‘‘(i) the compensation includible in
such individual’s gross income for the tax-
able year, plus
‘‘(ii) the compensation includible in
the gross income of such individual’s
spouse for the taxable year reduced by the
amount allowable as a deduction under
subsection (a) to such spouse for such tax-
able year.
‘‘(2) INDIVIDUALS
TO
WHOM
PARAGRAPH
(1)
APPLIES.—Paragraph (1) shall apply to any individ-
ual if—
‘‘(A) such individual files a joint return for
the taxable year, and
‘‘(B) the amount of compensation (if any)
includible in such individual’s gross income for
the taxable year is less than the compensation
includible in the gross income of such individ-
ual’s spouse for the taxable year.’’.
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 219(f) (relating to
other definitions and special rules) is amended by
striking ‘‘subsections (b) and (c)’’ and inserting
‘‘subsection (b)’’.
(2) Paragraph (2) of section 219(h), as added
by section 102, is amended by striking ‘‘Each of the
dollar amounts’’ and inserting ‘‘The dollar amount’’.
(3) Section 408(d)(5) is amended by striking
‘‘$2,250’’ and inserting ‘‘$2,000’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1994.
SEC. 104. CERTAIN COINS AND BULLION NOT TREATED AS
COLLECTIBLES.
(a) IN GENERAL.—Paragraph (3) of section 408(m)
(relating to exception for certain coin) is amended to read
as follows:
‘‘(3) EXCEPTION FOR CERTAIN COINS AND BUL-
LION.—For purposes of this subsection, the term
‘collectible’ shall not include—
‘‘(A) any coin certified by a recognized
grading service and traded on a nationally rec-
ognized electronic network, or listed by a recog-
nized wholesale reporting service, and—
‘‘(i) which is or was at any time legal
tender in the country of issuance, or
‘‘(ii) issued under the laws of any
State, and
‘‘(B) any gold, silver, platinum, or palla-
dium bullion (whether fabricated in the form of
a coin or otherwise) of a fineness equal to or
exceeding the minimum fineness required for
metals which may be delivered in satisfaction of
a regulated futures contract subject to regula-
tion by the Commodity Futures Trading Com-
mission under the Commodity Exchange Act,
if such coin or bullion is in the physical possession
of a trustee described under subsection (a) of this
section.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1994.
SEC. 105. COORDINATION OF IRA DEDUCTION LIMIT WITH
ELECTIVE DEFERRAL LIMIT.
(a) IN GENERAL.—Section 219(b) (relating to maxi-
mum amount of deduction) is amended by adding at the
end the following new paragraph:
‘‘(4) COORDINATION
WITH
ELECTIVE
DEFER-
RAL LIMIT.—The amount determined under para-
graph (1) or subsection (c)(1) with respect to any
individual for any taxable year shall not exceed the
excess (if any) of—
‘‘(A) the maximum amount of elective de-
ferrals of the individual which are excludable
from gross income for the taxable year under
section 402(g)(1), over
‘‘(B) the amount so excluded.’’.
(b) CONFORMING AMENDMENT.—Section 219(c), as
amended by section 104, is amended by adding at the end
the following new paragraph:
‘‘(3) CROSS REFERENCE.—
‘‘For reduction in paragraph (1) amount, see sub-
section (b)(4).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1994.
Subtitle B—Nondeductible Tax-
Free IRAs
SEC. 111. ESTABLISHMENT OF NONDEDUCTIBLE TAX-FREE
INDIVIDUAL RETIREMENT ACCOUNTS.
(a) IN GENERAL.—Subpart A of part I of subchapter
D of chapter 1 (relating to pension, profit-sharing, stock
bonus plans, etc.) is amended by inserting after section
408 the following new section:
‘‘SEC. 408A. IRA PLUS ACCOUNTS.
‘‘(a) GENERAL RULE.—Except as provided in this
section, an IRA Plus account shall be treated for purposes
of this title in the same manner as an individual retire-
ment plan.
‘‘(b) IRA PLUS ACCOUNT.—For purposes of this
title, the term ‘IRA Plus account’ means an individual re-
tirement plan which is designated at the time of establish-
ment of the plan as an IRA Plus account.
