II

103D CONGRESS

1ST SESSION S. 1105

To amend the Internal Revenue Code of 1986 to provide for the establishment

of individual medical savings accounts to assist in the payment of medical

and long-term care expenses, to provide that the earnings on such accounts will not be taxable, to allow rollovers of such accounts into

individual retirement accounts, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JUNE 15, 1993

Mr. COATS (for himself, Mr. LUGAR, and Mr. GRAMM) 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 provide

for the establishment of individual medical savings accounts to assist in the payment of medical and longterm care expenses, to provide that the earnings on such

accounts will not be taxable, to allow rollovers of such

accounts into individual retirement accounts, and for

other purposes.

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

3 SECTION 1. INDIVIDUAL MEDICAL SAVINGS ACCOUNTS.

4 (a) IN GENERAL.—Subchapter F of chapter 1 of the

5 Internal Revenue Code of 1986 (relating to exempt organi-
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1 zations) is amended by adding at the end thereof the fol2 lowing new part:

3 ‘‘PART VIII—INDIVIDUAL MEDICAL SAVINGS

4 ACCOUNTS

‘‘Sec. 529. Taxation of individual medical savings accounts.

5 ‘‘SEC. 529. TAXATION OF INDIVIDUAL MEDICAL SAVINGS

6 ACCOUNTS.

7 ‘‘(a) EXEMPTION FROM TAXATION.—

8 ‘‘(1) IN GENERAL.—Except as provided in para9 graph (2), an individual medical savings account is

10 exempt from taxation under this subtitle.

11 ‘‘(2) UNRELATED BUSINESS INCOME.—An indi12 vidual medical savings account shall be subject to

13 the tax imposed by section 511 (relating to imposi14 tion of tax on unrelated business income of chari15 table, etc. organizations).

16 ‘‘(b) DEFINITION OF INDIVIDUAL MEDICAL SAVINGS

17 ACCOUNT.—

18 ‘‘(1) IN GENERAL.—For purposes of this sec19 tion, the term ‘individual medical savings account’

20 means a trust created or organized in the United

21 States exclusively for the purpose of making quali22 fied distributions to, or for the benefit of, an individ23 ual, but only if the written governing instrument

24 creating the trust meets the following requirements:
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1 ‘‘(A) No contribution will be accepted un2 less—

3 ‘‘(i) the employer of such individual

4 provides written confirmation that such

5 employer is maintaining a catastrophic

6 health care insurance plan for such

7 individual,

8 ‘‘(ii) upon the election of such individ9 ual to enroll in such plan, such contribu10 tion from such employer is equal to the

11 qualified premium differential amount re12 lating to such plan,

13 ‘‘(iii) except in the case of contribu14 tions from another individual medical sav15 ings account or qualified surrender

16 amounts, the total amount of contributions

17 for the taxable year from all individuals

18 specified in subparagraph (F) is not great19 er than an amount equal to the sum of—

20 ‘‘(I) $3,000, plus

21 ‘‘(II) $600 for each dependent

22 (as defined in section 152) of the indi23 vidual, and

24 ‘‘(iv) such contribution is in cash,

25 stocks, bonds, or other securities which are
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1 readily tradable on an established securi2 ties market.

3 ‘‘(B) The trustee is a bank (as defined in

4 section 408(n)) or another person who dem5 onstrates to the satisfaction of the Secretary

6 that the manner in which that person will ad7 minister the trust will be consistent with the re8 quirements of this section.

9 ‘‘(C) No part of the trust assets will be in10 vested in life insurance contracts.

11 ‘‘(D) The assets of the account may only

12 be invested in accordance with the direction

13 of—

14 ‘‘(i) the individual for whose benefit

15 the account is established (or the legal rep16 resentative of such individual), and

17 ‘‘(ii) all individuals contributing to the

18 account.

19 ‘‘(E) The assets of the trust will not be

20 commingled with other property except in a

21 common trust fund or common investment

22 fund.

