‘‘(1) COMPENSATION.—For purposes of this
section, the term ‘compensation’ has the meaning
given to such term by section 219(f)(1).
‘‘(2) MARRIED
INDIVIDUALS.—The maximum
deduction under subsection (b) shall be computed
separately for each individual, and this section shall
be applied without regard to any community prop-
erty laws.
‘‘(3) TIME
WHEN
CONTRIBUTIONS
DEEMED
MADE.—For purposes of this section, a taxpayer
shall be deemed to have made a contribution to a
Universal Retirement Savings Account on the last
day of the preceding taxable year if the contribution
is made on account of such taxable year and is made
not later than the time prescribed by law for filing
the return for such taxable year (not including ex-
tensions thereof).
‘‘(4) EMPLOYER PAYMENTS.—For purposes of
this title, any amount paid by an employer to a Uni-
versal Retirement Savings Account shall be treated
as payment of compensation to the employee (other
than a self-employed individual who is an employee
within the meaning of section 401(c)(1)) includible
in the employee’s gross income in the taxable year
for which the amount was contributed, whether or
not a deduction for such payment is allowable under
this section to the employee.
‘‘(5) EXCESS
CONTRIBUTIONS
TREATED
AS
CONTRIBUTION
MADE
DURING
SUBSEQUENT
YEAR
FOR WHICH THERE IS AN UNUSED LIMITATION.—A
rule similar to the rule of section 219(f)(5) shall
apply for purposes of this section.’’
(2) DEDUCTION ALLOWED WHETHER OR NOT
TAXPAYER ITEMIZES DEDUCTIONS.—Subsection (a)
of section 62 is amended by inserting after para-
graph (18) the following new paragraph:
‘‘(19) CONTRIBUTIONS TO UNIVERSAL RETIRE-
MENT SAVINGS ACCOUNTS.—The deduction allowed
by section 219A.’’
(3) TECHNICAL AMENDMENTS.—
(A) Subparagraph (B) of section 135(c)(4)
is amended by striking ‘‘and 219’’ and inserting
‘‘219, and 219A’’.
(B) Subparagraph (B) of section 137(b)(3)
is amended by inserting ‘‘219A,’’ after ‘‘219,’’.
(C) Clause (ii) of section 219(g)(3)(A) is
amended by inserting ‘‘219A,’’ after ‘‘137,’’.
(D) Clause (ii) of section 221(b)(2)(C) is
amended by inserting ‘‘219A,’’ after ‘‘219,’’.
(E) Clause (ii) of section 222(b)(2)(C) is
amended by inserting ‘‘219A,’’ after ‘‘219,’’.
(F) Clause (iii) of section 469(i)(3)(F) is
amended by inserting ‘‘219A,’’ after ‘‘219,’’.
(G) Subsection (c) of section 4974 is
amended by striking ‘‘or’’ at the end of para-
graph (4), by striking the period at the end of
paragraph (5) and inserting ‘‘, or’’, and by in-
serting after paragraph (5) the following new
paragraph:
‘‘(6) a Universal Retirement Savings Account
described in section 408B.’’
(4) CLERICAL AMENDMENT.—The table of sec-
tions for part VII of subchapter B of chapter 1 is
amended by inserting after the item relating to sec-
tion 219 the following new item:
‘‘Sec. 219A. Contributions to Universal Retirement Savings Ac-
counts.’’
(b) UNIVERSAL RETIREMENT SAVINGS ACCOUNTS.—
(1) IN GENERAL.—Subpart A of part I of sub-
chapter D of chapter 1 is amended by inserting after
section 408A the following new section:
‘‘SEC. 408B. UNIVERSAL RETIREMENT SAVINGS ACCOUNTS.
‘‘(a) IN GENERAL.—For purposes of this title, the
term ‘Universal Retirement Savings Account’ means a
trust created or organized in the United States for the
exclusive benefit of an individual or such individual’s bene-
ficiaries, but only if the written governing instrument cre-
ating the trust meets the following requirements:
‘‘(1) Except in the case of a rollover contribu-
tion described in subsection (b)(3), in section 402(c),
403(a)(4), 403(b)(8), or 457(e)(16), no contribution
will be accepted unless it is in cash, and contribu-
tions will not be accepted for the taxable year on be-
half of any individual in excess of the deductible
amount in effect for such taxable year under section
219A(b)(2).
