No official summary available for this bill.
[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 3716 Introduced in Senate (IS)]
<DOC>
118th CONGRESS
2d Session
S. 3716
To create children's lifetime savings accounts, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
January 31, 2024
Mr. Casey (for himself, Mr. Wyden, Mr. Schumer, Ms. Smith, Mr.
Fetterman, and Mr. Blumenthal) introduced the following bill; which was
read twice and referred to the Committee on Finance
_______________________________________________________________________
A BILL
To create children's lifetime savings accounts, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``401Kids Savings Account Act of
2024''.
SEC. 2. 401KIDS ACCOUNT PROGRAMS.
(a) In General.--Section 529 of the Internal Revenue Code of 1986
is amended by redesignating subsection (f) as subsection (g) and by
inserting after subsection (e) the following new subsection:
``(f) 401Kids Account Programs.--
``(1) In general.--A qualified tuition program shall not be
treated as failing to meet the requirements of this section
solely because such program includes a 401Kids Account Program.
``(2) 401kids account program.--For purposes of this
section--
``(A) In general.--The term `401Kids Account
Program' means a program established and maintained by
a State or agency or instrumentality thereof which--
``(i) establishes a savings account
(referred to in this subsection as a `401Kids
Savings Account') which meets the requirements
of this subsection on behalf of every eligible
individual as of the later of--
``(I) birth or naturalization, or
``(II) establishment of the program
under this section,
including eligible individuals who are in
foster care, in coordination with the
applicable State agency, and notifies such
individuals of the establishment of such
accounts,
``(ii) requires the assets of each 401Kids
Savings Account established under the program
to be held by a person designated by the State
or agency or instrumentality,
``(iii) within the limitations of paragraph
(3), permits contributions to be made
periodically to such 401Kids Savings Accounts
by direct deposit through payroll deduction or
by electronic means, and by methods that
provide access for people with limited access
to the financial system,
``(iv) provides for the annual deposit
under section 3(b)(4) of the 401Kids Savings
Account Act of 2024 and the matching
contributions under section 3(b)(5) of such Act
to be made to such 401Kids Savings Accounts, if
applicable,
``(v) permits distributions and rollovers
from such 401Kids Savings Accounts as provided
in paragraph (4),
``(vi) except as provided in the second
sentence of this subparagraph, prohibits
multiple accounts from being established for
the same individual, and includes--
``(I) procedures to consolidate
multiple accounts established for the
same individual and return excess
contributions on an annual basis, with
notice provided to the parent or
guardian of the individual (or, if
appropriate, to the individual) and a
procedure for resolution of disputes,
and
``(II) procedures by which all
accounts established are reported to
the Secretary to ensure compliance with
this clause,
``(vii) permits, not less frequently than
once per year, for an account to be moved from
one State program to another or between a State
program and the Federal 401Kids Account
Program, and
``(viii) ensures that such 401Kids Savings
Accounts are invested in accordance with
prudent investment strategies which are in the
best interest of eligible individuals.
``(B) Collective account.--For purposes of
subparagraph (A), a State may establish a collective
account for all eligible individuals in the State which
is owned by the State, but only if--
``(i) the State program provides for
separate accounting for each such individual,
``(ii) allows such account to receive
contributions described in subparagraph
(A)(iv), and
``(iii) if such account does not permit
contributions by persons other than the State
or the Secretary, permits for the establishment
of a linked account under the program which
accepts contributions by such other persons as
provided in subparagraph (A)(iii) and which is
aggregated for purposes of any limitation under
this section with the amounts credited to the
eligible individual in the State collective
account.
``(C) Certification.--A program of a State shall
not be treated as a 401Kids Account Program unless such
program is certified by the Secretary as meeting the
requirements of this subsection.
``(3) Limitations.--
``(A) Contribution minimum.--A 401Kids Account
Program may establish minimum amounts for initial and
additional contributions to a 401Kids Savings Account,
not to exceed $10.
``(B) Contribution limitation.--
``(i) In general.--Contributions to a
401Kids Savings Account under a 401Kids Account
Program during any taxable year (other than
contributions made under section 3(b)(4) or
3(b)(5) of the 401Kids Savings Account Act of
2024) shall not be accepted to the extent such
contributions exceed $2,500.