23 ‘‘(F) Contributions may be made to the ac24 count only by the individual for whose benefit

25 the account is established, the individual’s
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1 spouse, the individual’s parents or children, and

2 the individual’s employer (under rules similar to

3 the requirements described in paragraphs (2),

4 (3), and (5) of section 408(k)).

5 ‘‘(G) The account may not be established

6 for the benefit of more than 1 individual (other

7 than the spouse and dependents of such individ8 ual).

9 ‘‘(H) The beneficiary of the account may

10 not be the beneficiary of any other individual

11 medical savings account (other than as a spouse

12 or dependent of the beneficiary of such other

13 account).

14 ‘‘(2) STOCK, ETC., TO BE VALUED AS OF

15 TRANSFER DATE.—The fair market value of stocks,

16 bonds, and other securities shall be determined as of

17 the date on which transferred to the account. If the

18 date of transfer falls on a Saturday, Sunday, or pub19 lic legal holiday, then the fair market value shall be

20 determined by reference to the last preceding trad21 ing day on which such stocks, bonds, or securities

22 could have been traded on an established securities

23 market.

24 ‘‘(3) CATASTROPHIC HEALTH CARE INSURANCE

25 PLAN.—
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1 ‘‘(A) IN GENERAL.—For purposes of para2 graph (1), the term ‘catastrophic health care in3 surance plan’ means a group health plan which

4 provides, for a higher deductible (not less than

5 $2,000), similar benefits to—

6 ‘‘(i) other group health plans offered

7 by the employer,

8 ‘‘(ii) other group health plans pre9 viously offered by the employer, in the case

10 in which a single group health plan is of11 fered by the employer, or

12 ‘‘(iii) other group health plans for

13 similar employees in the same geographic

14 area, in the case in which the employer has

15 not previously offered any group health

16 plan.

17 ‘‘(B) GROUP HEALTH PLAN.—For pur18 poses of subparagraph (A), the term ‘group

19 health plan’ has the meaning given such term

20 by section 5000(b)(1).

21 ‘‘(4) QUALIFIED PREMIUM DIFFERENTIAL

22 AMOUNT.—For purposes of paragraph (1), the quali23 fied premium differential amount for an employee is

24 equal to—
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1 ‘‘(A) the premium differential amount real2 ized by the employer in the plan year in which

3 the employee elects coverage under a cata4 strophic health care insurance plan, and

5 ‘‘(B) for each subsequent plan year during

6 which such election remains in effect, the

7 amount determined under subparagraph (A) in8 creased by an amount equal to—

9 ‘‘(i) such dollar amount, multiplied by

10 ‘‘(ii) the cost-of-living adjustment de11 termined under section 1(f)(3) for the cal12 endar year in which the plan year begins,

13 by substituting ‘the calendar year preced14 ing the calendar year in which the plan

15 year described in section 529(b)(4)(A)

16 began’ for ‘calendar year 1989’.

17 ‘‘(5) DETERMINATION OF PREMIUM DIFFEREN18 TIAL.—For purposes of this subsection, in making a

19 determination of a premium differential for any

20 year, the employer shall use only actual premiums

21 charged to such employer, or, in the case of group

22 health plans described in clauses (ii) and (iii) of

23 paragraph (3)(A), bona fide premium quotes for

24 such year.
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1 ‘‘(6) INFLATION ADJUSTMENT.—In the case of

2 any taxable year beginning in a calendar year after

3 1994, each dollar amount contained in paragraph

4 (1)(A)(iii) shall be increased by an amount equal

5 to—

6 ‘‘(A) such dollar amount, multiplied by

7 ‘‘(B) the cost-of-living adjustment deter8 mined under section 1(f)(3) for the calendar

9 year in which the taxable year begins, by sub10 stituting ‘calendar year 1993’ for ‘calendar year

11 1989’ in subparagraph (B) thereof.