‘‘(c) TREATMENT OF CONTRIBUTIONS.—
‘‘(1) NO DEDUCTION ALLOWED.—No deduction
shall be allowed under section 219 for a contribution
to an IRA Plus account.
‘‘(2) CONTRIBUTION
LIMIT.—The aggregate
amount of contributions for any taxable year to all
IRA Plus accounts maintained for the benefit of an
individual shall not exceed the excess (if any) of—
‘‘(A) the maximum amount allowable as a
deduction under section 219 with respect to
such individual for such taxable year (computed
without regard to subsections (b)(4) and (g) of
such section), over
‘‘(B) the amount so allowed.
‘‘(3) ROLLOVER CONTRIBUTIONS.—
‘‘(A) IN GENERAL.—No rollover contribu-
tion may be made to an IRA Plus account un-
less it is a qualified transfer.
‘‘(B) COORDINATION WITH LIMIT.—A roll-
over contribution shall not be taken into ac-
count for purposes of paragraph (2).
‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.—
‘‘(1) IN GENERAL.—Except as provided in this
subsection, any amount paid or distributed out of an
IRA Plus account shall not be included in the gross
income of the distributee.
‘‘(2) EXCEPTION FOR EARNINGS ON CONTRIBU-
TIONS HELD LESS THAN 5 YEARS.—
‘‘(A) IN GENERAL.—Any amount distrib-
uted out of an IRA Plus account which consists
of earnings allocable to contributions made to
the account during the 5-year period ending on
the day before such distribution shall be in-
cluded in the gross income of the distributee for
the taxable year in which the distribution oc-
curs.
‘‘(B) CROSS REFERENCE.—
‘‘For additional tax for early withdrawal, see sec-
tion 72(t).
‘‘(C) ORDERING RULE.—
‘‘(i) FIRST-IN, FIRST-OUT
RULE.—
Distributions from an IRA Plus account
shall be treated as having been made—
‘‘(I) first from the earliest con-
tribution 
(and 
earnings 
allocable
thereto) remaining in the account at
the time of the distribution, and
‘‘(II) then from other contribu-
tions (and earnings allocable thereto)
in the order in which made.
‘‘(ii) ALLOCATIONS
BETWEEN
CON-
TRIBUTIONS AND EARNINGS.—Any portion
of a distribution allocated to a contribution
(and earnings allocable thereto) shall be
treated as allocated first to the earnings
and then to the contribution.
‘‘(iii) ALLOCATION
OF
EARNINGS.—
Earnings shall be allocated to a contribu-
tion in such manner as the Secretary may
by regulations prescribe.
‘‘(iv) 
CONTRIBUTIONS
IN
SAME
YEAR.—Except as provided in regulations,
all contributions made during the same
taxable year may be treated as 1 contribu-
tion for purposes of this subparagraph.
‘‘(3) ROLLOVERS.—
‘‘(A) IN
GENERAL.—Paragraph (2) shall
not apply to any distribution which is trans-
ferred in a qualified transfer to another IRA
Plus account.
‘‘(B) CONTRIBUTION
PERIOD.—For pur-
poses of paragraph (2), the IRA Plus account
to which any contributions are transferred from
another IRA Plus account shall be treated as
having held such contributions during any pe-
riod such contributions were held (or are treat-
ed as held under this subparagraph) by the ac-
count from which transferred.
‘‘(4) SPECIAL
RULES
RELATING
TO
CERTAIN
TRANSFERS.—
‘‘(A) IN GENERAL.—Notwithstanding any
other provision of law, in the case of a qualified
transfer to an IRA Plus account from an indi-
vidual retirement plan which is not an IRA
Plus account—
‘‘(i) there shall be included in gross
income any amount which, but for the
qualified transfer, would be includible in
gross income, but
‘‘(ii) section 72(t) shall not apply to
such amount.
‘‘(B) TIME FOR INCLUSION.—In the case
of any qualified transfer which occurs before
January 1, 1997, any amount includible in
gross income under subparagraph (A) with re-
spect to such contribution shall be includible
ratably over the 4-taxable year period beginning
in the taxable year in which the amount was
paid or distributed out of the individual retire-
ment plan.
