1. Treating excluded difficulty of care payments as compensation for determining retirement contribution limitations (a) Individual retirement accounts (1) In general Section 408(o) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph: (5) Special rule for difficulty of care payments excluded from gross income In the case of an individual who for a taxable year excludes from gross income under section 131 a qualified foster care payment which is a difficulty of care payment, if— (A) the deductible amount in effect for the taxable year under subsection (b), exceeds (B) the amount of compensation includible in the individual’s gross income for the taxable year, the individual may elect to increase the nondeductible limit under paragraph (2) for the taxable year by an amount equal to the lesser of such excess or the amount so excluded. . (2) Effective date The amendments made by this section shall apply to contributions after the date of the enactment of this Act. (b) Defined contribution plans Section 415(c) of such Code is amended by adding at the end the following new paragraph: (8) Special rule for difficulty of care payments excluded from gross income (A) In general For purposes of paragraph (1)(B), in the case of an individual who for a taxable year excludes from gross income under section 131 a qualified foster care payment which is a difficulty of care payment, the participant’s compensation, or earned income, as the case may be, shall be increased by the amount so excluded. (B) Contributions allocable to difficulty of care payments treated as after-tax Any contribution by the participant which is allocable to an amount so excluded— (i) shall be treated for purposes of this title as investment in the contract, and (ii) shall not cause a plan (and any arrangement which is part of such plan) to be treated as failing to meet any requirements of this chapter solely by reason of allowing any such contributions. . (c) Effective date The amendment made by this subsection