``(ii) Inflation adjustment.--In the case
of any calendar year after 2024, the $2,500
amount in clause (i) 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,
determined by substituting `calendar
year 2023' for `calendar year 2016' in
subparagraph (A)(ii) thereof.
If any dollar amount as increased under the
preceding sentence is not a multiple of $5,
such dollar amount shall be rounded to the
nearest multiple of $5.
``(C) Limitation on participation.--Within a
reasonable amount of time before the date an eligible
individual attains age 17, the program shall provide
notice to the eligible individual and the parent or
guardian of the eligible individual that--
``(i) no deposits under paragraph (4) or
(5) of section 3(b) of the 401Kids Savings
Account Act of 2024 will be made for calendar
years after the year in which the individual
attains age 18,
``(ii) any contributions made by any person
after the date the individual attains age 18
will be taken into account as provided in
subparagraph (F), and
``(iii) the individual may elect to have
the account balance rolled over or distributed
as provided, and at the time specified, in
paragraph (4).
``(D) State contributions.--The State establishing
or maintaining a 401Kids Account Program may make
contributions under such program to accounts
established or maintained thereunder. Such
contributions--
``(i) shall not be taken into account for
purposes of subparagraph (B), and
``(ii) may be limited to eligible
individuals residing in the State at the time
the contribution is made.
``(E) Coordination with amounts contributed for
qualified higher education expenses.--
``(i) In general.--Contributions to a
qualified tuition program which are not
contributed to a 401Kids Account Program shall
not be taken into account under subparagraph
(B), and contributions to a 401Kids Account
Program shall not be taken into account for
purposes of subsection (b)(6).
``(ii) Transfers from qualified tuition
program.--Amounts contributed to a qualified
tuition program (other than to a 401Kids
Account Program which is part of such qualified
tuition program) may be transferred to a
401Kids Savings Account established under a
401Kids Account Program on behalf of the
designated beneficiary, subject to the
limitation of subparagraph (B). For purposes of
such limitation, any such transfer in a taxable
year shall be aggregated with any other
contributions to such 401Kids Account program
(other than contributions made under section
3(b)(4) or 3(b)(5) of the 401Kids Savings
Account Act of 2024).
``(F) Amounts contributed after age 18.--Any
contribution by any person to a 401Kids Savings Account
after the date the individual on whose behalf the
account is established attains age 18 shall be treated
for purposes of section 408A(c)(2) as a contribution to
a Roth IRA maintained for the benefit of the
individual, and no such contribution shall be accepted
to the extent such contribution, when aggregated with
all contributions for the taxable year to all Roth IRAs
maintained for the benefit of the individual, exceeds
the limitation of section 408A(c)(2).
``(4) Distributions.--
``(A) In general.--Amounts in a 401Kids Savings
Account under a 401Kids Account Program--
``(i) if such amounts are held in a
collective account owned by the State, may be
rolled over into a linked account under the
program which accepts contributions by persons
other than the State, or merged with such an
account previously established, after the date
the individual on whose behalf the account was
established attains age 18 (or earlier as
permitted by the State program), and
``(ii) after the date the individual on
whose behalf the account was established
attains age 18, may be--
``(I) distributed to such
individual in cash,
``(II) transferred directly to an
eligible educational institution,
mortgagee, lender, or guarantor with
respect to an expense described in
subparagraph (E)(i), or
``(III) contributed in a direct
transfer to an ABLE account (as defined
in section 529A(e)(6)) or a Roth IRA of
the individual, and
``(iii) if the individual whose behalf the
account was established does not elect to
receive any such distribution, shall remain in
the account.
``(B) Treatment of distributions.--No amount shall
be includible in gross income under subsection
(c)(3)(A) by reason of any cash distribution from an
account under a 401Kids Account Program which is made
after the date the individual on whose behalf such
account was established attains age 18, to the extent
such distribution does not exceed the qualified
expenses of the individual which are paid or incurred
during the taxable year of the distribution.
``(C) Treatment of rollovers.--
``(i) ABLE accounts.--Any contribution from
a 401Kids Account Program to an ABLE account
pursuant to subparagraph (A)(ii)(III) shall be
treated--
``(I) as a contribution from
another ABLE account as described in
section 529A(c)(1)(C)(i), and
``(II) as having been contributed
to such ABLE account in a direct
trustee-to-trustee transfer within 60
days of the distribution for purposes
of such section.
