on certain accumulations in qualified retirement
plans) shall not apply to any IRA Plus account.
‘‘(B) POST-DEATH DISTRIBUTIONS.—Rules
similar to the rules of section 401(a)(9) (other
than subparagraph (A) thereof) shall apply for
purposes of this section.
‘‘(5) ROLLOVER CONTRIBUTIONS.—
‘‘(A) IN GENERAL.—No rollover contribu-
tion may be made to an IRA Plus account un-
less it is a qualified rollover contribution.
‘‘(B) 
COORDINATION
WITH
LIMIT.—A
qualified rollover contribution shall not be taken
into account for purposes of paragraph (2).
‘‘(6) TIME WHEN CONTRIBUTIONS MADE.—For
purposes of this section, the rule of section 219(f)(3)
shall apply.
‘‘(d) DISTRIBUTION RULES.—For purposes of this
title—
‘‘(1) GENERAL RULES.—
‘‘(A) EXCLUSIONS FROM GROSS INCOME.—
Any qualified distribution from an IRA Plus ac-
count shall not be includible in gross income.
‘‘(B) NONQUALIFIED DISTRIBUTIONS.—In
applying section 72 to any distribution from an
IRA Plus account which is not a qualified dis-
tribution, such distribution shall be treated as
made from contributions to the IRA Plus ac-
count to the extent that such distribution, when
added to all previous distributions from the
IRA Plus account, does not exceed the aggre-
gate amount of contributions to the IRA Plus
account. For purposes of the preceding sen-
tence, all IRA Plus accounts maintained for the
benefit of an individual shall be treated as 1
account.
‘‘(C) EXCEPTION FROM PENALTY TAX.—
Section 72(t) shall not apply to any qualified
distribution from an IRA Plus account.
‘‘(2) QUALIFIED DISTRIBUTION.—For purposes
of this subsection—
‘‘(A) IN
GENERAL.—The term ‘qualified
distribution’ 
means 
any 
payment 
or
distribution—
‘‘(i) made on or after the date on
which the individual attains age 591⁄2,
‘‘(ii) made to a beneficiary (or to the
estate of the individual) on or after the
death of the individual,
‘‘(iii) attributable to the individual’s
being disabled (within the meaning of sec-
tion 72(m)(7)), or
‘‘(iv) which is a qualified special pur-
pose distribution.
‘‘(B) CERTAIN DISTRIBUTIONS WITHIN 5
YEARS.—A payment or distribution shall not be
treated as a qualified distribution under clause
(i) of subparagraph (A) if—
‘‘(i) it is made within the 5-taxable
year period beginning with the 1st taxable
year for which the individual made a con-
tribution to an IRA Plus account (or such
individual’s spouse made a contribution to
an IRA Plus account) established for such
individual, or
‘‘(ii) in the case of a payment or dis-
tribution properly allocable (as determined
in the manner prescribed by the Secretary)
to a qualified rollover contribution (or in-
come allocable thereto), it is made within
the 5-taxable year period beginning with
the taxable year in which the rollover con-
tribution was made.
Clause (ii) shall not apply to a qualified rollover
contribution from an IRA plus account.
‘‘(3) ROLLOVERS.—
‘‘(A) IN
GENERAL.—Paragraph (1) shall
not apply to any distribution which is trans-
ferred in a qualified rollover contribution to an
IRA Plus account.
‘‘(B) INCOME INCLUSION FOR ROLLOVERS
FROM
NON-PLUS
IRAS.—In the case of any
qualified rollover contribution from an individ-
ual retirement plan (other than an IRA Plus
account) to an IRA Plus account established for
the benefit of the payee or distributee, as the
case may be—
‘‘(i) sections 72(t) and 408(d)(3) shall
not apply, and
‘‘(ii) in any case where such contribu-
tion is made before January 1, 1999, any
amount required to be included in gross in-
come by reason of this paragraph shall be
so included ratably over the 4-taxable year
period beginning with the taxable year in
which the payment or distribution is made.
‘‘(C) ADDITIONAL
REPORTING
REQUIRE-
MENTS.—The Secretary shall require that
trustees of IRA Plus accounts, trustees of indi-
vidual retirement plans, or both, whichever is
appropriate, shall include such additional infor-
mation in reports required under section 408(i)
as is necessary to ensure that amounts required
to be included in gross income under subpara-
graph (B) are so included.
‘‘(4) QUALIFIED SPECIAL PURPOSE DISTRIBU-
TION.—For purposes of this section, the term ‘quali-
fied special purpose distribution’ means any distribu-
tion to which subparagraph (B), (D), or (E) of sec-
tion 72(t)(2) applies.
‘‘(e) QUALIFIED ROLLOVER CONTRIBUTION.—For
purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified rollover
contribution’ means a rollover contribution to an
IRA Plus account from another such account, or
from an individual retirement plan, but only if such
rollover contribution meets the requirements of sec-
tion 
408(d)(3). 
For 
purposes 
of 
section
408(d)(3)(B), there shall be disregarded any quali-
fied rollover contribution from an individual retire-
ment plan to an IRA Plus account.
‘‘(2) CONVERSIONS.—The conversion of an indi-
vidual retirement plan to an IRA Plus account shall
be treated as if it were a qualified rollover
contribution.’’
