Encouraging Americans to Save Act

II 116TH CONGRESS 2D SESSION S. 5035 To amend the Internal Revenue Code of 1986 to provide matching payments for retirement savings contributions by certain individuals. IN THE SENATE OF THE UNITED STATES DECEMBER 16, 2020 Mr. WYDEN (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. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Encouraging Ameri- 4 cans to Save Act’’. 5 VerDate Sep 11 2014 21:32 Dec 29, 2020 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S5035.IS S5035 pamtmann on DSKBC07HB2PROD with BILLS 2 •S 5035 IS SEC. 2. MATCHING PAYMENTS FOR ELECTIVE DEFERRAL 1 AND IRA CONTRIBUTIONS BY CERTAIN INDI- 2 VIDUALS. 3 (a) IN GENERAL.—Subchapter B of chapter 65 of the 4 Internal Revenue Code of 1986 is amended by adding at 5 the end the following new section: 6 ‘‘SEC. 6433. MATCHING PAYMENTS FOR ELECTIVE DEFER- 7 RAL AND IRA CONTRIBUTIONS BY CERTAIN 8 INDIVIDUALS. 9 ‘‘(a) IN GENERAL.— 10 ‘‘(1) ALLOWANCE OF CREDIT.—Any eligible in- 11 dividual who makes qualified retirement savings con- 12 tributions for the taxable year shall be allowed a 13 credit for such taxable year in an amount equal to 14 the applicable percentage of so much of the qualified 15 retirement savings contributions made by such eligi- 16 ble individual for the taxable year as does not exceed 17 $2,000. 18 ‘‘(2) PAYMENT OF CREDIT.—The credit under 19 this section shall be paid by the Secretary as a con- 20 tribution (as soon as practicable after the eligible in- 21 dividual has filed a tax return for the taxable year) 22 to the applicable retirement savings vehicle of an eli- 23 gible individual. 24 ‘‘(b) APPLICABLE PERCENTAGE.—For purposes of 25 this section— 26 VerDate Sep 11 2014 21:32 Dec 29, 2020 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S5035.IS S5035 pamtmann on DSKBC07HB2PROD with BILLS 3 •S 5035 IS ‘‘(1) IN GENERAL.—Except as provided in para- 1 graph (2), the applicable percentage is 50 percent. 2 ‘‘(2) PHASEOUT.—The percentage under para- 3 graph (1) shall be reduced (but not below zero) by 4 the number of percentage points which bears the 5 same ratio to 50 percentage points as— 6 ‘‘(A) the excess of— 7 ‘‘(i) the taxpayer’s modified adjusted 8 gross income for such taxable year, over 9 ‘‘(ii) the applicable dollar amount, 10 bears to 11 ‘‘(B) the phaseout range. 12 If any reduction determined under this paragraph is 13 not a whole percentage point, such reduction shall be 14 rounded to the next lowest whole percentage point. 15 ‘‘(3) APPLICABLE DOLLAR AMOUNT; PHASEOUT 16 RANGE.— 17 ‘‘(A) JOINT RETURNS.—Except as pro- 18 vided in subparagraph (B)— 19 ‘‘(i) the applicable dollar amount is 20 $65,000, and 21 ‘‘(ii) the phaseout range is $20,000. 22 ‘‘(B) OTHER RETURNS.—In the case of— 23 ‘‘(i) a head of a household (as defined 24 in section 2(b)), the applicable dollar 25 VerDate Sep 11 2014 21:32 Dec 29, 2020 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S5035.IS S5035 pamtmann on DSKBC07HB2PROD with BILLS 4 •S 5035 IS amount and the phaseout range shall be 3⁄4 1 of the amounts applicable under subpara- 2 graph (A) (as adjusted under subsection 3 (g)), and 4 ‘‘(ii) any taxpayer who is not filing a 5 joint return and who is not a head of a 6 household (as so defined), the applicable 7 dollar amount and the phaseout range 8 shall be 1⁄2 of the amounts applicable 9 under subparagraph (A) (as so adjusted). 10 ‘‘(4) EXCEPTION; MINIMUM CREDIT.—In the 11 case of an eligible individual with respect to whom 12 (without regard to this paragraph) the credit deter- 13 mined under subsection (a)(1) is greater than zero 14 but less than $100, the credit allowed under this 15 section shall be $100. 