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S. 5035 (116th): Encouraging Americans to Save Act


The text of the bill below is as of Dec 16, 2020 (Introduced). The bill was not enacted into law.


II

116th CONGRESS

2d Session

S. 5035

IN THE SENATE OF THE UNITED STATES

December 16, 2020

(for himself, Mr. Bennet, Mr. Brown, Mr. Casey, Ms. Cortez Masto, Mr. Durbin, Ms. Klobuchar, and Mrs. Murray) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to provide matching payments for retirement savings contributions by certain individuals.

1.

Short title

This Act may be cited as the Encouraging Americans to Save Act.

2.

Matching payments for elective deferral and IRA contributions by certain individuals

(a)

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:

6433.

Matching payments for elective deferral and IRA contributions by certain individuals

(a)

In general

(1)

Allowance of credit

Any eligible individual who makes qualified retirement savings contributions for the taxable year shall be allowed a credit for such taxable year in an amount equal to the applicable percentage of so much of the qualified retirement savings contributions made by such eligible individual for the taxable year as does not exceed $2,000.

(2)

Payment of credit

The credit under this section shall be paid by the Secretary as a contribution (as soon as practicable after the eligible individual has filed a tax return for the taxable year) to the applicable retirement savings vehicle of an eligible individual.

(b)

Applicable percentage

For purposes of this section—

(1)

In general

Except as provided in paragraph (2), the applicable percentage is 50 percent.

(2)

Phaseout

The percentage under paragraph (1) shall be reduced (but not below zero) by the number of percentage points which bears the same ratio to 50 percentage points as—

(A)

the excess of—

(i)

the taxpayer’s modified adjusted gross income for such taxable year, over

(ii)

the applicable dollar amount, bears to

(B)

the phaseout range.

If any reduction determined under this paragraph is not a whole percentage point, such reduction shall be rounded to the next lowest whole percentage point.
(3)

Applicable dollar amount; phaseout range

(A)

Joint returns

Except as provided in subparagraph (B)—

(i)

the applicable dollar amount is $65,000, and

(ii)

the phaseout range is $20,000.

(B)

Other returns

In the case of—

(i)

a head of a household (as defined in section 2(b)), the applicable dollar amount and the phaseout range shall be 3/4 of the amounts applicable under subparagraph (A) (as adjusted under subsection (g)), and

(ii)

any taxpayer who is not filing a joint return and who is not a head of a household (as so defined), the applicable dollar amount and the phaseout range shall be ½ of the amounts applicable under subparagraph (A) (as so adjusted).

(4)

Exception; minimum credit

In the case of an eligible individual with respect to whom (without regard to this paragraph) the credit determined under subsection (a)(1) is greater than zero but less than $100, the credit allowed under this section shall be $100.

(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 152(f)(2)).

(d)

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 retirement contributions (as defined in section 219(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)).

Such term shall not include any amount attributable to a payment under subsection (a).
(2)

Reduction for certain distributions

(A)

In general

The qualified retirement savings contributions determined under paragraph (1) for a taxable year shall be reduced (but not below zero) by the aggregate distributions received by the individual during the testing period from any entity of a type to which contributions under paragraph (1) may be made.

(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),

(ii)

any distribution to which section 408(d)(3) or 408A(d)(3) applies, and

(iii)

any portion of a distribution if such portion is transferred or paid in a rollover contribution (as defined in section 402(c), 403(a)(4), 403(b)(8), 408A(e), or 457(e)(16)) to an account or plan to which qualified retirement contributions can be made.

(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.

(e)

Applicable retirement savings vehicle

(1)

In general

The term applicable retirement savings vehicle means—

(A)

an account or plan elected by the eligible individual under paragraph (2), or

(B)

if no such election is made or the Secretary is not able to make a contribution into the account or plan selected by the eligible individual, an account established for the benefit of the eligible individual under the R-Bond Program.

For purposes of subparagraph (B), if no account has previously been established for the benefit of the individual under the R-Bond Program, the Secretary shall establish such an account for such individual for purposes of contributions under this section.
(2)

Other retirement vehicles

An eligible individual may elect to have the amount determined under subsection (a) contributed to an account or plan which—

(A)

is a Roth IRA or a designated Roth account (within the meaning of section 402A) of an applicable retirement plan (as defined in section 402A(e)(1)),

(B)

is for the benefit of the eligible individual,

(C)

accepts contributions made under this section, and

(D)

is designated by such individual (in such form and manner as the Secretary may provide) on the return of tax for the taxable year.

