Health Hippo
HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT OF 1996
(Public Law 104-191 104th Congress)
TITLE III–TAX-RELATED HEALTH PROVISIONS
- Sec. 300. Amendment of 1986 Code.
- Subtitle A–Medical Savings Accounts
- Sec. 301. Medical savings
accounts.
- Sec. 301. Medical savings
- Subtitle B–Increase in Deduction for Health Insurance Costs
of Self- Employed Individuals- Sec. 311. Increase in deduction
for health insurance costs of self- employed indi- viduals.
- Sec. 311. Increase in deduction
- Subtitle C–Long-Term Care Services and Contracts
- Part I–General Provisions
- Part II–Consumer Protection Provisions
- Subtitle D–Treatment of Accelerated Death Benefits
- Subtitle E–State Insurance Pools
- Subtitle F–Organizations Subject to Section 833
- Sec. 351. Organizations subject
to section 833.
- Sec. 351. Organizations subject
- Subtitle G–IRA Distributions to the Unemployed
- Sec. 361. Distributions from
certain plans may be used without additional tax to pay
financially devastating medical expenses.
- Sec. 361. Distributions from
- Subtitle H–Organ and Tissue Donation Information Included
With Income Tax Refund Payments- Sec. 371. Organ and tissue
donation information included with income tax refund payments.
- Sec. 371. Organ and tissue
SEC. 300. AMENDMENT OF 1986 CODE.
Except as otherwise expressly provided, whenever in this title an
amendment or repeal is expressed in terms of an amendment to, or
repeal of, a section or other provision, the reference shall be
considered to be made to a section or other provision of the Internal
Revenue Code of 1986.
Subtitle A–Medical Savings Accounts
SEC. 301. MEDICAL SAVINGS ACCOUNTS.
(a) In General.–Part VII of subchapter B of chapter 1 (relating
to additional itemized deductions for individuals) is amended by
redesignating section 220 as section 221 and by inserting after
section 219 the following new section:
SEC. 220. MEDICAL SAVINGS ACCOUNTS.
(a) Deduction Allowed.–In the case of an individual who is an
eligible individual for any month during the taxable year, there
shall be allowed as a deduction for the taxable year an amount equal
to the aggregate amount paid in cash during such taxable year by such
individual to a medical savings account of such individual.
(b) Limitations.– (1) In general.–The amount allowable as a
deduction under subsection (a) to an individual for the taxable year
shall not exceed the sum of the monthly limitations for months during
such taxable year that the individual is an eligible individual.
(2) Monthly limitation.–The monthly limitation for any month is
the amount equal to \1/12\ of– (A) in the case of an individual who
has self-only coverage under the high deductible health plan as of
the first day of such month, 65 percent of the annual deductible
under such coverage, and (B) in the case of an individual who has
family coverage under the high deductible health plan as of the first
day of such month, 75 percent of the annual deductible under such
coverage.
(3) Special rule for married individuals.–In the case of
individuals who are married to each other, if either spouse has
family coverage– (A) both spouses shall be treated as having only
such family coverage (and if such spouses each have family coverage
under different plans, as having the family coverage with the lowest
annual deductible), and (B) the limitation under paragraph (1) (after
the application of subparagraph (A) of this paragraph) shall be
divided equally between them unless they agree on a different
division.
(4) Deduction not to exceed compensation.– (A) Employees.–The
deduction allowed under subsection (a) for contributions as an
eligible individual described in subclause (I) of subsection
(c)(1)(A)(iii) shall not exceed such individual’s wages, salaries,
tips, and other employee compensation which are attributable to such
individual’s employment by the employer referred to in such
subclause.
(B) Self-employed individuals.–The deduction allowed under
subsection (a) for contributions as an eligible individual described
in subclause (II) of subsection (c)(1)(A)(iii) shall not exceed such
individual’s earned income (as defined in section 401(c)(1)) derived
by the taxpayer from the trade or business with respect to which the
high deductible health plan is established.
(C) Community property laws not to apply.–The limitations under
this paragraph shall be determined without regard to community
property laws.
(5) Coordination with exclusion for employer contributions.–No
deduction shall be allowed under this section for any amount paid for
any taxable year to a medical savings account of an individual if–
(A) any amount is contributed to any medical savings account of such
individual for such year which is excludable from gross income under
section 106(b), or (B) if such individual’s spouse is covered under
the high deductible health plan covering such individual, any amount
is contributed for such year to any medical savings account of such
spouse which is so excludable.
(6) Denial of deduction to dependents.–No deduction shall be
allowed under this section to any individual with respect to whom a
deduction under section 151 is allowable to another taxpayer for a
taxable year beginning in the calendar year in which such
individual’s taxable year begins.
(c) Definitions.–For purposes of this section– (1) Eligible
individual.– (A) In general.–The term `eligible individual’ means,
with respect to any month, any individual if– (i) such individual is
covered under a high deductible health plan as of the 1st day of such
month, (ii) such individual is not, while covered under a high
deductible health plan, covered under any health plan– (I) which is
not a high deductible health plan, and (II) which provides coverage
for any benefit which is covered under the high deductible health
plan, and (iii)(I) the high deductible health plan covering such
individual is established and maintained by the employer of such
individual or of the spouse of such individual and such employer is a
small employer, or (II) such individual is an employee (within the
meaning of section 401(c)(1)) or the spouse of such an employee and
the high deductible health plan covering such individual is not
established or maintained by any employer of such individual or
spouse.
(B) Certain coverage disregarded.–Subparagraph (A)(ii) shall be
applied without regard to– (i) coverage for any benefit provided by
permitted insurance, and (ii) coverage (whether through insurance or
otherwise) for accidents, disability, dental care, vision care, or
long-term care.
(C) Continued eligibility of employee and spouse establishing
medical savings accounts.–If, while an employer is a small
employer– (i) any amount is contributed to a medical savings account
of an individual who is an employee of such employer or the spouse of
such an employee, and (ii) such amount is excludable from gross
income under section 106(b) or allowable as a deduction under this
section, such individual shall not cease to meet the requirement of
subparagraph (A)(iii)(I) by reason of such employer ceasing to be a
small employer so long as such employee continues to be an employee
of such employer.
(D) Limitations on eligibility.– For limitations on number of
taxpayers who are eligible to have medical savings accounts, see
subsection (i).
(2) High deductible health plan.– (A) In general.–The term `high
deductible health plan’ means a health plan– (i) in the case of
self-only coverage, which has an annual deductible which is not less
than $1,500 and not more than $2,250, (ii) in the case of family
coverage, which has an annual deductible which is not less than
$3,000 and not more than $4,500, and (iii) the annual out-of-pocket
expenses required to be paid under the plan (other than for premiums)
for covered benefits does not exceed– (I) $3,000 for self-only
coverage, and (II) $5,500 for family coverage.
(B) Special rules.– (i) Exclusion of certain plans.–Such term
does not include a health plan if substantially all of its coverage
is coverage described in paragraph (1)(B).
(ii) Safe harbor for absence of preventive care deductible.–A
plan shall not fail to be treated as a high deductible health plan by
reason of failing to have a deductible for preventive care if the
absence of a deductible for such care is required by State law.
(3) Permitted insurance.–The term `permitted insurance’ means–
(A) Medicare supplemental insurance, (B) insurance if substantially
all of the coverage provided under such insurance relates to– (i)
liabilities incurred under workers’ compensation laws, (ii) tort
liabilities, (iii) liabilities relating to ownership or use of
property, or (iv) such other similar liabilities as the Secretary may
specify by regulations, (C) insurance for a specified disease or
illness, and (D) insurance paying a fixed amount per day (or other
period) of hospitalization.
(4) Small employer.– (A) In general.–The term `small employer’
means, with respect to any calendar year, any employer if such
employer employed an average of 50 or fewer employees on business
days during either of the 2 preceding calendar years. For purposes of
the preceding sentence, a preceding calendar year may be taken into
account only if the employer was in existence throughout such year.
(B) Employers not in existence in preceding year.–In the case of
an employer which was not in existence throughout the 1st preceding
calendar year, the determination under subparagraph (A) shall be
based on the average number of employees that it is reasonably
expected such employer will employ on business days in the current
calendar year.
(C) Certain growing employers retain treatment as small
employer.–The term `small employer’ includes, with respect to any
calendar year, any employer if– (i) such employer met the
requirement of subparagraph (A) (determined without regard to
subparagraph (B)) for any preceding calendar year after 1996, (ii)
any amount was contributed to the medical savings account of any
employee of such employer with respect to coverage of such employee
under a high deductible health plan of such employer during such
preceding calendar year and such amount was excludable from gross
income under section 106(b) or allowable as a deduction under this
section, and (iii) such employer employed an average of 200 or fewer
employees on business days during each preceding calendar year after
1996.
(D) Special rules.– (i) Controlled groups.–For purposes of this
paragraph, all persons treated as a single employer under subsection
(b), (c), (m), or (o) of section 414 shall be treated as 1 employer.
(ii) Predecessors.–Any reference in this paragraph to an employer
shall include a reference to any predecessor of such employer.
(5) Family coverage.–The term `family coverage’ means any
coverage other than self-only coverage.
(d) Medical Savings Account.–For purposes of this section– (1)
Medical savings account.–The term `medical savings account’ means a
trust created or organized in the United States exclusively for the
purpose of paying the qualified medical expenses of the account
holder, but only if the written governing instrument creating the
trust meets the following requirements: (A) Except in the case of a
rollover contribution described in subsection (f)(5), no contribution
will be accepted– (i) unless it is in cash, or (ii) to the extent
such contribution, when added to previous contributions to the trust
for the calendar year, exceeds 75 percent of the highest annual limit
deductible permitted under subsection (c)(2)(A)(ii) for such calendar
year.
(B) The trustee is a bank (as defined in section 408(n)), an
insurance company (as defined in section 816), or another person who
demonstrates to the satisfaction of the Secretary that the manner in
which such person will administer the trust will be consistent with
the requirements of this section.
(C) No part of the trust assets will be invested in life insurance
contracts.
