I
103D CONGRESS
1ST SESSION
H. R. 337
To amend the Internal Revenue Code of 1986 to permit nondeductible tax-
free individual retirement accounts.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 5, 1993
Mrs. ROUKEMA 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 permit
nondeductible tax-free individual retirement accounts.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. ESTABLISHMENT OF NONDEDUCTIBLE TAX-
FREE INDIVIDUAL RETIREMENT ACCOUNTS.
(a) IN GENERAL.—Subpart A of part I of subchapter
D of chapter 1 of the Internal Revenue Code of 1986 (re-
lating to pension, profit-sharing, stock bonus plans, etc.)
is amended by inserting after section 408 the following
new section:
‘‘SEC. 408A. SPECIAL INDIVIDUAL RETIREMENT ACCOUNTS.
‘‘(a) GENERAL RULE.—Except as provided in this
section, a special individual retirement account shall be
treated for purposes of this title in the same manner as
an individual retirement plan.
‘‘(b) 
SPECIAL
INDIVIDUAL
RETIREMENT
AC-
COUNT.—For purposes of this title, the term ‘special indi-
vidual retirement account’ means an individual retirement
plan which is designated at the time of establishment of
the plan as a special individual retirement account.
‘‘(c) TREATMENT OF CONTRIBUTIONS.—
‘‘(1) NO DEDUCTION ALLOWED.—No deduction
shall be allowed under section 219 for a contribution
to a special individual retirement account.
‘‘(2) CONTRIBUTION
LIMIT.—The aggregate
amount of contributions for any taxable year to all
special individual retirement accounts maintained for
the benefit of an individual shall not exceed the ex-
cess (if any) of—
‘‘(A) the maximum amount allowable as a
deduction under section 219 with respect to
such individual for such taxable year (deter-
mined without regard to section 219(g)), over
‘‘(B) the amount so allowed.
‘‘(3) SPECIAL RULES FOR QUALIFIED TRANS-
FERS.—
‘‘(A) IN GENERAL.—No rollover contribu-
tion may be made to a special individual retire-
ment account unless it is a qualified transfer.
‘‘(B) LIMIT NOT TO APPLY.—The limita-
tion under paragraph (2) shall not apply to a
qualified transfer to a special individual retire-
ment account.
‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.—
‘‘(1) IN GENERAL.—Except as provided in this
subsection, any amount paid or distributed out of a
special individual retirement account shall not be in-
cluded 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 a special individual retirement ac-
count which consists of earnings allocable to
contributions made to the account during the 5-
year period ending on the day before such dis-
tribution shall be included in the gross income
of the distributee for the taxable year in which
the distribution occurs.
‘‘(B) ORDERING RULE.—
‘‘(i) FIRST-IN, FIRST-OUT
RULE.—
Distributions from a special individual re-
tirement 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.
‘‘(C) CROSS REFERENCE.—
‘‘For additional tax for early withdrawal, see sec-
tion 72(t).
‘‘(3) QUALIFIED TRANSFER.—
‘‘(A) IN
GENERAL.—Paragraph (2) shall
not apply to any distribution which is trans-
ferred in a qualified transfer to another special
individual retirement account.
‘‘(B) CONTRIBUTION
PERIOD.—For pur-
poses of paragraph (2), the special individual
retirement account to which any contributions
are transferred shall be treated as having held
such contributions during any period such con-
tributions were held (or are treated as held
under this subparagraph) by the special individ-
ual retirement account 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 a special individual retirement ac-
count from an individual retirement plan which
is not a special individual retirement 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, 1994, 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—
‘‘(1) IN GENERAL.—The term ‘qualified trans-
fer’ means a transfer to a special individual retire-
ment account from another such account or from an
individual retirement plan but only if such transfer
meets the requirements of section 408(d)(3).
‘‘(2) LIMITATION.—A transfer otherwise de-
scribed in paragraph (1) shall not be treated as a
qualified transfer if the taxpayer’s adjusted gross in-
come for the taxable year of the transfer exceeds the
sum of the applicable dollar amount plus $10,000.
This paragraph shall not apply to a transfer from a
special individual retirement account to another spe-
cial individual retirement account.
‘‘(3) DEFINITIONS.—For purposes of this sub-
section, the terms ‘adjusted gross income’ and ‘ap-
plicable dollar amount’ have the meanings given
such terms by section 219(g)(3), except subpara-
graph (A)(ii) thereof shall be applied without regard
to the phrase ‘or the deduction allowable under this
section’.’’
(b) EARLY WITHDRAWAL PENALTY.—Section 72(t)
of such Code is amended by adding at the end thereof
the following new paragraph:
‘‘(6) RULES RELATING TO SPECIAL INDIVIDUAL
RETIREMENT ACCOUNTS.—In the case of a special
individual retirement 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) of
such Code is amended by adding at the end thereof 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 of such Code is amended by inserting after the item
relating to section 408 the following new item:
‘‘Sec. 408A. Special individual retirement 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, 1993.
(2) QUALIFIED
TRANSFERS
IN
1993.—The
amendments made by this section shall apply to any
qualified transfer during any taxable year beginning
in 1993.
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