                                the individual, and
                            ``(iii) if the individual whose behalf the 
                        account was established does not elect to 
                        receive any such distribution, shall remain in 
                        the account.
                    ``(B) Treatment of distributions.--No amount shall 
                be includible in gross income under subsection 
                (c)(3)(A) by reason of any cash distribution from an 
                account under a 401Kids Account Program which is made 
                after the date the individual on whose behalf such 
                account was established attains age 18, to the extent 
                such distribution does not exceed the qualified 
                expenses of the individual which are paid or incurred 
                during the taxable year of the distribution.
                    ``(C) Treatment of rollovers.--
                            ``(i) ABLE accounts.--Any contribution from 
                        a 401Kids Account Program to an ABLE account 
                        pursuant to subparagraph (A)(ii)(III) shall be 
                        treated--
                                    ``(I) as a contribution from 
                                another ABLE account as described in 
                                section 529A(c)(1)(C)(i), and
                                    ``(II) as having been contributed 
                                to such ABLE account in a direct 
                                trustee-to-trustee transfer within 60 
                                days of the distribution for purposes 
                                of such section.
                            ``(ii) Roth iras.--Any contribution from a 
                        401Kids Account Program to a Roth IRA pursuant 
                        to subparagraph (A)(ii)(III) shall be treated--
                                    ``(I) as a contribution from 
                                another Roth IRA as described in 
                                section 408A(e)(1)(A), and
                                    ``(II) as having been contributed 
                                to such Roth IRA in a direct trustee-
                                to-trustee transfer within 60 days of 
                                the distribution for purposes of 
                                section 408(d)(3), and
                        shall not be taken into account under 
                        subsection (c)(3)(E).
                    ``(D) Additional tax on nonqualified use.--
                            ``(i) In general.--The tax imposed by this 
                        chapter for the taxable year shall be increased 
                        by an amount equal to 10 percent of the amount 
                        of any distribution from an account under a 
                        401Kids Account Program during the taxable year 
                        which is not described in subparagraph (A)(i), 
                        (A)(ii)(II), (A)(ii)(III), or (B).
                            ``(ii) Distributions from roth ira.--If any 
                        amount is contributed to a Roth IRA in a 
                        rollover distribution from an account under a 
                        401Kids Account Program pursuant to 
                        subparagraph (A)(ii)(III), the tax imposed by 
                        this title for the taxable year shall be 
                        increased by an amount equal to 10 percent of 
                        the amount of any distribution from such Roth 
                        IRA which is made within the 5-year period 
                        beginning on the date of the rollover--
                                    ``(I) to the extent that such 
                                distribution from the Roth IRA, when 
                                aggregated with all other distributions 
                                from such Roth IRA during such 5-year 
                                period, does not exceed the amount 
                                contributed in such rollover 
                                distribution, and
                                    ``(II) unless the qualified 
                                expenses of the individual on whose 
                                behalf the account was established paid 
                                or incurred during the taxable year of 
                                the distribution are equal to or exceed 
                                the amount of such distribution.
                            ``(iii) Coordination rule.--Subsection 
                        (c)(6) shall not apply to any amount with 
                        respect to which a tax is imposed under clause 
                        (i) or (ii).
                            ``(iv) Federal 401kids account program.--
                                    ``(I) In general.--The tax imposed 
                                by this chapter for the taxable year 
                                shall be increased by an amount equal 
                                to 10 percent of the amount of any 
                                distribution during the taxable year 
                                from an account under the Federal 
                                401Kids Account Program established by 
                                section 3 of the 401Kids Savings 
                                Account Act of 2024 which is not 
                                described in subsection (c)(1)(A)(ii), 
                                (c)(1)(A)(iii), or (c)(2)(A) of section 
                                3 of such Act.
                                    ``(II) Distributions from roth 
                                ira.--The tax imposed by clause (ii) 
                                shall apply to a rollover distribution 
                                from an account under the Federal 
                                401Kids Account program pursuant to 
                                section 3(c)(1)(A)(iii) of the 401Kids 
                                Savings Account Act of 2024 in the same 
                                manner as a rollover distribution from 
                                an account under a 401Kids Account 
                                Program pursuant to subparagraph 
                                (A)(ii)(III).