(D) The assets of the trust will not be commingled with other
property except in a common trust fund or common investment fund.
(E) The interest of an individual in the balance in his account is
nonforfeitable.
(2) Qualified medical expenses.– (A) In general.–The term
`qualified medical expenses’ means, with respect to an account
holder, amounts paid by such holder for medical care (as defined in
section 213(d)) for such individual, the spouse of such individual,
and any dependent (as defined in section 152) of such individual, but
only to the extent such amounts are not compensated for by insurance
or otherwise.
(B) Health insurance may not be purchased from account.– (i) In
general.–Subparagraph (A) shall not apply to any payment for
insurance.
(ii) Exceptions.–Clause (i) shall not apply to any expense for
coverage under– (I) a health plan during any period of continuation
coverage required under any Federal law, (II) a qualified long-term
care insurance contract (as defined in section 7702B(b)), or (III) a
health plan during a period in which the individual is receiving
unemployment compensation under any Federal or State law.
(C) Medical expenses of individuals who are not eligible
individuals.–Subparagraph (A) shall apply to an amount paid by an
account holder for medical care of an individual who is not an
eligible individual for the month in which the expense for such care
is incurred only if no amount is contributed (other than a rollover
contribution) to any medical savings account of such account holder
for the taxable year which includes such month. This subparagraph
shall not apply to any expense for coverage described in subclause
(I) or (III) of subparagraph (B)(ii).
(3) Account holder.–The term `account holder’ means the
individual on whose behalf the medical savings account was
established.
(4) Certain rules to apply.–Rules similar to the following rules
shall apply for purposes of this section: (A) Section 219(d)(2)
(relating to no deduction for rollovers).
(B) Section 219(f)(3) (relating to time when contributions deemed
made).
(C) Except as provided in section 106(b), section 219(f)(5)
(relating to employer payments).
(D) Section 408(g) (relating to community property laws).
(E) Section 408(h) (relating to custodial accounts).
(e) Tax Treatment of Accounts.– (1) In general.–A medical
savings account is exempt from taxation under this subtitle unless
such account has ceased to be a medical savings account.
Notwithstanding the preceding sentence, any such account is subject
to the taxes imposed by section 511 (relating to imposition of tax on
unrelated business income of charitable, etc. organizations).
(2) Account terminations.–Rules similar to the rules of
paragraphs (2) and (4) of section 408(e) shall apply to medical
savings accounts, and any amount treated as distributed under such
rules shall be treated as not used to pay qualified medical expenses.
(f) Tax Treatment of Distributions.– (1) Amounts used for
qualified medical expenses.–Any amount paid or distributed out of a
medical savings account which is used exclusively to pay qualified
medical expenses of any account holder shall not be includible in
gross income.
(2) Inclusion of amounts not used for qualified medical
expenses.–Any amount paid or distributed out of a medical savings
account which is not used exclusively to pay the qualified medical
expenses of the account holder shall be included in the gross income
of such holder.
(3) Excess contributions returned before due date of return.– (A)
In general.–If any excess contribution is contributed for a taxable
year to any medical savings account of an individual, paragraph (2)
shall not apply to distributions from the medical savings accounts of
such individual (to the extent such distributions do not exceed the
aggregate excess contributions to all such accounts of such
individual for such year) if– (i) such distribution is received by
the individual on or before the last day prescribed by law (including
extensions of time) for filing such individual’s return for such
taxable year, and (ii) such distribution is accompanied by the amount
of net income attributable to such excess contribution.
Any net income described in clause (ii) shall be included in the
gross income of the individual for the taxable year in which it is
received.
(B) Excess contribution.–For purposes of subparagraph (A), the
term `excess contribution’ means any contribution (other than a
rollover contribution) which is neither excludable from gross income
under section 106(b) nor deductible under this section.
(4) Additional tax on distributions not used for qualified medical
expenses.– (A) In general.–The tax imposed by this chapter on the
account holder for any taxable year in which there is a payment or
distribution from a medical savings account of such holder which is
includible in gross income under paragraph (2) shall be increased by
15 percent of the amount which is so includible.
(B) Exception for disability or death.– Subparagraph (A) shall
not apply if the payment or distribution is made after the account
holder becomes disabled within the meaning of section 72(m)(7) or
dies.
(C) Exception for distributions after medicare
eligibility.–Subparagraph (A) shall not apply to any payment or
distribution after the date on which the account holder attains the
age specified in section 1811 of the Social Security Act.
(5) Rollover contribution.–An amount is described in this
paragraph as a rollover contribution if it meets the requirements of
subparagraphs (A) and (B).
(A) In general.–Paragraph (2) shall not apply to any amount paid
or distributed from a medical savings account to the account holder
to the extent the amount received is paid into a medical savings
account for the benefit of such holder not later than the 60th day
after the day on which the holder receives the payment or
distribution.
(B) Limitation.–This paragraph shall not apply to any amount
described in subparagraph (A) received by an individual from a
medical savings account if, at any time during the 1-year period
ending on the day of such receipt, such individual received any other
amount described in subparagraph (A) from a medical savings account
which was not includible in the individual’s gross income because of
the application of this paragraph.
(6) Coordination with medical expense deduction.–For purposes of
determining the amount of the deduction under section 213, any
payment or distribution out of a medical savings account for
qualified medical expenses shall not be treated as an expense paid
for medical care.
(7) Transfer of account incident to divorce.–The transfer of an
individual’s interest in a medical savings account to an individual’s
spouse or former spouse under a divorce or separation instrument
described in subparagraph (A) of section 71(b)(2) shall not be
considered a taxable transfer made by such individual notwithstanding
any other provision of this subtitle, and such interest shall, after
such transfer, be treated as a medical savings account with respect
to which such spouse is the account holder.
(8) Treatment after death of account holder.– (A) Treatment if
designated beneficiary is spouse.–If the account holder’s surviving
spouse acquires such holder’s interest in a medical savings account
by reason of being the designated beneficiary of such account at the
death of the account holder, such medical savings account shall be
treated as if the spouse were the account holder.
(B) Other cases.– (i) In general.–If, by reason of the death of
the account holder, any person acquires the account holder’s interest
in a medical savings account in a case to which subparagraph (A) does
not apply– (I) such account shall cease to be a medical savings
account as of the date of death, and (II) an amount equal to the fair
market value of the assets in such account on such date shall be
includible if such person is not the estate of such holder, in such
person’s gross income for the taxable year which includes such date,
or if such person is the estate of such holder, in such holder’s
gross income for the last taxable year of such holder.
(ii) Special rules.– (I) Reduction of inclusion for pre-death
expenses.–The amount includible in gross income under clause (i) by
any person (other than the estate) shall be reduced by the amount of
qualified medical expenses which were incurred by the decedent before
the date of the decedent’s death and paid by such person within 1
year after such date.
(II) Deduction for estate taxes.– An appropriate deduction shall
be allowed under section 691(c) to any person (other than the
decedent or the decedent’s spouse) with respect to amounts included
in gross income under clause (i) by such person.
(g) Cost-of-Living Adjustment.–In the case of any taxable year
beginning in a calendar year after 1998, each dollar amount in
subsection (c)(2) shall be increased by an amount equal to– (1) such
dollar amount, multiplied by (2) the cost-of-living adjustment
determined under section 1(f)(3) for the calendar year in which such
taxable year begins by substituting `calendar year 1997′ for
`calendar year 1992′ in subparagraph (B) thereof.
If any increase under the preceding sentence is not a multiple of
$50, such increase shall be rounded to the nearest multiple of $50.
(h) Reports.–The Secretary may require the trustee of a medical
savings account to make such reports regarding such account to the
Secretary and to the account holder with respect to contributions,
distributions, and such other matters as the Secretary determines
appropriate. The reports required by this subsection 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.
(i) Limitation on Number of Taxpayers Having Medical Savings
Accounts.– (1) In general.–Except as provided in paragraph (5), no
individual shall be treated as an eligible individual for any taxable
year beginning after the cut-off year unless– (A) such individual
was an active MSA participant for any taxable year ending on or
before the close of the cut-off year, or (B) such individual first
became an active MSA participant for a taxable year ending after the
cut-off year by reason of coverage under a high deductible health
plan of an MSA-participating employer.
(2) Cut-off year.–For purposes of paragraph (1), the term
`cut-off year’ means the earlier of– (A) calendar year 2000, or (B)
the first calendar year before 2000 for which the Secretary
determines under subsection (j) that the numerical limitation for
such year has been exceeded.
(3) Active msa participant.–For purposes of this subsection– (A)
In general.–The term `active MSA participant’ means, with respect to
any taxable year, any individual who is the account holder of any
medical savings account into which any contribution was made which
was excludable from gross income under section 106(b), or allowable
as a deduction under this section, for such taxable year.
(B) Special rule for cut-off years before 2000.– In the case of a
cut-off year before 2000– (i) an individual shall not be treated as
an eligible individual for any month of such year or an active MSA
participant under paragraph (1)(A) unless such individual is, on or
before the cut- off date, covered under a high deductible health
plan, and (ii) an employer shall not be treated as an
MSA-participating employer unless the employer, on or before the
cut-off date, offered coverage under a high deductible health plan to
any employee.
(C) Cut-off date.–For purposes of subpara- graph (B)– (i) In
general.–Except as otherwise provided in this subparagraph, the
cut-off date is October 1 of the cut-off year.
(ii) Employees with enrollment periods after october 1.–In the
case of an individual described in subclause (I) of subsection
(c)(1)(A)(iii), if the regularly scheduled enrollment period for
health plans of the individual’s employer occurs during the last 3
months of the cut-off year, the cut-off date is December 31 of the
cut-off year.
(iii) Self-employed individuals.–In the case of an individual
described in subclause (II) of subsection (c)(1)(A)(iii), the cut-off
date is November 1 of the cut-off year.
(iv) Special rules for 1997.–If 1997 is a cut-off year by reason
of subsection (j)(1)(A)– (I) each of the cut-off dates under clauses
(i) and (iii) shall be 1 month earlier than the date determined
without regard to this clause, and (II) clause (ii) shall be applied
by substituting `4 months’ for `3 months’.