‘‘(2) The trustee is a bank (as defined in sec-
tion 408(n)) or such other person who demonstrates
to the satisfaction of the Secretary that the manner
in which such other person will administer the trust
will be consistent with the requirements of this sec-
tion.
‘‘(3) No part of the trust funds will be invested
in life insurance contracts.
‘‘(4) The interest of an individual in the bal-
ance in such individual’s account is nonforfeitable.
‘‘(5) The assets of the trust will not be commin-
gled with other property except in a common trust
fund or common investment fund.
‘‘(6) Under regulations prescribed by the Sec-
retary, rules similar to the rules of section 401(a)(9)
and the incidental death benefit requirements of sec-
tion 401(a) shall apply to the distribution of the en-
tire interest of an individual for whose benefit the
trust is maintained.
‘‘(b) TAX TREATMENT OF DISTRIBUTIONS.—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, any amount distributed out
of a Universal Retirement Savings Account shall be
included in gross income by the distributee without
regard to basis.
‘‘(2) 
EXCEPTION
FOR
IMMEDIATE
ANNU-
ITIES.—If any distribution is a part of a series of
substantially equal periodic payments (not less fre-
quently than annually) made for the life (or life ex-
pectancy) of the distributee or the joint lives (or
joint life expectancies) of such distributee and such
distributee’s designated beneficiary, the amount in-
cludible in gross income under paragraph (1) shall
be determined in the manner provided under section
72. The rules of section 408(d)(2) shall apply for
purposes of the preceding sentence.
‘‘(3) EXCEPTION FOR ROLLOVERS.—
‘‘(A) IN
GENERAL.—Paragraph (1) shall
not apply to any amount distributed out of a
Universal Retirement Savings Account to the
individual for whose benefit the account is
maintained if the entire amount received (in-
cluding money and any other property) is paid
into a Universal Retirement Savings Account
(other than an endowment contract) for the
benefit of such individual not later than the
60th day after the day on which the individual
receives the distribution.
‘‘(B) LIMITATION.—This paragraph does
not apply to any amount described in subpara-
graph (A) received by an individual from a Uni-
versal Retirement Savings Account if at any
time during the 1-year period ending on the day
of such receipt such individual received any
other amount described in that subparagraph
from a Universal Retirement Savings Account
which was not includible in such individual’s
gross income because of the application of this
paragraph.
‘‘(C) SPECIAL
RULES.—Rules similar to
the rules of subparagraphs (C), (D), (E), (F),
and (I) of section 408(d)(3) shall apply for pur-
poses of this paragraph.
‘‘(4) EXCEPTION
FOR
QUALIFIED
DISTRIBU-
TIONS.—
‘‘(A) DISTRIBUTIONS
FOR
HIGHER
EDU-
CATION
EXPENSES.—Paragraph (1) shall not
apply to distributions to an individual to the ex-
tent such distributions do not exceed the quali-
fied higher education expenses (as defined in
section 72(t)(7)) of the taxpayer for the taxable
year.
‘‘(B) DISTRIBUTIONS
FOR
FIRST
HOME
PURCHASES.—Paragraph (1) shall not apply to
distributions to an individual which are quali-
fied first-time homebuyer distributions (as de-
fined in section 72(t)(8)).
‘‘(5) OTHER DISTRIBUTIONS.—Rules similar to
the rules of paragraphs (4) and (6) of section
408(d) shall apply for purposes of this subsection.
‘‘(c) TAX TREATMENT OF ACCOUNTS.—
‘‘(1) EXEMPTION
FROM
TAX.—Any Universal
Retirement Savings Account is exempt from taxation
under this subtitle unless such account has ceased to
be a Universal Retirement Savings Account by rea-
son of paragraph (2). Notwithstanding the preceding
sentence, any such account is subject to the taxes
imposed by section 511 (relating to imposition of tax
on unrelated business income of charitable, etc. or-
ganizations).
‘‘(2) LOSS
OF
EXEMPTION
FOR
PROHIBITED
TRANSACTION.—Rules similar to the rules of section
408(e)(2) shall apply for purposes of this subsection.