                    ``(E) Qualified expenses.--For purposes of this 
                paragraph--
                            ``(i) In general.--The term `qualified 
                        expenses' means amounts paid or incurred by an 
                        individual--
                                    ``(I) as payment or collateral 
                                required for a loan guaranteed by the 
                                Small Business Administration or the 
                                United States Department of Agriculture 
                                Rural Development or other small 
                                business loan as determined by the 
                                Secretary, pursuant to the rules 
                                determined under clause (iii),
                                    ``(II) as qualified acquisition 
                                costs (as defined in section 
                                72(t)(8)(C)) with respect to a 
                                residence intended to be the primary 
                                residence of the individual,
                                    ``(III) for qualified higher 
                                education expenses of the individual at 
                                an eligible educational institution, or 
                                for other post-secondary educational 
                                expenses in an accredited degree-
                                granting program or expenses for 
                                obtaining a trade certificate, as 
                                provided by the Secretary in 
                                consultation with the Secretary of 
                                Education, or
                                    ``(IV) after the date the 
                                individual on whose behalf the account 
                                was established attains age 59\1/2\, 
                                for any purpose.
                            ``(ii) Certification.--Except in the case 
                        of qualified expenses described in clause 
                        (i)(IV), the individual shall certify on the 
                        return of tax, in such manner as the Secretary 
                        shall prescribe, the qualified expenses paid or 
                        incurred by the individual during the taxable 
                        year.
                            ``(iii) Small business loans.--The 
                        Secretary shall prescribe rules or other 
                        guidance, or shall certify a process, for 
                        determining whether a loan shall be taken into 
                        account under clause (i)(I).
            ``(5) Eligible individual.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `eligible individual' 
                means a child who has not attained age 18 and is a 
                citizen of the United States.
                    ``(B) Treatment as designated beneficiary.--The 
                rules of subsections (a) through (e) shall be applied 
                (except as otherwise provided in this subsection) by 
                treating the eligible individual on whose behalf a 
                401Kids Savings Account under a 401Kids Account Program 
                is established as the designated beneficiary with 
                respect to such account.
            ``(6) State.--For purposes of this subsection, the term 
        `State' includes the District of Columbia, any possession of 
        the United States, and any Indian tribe (as defined in section 
        45A(c)(6)).
            ``(7) Accounts may not be assigned.--An account established 
        on behalf of an individual under a 401Kids Account Program may 
        not be pledged or assigned to any other person.
            ``(8) Third-party contractors.--A State may contract with a 
        third party for purposes of administration of a 401Kids Account 
        Program, including record keeping and account investment.
            ``(9) Account management.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B)--
                            ``(i) the eligible individual on whose 
                        behalf a 401Kids Savings Account under a 
                        401Kids Account Program is established, after 
                        the date the individual attains age 18, shall 
                        have sole discretion over the distribution of 
                        amounts in the account, and
                            ``(ii) in the case of an account not owned 
                        and controlled by a State, such eligible 
                        individual, after the date the individual 
                        attains age 18, and the parent or guardian of 
                        such individual before such date, may exercise 
                        control over the investment of account assets 
                        other than amounts attributable to deposits 
                        under paragraph (4) or (5) of section 3(b) of 
                        the 401Kids Savings Account Act of 2024 
                        (including any gain or loss attributable 
                        thereto).
                    ``(B) Death of account beneficiary.--In the event 
                the individual on whose behalf a 401Kids Savings 
                Account under a 401Kids Account Program is established 
                dies before attaining age 18--
                            ``(i) any amounts attributable to deposits 
                        under paragraph (4) or (5) of section 3(b) of 
                        the 401Kids Savings Account Act of 2024 
                        (including any gain or loss attributable 
                        thereto) shall be returned to the Treasury, and
                            ``(ii) the successor owner or beneficiary 
                        of the account shall withdraw all amounts not 
                        returned under subparagraph (A) not later than 
                        the last day of the calendar year after the 
                        calendar year in which the death occurs.
                Amounts withdrawn pursuant to this subparagraph shall 
                not be included in gross income of the deceased 
                individual or the successor owner or beneficiary to the 
                extent such amounts are attributable to contributions 
                to the account (and not to gain attributable 
                thereto).''.
    (b) Conforming Amendments.--
            (1) Reports.--Paragraph (1) of section 529(d) of the 
        Internal Revenue Code of 1986 is amended by inserting ``, 
        including a 401Kids Account Program under such qualified 
        tuition program,'' after ``the qualified tuition program''.
