II 

108TH CONGRESS 

2D SESSION S. 2751 

To encourage savings, promote financial literacy, and expand opportunities 

for young adults by establishing KIDS Accounts. 

IN THE SENATE OF THE UNITED STATES 

JULY 22, 2004 

Mr. SANTORUM (for himself and Mr. CORZINE) introduced the following bill; 

which was read twice and referred to the Committee on Finance 

A BILL

To encourage savings, promote financial literacy, and expand 

opportunities for young adults by establishing KIDS Accounts.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘America Saving for 

5 Personal Investment, Retirement, and Education Act of 

6 2004’’ or the ‘‘ASPIRE Act of 2004’’. 

7 SEC. 2. KIDS ACCOUNT FUND. 

8 (a) ESTABLISHMENT.—There is established in the 

9 Treasury of the United States a KIDS Account Fund. 
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1 (b) AMOUNTS HELD BY FUND.—The KIDS Account 

2 Fund consists of the sum of all amounts paid into the 

3 Fund under subsections (d) and (e), increased by the total 

4 net earnings from investments of sums held in the Fund 

5 or reduced by the total net losses from investments of 

6 sums held in the Fund, and reduced by the total amount 

7 of payments made from the Fund (including payments for 

8 administrative expenses). 

9 (c) USE OF FUND.— 

10 (1) IN GENERAL.—The sums in the KIDS Ac11 count Fund are appropriated and shall remain avail12 able without fiscal year limitation— 

13 (A) to invest under section 5, 

14 (B) to make distributions under section 6, 

15 (C) to pay the administrative expenses of 

16 carrying out this Act, and 

17 (D) to purchase insurance as provided in 

18 section 10(c)(2). 

19 (2) EXCLUSIVE PURPOSES.—The sums in the 

20 KIDS Account Fund shall not be appropriated for 

21 any purpose other than the purposes specified in this 

22 section and may not be used for any other purpose. 

23 (d) GOVERNMENT CONTRIBUTIONS.— 
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1 (1) IN GENERAL.—The Secretary of the Treas2 ury shall make transfers from the general fund of 

3 the Treasury to the KIDS Account Fund as follows: 

4 (A) AUTOMATIC CONTRIBUTIONS.—Upon 

5 receipt of each certification under section 3(b), 

6 the Secretary of the Treasury shall transfer 

7 $500. 

8 (B) SUPPLEMENTAL CONTRIBUTIONS.—

9 Upon receipt of each certification under section 

10 4(a), the Secretary of the Treasury shall trans11 fer the supplemental amount. 

12 (C) MATCHING CONTRIBUTIONS.—Upon 

13 receipt of each certification under section 4(b), 

14 the Secretary of the Treasury shall transfer the 

15 matching amount. 

16 (2) ADJUSTMENT FOR INFLATION.— 

17 (A) IN GENERAL.—For each fifth calendar 

18 year beginning after 2005, the $500 amount in 

19 paragraph (1)(A) shall be increased by such 

20 dollar amount multiplied by the cost-of-living 

21 adjustment determined under section 1(f)(3) of 

22 the Internal Revenue Code of 1986 determined 

23 by substituting ‘‘calendar year 2004’’ for ‘‘cal24 endar year 1992’’ in subparagraph (B) thereof. 
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•S 2751 IS 

1 (B) ROUNDING.—If any amount adjusted 

2 under subparagraph (A) is not a multiple of 

3 $50, such amount shall be rounded to the next 

4 lowest multiple of $50. 

5 (e) PRIVATE CONTRIBUTIONS.—The Executive Di6 rector shall pay into the KIDS Account Fund such 

7 amounts as are contributed under section 3(f). 

8 SEC. 3. KIDS ACCOUNTS. 

9 (a) ESTABLISHMENT.—The Executive Director shall 

10 establish in the KIDS Account Fund a Kids Investment 

11 and Development Savings Account (hereinafter a ‘‘KIDS 

12 Account’’) for each eligible individual certified under sub13 section (b). Each such account shall be identified to its 

14 account holder by means of the account holder’s social se15 curity account number. 