‘‘(3) EFFECT OF PLEDGING ACCOUNT AS SECU-
RITY; PURCHASE OF ENDOWMENT CONTRACT; COM-
MINGLING
AMOUNTS
IN
CERTAIN
COMMON
TRUST
FUNDS AND COMMON INVESTMENT FUNDS.—Rules
similar to the rules of paragraphs (4), (5), and (6)
of section 408(e) shall apply for purposes of this
subsection.
‘‘(d) EMPLOYERS REQUIRED TO OFFER SALARY RE-
DUCTION CONTRIBUTIONS TO UNIVERSAL RETIREMENT
SAVINGS ACCOUNTS FOR CERTAIN EMPLOYEES.—
‘‘(1) IN GENERAL.—Every employer shall pro-
vide a qualified salary reduction arrangement which
meets the requirements of paragraphs (3), (4), and
(5).
‘‘(2) QUALIFIED SALARY REDUCTION ARRANGE-
MENT.—For purposes of this subsection, the term
‘qualified salary reduction arrangement’ means a
written arrangement of an employer under which—
‘‘(A) an employee eligible to participate in
the arrangement may elect to have the employer
make payments—
‘‘(i) as elective employer contributions
to a Universal Retirement Savings Account
on behalf of the employee, or
‘‘(ii) to the employee directly in cash,
‘‘(B) the employer may make other con-
tributions as provided in paragraph (6),
‘‘(C) the amount which an employee may
elect under subparagraph (A) for any year may
not exceed a the deductible amount (as defined
in section 219A(b)) for such year, and
‘‘(D) no contributions may be made other
than contributions described in subparagraph
(A) or (B).
‘‘(3) VESTING
REQUIREMENTS.—The require-
ments of this paragraph are met if the employee’s
rights to any contribution to the Universal Retire-
ment Savings Account are nonforfeitable. For pur-
poses of this paragraph, rules similar to the rules of
section 408(k)(4) shall apply.
‘‘(4) PARTICIPATION REQUIREMENTS.—
‘‘(A) IN GENERAL.—The requirements of
this paragraph are met with respect to any Uni-
versal Retirement Savings Account for a year
only if, under the qualified salary reduction ar-
rangement, all nonexcludable employees of the
employer are eligible to make the election under
paragraph (2).
‘‘(B) NONEXCLUDABLE EMPLOYEES.—For
purposes of subparagraph (A), the term ‘non-
excludable employee’ means any employee of an
employer unless such employee is eligible to
participate in a qualified plan maintained by
the employer. For purposes of the preceding
sentence, the term ‘qualified plan’ means a
plan, contract, pension, or trust described in
subparagraph (A) or (B) of section 219(g)(5).
‘‘(5) ADMINISTRATIVE
REQUIREMENTS.—The
requirements of this paragraph are met with respect
to any Universal Retirement Savings Account if,
under the qualified salary reduction arrangement—
‘‘(A) an employer must—
‘‘(i) make the elective employer con-
tributions under paragraph (2) not later
than the close of the 30-day period fol-
lowing the last day of the month with re-
spect to which the contributions are to be
made, and
‘‘(ii) make the contributions under
paragraph (6) (if any) not later than the
date described in section 404(m)(2)(B),
‘‘(B) an employee may elect to terminate
participation in such arrangement at any time
during the year, except that if an employee so
terminates, the arrangement may provide that
the employee may not elect to resume participa-
tion until the beginning of the next year, and
‘‘(C) each employee eligible to participate
may elect, during the 60-day period before the
beginning of any year (and the 60-day period
before the first day such employee is eligible to
participate), to participate in the arrangement,
or to modify the amounts subject to such ar-
rangement, for such year.
‘‘(6) EMPLOYER CONTRIBUTIONS.—
‘‘(A) IN GENERAL.—If an employer elects
to make contributions to a Universal Retire-
ment Savings Account, such contributions meet
the requirements of this paragraph if the em-
ployer elects to make nonelective contributions
of 1 percent of compensation for each employee
who is eligible to participate in the arrange-
ment.
‘‘(B) COMPENSATION
LIMITATION.—The
compensation taken into account under sub-
paragraph (A) for any year shall not exceed the
limitation in effect for such year under section
401(a)(17).