12 If any increase determined under the preceding sen13 tence is not a multiple of $10, such increase shall

14 be rounded to the nearest multiple of $10 (or if such

15 increase is a multiple of $5, such increase shall be

16 rounded to the next highest multiple of $10).

17 ‘‘(c) OTHER DEFINITIONS.—For purposes of this

18 section—

19 ‘‘(1) QUALIFIED DISTRIBUTIONS.—The term

20 ‘qualified distributions’ means any—

21 ‘‘(A) qualified medical expense distribu22 tion, and

23 ‘‘(B) qualified long-term care expense dis24 tribution.
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1 ‘‘(2) QUALIFIED MEDICAL EXPENSE DISTRIBU2 TION.—The term ‘qualified medical expense distribu3 tion’ means any distribution made to the individual

4 (other than distributions described in paragraph (3))

5 to the extent such distribution does not exceed the

6 amount allowable as a deduction under section 213

7 to the individual for amounts paid during the tax8 able year for medical care (determined without re9 gard to whether the individual itemizes deductions

10 for such taxable year).

11 ‘‘(3) QUALIFIED LONG-TERM CARE EXPENSE

12 DISTRIBUTION.—

13 ‘‘(A) IN GENERAL.—The term ‘qualified

14 long-term care expense distribution’ means any

15 distribution made to the individual (other than

16 distributions described in paragraph (2)) to the

17 extent such distribution does not exceed the

18 amount of qualified long-term care expenses of

19 the individual, or the spouse or child (as de20 fined in section 151(c)(3)) of such individual,

21 for the taxable year.

22 ‘‘(B) QUALIFIED LONG-TERM CARE EX23 PENSES.—For purposes of subparagraph (A),

24 the term ‘qualified long-term care expenses’

25 means amounts paid or incurred for—
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1 ‘‘(i) qualified long-term care insur2 ance, and

3 ‘‘(ii) qualified long-term care.

4 ‘‘(C) QUALIFIED LONG-TERM CARE INSUR5 ANCE.—For purposes of subparagraph (B)(i)—

6 ‘‘(i) IN GENERAL.—Subject to clauses

7 (ii) and (iii), the term ‘qualified long-term

8 care insurance’ means insurance under a

9 policy or rider issued by a qualified issuer

10 to be advertised, marketed, offered, or de11 signed to provide coverage—

12 ‘‘(I) for not less than 12 consecu13 tive months for each covered person,

14 ‘‘(II) on an expense incurred, in15 demnity, or prepaid basis,

16 ‘‘(III) for 1 or more medically

17 necessary diagnostic services, preven18 tive services, therapeutic services, re19 habilitation services, maintenance

20 services, or personal care services, and

21 ‘‘(IV) provided in a setting other

22 than an acute care unit of a hospital.

23 ‘‘(ii) COVERAGE SPECIFICALLY EX24 CLUDED.—Such term does not include any

25 insurance under any policy or rider which
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1 is offered primarily to provide any com2 bination of the following kinds of coverage:

3 ‘‘(I) Basic Medicare supplement

4 coverage.

5 ‘‘(II) Basic hospital-based acute

6 care expense coverage.

7 ‘‘(III) Basic medical-surgical ex8 pense coverage.

9 ‘‘(IV) Hospital confinement in10 demnity coverage.

11 ‘‘(V) Major medical expense cov12 erage.

13 ‘‘(VI) Disability income protec14 tion coverage.

15 ‘‘(VII) Accident only coverage.

16 ‘‘(VIII) Specified disease cov17 erage.

18 ‘‘(IX) Specified accident cov19 erage.

20 ‘‘(X) Limited benefit health cov21 erage.

22 ‘‘(iii) QUALIFIED ISSUER.—For pur23 poses of clause (i), the term ‘qualified is24 suer’ means any of the following:

25 ‘‘(I) Private insurance company.
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1 ‘‘(II) Fraternal benefit society.