16 (b) CERTIFICATION OF ACCOUNT HOLDERS.—On the 

17 date on which an eligible individual is issued a social secu18 rity account number under section 203(c)(2) of the Social 

19 Security Act, the Commissioner of Social Security shall 

20 certify to the Executive Director and the Secretary of the 

21 Treasury the name of, and social security number issued 

22 to, such eligible individual. 

23 (c) ACCOUNT BALANCE.—The balance in an account 

24 holder’s KIDS Account at any time is the excess of— 

25 (1) the sum of— 
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1 (A) all deposits made into the KIDS Ac2 count Fund and credited to the account under 

3 subsection (d), and 

4 (B) the total amount of allocations made 

5 to and reductions made in the account pursuant 

6 to subsection (e), over 

7 (2) the amounts paid out of the account with 

8 respect to such individual under section 6. 

9 (d) CREDITING OF CONTRIBUTIONS.—Pursuant to 

10 regulations which shall be prescribed by the Executive Di11 rector, the Executive Director shall credit to each KIDS 

12 Account the amounts paid into the KIDS Account Fund 

13 under subsections (d) and (e) of section 2 which are attrib14 utable to the account holder of such account. 

15 (e) ALLOCATION OF EARNINGS AND LOSSES.—The 

16 Executive Director shall allocate to each KIDS Account 

17 an amount equal to the net earnings and net losses from 

18 each investment of sums in the KIDS Account Fund 

19 which are attributable, on a pro rata basis, to sums cred20 ited to such account, reduced by an appropriate share of 

21 the administrative expenses paid out of the net earnings, 

22 as determined by the Executive Director. 

23 (f) PRIVATE CONTRIBUTIONS.— 

24 (1) IN GENERAL.—The Executive Director shall 

25 accept cash contributions for payment into the
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1 KIDS Account Fund if such contribution is identi2 fied (in such manner as the Executive Director may 

3 require) with the account holder of a KIDS Account 

4 to whom it is to be credited at the time the contribu5 tion is made. 

6 (2) ALTERNATIVE METHODS OF CONTRIBU7 TION.— 

8 (A) PAYROLL DEDUCTION.—Under regula9 tions prescribed by the Executive Director and 

10 at the election of the employer, contributions 

11 under paragraph (1) may be made through pay12 roll deductions. 

13 (B) TAX REFUNDS.—Under regulations 

14 prescribed by the Secretary of the Treasury, 

15 contributions under paragraph (1) may be made 

16 by an election to contribute all or a portion of 

17 the tax refund of the contributor. 

18 (3) ANNUAL LIMITATION.— 

19 (A) ACCOUNT HOLDERS UNDER AGE 18.—

20 In the case of an account holder who has not 

21 attained age 18 at the end of a calendar year— 

22 (i) the limitation under section 

23 219(b)(1) of the Internal Revenue Code of 

24 1986 shall not apply, and 
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1 (ii) the Executive Director shall not 

2 accept any contribution identified with 

3 such account holder if such contribution, 

4 when added to all other contributions made 

5 under this subsection during such calendar 

6 year with respect to such account holder, 

7 exceeds $1,000. 

8 (B) ACCOUNT HOLDERS AGE 18 OR

9 OLDER.—In the case of an account holder who 

10 is age 18 or older at the end of a calendar year, 

11 any contribution identified with such account 

12 holder shall be taken into account under section 

13 219(b)(1) of the Internal Revenue Code of 

14 1986 for such year. 

15 (C) ADJUSTMENT FOR INFLATION.— 

16 (i) IN GENERAL.—For each fifth cal17 endar year beginning after 2005, the 

18 $1,000 amount under subparagraph (A)(ii) 

19 shall be increased by such dollar amount 

20 multiplied by the cost-of-living adjustment 

21 determined under section 1(f)(3) of the In22 ternal Revenue Code of 1986 determined 

23 by substituting ‘‘calendar year 2004’’ for 

24 ‘‘calendar year 1992’’ in subparagraph (B) 

25 thereof. 
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1 (ii) ROUNDING.—If any amount ad2 justed under clause (i) is not a multiple of 

3 $50, such amount shall be rounded to the 

4 next lowest multiple of $50. 