‘‘(7) EXCEPTION FOR CERTAIN EMPLOYERS.—
This subsection shall not apply for any calendar year
to an employer—
‘‘(A) which had no more than 20 employ-
ees on a typical business day during the pre-
ceding calendar year, and
‘‘(B) which elects not to have this sub-
section apply for such year.
‘‘(8) EXCLUSION
FROM
INCOME
FOR
SALARY
REDUCTIONS.—Contributions made by an employer
on behalf of an employee to a Universal Retirement
Savings Account pursuant to a qualified salary re-
duction arrangement which meets the requirements
of this subsection shall not be treated as distributed
or made available to the employee or as contribu-
tions made by the employee.
‘‘(9) USE OF DESIGNATED FINANCIAL INSTITU-
TION.—An employer shall not be treated as failing
to satisfy the requirements of this subsection or any
other provision of this title merely because the em-
ployer makes all contributions to the Universal Re-
tirement Savings Accounts of a designated trustee or
issuer. The preceding sentence shall not apply unless
each participant is notified in writing that the par-
ticipant’s balance may be transferred without cost or
penalty to another Universal Retirement Savings Ac-
count in accordance with subsection (b)(3).
‘‘(10) SPECIAL
RULES
FOR
ACQUISITIONS,
ETC.—Rules 
similar 
to 
the 
rules 
of 
section
408(p)(10) shall apply for purposes of this sub-
section.
‘‘(11) SUMMARY DESCRIPTION; EMPLOYER NO-
TIFICATION.—
‘‘(A) SUMMARY DESCRIPTION.—The trust-
ee of any Universal Retirement Savings Ac-
count established pursuant to a qualified salary
reduction arrangement under this subsection
shall provide to the employer maintaining the
arrangement, each year a description containing
the following information:
‘‘(i) The name and address of the em-
ployer and the trustee or issuer.
‘‘(ii) The requirements for eligibility
for participation.
‘‘(iii) The benefits provided with re-
spect to the arrangement.
‘‘(iv) The time and method of making
elections with respect to the arrangement.
‘‘(v) The procedures for, and effects
of, withdrawals (including rollovers) from
the arrangement.
‘‘(B) EMPLOYEE NOTIFICATION.—The em-
ployer shall notify each employee immediately
before the period for which an election de-
scribed in paragraph (5)(C) may be made of the
employee’s opportunity to make such election.
Such notice shall include a copy of the descrip-
tion described in subparagraph (A).
‘‘(e) ROLLOVERS PERMITTED FROM IRA’S, ETC.—
Solely for purposes of determining whether any rollover
may be made to a Universal Retirement Savings Account,
a Universal Retirement Savings Account shall be treated
as if it were an individual retirement plan. No amount
may be distributed in a rollover other than to a Universal
Retirement Savings Account.
‘‘(f) SPECIAL RULES.—
‘‘(1) COMMUNITY PROPERTY LAWS.—This sec-
tion shall be applied without regard to any commu-
nity property laws.
‘‘(2) CUSTODIAL ACCOUNTS.—Rules similar to
the rules of section 408(g) shall apply for purposes
of this subsection.
‘‘(3) INVESTMENT IN COLLECTIBLES TREATED
AS DISTRIBUTIONS.—The acquisition by a Universal
Retirement Savings Account of any collectible (as
defined in section 408(m)) shall be treated (for pur-
poses of this section and section 402) as a distribu-
tion from such account in an amount equal to the
cost to such account of such collectible.
‘‘(g) REPORTS.—The trustee of a Universal Retire-
ment Savings Account shall make such reports regarding
such Account to the Secretary and to the individuals for
whom the Account is, or is to be, maintained with respect
to contributions (and the years to which they relate), dis-
tributions, aggregating $10 or more in any calendar year
and such other matters as the Secretary may require. The
reports required by this subsection—
‘‘(1) shall be filed at such time and in such
manner as the Secretary prescribes, and
‘‘(2) shall be furnished to individuals—
‘‘(A) not later than January 31 of the cal-
endar year following the calendar year to which
such reports relate, and
‘‘(B) in such manner as the Secretary pre-
scribes.’’