``(ii) Roth iras.--Any contribution from a
401Kids Account Program to a Roth IRA pursuant
to subparagraph (A)(ii)(III) shall be treated--
``(I) as a contribution from
another Roth IRA as described in
section 408A(e)(1)(A), and
``(II) as having been contributed
to such Roth IRA in a direct trustee-
to-trustee transfer within 60 days of
the distribution for purposes of
section 408(d)(3), and
shall not be taken into account under
subsection (c)(3)(E).
``(D) Additional tax on nonqualified use.--
``(i) In general.--The tax imposed by this
chapter for the taxable year shall be increased
by an amount equal to 10 percent of the amount
of any distribution from an account under a
401Kids Account Program during the taxable year
which is not described in subparagraph (A)(i),
(A)(ii)(II), (A)(ii)(III), or (B).
``(ii) Distributions from roth ira.--If any
amount is contributed to a Roth IRA in a
rollover distribution from an account under a
401Kids Account Program pursuant to
subparagraph (A)(ii)(III), the tax imposed by
this title for the taxable year shall be
increased by an amount equal to 10 percent of
the amount of any distribution from such Roth
IRA which is made within the 5-year period
beginning on the date of the rollover--
``(I) to the extent that such
distribution from the Roth IRA, when
aggregated with all other distributions
from such Roth IRA during such 5-year
period, does not exceed the amount
contributed in such rollover
distribution, and
``(II) unless the qualified
expenses of the individual on whose
behalf the account was established paid
or incurred during the taxable year of
the distribution are equal to or exceed
the amount of such distribution.
``(iii) Coordination rule.--Subsection
(c)(6) shall not apply to any amount with
respect to which a tax is imposed under clause
(i) or (ii).
``(iv) Federal 401kids account program.--
``(I) In general.--The tax imposed
by this chapter for the taxable year
shall be increased by an amount equal
to 10 percent of the amount of any
distribution during the taxable year
from an account under the Federal
401Kids Account Program established by
section 3 of the 401Kids Savings
Account Act of 2024 which is not
described in subsection (c)(1)(A)(ii),
(c)(1)(A)(iii), or (c)(2)(A) of section
3 of such Act.
``(II) Distributions from roth
ira.--The tax imposed by clause (ii)
shall apply to a rollover distribution
from an account under the Federal
401Kids Account program pursuant to
section 3(c)(1)(A)(iii) of the 401Kids
Savings Account Act of 2024 in the same
manner as a rollover distribution from
an account under a 401Kids Account
Program pursuant to subparagraph
(A)(ii)(III).
``(E) Qualified expenses.--For purposes of this
paragraph--
``(i) In general.--The term `qualified
expenses' means amounts paid or incurred by an
individual--
``(I) as payment or collateral
required for a loan guaranteed by the
Small Business Administration or the
United States Department of Agriculture
Rural Development or other small
business loan as determined by the
Secretary, pursuant to the rules
determined under clause (iii),
``(II) as qualified acquisition
costs (as defined in section
72(t)(8)(C)) with respect to a
residence intended to be the primary
residence of the individual,
``(III) for qualified higher
education expenses of the individual at
an eligible educational institution, or
for other post-secondary educational
expenses in an accredited degree-
granting program or expenses for
obtaining a trade certificate, as
provided by the Secretary in
consultation with the Secretary of
Education, or
``(IV) after the date the
individual on whose behalf the account
was established attains age 59\1/2\,
for any purpose.
``(ii) Certification.--Except in the case
of qualified expenses described in clause
(i)(IV), the individual shall certify on the
return of tax, in such manner as the Secretary
shall prescribe, the qualified expenses paid or
incurred by the individual during the taxable
year.
``(iii) Small business loans.--The
Secretary shall prescribe rules or other
guidance, or shall certify a process, for
determining whether a loan shall be taken into
account under clause (i)(I).
``(5) Eligible individual.--For purposes of this
subsection--
``(A) In general.--The term `eligible individual'
means a child who has not attained age 18 and is a
citizen of the United States.
``(B) Treatment as designated beneficiary.--The
rules of subsections (a) through (e) shall be applied
(except as otherwise provided in this subsection) by
treating the eligible individual on whose behalf a
401Kids Savings Account under a 401Kids Account Program
is established as the designated beneficiary with
respect to such account.