(4) MSA-participating employer.–For purposes of this subsection,
the term `MSA-participating employer’ means any small employer if–
(A) such employer made any contribution to the medical savings
account of any employee during the cut- off year or any preceding
calendar year which was excludable from gross income under section
106(b), or (B) at least 20 percent of the employees of such employer
who are eligible individuals for any month of the cut-off year by
reason of coverage under a high deductible health plan of such
employer each made a contribution of at least $100 to their medical
savings accounts for any taxable year ending with or within the
cut-off year which was allowable as a deduction under this section.
(5) Additional eligibility after cut-off year.–If the Secretary
determines under subsection (j)(2)(A) that the numerical limit for
the calendar year following a cut-off year described in paragraph
(2)(B) has not been exceeded– (A) this subsection shall not apply to
any otherwise eligible individual who is covered under a high
deductible health plan during the first 6 months of the second
calendar year following the cut-off year (and such individual shall
be treated as an active MSA participant for purposes of this
subsection if a contribution is made to any medical savings account
with respect to such coverage), and (B) any employer who offers
coverage under a high deductible health plan to any employee during
such 6- month period shall be treated as an MSA-participating
employer for purposes of this subsection if the requirements of
paragraph (4) are met with respect to such coverage.
For purposes of this paragraph, subsection (j)(2)(A) shall be
applied for 1998 by substituting `750,000′ for `600,000′.
(j) Determination of Whether Numerical Limits Are Exceeded.– (1)
Determination of whether limit exceeded for 1997.–The numerical
limitation for 1997 is exceeded if, based on the reports required
under paragraph (4), the number of medical savings accounts
established as of– (A) April 30, 1997, exceeds 375,000, or (B) June
30, 1997, exceeds 525,000.
(2) Determination of whether limit exceeded for 1998 or 1999.–
(A) In general.–The numerical limitation for 1998 or 1999 is
exceeded if the sum of– (i) the number of MSA returns filed on or
before April 15 of such calendar year for taxable years ending with
or within the preceding calendar year, plus (ii) the Secretary’s
estimate (determined on the basis of the returns described in clause
(i)) of the number of MSA returns for such taxable years which will
be filed after such date, exceeds 600,000 (750,000 in the case of
1999). For purposes of the preceding sentence, the term `MSA return’
means any return on which any exclusion is claimed under section
106(b) or any deduction is claimed under this section.
(B) Alternative computation of limitation.–The numerical
limitation for 1998 or 1999 is also exceeded if the sum of– (i) 90
percent of the sum determined under subparagraph (A) for such
calendar year, plus (ii) the product of 2.5 and the number of medical
savings accounts established during the portion of such year
preceding July 1 (based on the reports required under paragraph (4))
for taxable years beginning in such year, exceeds 750,000.
(3) Previously uninsured individuals not included in
determination.– (A) In general.–The determination of whether any
calendar year is a cut-off year shall be made by not counting the
medical savings account of any previously uninsured individual.
(B) Previously uninsured individual.–For purposes of this
subsection, the term `previously uninsured individual’ means, with
respect to any medical savings account, any individual who had no
health plan coverage (other than coverage referred to in subsection
(c)(1)(B)) at any time during the 6-month period before the date such
individual’s coverage under the high deductible health plan
commences.
(4) Reporting by msa trustees.– (A) In general.–Not later than
August 1 of 1997, 1998, and 1999, each person who is the trustee of a
medical savings account established before July 1 of such calendar
year shall make a report to the Secretary (in such form and manner as
the Secretary shall specify) which specifies– (i) the number of
medical savings accounts established before such July 1 (for taxable
years beginning in such calendar year) of which such person is the
trustee, (ii) the name and TIN of the account holder of each such
account, and (iii) the number of such accounts which are accounts of
previously uninsured individuals.
(B) Additional report for 1997.–Not later than June 1, 1997, each
person who is the trustee of a medical savings account established
before May 1, 1997, shall make an additional report described in
subparagraph (A) but only with respect to accounts established before
May 1, 1997.
(C) Penalty for failure to file report.–The penalty provided in
section 6693(a) shall apply to any report required by this paragraph,
except that– (i) such section shall be applied by substituting `$25′
for `$50′, and (ii) the maximum penalty imposed on any trustee shall
not exceed $5,000.
(D) Aggregation of accounts.–To the extent practicable, in
determining the number of medical savings accounts on the basis of
the reports under this paragraph, all medical savings accounts of an
individual shall be treated as 1 account and all accounts of
individuals who are married to each other shall be treated as 1
account.
(5) Date of making determinations.–Any determination under this
subsection that a calendar year is a cut-off year shall be made by
the Secretary and shall be published not later than October 1 of such
year.”.
(b) Deduction Allowed Whether or Not Individual Itemizes Other
Deductions.–Subsection (a) of section 62 is amended by inserting
after paragraph (15) the following new paragraph: (16) Medical
savings accounts.–The deduction allowed by section 220.”.
(c) Exclusions for Employer Contributions to Medical Savings
Accounts.– (1) Exclusion from income tax.–The text of section 106
(relating to contributions by employer to accident and health plans)
is amended to read as follows:
(a) General Rule.–Except as otherwise provided in this section,
gross income of an employee does not include employer-provided
coverage under an accident or health plan.
(b) Contributions to Medical Savings Accounts.– (1) In
general.–In the case of an employee who is an eligible individual,
amounts contributed by such employee’s employer to any medical
savings account of such employee shall be treated as
employer-provided coverage for medical expenses under an accident or
health plan to the extent such amounts do not exceed the limitation
under section 220(b)(1) (determined without regard to this
subsection) which is applicable to such employee for such taxable
year.
(2) No constructive receipt.–No amount shall be included in the
gross income of any employee solely because the employee may choose
between the contributions referred to in paragraph (1) and employer
contributions to another health plan of the employer.
(3) Special rule for deduction of employer contributions.–Any
employer contribution to a medical savings account, if otherwise
allowable as a deduction under this chapter, shall be allowed only
for the taxable year in which paid.
(4) Employer msa contributions required to be shown on
return.–Every individual required to file a return under section
6012 for the taxable year shall include on such return the aggregate
amount contributed by employers to the medical savings accounts of
such individual or such individual’s spouse for such taxable year.
(5) MSA contributions not part of cobra coverage.– Paragraph (1)
shall not apply for purposes of section 4980B.
(6) Definitions.–For purposes of this subsection, the terms
`eligible individual’ and `medical savings account’ have the
respective meanings given to such terms by section 220.
(7) Cross reference.– For penalty on failure by employer to make
comparable contributions to the medical savings accounts of
comparable employees, see section 4980E.”.
(2) Exclusion from employment taxes.– (A) Railroad retirement
tax.–Subsection (e) of section 3231 is amended by adding at the end
the following new paragraph: (10) Medical savings account
contributions.–The term `compensation’ shall not include any payment
made to or for the benefit of an employee if at the time of such
payment it is reasonable to believe that the employee will be able to
exclude such payment from income under section 106(b).”.
(B) Unemployment tax.–Subsection (b) of section 3306 is amended
by striking or” at the end of paragraph (15), by striking the period
at the end of paragraph (16) and inserting ; or”, and by inserting
after paragraph (16) the following new paragraph: (17) any payment
made to or for the benefit of an employee if at the time of such
payment it is reasonable to believe that the employee will be able to
exclude such payment from income under section 106(b).”.
(C) Withholding tax.–Subsection (a) of section 3401 is amended by
striking or” at the end of paragraph (19), by striking the period at
the end of paragraph (20) and inserting ; or”, and by inserting
after paragraph (20) the following new paragraph: (21) any payment
made to or for the benefit of an employee if at the time of such
payment it is reasonable to believe that the employee will be able to
exclude such payment from income under section 106(b).” (3) Employer
contributions required to be shown on w-2.– Subsection (a) of
section 6051 is amended by striking and” at the end of paragraph
(9), by striking the period at the end of paragraph (10) and
inserting , and”, and by inserting after paragraph (10) the
following new paragraph: (11) the amount contributed to any medical
savings account (as defined in section 220(d)) of such employee or
such employee’s spouse.”.
(4) Penalty for failure of employer to make comparable msa
contributions.– (A) In general.–Chapter 43 is amended by adding
after section 4980D the following new section: SEC. 4980E. FAILURE OF
EMPLOYER TO MAKE COMPARABLE MEDICAL SAVINGS ACCOUNT CONTRIBUTIONS.
(a) General Rule.–In the case of an employer who makes a
contribution to the medical savings account of any employee with
respect to coverage under a high deductible health plan of the
employer during a calendar year, there is hereby imposed a tax on the
failure of such employer to meet the requirements of subsection (d)
for such calendar year.
(b) Amount of Tax.–The amount of the tax imposed by subsection
(a) on any failure for any calendar year is the amount equal to 35
percent of the aggregate amount contributed by the employer to
medical savings accounts of employees for taxable years of such
employees ending with or within such calendar year.
(c) Waiver by Secretary.–In the case of a failure which is due to
reasonable cause and not to willful neglect, the Secretary may waive
part or all of the tax imposed by subsection (a) to the extent that
the payment of such tax would be excessive relative to the failure
involved.
(d) Employer Required To Make Comparable MSA Contributions for All
Participating Employees.– (1) In general.–An employer meets the
requirements of this subsection for any calendar year if the employer
makes available comparable contributions to the medical savings
accounts of all comparable participating employees for each coverage
period during such calendar year.
(2) Comparable contributions.– (A) In general.–For purposes of
paragraph (1), the term `comparable contributions’ means
contributions– (i) which are the same amount, or (ii) which are the
same percentage of the annual deductible limit under the high
deductible health plan covering the employees.
(B) Part-year employees.–In the case of an employee who is
employed by the employer for only a portion of the calendar year, a
contribution to the medical savings account of such employee shall be
treated as comparable if it is an amount which bears the same ratio
to the comparable amount (determined without regard to this
subparagraph) as such portion bears to the entire calendar year.
