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Author: dokdale One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76421  
Subject: Elimination of the Roth IRA Date: 5/21/2002 6:07 AM
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--- From Rothira.com------


1. House Democratic Leader Gephardt introduced a bill on 4/18/02, H.R. 4482, that would eliminate Roth IRAs. H.R. 4482 would replace all existing types of IRAs and Roth IRAs with a Universal Retirement Savings Account from which all distributions would be taxable. H.R. 4482 seems to have little chance of passage at this time. (5/6/02).

107th CONGRESS

2d Session

H. R. 4482
To amend the Internal Revenue Code of 1986 to provide for Universal Retirement Savings Accounts in lieu of the various individual retirement plans.


IN THE HOUSE OF REPRESENTATIVES

APRIL 18, 2002
Mr. GEPHARDT 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 provide for Universal Retirement Savings Accounts in lieu of the various individual retirement plans.


Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

(a) SHORT TITLE- This Act may be cited as the `Universal and Portable Pension Act of 2002'.

(b) AMENDMENT OF 1986 CODE- Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.

SEC. 2. UNIVERSAL RETIREMENT SAVINGS ACCOUNTS.

(a) DEDUCTION FOR CONTRIBUTIONS-

(1) IN GENERAL- Part VII of subchapter B of chapter 1 (relating to additional itemized deductions for individuals) is amended by inserting after section 219 the following new section:

`SEC. 219A. CONTRIBUTIONS TO UNIVERSAL RETIREMENT SAVINGS ACCOUNTS.

`(a) ALLOWANCE OF DEDUCTION- In the case of an individual, there shall be allowed as a deduction an amount equal to the qualified universal retirement contributions of the individual for the taxable year.

`(b) MAXIMUM AMOUNT OF DEDUCTION-

`(1) IN GENERAL- The amount allowable as a deduction under subsection (a) to any individual for any taxable year shall not exceed the lesser of--

`(A) the deductible amount, or

`(B) an amount equal to the compensation includible in the individual's gross income for such taxable year.

`(2) DEDUCTIBLE AMOUNT- For purposes of paragraph (1)(A), the deductible amount shall be determined in accordance with the following table:

`For taxable years beginning
--The deductible


in calendar year--
--amount is--

2002, 2003, or 2004

--$3,000

2005, 2006, or 2007

--$4,000

2008 or thereafter

--$5,000.


`(3) COST-OF-LIVING ADJUSTMENT-

`(A) IN GENERAL- In the case of any taxable year beginning in a calendar year after 2008, the $5,000 amount in paragraph (2) shall be increased by an amount equal to--

`(i) such dollar amount, multiplied by

`(ii) 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 2007' for `calendar year 1992' in subparagraph (B) thereof.

`(B) ROUNDING- If any amount after adjustment under clause (i) is not a multiple of $500, such amount shall be rounded to the next lower multiple of $500.

`(c) LIMITATION BASED ON ADJUSTED GROSS INCOME-

`(1) IN GENERAL- The deductible amount otherwise applicable under subsection (b) for any taxable year shall be reduced (but not below zero) by the amount determined under paragraph (2).

`(2) AMOUNT OF REDUCTION-

`(A) IN GENERAL- The amount determined under this paragraph with respect to any dollar limitation shall be the amount which bears the same ratio to such limitation as--

`(i) the excess of--

`(I) the taxpayer's adjusted gross income for such taxable year, over

`(II) $50,000 ($100,000 in the case of a joint return), bears to

`(ii) $50,000 ($60,000 in the case of a joint return).

`(B) NO REDUCTION BELOW $200 UNTIL COMPLETE PHASE-OUT- No dollar limitation shall be reduced below $200 under paragraph (1) unless (without regard to this subparagraph) such limitation is reduced to zero.

`(C) ROUNDING- Any amount determined under this paragraph which is not a multiple of $10 shall be rounded to the next lowest $10.

`(3) ADJUSTED GROSS INCOME- For purposes of this subsection, adjusted gross income of any taxpayer shall be determined--

`(A) after application of sections 86, 219, and 469, and

`(B) without regard to sections 135, 137, 221, 222, and 911 or the deduction allowable under this section.