16 ‘‘(c) ELIGIBLE INDIVIDUAL.—For purposes of this 17 section— 18 ‘‘(1) IN GENERAL.—The term ‘eligible indi- 19 vidual’ means any individual if such individual has 20 attained the age of 18 as of the close of the taxable 21 year. 22 ‘‘(2) DEPENDENTS AND FULL-TIME STUDENTS 23 NOT ELIGIBLE.—The term ‘eligible individual’ shall 24 not include— 25 VerDate Sep 11 2014 21:32 Dec 29, 2020 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S5035.IS S5035 pamtmann on DSKBC07HB2PROD with BILLS 5 •S 5035 IS ‘‘(A) any individual with respect to whom 1 a deduction under section 151 is allowed to an- 2 other taxpayer for a taxable year beginning in 3 the calendar year in which such individual’s 4 taxable year begins, and 5 ‘‘(B) any individual who is a student (as 6 defined in section 152(f)(2)). 7 ‘‘(d) QUALIFIED RETIREMENT SAVINGS CONTRIBU- 8 TIONS.—For purposes of this section— 9 ‘‘(1) IN GENERAL.—The term ‘qualified retire- 10 ment savings contributions’ means, with respect to 11 any taxable year, the sum of— 12 ‘‘(A) the amount of the qualified retire- 13 ment contributions (as defined in section 14 219(e)) made by the eligible individual, 15 ‘‘(B) the amount of— 16 ‘‘(i) any elective deferrals (as defined 17 in section 402(g)(3)) of such individual, 18 and 19 ‘‘(ii) any elective deferral of com- 20 pensation by such individual under an eli- 21 gible deferred compensation plan (as de- 22 fined in section 457(b)) of an eligible em- 23 ployer described in section 457(e)(1)(A), 24 and 25 VerDate Sep 11 2014 21:32 Dec 29, 2020 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S5035.IS S5035 pamtmann on DSKBC07HB2PROD with BILLS 6 •S 5035 IS ‘‘(C) the amount of voluntary employee 1 contributions by such individual to any qualified 2 retirement plan (as defined in section 4974(c)). 3 Such term shall not include any amount attributable 4 to a payment under subsection (a). 5 ‘‘(2) REDUCTION FOR CERTAIN DISTRIBU- 6 TIONS.— 7 ‘‘(A) IN GENERAL.—The qualified retire- 8 ment savings contributions determined under 9 paragraph (1) for a taxable year shall be re- 10 duced (but not below zero) by the aggregate 11 distributions received by the individual during 12 the testing period from any entity of a type to 13 which contributions under paragraph (1) may 14 be made. 15 ‘‘(B) TESTING PERIOD.—For purposes of 16 subparagraph (A), the testing period, with re- 17 spect to a taxable year, is the period which in- 18 cludes— 19 ‘‘(i) such taxable year, 20 ‘‘(ii) the 2 preceding taxable years, 21 and 22 ‘‘(iii) the period after such taxable 23 year and before the due date (including ex- 24 VerDate Sep 11 2014 21:32 Dec 29, 2020 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S5035.IS S5035 pamtmann on DSKBC07HB2PROD with BILLS 7 •S 5035 IS tensions) for filing the return of tax for 1 such taxable year. 2 ‘‘(C) EXCEPTED DISTRIBUTIONS.—There 3 shall not be taken into account under subpara- 4 graph (A)— 5 ‘‘(i) any distribution referred to in 6 section 72(p), 401(k)(8), 401(m)(6), 7 402(g)(2), 404(k), or 408(d)(4), 8 ‘‘(ii) any distribution to which section 9 408(d)(3) or 408A(d)(3) applies, and 10 ‘‘(iii) any portion of a distribution if 11 such portion is transferred or paid in a 12 rollover contribution (as defined in section 13 402(c), 403(a)(4), 403(b)(8), 408A(e), or 14 457(e)(16)) to an account or plan to which 15 qualified retirement contributions can be 16 made. 17 ‘‘(D) TREATMENT OF DISTRIBUTIONS RE- 18 CEIVED BY SPOUSE OF INDIVIDUAL.