2 ‘‘(III) Nonprofit health corpora3 tion.

4 ‘‘(IV) Nonprofit hospital corpora5 tion.

6 ‘‘(V) Nonprofit medical service

7 corporation.

8 ‘‘(VI) Prepaid health plan.

9 ‘‘(D) QUALIFIED LONG-TERM CARE.—The

10 term ‘qualified long-term care’ means services

11 described in subparagraph (C)(i)(III) which

12 may be covered under qualified long-term care

13 insurance.

14 ‘‘(4) QUALIFIED SURRENDER AMOUNTS.—The

15 term ‘qualified surrender amounts’ means amounts

16 received on the whole or partial surrender, cancella17 tion, or exchange of any life insurance contract to

18 the extent that, within 60 days of the receipt of such

19 amounts, such amounts are transferred to an indi20 vidual medical savings account.

21 ‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.—

22 ‘‘(1) IN GENERAL.—Except as otherwise pro23 vided in this subsection, any amount paid or distrib24 uted out of an individual medical savings account
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1 shall be included in the gross income of the individ2 ual for whose benefit the account was established.

3 ‘‘(2) EXCEPTION FOR CERTAIN DISTRIBU4 TIONS.—Paragraph (1) shall not apply to any quali5 fied distribution.

6 ‘‘(3) ROLLOVERS.—Paragraph (1) shall not

7 apply to any portion of any payment or distribution

8 which, within 60 days of receipt of such payment or

9 distribution, is paid into an individual medical sav10 ings account or an individual retirement account for

11 the benefit of the individual for whom the account

12 from which such portion is transferred was main13 tained.

14 ‘‘(4) EXCESS CONTRIBUTIONS RETURNED BE15 FORE DUE DATE OF RETURN.—Paragraph (1) shall

16 not apply to the distribution of any contribution paid

17 during a taxable year to an individual medical sav18 ings account to the extent that such contribution ex19 ceeds the amount allowable under subsection

20 (b)(1)(A) if—

21 ‘‘(A) such distribution is received on or be22 fore the day prescribed by law (including exten23 sions of time) for filing such individual’s return

24 for such taxable year, and
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1 ‘‘(B) such distribution is accompanied by

2 the amount of net income attributable to such

3 excess contribution.

4 Any net income described in subparagraph (B) shall

5 be included in the gross income of the individual for

6 the taxable year in which it is received.

7 ‘‘(e) TAX TREATMENT OF ACCOUNTS.—

8 ‘‘(1) CESSATION OF TREATMENT AS AC9 COUNT.—

10 ‘‘(A) IN GENERAL.—If during any taxable

11 year of an individual who contributes to an in12 dividual medical savings account—

13 ‘‘(i) the requirements of subsection

14 (b)(1) are not met, or

15 ‘‘(ii) such individual engages in any

16 transaction prohibited by section 4975

17 with respect to the account,

18 the account shall cease to be an individual med19 ical savings account as of the first day of that

20 taxable year.

21 ‘‘(B) ACCOUNT TREATED AS DISTRIBUTING

22 ALL ITS ASSETS.—In any case in which any ac23 count ceases to be an individual medical savings

24 account by reason of subparagraph (A) on the

25 first day of any taxable year, paragraph (1) of
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1 subsection (d) shall apply as if there were a dis2 tribution on such first day in an amount equal

3 to the fair market value (on such first day) of

4 all assets in the account (on such first day).

5 ‘‘(2) EFFECT OF PLEDGING ACCOUNT AS SECU6 RITY.—If, during any taxable year, the individual for

7 whose benefit an individual medical savings account

8 is established uses the account or any portion there9 of as security for a loan, the portion so used shall

10 be treated as distributed to that individual.

