II

103D CONGRESS

2D SESSION S. 2301

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

investment through individual retirement accounts, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JULY 21 (legislative day, JULY 20), 1994

Mr. ROTH (for himself, Mr. BREAUX, Mr. FORD, Mr. DOLE, Mr. SIMPSON,

Mr. BOREN, Mr. RIEGLE, Mr. GRASSLEY, Mr. WALLOP, Mr. HATCH, Mr.

LAUTENBERG, Mr. COATS, Mr. SHELBY, Mr. WARNER, Mr. SMITH, Mr.

JOHNSTON, Ms. MIKULSKI, Mr. BOND, Mr. CRAIG, Mr. HELMS, Mr.

PRESSLER, Mr. STEVENS, Mr. FAIRCLOTH, Mr. BROWN, Mr. COCHRAN,

Mr. LOTT, Mr. THURMOND, Mr. BENNETT, Mr. GREGG, Mrs.

HUTCHISON, Mr. INOUYE, Mr. HATFIELD, Mrs. FEINSTEIN, Mr. BURNS,

Mr. D’AMATO, Mr. MACK, Mr. HOLLINGS, Mr. NICKLES, Mr. SPECTER,

Mr. EXON, Mr. SIMON, Mr. DODD, Mr. MURKOWSKI, Mr. DECONCINI,

Mr. LIEBERMAN, Mr. BRYAN, Mr. ROBB, Ms. MOSELEY-BRAUN, Mr.

AKAKA, Mr. MCCONNELL, Mr. NUNN, Mr. GRAMM, Mr. KOHL, Mr.

PELL, Mr. HEFLIN, Mr. BIDEN, and Mr. KEMPTHORNE) 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 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 SEC. 104. CERTAIN COINS AND BULLION NOT TREATED AS

5 COLLECTIBLES.

6 (a) IN GENERAL.—Paragraph (3) of section 408(m)

7 (relating to exception for certain coin) is amended to read

8 as follows:

9 ‘‘(3) EXCEPTION FOR CERTAIN COINS AND BUL10 LION.—For purposes of this subsection, the term

11 ‘collectible’ shall not include—

12 ‘‘(A) any coin certified by a recognized

13 grading service and traded on a nationally rec14 ognized electronic network, or listed by a recog15 nized wholesale reporting service, and—

16 ‘‘(i) which is or was at any time legal

17 tender in the country of issuance, or

18 ‘‘(ii) issued under the laws of any

19 State, and

20 ‘‘(B) any gold, silver, platinum, or palla21 dium bullion (whether fabricated in the form of

22 a coin or otherwise) of a fineness equal to or

23 exceeding the minimum fineness required for

24 metals which may be delivered in satisfaction of

25 a regulated futures contract subject to regula-
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1 tion by the Commodity Futures Trading Com2 mission under the Commodity Exchange Act,

3 if such coin or bullion is in the physical possession

4 of a trustee described under subsection (a) of this

5 section.’’.

6 (b) EFFECTIVE DATE.—The amendment made by

7 this section shall apply to taxable years beginning after

8 December 31, 1994.

9 Subtitle B—Nondeductible Tax10 Free IRAs

11 SEC. 111. ESTABLISHMENT OF NONDEDUCTIBLE TAX-FREE

12 INDIVIDUAL RETIREMENT ACCOUNTS.

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

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

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

16 408 the following new section:

17 ‘‘SEC. 408A. IRA PLUS ACCOUNTS.

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

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

20 of this title in the same manner as an individual retire21 ment plan.

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

23 title, the term ‘IRA Plus account’ means an individual re24 tirement plan which is designated at the time of establish25 ment of the plan as an IRA Plus account.
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1 ‘‘(c) TREATMENT OF CONTRIBUTIONS.—

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

3 shall be allowed under section 219 for a contribution

4 to an IRA Plus account.

5 ‘‘(2) CONTRIBUTION LIMIT.—The aggregate

6 amount of contributions for any taxable year to all

7 IRA Plus accounts maintained for the benefit of an

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

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

10 deduction under section 219 with respect to

11 such individual for such taxable year, over

12 ‘‘(B) the amount so allowed.

13 ‘‘(3) ROLLOVER CONTRIBUTIONS.—

14 ‘‘(A) IN GENERAL.—No rollover contribu15 tion may be made to an IRA Plus account un16 less such contribution consists of a payment or

17 distribution out of another IRA Plus account.

18 ‘‘(B) COORDINATION WITH LIMIT.—A roll19 over contribution shall not be taken into ac20 count for purposes of paragraph (2).