``(6) State.--For purposes of this subsection, the term
`State' includes the District of Columbia, any possession of
the United States, and any Indian tribe (as defined in section
45A(c)(6)).
``(7) Accounts may not be assigned.--An account established
on behalf of an individual under a 401Kids Account Program may
not be pledged or assigned to any other person.
``(8) Third-party contractors.--A State may contract with a
third party for purposes of administration of a 401Kids Account
Program, including record keeping and account investment.
``(9) Account management.--
``(A) In general.--Except as provided in
subparagraph (B)--
``(i) the eligible individual on whose
behalf a 401Kids Savings Account under a
401Kids Account Program is established, after
the date the individual attains age 18, shall
have sole discretion over the distribution of
amounts in the account, and
``(ii) in the case of an account not owned
and controlled by a State, such eligible
individual, after the date the individual
attains age 18, and the parent or guardian of
such individual before such date, may exercise
control over the investment of account assets
other than amounts attributable to deposits
under paragraph (4) or (5) of section 3(b) of
the 401Kids Savings Account Act of 2024
(including any gain or loss attributable
thereto).
``(B) Death of account beneficiary.--In the event
the individual on whose behalf a 401Kids Savings
Account under a 401Kids Account Program is established
dies before attaining age 18--
``(i) any amounts attributable to deposits
under paragraph (4) or (5) of section 3(b) of
the 401Kids Savings Account Act of 2024
(including any gain or loss attributable
thereto) shall be returned to the Treasury, and
``(ii) the successor owner or beneficiary
of the account shall withdraw all amounts not
returned under subparagraph (A) not later than
the last day of the calendar year after the
calendar year in which the death occurs.
Amounts withdrawn pursuant to this subparagraph shall
not be included in gross income of the deceased
individual or the successor owner or beneficiary to the
extent such amounts are attributable to contributions
to the account (and not to gain attributable
thereto).''.
(b) Conforming Amendments.--
(1) Reports.--Paragraph (1) of section 529(d) of the
Internal Revenue Code of 1986 is amended by inserting ``,
including a 401Kids Account Program under such qualified
tuition program,'' after ``the qualified tuition program''.
(2) Reports regarding rollover distributions.--Paragraph
(2) of section 529(d) of such Code is amended--
(A) by striking ``subsection (c)(3)(E)'' and
inserting ``subsection (c)(3)(E) or (f)(4)(C)'',
(B) by striking ``Roth IRA'' and inserting ``Roth
IRA or ABLE account'',
(C) by striking ``the qualified tuition program''
and inserting ``the qualified tuition program or
401Kids Account Program'', and
(D) by striking ``subsection (c)(3)(A)'' and
inserting ``subsection (c)(3)(E) or (f)(4)(C)''.
(3) Qualified use.--Clause (i) of section 529(c)(3)(C) of
such Code is amended--
(A) by striking ``or'' at the end of subclause
(II),
(B) by redesignating subclause (III) as subclause
(IV),
(C) by inserting after subclause (II) the following
new subclause:
``(III) to a 401Kids Savings
Account under a 401Kids Account Program
established on behalf of the designated
beneficiary under subsection (f) or
section 3 of the 401Kids Savings
Account Act of 2024, or'', and
(D) by striking ``Subclause (III) shall not apply''
in the second sentence and inserting ``Subclause (III)
shall not apply to so much of a distribution which,
when aggregated with other contributions as provided in
subsection (f)(3)(E)(ii), exceeds the limitation under
subsection (f)(3)(B). Subclause (IV) shall not apply''.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to taxable years beginning after the date of the
enactment of this Act.
(2) Existing programs.--A qualified tuition program (as
defined in section 529 of the Internal Revenue Code of 1986) of
a State which includes a savings account program shall be
treated for taxable years beginning after the date of the
enactment of this Act as meeting the requirements of section
529(f) of the Internal Revenue Code of 1986, as added by this
Act, if such qualified tuition program (as amended, if
necessary) meets such requirements for the first taxable year
beginning more than 1 year after such date of enactment.