‘‘(e) QUALIFIED TRANSFER.—For purposes of this
section, the term ‘qualified transfer’ means a transfer to
an IRA Plus account from another such account or from
an individual retirement plan but only if such transfer
meets the requirements of section 408(d)(3).’’.
(b) EARLY WITHDRAWAL PENALTY.—Section 72(t),
as amended by section 201(c), is amended by adding at
the end the following new paragraph:
‘‘(8) RULES
RELATING
TO
IRA
PLUS
AC-
COUNTS.—In the case of an IRA Plus account under
section 408A—
‘‘(A) this subsection shall only apply to
distributions out of such account which consist
of earnings allocable to contributions made to
the account during the 5-year period ending on
the day before such distribution, and
‘‘(B) paragraph (2)(A)(i) shall not apply to
any distribution described in subparagraph
(A).’’.
(c) EXCESS CONTRIBUTIONS.—Section 4973(b) is
amended by adding at the end the following new sentence:
‘‘For purposes of paragraphs (1)(B) and (2)(C), the
amount allowable as a deduction under section 219 shall
be computed without regard to section 408A.’’
(d) CONFORMING AMENDMENT.—The table of sec-
tions for subpart A of part I of subchapter D of chapter
1 is amended by inserting after the item relating to section
408 the following new item:
‘‘Sec. 408A. IRA Plus accounts.’’.
(e) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to taxable years beginning after Decem-
ber 31, 1994.
(2) QUALIFIED
TRANSFERS
IN
1994.—The
amendments made by this section shall apply to any
qualified transfer during any taxable year beginning
in 1994.
TITLE II—PENALTY-FREE
DISTRIBUTIONS
SEC. 201. DISTRIBUTIONS FROM CERTAIN PLANS MAY BE
USED 
WITHOUT 
PENALTY 
TO 
PURCHASE
FIRST HOMES, TO PAY HIGHER EDUCATION
OR FINANCIALLY DEVASTATING MEDICAL EX-
PENSES, OR TO PAY LONG-TERM CARE IN-
SURANCE PREMIUMS.
(a) IN GENERAL.—Paragraph (2) of section 72(t)
(relating to exceptions to 10-percent additional tax on
early distributions from qualified retirement plans) is
amended by adding at the end the following new subpara-
graph:
‘‘(D) 
DISTRIBUTIONS
FROM
CERTAIN
PLANS
FOR
FIRST
HOME
PURCHASES, EDU-
CATIONAL EXPENSES, OR LONG-TERM CARE IN-
SURANCE EXPENSES.—Distributions to an indi-
vidual from an individual retirement plan, or
from amounts attributable to employer con-
tributions made pursuant to elective deferrals
described in subparagraph (A) or (C) of section
402(g)(3) or section 501(c)(18)(D)(iii)—
‘‘(i) which are qualified first-time
homebuyer distributions (as defined in
paragraph (6)),
‘‘(ii) to the extent such distributions
do not exceed the qualified higher edu-
cation expenses (as defined in paragraph
(7)) of the taxpayer for the taxable year,
or
‘‘(iii) to the extent such distributions
do not exceed the amounts paid by the tax-
payer during the taxable year for coverage
of the taxpayer or the taxpayer’s spouse
under any long-term care insurance con-
tract (as defined in section 7705).’’.
(b) FINANCIALLY
DEVASTATING
MEDICAL
EX-
PENSES.—
(1) 
IN
GENERAL.—Section 
72(t)(3)(A) 
is
amended by striking ‘‘(B),’’.
(2) CERTAIN LINEAL DESCENDANTS AND AN-
CESTORS
TREATED
AS
DEPENDENTS.—Subpara-
graph (B) of section 72(t)(2) is amended by striking
‘‘medical care’’ and all that follows and inserting
‘‘medical care determined—
‘‘(i) without regard to whether the
employee itemizes deductions for such tax-
able year, and
‘‘(ii) by treating such employee’s de-
pendents as including—
‘‘(I) all children and grand-
children of the employee or such em-
ployee’s spouse, and
‘‘(II) all ancestors of the em-
ployee or such employee’s spouse.’’.