            (2) Reports regarding rollover distributions.--Paragraph 
        (2) of section 529(d) of such Code is amended--
                    (A) by striking ``subsection (c)(3)(E)'' and 
                inserting ``subsection (c)(3)(E) or (f)(4)(C)'',
                    (B) by striking ``Roth IRA'' and inserting ``Roth 
                IRA or ABLE account'',
                    (C) by striking ``the qualified tuition program'' 
                and inserting ``the qualified tuition program or 
                401Kids Account Program'', and
                    (D) by striking ``subsection (c)(3)(A)'' and 
                inserting ``subsection (c)(3)(E) or (f)(4)(C)''.
            (3) Qualified use.--Clause (i) of section 529(c)(3)(C) of 
        such Code is amended--
                    (A) by striking ``or'' at the end of subclause 
                (II),
                    (B) by redesignating subclause (III) as subclause 
                (IV),
                    (C) by inserting after subclause (II) the following 
                new subclause:
                                    ``(III) to a 401Kids Savings 
                                Account under a 401Kids Account Program 
                                established on behalf of the designated 
                                beneficiary under subsection (f) or 
                                section 3 of the 401Kids Savings 
                                Account Act of 2024, or'', and
                    (D) by striking ``Subclause (III) shall not apply'' 
                in the second sentence and inserting ``Subclause (III) 
                shall not apply to so much of a distribution which, 
                when aggregated with other contributions as provided in 
                subsection (f)(3)(E)(ii), exceeds the limitation under 
                subsection (f)(3)(B). Subclause (IV) shall not apply''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after the date of the 
        enactment of this Act.
            (2) Existing programs.--A qualified tuition program (as 
        defined in section 529 of the Internal Revenue Code of 1986) of 
        a State which includes a savings account program shall be 
        treated for taxable years beginning after the date of the 
        enactment of this Act as meeting the requirements of section 
        529(f) of the Internal Revenue Code of 1986, as added by this 
        Act, if such qualified tuition program (as amended, if 
        necessary) meets such requirements for the first taxable year 
        beginning more than 1 year after such date of enactment.
    (d) Regulations.--The Secretary of the Treasury (or such 
Secretary's delegate) shall issue such regulations or other guidance as 
is necessary to implement State 401Kids Account Programs, including 
guidance--
            (1) regarding the personally identifying information which 
        is necessary for States to establish accounts on behalf of 
        individuals born in the State,
            (2) for informing individuals of accounts established on 
        their behalf, and
            (3) for processing accounts of deceased individuals and 
        returning Federal contributions to the Treasury pursuant to 
        section 529(f)(9)(B) of the Internal Revenue Code of 1986.

SEC. 3. ESTABLISHMENT OF FEDERAL 401KIDS ACCOUNT PROGRAM.

    (a) Establishment of Program.--The Secretary of the Treasury shall, 
not later than December 31, 2024, establish a permanent program, to be 
known as the ``Federal 401Kids Account Program'', which meets the 
requirements of this section to--
            (1) establish and maintain a savings account (referred to 
        in this section as a ``401Kids Savings Account'') meeting the 
        requirements of subsections (b) and (c) on behalf of eligible 
        individuals whose State does not maintain a 401Kids Account 
        Program pursuant to section 529(f) of the Internal Revenue Code 
        of 1986, and
            (2) make contributions pursuant to paragraphs (4) and (5) 
        on behalf of eligible individuals to such 401Kids Savings 
        Accounts and to accounts under any such State 401Kids Account 
        Program.
