I

104TH CONGRESS

1ST SESSION H. R. 682

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

JANUARY 25, 1995

Mr. THOMAS of California (for himself and Mr. NEAL) 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,

3 SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

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

5 ‘‘Savings and Investment Incentive Act of 1995’’.

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment

9 to, or repeal of, a section or other provision, the reference
2

•HR 682 IH

1 shall be considered to be made to a section or other provi2 sion of the Internal Revenue Code of 1986.

3 TITLE I—RETIREMENT SAVINGS

4 INCENTIVES

5 Subtitle A—Restoration of IRA

6 Deduction

7 SEC. 101. RESTORATION OF IRA DEDUCTION.

8 (a) PHASE-UP OF INCOME LIMITS.—

9 (1) IN GENERAL.—Subparagraph (B) of section

10 219(g)(3) (relating to applicable dollar amount) is

11 amended to read as follows:

12 ‘‘(B) APPLICABLE DOLLAR AMOUNT.—The

13 term ‘applicable dollar amount’ means the fol14 lowing:

15 ‘‘(i) In the case of a taxpayer filing a

16 joint return:

The applicable

‘‘For taxable years beginning in: dollar amount is:

1995 ......................................................................................... $65,000

1996 ......................................................................................... $90,000

1997 ......................................................................................... $115,000

1998 ......................................................................................... $140,000.

17 ‘‘(ii) In the case of any other taxpayer

18 (other than a married individual filing a

19 separate return):

The applicable

‘‘For taxable years beginning in: dollar amount is:

1995 ......................................................................................... $50,000

1996 ......................................................................................... $75,000

1997 ......................................................................................... $100,000

1998 ......................................................................................... $125,000.
3

•HR 682 IH

1 ‘‘(iii) In the case of a married individ2 ual filing a separate return, zero.’’.

3 (2) UNLINKING OF SPOUSAL RULE.—Paragraph

4 (1) of section 219(g) (relating to limitation on de5 duction for active participants in certain pension

6 plans) is amended by striking ‘‘or the individual’s

7 spouse’’.

8 (b) TERMINATION OF INCOME LIMITS.—

9 (1) IN GENERAL.—Section 219 (relating to de10 duction for retirement savings), as amended by sec11 tion 102, is amended by striking subsection (g) and

12 by redesignating subsections (h) and (i) as sub13 section (g) and (h), respectively.

14 (2) TECHNICAL AND CONFORMING AMEND15 MENTS.—

16 (A) Subsection (f) of section 219 is amend17 ed by striking paragraph (7).

18 (B) Paragraph (5) of section 408(d) is

19 amended by striking the last sentence.

20 (C) Section 408(o) is amended by adding

21 at the end the following new paragraph:

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

23 apply to any designated nondeductible contribution

24 for any taxable year beginning after December 31,

25 1998.’’.
4

•HR 682 IH

1 (D) Section 408A(c)(2)(A), as added by

2 section 111, is amended by striking ‘‘(computed

3 without regard to subsections (b)(4) and (g) of

4 such section)’’ and inserting ‘‘(computed with5 out regard to section 219(b)(4))’’.

6 (E) Subsection (b) of section 4973 is

7 amended by striking the last sentence.

8 (c) EFFECTIVE DATES.—

9 (1) PHASE-UP.—The amendments made by

10 subsection (a) shall apply to taxable years beginning

11 after December 31, 1994.

12 (2) TERMINATION.—The amendments made by

13 subsection (b) shall apply to taxable years beginning

14 after December 31, 1998.

15 SEC. 102. INFLATION ADJUSTMENT FOR DEDUCTIBLE

16 AMOUNT.

17 (a) IN GENERAL.—Section 219, as amended by sec18 tion 101(a), is amended by redesignating subsection (h)

19 as subsection (i) and by inserting after subsection (g) the

20 following new subsection:

21 ‘‘(h) COST-OF-LIVING ADJUSTMENTS.—

22 ‘‘(1) DEDUCTION AMOUNT.—

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

24 taxable year beginning in a calendar year after

25 1995, the $2,000 amount under subsection
5

•HR 682 IH

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

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

3 adjustment for the calendar year.

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

5 If the amount to which $2,000 would be in6 creased under subparagraph (A) is not a mul7 tiple of $500, such amount shall be rounded to

8 the next lowest multiple of $500.