(3) CONFORMING AMENDMENT.—Subparagraph
(B) of section 72(t)(2) is amended by striking ‘‘or
(C)’’ and inserting ‘‘, (C) or (D)’’.
(c) PENALTY-FREE DISTRIBUTIONS FOR CERTAIN
UNEMPLOYED INDIVIDUALS.—Paragraph (2) of section
72(t) is amended by adding at the end the following new
subparagraph:
‘‘(E) DISTRIBUTIONS TO UNEMPLOYED IN-
DIVIDUALS.—A distribution from an individual
retirement plan to an individual after separa-
tion from employment, if—
‘‘(i) such individual has received un-
employment compensation for 12 consecu-
tive weeks under any Federal or State un-
employment compensation law by reason of
such separation, and
‘‘(ii) such distributions are made dur-
ing any taxable year during which such un-
employment compensation is paid or the
succeeding taxable year.
To the extent provided in regulations, a self-em-
ployed individual shall be treated as meeting
the requirements of clause (i) if, under Federal
or State law, the individual would have received
unemployment compensation but for the fact
the individual was self-employed.’’.
(d) DEFINITIONS.—
(1) Section 72(t) is amended by adding at the
end the following new paragraphs:
‘‘(6) QUALIFIED FIRST-TIME HOMEBUYER DIS-
TRIBUTIONS.—For purposes of paragraph (2)(D)(i):
‘‘(A) IN
GENERAL.—The term ‘qualified
first-time homebuyer distribution’ means any
payment or distribution received by an individ-
ual to the extent such payment or distribution
is used by the individual before the close of the
60th day after the day on which such payment
or distribution is received to pay qualified ac-
quisition costs with respect to a principal resi-
dence of a first-time homebuyer who is such in-
dividual, the spouse of such individual, or any
child, grandchild, or ancestor of such individual
or the individual’s spouse.
‘‘(B) QUALIFIED
ACQUISITION
COSTS.—
For purposes of this paragraph, the term
‘qualified acquisition costs’ means the costs of
acquiring, constructing, or reconstructing a res-
idence. Such term includes any usual or reason-
able settlement, financing, or other closing
costs.
‘‘(C) FIRST-TIME
HOMEBUYER; 
OTHER
DEFINITIONS.—For purposes of this paragraph:
‘‘(i) FIRST-TIME
HOMEBUYER.—The
term ‘first-time homebuyer’ means any in-
dividual if—
‘‘(I) such individual (and if mar-
ried, such individual’s spouse) had no
present ownership interest in a prin-
cipal residence during the 2-year pe-
riod ending on the date of acquisition
of the principal residence to which
this paragraph applies, and
‘‘(II) subsection (a)(6), (h), or
(k) of section 1034 did not suspend
the running of any period of time
specified in section 1034 with respect
to such individual on the day before
the date the distribution is applied
pursuant to subparagraph (A)(ii).
‘‘(ii) 
PRINCIPAL
RESIDENCE.—The
term ‘principal residence’ has the same
meaning as when used in section 1034.
‘‘(iii) DATE
OF
ACQUISITION.—The
term ‘date of acquisition’ means the date—
‘‘(I) on which a binding contract
to acquire the principal residence to
which subparagraph (A) applies is en-
tered into, or
‘‘(II) on which construction or re-
construction of such a principal resi-
dence is commenced.
‘‘(D) SPECIAL RULE WHERE DELAY IN AC-
QUISITION.—If any distribution from any indi-
vidual retirement plan fails to meet the require-
ments of subparagraph (A) solely by reason of
a delay or cancellation of the purchase or con-
struction of the residence, the amount of the
distribution may be contributed to an individual
retirement 
plan 
as 
provided 
in 
section
408(d)(3)(A)(i) (determined by substituting
‘120 days’ for ‘60 days’ in such section), except
that—
‘‘(i) section 408(d)(3)(B) shall not be
applied to such contribution, and
‘‘(ii) such amount shall not be taken
into account in determining whether sec-
tion 408(d)(3)(A)(i) applies to any other
amount.