    (b) Program Specifications.--
            (1) In general.--
                    (A) 401kids savings accounts.--The Federal 401Kids 
                Account Program established under this section shall--
                            (i) establish on behalf of each eligible 
                        individual whose State does not maintain a 
                        401Kids Account Program pursuant to section 
                        529(f) of the Internal Revenue Code of 1986 a 
                        401Kids Savings Account which meets the 
                        requirements of this subsection and subsection 
                        (c) on behalf of the individual as of 1 year 
                        after the later of--
                                    (I) birth or naturalization; or
                                    (II) establishment of the program 
                                under this section,
                        and notify such individuals of the 
                        establishment of such accounts;
                            (ii) require the assets of each 401Kids 
                        Savings Account established under the program 
                        to be held by the designated custodian;
                            (iii) within the limitations of paragraph 
                        (3), permit contributions to be made 
                        periodically to such 401Kids Savings Accounts 
                        by direct deposit through payroll deduction or 
                        by electronic means, and by methods that 
                        provide access for people with limited access 
                        to the financial system;
                            (iv) provide for the annual deposit under 
                        paragraph (4) and the matching contributions 
                        under paragraph (5) to be made to such 401Kids 
                        Savings Accounts, and to 401Kids Savings 
                        Accounts under such 401Kids Account Programs 
                        established and maintained by States, if 
                        applicable;
                            (v) as provided in subsection (c), permit 
                        distributions and rollovers from such 401Kids 
                        Savings Accounts after the individual on whose 
                        behalf the account is established attains age 
                        18;
                            (vi) include procedures to consolidate 
                        multiple accounts established for the same 
                        individual, including across States, and return 
                        excess contributions on an annual basis, with 
                        notice provided to the parent or guardian of 
                        the individual (or, if appropriate, to the 
                        individual) and a procedure for resolution of 
                        disputes;
                            (vii) permit, not less frequently than once 
                        per year, for an account to be moved between a 
                        State program and the Federal 401Kids Account 
                        Program; and
                            (viii) ensure that such 401Kids Savings 
                        Accounts are invested in accordance with 
                        subsection (e).
                    (B) Regulations, etc.--The Secretary of the 
                Treasury shall have authority to promulgate such 
                regulations, rules, and other guidance as are necessary 
                to implement the Federal 401Kids Account Program, and 
                are consistent with this section and section 529(f) of 
                the Internal Revenue Code of 1986, including--
                            (i) rules regarding the provision of 
                        periodic notices to individuals and parents or 
                        guardians of individuals, as appropriate, on 
                        whose behalf accounts are established under the 
                        program, including information on account 
                        balances and activity;
                            (ii) rules for making the deposit under 
                        paragraph (4)(A) in the case of taxpayers who 
                        are not required to file an income tax return;
                            (iii) rules for recapture of improperly 
                        made deposits under paragraphs (4) and (5); and
                            (iv) rules regarding beneficiary 
                        designation in the case of the death of the 
                        individual on whose behalf an account was 
                        established.
            (2) Program for deposits made with federal partners.--The 
        Secretary of the Treasury may, in fulfillment of subparagraph 
        (A)(iii), establish a program which would allow grocery stores, 
        pharmacies, banks, and other similar businesses to partner with 
        the Federal Government to accept cash deposits from customers 
        and to remit such deposits to the Treasury for payment into 
        401Kids Savings Accounts under the Federal 401Kids Account 
        Program.
            (3) Limitations.--
                    (A) Contribution minimum.--The Secretary of the 
                Treasury may establish minimum amounts for initial and 
                additional contributions to a 401Kids Savings Account 
                under the Federal 401Kids Account Program, not to 
                exceed $10.
                    (B) Contribution limitation.--Contributions to a 
                401Kids Savings Account under the Federal 401Kids 
                Account Program during any taxable year (other than 
                contributions made under paragraphs (4) and (5)) shall 
                not be accepted to the extent such contributions exceed 
                $2,500.
                    (C) Limitation on participation.--Within a 
                reasonable amount of time before the date an eligible 
                individual attains age 17, the designated custodian 
                shall provide notice to the eligible individual and the 
                parent or guardian of the eligible individual that--
                            (i) no deposits under paragraph (4) or (5) 
                        will be made for calendar years after the year 
                        in which the individual attains age 18;
                            (ii) any contributions made by any person 
                        after the date the individual attains age 18 
                        will be taken into account as provided in 
                        section 529(f)(3)(F) of the Internal Revenue 
                        Code of 1986; and
                            (iii) the individual (or, as provided, the 
                        individual's parent or guardian) may elect to 
                        have the account balance rolled over or 
                        distributed as provided, and at the time 
                        specified, in subsection (c).
            (4) Annual deposit.--
                    (A) In general.--
                            (i) Annual amount.--Within a reasonable 
                        amount of time (not to exceed 60 days) after 
                        the filing of the return of tax for each 
                        taxable year by a taxpayer claiming an eligible 
                        individual as a dependent, the Secretary of the 
                        Treasury shall deposit $500 into the 401Kids 
                        Savings Account established for such individual 
                        under the Federal 401Kids Account Program or a 
                        401Kids Account Program established and 
                        maintained by a State.