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

10 amounts contained in subsection (c)(2) shall be in11 creased at the same time, and by the same amount,

12 as the increase under paragraph (1).

13 ‘‘(3) COST-OF-LIVING ADJUSTMENT.—For pur14 poses of this subsection:

15 ‘‘(A) IN GENERAL.—The cost-of-living ad16 justment for any calendar year is the percent17 age (if any) by which—

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

19 exceeds

20 ‘‘(ii) the CPI for 1994.

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

22 CPI for any calendar year shall be determined

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

24 (b) CONFORMING AMENDMENTS.—
6

•HR 682 IH

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

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

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

4 of the amount in effect for such taxable year under

5 section 219(b)(1)(A)’’.

6 (2) Section 408(b)(2)(B) is amended by strik7 ing ‘‘$2,000’’ and inserting ‘‘the dollar amount in

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

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

10 ‘‘$2,000’’.

11 SEC. 103. HOMEMAKERS ELIGIBLE FOR FULL IRA DEDUC12 TION.

13 (a) SPOUSAL IRA COMPUTED ON BASIS OF COM14 PENSATION OF BOTH SPOUSES.—Subsection (c) of section

15 219 (relating to special rules for certain married individ16 uals) is amended to read as follows:

17 ‘‘(c) SPECIAL RULES FOR CERTAIN MARRIED INDI18 VIDUALS.—

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

20 to whom this paragraph applies for the taxable year,

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

22 shall be equal to the lesser of—

23 ‘‘(A) $2,000, or

24 ‘‘(B) the sum of—
7

•HR 682 IH

1 ‘‘(i) the compensation includible in

2 such individual’s gross income for the tax3 able year, plus

4 ‘‘(ii) the compensation includible in

5 the gross income of such individual’s

6 spouse for the taxable year reduced by the

7 amount allowable as a deduction under

8 subsection (a) to such spouse for such tax9 able year.

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

11 APPLIES.—Paragraph (1) shall apply to any individ12 ual if—

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

14 the taxable year, and

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

16 includible in such individual’s gross income for

17 the taxable year is less than the compensation

18 includible in the gross income of such individ19 ual’s spouse for the taxable year.’’.

20 (b) CONFORMING AMENDMENTS.—

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

22 other definitions and special rules) is amended by

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

24 ‘‘subsection (b)’’.
8

•HR 682 IH

1 (2) Paragraph (2) of section 219(h), as added

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

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

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

5 ‘‘$2,250’’ and inserting ‘‘$2,000’’.

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

7 this section shall apply to taxable years beginning after

8 December 31, 1994.

9 SEC. 104. CERTAIN COINS AND BULLION NOT TREATED AS

10 COLLECTIBLES.

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

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

13 as follows:

14 ‘‘(3) EXCEPTION FOR CERTAIN COINS AND BUL15 LION.—For purposes of this subsection, the term

16 ‘collectible’ shall not include—

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

18 grading service and traded on a nationally rec19 ognized electronic network, or listed by a recog20 nized wholesale reporting service, and—

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

22 tender in the country of issuance, or

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

24 State, and
9

•HR 682 IH

1 ‘‘(B) any gold, silver, platinum, or palla2 dium bullion (whether fabricated in the form of

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

4 exceeding the minimum fineness required for

5 metals which may be delivered in satisfaction of

6 a regulated futures contract subject to regula7 tion by the Commodity Futures Trading Com8 mission under the Commodity Exchange Act,

9 if such coin or bullion is in the physical possession

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

11 section.’’.

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

13 this section shall apply to taxable years beginning after

14 December 31, 1994.

15 SEC. 105. COORDINATION OF IRA DEDUCTION LIMIT WITH

16 ELECTIVE DEFERRAL LIMIT.

17 (a) IN GENERAL.—Section 219(b) (relating to maxi18 mum amount of deduction) is amended by adding at the

19 end the following new paragraph:

20 ‘‘(4) COORDINATION WITH ELECTIVE DEFER21 RAL LIMIT.—The amount determined under para22 graph (1) or subsection (c)(1) with respect to any

23 individual for any taxable year shall not exceed the

24 excess (if any) of—
10

•HR 682 IH

1 ‘‘(A) the maximum amount of elective de2 ferrals of the individual which are excludable

3 from gross income for the taxable year under

4 section 402(g)(1), over

5 ‘‘(B) the amount so excluded.’’.