‘‘(7) QUALIFIED
HIGHER
EDUCATION
EX-
PENSES.—For purposes of paragraph (2)(D)(ii):
‘‘(A) IN
GENERAL.—The term ‘qualified
higher education expenses’ means tuition, fees,
books, supplies, and equipment required for the
enrollment or attendance of—
‘‘(i) the taxpayer,
‘‘(ii) the taxpayer’s spouse, or
‘‘(iii) any child (as defined in section
151(c)(3)), grandchild, or ancestor of the
taxpayer or the taxpayer’s spouse,
at an eligible educational institution (as defined
in section 135(c)(3)).
‘‘(B) COORDINATION WITH SAVINGS BOND
PROVISIONS.—The amount of qualified higher
education expenses for any taxable year shall be
reduced by any amount excludable from gross
income under section 135.’’.
(2) Chapter 79 is amended by adding at the
end the following new section:
‘‘SEC. 7705. LONG-TERM CARE INSURANCE CONTRACT.
‘‘(a) GENERAL RULE.—For purposes of the provi-
sions of this title which refer to this section—
‘‘(1) IN GENERAL.—The term ‘long-term care
insurance contract’ means any insurance contract is-
sued if—
‘‘(A) the only insurance protection pro-
vided under such contract is coverage of quali-
fied long-term care services and benefits inci-
dental to such coverage,
‘‘(B) such contract does not cover expenses
incurred for services or items to the extent that
such expenses are reimbursable under title
XVIII of the Social Security Act or would be so
reimbursable but for the application of a de-
ductible or coinsurance amount,
‘‘(C) such contract is guaranteed renew-
able,
‘‘(D) such contract does not have any cash
surrender value, and
‘‘(E) all refunds of premiums, and all pol-
icyholder dividends or similar amounts, under
such contract are to be applied as a reduction
in future premiums or to increase future bene-
fits.
‘‘(2) SPECIAL RULES.—
‘‘(A) PER
DIEM, ETC. PAYMENTS
PER-
MITTED.—A contract shall not fail to be treated
as described in paragraph (1)(A) by reason of
payments being made on a per diem or other
periodic basis without regard to the expenses
incurred during the period to which the pay-
ments relate.
‘‘(B) CONTRACT
MAY
COVER
MEDICARE
REIMBURSABLE
EXPENSES
WHERE
MEDICARE
IS SECONDARY PAYOR.—Paragraph (1)(B) shall
not apply to expenses which are reimbursable
under title XVIII of the Social Security Act
only as a secondary payor.
‘‘(C) REFUNDS OF PREMIUMS.—Paragraph
(1)(E) shall not apply to any refund of pre-
miums on surrender or cancellation of the con-
tract.
‘‘(b) QUALIFIED LONG-TERM CARE SERVICES.—For
purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified long-
term care services’ means necessary diagnostic, pre-
ventive, therapeutic, and rehabilitative services, and
maintenance or personal care services, which—
‘‘(A) are required by a chronically ill indi-
vidual in a qualified facility, and
‘‘(B) are provided pursuant to a plan of
care prescribed by a licensed health care practi-
tioner.
‘‘(2) CHRONICALLY ILL INDIVIDUAL.—
‘‘(A) IN GENERAL.—The term ‘chronically
ill individual’ means any individual who has
been certified by a licensed health care practi-
tioner as—
‘‘(i)(I) being unable to perform (with-
out substantial assistance from another in-
dividual) at least 2 activities of daily living
(as defined in subparagraph (B)) for a pe-
riod of at least 90 days due to a loss of
functional capacity, or
‘‘(II) having a level of disability simi-
lar (as determined by the Secretary in con-
sultation with the Secretary of Health and
Human Services) to the level of disability
described in subclause (I), or
‘‘(ii) having a similar level of disabil-
ity due to cognitive impairment.
‘‘(B) ACTIVITIES OF DAILY LIVING.—For
purposes of subparagraph (A), each of the fol-
lowing is an activity of daily living:
‘‘(i) MOBILITY.—The process of walk-
ing or wheeling on a level surface which
may include the use of an assistive device
such as a cane, walker, wheelchair, or
brace.
‘‘(ii) DRESSING.—The overall complex
behavior of getting clothes from closets
and drawers and then getting dressed.