(2) TECHNICAL AMENDMENTS.—
(A) EXCESS CONTRIBUTIONS.—
(i) IN
GENERAL.—Subsection (a) of
section 4973 is amended by redesignating
paragraphs (2), (3), and (4) as paragraphs
(3), (4), and (5), respectively, and by in-
serting after paragraph (1) the following
new paragraph:
‘‘(2) a Universal Retirement Savings Account
(as defined in section 408B),’’.
(ii) DETERMINATION OF EXCESS.—Section
4973 is amended by adding at the end the fol-
lowing new subsection:
‘‘(g) EXCESS CONTRIBUTIONS TO UNIVERSAL RE-
TIREMENT SAVINGS ACCOUNTS.—Rules similar to the
rules under subsection (b) shall apply to any Universal
Retirement Savings Account (as defined in section
408B).’’
(B) 
EARLY
WITHDRAWAL
PENALTY,
ETC.—Subsection (c) of section 4974 is amend-
ed by striking ‘‘or’’ at the end of paragraph (4),
by striking the period at the end of paragraph
(5) and inserting ‘‘, or’’, and by inserting after
paragraph (5) the following new paragraph:
‘‘(6) a Universal Retirement Savings Account
described in section 408B.’’
(C) PROHIBITED TRANSACTIONS.—
(i) IN
GENERAL.—Paragraph (1) of
section 4975(e) is amended by redesig-
nating subparagraphs (D), (E), and (F) as
subparagraphs (E), (F), and (G), respec-
tively, and by inserting after subparagraph
(C) the following new subparagraph:
‘‘(D) a Universal Retirement Savings Ac-
count described in section 408B,’’.
(ii) EXCEPTION.—Subsection (c) of
section 4975 is amended by adding at the
end the following new paragraph:
‘‘(5) SPECIAL RULE FOR UNIVERSAL RETIRE-
MENT SAVINGS ACCOUNTS.—An individual for whose
benefit a Universal Retirement Savings Account is
established shall be exempt from the tax imposed by
this section with respect to any transaction con-
cerning such Account (which would otherwise be tax-
able under this section) if section 408B(d)(2) applies
with respect to such transaction.’’
(D) FAILURE
TO
PROVIDE
REPORTS.—
Paragraph (2) of section 6693(a) (relating to
failure to provide reports on individual retire-
ment accounts or annuities) is amended by re-
designating subparagraphs (C) and (D) as sub-
paragraphs (D) and (E), respectively, and by
inserting after subparagraph (B) the following
new subparagraph:
‘‘(C) a Universal Retirement Savings Ac-
count described in section 408B,’’.
(E) W–2 REPORTING.—Subsection (a) of
section 6051 is amended by striking ‘‘and’’ at
the end of paragraph (10), by striking the pe-
riod at the end of paragraph (11) and inserting
‘‘, and’’, and by inserting after paragraph (11)
the following new paragraph:
‘‘(12) the total amount of elective employer con-
tributions under section 408B(d)(2)(A).’’
(F) OTHER
TECHNICAL
AMENDMENTS.—
The following provisions are each amended by
inserting ‘‘408B(d),’’ after ‘‘408(p),’’:
(i) Subsections (b) and (c) of section
414.
(ii) Section 414(m)(4)(B).
(iii) Section 414(n)(3)(B).
(iv) Section 414(u)(1)(C).
(G) ELECTIVE
CONTRIBUTIONS
SUBJECT
TO FICA AND FUTA.—
(i) Paragraph (5) of section 3121(a)
is amended by striking ‘‘or’’ at the end of
subparagraph (H), by striking the semi-
colon at the end of subparagraph (I) and
inserting ‘‘, or’’, and by adding at the end
the following new subparagraph:
‘‘(J) under an arrangement to which sec-
tion 408B(d) applies, other than any elective
contributions under paragraph (2)(A) thereof;’’.
(ii) Paragraph (4) of section 209(a) of
the Social Security Act is amended by add-
ing at the end ‘‘or (J) under an arrange-
ment to which section 408B(d) of such
Code applies, other than any elective con-
tributions under paragraph (2)(A) there-
of;’’.
(iii) Paragraph (5) of section 3306(b)
is amended by striking ‘‘or’’ at the end of
subparagraph (G), by striking the semi-
colon at the end of subparagraph (H) and
inserting ‘‘, or’’, and by adding at the end
the following new subparagraph:
‘‘(5) No contribution shall be accepted for any
taxable year beginning after December 31, 2002, un-
less such annuity is a simplified employee pension or
a simple retirement account.’’