6 (b) CONFORMING AMENDMENT.—Section 219(c), as

7 amended by section 104, is amended by adding at the end

8 the following new paragraph:

9 ‘‘(3) CROSS REFERENCE.—

‘‘For reduction in paragraph (1) amount, see subsection (b)(4).’’.

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

11 this section shall apply to taxable years beginning after

12 December 31, 1994.

13 Subtitle B—Nondeductible Tax14 Free IRAs

15 SEC. 111. ESTABLISHMENT OF NONDEDUCTIBLE TAX-FREE

16 INDIVIDUAL RETIREMENT ACCOUNTS.

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

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

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

20 408 the following new section:

21 ‘‘SEC. 408A. IRA PLUS ACCOUNTS.

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

23 section, an IRA Plus account shall be treated for purposes
11

•HR 682 IH

1 of this title in the same manner as an individual retire2 ment plan.

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

4 title, the term ‘IRA Plus account’ means an individual re5 tirement plan which is designated at the time of establish6 ment of the plan as an IRA Plus account.

7 ‘‘(c) TREATMENT OF CONTRIBUTIONS.—

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

9 shall be allowed under section 219 for a contribution

10 to an IRA Plus account.

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

12 amount of contributions for any taxable year to all

13 IRA Plus accounts maintained for the benefit of an

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

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

16 deduction under section 219 with respect to

17 such individual for such taxable year (computed

18 without regard to subsections (b)(4) and (g) of

19 such section), over

20 ‘‘(B) the amount so allowed.

21 ‘‘(3) ROLLOVER CONTRIBUTIONS.—

22 ‘‘(A) IN GENERAL.—No rollover contribu23 tion may be made to an IRA Plus account un24 less it is a qualified transfer.
12

•HR 682 IH

1 ‘‘(B) COORDINATION WITH LIMIT.—A roll2 over contribution shall not be taken into ac3 count for purposes of paragraph (2).

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

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

6 subsection, any amount paid or distributed out of an

7 IRA Plus account shall not be included in the gross

8 income of the distributee.

9 ‘‘(2) EXCEPTION FOR EARNINGS ON CONTRIBU10 TIONS HELD LESS THAN 5 YEARS.—

11 ‘‘(A) IN GENERAL.—Any amount distrib12 uted out of an IRA Plus account which consists

13 of earnings allocable to contributions made to

14 the account during the 5-year period ending on

15 the day before such distribution shall be in16 cluded in the gross income of the distributee for

17 the taxable year in which the distribution oc18 curs.

19 ‘‘(B) CROSS REFERENCE.—

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

20 ‘‘(C) ORDERING RULE.—

21 ‘‘(i) FIRST-IN, FIRST-OUT RULE.—

22 Distributions from an IRA Plus account

23 shall be treated as having been made—
13

•HR 682 IH

1 ‘‘(I) first from the earliest con2 tribution (and earnings allocable

3 thereto) remaining in the account at

4 the time of the distribution, and

5 ‘‘(II) then from other contribu6 tions (and earnings allocable thereto)

7 in the order in which made.

8 ‘‘(ii) ALLOCATIONS BETWEEN CON9 TRIBUTIONS AND EARNINGS.—Any portion

10 of a distribution allocated to a contribution

11 (and earnings allocable thereto) shall be

12 treated as allocated first to the earnings

13 and then to the contribution.

14 ‘‘(iii) ALLOCATION OF EARNINGS.—

15 Earnings shall be allocated to a contribu16 tion in such manner as the Secretary may

17 by regulations prescribe.

18 ‘‘(iv) CONTRIBUTIONS IN SAME

19 YEAR.—Except as provided in regulations,

20 all contributions made during the same

21 taxable year may be treated as 1 contribu22 tion for purposes of this subparagraph.