In the case of a plan of which a qualified trust under section 401(a) is a part, an annuity contract described in section 403(b), or a plan described in section 457(b) which is established and maintained by an employer described in section 457(e)(1)(A), amounts under this section may only be contributed to such plan if the plan document permits such contribution.
(f)

Other definitions and special rules

(1)

Modified adjusted gross income

For purposes of this section, the term modified adjusted gross income means adjusted gross income—

(A)

determined without regard to sections 911, 931, and 933, and

(B)

determined without regard to any exclusion or deduction allowed for any qualified retirement savings contribution made during the taxable year.

(2)

Treatment of contributions

In the case of any contribution under subsection (a)(2)—

(A)

except as otherwise provided in this section or by the Secretary under regulations, such contribution shall be treated as—

(i)

an elective deferral made by the individual which is a designated Roth contribution, if contributed to an applicable retirement plan, or

(ii)

as a Roth IRA contribution made by such individual, if contributed to a Roth IRA,

(B)

such contribution shall not be treated as income to the taxpayer, and

(C)

such contribution shall not be taken into account with respect to any applicable limitation under sections 402(g)(1), 403(b), 408(a)(1), 408(b)(2)(B), 408A(c)(2), 414(v)(2), 415(c), or 457(b)(2), and shall be disregarded for purposes of sections 401(a)(4), 401(k)(3), 401(k)(11)(B)(i)(III), and 416.

(3)

Treatment of qualified plans, etc

A plan or arrangement to which a contribution is made under this section shall not be treated as violating any requirement under section 401, 403, 408, or 457 solely by reason of accepting such contribution.

(4)

Erroneous credits

If any contribution is erroneously paid under subsection (a)(2), the amount of such erroneous payment shall be treated as an underpayment of tax.

(g)

Inflation adjustments

(1)

In general

In the case of any taxable year beginning in a calendar year after 2020, each of the dollar amounts in subsections (a)(1) and (b)(3)(A)(i) 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 2019 for calendar year 2016 in subparagraph (A)(ii) thereof.

(2)

Rounding

Any increase determined under paragraph (1) shall be rounded to the nearest multiple of—

(A)

$100 in the case of an adjustment of the amount in subsection (a)(1), and

(B)

$1,000 in the case of an adjustment of the amount in subsection (b)(3)(A)(i).

.

(b)

Payment authority

Section 1324(b)(2) of title 31, United States Code, is amended by striking or 6431 and inserting 6431, or 6433.

(c)

Deficiencies

Section 6211(b)(4) is amended by striking and 6431 and inserting 6431, and 6433.

(d)

Reporting

The Secretary of Labor, the Secretary of the Treasury, and the Director of the Pension Benefit Guaranty Corporation shall—

(1)

amend Form 5500 to require separate reporting of the aggregate amount of contributions received by the plan during the year under section 6433 of the Internal Revenue Code of 1986 (as added by this section), and

(2)

amend Form 5498 to require similar reporting with respect to individual retirement plans (as defined in section 7701(a)(37) of such Code).

(e)

Conforming amendments

(1)

Section 25B of the Internal Revenue Code of 1986 is amended by striking subsections (a) through (f) and inserting the following:

For payment of credit related to qualified retirement savings contributions, see section 6433.

.

(2)

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. 6433. Matching payments for elective deferral and IRA contributions by certain individuals.

.

(f)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2021.

(g)

Coronavirus recovery bonus credit

(1)

In general

In the case of taxable years beginning after December 31, 2021, and before January 1, 2027, the amount of the credit determined under section 6433 of the Internal Revenue Code of 1986, as added by this section, shall be increased by an amount equal to 50 percent of so much of the qualified retirement savings contributions made by an eligible individual for the taxable year as does not exceed—

(A)

$10,000, reduced by

(B)

the aggregate amount of qualified retirement savings contributions made by the eligible individual in all preceding taxable years which begin after December 31, 2021.

(2)

Definitions

For purposes of this subsection, the terms qualified retirement savings contributions and eligible individual have the meanings given such terms by subsections (d) and (c), respectively, of section 6433 of such Code, as so added.

3.

Establishment of R-Bond Program

(a)

In general

The Secretary of the Treasury shall, not later than December 31, 2022, establish a permanent program, to be known as the R-Bond Program, which meets the requirements of this section to establish and maintain a Roth IRA on behalf of individuals.