(d) Regulations.--The Secretary of the Treasury (or such
Secretary's delegate) shall issue such regulations or other guidance as
is necessary to implement State 401Kids Account Programs, including
guidance--
(1) regarding the personally identifying information which
is necessary for States to establish accounts on behalf of
individuals born in the State,
(2) for informing individuals of accounts established on
their behalf, and
(3) for processing accounts of deceased individuals and
returning Federal contributions to the Treasury pursuant to
section 529(f)(9)(B) of the Internal Revenue Code of 1986.
SEC. 3. ESTABLISHMENT OF FEDERAL 401KIDS ACCOUNT PROGRAM.
(a) Establishment of Program.--The Secretary of the Treasury shall,
not later than December 31, 2024, establish a permanent program, to be
known as the ``Federal 401Kids Account Program'', which meets the
requirements of this section to--
(1) establish and maintain a savings account (referred to
in this section as a ``401Kids Savings Account'') meeting the
requirements of subsections (b) and (c) on behalf of eligible
individuals whose State does not maintain a 401Kids Account
Program pursuant to section 529(f) of the Internal Revenue Code
of 1986, and
(2) make contributions pursuant to paragraphs (4) and (5)
on behalf of eligible individuals to such 401Kids Savings
Accounts and to accounts under any such State 401Kids Account
Program.
(b) Program Specifications.--
(1) In general.--
(A) 401kids savings accounts.--The Federal 401Kids
Account Program established under this section shall--
(i) establish on behalf of each eligible
individual whose State does not maintain a
401Kids Account Program pursuant to section
529(f) of the Internal Revenue Code of 1986 a
401Kids Savings Account which meets the
requirements of this subsection and subsection
(c) on behalf of the individual as of 1 year
after the later of--
(I) birth or naturalization; or
(II) establishment of the program
under this section,
and notify such individuals of the
establishment of such accounts;
(ii) require the assets of each 401Kids
Savings Account established under the program
to be held by the designated custodian;
(iii) within the limitations of paragraph
(3), permit contributions to be made
periodically to such 401Kids Savings Accounts
by direct deposit through payroll deduction or
by electronic means, and by methods that
provide access for people with limited access
to the financial system;
(iv) provide for the annual deposit under
paragraph (4) and the matching contributions
under paragraph (5) to be made to such 401Kids
Savings Accounts, and to 401Kids Savings
Accounts under such 401Kids Account Programs
established and maintained by States, if
applicable;
(v) as provided in subsection (c), permit
distributions and rollovers from such 401Kids
Savings Accounts after the individual on whose
behalf the account is established attains age
18;
(vi) include procedures to consolidate
multiple accounts established for the same
individual, including across States, and return
excess contributions on an annual basis, with
notice provided to the parent or guardian of
the individual (or, if appropriate, to the
individual) and a procedure for resolution of
disputes;
(vii) permit, not less frequently than once
per year, for an account to be moved between a
State program and the Federal 401Kids Account
Program; and
(viii) ensure that such 401Kids Savings
Accounts are invested in accordance with
subsection (e).
(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 Federal 401Kids Account Program, and
are consistent with this section and section 529(f) of
the Internal Revenue Code of 1986, including--
(i) rules regarding the provision of
periodic notices to individuals and parents or
guardians of individuals, as appropriate, on
whose behalf accounts are established under the
program, including information on account
balances and activity;
(ii) rules for making the deposit under
paragraph (4)(A) in the case of taxpayers who
are not required to file an income tax return;
(iii) rules for recapture of improperly
made deposits under paragraphs (4) and (5); and
(iv) rules regarding beneficiary
designation in the case of the death of the
individual on whose behalf an account was
established.
(2) Program for deposits made with federal partners.--The
Secretary of the Treasury may, in fulfillment of subparagraph
(A)(iii), establish a program which would allow grocery stores,
pharmacies, banks, and other similar businesses to partner with
the Federal Government to accept cash deposits from customers
and to remit such deposits to the Treasury for payment into
401Kids Savings Accounts under the Federal 401Kids Account
Program.
(3) Limitations.--
(A) Contribution minimum.--The Secretary of the
Treasury may establish minimum amounts for initial and
additional contributions to a 401Kids Savings Account
under the Federal 401Kids Account Program, not to
exceed $10.
(B) Contribution limitation.--Contributions to a
401Kids Savings Account under the Federal 401Kids
Account Program during any taxable year (other than
contributions made under paragraphs (4) and (5)) shall
not be accepted to the extent such contributions exceed
$2,500.