23 ‘‘(3) ROLLOVERS.—

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

25 not apply to any distribution which is trans-
14

•HR 682 IH

1 ferred in a qualified transfer to another IRA

2 Plus account.

3 ‘‘(B) CONTRIBUTION PERIOD.—For pur4 poses of paragraph (2), the IRA Plus account

5 to which any contributions are transferred from

6 another IRA Plus account shall be treated as

7 having held such contributions during any pe8 riod such contributions were held (or are treat9 ed as held under this subparagraph) by the ac10 count from which transferred.

11 ‘‘(4) SPECIAL RULES RELATING TO CERTAIN

12 TRANSFERS.—

13 ‘‘(A) IN GENERAL.—Notwithstanding any

14 other provision of law, in the case of a qualified

15 transfer to an IRA Plus account from an indi16 vidual retirement plan which is not an IRA

17 Plus account—

18 ‘‘(i) there shall be included in gross

19 income any amount which, but for the

20 qualified transfer, would be includible in

21 gross income, but

22 ‘‘(ii) section 72(t) shall not apply to

23 such amount.

24 ‘‘(B) TIME FOR INCLUSION.—In the case

25 of any qualified transfer which occurs before
15

•HR 682 IH

1 January 1, 1997, any amount includible in

2 gross income under subparagraph (A) with re3 spect to such contribution shall be includible

4 ratably over the 4-taxable year period beginning

5 in the taxable year in which the amount was

6 paid or distributed out of the individual retire7 ment plan.

8 ‘‘(e) QUALIFIED TRANSFER.—For purposes of this

9 section, the term ‘qualified transfer’ means a transfer to

10 an IRA Plus account from another such account or from

11 an individual retirement plan but only if such transfer

12 meets the requirements of section 408(d)(3).’’.

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

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

15 the end the following new paragraph:

16 ‘‘(8) RULES RELATING TO IRA PLUS AC17 COUNTS.—In the case of an IRA Plus account under

18 section 408A—

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

20 distributions out of such account which consist

21 of earnings allocable to contributions made to

22 the account during the 5-year period ending on

23 the day before such distribution, and
16

•HR 682 IH

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

2 any distribution described in subparagraph

3 (A).’’.

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

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

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

7 amount allowable as a deduction under section 219 shall

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

9 (d) CONFORMING AMENDMENT.—The table of sec10 tions for subpart A of part I of subchapter D of chapter

11 1 is amended by inserting after the item relating to section

12 408 the following new item:

‘‘Sec. 408A. IRA Plus accounts.’’.

13 (e) EFFECTIVE DATES.—

14 (1) IN GENERAL.—Except as provided in para15 graph (2), the amendments made by this section

16 shall apply to taxable years beginning after Decem17 ber 31, 1994.

18 (2) QUALIFIED TRANSFERS IN 1994.—The

19 amendments made by this section shall apply to any

20 qualified transfer during any taxable year beginning

21 in 1994.
17

•HR 682 IH

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, TO PAY HIGHER EDUCATION

6 OR FINANCIALLY DEVASTATING MEDICAL EX7 PENSES, OR TO PAY LONG-TERM CARE IN8 SURANCE PREMIUMS.

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

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

11 early distributions from qualified retirement plans) is

12 amended by adding at the end the following new subpara13 graph:

14 ‘‘(D) DISTRIBUTIONS FROM CERTAIN

15 PLANS FOR FIRST HOME PURCHASES, EDU16 CATIONAL EXPENSES, OR LONG-TERM CARE IN17 SURANCE EXPENSES.—Distributions to an indi18 vidual from an individual retirement plan, or

19 from amounts attributable to employer con20 tributions made pursuant to elective deferrals

21 described in subparagraph (A) or (C) of section

22 402(g)(3) or section 501(c)(18)(D)(iii)—

23 ‘‘(i) which are qualified first-time

24 homebuyer distributions (as defined in

25 paragraph (6)),
18

•HR 682 IH

1 ‘‘(ii) to the extent such distributions

2 do not exceed the qualified higher edu3 cation expenses (as defined in paragraph

4 (7)) of the taxpayer for the taxable year,

5 or

6 ‘‘(iii) to the extent such distributions

7 do not exceed the amounts paid by the tax8 payer during the taxable year for coverage

9 of the taxpayer or the taxpayer’s spouse

10 under any long-term care insurance con11 tract (as defined in section 7705).’’.

12 (b) FINANCIALLY DEVASTATING MEDICAL EX13 PENSES.—

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

15 amended by striking ‘‘(B),’’.