11 ‘‘(f) ADDITIONAL TAX ON CERTAIN AMOUNTS IN12 CLUDED IN GROSS INCOME.—

13 ‘‘(1) DISTRIBUTION NOT A QUALIFIED DIS14 TRIBUTION.—If a distribution—

15 ‘‘(A) is made from an individual medical

16 savings account, and

17 ‘‘(B) is not a qualified distribution,

18 the tax liability (for the taxable year in which such

19 distribution is received) of such individual shall be

20 increased by an amount equal to 20 percent of the

21 amount of the distribution which is includible in the

22 gross income of such individual for such taxable

23 year.

24 ‘‘(2) DISQUALIFICATION CASES.—If an amount

25 is includible in the gross income of an individual for
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1 a taxable year under subsection (e), the tax liability

2 of such individual under this chapter for such tax3 able year shall be increased by an amount equal to

4 20 percent of such amount required to be included

5 in gross income.

6 ‘‘(3) DISABILITY OR DEATH CASES.—Para7 graphs (1) and (2) shall not apply if the payment

8 or distribution is made after the individual for whose

9 benefit the individual medical savings account be10 comes disabled within the meaning of section

11 72(m)(7) or dies.

12 ‘‘(g) COMMUNITY PROPERTY LAWS.—This section

13 shall be applied without regard to any community property

14 laws.

15 ‘‘(h) CUSTODIAL ACCOUNTS.—For purposes of this

16 section, a custodial account shall be treated as a trust if

17 the assets of such account are held by a bank (as defined

18 in section 408(n)) or another person who demonstrates,

19 to the satisfaction of the Secretary, that—

20 ‘‘(1) the manner in which he will administer the

21 account will be consistent with the requirements of

22 this section, and

23 ‘‘(2) the custodial account would, except for the

24 fact that it is not a trust, constitute an individual

25 medical savings account described in subsection (b).
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1 For purposes of this title, in the case of a custodial ac2 count treated as a trust by reason of the preceding sen3 tence, the custodian of such account shall be treated as

4 the trustee thereof.

5 ‘‘(i) REPORTS.—The trustee of an individual medical

6 savings account shall make such reports regarding such

7 account to the Secretary and to the individual for whose

8 benefit the account is maintained with respect to contribu9 tions, distributions, and such other matters as the Sec10 retary may require under regulations. The reports re11 quired by this subsection shall be filed at such time and

12 in such manner and furnished to such individuals at such

13 time and in such manner as may be required by those reg14 ulations.’’.

15 (b) TAX ON EXCESS CONTRIBUTIONS.—Section 4973

16 of such Code (relating to tax on excess contributions to

17 individual retirement accounts, certain section 403(b) con18 tracts, and certain individual retirement annuities) is

19 amended—

20 (1) by inserting ‘‘INDIVIDUAL MEDICAL SAV21 INGS ACCOUNTS,’’ after ‘‘ACCOUNTS,’’ in the

22 heading of such section,

23 (2) by redesignating paragraph (2) of sub24 section (a) as paragraph (3) and by inserting after

25 paragraph (1) the following:
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1 ‘‘(2) an individual medical savings account

2 (within the meaning of section 529(b)), or’’,

3 (3) by striking out ‘‘or’’ at the end of para4 graph (1) of subsection (a), and

5 (4) by adding at the end thereof the following

6 new subsection:

7 ‘‘(d) EXCESS CONTRIBUTIONS TO INDIVIDUAL MEDI8 CAL SAVINGS ACCOUNTS.—For purposes of this section,

9 in the case of an individual medical savings account, the

10 term ‘excess contributions’ means the amount by which

11 the amount contributed for the taxable year to the account

12 exceeds the amount allowable under section 529(b)(1)(A)

13 for such taxable year. For purposes of this subsection, any

14 contribution which is distributed out of the individual

15 medical savings account in a distribution to which section

16 529(d)(4) applies shall be treated as an amount not con17 tributed.’’.

