To amend the Internal Revenue Code of 1986, the Employee Retirement Income Security Act of 1974, and the Public Health Service Act to extend the basic period for health care continuation coverage from 18 months to 5 years, to permit a further extension of continuation coverage for individuals age 55 or older, and to provide for a 50 percent refundable tax credit towards premiums for COBRA continuation coverage.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``COBRA Coverage Extension and 
Affordability Act of 2001''.

SEC. 2. EXTENSION OF BASIC COBRA CONTINUATION PERIOD FROM 18 MONTHS TO 
              5 YEARS.

    (a) Internal Revenue Code Amendments.--Section 4980B(f)(2) of the 
Internal Revenue Code of 1986 is amended--
            (1) by amending subclause (I) of subparagraph (B)(i) to 
        read as follows:
                                    ``(I) General rule.--In the case of 
                                a qualifying event not described in 
                                paragraph (3)(F), the date which is 60 
                                months after the date of the qualifying 
                                event.'';
            (2) in subparagraph (B)(i)--
                    (A) by striking subclause (II);
                    (B) by striking subclauses (IV) and all that 
                follows;
                    (C) by redesignating subclause (III) as subclause 
                (II); and
                    (D) in subclause (II), as so redesignated, by 
                inserting before the period at the end the following: 
                ``or, in such case and if later, 60 months after the 
                date of the qualifying event''; and
            (3) by striking the last sentence in subparagraph (C).
    (b) ERISA Amendments.--Section 602 of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1162) is amended--
            (1) by amending clause (i) of paragraph (2)(A) to read as 
        follows:
                            ``(i) General rule.--In the case of a 
                        qualifying event not described in section 
                        603(6), the date which is 60 months after the 
                        date of the qualifying event.'';
            (2) in paragraph (2)(A)--
                    (A) by striking clause (ii);
                    (B) by striking clause (iv) and all that follows;
                    (C) by redesignating clause (iii) as clause (ii); 
                and
                    (D) in clause (ii), as so redesignated, by striking 
                ``36 months after the date of the death of the covered 
                employee'' and inserting ``the later of (I) 36 months 
                after the date of the death of the covered employee, or 
                (II) 60 months after the date of the qualifying 
                event''; and
            (3) by striking the last sentence in paragraph (3).
    (c) PHSA Amendments.--Section 2202 of the Public Health Service Act 
429 U.S.C. 300bb-2) is amended--
            (1) by amending subparagraph (A) of paragraph (2)(A) to 
        read as follows:
                    ``(A) Maximum required period.--The date which is 
                60 months after the date of the qualifying event.''; 
                and
            (2) by striking the last sentence of paragraph (3).
    (d) Effective Date.--The amendments made by this section shall 
apply to plan years beginning on or after January 1, 2002, with respect 
to individuals whose period of extended coverage has not otherwise 
expired as of the first day of the first such plan year.

SEC. 3. FURTHER EXTENSION OF COBRA CONTINUATION COVERAGE FOR 
              INDIVIDUALS AGE 55 OR OLDER.

