calculated and applied separately with respect 
to joint returns and all other returns. 
SEC. 5. RULES GOVERNING KIDS ACCOUNTS RELATING TO 
INVESTMENT, ACCOUNTING, AND REPORT-
ING. 
(a) DEFAULT INVESTMENT PROGRAM.—The KIDS 
Account Fund Board shall establish a default investment 
program under which, in a manner similar to a lifecycle 
investment program, sums in each KIDS Account are allo-
cated to investment funds in the KIDS Account Fund 
based on the amount of time before the account holder 
attains the age of 18. Each account holder of a KIDS 
Account shall be enrolled in such program unless such ac-
count holder, in such form and manner as prescribed by 
the Executive Director, elects otherwise. 
(b) OTHER RULES.—Under regulations which shall 
be prescribed by the Executive Director, and subject to 
the provisions of this Act, the provisions of—
(1) section 8438 of title 5, United States Code 
(relating to investment of the Thrift Savings Fund), 
(2) section 8439(b) of such title (relating to en-
gagement of independent qualified public account-
ant),
(3) section 8439(c) of such title (relating to 
periodic statements and summary descriptions of in-
vestment options), and 
(4) section 8439(d) of such title (relating to as-
sumption of risk), 
shall apply with respect to the KIDS Account Fund and 
accounts maintained in such Fund in the same manner 
and to the same extent as such provisions relate to the 
Thrift Savings Fund and the accounts maintained in the 
Thrift Savings Fund. For purposes of this subsection, ref-
erences in such sections 8438 and 8439 to an employee, 
Member, former employee, or former Member shall be 
deemed references to an account holder of a KIDS Ac-
count in the KIDS Account Fund. 
SEC. 6. DISTRIBUTIONS FROM KIDS ACCOUNTS. 
(a) IN GENERAL.—Under regulations prescribed by 
the Executive Director, amounts in a KIDS Account shall, 
at the request of the account holder, be distributed to the 
account holder if the account holder demonstrates to the 
satisfaction of the Executive Director that such amount 
will be used for qualified expenses. 
(b) AGE LIMITATION.—
(1) EARLY
DISTRIBUTIONS.—No distribution 
shall be made under subsection (a) with respect to
any account holder of a KIDS Account before such 
account holder attains age 18. 
(2) EXCEPTION.—Paragraph (1) shall not 
apply with respect to amounts distributed for quali-
fied higher education expenses (as defined in section 
529(e)(3) of the Internal Revenue Code of 1986). 
(c) QUALIFIED EXPENSES.—For purposes of this 
Act, the term ‘‘qualified expenses’’ means, with respect to 
any account holder—
(1) qualified distributions (within the meaning 
of section 408A(d)(2) of the Internal Revenue Code 
of 1986), 
(2) qualified higher education expenses (as de-
fined in section 529(e)(3) of such Code), and 
(3) amounts which within 60 days of distribu-
tion are transferred to a qualified tuition program 
under section 529 of the Internal Revenue Code of 
1986 for the benefit of the account holder or a mem-
ber of the family (within the meaning of section 
529(e)(2) of such Code) of such account holder. 
SEC. 7. TAX TREATMENT OF KIDS ACCOUNTS. 
(a) IN GENERAL.—Except as otherwise provided in 
this Act, for purposes of the Internal Revenue Code of 
1986—