16 (2) CERTAIN LINEAL DESCENDANTS AND AN17 CESTORS TREATED AS DEPENDENTS.—Subpara18 graph (B) of section 72(t)(2) is amended by striking

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

20 ‘‘medical care determined—

21 ‘‘(i) without regard to whether the

22 employee itemizes deductions for such tax23 able year, and

24 ‘‘(ii) by treating such employee’s de25 pendents as including—
19

•HR 682 IH

1 ‘‘(I) all children and grand2 children of the employee or such em3 ployee’s spouse, and

4 ‘‘(II) all ancestors of the em5 ployee or such employee’s spouse.’’.

6 (3) CONFORMING AMENDMENT.—Subparagraph

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

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

9 (c) PENALTY-FREE DISTRIBUTIONS FOR CERTAIN

10 UNEMPLOYED INDIVIDUALS.—Paragraph (2) of section

11 72(t) is amended by adding at the end the following new

12 subparagraph:

13 ‘‘(E) DISTRIBUTIONS TO UNEMPLOYED IN14 DIVIDUALS.—A distribution from an individual

15 retirement plan to an individual after separa16 tion from employment, if—

17 ‘‘(i) such individual has received un18 employment compensation for 12 consecu19 tive weeks under any Federal or State un20 employment compensation law by reason of

21 such separation, and

22 ‘‘(ii) such distributions are made dur23 ing any taxable year during which such un24 employment compensation is paid or the

25 succeeding taxable year.
20

•HR 682 IH

1 To the extent provided in regulations, a self-em2 ployed individual shall be treated as meeting

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

4 or State law, the individual would have received

5 unemployment compensation but for the fact

6 the individual was self-employed.’’.

7 (d) DEFINITIONS.—

8 (1) Section 72(t) is amended by adding at the

9 end the following new paragraphs:

10 ‘‘(6) QUALIFIED FIRST-TIME HOMEBUYER DIS11 TRIBUTIONS.—For purposes of paragraph (2)(D)(i):

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

13 first-time homebuyer distribution’ means any

14 payment or distribution received by an individ15 ual to the extent such payment or distribution

16 is used by the individual before the close of the

17 60th day after the day on which such payment

18 or distribution is received to pay qualified ac19 quisition costs with respect to a principal resi20 dence of a first-time homebuyer who is such in21 dividual, the spouse of such individual, or any

22 child, grandchild, or ancestor of such individual

23 or the individual’s spouse.

24 ‘‘(B) QUALIFIED ACQUISITION COSTS.—

25 For purposes of this paragraph, the term
21

•HR 682 IH

1 ‘qualified acquisition costs’ means the costs of

2 acquiring, constructing, or reconstructing a res3 idence. Such term includes any usual or reason4 able settlement, financing, or other closing

5 costs.

6 ‘‘(C) FIRST-TIME HOMEBUYER; OTHER

7 DEFINITIONS.—For purposes of this paragraph:

8 ‘‘(i) FIRST-TIME HOMEBUYER.—The

9 term ‘first-time homebuyer’ means any in10 dividual if—

11 ‘‘(I) such individual (and if mar12 ried, such individual’s spouse) had no

13 present ownership interest in a prin14 cipal residence during the 2-year pe15 riod ending on the date of acquisition

16 of the principal residence to which

17 this paragraph applies, and

18 ‘‘(II) subsection (a)(6), (h), or

19 (k) of section 1034 did not suspend

20 the running of any period of time

21 specified in section 1034 with respect

22 to such individual on the day before

23 the date the distribution is applied

24 pursuant to subparagraph (A)(ii).
22

•HR 682 IH

1 ‘‘(ii) PRINCIPAL RESIDENCE.—The

2 term ‘principal residence’ has the same

3 meaning as when used in section 1034.

4 ‘‘(iii) DATE OF ACQUISITION.—The

5 term ‘date of acquisition’ means the date—

6 ‘‘(I) on which a binding contract

7 to acquire the principal residence to

8 which subparagraph (A) applies is en9 tered into, or

10 ‘‘(II) on which construction or re11 construction of such a principal resi12 dence is commenced.