‘‘(iii) TOILETING
AND
BATHING.—
Each of the following shall be treated as 1
activity:
‘‘(I) The act of going to the toilet
room for bowel and bladder function,
transferring on and off the toilet,
cleaning after elimination, and ar-
ranging clothes or the ability to volun-
tarily control bowel and bladder func-
tion, or in the event of incontinence,
the ability to maintain a reasonable
level of personal hygiene.
‘‘(II) The overall complex behav-
ior of getting water and cleansing the
whole body, including turning on the
water for a bath, shower, or sponge
bath, getting to, in, and out of a tub
or shower, and washing and drying
oneself.
‘‘(iv) TRANSFER.—The process of get-
ting in and out of bed or in and out of a
chair or wheelchair.
‘‘(v) EATING.—The process of getting
food from a plate or its equivalent into the
mouth.
‘‘(3) QUALIFIED FACILITY.—The term ‘quali-
fied facility’ means—
‘‘(A) a nursing, rehabilitative, hospice, or
adult day care facility (including a hospital, re-
tirement home, nursing home, skilled nursing
facility, intermediate care facility, or similar in-
stitution)—
‘‘(i) which is licensed under State law,
or
‘‘(ii) which is a certified facility for
purposes of title XVIII or XIX of the So-
cial Security Act, or
‘‘(B) an individual’s home if a licensed
health care practitioner certifies that without
home care the individual would have to be cared
for in a facility described in subparagraph (A).
‘‘(4) MAINTENANCE OR PERSONAL CARE SERV-
ICES.—The term ‘maintenance or personal care serv-
ices’ means any care the primary purpose of which
is to provide needed assistance with any of the ac-
tivities of daily living described in paragraph (2)(B).
‘‘(5) 
LICENSED
HEALTH
CARE
PRACTI-
TIONER.—The term ‘licensed health care practi-
tioner’ means any physician (as defined in section
1861(r) of the Social Security Act) and any reg-
istered professional nurse, licensed social worker, or
other individual who meets such requirements as
may be prescribed by the Secretary.
‘‘(c) TREATMENT OF COVERAGE PROVIDED AS PART
OF A LIFE INSURANCE CONTRACT.—Except as otherwise
provided in regulations prescribed by the Secretary, in the
case of any long-term care insurance coverage (whether
or not qualified) provided by rider on a life insurance con-
tract, this section shall be applied as if the portion of the
contract providing such coverage were a separate con-
tract.’’
(e) CONFORMING AMENDMENTS.—
(1) Section 401(k)(2)(B)(i) is amended by
striking ‘‘or’’ at the end of subclause (III), by strik-
ing ‘‘and’’ at the end of subclause (IV) and inserting
‘‘or’’, and by inserting after subclause (IV) the fol-
lowing new subclause:
‘‘(V) the date on which qualified
first-time homebuyer distributions (as
defined in section 72(t)(6)), distribu-
tions for qualified higher education
expenses 
(as 
defined 
in 
section
72(t)(7)), or distributions for coverage
of the taxpayer or the taxpayer’s
spouse under any long-term care in-
surance contract (as defined in section
7705) are made, and’’.
(2) Section 403(b)(11) is amended by striking
‘‘or’’ at the end of subparagraph (A), by striking the
period at the end of subparagraph (B) and inserting
‘‘, or’’, and by inserting after subparagraph (B) the
following new subparagraph:
‘‘(C) for qualified first-time homebuyer dis-
tributions (as defined in section 72(t)(6)), for
the payment of qualified higher education ex-
penses (as defined in section 72(t)(7)), or dis-
tributions for coverage of the taxpayer or the
taxpayer’s spouse under any long-term care in-
surance contract (as defined in section 7705).’’.
(3) The table of sections for chapter 79 is
amended by adding at the end the following new
item:
‘‘Sec. 7705. Long-term care insurance contract.’’
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to payments and distributions after
the date of the enactment of this Act.
TITLE III—AID TO FAMILIES
WITH DEPENDENT CHILDREN
SEC. 301. DISREGARD OF INCOME AND RESOURCES DES-
IGNATED FOR EDUCATION, TRAINING, AND
EMPLOYABILITY.
