I
103D CONGRESS
1ST SESSION
H. R. 822
To amend the Internal Revenue Code of 1986 to increase the availability
of individual retirement accounts, to increase amount deductible for con-
tributions to such accounts, and to permit penalty-free withdrawals from
such accounts to pay educational, medical, and business start-up ex-
penses.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 4, 1993
Mr. BROWN of California 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 increase
the availability of individual retirement accounts, to in-
crease amount deductible for contributions to such ac-
counts, and to permit penalty-free withdrawals from such
accounts to pay educational, medical, and business start-
up expenses.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Middle Class Flexible
Savings Act of 1993’’.
SEC. 2. HIGHER MAXIMUM IRA DEDUCTION AND INCOME
PHASEOUT LIMITS; INFLATION ADJUSTMENT
OF MAXIMUM IRA DEDUCTION AND PHASE-
OUT LIMITS.
(a) HIGHER MAXIMUM IRA DEDUCTION.—
(1) IN GENERAL.—The following provisions of
the Internal Revenue Code of 1986 are each amend-
ed by striking ‘‘$2,000’’ and inserting ‘‘$3,000’’:
(A) Subsections (b)(1)(A) and (c)(2) of
section 219.
(B) Subsections (a)(1), (b), and (j) of sec-
tion 408.
(2) 
CONFORMING
AMENDMENT.—Sections
219(c)(2) and 408(d)(5) are each amended by strik-
ing ‘‘$2,250’’ and inserting ‘‘$3,500’’.
(b) HIGHER INCOME PHASEOUT LIMITS.—
(1) Subparagraph (B) of section 219(g)(3) of
such Code is amended—
(A) by striking ‘‘$40,000’’ and inserting
‘‘$50,000’’, and
(B) by striking ‘‘$25,000’’ and inserting
‘‘$30,000’’.
(2) Clause (ii) of section 219(g)(2)(A) of such
Code is amended to read as follows:
‘‘(ii) $12,000.’’
(c) INFLATION ADJUSTMENT OF MAXIMUM IRA DE-
DUCTION AND INCOME PHASEOUT LIMITS.—Section 219
of such Code is amended by inserting after subsection (f)
the following new subsection:
‘‘(g) INFLATION ADJUSTMENT OF MAXIMUM DEDUC-
TION AND INCOME PHASEOUT LIMITS.—
‘‘(1) IN GENERAL.—In the case of any taxable
year beginning in a calendar year after 1993, each
applicable dollar amount shall be increased by an
amount equal to—
‘‘(A) such dollar amount, multiplied by
‘‘(B) the cost-of-living adjustment under
section 1(f)(3) for the calendar year in which
the taxable year begins, determined by sub-
stituting ‘calendar year 1992’ for ‘calendar year
1989’ in subparagraph (B) thereof.
‘‘(2) APPLICABLE DOLLAR AMOUNT.—For pur-
poses of paragraph (1), the term ‘applicable dollar
amount’ means—
‘‘(A) the $3,000 amount in subsections
(b)(1)(A), (c)(2), and (c)(3) of this section and
in subsections (a)(1), (b), and (j) of section
408,
‘‘(B) the $3,500 amount in subsection
(c)(2) of this section and in section 408(d)(5),
‘‘(C) the $50,000 and $30,000 amounts in
subsection (g)(3)(B), and
‘‘(D) the $12,000 amount in subsection
(g)(2)(A)(ii).
‘‘(3) ROUNDING.—If any amount as adjusted
under paragraph (1) is not a multiple of $50, such
amount shall be rounded to the nearest multiple of
$50 (or, if such amount is a multiple of $25 and not
of $50, such amount shall be rounded to the next
highest multiple of $50).’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1992.
SEC. 3. IRA FOR NONWORKING SPOUSE WITH YOUNG CHIL-
DREN COMPUTED ON BASIS OF COMPENSA-
TION OF BOTH SPOUSES.
(a) IN GENERAL.—Subsection (c) of section 219 of
the Internal Revenue Code of 1986 (relating to special
rules for certain married individuals) is amended by add-
ing at the end thereof the following new paragraph:
‘‘(3) HIGHER LIMIT FOR SPOUSE WITH YOUNG
CHILDREN.—
‘‘(A) IN GENERAL.—In the case of a quali-
fying spouse, the amount allowable as a deduc-
tion under paragraph (1) shall not exceed the
lesser of—
‘‘(i) $3,000, or
‘‘(ii) the sum of—
‘‘(I) the compensation includible
in such individual’s gross income for
the taxable year, plus
‘‘(II) the compensation includible
in the gross income of such individ-
ual’s spouse for the taxable year re-
duced by the amount allowable as a
deduction under subsection (a) to
such spouse for such taxable year.