(C) Limitation on participation.--Within a
reasonable amount of time before the date an eligible
individual attains age 17, the designated custodian
shall provide notice to the eligible individual and the
parent or guardian of the eligible individual that--
(i) no deposits under paragraph (4) or (5)
will be made for calendar years after the year
in which the individual attains age 18;
(ii) any contributions made by any person
after the date the individual attains age 18
will be taken into account as provided in
section 529(f)(3)(F) of the Internal Revenue
Code of 1986; and
(iii) the individual (or, as provided, the
individual's parent or guardian) may elect to
have the account balance rolled over or
distributed as provided, and at the time
specified, in subsection (c).
(4) Annual deposit.--
(A) In general.--
(i) Annual amount.--Within a reasonable
amount of time (not to exceed 60 days) after
the filing of the return of tax for each
taxable year by a taxpayer claiming an eligible
individual as a dependent, the Secretary of the
Treasury shall deposit $500 into the 401Kids
Savings Account established for such individual
under the Federal 401Kids Account Program or a
401Kids Account Program established and
maintained by a State.
(ii) Additional amount for earned income
credit eligible families.--If a credit is
allowable under section 32 of the Internal
Revenue Code of 1986 to the parent or guardian
or an eligible individual for a taxable year,
clause (i) shall be applied by substituting
``$750'' for ``$500''.
(B) Phaseout.--In the case of a taxpayer to whom
subparagraph (A)(ii) does not apply, the $500 amount
under subparagraph (A)(i) shall be reduced (but not
below zero) by $10 for each $1,000 (or fraction
thereof) by which the taxpayer's modified adjusted
gross income for the taxable year exceeds $75,000
($150,000 in the case of a joint return).
(C) Married couples must file joint return.--If the
taxpayer is married at the close of the taxable year,
subparagraph (A) shall apply only if the taxpayer and
the taxpayer's spouse file a joint return for the
taxable year.
(D) Deposit on behalf of children in foster care.--
At an appropriate time each year as determined by the
Secretary of the Treasury in coordination with the
Administration for Children and Families, such
Secretary shall deposit $750 into the 401Kids Savings
Account established under the Federal 401Kids Account
Program or a 401Kids Account Program established and
maintained by a State for any eligible individual in
foster care, in any State, with respect to whom no
deposit was made for such year under subparagraph (A).
(5) Matching contributions for earned income credit
eligible families.--If a credit is allowable under section 32
of the Internal Revenue Code of 1986 to the parent or guardian
or an eligible individual for a taxable year, the Secretary of
the Treasury shall deposit, at the same time as the annual
deposit under paragraph (4)(A), into the 401Kids Savings
Account established for such eligible individual under the
Federal 401Kids Account Program or a 401Kids Account Program
established and maintained by a State an amount equal to so
much of the contributions made by the parent or guardian of the
eligible individual to such account during the preceding
taxable year as does not exceed $250. Such deposit shall be
made in addition to the deposit under paragraph (4).
(6) Designated custodian.--For purposes of this section,
the designated custodian is the person designated by the
Secretary of the Treasury to act as custodian of the 401Kids
Savings Accounts established on behalf of participants in the
Federal 401Kids Account Program.
(7) Inflation adjustments.--
(A) In general.--In the case of any calendar year
after 2024, the $2,500 amount in paragraph (3)(B), the
$500 amount in paragraphs (4)(A), (4)(B), and (4)(D),
the $750 amount in paragraphs (4)(A) and (4)(D), and
the $250 amount in paragraph (5) shall each 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 2023'' for ``calendar year 2016'' in
subparagraph (A)(ii) thereof.
(B) Rounding.--If any dollar amount increased under
subparagraph (A) is not a multiple of $5, such dollar
amount shall be rounded to the nearest multiple of $5.
(8) Accounts may not be assigned.--An account established
on behalf of an individual under the Federal 401Kids Account
Program may not be pledged or assigned to any other person.
(9) Modified adjusted gross income.--For purposes of this
subsection, the term ``modified adjusted gross income'' means
adjusted gross income (as defined in section 62 of the Internal
Revenue Code of 1986) increased by--
(A) any amount excluded from gross income under
section 911 of such Code,
(B) any amount of interest received or accrued by
the taxpayer during the taxable year which is exempt
from tax, and
(C) an amount equal to the portion of the
taxpayer's social security benefits (as defined in
section 86(d) of such Code) which is not included in
gross income under such section 86 for the taxable
year.