`(4) MARRIED INDIVIDUALS FILING SEPARATE RETURNS-

`(A) IN GENERAL- In the case of a married individual filing a separate return, the amount applicable under paragraph (2)(A)(i)(II) is zero.

`(B) SPECIAL RULE FOR MARRIED INDIVIDUALS FILING SEPARATELY AND LIVING APART- A husband and wife who--

`(i) file separate returns for any taxable year, and

`(ii) live apart at all times during such taxable year,

shall not be treated as married individuals for purposes of this subsection.

`(d) SPECIAL RULES FOR CERTAIN MARRIED INDIVIDUALS-

`(1) IN GENERAL- In the case of an individual to whom this paragraph applies for the taxable year, the limitation of paragraph (1) of subsection (b) shall be equal to the lesser of--

`(A) the dollar amount in effect under subsection (b)(1)(A) for the taxable year, or

`(B) 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 individual's spouse for the taxable year reduced by the amount allowed as a deduction under subsection (a) to such spouse for such taxable year.

`(2) INDIVIDUALS TO WHOM PARAGRAPH (1) APPLIES- Paragraph (1) shall apply to any individual if--

`(A) such individual files a joint return for the taxable year, and

`(B) the amount of compensation (if any) includible in such individual's gross income for the taxable year is less than the compensation includible in the gross income of such individual's spouse for the taxable year.

`(e) QUALIFIED UNIVERSAL RETIREMENT CONTRIBUTIONS- For purposes of this section, the term `qualified universal retirement contribution' means any amount paid in cash for the taxable year by or on behalf of an individual to a Universal Retirement Savings Account for such individual's benefit.

`(f) OTHER LIMITATIONS AND RESTRICTIONS-

`(1) BENEFICIARY MUST BE UNDER AGE 70 1/2 - No deduction shall be allowed under this section with respect to any qualified retirement contribution for the benefit of an individual if such individual has attained age 70 1/2 before the close of such individual's taxable year for which the contribution was made.

`(2) RECONTRIBUTED AMOUNTS- No deduction shall be allowed under this section with respect to a rollover contribution to a Universal Retirement Savings Account.

`(3) DENIAL OF DEDUCTION FOR AMOUNT CONTRIBUTED TO INHERITED ACCOUNTS- No deduction shall be allowed under this section with respect to any amount paid to an inherited Universal Retirement Savings Account.

`(g) OTHER DEFINITIONS AND SPECIAL RULES-

`(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 property 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 extensions thereof).

`(4) EMPLOYER PAYMENTS- For purposes of this title, any amount paid by an employer to a Universal 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 paragraph (18) the following new paragraph:

`(19) CONTRIBUTIONS TO UNIVERSAL RETIREMENT 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 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.'

(4) CLERICAL AMENDMENT- The table of sections for part VII of subchapter B of chapter 1 is amended by inserting after the item relating to section 219 the following new item:
`Sec. 219A. Contributions to Universal Retirement Savings Accounts.'


(b) UNIVERSAL RETIREMENT SAVINGS ACCOUNTS-

(1) IN GENERAL- Subpart A of part I of subchapter 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 beneficiaries, but only if the written governing instrument creating the trust meets the following requirements:

`(1) Except in the case of a rollover contribution 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 contributions will not be accepted for the taxable year on behalf 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 section 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 section.

`(3) No part of the trust funds will be invested in life insurance contracts.

`(4) The interest of an individual in the balance in such individual's account is nonforfeitable.

`(5) The assets of the trust will not be commingled with other property except in a common trust fund or common investment fund.

`(6) Under regulations prescribed by the Secretary, rules similar to the rules of section 401(a)(9) and the incidental death benefit requirements of section 401(a) shall apply to the distribution of the entire interest of an individual for whose benefit the trust is maintained.

`(b) TAX TREATMENT OF DISTRIBUTIONS-

`(1) IN GENERAL- Except as otherwise provided 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 ANNUITIES- If any distribution is a part of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of such distributee and such distributee's designated beneficiary, the amount includible 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 (including 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 subparagraph (A) received by an individual from a Universal 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 purposes of this paragraph.

