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March 13, 1991
TO: MEMBERS - ONE PER COMPLEX NO. 12-91
PENSION MEMBERS NO. 10-91
RE: BENTSEN-ROTH IRA BILL INTRODUCED
__________________________________________________________
Yesterday Senators Bentsen and Roth introduced S. 612, the
Savings and Investment Incentive Act of 1991. The bill was
introduced with 72 Senate co-sponsors. A companion bill, H.R.
1406, was introduced in the House of Representatives.
Effective for 1991, the bill would restore the universal
income tax deduction for IRA contributions. All working
individuals, regardless of their income level or coverage by
other retirement plans would be eligible to make a $2000
deductible IRA contribution. The limit on IRA contributions
would be indexed for inflation in $500 increments.
In addition, the bill would create a "Special IRA" under
which contributions would not be deductible; however, earnings on
amounts remaining in the account for at least five years could be
withdrawn tax-free. Earnings derived from "Special IRA"
contributions held for less than five years would be subject to
income tax and a 10 percent penalty upon withdrawal. Individuals
could contribute the full $2000 to either a deductible IRA or to
a "Special IRA" or could allocate the $2000 between the two
accounts (e.g., $500 to a deductible IRA and $1500 to a Special
IRA). However, "Special IRA" contributions could not be
commingled with other IRAs.
Finally, the bill would permit penalty-free IRA withdrawals
for first-time home purchases, education expenses and
catastrophic medical expenses. These withdrawals could be made
for the benefit of the IRA owner or the children or grandchildren
of the IRA owner. Penalty-free withdrawals from 401(k) and
403(b) plans would also be permitted under the bill for first
home purchases and education expenses.
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Attached are a copy of S. 612, a summary of the bill
prepared by Senator Bentsen’s staff and the Congressional Record
statement.
We will keep you informed of developments.
W. Richard Mason
Assistant Counsel - Pension
Attachments