‘‘(B) QUALIFYING SPOUSE.—For purposes
of subparagraph (A), the term ‘qualifying
spouse’ means any spouse of an individual if—
‘‘(i) such individual and spouse file a
joint return for the taxable year,
‘‘(ii) such spouse has less than $1,000
of compensation (determined without re-
gard to section 911) for the taxable year,
and
‘‘(iii) such spouse has a child (as de-
fined in section 151(c)(3)) who has not at-
tained age 6 as of the close of such taxable
year and who is a dependent (as defined in
section 152) of the taxpayer for such
year.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1992.
SEC. 4. PENALTY-FREE WITHDRAWALS FROM CERTAIN
PLANS TO PAY EDUCATIONAL EXPENSES,
MEDICAL EXPENSES, AND BUSINESS START-
UP EXPENSES.
(a) EDUCATIONAL EXPENSES AND BUSINESS START-
UP EXPENSES.—
(1) IN
GENERAL.—Paragraph (2) of section
72(t) of the Internal Revenue Code of 1986 (relating
to exceptions to 10-percent additional tax on early
distributions from qualified retirement plans) is
amended by adding at the end thereof the following
new subparagraph:
‘‘(D) 
DISTRIBUTIONS
FROM
CERTAIN
PLANS FOR EDUCATIONAL EXPENSES AND BUSI-
NESS START-UP EXPENSES.—
‘‘(i) IN
GENERAL.—Distributions to
an individual from an individual retirement
plan, or from amounts attributable to em-
ployer contributions made pursuant to
elective deferrals described in subpara-
graph (A) or (C) of section 402(g)(3) or
section 501(c)(18)(D)(iii) to the extent
such distributions do not exceed the sum
of—
‘‘(I) the qualified higher edu-
cation expenses (as defined in para-
graph (6)) of the taxpayer for the tax-
able year, and
‘‘(II) the start-up expenditures
(as defined in section 195(c)) of the
taxpayer for the taxable year.
‘‘(ii) 
ADJUSTED
GROSS
INCOME
LIMIT.—Clause (i) shall apply to distribu-
tions from an individual retirement plan
only if the adjusted gross income of the
distributee for the taxable year in which
the distribution occurs does not exceed—
‘‘(I) $60,000 in the case of an
unmarried individual,
‘‘(II) $70,000 in the case of a
joint return, and
‘‘(III) $35,000 in the case of a
married individual filing a separate
return.’’
(2) QUALIFIED HIGHER EDUCATION EXPENSES
DEFINED.—Section 72(t) of such Code is amended
by adding at the end thereof the following new para-
graph:
‘‘(6) QUALIFIED
HIGHER
EDUCATION
EX-
PENSES.—For purposes of paragraph (2)(D)—
‘‘(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) a child (as defined in section
151(c)(3)) of the taxpayer,
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.’’
(b) CATASTROPHIC ILLNESS EXPENSES.—Subpara-
graph (A) of section 72(t)(3) of such Code is amended
to read as follows:
‘‘(A) CERTAIN EXCEPTIONS NOT TO APPLY
TO INDIVIDUAL RETIREMENT PLANS.—
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), subparagraphs (A)(v),
(B), and (C) of paragraph (2) shall not
apply to distributions from an individual
retirement plan.
‘‘(ii) DISTRIBUTIONS
FOR
MEDICAL
EXPENSES FROM CERTAIN INDIVIDUAL RE-
TIREMENT PLANS.—Subparagraph (B) of
paragraph (2) shall apply to distributions
from an individual retirement plan if the
adjusted gross income of the distributee
for the taxable year in which the distribu-
tion occurs does not exceed the applicable
limitation under paragraph (2)(D).’’
(c) CONFORMING AMENDMENTS.—
(1) Section 401(k)(2)(B)(i) of such Code is
amended by striking ‘‘or’’ at the end of subclause
(III), by striking ‘‘and’’ at the end of subclause (IV)
and inserting ‘‘or’’, and by inserting after subclause
(IV) the following new subclause:
‘‘(V) the date on which distribu-
tions for qualified higher education
expenses 
(as 
defined 
in 
section
72(t)(6)) or start-up expenses (as de-
fined in section 195(c)) are made,
and’’.
(2) Section 403(b)(11) of such Code is amend-
ed 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 sub-
paragraph (B) the following new subparagraph:
‘‘(C) for the payment of qualified higher
education expenses (as defined in section
72(t)(6)) or start-up expenses (as defined in
section 195(c)).’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to payments and distributions after
the date of the enactment of this Act.
Æ