`(4) EXCEPTION FOR QUALIFIED DISTRIBUTIONS-

`(A) DISTRIBUTIONS FOR HIGHER EDUCATION EXPENSES- Paragraph (1) shall not apply to distributions to an individual to the extent such distributions do not exceed the qualified 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 qualified first-time homebuyer distributions (as defined 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 reason 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. organizations).

`(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 SECURITY; PURCHASE OF ENDOWMENT CONTRACT; COMMINGLING 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 REDUCTION CONTRIBUTIONS TO UNIVERSAL RETIREMENT SAVINGS ACCOUNTS FOR CERTAIN EMPLOYEES-

`(1) IN GENERAL- Every employer shall provide a qualified salary reduction arrangement which meets the requirements of paragraphs (3), (4), and (5).

`(2) QUALIFIED SALARY REDUCTION ARRANGEMENT- 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 contributions 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 requirements of this paragraph are met if the employee's rights to any contribution to the Universal Retirement Savings Account are nonforfeitable. For purposes 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 Universal Retirement Savings Account for a year only if, under the qualified salary reduction arrangement, 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 `nonexcludable 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 contributions under paragraph (2) not later than the close of the 30-day period following the last day of the month with respect 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 participation 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 arrangement, for such year.

`(6) EMPLOYER CONTRIBUTIONS-

`(A) IN GENERAL- If an employer elects to make contributions to a Universal Retirement Savings Account, such contributions meet the requirements of this paragraph if the employer elects to make nonelective contributions of 1 percent of compensation for each employee
who is eligible to participate in the arrangement.


`(B) COMPENSATION LIMITATION- The compensation taken into account under subparagraph (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 employees on a typical business day during the preceding calendar year, and

`(B) which elects not to have this subsection 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 reduction arrangement which meets the requirements of this subsection shall not be treated as distributed or made available to the employee or as contributions made by the employee.

`(9) USE OF DESIGNATED FINANCIAL INSTITUTION- 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 employer makes all contributions to the Universal Retirement Savings Accounts of a designated trustee or issuer. The preceding sentence shall not apply unless each participant is notified in writing that the participant's balance may be transferred without cost or penalty to another Universal Retirement Savings Account 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 subsection.

`(11) SUMMARY DESCRIPTION; EMPLOYER NOTIFICATION-

`(A) SUMMARY DESCRIPTION- The trustee of any Universal Retirement Savings Account 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 employer and the trustee or issuer.

`(ii) The requirements for eligibility for participation.

`(iii) The benefits provided with respect 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 employer shall notify each employee immediately before the period for which an election described in paragraph (5)(C) may be made of the employee's opportunity to make such election. Such notice shall include a copy of the description 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 section shall be applied without regard to any community 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 purposes of this section and section 402) as a distribution from such account in an amount equal to the cost to such account of such collectible.

`(g) REPORTS- The trustee of a Universal Retirement 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), distributions, 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 calendar year following the calendar year to which such reports relate, and

`(B) in such manner as the Secretary prescribes.'

(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 inserting 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 following new subsection:

`(g) EXCESS CONTRIBUTIONS TO UNIVERSAL RETIREMENT 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 amended 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 redesignating subparagraphs (D), (E), and (F) as subparagraphs (E), (F), and (G), respectively, and by inserting after subparagraph (C) the following new subparagraph:

`(D) a Universal Retirement Savings Account 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 RETIREMENT 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 concerning such Account (which would otherwise be
taxable 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 retirement accounts or annuities) is amended by redesignating subparagraphs (C) and (D) as subparagraphs (D) and (E), respectively, and by inserting after subparagraph (B) the following new subparagraph:

`(C) a Universal Retirement Savings Account 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 period 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 contributions 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 semicolon 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 section 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 adding at the end `or (J) under an arrangement to which section 408B(d) of such Code applies, other than any elective contributions under paragraph (2)(A) thereof;'.