5 (g) ELIGIBLE INDIVIDUAL.—For purposes of this 

6 Act, the term ‘‘eligible individual’’ means any individual 

7 who is— 

8 (1) a United States citizen or a person de9 scribed in paragraph (1) of section 431(b) of the 

10 Personal Responsibility and Work Opportunity Rec11 onciliation Act of 1996, 

12 (2) born after December 31, 2005, and 

13 (3) less than 18 years of age. 

14 (h) REPAYMENT OF AUTOMATIC CONTRIBUTION.—

15 Beginning with the year in which an account holder of 

16 a KIDS Account attains the age of 30, such account hold17 er shall repay, in such form and manner as the Executive 

18 Director shall prescribe by regulation, the amount trans19 ferred under section 2(d)(1)(A) and credited to the ac20 count of the account holder under subsection (d). 

21 (i) RIGHTS OF LEGAL GUARDIAN.—Until the account 

22 holder of a KIDS Account attains age 18, any rights or 

23 duties of the account holder under this Act with respect 

24 to such account shall be exercised or performed by the 

25 legal guardian of such account holder. 
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1 SEC. 4. CERTIFICATIONS RELATED TO GOVERNMENT CON2 TRIBUTIONS. 

3 (a) SUPPLEMENTAL GOVERNMENT CONTRIBU4 TIONS.— 

5 (1) IN GENERAL.—Upon such showing as the 

6 Executive Director may require to establish the basis 

7 for certification, the Executive Director shall, with 

8 respect to each eligible account holder, certify to the 

9 Secretary of the Treasury the supplemental amount 

10 with respect to such account holder. 

11 (2) ELIGIBLE ACCOUNT HOLDER.—For pur12 poses of this subsection, the term ‘‘eligible account 

13 holder’’ means an account holder of a KIDS Ac14 count who, for the last taxable year ending before 

15 such account holder’s certification under section 

16 3(b), has a modified adjusted gross income which is 

17 below the applicable national median adjusted gross 

18 income amount. 

19 (3) SUPPLEMENTAL AMOUNT.— 

20 (A) IN GENERAL.—For purposes of this 

21 Act, the term ‘‘supplemental amount’’ means 

22 $500. 

23 (B) INCOME PHASE-OUT.—With respect to 

24 any account holder who has a modified adjusted 

25 gross income for the last taxable year ending 

26 before such account holder’s certification under 
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1 section 3(b) which is in excess of 50 percent of 

2 the applicable national median adjusted gross 

3 income amount, the $500 amount in subpara4 graph (A) shall be reduced (but not below zero) 

5 by an amount which bears the same ratio to 

6 $500 as such excess bears to 50 percent of the 

7 applicable national median adjusted gross in8 come amount. 

9 (C) ADJUSTMENT FOR INFLATION.— 

10 (i) IN GENERAL.—For each fifth cal11 endar year beginning after 2005, each of 

12 the $500 amounts under subparagraphs 

13 (A) and (B) shall be increased by such dol14 lar amount multiplied by the cost-of-living 

15 adjustment determined under section 

16 1(f)(3) of the Internal Revenue Code of 

17 1986 determined by substituting ‘‘calendar 

18 year 2004’’ for ‘‘calendar year 1992’’ in 

19 subparagraph (B) thereof. 

20 (ii) ROUNDING.—If any amount ad21 justed under clause (i) is not a multiple of 

22 $50, such amount shall be rounded to the 

23 next lowest multiple of $50. 

24 (b) GOVERNMENT MATCHING CONTRIBUTION.—
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1 (1) IN GENERAL.—Upon such showing as the 

2 Executive Director may require to establish the basis 

3 for certification, the Executive Director shall, with 

4 respect to each private contribution to the account 

5 of an account holder which is made before such ac6 count holder attains age 18, certify to the Secretary 

7 of the Treasury the matching amount with respect 

8 to such contribution. 

9 (2) MATCHING AMOUNT.— 

10 (A) IN GENERAL.—For purposes of this 

11 subsection, the term ‘‘matching amount’’ 

12 means, with respect to the first $500 of private 

13 contributions to an account during any calendar 

14 year, an amount equal to 100 percent of such 

15 contribution. 