(b)

Program specifications

(1)

In general

(A)

Roth IRAs

The R-Bond Program established under this section shall—

(i)

permit an individual to establish a Roth IRA which satisfies the requirements of section 408A of the Internal Revenue Code of 1986 on behalf of the individual;

(ii)

permit an employer to establish such a Roth IRA on behalf of 1 or more employees of such employer;

(iii)

require the assets of each Roth IRA established under the program to be held by the designated Roth IRA custodian;

(iv)

permit contributions to be made periodically to such Roth IRAs by direct deposit or other electronic means and by methods that provide access for the unbanked;

(v)

permit distributions and rollovers from such Roth IRAs upon request of the account owner;

(vi)

include procedures to consolidate multiple accounts established for the same individual; and

(vii)

ensure that such Roth IRAs are invested solely in retirement savings bonds issued by the Department of the Treasury for the purpose of the R-Bond Program.

(B)

Regulations, etc

The Secretary of the Treasury shall have authority to promulgate such regulations, rules, and other guidance as are necessary to implement the R-Bond Program, and are consistent with this section, as well as coordination rules permitting Roth IRAs to be established under the R-Bond Program in connection with State and local laws that enroll residents in Roth IRAs.

(2)

No fees

No fees shall be assessed on participants in the R-Bond Program.

(3)

Limitations

(A)

Contribution minimum

The Secretary of the Treasury may establish minimum amounts for initial and additional contributions to a Roth IRA under the R-Bond Program, not to exceed $5.

(B)

Rollover contributions not permitted

No rollover contribution shall be accepted to a Roth IRA under the R-Bond Program.

(C)

Account maximum

No contributions (other than a contribution made under section 6433(a)(2) of the Internal Revenue Code of 1986, as added by this Act) shall be credited to a Roth IRA under the R-Bond Program after the account balance of such Roth IRA reaches $15,000.

(D)

Limitation on participation

Within a reasonable amount of time after the earlier of—

(i)

the date the account balance of a Roth IRA under the R-Bond Program reaches $15,000; or

(ii)

the earlier of—

(I)

the date that the participant has been a participant in the R-Bond Program for 30 years; or

(II)

the date that the participant reaches age 591/2,

the designated Roth IRA custodian shall provide notice to the participant that no further contributions will be accepted and that the participant may elect to have the account balance rolled over to another Roth IRA according to the rules relating to rollovers and transfers of Roth IRAs under the Internal Revenue Code of 1986.
(E)

Adjustment for inflation

(i)

In general

In the case of any calendar year after 2023, the $15,000 amount in subparagraphs (C) and (D) and subsection (c)(3)(B) 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) of the Internal Revenue Code of 1986 for the calendar year, determined by substituting calendar year 2022 for calendar year 2016 in subparagraph (A)(ii) thereof.

(ii)

Rounding

If any increase determined under clause (i) is not a multiple of $50, such increase shall be rounded to the next lowest multiple of $50.

(4)

Designated Roth IRA custodian

For purposes of this section, the designated Roth IRA custodian is the person designated by the Secretary of the Treasury to act as custodian of the Roth IRAs established on behalf of participants in the retirement savings program of such Department.

(c)

Retirement savings bonds

For purposes of this section—

(1)

In general

The term retirement savings bond means an interest-bearing electronic United States savings bond issued to the designated Roth IRA custodian which is available only to participants in the R-Bond Program.

(2)

Interest rate

Bonds issued under the R-Bond Program shall earn interest at a rate equal to the greater of (determined on the issue date)—

(A)

the rate earned by the Government Securities Investment Fund established under section 8438(b)(1) of title 5, United States Code; or

(B)

a Series I United States savings bond.

(3)

Bonds to be credited to single account

Each retirement savings bond issued to the designated Roth IRA custodian shall be credited to a single Roth IRA established through the R-Bond Program on behalf of a participant.

(4)

Reissue in case of change in custodian

If a successor designated Roth IRA custodian is designated under subsection (b)(4), the retirement savings bonds issued to the predecessor designated Roth IRA custodian shall be reissued to such successor.

(d)

Roth IRA

For purposes of this section, the term Roth IRA has the meaning given such term by section 408A(b) of the Internal Revenue Code of 1986.

4.

Promotion and guidance

(a)

Promotion

The Secretary of the Treasury (or the Secretary's delegate) shall educate taxpayers on the benefits provided under section 6433 of the Internal Revenue Code of 1986 and the R-Bond Program established under section 3 of this Act.

(b)

Guidance

Not later than December 31, 2021, the Secretary of the Treasury (or the Secretary's delegate) shall issue guidance on the implementation and administration of the amendments made by section 2 of this Act.