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

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

23 subsection, any amount paid or distributed out of an

24 IRA Plus account shall not be included in the gross

25 income of the distributee.
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1 ‘‘(2) EXCEPTION FOR EARNINGS ON CONTRIBU2 TIONS HELD LESS THAN 5 YEARS.—

3 ‘‘(A) IN GENERAL.—Any amount distrib4 uted out of an IRA Plus account which consists

5 of earnings allocable to contributions made to

6 the account during the 5-year period ending on

7 the day before such distribution shall be in8 cluded in the gross income of the distributee for

9 the taxable year in which the distribution oc10 curs.

11 ‘‘(B) CROSS REFERENCE.—

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

12 ‘‘(C) ORDERING RULE.—

13 ‘‘(i) FIRST-IN, FIRST-OUT RULE.—

14 Distributions from an IRA Plus account

15 shall be treated as having been made—

16 ‘‘(I) first from the earliest con17 tribution (and earnings allocable

18 thereto) remaining in the account at

19 the time of the distribution, and

20 ‘‘(II) then from other contribu21 tions (and earnings allocable thereto)

22 in the order in which made.

23 ‘‘(ii) ALLOCATIONS BETWEEN CON24 TRIBUTIONS AND EARNINGS.—Any portion
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1 of a distribution allocated to a contribution

2 (and earnings allocable thereto) shall be

3 treated as allocated first to the earnings

4 and then to the contribution.

5 ‘‘(iii) ALLOCATION OF EARNINGS.—

6 Earnings shall be allocated to a contribu7 tion in such manner as the Secretary may

8 by regulations prescribe.

9 ‘‘(iv) CONTRIBUTIONS IN SAME

10 YEAR.—Under regulations, all contribu11 tions made during the same taxable year

12 may be treated as 1 contribution for pur13 poses of this subparagraph.

14 ‘‘(3) ROLLOVERS.—

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

16 not apply to any distribution which is trans17 ferred to another IRA Plus account.

18 ‘‘(B) CONTRIBUTION PERIOD.—For pur19 poses of paragraph (2), the IRA Plus account

20 to which any contributions are transferred from

21 another IRS Plus account shall be treated as

22 having held such contributions during any pe23 riod such contributions were held (or are treat24 ed as held under this subparagraph) by the ac25 count from which transferred.’’.
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1 (b) EARLY WITHDRAWAL PENALTY.—Section 72(t),

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

3 the end the following new paragraph:

4 ‘‘(8) RULES RELATING TO IRA PLUS AC5 COUNTS.—In the case of an IRA Plus account under

6 section 408A—

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

8 distributions out of such account which consist

9 of earnings allocable to contributions made to

10 the account during the 5-year period ending on

11 the day before such distribution, and

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

13 any distribution described in subparagraph

14 (A).’’.

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

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

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

18 amount allowable as a deduction under section 219 shall

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

20 (d) CONFORMING AMENDMENT.—The table of sec21 tions for subpart A of part I of subchapter D of chapter

22 1 is amended by inserting after the item relating to section

23 408 the following new item:

‘‘Sec. 408A. IRA Plus accounts.’’.
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1 (e) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 1994.

4 TITLE II—PENALTY-FREE

5 DISTRIBUTIONS

6 SEC. 201. DISTRIBUTIONS FROM CERTAIN PLANS MAY BE

7 USED WITHOUT PENALTY TO PURCHASE

8 FIRST HOMES OR TO PAY HIGHER EDU9 CATION OR FINANCIALLY DEVASTATING

10 MEDICAL EXPENSES.

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

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

13 early distributions from qualified retirement plans) is

14 amended by adding at the end the following new subpara15 graph:

16 ‘‘(D) DISTRIBUTIONS FROM CERTAIN PLANS

17 FOR FIRST HOME PURCHASES OR EDUCATIONAL EX18 PENSES.—Distributions to an individual from an in19 dividual retirement plan, or from amounts attrib20 utable to employer contributions made pursuant to

21 elective deferrals described in subparagraph (A) or

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

23 501(c)(18)(D)(iii)—
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1 ‘‘(i) which are qualified first-time home2 buyer distributions (as defined in paragraph

3 (6)), or

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

5 exceed the qualified higher education expenses

6 (as defined in paragraph (7)) of the taxpayer

7 for the taxable year.’’.

8 (b) FINANCIALLY DEVASTATING MEDICAL EX9 PENSES.—

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

11 amended by striking ‘‘(B),’’.

12 (2) CERTAIN LINEAL DESCENDANTS AND AN13 CESTORS TREATED AS DEPENDENTS.—Subpara14 graph (B) of section 72(t)(2) is amended by striking

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

16 ‘‘medical care determined—

17 ‘‘(i) without regard to whether the

18 employee itemizes deductions for such tax19 able year, and

20 ‘‘(ii) by treating such employee’s de21 pendents as including—

22 ‘‘(I) all children and grand23 children of the employee or such em24 ployee’s spouse, and
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1 ‘‘(II) all ancestors of the em2 ployee or such employee’s spouse.’’.