16 (B) INCOME PHASE-OUT.—With respect to 

17 any account holder who has a modified adjusted 

18 gross income for the last taxable year ending 

19 before such contribution which is in excess of 

20 100 percent of the applicable national median 

21 adjusted gross income amount, the $500 

22 amount in subparagraph (A) shall be reduced 

23 (but not below zero) by an amount which bears 

24 the same ratio to $500 as such excess bears to 
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1 5 percent of the applicable national median ad2 justed gross income amount. 

3 (C) ADJUSTMENT FOR INFLATION.— 

4 (i) IN GENERAL.—For each fifth cal5 endar year beginning after 2005, each of 

6 the $500 amounts under subparagraphs 

7 (A) and (B) shall be increased by such dol8 lar amount multiplied by the cost-of-living 

9 adjustment determined under section 

10 1(f)(3) of the Internal Revenue Code of 

11 1986 determined by substituting ‘‘calendar 

12 year 2004’’ for ‘‘calendar year 1992’’ in 

13 subparagraph (B) thereof. 

14 (ii) ROUNDING.—If any amount ad15 justed under clause (i) is not a multiple of 

16 $50, such amount shall be rounded to the 

17 next lowest multiple of $50. 

18 (3) PRIVATE CONTRIBUTION.—For purposes of 

19 this subsection, the term ‘‘private contribution’’ 

20 means a contribution accepted under section 3(f). 

21 (c) DEFINITIONS AND RULES RELATING TO MODI22 FIED ADJUSTED GROSS INCOME.—For purposes of this 

23 section— 

24 (1) SPECIAL RULE FOR ACCOUNT HOLDERS

25 WHO CAN BE CLAIMED AS DEPENDENTS.—In the 
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1 case of an account holder of a KIDS Account for 

2 whom a deduction is allowable under section 151 of 

3 the Internal Revenue Code of 1986 to another tax4 payer, any reference in this section to the modified 

5 adjusted gross income of the account holder for any 

6 taxable year shall be treated as a reference to the 

7 modified adjusted gross income of such other tax8 payer. 

9 (2) MODIFIED ADJUSTED GROSS INCOME.—The 

10 term ‘‘modified adjusted gross income’’ has the 

11 meaning given such term in section 221(b) of the In12 ternal Revenue Code of 1986. 

13 (3) APPLICABLE NATIONAL MEDIAN ADJUSTED

14 GROSS INCOME.— 

15 (A) IN GENERAL.—The term ‘‘applicable 

16 national median adjusted gross income’’ means, 

17 with respect to any calendar year, the median 

18 amount of adjusted gross income (as defined in 

19 section 62 of the Internal Revenue Code of 

20 1986) for individual taxpayers for taxable years 

21 ending in the prior calendar year as determined 

22 by the Secretary of the Treasury. 

23 (B) JOINT RETURNS.—The applicable na24 tional median adjusted gross income shall be 
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•S 2751 IS 

1 calculated and applied separately with respect 

2 to joint returns and all other returns. 

3 SEC. 5. RULES GOVERNING KIDS ACCOUNTS RELATING TO 

4 INVESTMENT, ACCOUNTING, AND REPORT5 ING. 

6 (a) DEFAULT INVESTMENT PROGRAM.—The KIDS 

7 Account Fund Board shall establish a default investment 

8 program under which, in a manner similar to a lifecycle 

9 investment program, sums in each KIDS Account are allo10 cated to investment funds in the KIDS Account Fund 

11 based on the amount of time before the account holder 

12 attains the age of 18. Each account holder of a KIDS 

13 Account shall be enrolled in such program unless such ac14 count holder, in such form and manner as prescribed by 

15 the Executive Director, elects otherwise. 