(3) Comparable participating employees.–For purposes of paragraph
(1), the term `comparable participating employees’ means all
employees– (A) who are eligible individuals covered under any high
deductible health plan of the employer, and (B) who have the same
category of coverage.
For purposes of subparagraph (B), the categories of coverage are
self-only and family coverage.
(4) Part-time employees.– (A) In general.–Paragraph (3) shall be
applied separately with respect to part-time employees and other
employees.
(B) Part-time employee.–For purposes of subparagraph (A), the
term `part-time employee’ means any employee who is customarily
employed for fewer than 30 hours per week.
(e) Controlled Groups.–For purposes of this section, all persons
treated as a single employer under subsection (b), (c), (m), or (o)
of section 414 shall be treated as 1 employer.
(f) Definitions.–Terms used in this section which are also used
in section 220 have the respective meanings given such terms in
section 220.”.
(B) Clerical amendment.–The table of sections for chapter 43 is
amended by adding after the item relating to section 4980D the
following new item: Sec. 4980E. Failure of employer to make
comparable medical savings account contributions.”.
(d) Medical Savings Account Contributions Not Available Under
Cafeteria Plans.–Subsection (f) of section 125 of such Code is
amended by inserting 106(b),” before 117”.
(e) Tax on Excess Contributions.–Section 4973 (relating to tax on
excess contributions to individual retirement accounts, certain
section 403(b) contracts, and certain individual retirement
annuities) is amended– (1) by inserting medical savings accounts,”
after accounts,” in the heading of such section, (2) by striking
or” at the end of paragraph (1) of sub- section (a), (3) by
redesignating paragraph (2) of subsection (a) as paragraph (3) and by
inserting after paragraph (1) the following: (2) a medical savings
account (within the meaning of section 220(d)), or”, and (4) by
adding at the end the following new subsection:
(d) Excess Contributions to Medical Savings Accounts.–For
purposes of this section, in the case of medical savings accounts
(within the meaning of section 220(d)), the term `excess
contributions’ means the sum of– (1) the aggregate amount
contributed for the taxable year to the accounts (other than rollover
contributions described in section 220(f)(5)) which is neither
excludable from gross income under section 106(b) nor allowable as a
deduction under section 220 for such year, and (2) the amount
determined under this subsection for the preceding taxable year,
reduced by the sum of– (A) the distributions out of the accounts
which were included in gross income under section 220(f)(2), and (B)
the excess (if any) of– (i) the maximum amount allowable as a
deduction under section 220(b)(1) (determined without regard to
section 106(b)) for the taxable year, over (ii) the amount
contributed to the accounts for the taxable year.
For purposes of this subsection, any contribution which is
distributed out of the medical savings account in a distribution to
which section 220(f)(3) applies shall be treated as an amount not
contributed.”.
(f) Tax on Prohibited Transactions.– (1) Section 4975 (relating
to tax on prohibited transactions) is amended by adding at the end of
subsection (c) the following new paragraph: (4) Special rule for
medical savings accounts.–An individual for whose benefit a medical
savings account (within the meaning of section 220(d)) is established
shall be exempt from the tax imposed by this section with respect to
any transaction concerning such account (which would otherwise be
taxable under this section) if, with respect to such transaction, the
account ceases to be a medical savings account by reason of the
application of section 220(e)(2) to such account.”.
(2) Paragraph (1) of section 4975(e) is amended to read as
follows: (1) Plan.–For purposes of this section, the term `plan’
means– (A) a trust described in section 401(a) which forms a part of
a plan, or a plan described in section 403(a), which trust or plan is
exempt from tax under section 501(a), (B) an individual retirement
account described in section 408(a), (C) an individual retirement
annuity described in section 408(b), (D) a medical savings account
described in section 220(d), or (E) a trust, plan, account, or
annuity which, at any time, has been determined by the Secretary to
be described in any preceding subparagraph of this paragraph.”.
(g) Failure To Provide Reports on Medical Savings Accounts.– (1)
Subsection (a) of section 6693 (relating to failure to provide
reports on individual retirement accounts or annuities) is amended to
read as follows:
(a) Reports.– (1) In general.–If a person required to file a
report under a provision referred to in paragraph (2) fails to file
such report at the time and in the manner required by such provision,
such person shall pay a penalty of $50 for each failure unless it is
shown that such failure is due to reasonable cause.
(2) Provisions.–The provisions referred to in this paragraph
are– (A) subsections (i) and (l) of section 408 (relating to
individual retirement plans), and (B) section 220(h) (relating to
medical savings accounts).”.
(h) Exception From Capitalization of Policy Acquisition
Expenses.– Subparagraph (B) of section 848(e)(1) (defining specified
insurance contract) is amended by striking and” at the end of clause
(ii), by striking the period at the end of clause (iii) and inserting
, and”, and by adding at the end the following new clause: (iv) any
contract which is a medical savings account (as defined in section
220(d)).”.
(i) Clerical Amendment.–The table of sections for part VII of
subchapter B of chapter 1 is amended by striking the last item and
inserting the following:
Sec. 220. Medical savings accounts.
Sec. 221. Cross reference.”.
(j) Effective <<NOTE: 26 USC 62 note.>> Date.–The
amendments made by this section shall apply to taxable years
beginning after December 31, 1996.
(k) Monitoring <<NOTE: 26 USC 220 note.>> of
Participation in Medical Savings Accounts.–The Secretary of the
Treasury or his delegate shall– (1) during 1997, 1998, 1999, and
2000, regularly evaluate the number of individuals who are
maintaining medical savings accounts and the reduction in revenues to
the United States by reason of such accounts, and (2) provide such
reports of such evaluations to Congress as such Secretary determines
appropriate.
(l) Study <<NOTE: 26 USC 220 note.>> of Effects of
Medical Savings Accounts on Small Group Market.–The Comptroller
General of the United States shall enter into a contract with an
organization with expertise in health economics, health insurance
markets, and actuarial science to conduct a comprehensive study
regarding the effects of medical savings accounts in the small group
market on– (1) selection, including adverse selection, (2) health
costs, including any impact on premiums of individuals with
comprehensive coverage, (3) use of preventive care, (4) consumer
choice, (5) the scope of coverage of high deductible plans purchased
in conjunction with such accounts, and (6) other relevant items.
A report <<NOTE: Reports.>> on the results of the
study conducted under this subsection shall be submitted to the
Congress no later than January 1, 1999.
Subtitle B–Increase in Deduction for Health Insurance Costs of
Self- Employed Individuals
SEC. 311. INCREASE IN DEDUCTION FOR
HEALTH INSURANCE COSTS OF SELF- EMPLOYED INDIVIDUALS.
(a) In General.–Paragraph (1) of section 162(l) is amended to
read as follows: (1) Allowance of deduction.– (A) In general.–In
the case of an individual who is an employee within the meaning of
section 401(c)(1), there shall be allowed as a deduction under this
section an amount equal to the applicable percentage of the amount
paid during the taxable year for insurance which constitutes medical
care for the taxpayer, his spouse, and dependents.
(B) Applicable percentage.–For purposes of subparagraph (A), the
applicable percentage shall be determined under the following table
[EDITED TABLE]:
|
For taxable years: |
The applicable percentage is: |
|
1997 |
40 percent |
|
1998 through 2002 |
45 percent |
|
2003 |
50 percent |
|
2004 |
60 percent |
|
2005 |
70 percent |
|
2006 or thereafter |
80 percent |
(b) Exclusion for Amounts Received Under Certain Self-Insured
Plans.–Paragraph (3) of section 104(a) is amended by inserting (or
through an arrangement having the effect of accident or health
insurance)” after health insurance”.
(c) Effective Date <<NOTE: 26 USC 104 note.>> .–The
amendments made by this section shall apply to taxable years
beginning after December 31, 1996.
Subtitle C–Long-Term Care Services and Contracts
PART I–GENERAL PROVISIONS
SEC. 321. TREATMENT OF LONG-TERM CARE
INSURANCE.
(a) General Rule.–Chapter 79 (relating to definitions) is amended
by inserting after section 7702A the following new section:
SEC. 7702B. TREATMENT OF QUALIFIED LONG-TERM CARE INSURANCE.
(a) In General.–For purposes of this title– (1) a qualified
long-term care insurance contract shall be treated as an accident and
health insurance contract, (2) amounts (other than policyholder
dividends, as defined in section 808, or premium refunds) received
under a qualified long-term care insurance contract shall be treated
as amounts received for personal injuries and sickness and shall be
treated as reimbursement for expenses actually incurred for medical
care (as defined in section 213(d)), (3) any plan of an employer
providing coverage under a qualified long-term care insurance
contract shall be treated as an accident and health plan with respect
to such coverage, (4) except as provided in subsection (e)(3),
amounts paid for a qualified long-term care insurance contract
providing the benefits described in subsection (b)(2)(A) shall be
treated as payments made for insurance for purposes of section
213(d)(1)(D), and (5) a qualified long-term care insurance contract
shall be treated as a guaranteed renewable contract subject to the
rules of section 816(e).
(b) Qualified Long-Term Care Insurance Contract.–For purposes of
this title– (1) In general.–The term `qualified long-term care
insurance contract’ means any insurance contract if– (A) the only
insurance protection provided under such contract is coverage of
qualified long-term care services, (B) such contract does not pay or
reimburse expenses incurred for services or items to the extent that
such expenses are reimbursable under title XVIII of the Social
Security Act or would be so reimbursable but for the application of a
deductible or coinsurance amount, (C) such contract is guaranteed
renewable, (D) such contract does not provide for a cash surrender
value or other money that can be– (i) paid, assigned, or pledged as
collateral for a loan, or (ii) borrowed, other than as provided in
subparagraph (E) or paragraph (2)(C), (E) all refunds of premiums,
and all policyholder dividends or similar amounts, under such
contract are to be applied as a reduction in future premiums or to
increase future benefits, and (F) such contract meets the
requirements of subsection (g).
(2) Special rules.– (A) Per diem, etc. payments permitted.–A
contract shall not fail to be described in subparagraph (A) or (B) of
paragraph (1) by reason of payments being made on a per diem or other
periodic basis without regard to the expenses incurred during the
period to which the payments relate.