                            (ii) Additional amount for earned income 
                        credit eligible families.--If a credit is 
                        allowable under section 32 of the Internal 
                        Revenue Code of 1986 to the parent or guardian 
                        or an eligible individual for a taxable year, 
                        clause (i) shall be applied by substituting 
                        ``$750'' for ``$500''.
                    (B) Phaseout.--In the case of a taxpayer to whom 
                subparagraph (A)(ii) does not apply, the $500 amount 
                under subparagraph (A)(i) shall be reduced (but not 
                below zero) by $10 for each $1,000 (or fraction 
                thereof) by which the taxpayer's modified adjusted 
                gross income for the taxable year exceeds $75,000 
                ($150,000 in the case of a joint return).
                    (C) Married couples must file joint return.--If the 
                taxpayer is married at the close of the taxable year, 
                subparagraph (A) shall apply only if the taxpayer and 
                the taxpayer's spouse file a joint return for the 
                taxable year.
                    (D) Deposit on behalf of children in foster care.--
                At an appropriate time each year as determined by the 
                Secretary of the Treasury in coordination with the 
                Administration for Children and Families, such 
                Secretary shall deposit $750 into the 401Kids Savings 
                Account established under the Federal 401Kids Account 
                Program or a 401Kids Account Program established and 
                maintained by a State for any eligible individual in 
                foster care, in any State, with respect to whom no 
                deposit was made for such year under subparagraph (A).
            (5) Matching contributions for earned income credit 
        eligible families.--If a credit is allowable under section 32 
        of the Internal Revenue Code of 1986 to the parent or guardian 
        or an eligible individual for a taxable year, the Secretary of 
        the Treasury shall deposit, at the same time as the annual 
        deposit under paragraph (4)(A), into the 401Kids Savings 
        Account established for such eligible individual under the 
        Federal 401Kids Account Program or a 401Kids Account Program 
        established and maintained by a State an amount equal to so 
        much of the contributions made by the parent or guardian of the 
        eligible individual to such account during the preceding 
        taxable year as does not exceed $250. Such deposit shall be 
        made in addition to the deposit under paragraph (4).
            (6) Designated custodian.--For purposes of this section, 
        the designated custodian is the person designated by the 
        Secretary of the Treasury to act as custodian of the 401Kids 
        Savings Accounts established on behalf of participants in the 
        Federal 401Kids Account Program.
            (7) Inflation adjustments.--
                    (A) In general.--In the case of any calendar year 
                after 2024, the $2,500 amount in paragraph (3)(B), the 
                $500 amount in paragraphs (4)(A), (4)(B), and (4)(D), 
                the $750 amount in paragraphs (4)(A) and (4)(D), and 
                the $250 amount in paragraph (5) shall each 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) of the 
                        Internal Revenue Code of 1986 for the calendar 
                        year, determined by substituting ``calendar 
                        year 2023'' for ``calendar year 2016'' in 
                        subparagraph (A)(ii) thereof.
                    (B) Rounding.--If any dollar amount increased under 
                subparagraph (A) is not a multiple of $5, such dollar 
                amount shall be rounded to the nearest multiple of $5.
            (8) Accounts may not be assigned.--An account established 
        on behalf of an individual under the Federal 401Kids Account 
        Program may not be pledged or assigned to any other person.
            (9) Modified adjusted gross income.--For purposes of this 
        subsection, the term ``modified adjusted gross income'' means 
        adjusted gross income (as defined in section 62 of the Internal 
        Revenue Code of 1986) increased by--
                    (A) any amount excluded from gross income under 
                section 911 of such Code,
                    (B) any amount of interest received or accrued by 
                the taxpayer during the taxable year which is exempt 
                from tax, and
                    (C) an amount equal to the portion of the 
                taxpayer's social security benefits (as defined in 
                section 86(d) of such Code) which is not included in 
                gross income under such section 86 for the taxable 
                year.