13 ‘‘(D) SPECIAL RULE WHERE DELAY IN AC14 QUISITION.—If any distribution from any indi15 vidual retirement plan fails to meet the require16 ments of subparagraph (A) solely by reason of

17 a delay or cancellation of the purchase or con18 struction of the residence, the amount of the

19 distribution may be contributed to an individual

20 retirement plan as provided in section

21 408(d)(3)(A)(i) (determined by substituting

22 ‘120 days’ for ‘60 days’ in such section), except

23 that—

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

25 applied to such contribution, and
23

•HR 682 IH

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

2 into account in determining whether sec3 tion 408(d)(3)(A)(i) applies to any other

4 amount.

5 ‘‘(7) QUALIFIED HIGHER EDUCATION EX6 PENSES.—For purposes of paragraph (2)(D)(ii):

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

8 higher education expenses’ means tuition, fees,

9 books, supplies, and equipment required for the

10 enrollment or attendance of—

11 ‘‘(i) the taxpayer,

12 ‘‘(ii) the taxpayer’s spouse, or

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

14 151(c)(3)), grandchild, or ancestor of the

15 taxpayer or the taxpayer’s spouse,

16 at an eligible educational institution (as defined

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

18 ‘‘(B) COORDINATION WITH SAVINGS BOND

19 PROVISIONS.—The amount of qualified higher

20 education expenses for any taxable year shall be

21 reduced by any amount excludable from gross

22 income under section 135.’’.

23 (2) Chapter 79 is amended by adding at the

24 end the following new section:
24

•HR 682 IH

1 ‘‘SEC. 7705. LONG-TERM CARE INSURANCE CONTRACT.

2 ‘‘(a) GENERAL RULE.—For purposes of the provi3 sions of this title which refer to this section—

4 ‘‘(1) IN GENERAL.—The term ‘long-term care

5 insurance contract’ means any insurance contract is6 sued if—

7 ‘‘(A) the only insurance protection pro8 vided under such contract is coverage of quali9 fied long-term care services and benefits inci10 dental to such coverage,

11 ‘‘(B) such contract does not cover expenses

12 incurred for services or items to the extent that

13 such expenses are reimbursable under title

14 XVIII of the Social Security Act or would be so

15 reimbursable but for the application of a de16 ductible or coinsurance amount,

17 ‘‘(C) such contract is guaranteed renew18 able,

19 ‘‘(D) such contract does not have any cash

20 surrender value, and

21 ‘‘(E) all refunds of premiums, and all pol22 icyholder dividends or similar amounts, under

23 such contract are to be applied as a reduction

24 in future premiums or to increase future bene25 fits.

26 ‘‘(2) SPECIAL RULES.—
25

•HR 682 IH

1 ‘‘(A) PER DIEM, ETC. PAYMENTS PER2 MITTED.—A contract shall not fail to be treated

3 as described in paragraph (1)(A) by reason of

4 payments being made on a per diem or other

5 periodic basis without regard to the expenses

6 incurred during the period to which the pay7 ments relate.

8 ‘‘(B) CONTRACT MAY COVER MEDICARE

9 REIMBURSABLE EXPENSES WHERE MEDICARE

10 IS SECONDARY PAYOR.—Paragraph (1)(B) shall

11 not apply to expenses which are reimbursable

12 under title XVIII of the Social Security Act

13 only as a secondary payor.

14 ‘‘(C) REFUNDS OF PREMIUMS.—Paragraph

15 (1)(E) shall not apply to any refund of pre16 miums on surrender or cancellation of the con17 tract.

18 ‘‘(b) QUALIFIED LONG-TERM CARE SERVICES.—For

19 purposes of this section—

20 ‘‘(1) IN GENERAL.—The term ‘qualified long21 term care services’ means necessary diagnostic, pre22 ventive, therapeutic, and rehabilitative services, and

23 maintenance or personal care services, which—

24 ‘‘(A) are required by a chronically ill indi25 vidual in a qualified facility, and
26

•HR 682 IH

1 ‘‘(B) are provided pursuant to a plan of

2 care prescribed by a licensed health care practi3 tioner.