(iii) Paragraph (5) of section 3306(b) is amended by striking `or' at the end of subparagraph (G), by striking the semicolon at the end of subparagraph (H) and inserting `, or', and by adding at the end the following new subparagraph:

`(I) under an arrangement to which section 408B(d) applies, other than any elective contributions under paragraph (2)(A) thereof;'.

(iv) Paragraph (12) of section 3401(a) is amended by adding at the end the following new subparagraph:

`(F) under an arrangement to which section 408B(d) applies; or'.

(3) CLERICAL AMENDMENT- The table of sections for subpart A of part I of subchapter D of chapter 1 is amended by inserting after the item relating to section 408A the following new item:
`Sec. 408B. Universal Retirement Savings Accounts.'


(c) TERMINATION OF CONTRIBUTIONS TO INDIVIDUAL RETIREMENT PLANS, INCLUDING ROTH IRA'S-

(1) Subsection (a) of section 408 is amended by adding at the end the following new paragraph:

`(7) No contribution (other than a rollover contribution referred to in paragraph (1)) shall be accepted for any taxable year beginning after December 31, 2002, unless such account is a simplified employee pension or a simple retirement account.'

(2) Subsection (b) of section 408 is amended by inserting after paragraph (4) the following new paragraph:

`(5) No contribution shall be accepted for any taxable year beginning after December 31, 2002, unless 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 related 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 determined under this section for any taxable year is the aggregate 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 following 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 paragraph:

`(16) in the case of an eligible employer (as defined in section 45G(c)), the small employer Universal Retirement Savings Account cost credit determined under section 45G(a).'.

(3) CLERICAL AMENDMENT- The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended by adding at the end the following new item:
`Sec. 45G. Small employer Universal Retirement Savings Account 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 refundable 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 RETIREMENT SAVINGS ACCOUNT CONTRIBUTIONS BY CERTAIN INDIVIDUALS.

`(a) ALLOWANCE OF CREDIT- In the case of an eligible 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 the qualified retirement savings contributions of the eligible individual for the taxable year as do not exceed $2,000.

`(b) APPLICABLE PERCENTAGE- For purposes of this section, the applicable percentage is the percentage determined in accordance with the following table:
-----------------------------------------------------------------------------------------------------------
Adjusted Gross Income Applicable percentage
Joint return Head of a household All other cases
Over Not over Over Not over Over Not over
-----------------------------------------------------------------------------------------------------------
$60,000 $45,000 $30,000 50
60,000 70,000 45,000 52,500 30,000 35,000 20
70,000 80,000 52,500 60,000 35,000 40,000 10
80,000 60,000 40,000 0
-----------------------------------------------------------------------------------------------------------

`(c) ELIGIBLE INDIVIDUAL- For purposes of this section--

`(1) IN GENERAL- The term `eligible individual' means any individual if such individual has attained the age of 18 as of the close of the taxable year.

`(2) DEPENDENTS AND FULL-TIME STUDENTS NOT ELIGIBLE- The term `eligible individual' shall not include--

`(A) any individual with respect to whom a deduction under section 151 is allowed to another taxpayer for a taxable year beginning in the calendar year in which such individual's taxable year begins, and

`(B) any individual who is a student (as defined in section 151(c)(4)).

`(d) CREDIT FOR CONTRIBUTIONS TO UNIVERSAL RETIREMENT SAVINGS ACCOUNTS OF DEPENDENTS-

`(1) IN GENERAL- In addition to the credit allowed 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 Account 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 CONTRIBUTIONS- For purposes of this section--

`(1) IN GENERAL- The term `qualified retirement 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 compensation by such individual under an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer 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 DISTRIBUTIONS-

`(A) IN GENERAL- The qualified retirement 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 compensation 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 individual during the testing period which is not a qualified rollover contribution (as defined 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 respect 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 extensions) for filing the return of tax for such taxable year.

`(C) EXCEPTED DISTRIBUTIONS- There shall not be taken into account under subparagraph (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 RECEIVED BY SPOUSE OF INDIVIDUAL- For purposes 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 received 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- Notwithstanding any other provision of law, a qualified retirement savings contribution shall not fail to be included in determining the investment in the contract for purposes of section 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 inserting `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 before 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 account 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.
END

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