(c) Distributions From 401Kids Savings Account.--
(1) In general.--Amounts in a 401Kids Savings Account under
the Federal 401Kids Account Program--
(A) after the date the individual on whose behalf
the account was established attains age 18, may be--
(i) distributed to such individual in cash,
(ii) transferred directly to an eligible
educational institution, mortgagee, lender, or
guarantor with respect to an expense described
in section 529(f)(4)(E)(i) of the Internal
Revenue Code of 1986, or
(iii) contributed in a direct transfer to
an ABLE account (as defined in section
529A(e)(6) of the Internal Revenue Code of
1986) or a Roth IRA (as defined in section 408A
of such Code) of the individual, and
(B) if the individual whose behalf the account was
established does not elect to receive any such
distribution, shall remain in the account.
(2) Treatment of distributions.--
(A) In general.--No amount shall be includible in
gross income for purposes of the Internal Revenue Code
of 1986 by reason of any cash distribution from an
account under the Federal 401Kids Account Program which
is made after the date the individual on whose behalf
such account was established attains age 18, to the
extent such distribution does not exceed the qualified
expenses of the individual (as defined in section
529(f)(4)(E) of such Code) which are paid or incurred
during the taxable year of the distribution.
(B) Treatment of rollovers.--The rules of section
529(f)(4)(C) of such Code shall apply in the case of a
rollover distribution described in paragraph
(1)(A)(iii).
(d) Eligible Individual.--For purposes of this section, with
respect to any calendar year, the term ``eligible individual'' means a
child who has not attained age 18 as of the last day of such calendar
year and is a citizen of the United States.
(e) Investment of Account Assets.--The Secretary of the Treasury
shall ensure that amounts in the Federal 401Kids Account Program are
invested so as to maximize returns over the first 18 years of the life
of an eligible individual on whose behalf a 401Kids Savings Account is
established under such program, and shall reevaluate the investment of
such amounts after an eligible individual attains age 18 to ensure
amounts are available and growing for uses later in the individual's
life. The Secretary of the Treasury may, in the Secretary's discretion,
permit some or all eligible individuals to exercise control over the
investment of account assets other than amounts attributable to
deposits under paragraph (4) or (5) of subsection (b) (including any
gain or loss attributable thereto).
(f) Reports.--
(1) In general.--The designated custodian shall make such
reports regarding the Federal 401Kids Account Program to the
Secretary of the Treasury and to individuals on whose behalf
accounts are established under such program with respect to
contributions, distributions, and such other matters as the
Secretary of the Treasury may require. The reports required by
this paragraph shall be filed at such time and in such manner
and furnished to such individuals at such time and in such
manner as may be required by the Secretary of the Treasury.
(2) Rollover distributions.--In the case of any
distribution described in subsection (c)(1)(A)(iii), the
designated custodian shall provide a report to the trustee of
the Roth IRA or ABLE account to which the distribution is made.
Such report shall be filed at such time and in such manner as
the Secretary of the Treasury may require and shall include
information with respect to the contributions, distributions,
and earnings of the account under the Federal 401Kids Account
program as of the date of the distribution described in
subsection (c)(1)(A)(iii), together with such other matters as
the Secretary of the Treasury may require.
SEC. 4. TREATMENT OF ACCOUNTS UNDER CERTAIN FEDERAL PROGRAMS.
(a) Account Funds Disregarded for Purposes of Certain Other Means-
Tested Federal Programs.--Notwithstanding any other provision of
Federal law that requires consideration of one or more financial
circumstances of an individual, for the purpose of determining
eligibility to receive, or the amount of, any assistance or benefit
authorized by such provision to be provided to or for the benefit of
such individual, any amount (including earnings thereon) in an
individual's account established under a 401Kids Account Program (as
defined in section 529(f) of the Internal Revenue Code of 1986) or the
Federal 401Kids Account Program pursuant to section 3, any
contributions to such account, and any distribution (or portion
thereof) shall be disregarded for such purpose with respect to any
period during which such individual maintains, makes contributions to,
or receives distributions from such account, except that--
(1) a distribution for qualified acquisition costs (within
the meaning of section 529(f)(4)(E)(ii) of such Code) shall not
be so disregarded; and
(2) any amount (including such earnings) in such account
shall be considered a resource of the individual to the extent
that such amount exceeds $100,000.