—For pur- 19 poses of determining distributions received by 20 an individual under subparagraph (A) for any 21 taxable year, any distribution received by the 22 spouse of such individual shall be treated as re- 23 ceived by such individual if such individual and 24 spouse file a joint return for such taxable year 25 VerDate Sep 11 2014 21:32 Dec 29, 2020 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S5035.IS S5035 pamtmann on DSKBC07HB2PROD with BILLS 8 •S 5035 IS and for the taxable year during which the 1 spouse receives the distribution. 2 ‘‘(e) APPLICABLE RETIREMENT SAVINGS VEHI- 3 CLE.— 4 ‘‘(1) IN GENERAL.—The term ‘applicable retire- 5 ment savings vehicle’ means— 6 ‘‘(A) an account or plan elected by the eli- 7 gible individual under paragraph (2), or 8 ‘‘(B) if no such election is made or the 9 Secretary is not able to make a contribution 10 into the account or plan selected by the eligible 11 individual, an account established for the ben- 12 efit of the eligible individual under the R-Bond 13 Program. 14 For purposes of subparagraph (B), if no account has 15 previously been established for the benefit of the in- 16 dividual under the R-Bond Program, the Secretary 17 shall establish such an account for such individual 18 for purposes of contributions under this section. 19 ‘‘(2) OTHER RETIREMENT VEHICLES.—An eligi- 20 ble individual may elect to have the amount deter- 21 mined under subsection (a) contributed to an ac- 22 count or plan which— 23 ‘‘(A) is a Roth IRA or a designated Roth 24 account (within the meaning of section 402A) 25 VerDate Sep 11 2014 21:32 Dec 29, 2020 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S5035.IS S5035 pamtmann on DSKBC07HB2PROD with BILLS 9 •S 5035 IS of an applicable retirement plan (as defined in 1 section 402A(e)(1)), 2 ‘‘(B) is for the benefit of the eligible indi- 3 vidual, 4 ‘‘(C) accepts contributions made under this 5 section, and 6 ‘‘(D) is designated by such individual (in 7 such form and manner as the Secretary may 8 provide) on the return of tax for the taxable 9 year. 10 In the case of a plan of which a qualified trust 11 under section 401(a) is a part, an annuity contract 12 described in section 403(b), or a plan described in 13 section 457(b) which is established and maintained 14 by an employer described in section 457(e)(1)(A), 15 amounts under this section may only be contributed 16 to such plan if the plan document permits such con- 17 tribution. 18 ‘‘(f) OTHER DEFINITIONS AND SPECIAL RULES.— 19 ‘‘(1) MODIFIED ADJUSTED GROSS INCOME.— 20 For purposes of this section, the term ‘modified ad- 21 justed gross income’ means adjusted gross income— 22 ‘‘(A) determined without regard to sections 23 911, 931, and 933, and 24 VerDate Sep 11 2014 21:32 Dec 29, 2020 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S5035.IS S5035 pamtmann on DSKBC07HB2PROD with BILLS 10 •S 5035 IS ‘‘(B) determined without regard to any ex- 1 clusion or deduction allowed for any qualified 2 retirement savings contribution made during 3 the taxable year. 4 ‘‘(2) TREATMENT OF CONTRIBUTIONS.—In the 5 case of any contribution under subsection (a)(2)— 6 ‘‘(A) except as otherwise provided in this 7 section or by the Secretary under regulations, 8 such contribution shall be treated as— 9 ‘‘(i) an elective deferral made by the 10 individual which is a designated Roth con- 11 tribution, if contributed to an applicable 12 retirement plan, or 13 ‘‘(ii) as a Roth IRA contribution made 14 by such individual, if contributed to a Roth 15 IRA, 16 ‘‘(B) such contribution shall not be treated 17 as income to the taxpayer, and 18 ‘‘(C) such contribution shall not be taken 19 into account with respect to any applicable limi- 20 tation under sections 402(g)(1), 403(b), 21 408(a)(1), 408(b)(2)(B), 408A(c)(2), 414(v)(2), 22 415(c), or 457(b)(2), and shall be disregarded 23 for purposes of sections 401(a)(4), 401(k)(3), 24 401(k)(11)(B)(i)(III), and 416. 