(d) CREDIT FOR SMALL EMPLOYERS MAINTAINING
SALARY REDUCTION ARRANGEMENTS
FOR UNIVERSAL
RETIREMENT SAVINGS ACCOUNTS.—
(1) IN GENERAL.—Subpart D of part IV of
subchapter A of chapter 1 (relating to business re-
lated credits) is amended by adding at the end the
following new section:
‘‘SEC. 45G. SMALL EMPLOYER UNIVERSAL RETIREMENT
SAVINGS ACCOUNT COSTS.
‘‘(a) GENERAL RULE.—For purposes of section 38,
in the case of an eligible employer, the small employer
Universal Retirement Savings Account cost credit deter-
mined under this section for any taxable year is the aggre-
gate of the amount determined under subsection (b) for
each employee participating in an arrangement meeting
the requirements of section 408B(d).
‘‘(b) AMOUNT OF CREDIT.—The amount of the credit
determined under this section for any taxable year with
respect to an employee shall be—
‘‘(1) $50 for the taxable year which includes the
date that the arrangement referred to subsection (a)
becomes effective,
‘‘(2) $20 for each of the 3 taxable years fol-
lowing the taxable year described in paragraph (1),
and
‘‘(3) zero for any other taxable year.
‘‘(c) ELIGIBLE EMPLOYER.—For purposes of this
section, the term ‘eligible employer’ means, with respect
to any taxable year, an employer which had no more than
100 employees on a typical business day during the most
recent calendar year ending before such taxable year. For
purposes of the preceding sentence, all persons treated as
a single employer under subsection (a) or (b) of section
52, or subsection (n) or (o) of section 414, shall be treated
as one person.’’
(2) CREDIT ALLOWED AS PART OF GENERAL
BUSINESS CREDIT.—Section 38(b) (defining current
year business credit) is amended by striking ‘‘plus’’
at the end of paragraph (14), by striking the period
at the end of paragraph (15) and inserting ‘‘, plus’’,
and by adding at the end the following new para-
graph:
‘‘(16) in the case of an eligible employer (as de-
fined in section 45G(c)), the small employer Uni-
versal Retirement Savings Account cost credit deter-
mined under section 45G(a).’’.
(3) CLERICAL AMENDMENT.—The table of sec-
tions for subpart D of part IV of subchapter A of
chapter 1 is amended by adding at the end the fol-
lowing new item:
‘‘Sec. 45G. Small employer Universal Retirement Savings Ac-
count costs.’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2002.
SEC. 3. EXPANSION OF RETIREMENT SAVINGS CREDIT.
(a) CREDIT TO BE REFUNDABLE; EXPANSION OF
ELIGIBILITY; CREDIT MADE PERMANENT.—Subpart C of
part IV of subchapter A of chapter 1 (relating to refund-
able credits) is amended by redesignating section 35 as
section 36 and by inserting after section 34 the following
new section:
‘‘SEC. 35. ELECTIVE DEFERRALS AND UNIVERSAL RETIRE-
MENT SAVINGS ACCOUNT CONTRIBUTIONS
BY CERTAIN INDIVIDUALS.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an eli-
gible individual, there shall be allowed as a credit against
the tax imposed by this subtitle for the taxable year an
amount equal to the applicable percentage of so much of
‘‘(d) CREDIT FOR CONTRIBUTIONS TO UNIVERSAL
RETIREMENT SAVINGS ACCOUNTS OF DEPENDENTS.—
‘‘(1) IN GENERAL.—In addition to the credit al-
lowed by subsection (a) for the taxable year, there
shall be allowed as a credit against the tax imposed
by this subtitle an amount equal to the applicable
percentage of the amount paid in cash by an eligible
individual to a Universal Retirement Savings Ac-
count for the benefit of an individual with respect to
whom a deduction under section 151(c) is allowed to
the taxpayer for such taxable year.
‘‘(2) MAXIMUM CREDIT.—The credit allowed by
this subsection shall not exceed $200 with respect to
each individual for whose benefit an amount was so
paid. The preceding sentence shall be applied by
substituting ‘$500’ for ‘$200’ for the taxable year in
which such individual is assigned a TIN.