    (c) Distributions From 401Kids Savings Account.--
            (1) In general.--Amounts in a 401Kids Savings Account under 
        the Federal 401Kids Account Program--
                    (A) after the date the individual on whose behalf 
                the account was established attains age 18, may be--
                            (i) distributed to such individual in cash,
                            (ii) transferred directly to an eligible 
                        educational institution, mortgagee, lender, or 
                        guarantor with respect to an expense described 
                        in section 529(f)(4)(E)(i) of the Internal 
                        Revenue Code of 1986, or
                            (iii) contributed in a direct transfer to 
                        an ABLE account (as defined in section 
                        529A(e)(6) of the Internal Revenue Code of 
                        1986) or a Roth IRA (as defined in section 408A 
                        of such Code) of the individual, and
                    (B) if the individual whose behalf the account was 
                established does not elect to receive any such 
                distribution, shall remain in the account.
            (2) Treatment of distributions.--
                    (A) In general.--No amount shall be includible in 
                gross income for purposes of the Internal Revenue Code 
                of 1986 by reason of any cash distribution from an 
                account under the Federal 401Kids Account Program which 
                is made after the date the individual on whose behalf 
                such account was established attains age 18, to the 
                extent such distribution does not exceed the qualified 
                expenses of the individual (as defined in section 
                529(f)(4)(E) of such Code) which are paid or incurred 
                during the taxable year of the distribution.
                    (B) Treatment of rollovers.--The rules of section 
                529(f)(4)(C) of such Code shall apply in the case of a 
                rollover distribution described in paragraph 
                (1)(A)(iii).
    (d) Eligible Individual.--For purposes of this section, with 
respect to any calendar year, the term ``eligible individual'' means a 
child who has not attained age 18 as of the last day of such calendar 
year and is a citizen of the United States.
    (e) Investment of Account Assets.--The Secretary of the Treasury 
shall ensure that amounts in the Federal 401Kids Account Program are 
invested so as to maximize returns over the first 18 years of the life 
of an eligible individual on whose behalf a 401Kids Savings Account is 
established under such program, and shall reevaluate the investment of 
such amounts after an eligible individual attains age 18 to ensure 
amounts are available and growing for uses later in the individual's 
life. The Secretary of the Treasury may, in the Secretary's discretion, 
permit some or all eligible individuals to exercise control over the 
investment of account assets other than amounts attributable to 
deposits under paragraph (4) or (5) of subsection (b) (including any 
gain or loss attributable thereto).
    (f) Reports.--
            (1) In general.--The designated custodian shall make such 
        reports regarding the Federal 401Kids Account Program to the 
        Secretary of the Treasury and to individuals on whose behalf 
        accounts are established under such program with respect to 
        contributions, distributions, and such other matters as the 
        Secretary of the Treasury may require. The reports required by 
        this paragraph shall be filed at such time and in such manner 
        and furnished to such individuals at such time and in such 
        manner as may be required by the Secretary of the Treasury.
            (2) Rollover distributions.--In the case of any 
        distribution described in subsection (c)(1)(A)(iii), the 
        designated custodian shall provide a report to the trustee of 
        the Roth IRA or ABLE account to which the distribution is made. 
        Such report shall be filed at such time and in such manner as 
        the Secretary of the Treasury may require and shall include 
        information with respect to the contributions, distributions, 
        and earnings of the account under the Federal 401Kids Account 
        program as of the date of the distribution described in 
        subsection (c)(1)(A)(iii), together with such other matters as 
        the Secretary of the Treasury may require.

SEC. 4. TREATMENT OF ACCOUNTS UNDER CERTAIN FEDERAL PROGRAMS.

    (a) Account Funds Disregarded for Purposes of Certain Other Means-
Tested Federal Programs.--Notwithstanding any other provision of 
Federal law that requires consideration of one or more financial 
circumstances of an individual, for the purpose of determining 
eligibility to receive, or the amount of, any assistance or benefit 
authorized by such provision to be provided to or for the benefit of 
such individual, any amount (including earnings thereon) in an 
individual's account established under a 401Kids Account Program (as 
defined in section 529(f) of the Internal Revenue Code of 1986) or the 
Federal 401Kids Account Program pursuant to section 3, any 
contributions to such account, and any distribution (or portion 
thereof) shall be disregarded for such purpose with respect to any 
period during which such individual maintains, makes contributions to, 
or receives distributions from such account, except that--
            (1) a distribution for qualified acquisition costs (within 
        the meaning of section 529(f)(4)(E)(ii) of such Code) shall not 
        be so disregarded; and
            (2) any amount (including such earnings) in such account 
        shall be considered a resource of the individual to the extent 
        that such amount exceeds $100,000.