25 VerDate Sep 11 2014 21:32 Dec 29, 2020 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S5035.IS S5035 pamtmann on DSKBC07HB2PROD with BILLS 11 •S 5035 IS ‘‘(3) TREATMENT OF QUALIFIED PLANS, ETC.— 1 A plan or arrangement to which a contribution is 2 made under this section shall not be treated as vio- 3 lating any requirement under section 401, 403, 408, 4 or 457 solely by reason of accepting such contribu- 5 tion. 6 ‘‘(4) ERRONEOUS CREDITS.—If any contribu- 7 tion is erroneously paid under subsection (a)(2), the 8 amount of such erroneous payment shall be treated 9 as an underpayment of tax. 10 ‘‘(g) INFLATION ADJUSTMENTS.— 11 ‘‘(1) IN GENERAL.—In the case of any taxable 12 year beginning in a calendar year after 2020, each 13 of the dollar amounts in subsections (a)(1) and 14 (b)(3)(A)(i) shall be increased by an amount equal 15 to— 16 ‘‘(A) such dollar amount, multiplied by 17 ‘‘(B) the cost-of-living adjustment deter- 18 mined under section 1(f)(3) for the calendar 19 year in which the taxable year begins, deter- 20 mined by substituting ‘calendar year 2019’ for 21 ‘calendar year 2016’ in subparagraph (A)(ii) 22 thereof. 23 VerDate Sep 11 2014 21:32 Dec 29, 2020 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S5035.IS S5035 pamtmann on DSKBC07HB2PROD with BILLS 12 •S 5035 IS ‘‘(2) ROUNDING.—Any increase determined 1 under paragraph (1) shall be rounded to the nearest 2 multiple of— 3 ‘‘(A) $100 in the case of an adjustment of 4 the amount in subsection (a)(1), and 5 ‘‘(B) $1,000 in the case of an adjustment 6 of the amount in subsection (b)(3)(A)(i).’’. 7 (b) PAYMENT AUTHORITY.—Section 1324(b)(2) of 8 title 31, United States Code, is amended by striking ‘‘or 9 6431’’ and inserting ‘‘6431, or 6433’’. 10 (c) DEFICIENCIES.—Section 6211(b)(4) is amended 11 by striking ‘‘and 6431’’ and inserting ‘‘6431, and 6433’’. 12 (d) REPORTING.—The Secretary of Labor, the Sec- 13 retary of the Treasury, and the Director of the Pension 14 Benefit Guaranty Corporation shall— 15 (1) amend Form 5500 to require separate re- 16 porting of the aggregate amount of contributions re- 17 ceived by the plan during the year under section 18 6433 of the Internal Revenue Code of 1986 (as 19 added by this section), and 20 (2) amend Form 5498 to require similar report- 21 ing with respect to individual retirement plans (as 22 defined in section 7701(a)(37) of such Code). 23 (e) CONFORMING AMENDMENTS.— 24 VerDate Sep 11 2014 20:24 Jan 03, 2021 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S5035.IS S5035 pamtmann on DSKBC07HB2PROD with BILLS 13 •S 5035 IS (1) Section 25B of the Internal Revenue Code 1 of 1986 is amended by striking subsections (a) 2 through (f) and inserting the following: 3 ‘‘For payment of credit related to qualified retirement sav- 4 ings contributions, see section 6433.’’. 5 (2) The table of sections for subchapter B of 6 chapter 65 of such Code is amended by adding at 7 the end the following new item: 8 ‘‘Sec. 6433. Matching payments for elective deferral and IRA contributions by certain individuals.’’. (f) EFFECTIVE DATE.—The amendments made by 9 this section shall apply to taxable years begin [Text truncated for display. Full text available on Congress.gov.]