    (a) Internal Revenue Code Amendments.--Section 4980B(f)(2) of the 
Internal Revenue Code of 1986 is amended--
            (1) in subparagraph (B)(i), by inserting ``.--Subject to 
        subparagraph (F)(i)--'' after ``period'';
            (2) in subparagraph (C)(i), by inserting ``subject to 
        subparagraph (F)(ii),'' after ``(i)''; and
            (3) by adding at the end the following new subparagraph:
                    ``(F) Extension of coverage for individuals age 55 
                or older.--In the case of an individual who attains the 
                age of 55 on the date the period of extended coverage 
                under this section would otherwise end by virtue of the 
                application of a durational limitation in subparagraph 
                (B)(i)--
                            ``(i) such durational limitations shall no 
                        longer apply to the individual; and
                            ``(ii) during the period of any extended 
                        coverage solely by reason of the application of 
                        clause (i), in applying subparagraph (C)(i) any 
                        reference in such subparagraph to `102 percent' 
                        is deemed a reference to `125 percent'.''.
    (b) ERISA Amendments.--Section 602 of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1162) is amended--
            (1) in paragraph (2)(A), by inserting ``Subject to 
        paragraph (6)(A)--'' after ``period.--'';
            (2) in paragraph (3)(A), by inserting ``subject to 
        paragraph (6)(B),'' after ``(A)''; and
            (3) by adding at the end the following new paragraph:
            ``(6) Extension of coverage for individuals age 55 or 
        older.--In the case of an individual who attains the age of 55 
        on the date the period of extended coverage under this section 
        would otherwise end by virtue of the application of a 
        durational limitation in paragraph (2)(A)--
                    ``(A) such durational limitations shall no longer 
                apply to the individual; and
                    ``(B) during the period of any extended coverage 
                solely by reason of the application of subparagraph 
                (A), in applying paragraph (3)(A) any reference in such 
                paragraph to `102 percent' is deemed a reference to 
                `125 percent'.''.
    (c) PHSA Amendments.--Section 2202 of the Public Health Service Act 
(42 U.S.C. 300bb-2) is amended--
            (1) in paragraph (2)(A), by inserting ``Subject to 
        paragraph (6)(A)--'' after ``period.--'';
            (2) in paragraph (3)(A), by inserting ``subject to 
        paragraph (6)(B),'' after ``(A)''; and
            (3) by adding at the end the following new paragraph:
            ``(6) Extension of coverage for individuals age 55 or 
        older.--In the case of an individual who attains the age of 55 
        on the date the period of extended coverage under this section 
        would otherwise end by virtue of the application of a 
        durational limitation in paragraph (2)(A)--
                    ``(A) such durational limitations shall no longer 
                apply to the individual; and
                    ``(B) during the period of any extended coverage 
                solely by reason of the application of subparagraph 
                (A), in applying paragraph (3)(A) any reference in such 
                paragraph to `102 percent' is deemed a reference to 
                `125 percent'.''.
    (d) Effective Date.--The amendments made by this section apply with 
respect to plan years beginning on or after January 1, 2002, with 
respect to individuals whose period of extended coverage otherwise ends 
on or after first day of the first such plan year.

SEC. 4. 50 PERCENT REFUNDABLE TAX CREDIT TOWARDS PREMIUMS FOR COBRA 
              CONTINUATION COVERAGE.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to nonrefundable 
personal credits) is amended by inserting after section 25A the 
following new section:

``SEC. 25B. COBRA CONTINUATION COVERAGE PREMIUMS.

    ``(a) In General.--In the case of an individual, there shall be 
allowed as a credit against the tax imposed by this chapter for the 
taxable year an amount equal to 50 percent of the amount paid during 
such year as continuation health coverage premiums.
    ``(b) Continuation Health Coverage Premiums Defined.--For purposes 
of this section, the term `continuation health coverage premiums' 
means, for any period, premiums paid for continuation coverage (as 
defined in section 4980B(f)) under a group health plan for such period 
but only if failure to offer such coverage to the taxpayer for such 
period would constitute a failure by such health plan to meet the 
requirements of section 4980B(f).''
    (b) Clerical Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 of such Code is amended by 
inserting after the item relating to section 25A the following new 
item:

                              ``Sec. 25B. COBRA continuation coverage 
                                        premiums.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2001, for premiums 
for months beginning with January 2002.

Summary: COBRA Coverage Extension and Affordability Act of 2001 - Amends the Internal Revenue Code, the Employee Retirement Income Security Act of 1974 (ERISSA), and the Public Health Service Act to: (1) extend basic COBRA health care continuation coverage to 60 months. And (2) permit a further extension of continuation coverage for persons 55 years or older. Amends the Internal Revenue Code to provide a 50 percent refundable tax credit for COBRA continuation coverage premiums.