To amend the Internal Revenue Code of 1986 to provide for tax-favored unemployment savings accounts, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Worker Savings Account Act of 
2008''.

SEC. 2. WORKER SAVINGS ACCOUNTS.

    (a) In General.--Subpart A of part I of subchapter D of chapter 1 
of the Internal Revenue Code of 1986 (relating to pension, profit-
sharing, stock bonus plans, etc.) is amended by inserting after section 
408A the following new section:

``SEC. 408B. WORKER SAVINGS ACCOUNTS.

    ``(a) In General.--
            ``(1) Treated in same manner as ira.--Except as provided in 
        this section, a worker savings account shall be treated for 
        purposes of this title in the same manner as an individual 
        retirement plan.
            ``(2) Separate application of rules.--Rules made applicable 
        by reason of this paragraph shall be applied separately with 
        respect to worker savings accounts and individual retirement 
        plans of the individual.
    ``(b) Worker Savings Account.--For purposes of this title, the term 
`worker savings account' means an individual retirement plan (as 
defined in section 7701(a)(37)) which is designated (in such manner as 
the Secretary may prescribe) at the time of establishment of the plan 
as a worker savings account.
    ``(c) Contributions.--
            ``(1) Employer contributions.--For purposes of this 
        section, the amount in effect under section 219(b)(5)(A), with 
        respect to an individual for a taxable year, shall be increased 
        by the lesser of--
                    ``(A) $5,000, or
                    ``(B) the amounts contributed for the taxable year 
                to the individual's worker savings account by all 
                employers of the individual.
            ``(2) Worker savings account refund payment.--Section 
        408(a)(1) shall not apply with respect to a payment under 
        section 6431.
            ``(3) Contributions after receipt of social security 
        benefits.--Except in the case of a rollover contribution 
        described in subsection (e)(1), no contributions may be made to 
        an individual's worker savings account during calendar years 
        beginning after the first month such individual begins 
        receiving amounts by reason of entitlement to a monthly benefit 
        under title II of the Social Security Act.
    ``(d) Treatment of Distributions.--
            ``(1) In general.--Any amounts distributed from a worker 
        savings account shall be included in gross income, unless such 
        amount is a qualified unemployment distribution.
            ``(2) Qualified unemployment distribution.--For purposes of 
        this section--
                    ``(A) In general.--The term `qualified unemployment 
                distribution' means any amount distributed--
                            ``(i) during a period of unemployment of 
                        the account beneficiary which is by reason of 
                        termination of employment (other than for gross 
                        misconduct of the account beneficiary), or
                            ``(ii) not earlier than the first month the 
                        account beneficiary receives an amount by 
                        reason of entitlement to a monthly benefit 
                        under title II of the Social Security Act.
            ``(3) Disability distribution.--Paragraph (1) shall not 
        apply to any amount paid or distributed on or after disability 
        (within the meaning of section 72(m)(7)) of the account 
        beneficiary.
            ``(4) Other distribution rules.--
                    ``(A) Excess contributions; transfer of account 
                incident to divorce.--Rules similar to the rules of 
                paragraphs (4) through (6) of section 408(d) shall 
                apply for purposes of this section.
                    ``(B) No minimum distribution requirement prior to 
                death.--Notwithstanding subsections (a)(6) and (b)(6), 
                section 401(a)(9) and the incidental death benefit 
                requirement of section 401(a) shall not apply for 
                purposes of this subsection.
                    ``(C) Treatment after death of account 
                beneficiary.--Rules similar to the rules of paragraph 
                (8) of section 223(f) shall apply for purposes of this 
                section.
    ``(e) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Rollover contributions.--An amount is described in 
        this paragraph as a rollover contribution if it meets the 
        requirements of clauses (i) and (ii).
                    ``(A) In general.--Paragraph (1) shall not apply to 
                any amount paid or distributed from a worker savings 
                account to the account holder to the extent--
                            ``(i) the entire amount received is paid 
                        into a worker savings account for the benefit 
                        of such holder not later than the 60th day 
                        after the day on which the holder receives the 
                        payment or distribution, or
                            ``(ii) the entire amount received is paid 
                        into an eligible retirement plan (as defined in 
                        section 408(d)(3)) for the benefit of such 
                        holder not later than the 60th day after the 
                        day on which the holder receives the payment or 
                        distribution, except that the maximum amount 
                        which may be paid into such plan may not exceed 
                        the portion of the amount received which is 
                        includible in gross income (determined without 
                        regard to this paragraph).
                    ``(B) Limitation.--This paragraph shall not apply 
                to any amount described in paragraph (A) received by an 
                individual from a worker 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 subparagraph (A) from a worker savings 
                account which was not includible in the individual's 
                gross income because of the application of this 
                paragraph.
            ``(2) Account beneficiary.--The term `account beneficiary' 
        means the individual on whose behalf the worker savings account 
        is established.
    ``(f) Inflation Adjustment.--In the case of any taxable year 
beginning in a calendar year after 2009, the dollar amount contained in 
subsection (c)(1) shall be increased by an amount equal to--
            ``(1) such dollar amount, multiplied by
            ``(2) the cost-of-living adjustment determined under 
        section 1(f)(3) for the calendar year in which the taxable year 
        begins, determined by substituting `calendar year 2008' for 
        `calendar year 1992' in subparagraph (B) thereof.
Any increase determined under the preceding sentence shall be rounded 
to the nearest multiple of $100.''.
    (b) Clerical Amendment.--The table of sections 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 408A the following new 
item:

``Sec. 408B. Worker savings accounts.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.

SEC. 3. PORTION OF SAVER'S CREDIT REFUNDABLE.

    (a) In General.--Section 25B of such Code (relating to elective 
deferrals and IRA contributions by certain individuals) is amended by 
adding at the end the following new subsection:
    ``(h) Portion of Credit Refundable.--
            ``(1) In general.--The aggregate credits allowed to a 
        taxpayer under subpart C shall be increased by the lesser of--
                    ``(A) $1,000, or
                    ``(B) the amount of the credit attributable to 
                qualified retirement savings contributions made by the 
                individual to worker savings accounts which would be 
                allowed under this section (without regard to this 
                subsection and the limitation under section 26(a)(2) or 
                subsection (g), as the case may be).
The amount of the credit allowed under this subsection shall not be 
treated as a credit allowed under this subpart and shall reduce the 
amount of credit otherwise allowable under subsection (a) without 
regard to section 26(a)(2) or subsection (g), as the case may be.
            ``(2) Limitation.--The amount of the credit allowed under 
        this section for any taxable year shall not exceed an amount 
        equal to the excess (if any) of--
                    ``(A) $5,000, over
                    ``(B) the aggregate amount of credits allowed under 
                this subsection for all prior taxable years.
            ``(3) Inflation adjustment.--In the case of any taxable 
        year beginning in a calendar year after 2009, each of the 
        dollar amounts contained in paragraphs (1) and (2) shall be 
        increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 2008' for `calendar year 1992' in 
                subparagraph (B) thereof.
        Any increase determined under the preceding sentence shall be 
        rounded to the nearest multiple of $100.''.
    (b) Refund Payable to Worker Savings Account.--
            (1) In general.--Subchapter B of chapter 65 of the Internal 
        Revenue Code of 1986 is amended by adding at the end the 
        following new section:

``SEC. 6431. WORKER SAVINGS ACCOUNT REFUND PAYMENT.

    ``(a) In General.--In the case of a credit allowed to an individual 
which is attributable to an increase under section 25B(h), the 
Secretary shall pay the amount of such credit into the designated 
retirement account of the individual.
    ``(b) Designated Retirement Account.--The term `designated 
retirement account' means any worker savings account of the 
individual--
            ``(1) which is designated (in such form and manner as the 
        Secretary may provide) on the individual's return of tax for 
        the taxable year to receive the payment under subsection (a), 
        and
            ``(2) which, under the terms of the account, accepts the 
        payment described in paragraph (1).''.
            (2) Clerical amendment.--The table of sections for 
        subchapter B of chapter 65 of such Code is amended by adding at 
        the end the following new item:

``Sec. 6431. Worker savings account refund payment.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.

SEC. 4. NO INFERENCE AS TO STATE AND FEDERAL UNEMPLOYMENT COMPENSATION.

    No provision of this Act (including the amendments made thereby) 
shall be construed to--
            (1) diminish an employer's obligation to pay any applicable 
        State and Federal unemployment taxes (or any other amount 
        required under State or Federal law to be paid into an 
        unemployment fund), or
            (2) reduce the amount of unemployment compensation (as 
        defined in section 85(b) of the Internal Revenue Code of 1986) 
        to which an individual is entitled.

Summary: Worker Savings Account Act of 2008 - Amends the Internal Revenue Code to: (1) establish worker savings accounts to make payments to workers during periods of unemployment; (2) treat such accounts in the same manner as individual retirement accounts (IRAs) for tax purposes; (3) allow employer matching contributions to such accounts; (4) make a portion of the tax credit for contributions to retirement accounts (saver's credit) refundable; and (5) require increases in the saver's credit to be paid into a worker savings account.

Provides that no provision of this Act shall be construed to diminish an employer's obligation to pay federal and state unemployment taxes or to reduce the amount of unemployment compensation to which a worker may be entitled.