16 (b) OTHER RULES.—Under regulations which shall 

17 be prescribed by the Executive Director, and subject to 

18 the provisions of this Act, the provisions of— 

19 (1) section 8438 of title 5, United States Code 

20 (relating to investment of the Thrift Savings Fund), 

21 (2) section 8439(b) of such title (relating to en22 gagement of independent qualified public account23 ant), 
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1 (3) section 8439(c) of such title (relating to 

2 periodic statements and summary descriptions of in3 vestment options), and 

4 (4) section 8439(d) of such title (relating to as5 sumption of risk), 

6 shall apply with respect to the KIDS Account Fund and 

7 accounts maintained in such Fund in the same manner 

8 and to the same extent as such provisions relate to the 

9 Thrift Savings Fund and the accounts maintained in the 

10 Thrift Savings Fund. For purposes of this subsection, ref11 erences in such sections 8438 and 8439 to an employee, 

12 Member, former employee, or former Member shall be 

13 deemed references to an account holder of a KIDS Ac14 count in the KIDS Account Fund. 

15 SEC. 6. DISTRIBUTIONS FROM KIDS ACCOUNTS. 

16 (a) IN GENERAL.—Under regulations prescribed by 

17 the Executive Director, amounts in a KIDS Account shall, 

18 at the request of the account holder, be distributed to the 

19 account holder if the account holder demonstrates to the 

20 satisfaction of the Executive Director that such amount 

21 will be used for qualified expenses. 

22 (b) AGE LIMITATION.— 

23 (1) EARLY DISTRIBUTIONS.—No distribution 

24 shall be made under subsection (a) with respect to
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1 any account holder of a KIDS Account before such 

2 account holder attains age 18. 

3 (2) EXCEPTION.—Paragraph (1) shall not 

4 apply with respect to amounts distributed for quali5 fied higher education expenses (as defined in section 

6 529(e)(3) of the Internal Revenue Code of 1986). 

7 (c) QUALIFIED EXPENSES.—For purposes of this 

8 Act, the term ‘‘qualified expenses’’ means, with respect to 

9 any account holder— 

10 (1) qualified distributions (within the meaning 

11 of section 408A(d)(2) of the Internal Revenue Code 

12 of 1986), 

13 (2) qualified higher education expenses (as de14 fined in section 529(e)(3) of such Code), and 

15 (3) amounts which within 60 days of distribu16 tion are transferred to a qualified tuition program 

17 under section 529 of the Internal Revenue Code of 

18 1986 for the benefit of the account holder or a mem19 ber of the family (within the meaning of section 

20 529(e)(2) of such Code) of such account holder. 

21 SEC. 7. TAX TREATMENT OF KIDS ACCOUNTS. 

22 (a) IN GENERAL.—Except as otherwise provided in 

23 this Act, for purposes of the Internal Revenue Code of 

24 1986— 
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•S 2751 IS 

1 (1) each KIDS Account shall be treated in the 

2 same manner as a Roth IRA (within the meaning of 

3 section 408A of such Code), and 

4 (2) any distribution from such account shall be 

5 treated in the same manner as a distribution from 

6 a Roth IRA, except that distributions described in 

7 paragraphs (2) and (3) of section 6(c) shall be treat8 ed as qualified distributions under section 408A(d) 

9 of such Code. 

10 (b) QUALIFIED ROLLOVERS CONTRIBUTIONS.— 

11 (1) IN GENERAL.—Except as provided in para12 graph (2), no qualified rollover contribution (as de13 fined in section 408A(e) of the Internal Revenue 

14 Code of 1986) shall be allowed with respect to a 

15 KIDS Account. 

16 (2) QUALIFIED ROLLOVERS.—Under regula17 tions prescribed by the Secretary of the Treasury in 

18 consultation with the Executive Director, after an 

19 account holder of a KIDS Account attains the age 

20 of 18, such account holder may elect to make a roll21 over contribution from such account holder’s account 

22 to— 

23 (A) a privately managed KIDS Account, or 

24 (B) a Roth IRA. 
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•S 2751 IS 

1 (c) 100 PERCENT TAX ON GOVERNMENT CONTRIBU2 TIONS.— 

3 (1) KIDS ACCOUNTS.— 

4 (A) IN GENERAL.—In the case of any 

5 amount distributed from a KIDS Account 

6 which is attributable to contributions made 

7 under section 2(d) and which would be includ8 ible in gross income (but for this paragraph)— 

9 (i) such amount shall not be includible 

10 in gross income, and 

11 (ii) the tax imposed under chapter 1 

12 of the Internal Revenue Code of 1986 on 

13 the distributee for the taxable year in 

14 which such amount is distributed shall be 

15 increased by 100 percent of such amount. 