(a) 
DISREGARD
AS
RESOURCE.—Section
402(a)(7)(B) of the Social Security Act (42 U.S.C.
602(a)(7)(B)) is amended—
(1) by striking ‘‘or’’ before ‘‘(iv)’’, and
(2) by inserting ‘‘, or (v) at the option of the
State, in the case of a family receiving aid under the
State plan (and a family not receiving such aid but
which received such aid in at least 1 of the preced-
ing 4 months or became ineligible for such aid dur-
ing the preceding 12 months because of excessive
earnings), any amount not to exceed $8,000 in a
qualified asset account (as defined in section 406(i))
of such family’’ before ‘‘; and’’.
(b) DISREGARD AS INCOME.—
(1) IN GENERAL.—Section 402(a)(8)(A) of such
Act (42 U.S.C. 602(a)(8)(A)) is amended—
(A) by striking ‘‘and’’ at the end of clause
(vii), and
(B) by inserting after clause (viii) the fol-
lowing new clause:
‘‘(ix) shall disregard any interest or
income earned on a qualified asset account
(as defined in section 406(i)); and’’.
(2) NONRECURRING LUMP SUM EXEMPT FROM
LUMP SUM RULE.—Section 402(a)(17) of such Act
(42 U.S.C. 602(a)(17)) is amended by adding at the
end the following: ‘‘; and that this paragraph shall
not apply to earned or unearned income received in
a month on a nonrecurring basis to the extent that
such income is placed in a qualified asset account
(as defined in section 406(i)) the total amount in
which, after such placement, does not exceed
$8,000;’’.
(3) 
TREATMENT
AS
INCOME.—Section
402(a)(7) of such Act (42 U.S.C. 602(a)(7)) is
amended—
(A) by striking ‘‘and’’ at the end of sub-
paragraph (B),
(B) by striking the semicolon at the end of
subparagraph (C) and inserting ‘‘; and’’, and
(C) by adding at the end the following new
subparagraph:
‘‘(D) shall treat as income any distribu-
tions from a qualified asset account (as defined
in section 406(i)(1)) which do not meet the def-
inition of a qualified distribution under section
406(i)(2);’’.
(c) QUALIFIED ASSET ACCOUNTS.—Section 406 of
such Act (42 U.S.C. 606) is amended by adding at the
end the following:
‘‘(i)(1) The term ‘qualified asset account’ means a
mechanism approved by the State (such as individual re-
tirement accounts, escrow accounts, or savings bonds) that
allows savings of a family receiving aid to families with
dependent children to be used for qualified distributions.
‘‘(2) The term ‘qualified distributions’ means dis-
tributions for expenses directly related to one or more of
the following purposes:
‘‘(A) The attendance of a member of the family
at any education or training program.
‘‘(B) The improvement of the employability (in-
cluding self-employment) of a member of the family
(such as through the purchase of an automobile).
‘‘(C) The purchase of a home for the family.
‘‘(D) A change of the family residence.’’.
(d) STUDY OF USE OF QUALIFIED ASSET ACCOUNTS;
REPORT.—The Secretary of Health and Human Services
shall conduct a study of the use of qualified asset accounts
established pursuant to the amendments made by this sec-
tion, and shall report on such study and any recommenda-
tions for modifications of such amendments to the Com-
mittee on Finance of the Senate and the Committee on
Ways and Means of the House of Representatives not later
than January 1, 1998.
(e) REPORT
ON AFDC ASSET LIMIT
ON AUTO-
MOBILES.—Within 3 months after the date of the enact-
ment of this section, the Secretary of Health and Human
Services shall submit to the Congress a report on—
(1) the need to revise the limitation, established
in regulations pursuant to section 402(a)(7)(B)(i) of
the Social Security Act, on the value of a family
automobile required to be disregarded by a State in
determining the eligibility of the family for aid to
families with dependent children under the State
plan approved under part A of title IV of such Act,
and
(2) the extent to which such a revision would
increase the employability of recipients of such aid.
(f) EFFECTIVE DATE.—The amendments made by
this section shall take effect on October 1, 1995, with re-
spect to accounts approved on or after such date and be-
fore October 1, 1998.
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