(b) Suspension of SSI Benefits During Periods of Excessive Account
Funds.--
(1) In general.--The benefits of an individual under the
supplemental security income program under title XVI of the
Social Security Act shall not be terminated, but shall be
suspended, by reason of excess resources of the individual
attributable to an amount in the account of the individual
established under a 401Kids Account Program which is not
disregarded under subsection (a).
(2) No impact on medicaid eligibility.--An individual who
would be receiving payment of such supplemental security income
benefits but for the application of paragraph (1) shall be
treated for purposes of title XIX of the Social Security Act as
if the individual continued to be receiving payment of such
benefits.
SEC. 5. DISCLOSURE OF TAXPAYER INFORMATION, ETC.
(a) In General.--Subsection (l) of section 6103 of the Internal
Revenue Code of 1986 is amended by adding at the end the following new
paragraph:
``(23) Disclosure of return information for purposes of
administration of 401kids account programs.--The Secretary
shall disclose to any officer or employee of the Department of
the Treasury, as necessary for the administration of the
Federal 401Kids Account Program established under section 3(a)
of the 401Kids Savings Account Act of 2024 and the requirements
of paragraphs (4) and (5) of section 3(b) of such Act, return
information relating to taxpayer identity, dependents, adjusted
gross income, and whether the taxpayer has claimed the earned
income credit under section 32 for the taxable year.''.
(b) Prohibition of Redisclosure.--Paragraph (3) of section 6103(a)
of the Internal Revenue Code of 1986 is amended by striking ``or (21)''
and inserting ``(21), or (23)''.
(c) Data Sharing.--The Secretary of the Treasury shall enter into
an agreement with the Commissioner of Social Security, the Secretary of
State, and the Director of the United States Citizenship and
Immigration Services to share data regarding births and naturalizations
of children under the age of 18 solely for purposes of--
(1) establishing accounts under the Federal 401Kids Account
Program, and
(2) making deposits pursuant to paragraphs (4) and (5) of
section 3.
(d) Use of Social Security Numbers.--Section 205(c)(2)(C) of the
Social Security Act (42 U.S.C. 405(c)(2)(C)) is amended by adding at
the end the following new clause:
``(xiv) The Secretary of the Treasury, for
purposes of the Federal 401Kids Account Program
established under section 3(a) of the 401Kids
Savings Account Act of 2024, and any State that
elects to establish a 401Kids Account Program
pursuant to section 529(f) of the Internal
Revenue Code of 1986, are authorized to collect
and use the names and social security account
numbers of individuals as required to establish
and maintain such accounts.''.
SEC. 6. TREASURY AUDIT OF STATE PROGRAMS.
The Secretary of the Treasury is authorized--
(1) to conduct audits of 401Kids Account Programs
established pursuant to section 529(f) of the Internal Revenue
Code of 1986 by States, and to assume management of any such
program as part of the Federal 401Kids Account Program under
section 3 in the event that such a program does not meet the
requirements of such section 529(f), and
(2) to require informational reports from States
maintaining such a 401Kids Account Program.
SEC. 7. STATE.
For purposes of this Act, the term ``State'' includes the District
of Columbia, any possession of the United States, and any Indian tribe
(as defined in section 45A(c)(6) of the Internal Revenue Code of 1986).
SEC. 8. APPROPRIATION.
There is hereby appropriated to the Secretary of the Treasury, to
remain available until spent without fiscal year limitation--
(1) $100,000,000 for the implementation and administration
of this Act (other than the purposes described in paragraphs
(2), (3), and (4));
(2) $30,000,000 for each fiscal year beginning with fiscal
year 2024 for the administration of the Federal 401Kids Account
Program;
(3) such sums as are necessary to assist States in the
establishment of a 401Kids Account Program pursuant to section
529(f) of the Internal Revenue Code of 1986 (according to such
procedures as the Secretary shall determine); and
(4) such sums as are necessary to make contributions to
Federal 401Kids Accounts as required under paragraphs (4) and
(5) of section 3(b).
<all>
Introduced in Senate
Read twice and referred to the Committee on Finance.
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