‘‘(e) QUALIFIED RETIREMENT SAVINGS CONTRIBU-
TIONS.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified retire-
ment savings contributions’ means, with respect to
any taxable year, the sum of—
‘‘(A) the amount of the qualified universal
retirement contributions (as defined in section
219A(e)) made by the eligible individual,
‘‘(B) the amount of—
‘‘(i) any elective deferrals (as defined
in section 402(g)(3)) of such individual,
and
‘‘(ii) any elective deferral of com-
pensation by such individual under an eli-
gible deferred compensation plan (as de-
fined in section 457(b)) of an eligible em-
ployer described in section 457(e)(1)(A),
and
‘‘(C) the amount of voluntary employee
contributions by such individual to any qualified
retirement plan (as defined in section 4974(c)).
‘‘(2) REDUCTION
FOR
CERTAIN
DISTRIBU-
TIONS.—
‘‘(A) IN GENERAL.—The qualified retire-
ment savings contributions determined under
paragraph (1) shall be reduced (but not below
zero) by the sum of—
‘‘(i) any distribution from a qualified
retirement plan (as defined in section
4974(c)), or from an eligible deferred com-
pensation plan (as defined in section
457(b)), received by the individual during
the testing period which is includible in
gross income, and
‘‘(ii) any distribution from a Roth
IRA or a Roth account received by the in-
dividual during the testing period which is
not a qualified rollover contribution (as de-
fined in section 408A(e)) to a Roth IRA or
a rollover under section 402(c)(8)(B) to a
Roth account.
‘‘(B) TESTING PERIOD.—For purposes of
subparagraph (A), the testing period, with re-
spect to a taxable year, is the period which
includes—
‘‘(i) such taxable year,
‘‘(ii) the 2 preceding taxable years,
and
‘‘(iii) the period after such taxable
year and before the due date (including ex-
tensions) for filing the return of tax for
such taxable year.
‘‘(C) EXCEPTED
DISTRIBUTIONS.—There
shall not be taken into account under subpara-
graph (A)—
‘‘(i) any distribution referred to in
section 
72(p), 
401(k)(8), 
401(m)(6),
402(g)(2), 404(k), or 408(d)(4), and
‘‘(ii) any distribution to which section
408A(d)(3) applies.
‘‘(D) TREATMENT OF DISTRIBUTIONS RE-
CEIVED BY SPOUSE OF INDIVIDUAL.—For pur-
poses of determining distributions received by
an individual under subparagraph (A) for any
taxable year, any distribution received by the
spouse of such individual shall be treated as re-
ceived by such individual if such individual and
spouse file a joint return for such taxable year
and for the taxable year during which the
spouse receives the distribution.
‘‘(f) ADJUSTED GROSS INCOME.—For purposes of
this section, adjusted gross income shall be determined
without regard to sections 911, 931, and 933.
‘‘(g) INVESTMENT
IN
THE CONTRACT.—Notwith-
standing any other provision of law, a qualified retirement
savings contribution shall not fail to be included in deter-
mining the investment in the contract for purposes of sec-
tion 72 by reason of the credit under this section.’’
(b) REPEAL OF NONREFUNDABLE CREDIT.—
(1) Section 25B is hereby repealed.
(2) Subparagraph (B) of section 25(b)(3) is
amended by striking ‘‘and 25B’’.
(3) Subparagraph (C) of section 25(e)(1) is
amended by striking ‘‘25B,’’.
(4) Sections 26(a)(1), 901(h), and 1400C are
each amended by striking ‘‘24, and 25B’’ and insert-
ing ‘‘and 24’’.
(5) The table of sections for subpart A of part
IV of subchapter A of chapter 1 is amended by
striking the item relating to section 25B.
(c) TECHNICAL AMENDMENTS.—
(1) Paragraph (2) of section 1324(b) of title
31, United States Code, is amended by inserting be-
fore the period ‘‘, or from section 35 of such Code’’.
(2) The table of sections for subpart C of part
IV of subchapter A of chapter 1 is amended by
striking the last item and inserting the following
new items:
‘‘Sec. 35. Elective deferrals and universal retirement savings ac-
count contributions by certain individuals.
‘‘Sec. 36. Overpayments of tax.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2002.
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