(B) Special rules relating to medicare.– (i) Paragraph (1)(B)
shall not apply to expenses which are reimbursable under title XVIII
of the Social Security Act only as a secondary payor.
(ii) No provision of law shall be construed or applied so as to
prohibit the offering of a qualified long-term care insurance
contract on the basis that the contract coordinates its benefits with
those provided under such title.
(C) Refunds of premiums.–Paragraph (1)(E) shall not apply to any
refund on the death of the insured, or on a complete surrender or
cancellation of the contract, which cannot exceed the aggregate
premiums paid under the contract. Any refund on a complete surrender
or cancellation of the contract shall be includible in gross income
to the extent that any deduction or exclusion was allowable with
respect to the premiums.
(c) Qualified Long-Term Care Services.–For purposes of this
section– (1) In general.–The term `qualified long-term care
services’ means necessary diagnostic, preventive, therapeutic,
curing, treating, mitigating, and rehabilitative services, and
maintenance or personal care services, which– (A) are required by a
chronically ill individual, and (B) are provided pursuant to a plan
of care prescribed by a licensed health care practitioner.
(2) Chronically ill individual.– (A) In general.–The term
`chronically ill individual’ means any individual who has been
certified by a licensed health care practitioner as– (i) being
unable to perform (without substantial assistance from another
individual) at least 2 activities of daily living for a period of at
least 90 days due to a loss of functional capacity, (ii) having a
level of disability similar (as determined under regulations
prescribed by the Secretary in consultation with the Secretary of
Health and Human Services) to the level of disability described in
clause (i), or (iii) requiring substantial supervision to protect
such individual from threats to health and safety due to severe
cognitive impairment.
Such term shall not include any individual otherwise meeting the
requirements of the preceding sentence unless within the preceding
12-month period a licensed health care practitioner has certified
that such individual meets such requirements.
(B) Activities of daily living.–For purposes of subparagraph (A),
each of the following is an activity of daily living: (i) Eating.
(ii) Toileting.
(iii) Transferring.
(iv) Bathing.
(v) Dressing.
(vi) Continence.
A contract shall not be treated as a qualified long-term care
insurance contract unless the determination of whether an individual
is a chronically ill individual takes into account at least 5 of such
activities.
(3) Maintenance or personal care services.–The term `maintenance
or personal care services’ means any care the primary purpose of
which is the provision of needed assistance with any of the
disabilities as a result of which the individual is a chronically ill
individual (including the protection from threats to health and
safety due to severe cognitive impairment).
(4) Licensed health care practitioner.–The term `licensed health
care practitioner’ means any physician (as defined in section
1861(r)(1) of the Social Security Act) and any registered
professional nurse, licensed social worker, or other individual who
meets such requirements as may be prescribed by the Secretary.
(d) Aggregate Payments in Excess of Limits.– (1) In general.–If
the aggregate of– (A) the periodic payments received for any period
under all qualified long-term care insurance contracts which are
treated as made for qualified long-term care services for an insured,
and (B) the periodic payments received for such period which are
treated under section 101(g) as paid by reason of the death of such
insured, exceeds the per diem limitation for such period, such excess
shall be includible in gross income without regard to section 72. A
payment shall not be taken into account under subparagraph (B) if the
insured is a terminally ill individual (as defined in section 101(g))
at the time the payment is received.
(2) Per diem limitation.–For purposes of paragraph (1), the per
diem limitation for any period is an amount equal to the excess (if
any) of– (A) the greater of– (i) the dollar amount in effect for
such period under paragraph (4), or (ii) the costs incurred for
qualified long- term care services provided for the insured for such
period, over (B) the aggregate payments received as reimbursements
(through insurance or otherwise) for qualified long-term care
services provided for the insured during such period.
(3) Aggregation rules.–For purposes of this subsection– (A) all
persons receiving periodic payments described in paragraph (1) with
respect to the same insured shall be treated as 1 person, and (B) the
per diem limitation determined under paragraph (2) shall be allocated
first to the insured and any remaining limitation shall be allocated
among the other such persons in such manner as the Secretary shall
prescribe.
(4) Dollar amount.–The dollar amount in effect under this
subsection shall be $175 per day (or the equivalent amount in the
case of payments on another periodic basis).
(5) Inflation adjustment.–In the case of a calendar year after
1997, the dollar amount contained in paragraph (4) shall be increased
at the same time and in the same manner as amounts are increased
pursuant to section 213(d)(10).
(6) Periodic payments.–For purposes of this subsection, the term
`periodic payment’ means any payment (whether on a periodic basis or
otherwise) made without regard to the extent of the costs incurred by
the payee for qualified long-term care services.
(e) Treatment of Coverage Provided as Part of a Life Insurance
Contract.–Except as otherwise provided in regulations prescribed by
the Secretary, in the case of any long-term care insurance coverage
(whether or not qualified) provided by a rider on or as part of a
life insurance contract– (1) In general.–This section shall apply
as if the portion of the contract providing such coverage is a
separate contract.
(2) Application of 7702.–Section 7702(c)(2) (relating to the
guideline premium limitation) shall be applied by increasing the
guideline premium limitation with respect to a life insurance
contract, as of any date– (A) by the sum of any charges (but not
premium payments) against the life insurance contract’s cash
surrender value (within the meaning of section 7702(f)(2)(A)) for
such coverage made to that date under the contract, less (B) any such
charges the imposition of which reduces the premiums paid for the
contract (within the meaning of section 7702(f)(1)).
(3) Application of section 213.–No deduction shall be allowed
under section 213(a) for charges against the life insurance
contract’s cash surrender value described in paragraph (2), unless
such charges are includible in income as a result of the application
of section 72(e)(10) and the rider is a qualified long-term care
insurance contract under subsection (b).
(4) Portion defined.–For purposes of this subsection, the term
`portion’ means only the terms and benefits under a life insurance
contract that are in addition to the terms and benefits under the
contract without regard to long-term care insurance coverage.
(f) Treatment of Certain State-Maintained Plans.– (1) In
general.–If– (A) an individual receives coverage for qualified
long-term care services under a State long-term care plan, and (B)
the terms of such plan would satisfy the requirements of subsection
(b) were such plan an insurance contract, such plan shall be treated
as a qualified long-term care insurance contract for purposes of this
title.
(2) State long-term care plan.–For purposes of paragraph (1), the
term `State long-term care plan’ means any plan– (A) which is
established and maintained by a State or an instrumentality of a
State, (B) which provides coverage only for qualified long-term care
services, and (C) under which such coverage is provided only to– (i)
employees and former employees of a State (or any political
subdivision or instrumentality of a State), (ii) the spouses of such
employees, and (iii) individuals bearing a relationship to such
employees or spouses which is described in any of paragraphs (1)
through (8) of section 152(a).”.
(b) Reserve Method.–Clause (iii) of section 807(d)(3)(A) is
amended by inserting (other than a qualified long-term care insurance
contract, as defined in section 7702B(b))” after insurance
contract”.
(c) Long-Term Care Insurance Not Permitted Under Cafeteria Plans
or Flexible Spending Arrangements.– (1) Cafeteria plans.–Section
125(f) is amended by adding at the end the following new sentence:
Such term shall not include any product which is advertised,
marketed, or offered as long-term care insurance.”.
(2) Flexible spending arrangements.–Section 106 (relating to
contributions by employer to accident and health plans), as amended
by section 301(c), is amended by adding at the end the following new
subsection:
(c) Inclusion of Long-Term Care Benefits Provided Through Flexible
Spending Arrangements.– (1) In general.–Effective on and after
January 1, 1997, gross income of an employee shall include
employer-provided coverage for qualified long-term care services (as
defined in section 7702B(c)) to the extent that such coverage is
provided through a flexible spending or similar arrangement.
(2) Flexible spending arrangement.–For purposes of this
subsection, a flexible spending arrangement is a benefit program
which provides employees with coverage under which– (A) specified
incurred expenses may be reimbursed (subject to reimbursement
maximums and other reasonable conditions), and (B) the maximum amount
of reimbursement which is reasonably available to a participant for
such coverage is less than 500 percent of the value of such coverage.
In the case of an insured plan, the maximum amount reasonably
available shall be determined on the basis of the underlying
coverage.”
(d) Continuation Coverage Rules Not To Apply.– (1) Paragraph (2)
of section 4980B(g) is amended by adding at the end the following new
sentence: Such term shall not include any plan substantially all of
the coverage under which is for qualified long-term care services (as
defined in section 7702B(c)).” (2) Paragraph (1) of section 607 of
the Employee Retirement Income Security Act of 1974 <<NOTE: 29
USC 1167.>> is amended by adding at the end the following new
sentence: Such term shall not include any plan substantially all of
the coverage under which is for qualified long-term care services (as
defined in section 7702B(c) of such Code).” (3) Paragraph (1) of
section 2208 of the Public Health Service Act <<NOTE: 42 USC
300bb-8.>> is amended by adding at the end the following new
sentence: Such term shall not include any plan substantially all of
the coverage under which is for qualified long-term care services (as
defined in section 7702B(c) of such Code).”
(e) Clerical Amendment.–The table of sections for chapter 79 is
amended by inserting after the item relating to section 7702A the
following new item:
Sec. 7702B. Treatment of qualified long-term care insurance.”.
(f) Effective <<NOTE: 26 USC 1702B note.>> Dates.–
(1) General effective date.– (A) In general.–Except as provided in
subparagraph (B), the amendments made by this section shall apply to
contracts issued after December 31, 1996.
(B) Reserve method.–The amendment made by subsection (b) shall
apply to contracts issued after December 31, 1997.
(2) Continuation of existing policies.–In the case of any
contract issued before January 1, 1997, which met the long-term care
insurance requirements of the State in which the contract was sitused
at the time the contract was issued– (A) such contract shall be
treated for purposes of the Internal Revenue Code of 1986 as a
qualified long- term care insurance contract (as defined in section
7702B(b) of such Code), and (B) services provided under, or
reimbursed by, such contract shall be treated for such purposes as
qualified long-term care services (as defined in section 7702B(c) of
such Code).