16 (B) ORDERING RULES.—For purposes of 

17 this paragraph, distributions from KIDS Ac18 counts shall be treated as made from amounts 

19 attributable to contributions made under sec20 tion 3(f) and from earnings before made from 

21 amounts attributable to contributions made 

22 under section 2(d). 

23 (2) ROTH IRAS.—Section 408A(d) of the Inter24 nal Revenue Code of 1986 (relating to distribution 
19

•S 2751 IS 

1 rules) is amended by adding at the end the following 

2 new paragraph: 

3 ‘‘(8) 100 PERCENT TAX ON DISTRIBUTIONS RE4 LATED TO CERTAIN GOVERNMENT CONTRIBU5 TIONS.— 

6 ‘‘(A) IN GENERAL.—In the case of any dis7 tribution which is attributable to contributions 

8 made under section 2(d) of the America Saving 

9 for Personal Investment, Retirement, and Edu10 cation Act of 2004 and which would be includ11 ible in gross income (but for this paragraph)— 

12 ‘‘(i) such amount shall not be includ13 ible in gross income, and 

14 ‘‘(ii) the tax imposed under chapter 1 

15 on the distributee for the taxable year in 

16 which such amount is distributed shall be 

17 increased by 100 percent of such amount. 

18 ‘‘(B) ORDERING RULES.—For purposes of 

19 this paragraph, distributions shall be treated as 

20 made from amounts attributable to other con21 tributions and from earnings before made from 

22 amounts attributable to contributions made 

23 under section 2(d) of the America Saving for 

24 Personal Investment, Retirement, and Edu25 cation Act of 2004.’’. 
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1 (3) QUALIFIED TUITION PROGRAMS.—Section 

2 529(c)(3) of the Internal Revenue Code of 1986 (re3 lating to distributions) is amended by adding at the 

4 end the following new subparagraph: 

5 ‘‘(E) 100 PERCENT TAX ON DISTRIBU6 TIONS RELATED TO CERTAIN GOVERNMENT

7 CONTRIBUTIONS.— 

8 ‘‘(i) IN GENERAL.—In the case of any 

9 distribution which is attributable to con10 tributions made under section 2(d) of the 

11 America Saving for Personal Investment, 

12 Retirement, and Education Act of 2004 

13 and which would be includible in gross in14 come (but for this subparagraph)— 

15 ‘‘(I) such amount shall not be in16 cludible in gross income, and 

17 ‘‘(II) the tax imposed under 

18 chapter 1 on the distributee for the 

19 taxable year in which such amount is 

20 distributed shall be increased by 100 

21 percent of such amount. 

22 ‘‘(ii) ORDERING RULES.—For pur23 poses of this subparagraph, distributions 

24 shall be treated as made from amounts at25 tributable to other contributions and from
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•S 2751 IS 

1 earnings before made from amounts attrib2 utable to contributions made under section 

3 2(d) of the America Saving for Personal 

4 Investment, Retirement, and Education 

5 Act of 2004.’’. 

6 SEC. 8. PRIVATE MANAGEMENT OF KIDS ACCOUNTS. 

7 (a) IN GENERAL.—Part I of subchapter D of chapter 

8 1 of the Internal Revenue Code of 1986 is amended by 

9 inserting after section 408A the following new section: 

10 ‘‘SEC. 408B. PRIVATELY MANAGED KIDS ACCOUNTS. 

11 ‘‘(a) IN GENERAL.—Except as provided in this sec12 tion, a privately managed KIDS Account shall be treated 

13 in the same manner as a Roth IRA, except that: 

14 ‘‘(1) Qualified distributions shall include— 

15 ‘‘(A) qualified higher education expenses 

16 (as defined in section 529(e)(3)) of the bene17 ficiary of a privately managed KIDS Account, 

18 and 

19 ‘‘(B) amounts which within 60 days of dis20 tribution are transferred to a qualified tuition 

21 program under section 529 for the benefit of 

22 the account holder of a privately managed 

23 KIDS Account or a member of the family 

24 (within the meaning of section 529(e)(2)) of 

25 such account holder. 
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•S 2751 IS 

1 ‘‘(2) Section 408A(d)(2)(B) shall not apply. 