(b) EXCESS DISTRIBUTIONS TAX NOT TO APPLY.—
(1) Subparagraph (A) of section 4980A(d)(3) is
amended by inserting ‘‘(other than IRA Plus ac-
counts described in section 408A(b))’’ after ‘‘retire-
ment plans’’.
(2) Section 4980A(e)(1) is amended by adding
at the end the following flush sentence:
‘‘Such term shall not include any amount distributed
from an IRA Plus account or any qualified rollover
contribution (as defined in section 408A(e)) from an
individual retirement plan to an IRA Plus account.’’
(c) EXCESS CONTRIBUTIONS.—Section 4973(b) is
amended to read as follows:
‘‘(b) EXCESS CONTRIBUTIONS.—For purposes of this
section—
‘‘(1) IN GENERAL.—In the case of individual re-
tirement accounts or individual retirement annuities,
the term ‘excess contributions’ means the sum of—
‘‘(A) the amount determined under para-
graph (2) for the taxable year, plus
‘‘(B) the carryover amount determined
under paragraph (3) for the taxable year.
‘‘(2) CURRENT YEAR.—The amount determined
under this paragraph for any taxable year is an
amount equal to the sum of—
‘‘(A) the excess (if any) of—
‘‘(i) the amount contributed for the
taxable year to the accounts or for the an-
nuities or bonds (other than IRA Plus ac-
counts), over
‘‘(ii) the amount allowable as a deduc-
tion under section 219 for the taxable
year, plus
‘‘(B) the excess (if any) of—
‘‘(i) the amount described in clause (i)
(taking into account contributions to IRA
Plus accounts) contributed for the taxable
year, over
‘‘(ii) the amount allowable as a deduc-
tion under section 219 for the taxable year
(computed without regard to subsection (g)
of such section).
‘‘(3) CARRYOVER
AMOUNT.—The carryover
amount determined under this paragraph for any
taxable year is the amount determined under para-
graph (2) for the preceding taxable year, reduced by
the sum of—
‘‘(A) the distributions out of the account
for the taxable year which were included in the
gross income of the payee under section
408(d)(1),
‘‘(B) the distributions out of the account
for the taxable year to which section 408(d)(5)
applies, and
‘‘(C) the excess (if any) of the amount de-
termined under paragraph (2)(B)(ii) over the
amount determined under paragraph (2)(B)(i).
‘‘(4) SPECIAL
RULES.—For purposes of this
subsection—
‘‘(A) ROLLOVER
CONTRIBUTIONS.—Roll-
over distributions described in sections 402(c),
403(a)(4), 403(b)(8), 408(d)(3), and 408A(e)
shall not be taken into account.
‘‘(B) CONTRIBUTIONS RETURNED BEFORE
DUE DATE.—Any contribution which is distrib-
uted from an individual retirement plan in a
distribution to which section 408(d)(4) applies
shall not be taken into account.
‘‘(C) EXCESS CONTRIBUTIONS TREATED AS
CONTRIBUTIONS.—In 
applying 
paragraph
(3)(C), the determination as to amounts con-
tributed for a taxable year shall be made with-
out regard to section 219(f)(6).’’
(d) 
SPOUSAL
IRA.—Clause 
(ii) 
of 
section
219(c)(1)(B) is amended to read as follows:
‘‘(ii) the compensation includible in
the gross income of such individual’s
spouse for the taxable year reduced by—
‘‘(I) the amount allowed as a de-
duction under subsection (a) to such
spouse for such taxable year, and
‘‘(II) the amount of any contribu-
tion on behalf of such spouse to an
IRA Plus account under section 408A
for such taxable year.’’
(e) 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.’’
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1996.
TITLE II—PENALTY-FREE
DISTRIBUTIONS
SEC. 201. DISTRIBUTIONS FROM CERTAIN PLANS MAY BE
USED 
WITHOUT 
PENALTY 
TO 
PURCHASE
FIRST HOMES OR TO PAY HIGHER EDU-
CATION OR WHEN UNEMPLOYED.
(a) FIRST HOMES AND EDUCATION.—
(1) 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 subparagraph:
‘‘(E) 
DISTRIBUTIONS
FROM
CERTAIN
PLANS FOR FIRST HOME PURCHASES OR EDU-
CATIONAL EXPENSES.—Distributions to an in-
dividual 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 (7)), or
(b) PENALTY-FREE DISTRIBUTIONS FOR CERTAIN
UNEMPLOYED INDIVIDUALS.—Subparagraph (D) of sec-
tion 72(t)(2) is amended—
(1) in clause (i), by inserting ‘‘and’’ at the end
of subclause (I), by striking ‘‘, and’’ at the end of
subclause (II) and inserting a period, and by strik-
ing subclause (III), and
(2) by striking ‘‘FOR HEALTH INSURANCE PRE-
MIUMS’’ in the heading thereof.
(c) 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)(7)) or dis-
tributions for qualified higher edu-
cation expenses (as defined in section
72(t)(8)) 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)(7)) or for
the payment of qualified higher education ex-
penses (as defined in section 72(t)(8)).’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to payments and distributions after
the date of the enactment of this Act.
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