In the case of an individual who is covered on December 31, 1996,
under a State long-term care plan (as defined in section 7702B(f)(2)
of such Code), the terms of such plan on such date shall be treated
for purposes of the preceding sentence as a contract issued on such
date which met the long-term care insurance requirements of such
State.
(3) Exchanges of existing policies.–If, after the date of
enactment of this Act and before January 1, 1998, a contract
providing for long-term care insurance coverage is exchanged solely
for a qualified long-term care insurance contract (as defined in
section 7702B(b) of such Code), no gain or loss shall be recognized
on the exchange. If, in addition to a qualified long-term care
insurance contract, money or other property is received in the
exchange, then any gain shall be recognized to the extent of the sum
of the money and the fair market value of the other property
received. For purposes of this paragraph, the cancellation of a
contract providing for long-term care insurance coverage and
reinvestment of the cancellation proceeds in a qualified long-term
care insurance contract within 60 days thereafter shall be treated as
an exchange.
(4) Issuance of certain riders permitted.–For purposes of
applying sections 101(f), 7702, and 7702A of the Internal Revenue
Code of 1986 to any contract– (A) the issuance of a rider which is
treated as a qualified long-term care insurance contract under
section 7702B, and (B) the addition of any provision required to
conform any other long-term care rider to be so treated, shall not be
treated as a modification or material change of such contract.
(5) Application of per diem limitation to existing contracts.–The
amount of per diem payments made under a contract issued on or before
July 31, 1996, with respect to an insured which are excludable from
gross income by reason of section 7702B of the Internal Revenue Code
of 1986 (as added by this section) shall not be reduced under
subsection (d)(2)(B) thereof by reason of reimbursements received
under a contract issued on or before such date. The preceding
sentence shall cease to apply as of the date (after July 31, 1996)
such contract is exchanged or there is any contract modification
which results in an increase in the amount of such per diem payments
or the amount of such reimbursements.
(g) Long-Term <<NOTE: 26 USC 7702B note.>> Care Study
Request.–The Chairman of the Committee on Ways and Means of the
House of Representatives and the Chairman of the Committee on Finance
of the Senate shall jointly request the National Association of
Insurance Commissioners, in consultation with representatives of the
insurance industry and consumer organizations, to formulate, develop,
and conduct a study to determine the marketing and other effects of
per diem limits on certain types of long-term care policies.
<<NOTE: Reports.>> If the National Association of
Insurance Commissioners agrees to the study request, the National
Association of Insurance Commissioners shall report the results of
its study to such committees not later than 2 years after accepting
the request.
SEC. 322. QUALIFIED LONG-TERM CARE
SERVICES TREATED AS MEDICAL CARE.
(a) General Rule.–Paragraph (1) of section 213(d) (defining
medical care) is amended by striking or” at the end of subparagraph
(B), by redesignating subparagraph (C) as subparagraph (D), and by
inserting after subparagraph (B) the following new subparagraph: (C)
for qualified long-term care services (as defined in section
7702B(c)), or”.
(b) Technical Amendments.– (1) Subparagraph (D) of section
213(d)(1) (as redesignated by subsection (a)) is amended by inserting
before the period or for any qualified long-term care insurance
contract (as defined in section 7702B(b))”.
(2)(A) Paragraph (1) of section 213(d) is amended by adding at the
end the following new flush sentence: In the case of a qualified
long-term care insurance contract (as defined in section 7702B(b)),
only eligible long-term care premiums (as defined in paragraph (10))
shall be taken into account under subparagraph (D).” (B) Paragraph
(2) of section 162(l) is amended by adding at the end the following
new subparagraph: (C) Long-term care premiums.–In the case of a
qualified long-term care insurance contract (as defined in section
7702B(b)), only eligible long-term care premiums (as defined in
section 213(d)(10)) shall be taken into account under paragraph
(1).” (C) Subsection (d) of section 213 is amended by adding at the
end the following new paragraphs: (10) Eligible long-term care
premiums.– (A) In general.–For purposes of this section, the term
`eligible long-term care premiums’ means the amount paid during a
taxable year for any qualified long-term care insurance contract (as
defined in section 7702B(b)) covering an individual, to the extent
such amount does not exceed the limitation determined under the
following table [EDITED TABLE]:
|
Age before close of the taxable year: |
Limitation: |
|
40 or less |
$ 200 |
|
More than 40 but not more than 50 |
$ 375 |
|
More than 50 but not more than 60 |
$ 750 |
|
More than 60 but not more than 70 |
$ 2,000 |
|
More than 70 |
$ 2,500 |
(B) Indexing.– (i) In general.–In the case of any taxable year
beginning in a calendar year after 1997, each dollar amount contained
in subparagraph (A) shall be increased by the medical care cost
adjustment of such amount for such calendar year. If any increase
determined under the preceding sentence is not a multiple of $10,
such increase shall be rounded to the nearest multiple of $10.
(ii) Medical care cost adjust- ment.–For purposes of clause (i),
the medical care cost adjustment for any calendar year is the
percentage (if any) by which– (I) the medical care component of the
Consumer Price Index (as defined in section 1(f)(5)) for August of
the preceding calendar year, exceeds (II) such component for August
of 1996.
The Secretary shall, in consultation with the Secre- tary of
Health and Human Services, prescribe an adjustment which the
Secretary determines is more appropriate for purposes of this
paragraph than the adjustment described in the preceding sentence,
and the adjustment so prescribed shall apply in lieu of the
adjustment described in the preceding sentence.
(11) Certain payments to relatives treated as not paid for medical
care.–An amount paid for a qualified long-term care service (as
defined in section 7702B(c)) provided to an individual shall be
treated as not paid for medical care if such service is provided–
(A) by the spouse of the individual or by a relative (directly or
through a partnership, corporation, or other entity) unless the
service is provided by a licensed professional with respect to such
service, or (B) by a corporation or partnership which is related
(within the meaning of section 267(b) or 707(b)) to the individual.
For purposes of this paragraph, the term `relative’ means an
individual bearing a relationship to the individual which is
described in any of paragraphs (1) through (8) of section 152(a).
This paragraph shall not apply for purposes of section 105(b) with
respect to reimbursements through insurance.”.
(3) Paragraph (6) of section 213(d) is amended– (A) by striking
subparagraphs (A) and (B)” and inserting subparagraphs (A), (B), and
(C)”, and (B) by striking paragraph (1)(C)” in subparagraph (A) and
inserting paragraph (1)(D)”.
(4) Paragraph (7) of section 213(d) is amended by striking
subparagraphs (A) and (B)” and inserting subparagraphs (A), (B), and
(C)”.
(c) Effective <<NOTE: 26 USC 162 note.>> Date.–The
amendments made by this section shall apply to taxable years
beginning after December 31, 1996.
SEC. 323. REPORTING REQUIREMENTS.
(a) In General.–Subpart B of part III of subchapter A of chapter
61 is amended by adding at the end the following new section:
SEC. 6050Q. CERTAIN LONG-TERM CARE
BENEFITS.
(a) Requirement of Reporting.–Any person who pays long-term care
benefits shall make a return, according to the forms or regulations
prescribed by the Secretary, setting forth– (1) the aggregate amount
of such benefits paid by such person to any individual during any
calendar year, (2) whether or not such benefits are paid in whole or
in part on a per diem or other periodic basis without regard to the
expenses incurred during the period to which the payments relate, (3)
the name, address, and TIN of such individual, and (4) the name,
address, and TIN of the chronically ill or terminally ill individual
on account of whose condition such benefits are paid.
(b) Statements To Be Furnished to Persons With Respect to Whom
Information Is Required.–Every person required to make a return
under subsection (a) shall furnish to each individual whose name is
required to be set forth in such return a written statement showing–
(1) the name of the person making the payments, and (2) the aggregate
amount of long-term care benefits paid to the individual which are
required to be shown on such return.
The written statement required under the preceding sentence shall
be furnished to the individual on or before January 31 of the year
following the calendar year for which the return under subsection (a)
was required to be made.
(c) Long-Term Care Benefits.–For purposes of this section, the
term `long-term care benefit’ means– (1) any payment under a product
which is advertised, marketed, or offered as long-term care
insurance, and (2) any payment which is excludable from gross income
by reason of section 101(g).”.
(b) Penalties.– (1) Subparagraph (B) of section 6724(d)(1) is
amended by redesignating clauses (ix) through (xiv) as clauses (x)
through (xv), respectively, and by inserting after clause (viii) the
following new clause: (ix) section 6050Q (relating to certain
long-term care benefits),”.
(2) Paragraph (2) of section 6724(d) is amended by redesignating
subparagraphs (Q) through (T) as subparagraphs (R) through (U),
respectively, and by inserting after subparagraph (P) the following
new subparagraph: (Q) section 6050Q(b) (relating to certain long-
term care benefits),”.
(c) Clerical Amendment.–The table of sections for subpart B of
part III of subchapter A of chapter 61 is amended by adding at the
end the following new item:
Sec. 6050Q. Certain long-term care benefits.
(d) Effective <<NOTE: 26 USC 6050Q note.>> Date.–The
amendments made by this section shall apply to benefits paid after
December 31, 1996.
PART II–CONSUMER PROTECTION PROVISIONS
SEC. 325. POLICY REQUIREMENTS.
Section 7702B (as added by section 321) is amended by adding at
the end the following new subsection: (g) Consumer Protection
Provisions.– (1) In general.–The requirements of this subsection
are met with respect to any contract if the contract meets– (A) the
requirements of the model regulation and model Act described in
paragraph (2), (B) the disclosure requirement of paragraph (3), and
(C) the requirements relating to nonforfeitability under paragraph
(4).
(2) Requirements of model regulation and act.– (A) In
general.–The requirements of this paragraph are met with respect to
any contract if such contract meets– (i) Model regulation.–The
following requirements of the model regulation: (I) Section 7A
(relating to guaranteed renewal or noncancellability), and the
requirements of section 6B of the model Act relating to such section
7A.
