II 

109TH CONGRESS 

2D SESSION S. 2270 

To amend the Internal Revenue Code of 1986 to allow a refundable credit 

against income tax to subsidize the cost of COBRA continuation coverage 

for certain individuals. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 9, 2006 

Mr. MENENDEZ introduced the following bill; which was read twice and 

referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to allow a 

refundable credit against income tax to subsidize the 

cost of COBRA continuation coverage for certain individuals. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Health Care COBRA 

5 OffSet Tax Savings Act of 2006’’ or the ‘‘Health Care 

6 COSTS Act of 2006’’. 
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1 SEC. 2. REFUNDABLE CREDIT TO SUBSIDIZE COST OF 

2 COBRA CONTINUATION COVERAGE FOR CER3 TAIN INDIVIDUALS. 

4 (a) IN GENERAL.—Subpart C of part IV of sub5 chapter A of chapter 1 of the Internal Revenue Code of 

6 1986 (relating to refundable credits) is amended by insert7 ing after section 35 the following new section: 

8 ‘‘SEC. 35A. CREDIT TO SUBSIDIZE COST OF COBRA CON9 TINUATION COVERAGE FOR CERTAIN INDI10 VIDUALS. 

11 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an eli12 gible individual, there shall be allowed as a credit against 

13 the tax imposed by this subtitle an amount equal to 50 

14 percent of the amount of the premium which would (but 

15 for this section) be required to be paid by such individual 

16 during the taxable year for COBRA continuation coverage 

17 under a group health plan. 

18 ‘‘(b) ELIGIBLE INDIVIDUAL.—For purposes of this 

19 section— 

20 ‘‘(1) IN GENERAL.—The term ‘eligible indi21 vidual’ means any individual— 

22 ‘‘(A) who receives COBRA continuation 

23 coverage under a group health plan by reason 

24 of a qualifying event described in section 

25 4980B(f)(3), and 
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1 ‘‘(B) the modified adjusted gross income 

2 (as defined in section 221(b)(2)(C)) of whom 

3 for the taxable year does not exceed the applica4 ble amount. 

5 ‘‘(2) APPLICABLE AMOUNT.—For purposes of 

6 paragraph (1), the applicable amount is $30,000 in7 creased by $10,000— 

8 ‘‘(A) for the spouse of the taxpayer, and 

9 ‘‘(B) for each individual who is a depend10 ent (as defined in section 152) of the taxpayer. 

11 ‘‘(c) ASSIGNMENT OF CREDIT TO PLAN ADMINIS12 TRATOR.—The Secretary shall prescribe regulations which 

13 permit eligible individuals to assign the credit under this 

14 section to the administrator of the plan under which 

15 COBRA continuation coverage is being provided. The 

16 credit so assigned by an individual shall be treated by the 

17 administrator as a premium payment by such individual. 

18 ‘‘(d) OTHER DEFINITIONS.—For purposes of this 

19 section— 

20 ‘‘(1) ADMINISTRATOR.—The term ‘adminis21 trator’ has the meaning given such term in section 

22 3(16) of the Employee Retirement Income Security 

23 Act of 1974. 

24 ‘‘(2) COBRA CONTINUATION COVERAGE.—The 

25 term ‘COBRA continuation coverage’ means the 
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1 first 18 months of continuation coverage provided 

2 pursuant to— 

3 ‘‘(A) section 4980B (other than subsection 

4 (f)(1) of such section insofar as it relates to pe5 diatric vaccines), 

6 ‘‘(B) title XXII of the Public Health Serv7 ice Act, 

8 ‘‘(C) part 6 of subtitle B of title I of the 

9 Employee Retirement Income Security Act of 

10 1974 (other than under section 609), 

11 ‘‘(D) section 8905a of title 5, United 

12 States Code, or 

13 ‘‘(E) a State program that provides con14 tinuation coverage comparable to such continu15 ation coverage. 

16 ‘‘(3) GROUP HEALTH PLAN.—The term ‘group 

17 health plan’ has the meaning given such term in sec18 tion 9832(a).’’. 

19 (b) CONFORMING AMENDMENTS.— 

20 (1) Section 1324(b)(2) of title 31, United 

21 States Code, is amended by striking ‘‘or’’ before 

22 ‘‘enacted’’ and by inserting before the period at the 

23 end ‘‘, or from section 35A of such Code’’. 
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1 (2) The table of sections for such subpart C is 

2 amended by inserting after the item relating to sec3 tion 35 the following new item: 

‘‘Sec. 35A. Credit to subsidize cost of COBRA continuation coverage for certain 

individuals.’’ 

4 (c) EFFECTIVE DATE.—The amendments made by 

5 this section shall apply to taxable years beginning after 

6 the date of the enactment of this Act. 

7 SEC. 3. CHANGE IN COBRA NOTICE. 

8 (a) NOTICES.— 

9 (1) GENERAL NOTICES.—In the case of notices 

10 provided under sections 606 of the Employee Retire11 ment Income Security Act of 1974, section 2206 of 

12 the Public Health Service Act, and section 

13 4980B(f)(6) of the Internal Revenue Code of 1986 

14 with respect to individuals who become entitled to 

15 elect COBRA continuation coverage after the date of 

16 the enactment of this Act, such notices shall include 

17 an additional notification to the recipient of the 

18 availability of the subsidy provided under section 

19 35A of the Internal Revenue Code of 1986. 

20 (2) ALTERNATIVE NOTICE.—In the case of 

21 COBRA continuation coverage to which the notice 

22 provisions described in paragraph (1) do not apply, 

23 the Secretary of Labor shall, in coordination with 

24 administrators of the group health plans (or other 
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1 entities) who provide or administer the COBRA con2 tinuation coverage involved, assure provision of such 

3 notice. 

4 (3) FORM.—The requirement of the additional 

5 notification under this subsection may be met by 

6 amendment of existing notice forms or by inclusion 

7 of a separate document with the notice otherwise re8 quired. 

9 (b) SPECIFIC REQUIREMENTS.—Each additional no10 tification under subsection (a) shall include— 

11 (1) a description of the eligibility requirements 

12 for premium assistance under section 35A of the In13 ternal Revenue Code of 1986, 

14 (2) the name, address, and telephone number 

15 necessary to contact the plan administrator and any 

16 other person maintaining relevant information in 

17 connection with the premium assistance, and 

18 (3) the following statement displayed in a 

19 prominent manner: ‘‘You may be eligible to receive 

20 assistance with payment of 50 percent of your 

21 COBRA continuation coverage premiums for a dura22 tion of not to exceed 18 months.’’. 
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1 (c) MODEL NOTICES.—The Secretary of Labor shall 

2 prescribe models for the additional notification required 

3 under this section. 

Æ