4 ‘‘(2) CHRONICALLY ILL INDIVIDUAL.—

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

6 ill individual’ means any individual who has

7 been certified by a licensed health care practi8 tioner as—

9 ‘‘(i)(I) being unable to perform (with10 out substantial assistance from another in11 dividual) at least 2 activities of daily living

12 (as defined in subparagraph (B)) for a pe13 riod of at least 90 days due to a loss of

14 functional capacity, or

15 ‘‘(II) having a level of disability simi16 lar (as determined by the Secretary in con17 sultation with the Secretary of Health and

18 Human Services) to the level of disability

19 described in subclause (I), or

20 ‘‘(ii) having a similar level of disabil21 ity due to cognitive impairment.

22 ‘‘(B) ACTIVITIES OF DAILY LIVING.—For

23 purposes of subparagraph (A), each of the fol24 lowing is an activity of daily living:
27

•HR 682 IH

1 ‘‘(i) MOBILITY.—The process of walk2 ing or wheeling on a level surface which

3 may include the use of an assistive device

4 such as a cane, walker, wheelchair, or

5 brace.

6 ‘‘(ii) DRESSING.—The overall complex

7 behavior of getting clothes from closets

8 and drawers and then getting dressed.

9 ‘‘(iii) TOILETING AND BATHING.—

10 Each of the following shall be treated as 1

11 activity:

12 ‘‘(I) The act of going to the toilet

13 room for bowel and bladder function,

14 transferring on and off the toilet,

15 cleaning after elimination, and ar16 ranging clothes or the ability to volun17 tarily control bowel and bladder func18 tion, or in the event of incontinence,

19 the ability to maintain a reasonable

20 level of personal hygiene.

21 ‘‘(II) The overall complex behav22 ior of getting water and cleansing the

23 whole body, including turning on the

24 water for a bath, shower, or sponge

25 bath, getting to, in, and out of a tub
28

•HR 682 IH

1 or shower, and washing and drying

2 oneself.

3 ‘‘(iv) TRANSFER.—The process of get4 ting in and out of bed or in and out of a

5 chair or wheelchair.

6 ‘‘(v) EATING.—The process of getting

7 food from a plate or its equivalent into the

8 mouth.

9 ‘‘(3) QUALIFIED FACILITY.—The term ‘quali10 fied facility’ means—

11 ‘‘(A) a nursing, rehabilitative, hospice, or

12 adult day care facility (including a hospital, re13 tirement home, nursing home, skilled nursing

14 facility, intermediate care facility, or similar in15 stitution)—

16 ‘‘(i) which is licensed under State law,

17 or

18 ‘‘(ii) which is a certified facility for

19 purposes of title XVIII or XIX of the So20 cial Security Act, or

21 ‘‘(B) an individual’s home if a licensed

22 health care practitioner certifies that without

23 home care the individual would have to be cared

24 for in a facility described in subparagraph (A).
29

•HR 682 IH

1 ‘‘(4) MAINTENANCE OR PERSONAL CARE SERV2 ICES.—The term ‘maintenance or personal care serv3 ices’ means any care the primary purpose of which

4 is to provide needed assistance with any of the ac5 tivities of daily living described in paragraph (2)(B).

6 ‘‘(5) LICENSED HEALTH CARE PRACTI7 TIONER.—The term ‘licensed health care practi8 tioner’ means any physician (as defined in section

9 1861(r) of the Social Security Act) and any reg10 istered professional nurse, licensed social worker, or

11 other individual who meets such requirements as

12 may be prescribed by the Secretary.

13 ‘‘(c) TREATMENT OF COVERAGE PROVIDED AS PART

14 OF A LIFE INSURANCE CONTRACT.—Except as otherwise

15 provided in regulations prescribed by the Secretary, in the

16 case of any long-term care insurance coverage (whether

17 or not qualified) provided by rider on a life insurance con18 tract, this section shall be applied as if the portion of the

19 contract providing such coverage were a separate con20 tract.’’

21 (e) CONFORMING AMENDMENTS.—

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

23 striking ‘‘or’’ at the end of subclause (III), by strik24 ing ‘‘and’’ at the end of subclause (IV) and inserting
30

•HR 682 IH

1 ‘‘or’’, and by inserting after subclause (IV) the fol2 lowing new subclause:

3 ‘‘(V) the date on which qualified

4 first-time homebuyer distributions (as

5 defined in section 72(t)(6)), distribu6 tions for qualified higher education

7 expenses (as defined in section

8 72(t)(7)), or distributions for coverage

9 of the taxpayer or the taxpayer’s

10 spouse under any long-term care in11 surance contract (as defined in section

12 7705) are made, and’’.