(II) Section 7B (relating to prohibitions on limitations and
exclusions).
(III) Section 7C (relating to extension of benefits).
(IV) Section 7D (relating to continuation or conversion of
coverage).
(V) Section 7E (relating to discontinuance and replacement of
policies).
(VI) Section 8 (relating to unintentional lapse).
(VII) Section 9 (relating to disclosure), other than section 9F
thereof.
(VIII) Section 10 (relating to prohibitions against post-claims
underwriting).
(IX) Section 11 (relating to minimum standards).
(X) Section 12 (relating to requirement to offer inflation
protection), except that any requirement for a signature on a
rejection of inflation protection shall permit the signature to be on
an application or on a separate form.
(XI) Section 23 (relating to prohibition against preexisting
conditions and probationary periods in replacement policies or
certificates).
(ii) Model act.–The following requirements of the model Act: (I)
Section 6C (relating to preexisting conditions).
(II) Section 6D (relating to prior hospitalization).
(B) Definitions.–For purposes of this paragraph– (i) Model
provisions.–The terms `model regulation’ and `model Act’ mean the
long-term care insur- ance model regulation, and the long- term care
insurance model Act, respectively, promulgated by the National
Association of Insurance Commissioners (as adopted as of January
1993).
(ii) Coordination.–Any provision of the model regulation or model
Act listed under clause (i) or (ii) of subparagraph (A) shall be
treated as including any other provision of such regulation or Act
necessary to implement the provision.
(iii) Determination.–For purposes of this section and section
4980C, the determination of whether any requirement of a model
regulation or the model Act has been met shall be made by the
Secretary.
(3) Disclosure requirement.–The requirement of this paragraph is
met with respect to any contract if such contract meets the
requirements of section 4980C(d).
(4) Nonforfeiture requirements.– (A) In general.–The
requirements of this paragraph are met with respect to any level
premium contract, if the issuer of such contract offers to the
policyholder, including any group policyholder, a nonforfeiture
provision meeting the requirements of subparagraph (B).
(B) Requirements of provision.–The nonforfeiture provision
required under subparagraph (A) shall meet the following
requirements: (i) The nonforfeiture provision shall be appropriately
captioned.
(ii) The nonforfeiture provision shall provide for a benefit
available in the event of a default in the payment of any premiums
and the amount of the benefit may be adjusted subsequent to being
initially granted only as necessary to reflect changes in claims,
persistency, and interest as reflected in changes in rates for
premium paying contracts approved by the Secretary for the same
contract form.
(iii) The nonforfeiture provision shall provide at least one of
the following: (I) Reduced paid-up insurance.
(II) Extended term insurance.
(III) Shortened benefit period.
(IV) Other similar offerings approved by the Secretary.
(5) Cross reference.– For coordination of the requirements of
this subsection with State requirements, see section 4980C(f).”.
SEC. 326. REQUIREMENTS FOR ISSUERS OF
QUALIFIED LONG-TERM CARE INSURANCE CONTRACTS.
(a) In General.–Chapter 43 is amended by adding at the end the
following new section: SEC. 4980C. REQUIREMENTS FOR ISSUERS OF
QUALIFIED LONG-TERM CARE INSURANCE CONTRACTS.
(a) General Rule.–There is hereby imposed on any person failing
to meet the requirements of subsection (c) or (d) a tax in the amount
determined under subsection (b).
(b) Amount.– (1) In general.–The amount of the tax imposed by
subsection (a) shall be $100 per insured for each day any requirement
of subsection (c) or (d) is not met with respect to each qualified
long-term care insurance contract.
(2) Waiver.–In the case of a failure which is due to reasonable
cause and not to willful neglect, the Secretary may waive part or all
of the tax imposed by subsection (a) to the extent that payment of
the tax would be excessive relative to the failure involved.
(c) Responsibilities.–The requirements of this subsection are as
follows: (1) Requirements of model provisions.– (A) Model
regulation.–The following requirements of the model regulation must
be met: (i) Section 13 (relating to application forms and replacement
coverage).
(ii) Section 14 (relating to reporting requirements), except that
the issuer shall also report at least annually the number of claims
denied during the reporting period for each class of business
(expressed as a percentage of claims denied), other than claims
denied for failure to meet the waiting period or because of any
applicable preexisting condition.
(iii) Section 20 (relating to filing requirements for marketing).
(iv) Section 21 (relating to standards for marketing), including
inaccurate completion of medical histories, other than sections
21C(1) and 21C(6) thereof, except that– (I) in addition to such
requirements, no person shall, in selling or offering to sell a
qualified long-term care insurance contract, misrepresent a material
fact; and (II) no such requirements shall include a requirement to
inquire or identify whether a prospective applicant or enrollee for
long-term care insurance has accident and sickness insurance.
(v) Section 22 (relating to appropriateness of recommended
purchase).
(vi) Section 24 (relating to standard format outline of coverage).
(vii) Section 25 (relating to requirement to deliver shopper’s
guide).
(B) Model act.–The following requirements of the model Act must
be met: (i) Section 6F (relating to right to return), except that
such section shall also apply to denials of applications and any
refund shall be made within 30 days of the return or denial.
(ii) Section 6G (relating to outline of coverage).
(iii) Section 6H (relating to requirements for certificates under
group plans).
(iv) Section 6I (relating to policy summary).
(v) Section 6J (relating to monthly reports on accelerated death
benefits).
(vi) Section 7 (relating to incontestability period).
(C) Definitions.–For purposes of this paragraph, the terms `model
regulation’ and `model Act’ have the meanings given such terms by
section 7702B(g)(2)(B).
(2) Delivery of policy.–If an application for a qualified
long-term care insurance contract (or for a certificate under such a
contract for a group) is approved, the issuer shall deliver to the
applicant (or policyholder or certificateholder) the contract (or
certificate) of insurance not later than 30 days after the date of
the approval.
(3) Information on denials of claims.–If a claim under a
qualified long-term care insurance contract is denied, the issuer
shall, within 60 days of the date of a written request by the
policyholder or certificateholder (or representative)– (A) provide a
written explanation of the reasons for the denial, and (B) make
available all information directly relating to such denial.
(d) Disclosure.–The requirements of this subsection are met if
the issuer of a long-term care insurance policy discloses in such
policy and in the outline of coverage required under subsection
(c)(1)(B)(ii) that the policy is intended to be a qualified long-term
care insurance contract under section 7702B(b).
(e) Qualified Long-Term Care Insurance Contract Defined.–For
purposes of this section, the term `qualified long-term care
insurance contract’ has the meaning given such term by section 7702B.
(f) Coordination With State Requirements.–If a State imposes any
requirement which is more stringent than the analogous requirement
imposed by this section or section 7702B(g), the requirement imposed
by this section or section 7702B(g) shall be treated as met if the
more stringent State requirement is met.”.
(b) Conforming Amendment.–The table of sections for chapter 43 is
amended by adding at the end the following new item:
Sec. 4980C. Requirements for issuers of qualified long-term care
insurance contracts.”.
SEC. 327. EFFECTIVE <<NOTE: 26 USC
4980C note.>> DATES.
(a) In General.–The provisions of, and amendments made by, this
part shall apply to contracts issued after December 31, 1996. The
provisions of section 321(f) (relating to transition rule) shall
apply to such contracts.
(b) Issuers.–The amendments made by section 326 shall apply to
actions taken after December 31, 1996.
Subtitle D–Treatment of Accelerated Death Benefits
SEC. 331. TREATMENT OF ACCELERATED DEATH
BENEFITS BY RECIPIENT.
(a) In General.–Section 101 (relating to certain death benefits)
is amended by adding at the end the following new subsection: (g)
Treatment of Certain Accelerated Death Benefits.– (1) In
general.–For purposes of this section, the following amounts shall
be treated as an amount paid by reason of the death of an insured:
(A) Any amount received under a life insurance contract on the life
of an insured who is a terminally ill individual.
(B) Any amount received under a life insurance contract on the
life of an insured who is a chronically ill individual.
(2) Treatment of viatical settlements.– (A) In general.–If any
portion of the death benefit under a life insurance contract on the
life of an insured described in paragraph (1) is sold or assigned to
a viatical settlement provider, the amount paid for the sale or
assignment of such portion shall be treated as an amount paid under
the life insurance contract by reason of the death of such insured.
(B) Viatical settlement provider.– (i) In general.–The term
`viatical settlement provider’ means any person regularly engaged in
the trade or business of purchasing, or taking assignments of, life
insurance contracts on the lives of insureds described in paragraph
(1) if– (I) such person is licensed for such purposes (with respect
to insureds described in the same subparagraph of paragraph (1) as
the insured) in the State in which the insured resides, or (II) in
the case of an insured who resides in a State not requiring the
licensing of such persons for such purposes with respect to such
insured, such person meets the requirements of clause (ii) or (iii),
whichever applies to such insured.
(ii) Terminally ill insureds.–A person meets the requirements of
this clause with respect to an insured who is a terminally ill
individual if such person– (I) meets the requirements of sections 8
and 9 of the Viatical Settlements Model Act of the National
Association of Insurance Commissioners, and (II) meets the
requirements of the Model Regulations of the National Association of
Insurance Commissioners (relating to standards for evaluation of
reasonable payments) in determining amounts paid by such person in
connection with such purchases or assignments.
(iii) Chronically ill insureds.–A person meets the requirements
of this clause with respect to an insured who is a chronically ill
individual if such person– (I) meets requirements similar to the
requirements referred to in clause (ii)(I), and (II) meets the
standards (if any) of the National Association of Insurance
Commissioners for evaluating the reasonableness of amounts paid by
such person in connection with such purchases or assignments with
respect to chronically ill individuals.
(3) Special rules for chronically ill insureds.–In the case of an
insured who is a chronically ill individual– (A) In
general.–Paragraphs (1) and (2) shall not apply to any payment
received for any period unless– (i) such payment is for costs
incurred by the payee (not compensated for by insurance or otherwise)
for qualified long-term care services provided for the insured for
such period, and (ii) the terms of the contract giving rise to such
payment satisfy– (I) the requirements of section 7702B(b)(1)(B), and
(II) the requirements (if any) applicable under subparagraph (B).