    (b) Suspension of SSI Benefits During Periods of Excessive Account 
Funds.--
            (1) In general.--The benefits of an individual under the 
        supplemental security income program under title XVI of the 
        Social Security Act shall not be terminated, but shall be 
        suspended, by reason of excess resources of the individual 
        attributable to an amount in the account of the individual 
        established under a 401Kids Account Program which is not 
        disregarded under subsection (a).
            (2) No impact on medicaid eligibility.--An individual who 
        would be receiving payment of such supplemental security income 
        benefits but for the application of paragraph (1) shall be 
        treated for purposes of title XIX of the Social Security Act as 
        if the individual continued to be receiving payment of such 
        benefits.

SEC. 5. DISCLOSURE OF TAXPAYER INFORMATION, ETC.

    (a) In General.--Subsection (l) of section 6103 of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
paragraph:
            ``(23) Disclosure of return information for purposes of 
        administration of 401kids account programs.--The Secretary 
        shall disclose to any officer or employee of the Department of 
        the Treasury, as necessary for the administration of the 
        Federal 401Kids Account Program established under section 3(a) 
        of the 401Kids Savings Account Act of 2024 and the requirements 
        of paragraphs (4) and (5) of section 3(b) of such Act, return 
        information relating to taxpayer identity, dependents, adjusted 
        gross income, and whether the taxpayer has claimed the earned 
        income credit under section 32 for the taxable year.''.
    (b) Prohibition of Redisclosure.--Paragraph (3) of section 6103(a) 
of the Internal Revenue Code of 1986 is amended by striking ``or (21)'' 
and inserting ``(21), or (23)''.
    (c) Data Sharing.--The Secretary of the Treasury shall enter into 
an agreement with the Commissioner of Social Security, the Secretary of 
State, and the Director of the United States Citizenship and 
Immigration Services to share data regarding births and naturalizations 
of children under the age of 18 solely for purposes of--
            (1) establishing accounts under the Federal 401Kids Account 
        Program, and
            (2) making deposits pursuant to paragraphs (4) and (5) of 
        section 3.
    (d) Use of Social Security Numbers.--Section 205(c)(2)(C) of the 
Social Security Act (42 U.S.C. 405(c)(2)(C)) is amended by adding at 
the end the following new clause:
                            ``(xiv) The Secretary of the Treasury, for 
                        purposes of the Federal 401Kids Account Program 
                        established under section 3(a) of the 401Kids 
                        Savings Account Act of 2024, and any State that 
                        elects to establish a 401Kids Account Program 
                        pursuant to section 529(f) of the Internal 
                        Revenue Code of 1986, are authorized to collect 
                        and use the names and social security account 
                        numbers of individuals as required to establish 
                        and maintain such accounts.''.

SEC. 6. TREASURY AUDIT OF STATE PROGRAMS.

    The Secretary of the Treasury is authorized--
            (1) to conduct audits of 401Kids Account Programs 
        established pursuant to section 529(f) of the Internal Revenue 
        Code of 1986 by States, and to assume management of any such 
        program as part of the Federal 401Kids Account Program under 
        section 3 in the event that such a program does not meet the 
        requirements of such section 529(f), and
            (2) to require informational reports from States 
        maintaining such a 401Kids Account Program.

SEC. 7. STATE.

    For purposes of this Act, the term ``State'' includes the District 
of Columbia, any possession of the United States, and any Indian tribe 
(as defined in section 45A(c)(6) of the Internal Revenue Code of 1986).

SEC. 8. APPROPRIATION.

    There is hereby appropriated to the Secretary of the Treasury, to 
remain available until spent without fiscal year limitation--
            (1) $100,000,000 for the implementation and administration 
        of this Act (other than the purposes described in paragraphs 
        (2), (3), and (4));
            (2) $30,000,000 for each fiscal year beginning with fiscal 
        year 2024 for the administration of the Federal 401Kids Account 
        Program;
            (3) such sums as are necessary to assist States in the 
        establishment of a 401Kids Account Program pursuant to section 
        529(f) of the Internal Revenue Code of 1986 (according to such 
        procedures as the Secretary shall determine); and
            (4) such sums as are necessary to make contributions to 
        Federal 401Kids Accounts as required under paragraphs (4) and 
        (5) of section 3(b).
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