18 (d) CONTRIBUTION NOT TO BE TREATED AS A GIFT

19 FOR GIFT TAX PURPOSES.—Section 2503 of such Code

20 (relating to taxable gifts) is amended by adding at the end

21 thereof the following new subsection:

22 ‘‘(h) INDIVIDUAL MEDICAL SAVINGS ACCOUNTS.—

23 For purposes of subsection (b), any payment made by an

24 individual to an individual medical savings account de25 scribed in section 529(b) shall not be considered a gift
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1 of a future interest in property to the extent that such

2 payment is allowed under section 529.’’.

3 (e) TAX ON PROHIBITED TRANSACTIONS.—Section

4 4975 of such Code (relating to prohibited transactions)

5 is amended—

6 (1) by adding at the end of subsection (c) the

7 following new paragraph:

8 ‘‘(4) SPECIAL RULE FOR INDIVIDUAL MEDICAL

9 SAVINGS ACCOUNTS.—An individual for whose bene10 fit an individual medical savings account is estab11 lished shall be exempt from the tax imposed by this

12 section with respect to any transaction concerning

13 such account (which would otherwise be taxable

14 under this section) if, with respect to such trans15 action, the account ceases to be an individual medi16 cal savings account by reason of the application of

17 section 529(e)(1)(A) to such account.’’, and

18 (2) by inserting ‘‘, or an individual medical sav19 ings account described in section 529(b)’’ in sub20 section (e)(1) after ‘‘described in section 408(a)’’.

21 (f) FAILURE TO PROVIDE REPORTS ON INDIVIDUAL

22 MEDICAL SAVINGS ACCOUNTS.—Section 6693 of such

23 Code (relating to failure to provide reports on individual

24 retirement account or annuities) is amended—
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1 (1) by inserting ‘‘OR AN INDIVIDUAL MEDI2 CAL SAVINGS ACCOUNT’’ after ‘‘ANNUITIES’’ in

3 the heading of such section, and

4 (2) by adding at the end of subsection (a) the

5 following: ‘‘The person required by section 529(i) to

6 file a report regarding an individual medical savings

7 account at the time and in the manner required by

8 such section shall pay a penalty of $50 for each fail9 ure unless it is shown that such failure is due to rea10 sonable cause.’’.

11 (g) EXCLUSION FROM GROSS INCOME.—

12 (1) Part III of subchapter B of chapter 1 of

13 such Code (relating to items specifically excluded

14 from gross income) is amended by redesignating sec15 tion 136 as section 137 and by inserting after sec16 tion 135 the following new section:

17 ‘‘SEC. 136. INDIVIDUAL MEDICAL SAVINGS ACCOUNT DIS18 TRIBUTIONS.

19 ‘‘In the case of an individual, and except as is pro20 vided in section 529(d), gross income does not include

21 qualified distributions from an individual medical savings

22 account.’’.

23 (2) The table of sections for such part III is

24 amended by striking out the item relating to section
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1 136 and inserting in lieu thereof the following new

2 items:

‘‘Sec. 136. Individual medical savings account distributions.

‘‘Sec. 137. Cross references to other Acts.’’.

3 (h) CONFORMING AMENDMENTS.—

4 (1) The table of parts for subchapter F of

5 chapter 1 of such Code is amended by adding at the

6 end thereof the following new item:

‘‘Part VIII. Individual medical savings accounts.’’.

7 (2) The table of sections for chapter 43 of such

8 Code is amended by striking out the item relating to

9 section 4973 and inserting in lieu thereof the follow10 ing:

‘‘Sec. 4973. Tax on excess contributions to individual retirement

accounts, individual medical savings accounts, certain 403(b) contracts, and certain individual retirement annuities.’’.

11 (3) The table of sections for subchapter B of

12 chapter 68 of such Code is amended by inserting ‘‘or

13 on individual medical savings accounts’’ after ‘‘annu14 ities’’ in the item relating to section 6693.