3 (3) CONFORMING AMENDMENT.—Subparagraph

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

5 (C)’’ and inserting ‘‘, (C) or (D)’’.

6 (c) DEFINITIONS.—Section 72(t) is amended by add7 ing at the end the following new paragraphs:

8 ‘‘(6) QUALIFIED FIRST-TIME HOMEBUYER DIS9 TRIBUTIONS.—For purposes of paragraph (2)(D)(i):

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

11 first-time homebuyer distribution’ means any

12 payment or distribution received by an individ13 ual to the extent such payment or distribution

14 is used by the individual before the close of the

15 60th day after the day on which such payment

16 or distribution is received to pay qualified ac17 quisition costs with respect to a principal resi18 dence of a first-time homebuyer who is such in19 dividual, the spouse of such individual, or any

20 child, grandchild, or ancestor of such individual

21 or the individual’s spouse.

22 ‘‘(B) QUALIFIED ACQUISITION COSTS.—

23 For purposes of this paragraph, the term

24 ‘qualified acquisition costs’ means the costs of

25 acquiring, constructing, or reconstructing a res-
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1 idence. Such term includes any usual or reason2 able settlement, financing, or other closing

3 costs.

4 ‘‘(C) FIRST-TIME HOMEBUYER; OTHER

5 DEFINITIONS.—For purposes of this paragraph:

6 ‘‘(i) FIRST-TIME HOMEBUYER.—The

7 term ‘first-time homebuyer’ means any in8 dividual if—

9 ‘‘(I) such individual (and if mar10 ried, such individual’s spouse) had no

11 present ownership interest in a prin12 cipal residence during the 2-year pe13 riod ending on the date of acquisition

14 of the principal residence to which

15 this paragraph applies, and

16 ‘‘(II) subsection (a)(6), (h), or

17 (k) of section 1034 did not suspend

18 the running of any period of time

19 specified in section 1034 with respect

20 to such individual on the day before

21 the date the distribution is applied

22 pursuant to subparagraph (A)(ii).

23 ‘‘(ii) PRINCIPAL RESIDENCE.—The

24 term ‘principal residence’ has the same

25 meaning as when used in section 1034.
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1 ‘‘(iii) DATE OF ACQUISITION.—The

2 term ‘date of acquisition’ means the date—

3 ‘‘(I) on which a binding contract

4 to acquire the principal residence to

5 which subparagraph (A) applies is en6 tered into, or

7 ‘‘(II) on which construction or re8 construction of such a principal resi9 dence is commenced.

10 ‘‘(D) SPECIAL RULE WHERE DELAY IN AC11 QUISITION.—If any distribution from any indi12 vidual retirement plan fails to meet the require13 ments of subparagraph (A) solely by reason of

14 a delay or cancellation of the purchase or con15 struction of the residence, the amount of the

16 distribution may be contributed to an individual

17 retirement plan as provided in section

18 408(d)(3)(A)(i) (determined by substituting

19 ‘120 days’ for ‘60 days’ in such section), except

20 that—

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

22 applied to such contribution, and

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

24 into account in determining whether sec-
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1 tion 408(d)(3)(A)(i) applies to any other

2 amount.

3 ‘‘(7) QUALIFIED HIGHER EDUCATION EX4 PENSES.—For purposes of paragraph (2)(D)(ii):

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

6 higher education expenses’ means tuition, fees,

7 books, supplies, and equipment required for the

8 enrollment or attendance of—

9 ‘‘(i) the taxpayer,

10 ‘‘(ii) the taxpayer’s spouse, or

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

12 151(c)(3)), grandchild, or ancestor of the

13 taxpayer or the taxpayer’s spouse,

14 at an eligible educational institution (as defined

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

16 ‘‘(B) COORDINATION WITH SAVINGS BOND

17 PROVISIONS.—The amount of qualified higher

18 education expenses for any taxable year shall be

19 reduced by any amount excludable from gross

20 income under section 135.’’.

21 (d) PENALTY-FREE DISTRIBUTIONS FOR CERTAIN

22 UNEMPLOYED INDIVIDUALS.—Paragraph (2) of section

23 72(t) is amended by adding at the end the following new

24 subparagraph:
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1 ‘‘(E) DISTRIBUTIONS TO UNEMPLOYED IN2 DIVIDUALS.—A distribution from an individual

3 retirement plan to an individual after separa4 tion from employment, if—

5 ‘‘(i) such individual has received un6 employment compensation for 12 consecu7 tive weeks under any Federal or State un8 employment compensation law by reason of

9 such separation, and

10 ‘‘(ii) such distributions are made dur11 ing any taxable year during which such un12 employment compensation is paid or the

13 succeeding taxable year.