2 ‘‘(3) In lieu of the definition given the term 

3 ‘qualified rollover contribution’ under section 

4 408A(e), such term shall mean a rollover contribu5 tion to a privately managed KIDS Account from an6 other such account or from a KIDS Account under 

7 section 7(b)(2)(A) of the America Saving for Per8 sonal Investment, Retirement, and Education Act of 

9 2004, but only if such rollover contribution meets 

10 the requirements of section 408(d)(3). 

11 ‘‘(4) In the case of any distribution which is at12 tributable to contributions made under section 2(d) 

13 of the America Saving for Personal Investment, Re14 tirement, and Education Act of 2004 and which 

15 would be includible in gross income (but for this 

16 paragraph)— 

17 ‘‘(A) such amount shall not be includible in 

18 gross income, and 

19 ‘‘(B) the tax imposed under chapter 1 on 

20 the distributee for the taxable year in which 

21 such amount is distributed shall be increased by 

22 100 percent of such amount. 

23 For purposes of this paragraph, distributions from 

24 privately managed KIDS Accounts shall be treated 

25 as made from amounts attributable to contributions 
23

•S 2751 IS 

1 made under section 3(f) of the America Saving for 

2 Personal Investment, Retirement, and Education 

3 Act of 2004 and from earnings before made from 

4 amounts attributable to contributions made under 

5 section 2(d) of such Act. 

6 ‘‘(b) PRIVATELY MANAGED KIDS ACCOUNT.—For 

7 purposes of this title, the term ‘privately managed KIDS 

8 Account’ means an individual retirement plan (as defined 

9 in section 7701(a)(37)) which is designated (in such man10 ner as the Secretary may prescribe) as a privately man11 aged KIDS Account.’’. 

12 (b) CONFORMING AMENDMENT.—The table of sec13 tions for part I of subchapter D of chapter 1 of the Inter14 nal Revenue Code of 1986 is amended by inserting after 

15 the item related to section 408A the following new item:

‘‘Sec. 408B. Privately managed KIDS Accounts.’’.

16 SEC. 9. KIDS ACCOUNT FUND BOARD. 

17 (a) IN GENERAL.—There is established in the Execu18 tive branch of the Government a KIDS Account Fund 

19 Board. 

20 (b) COMPOSITION, DUTIES, AND RESPONSIBIL21 ITIES.—Subject to the provisions of this Act, the provi22 sions of — 

23 (1) section 8472 of title 5, United States Code 

24 (relating to composition of Federal Retirement 

25 Thrift Investment Board), 
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•S 2751 IS 

1 (2) section 8474 of such title (relating to Exec2 utive Director), 

3 (3) section 8475 of such title (relating to in4 vestment policies), and 

5 (4) section 8476 of such title (relating to ad6 ministrative provisions), 

7 shall apply with respect to the KIDS Account Fund Board 

8 in the same manner and to the same extent as such provi9 sions relate to the Federal Retirement Thrift Investment 

10 Board. 

11 SEC. 10. FIDUCIARY RESPONSIBILITIES. 

12 (a) IN GENERAL.—Under regulations of the Sec13 retary of Labor, the provisions of sections 8477 and 8478 

14 of title 5, United States Code, shall apply in connection 

15 with the KIDS Account Fund and the accounts main16 tained in such Fund in the same manner and to the same 

17 extent as such provisions apply in connection with the 

18 Thrift Savings Fund and the accounts maintained in the 

19 Thrift Savings Fund. 

20 (b) INVESTIGATIVE AUTHORITY.—Any authority 

21 available to the Secretary of Labor under section 504 of 

22 the Employee Retirement Income Security Act of 1974 is 

23 hereby made available to the Secretary of Labor, and any 

24 officer designated by the Secretary of Labor, to determine 
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•S 2751 IS 

1 whether any person has violated, or is about to violate, 

2 any provision applicable under subsection (a). 