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

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

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

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

17 following new subparagraph:

18 ‘‘(C) for qualified first-time homebuyer dis19 tributions (as defined in section 72(t)(6)), for

20 the payment of qualified higher education ex21 penses (as defined in section 72(t)(7)), or dis22 tributions for coverage of the taxpayer or the

23 taxpayer’s spouse under any long-term care in24 surance contract (as defined in section 7705).’’.
31

•HR 682 IH

1 (3) The table of sections for chapter 79 is

2 amended by adding at the end the following new

3 item:

‘‘Sec. 7705. Long-term care insurance contract.’’

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

5 this section shall apply to payments and distributions after

6 the date of the enactment of this Act.

7 TITLE III—AID TO FAMILIES

8 WITH DEPENDENT CHILDREN

9 SEC. 301. DISREGARD OF INCOME AND RESOURCES DES10 IGNATED FOR EDUCATION, TRAINING, AND

11 EMPLOYABILITY.

12 (a) DISREGARD AS RESOURCE.—Section

13 402(a)(7)(B) of the Social Security Act (42 U.S.C.

14 602(a)(7)(B)) is amended—

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

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

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

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

19 which received such aid in at least 1 of the preced20 ing 4 months or became ineligible for such aid dur21 ing the preceding 12 months because of excessive

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

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

24 of such family’’ before ‘‘; and’’.

25 (b) DISREGARD AS INCOME.—
32

•HR 682 IH

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

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

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

4 (vii), and

5 (B) by inserting after clause (viii) the fol6 lowing new clause:

7 ‘‘(ix) shall disregard any interest or

8 income earned on a qualified asset account

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

10 (2) NONRECURRING LUMP SUM EXEMPT FROM

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

12 (42 U.S.C. 602(a)(17)) is amended by adding at the

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

14 not apply to earned or unearned income received in

15 a month on a nonrecurring basis to the extent that

16 such income is placed in a qualified asset account

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

18 which, after such placement, does not exceed

19 $8,000;’’.

20 (3) TREATMENT AS INCOME.—Section

21 402(a)(7) of such Act (42 U.S.C. 602(a)(7)) is

22 amended—

23 (A) by striking ‘‘and’’ at the end of sub24 paragraph (B),
33

•HR 682 IH

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

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

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

4 subparagraph:

5 ‘‘(D) shall treat as income any distribu6 tions from a qualified asset account (as defined

7 in section 406(i)(1)) which do not meet the def8 inition of a qualified distribution under section

9 406(i)(2);’’.

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

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

12 end the following:

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

14 mechanism approved by the State (such as individual re15 tirement accounts, escrow accounts, or savings bonds) that

16 allows savings of a family receiving aid to families with

17 dependent children to be used for qualified distributions.

18 ‘‘(2) The term ‘qualified distributions’ means dis19 tributions for expenses directly related to one or more of

20 the following purposes:

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

22 at any education or training program.

23 ‘‘(B) The improvement of the employability (in24 cluding self-employment) of a member of the family

25 (such as through the purchase of an automobile).
34

•HR 682 IH

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

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

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

4 REPORT.—The Secretary of Health and Human Services

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

6 established pursuant to the amendments made by this sec7 tion, and shall report on such study and any recommenda8 tions for modifications of such amendments to the Com9 mittee on Finance of the Senate and the Committee on

10 Ways and Means of the House of Representatives not later

11 than January 1, 1998.

12 (e) REPORT ON AFDC ASSET LIMIT ON AUTO13 MOBILES.—Within 3 months after the date of the enact14 ment of this section, the Secretary of Health and Human

15 Services shall submit to the Congress a report on—

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

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

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

19 automobile required to be disregarded by a State in

20 determining the eligibility of the family for aid to

21 families with dependent children under the State

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

23 and

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

25 increase the employability of recipients of such aid.
35

•HR 682 IH

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

2 this section shall take effect on October 1, 1995, with re3 spect to accounts approved on or after such date and be4 fore October 1, 1998.

Æ

HR 682 IH——2

HR 682 IH——3