![handle is hein.tera/crstax0286 and id is 1 raw text is: 96-20 EPW
Updated June 8, 1998
Individual Retirement Accounts (IRAs):
Legislative Issues in the 105th Congress
James R. Storey
Specialist in Social Legislation
Education and Public Welfare Division
Summary
Legislative History
In 1971, President Nixon proposed that workers be allowed to defer from taxable
income an amount of earnings set aside in an IRA. This idea was included in the
Employee Retirement Income Security Act (ERISA) of 1974 (P.L. 93-406), limited to
workers not covered by employer pension plans. Eligible workers could make tax-
deferred IRA contributions up to the lesser of $1,500 a year or 15% of earned income.
In 1981, President Reagan urged that all workers be allowed to have IRAs and that the
contribution limit be raised. The Economic Recovery Tax Act of 1981 (P.L. 97-34) raised
the limit to the lesser of $2,000 or 100% of earnings and made all workers eligible. A
total of $2,250 could be contributed by a worker and a nonworking spouse. The Tax
Reform Act of 1986 (P.L. 99-514) lowered income tax rates and broadened the taxable
income base. This base-broadening included a curb on tax deferrals for IRA
contributions, restricting deferrals to: (1) workers with no employer-sponsored retirement
plan; and (2) workers in employer plans who meet an income test. Married
accountholders with no employer coverage were treated as having employer coverage if
their spouses had such coverage.
Congressional Research Service *° The Library of Congress
CRS Report for Congress
Received through the CRS Web
The TaxpayNer- Relief Act of 1997 (P.L. 105-3 4) Minclded priov isionis for gr~eater, tax
dleferrials for- idtial r-etir'emlent accoun1t (IR.A) con1tribuLtion1s, reClaxed p~enalties onl
earlyN withidrawals, anid niew IRAs thiat pay tax-free b)enefits fundiced fr-om after-tax
savings. The 5-year- cost for thie IRA provmisionls is ani estimatedl $2.6 billioni for FY 1998-
FY2002. The 1 0-y ear cost ($211.9 billionl) is mu1tch gr']eater- becauise the tax benlefits of the
niew\ *Rothi IRAs w\ill be r-ealized oily \ wheni fundics ar-e wvithdrawnvi. Furth1er- chang1:es to
IRAs h~ave beenl pr-oposed. Sev eral technical r-evisionis in IRA Rules arfe inicludced in the
Senlate-passed v ersionl of the Initernall Rev enueI ServNice Restructuring1 andc Reforml Act
of 1998 (H.R. 2676). Similar- pr-ovisionis w\ere passed by the House Iin the Tax Technical
C'orrectionis Act of 1997 (H.R. 2645).](ViewImageLocal?handle=hein.tera/crstax0286&div=1&collection=&method=preview&ext=.png&size=3)
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