[9668]
February 11, 1998
TO: PENSION COMMITTEE No. 4-98
PENSION OPERATIONS ADVISORY COMMITTEE No. 3-98
RE: SENATE FINANCE COMMITTEE VOTES TO INCREASE EDUCATION IRA
ANNUAL LIMIT TO $2,000
______________________________________________________________________________
On February 10, the Senate Finance Committee voted to expand the Education IRA program
on an 11-8 vote. The Parent and Student Savings Account Plus Act, S. 1133, would expand and modify
the Education IRA program by increasing the annual contribution limit from $500 to $2,000 for the
period 1999 through 2002. For 2003 and later years, the limit would be $500. The bill also would
permit withdrawals to pay for expenses associated with elementary and secondary education expenses.
The Clinton Administration remains strongly opposed to any Education IRA program expansion that
would permit withdrawals to pay for elementary and secondary education expenses.
The bill also includes the following provisions relevant to the Education IRA:
(1) contributions to an Education IRA would be permitted after the designated beneficiary reaches age
18 in the case of a “special needs beneficiary”, and in the case of such a beneficiary, a deemed
distribution of the account balance would not be required when the beneficiary reaches age 30; (2)
corporations and other entities (e.g. tax-exempt entities) would be permitted to make contributions to
Education IRAs, regardless of the income of the entity for the year; and (3) several technical corrections,
as detailed in the attachment. Also, the bill was amended in Committee to clarify that expenses incurred
in connection with after-school programs for students in grades K through 12 are intended to be
included as a qualified use of an Education IRA distribution.
Russell G. Galer
Associate Counsel
Attachment