To amend the Internal Revenue Code of 1986 to permit tax-free distributions from governmental retirement plans for premiums for health and long-term care insurance for public safety officers.

Summary: Healthcare Enhancement for Local Public Safety Retirees Act of 2005 or the HELPS Retirees Act of 2005 - Amends the Internal Revenue Code to allow retired public safety officers to elect an annual exclusion from gross income up to $5,000 for distributions from governmental retirement plans for the payment of accident or health insurance or long-term care insurance.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Healthcare Enhancement for Local 
Public Safety Retirees Act of 2005'' or the ``HELPS Retirees Act of 
2005''.

SEC. 2. DISTRIBUTIONS FROM GOVERNMENTAL RETIREMENT PLANS FOR HEALTH AND 
              LONG-TERM CARE INSURANCE FOR PUBLIC SAFETY OFFICERS.

    (a) In General.--Section 402 of the Internal Revenue Code of 1986 
(relating to taxability of beneficiary of employees' trust) is amended 
by adding at the end the following new subsection:
    ``(l) Distributions From Governmental Plans for Health and Long-
Term Care Insurance.--
            ``(1) In general.--In the case of an employee who is an 
        eligible retired public safety officer who makes the election 
        described in paragraph (6) with respect to any taxable year of 
        such employee, gross income of such employee for such taxable 
        year does not include any distribution from an eligible 
        retirement plan to the extent that the aggregate amount of such 
        distributions does not exceed the amount paid by such employee 
        for qualified health insurance premiums of the employee, his 
        spouse, or dependents (as defined in section 152) for such 
        taxable year.
            ``(2) Limitation.--The amount which may be excluded from 
        gross income for the taxable year by reason of paragraph (1) 
        shall not exceed $5,000.
            ``(3) Distributions must otherwise be includible.--
                    ``(A) In general.--An amount shall be treated as a 
                distribution for purposes of paragraph (1) only to the 
                extent that such amount would be includible in gross 
                income without regard to paragraph (1).
                    ``(B) Application of section 72.--Notwithstanding 
                section 72, in determining the extent to which an 
                amount is treated as a distribution for purposes of 
                subparagraph (A), the aggregate amounts distributed 
                from an eligible retirement plan in a taxable year 
                shall be treated as includible in gross income (without 
                regard to subparagraph (A)) to the extent that such 
                amount does not exceed the aggregate amount which would 
                have been so includible if all amounts distributed from 
                all eligible retirement plans were treated as 1 
                contract for purposes of determining the inclusion of 
                such distribution under section 72. Proper adjustments 
                shall be made in applying section 72 to other 
                distributions in such taxable year and subsequent 
                taxable years.
            ``(4) Definitions.--For purposes of this subsection--
                    ``(A) Eligible retirement plan.--For purposes of 
                paragraph (1), the term `eligible retirement plan' 
                means a governmental plan (within the meaning of 
                section 414(d)) which is described in clause (iii), 
                (iv), (v), or (vi) of subsection (c)(8)(B).
                    ``(B) Eligible retired public safety officer.--The 
                term `eligible retired public safety officer' means an 
                individual who, by reason of disability or attainment 
                of normal retirement age, is separated from service as 
                a public safety officer with the employer who maintains 
                the eligible retirement plan from which distributions 
                subject to paragraph (1) are made.
                    ``(C) Public safety officer.--The term `public 
                safety officer' shall have the same meaning given such 
                term by section 1204(8)(A) of the Omnibus Crime Control 
                and Safe Streets Act of 1968 (42 U.S.C. 3796b(8)(A)).
                    ``(D) Qualified health insurance premiums.--The 
                term `qualified health insurance premiums' means 
                premiums for coverage for the eligible retired public 
                safety officer, his spouse, and dependents, by an 
                accident or health insurance plan or qualified long-
                term care insurance contract (as defined in section 
                7702B(b)).
            ``(5) Special rules.--For purposes of this subsection--
                    ``(A) Direct payment to insurer required.--
                Paragraph (1) shall only apply to a distribution if 
                payment of the premiums is made directly to the 
                provider of the accident or health insurance plan or 
                qualified long-term care insurance contract by 
                deduction from a distribution from the eligible 
                retirement plan.
                    ``(B) Related plans treated as 1.--All eligible 
                retirement plans of an employer shall be treated as a 
                single plan.
            ``(6) Election described.--
                    ``(A) In general.--For purposes of paragraph (1), 
                an election is described in this paragraph if the 
                election is made by an employee after separation from 
                service with respect to amounts not distributed from an 
                eligible retirement plan to have amounts from such plan 
                distributed in order to pay for qualified health 
                insurance premiums.
                    ``(B) Special rule.--A plan shall not be treated as 
                violating the requirements of section 401, or as 
                engaging in a prohibited transaction for purposes of 
                section 503(b), merely because it provides for an 
                election with respect to amounts that are otherwise 
                distributable under the plan or merely because of a 
                distribution made pursuant to an election described in 
                subparagraph (A).
            ``(7) Coordination with medical expense deduction.--The 
        amounts excluded from gross income under paragraph (1) shall 
        not be taken into account under section 213.
            ``(8) Coordination with deduction for health insurance 
        costs of self-employed individuals.--The amounts excluded from 
        gross income under paragraph (1) shall not be taken into 
        account under section 162(l).''.
    (b) Conforming Amendments.--
            (1) Section 403(a) of such Code (relating to taxability of 
        beneficiary under a qualified annuity plan) is amended by 
        inserting after paragraph (1) the following new paragraph:
            ``(2) Special rule for health and long-term care 
        insurance.--To the extent provided in section 402(l), paragraph 
        (1) shall not apply to the amount distributed under the 
        contract which is otherwise includible in gross income under 
        this subsection.''.
            (2) Section 403(b) of such Code (relating to taxability of 
        beneficiary under annuity purchased by section 501(c)(3) 
        organization or public school) is amended by inserting after 
        paragraph (1) the following new paragraph:
            ``(2) Special rule for health and long-term care 
        insurance.--To the extent provided in section 402(l), paragraph 
        (1) shall not apply to the amount distributed under the 
        contract which is otherwise includible in gross income under 
        this subsection.''.
            (3) Section 457(a) of such Code (relating to year of 
        inclusion in gross income) is amended by adding at the end the 
        following new paragraph:
            ``(3) Special rule for health and long-term care 
        insurance.--To the extent provided in section 402(l), paragraph 
        (1) shall not apply to amounts otherwise includible in gross 
        income under this subsection.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions in taxable years beginning after December 31, 
2004.