3 (c) EXCULPATORY PROVISIONS; INSURANCE.— 

4 (1) IN GENERAL.—Any provision in an agree5 ment or instrument which purports to relieve a fidu6 ciary from responsibility or liability for any responsi7 bility, obligation, or duty under this Act shall be 

8 void. 

9 (2) INSURANCE.—Amounts in the KIDS Ac10 count Fund available for administrative expenses 

11 shall be available and may be used at the discretion 

12 of the Executive Director to purchase insurance to 

13 cover potential liability of persons who serve in a fi14 duciary capacity with respect to the Fund and ac15 counts maintained therein, without regard to wheth16 er a policy of insurance permits recourse by the in17 surer against the fiduciary in the case of a breach 

18 of a fiduciary obligation. 

19 SEC. 11. ASSIGNMENT, ALIENATION, AND TREATMENT OF 

20 DECEASED INDIVIDUALS. 

21 (a) ASSIGNMENT AND ALIENATION.—Under regula22 tions which shall be prescribed by the Executive Director, 

23 rules relating to assignment and alienation applicable 

24 under chapter 84 of title 5, United States Code, with re25 spect to amounts held in accounts in the Thrift Savings
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•S 2751 IS 

1 Fund shall apply with respect to amounts held in KIDS 

2 Accounts in the KIDS Account Fund. 

3 (b) TREATMENT OF ACCOUNTS OF DECEASED INDI4 VIDUALS.—In the case of a deceased account holder of a 

5 KIDS Account which has an account balance greater than 

6 zero, upon receipt of notification of such individual’s 

7 death, the Executive Director shall close the account and 

8 shall transfer the balance in such account to the KIDS 

9 Account of such account holder’s surviving spouse or, if 

10 there is no such account of a surviving spouse, to the duly 

11 appointed legal representative of the estate of the deceased 

12 account holder, or if there is no such representative, to 

13 the person or persons determined to be entitled thereto 

14 under the laws of the domicile of the deceased account 

15 holder. 

16 SEC. 12. ACCOUNTS DISREGARDED IN DETERMINING ELIGI17 BILITY FOR FEDERAL BENEFITS. 

18 Amounts in any KIDS Account shall not be taken 

19 into account in determining any individual’s eligibility for 

20 any federally funded benefit, including student financial 

21 aid. 

22 SEC. 13. REPORTS. 

23 (a) ANNUAL REPORT.—The Executive Director, in 

24 consultation with the Secretary of the Treasury, shall an-
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1 nually transmit a written report to the Congress. Such re2 port shall include— 

3 (1) a detailed description of the status and op4 eration of the KIDS Account Fund and the manage5 ment of the KIDS Accounts, and 

6 (2) a detailed accounting of the administrative 

7 expenses in carrying out this Act, including the ratio 

8 of such administrative expenses to the balance of the 

9 KIDS Account Fund and the methodology adopted 

10 by the Executive Director for allocating such ex11 penses among the KIDS Accounts. 

12 (b) REPAYMENT OF AUTOMATIC CONTRIBUTIONS.—

13 Not later than 2 years before the issuance of any final 

14 regulation under section 3(h), the Executive Director shall 

15 transmit a written report to the Congress. Such report 

16 shall include a draft of the proposed regulation to be 

17 issued under such section and a description of the conclu18 sions and recommendations of the Executive Director re19 garding the implementation of the following repayment op20 tions: 

21 (1) Repayment through service or employment 

22 in high-need professions or areas. 

23 (2) Increasing the Federal income tax liability 

24 of each account holder of a KIDS Account by $100 
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1 per year for 5 years after the account holder attains 

2 age 30. 

3 (3) Repayment from the account or other 

4 sources before the account holder of a KIDS Ac5 count attains age 30. 

6 (4) Alternatives for individuals facing financial 

7 hardship, including deferred repayment and forgive8 ness. 

9 SEC. 14. PROGRAMS FOR PROMOTING FINANCIAL LIT10 ERACY. 

11 The Secretary of the Treasury, in coordination with 

12 the Financial Literacy and Education Commission, shall 

13 develop programs to promote the financial literacy of ac14 count holders of KIDS Accounts and the legal guardians 

15 of such account holders who have the rights with respect 

16 to such accounts under section 3(i).

Æ