14 To the extent provided in regulations, a self-em15 ployed individual shall be treated as meeting

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

17 or State law, the individual would have received

18 unemployment compensation but for the fact

19 the individual was self-employed.’’.

20 (e) CONFORMING AMENDMENTS.—

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

22 striking ‘‘or’’ at the end of subclause (III), by strik23 ing ‘‘and’’ at the end of subclause (IV) and inserting

24 ‘‘or’’, and by inserting after subclause (IV) the fol25 lowing new subclause:
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1 ‘‘(V) the date on which qualified

2 first-time homebuyer distributions (as

3 defined in section 72(t)(6)) or dis4 tributions for qualified higher edu5 cation expenses (as defined in section

6 72(t)(7)) are made, and’’.

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

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

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

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

11 following new subparagraph:

12 ‘‘(C) for qualified first-time homebuyer dis13 tributions (as defined in section 72(t)(6)) or for

14 the payment of qualified higher education ex15 penses (as defined in section 72(t)(7)).’’.

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

17 this section shall apply to payments and distributions after

18 the date of the enactment of this Act.
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1 TITLE III—AID TO FAMILIES

2 WITH DEPENDENT CHILDREN

3 SEC. 301. DISREGARD OF INCOME AND RESOURCES DES4 IGNATED FOR EDUCATION, TRAINING, AND

5 EMPLOYABILITY.

6 (a) DISREGARD AS RESOURCE.—Section

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

8 602(a)(7)(B)) is amended—

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

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

11 State, in the case of a family receiving aid under the

12 State plan (and a family not receiving such aid but

13 which received such aid in at least 1 of the preced14 ing 4 months or became ineligible for such aid dur15 ing the preceding 12 months because of excessive

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

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

18 of such family’’ before ‘‘; and’’.

19 (b) DISREGARD AS INCOME.—

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

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

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

23 (vii), and

24 (B) by inserting after clause (viii) the fol25 lowing new clause:
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1 ‘‘(ix) shall disregard any interest or

2 income earned on a qualified asset account

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

4 (2) NONRECURRING LUMP SUM EXEMPT FROM

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

6 (42 U.S.C. 602(a)(17)) is amended by adding at the

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

8 not apply to earned or unearned income received in

9 a month on a nonrecurring basis to the extent that

10 such income is placed in a qualified asset account

11 (as defined in section 406(i)) the total amount in

12 which, after such placement, does not exceed

13 $8,000;’’.

14 (3) TREATMENT AS INCOME.—Section

15 402(a)(7) of such Act (42 U.S.C. 602(a)(7)) is

16 amended—

17 (A) by striking ‘‘and’’ at the end of sub18 paragraph (B),

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

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

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

22 subparagraph:

23 ‘‘(D) shall treat as income any distribu24 tions from a qualified asset account (as defined

25 in section 406(i)(1)) which do not meet the def-
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1 inition of a qualified distribution under section

2 406(i)(2);’’.

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

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

5 end the following:

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

7 mechanism approved by the State (such as individual re8 tirement accounts, escrow accounts, or savings bonds) that

9 allows savings of a family receiving aid to families with

10 dependent children to be used for qualified distributions.

11 ‘‘(2) The term ‘qualified distributions’ means dis12 tributions for expenses directly related to one or more of

13 the following purposes:

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

15 at any education or training program.

16 ‘‘(B) The improvement of the employability (in17 cluding self-employment) of a member of the family

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

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

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

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

22 REPORT.—The Secretary of Health and Human Services

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

24 established pursuant to the amendments made by this sec25 tion, and shall report on such study and any recommenda-
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1 tions for modifications of such amendments to the Com2 mittee on Finance of the Senate and the Committee on

3 Ways and Means of the House of Representatives not later

4 than January 1, 1998.

5 (e) REPORT ON AFDC ASSET LIMIT ON AUTO6 MOBILES.—Within 3 months after the date of the enact7 ment of this section, the Secretary of Health and Human

8 Services shall submit to the Congress a report on—

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

10 in regulations pursuant to section 402(a)(7)(B)(i) of

11 the Social Security Act, on the value of a family

12 automobile required to be disregarded by a State in

13 determining the eligibility of the family for aid to

14 families with dependent children under the State

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

16 and

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

18 increase the employability of recipients of such aid.

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

20 this section shall take effect on October 1, 1995, with re21 spect to accounts approved on or after such date and be22 fore October 1, 1998.

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