15 (i) EFFECTIVE DATE.—The amendments made by

16 this section shall apply to taxable years beginning after

17 December 31, 1993.
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1 SEC. 2. EMPLOYER CONTRIBUTIONS TO INDIVIDUAL MEDI2 CAL SAVINGS ACCOUNT NOT INCLUDED IN

3 INDIVIDUAL’S GROSS INCOME.

4 (a) IN GENERAL.—Section 106 of the Internal Reve5 nue Code of 1986 (relating to contributions by employer

6 to accident and health plans) is amended by inserting ‘‘or

7 an employer-provided contribution to an individual medi8 cal savings account under section 529(b)(1)(F)’’ after

9 ‘‘health plan’’.

10 (b) EFFECTIVE DATE.—The amendment made by

11 subsection (a) shall apply to taxable years beginning after

12 December 31, 1993.

13 SEC. 3. QUALIFIED LONG-TERM CARE INSURANCE TREAT14 ED AS ACCIDENT AND HEALTH INSURANCE

15 FOR PURPOSES OF TAXATION OF LIFE INSUR16 ANCE COMPANIES.

17 (a) IN GENERAL.—Section 818 of the Internal Reve18 nue Code of 1986 (relating to other definitions and special

19 rules) is amended by adding at the end thereof the follow20 ing new subsection:

21 ‘‘(g) QUALIFIED LONG-TERM CARE INSURANCE

22 TREATED AS ACCIDENT OR HEALTH INSURANCE.—For

23 purposes of this part—

24 ‘‘(1) IN GENERAL.—Any reference to accident

25 or health insurance shall be treated as including a

26 reference to qualified long-term care insurance.
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1 ‘‘(2) QUALIFIED LONG-TERM CARE INSUR2 ANCE.—For purposes of this subsection, the term

3 ‘qualified long-term care insurance’ has the meaning

4 given such term by section 529(c)(3)(C).’’.

5 (b) EFFECTIVE DATE.—The amendment made by

6 subsection (a) shall apply to taxable years beginning after

7 December 31, 1993.

8 SEC. 4. QUALIFIED LONG-TERM CARE INSURANCE TREAT9 ED AS ACCIDENT AND HEALTH INSURANCE

10 FOR PURPOSES OF EXCLUSION FOR BENE11 FITS RECEIVED UNDER SUCH INSURANCE

12 AND FOR EMPLOYER CONTRIBUTIONS FOR

13 SUCH INSURANCE.

14 (a) IN GENERAL.—Section 105 of the Internal Reve15 nue Code of 1986 (relating to amounts received under ac16 cident and health plans) is amended by adding at the end

17 thereof the following new subsection:

18 ‘‘(j) SPECIAL RULES RELATING TO QUALIFIED

19 LONG-TERM CARE INSURANCE.—For purposes of section

20 104, this section, and section 106—

21 ‘‘(1) BENEFITS TREATED AS PAYABLE FOR

22 SICKNESS, ETC.—Any benefit received through quali23 fied long-term care insurance (as defined in section

24 529(c)(3)(C)) shall be treated as received for per25 sonal injuries or sickness.
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1 ‘‘(2) EXPENSES FOR WHICH REIMBURSEMENT

2 PROVIDED UNDER QUALIFIED LONG-TERM CARE IN3 SURANCE TREATED AS INCURRED FOR MEDICAL

4 CARE.—Expenses incurred by a taxpayer for which

5 reimbursement is paid through qualified long-term

6 care insurance (as so defined) shall be treated for

7 purposes of subsection (b) as incurred for medical

8 care (as defined in section 213(d)).

9 ‘‘(3) REFERENCES TO ACCIDENT AND HEALTH

10 PLANS.—Any reference to an accident or health plan

11 shall be treated as including a reference to a plan

12 providing qualified long-term care insurance.’’.

13 (b) EFFECTIVE DATE.—The amendment made by

14 subsection (a) shall apply to taxable years beginning after

15 December 31, 1993.

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