For purposes of the preceding sentence, the rule of section
7702B(b)(2)(B) shall apply.
(B) Other requirements.–The requirements applicable under this
subparagraph are– (i) those requirements of section 7702B(g) and
section 4980C which the Secretary specifies as applying to such a
purchase, assignment, or other arrangement, (ii) standards adopted by
the National Association of Insurance Commissioners which
specifically apply to chronically ill individuals (and, if such
standards are adopted, the analogous requirements specified under
clause (i) shall cease to apply), and (iii) standards adopted by the
State in which the policyholder resides (and if such standards are
adopted, the analogous requirements specified under clause (i) and
(subject to section 4980C(f)) standards under clause (ii), shall
cease to apply).
(C) Per diem payments.–A payment shall not fail to be described
in subparagraph (A) by reason of being made on a per diem or other
periodic basis without regard to the expenses incurred during the
period to which the payment relates.
(D) Limitation on exclusion for periodic payments.– For
limitation on amount of periodic payments which are treated as
described in paragraph (1), see section 7702B(d).”.
(4) Definitions.–For purposes of this subsection– (A) Terminally
ill individual.–The term `terminally ill individual’ means an
individual who has been certified by a physician as having an illness
or physical condition which can reasonably be expected to result in
death in 24 months or less after the date of the certification.
(B) Chronically ill individual.–The term `chronically ill
individual’ has the meaning given such term by section 7702B(c)(2);
except that such term shall not include a terminally ill individual.
(C) Qualified long-term care services.–The term `qualified
long-term care services’ has the meaning given such term by section
7702B(c).
(D) Physician.–The term `physician’ has the meaning given to such
term by section 1861(r)(1) of the Social Security Act (42 U.S.C.
1395x(r)(1)).
(5) Exception for business-related policies.–This subsection
shall not apply in the case of any amount paid to any taxpayer other
than the insured if such taxpayer has an insurable interest with
respect to the life of the insured by reason of the insured being a
director, officer, or employee of the taxpayer or by reason of the
insured being financially interested in any trade or business carried
on by the taxpayer.”.
(b) Effective <<NOTE: 26 USC 101 note.>> Date.–The
amendment made by subsection (a) shall apply to amounts received
after December 31, 1996.
SEC. 332. TAX TREATMENT OF COMPANIES
ISSUING QUALIFIED ACCELERATED DEATH BENEFIT RIDERS.
(a) Qualified Accelerated Death Benefit Riders Treated as Life
Insurance.–Section 818 (relating to other definitions and special
rules) is amended by adding at the end the following new subsection:
(g) Qualified Accelerated Death Benefit Riders Treated as Life
Insurance.–For purposes of this part– (1) In general.–Any
reference to a life insurance contract shall be treated as including
a reference to a qualified accelerated death benefit rider on such
contract.
(2) Qualified accelerated death benefit riders.–For purposes of
this subsection, the term `qualified accelerated death benefit rider’
means any rider on a life insurance contract if the only payments
under the rider are payments meeting the requirements of section
101(g).
(3) Exception for long-term care riders.–Paragraph (1) shall not
apply to any rider which is treated as a long-term care insurance
contract under section 7702B.”.
(b) Effective <<NOTE: 26 USC 818 note.>> Date.– (1)
In general.–The amendment made by this section shall take effect on
January 1, 1997.
(2) Issuance of rider not treated as material change.–For
purposes of applying sections 101(f), 7702, and 7702A of the Internal
Revenue Code of 1986 to any contract– (A) the issuance of a
qualified accelerated death benefit rider (as defined in section
818(g) of such Code (as added by this Act)), and (B) the addition of
any provision required to conform an accelerated death benefit rider
to the requirements of such section 818(g), shall not be treated as a
modification or material change of such contract.
Subtitle E–State Insurance Pools
SEC. 341. EXEMPTION FROM INCOME TAX FOR
STATE-SPONSORED ORGANIZATIONS PROVIDING HEALTH COVERAGE FOR HIGH-RISK
INDIVIDUALS.
(a) In General.–Subsection (c) of section 501 (relating to list
of exempt organizations) is amended by adding at the end the
following new paragraph: (26) Any membership organization if– (A)
such organization is established by a State exclusively to provide
coverage for medical care (as defined in section 213(d)) on a
not-for-profit basis to individuals described in subparagraph (B)
through– (i) insurance issued by the organization, or (ii) a health
maintenance organization under an arrangement with the organization,
(B) the only individuals receiving such coverage through the
organization are individuals– (i) who are residents of such State,
and (ii) who, by reason of the existence or history of a medical
condition– (I) are unable to acquire medical care coverage for such
condition through insurance or from a health maintenance
organization, or (II) are able to acquire such coverage only at a
rate which is substantially in excess of the rate for such coverage
through the membership organization, (C) the composition of the
membership in such organization is specified by such State, and (D)
no part of the net earnings of the organization inures to the benefit
of any private shareholder or indi- vidual.”.
(b) Effective <<NOTE: 26 USC 501 note.>> Date.–The
amendment made by this section shall apply to taxable years beginning
after December 31, 1996.
SEC. 342. EXEMPTION FROM INCOME TAX FOR
STATE-SPONSORED WORKMEN’S COMPENSATION REINSURANCE ORGANIZATIONS.
(a) In General.–Subsection (c) of section 501 (relating to list
of exempt organizations), as amended by section 341, is amended by
adding at the end the following new paragraph: (27) Any membership
organization if– (A) such organization is established before June 1,
1996, by a State exclusively to reimburse its members for losses
arising under workmen’s compensation acts, (B) such State requires
that the membership of such organization consist of– (i) all persons
who issue insurance covering workmen’s compensation losses in such
State, and (ii) all persons and governmental entities who self-insure
against such losses, and (C) such organization operates as a
non-profit organization by– (i) returning surplus income to its
members or workmen’s compensation policyholders on a periodic basis,
and (ii) reducing initial premiums in anticipation of investment
income.”.
(b) Effective <<NOTE: 26 USC 501 note.>> Date.–The
amendment made by this section shall apply to taxable years ending
after the date of the enactment of this Act.
Subtitle F–Organizations Subject to Section 833
SEC. 351. ORGANIZATIONS SUBJECT TO
SECTION 833.
(a) In General.–Section 833(c) (relating to organization to which
section applies) is amended by adding at the end the following new
paragraph: (4) Treatment as existing blue cross or blue shield
organization.– (A) In general.–Paragraph (2) shall be applied to an
organization described in subparagraph (B) as if it were a Blue Cross
or Blue Shield organization.
(B) Applicable organization.–An organization is described in this
subparagraph if it– (i) is organized under, and governed by, State
laws which are specifically and exclusively applicable to
not-for-profit health insurance or health service type organizations,
and (ii) is not a Blue Cross or Blue Shield organization or health
maintenance organization.”.
(b) Effective <<NOTE: 26 USC 833 note.>> Date.–The
amendment made by this section shall apply to taxable years ending
after December 31, 1996.
Subtitle G–IRA Distributions to the Unemployed
SEC. 361. DISTRIBUTIONS FROM CERTAIN
PLANS MAY BE USED WITHOUT ADDITIONAL TAX TO PAY FINANCIALLY
DEVASTATING MEDICAL EXPENSES.
(a) In General.–Section 72(t)(3)(A) is amended by striking
(B),”.
(b) Distributions for Payment of Health Insurance Premiums of
Certain Unemployed Individuals.–Paragraph (2) of section 72(t) is
amended by adding at the end the following new subparagraph: (D)
Distributions to unemployed individuals for health insurance
premiums.– (i) In general.–Distributions from an individual
retirement plan to an individual after separation from employment–
(I) if such individual has received unemployment compensation for 12
consecutive weeks under any Federal or State unemployment
compensation law by reason of such separation, (II) if such
distributions are made during any taxable year during which such
unemployment compensation is paid or the succeeding taxable year, and
(III) to the extent such distributions do not exceed the amount paid
during the taxable year for insurance described in section
213(d)(1)(D) with respect to the individual and the individual’s
spouse and dependents (as defined in section 152).
(ii) Distributions after reemployment.– Clause (i) shall not
apply to any distribution made after the individual has been employed
for at least 60 days after the separation from employment to which
clause (i) applies.
(iii) Self-employed individuals.–To the extent provided in
regulations, a self-employed individual shall be treated as meeting
the requirements of clause (i)(I) if, under Federal or State law, the
individual would have received unemployment compensation but for the
fact the individual was self-employed.”.
(c) Conforming Amendment.–Subparagraph (B) of section 72(t)(2) is
amended by striking or (C)” and inserting , (C), or (D)”.
(d) Effective <<NOTE: 26 USC 72 note.>> Date.–The
amendments made by this section shall apply to distributions after
December 31, 1996.
Subtitle H–Organ and Tissue Donation Information Included With
Income Tax Refund Payments
SEC. 371. ORGAN AND <<NOTE: 26 USC
6042 note.>> TISSUE DONATION INFORMATION INCLUDED WITH INCOME
TAXREFUND PAYMENTS.
(a) In General.–The Secretary of the Treasury shall, to the
extent practicable, include with the mailing of any payment of a
refund of individual income tax made during the period beginning on
February 1, 1997, and ending on June 30, 1997, a copy of the document
described in subsection (b).
(b) Text of Document.–The Secretary of the Treasury shall, after
consultation with the Secretary of Health and Human Services and
organizations promoting organ and tissue (including eye) donation,
prepare a document suitable for inclusion with individual income tax
refund payments which– (1) encourages organ and tissue donation; (2)
includes a detachable organ and tissue donor card; and (3) urges
recipients to– (A) sign the organ and tissue donor card; (B) discuss
organ and tissue donation with family members and tell family members
about the recipient’s desire to be an organ and tissue donor if the
occasion arises; and (C) encourage family members to request or
authorize organ and tissue donation if the occasion arises.
- Health Hippo ©1996-2015