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[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 30 Introduced in Senate (IS)]

104th CONGRESS
  1st Session
                                 S. 30

  To amend the Social Security Act to increase the earnings limit, to 
 amend the Internal Revenue Code of 1986 to repeal the increase in the 
   tax on social security benefits and to provide incentives for the 
     purchase of long-term care insurance, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                            January 4, 1995

  Mr. McCain introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL

 
  To amend the Social Security Act to increase the earnings limit, to 
 amend the Internal Revenue Code of 1986 to repeal the increase in the 
   tax on social security benefits and to provide incentives for the 
     purchase of long-term care insurance, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Senior Citizens' Equity Act''.

                 TITLE I--SOCIAL SECURITY EARNINGS TEST

SEC. 101. ADJUSTMENTS IN MONTHLY EXEMPT AMOUNT FOR PURPOSES OF THE 
              SOCIAL SECURITY EARNINGS TEST.

    (A) Increase in Monthly Exempt Amount for Individuals Who Have 
Attained Retirement Age.--Section 203(f)(8)(D) of the Social Security 
Act (42 U.S.C. 403(f)(8)(D)) is amended to read as follows:
            ``(D)(i) Notwithstanding any other provision of this 
        subsection, the exempt amount which is applicable to an 
        individual who has attained retirement age (as defined in 
        section 216(1)) before the close of the taxable year involved 
        shall be--
                    ``(I) for the taxable year beginning after 1995 and 
                before 1997, $1,250.00,
                    ``(II) for the taxable year beginning after 1996 
                and before 1998, $1,583.33\1/3\,
                    ``(III) for the taxable year beginning after 1997 
                and before 1999, $1,916.66\2/3\,
                    ``(IV) for the taxable year beginning after 1998 
                and before 2000, $2,250.00, and
                    ``(V) for the taxable year beginning after 1999 and 
                before 2001, $2,500.00.
            ``(ii) For purposes of subparagraph (B)(ii)(II), the 
        increase in the exempt amount provided under clause (i)(V) 
        shall be deemed to have resulted from a determination which 
        shall be deemed to have been made under subparagraph (A) in 
        1999.''.
    (b) Conforming Amendments.--The second sentence of section 
223(d)(4) of such Act (42 U.S.C. 423(d)(4)) is amended by striking 
``the exempt amount under section 203(f)(8) which is applicable to 
individuals described in subparagraph (D) thereof'' and inserting the 
following: ``an amount equal to the exempt amount which would have been 
applicable under section 203(f)(8), to individuals described in 
subparagraph (D) thereof, if section 101 of the Senior Citizens' Equity 
Act had not been enacted''.

SEC. 102. EFFECTIVE DATE.

    The amendments made by section 101 shall apply with respect to 
taxable years beginning after 1995.

    TITLE II--REPEAL OF INCREASE IN TAX ON SOCIAL SECURITY BENEFITS

SEC. 201. REPEAL OF INCREASE IN TAX ON SOCIAL SECURITY BENEFITS.

    (a) In General.--Subsection (a) of section 86 of the Internal 
Revenue Code of 1986 (relating to social security and tier 1 railroad 
retirement benefits) is amended by adding at the end the following new 
paragraph:
            ``(3) Phaseout of additional amount.--In the case of any 
        taxable year beginning in a calendar year after 1995 and before 
        2000, paragraph (2) shall be applied by substituting the 
        percentage determined under the following table for `85 
        percent' each place it appears:

        ``In the case of a taxable
                                                                       
          year beginning in cal-
                                                                       
          endar year:
                                                     The percentage is:
                1996.................................        75 percent
                1997.................................        65 percent
                1998.................................        60 percent
                1999.................................     55 percent.''
    (b) Termination of Additional Amount.--Paragraph (2) of section 
86(a) of such Code is amended by adding at the end the following new 
flush sentence:
        ``This paragraph shall not apply to any taxable year beginning 
        after December 31, 1999.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

                 TITLE III--TREATMENT OF LONG-TERM CARE

SEC. 301. TREATMENT OF LONG-TERM CARE INSURANCE OR PLANS.

    (a) General Rule.--Subpart E of part I of subchapter L of chapter 1 
of the Internal Revenue Code of 1986 is amended by inserting after 
section 818 the following new section:

``SEC. 818A. TREATMENT OF LONG-TERM CARE INSURANCE OR PLANS.

    ``(a) General Rule.--For purposes of this part, a long-term care 
insurance contract shall be treated as an accident or health insurance 
contract.
    ``(b) Long-Term Care Insurance Contract.--
            ``(1) In general.--For purposes of this part, the term 
        `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 and benefits incidental to such coverage,
                    ``(B) the maximum benefit under the policy for 
                expenses incurred for any day does not exceed $200,
                    ``(C) such contract does not cover expenses 
                incurred for services or items to the extent that such 
                expenses are rembursable under title XVIII of the 
                Social Security Act or would be so reimbursable but for 
                the application of a deductible or coinsurance amount,
                    ``(D) such contract is guaranteed renewable,
                    ``(E) such contract does not have any cash 
                surrender value, and
                    ``(F) 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.
            ``(2) Special rules.--
                    ``(A) Per diem, etc. payments permitted.--A 
                contract shall not fail to be treated as described in 
                paragraph (1)(A) 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) Contract may cover medicare reimbursable 
                expenses where medicare is secondary payor.--Paragraph 
                (1)(C) shall not apply to expenses which are 
                reimbursable under title XVIII of the Social Security 
                Act only as a secondary payor.
                    ``(C) Refunds of premiums.--Paragraph (1)(F) shall 
                not apply to any refund of premiums on surrender or 
                cancellation of the contract.
    ``(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, 
        and rehabilitative services, and maintenance or personal care 
        services, which--
                    ``(A) are required by a chronically ill individual 
                in a qualified facility, 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)(I) being unable to perform (without 
                        substantial assistance from another individual) 
                        at least 2 activities of daily living (as 
                        defined in subparagraph (B)) for a period of at 
                        least 90 days due to a loss of functional 
                        capacity, or
                            ``(II) having a level of disability similar 
                        (as determined by the Secretary in consultation 
                        with the Secretary of Health and Human 
                        Services) to the level of disability described 
                        in subclause (I), or
                            ``(ii) having a similar level of disability 
                        due to cognitive impairment.
                    ``(B) Activities of daily living.--For purposes of 
                subparagraph (A), each of the following is an activity 
                of daily living:
                            ``(i) Mobility.--The process of walking or 
                        wheeling on a level surface which may include 
                        the use of an assistive device such as a cane, 
                        walker, wheelchair, or brace.
                            ``(ii) Dressing.--The overall complex 
                        behavior of getting clothes from closets and 
                        drawers and then getting dressed.
                            ``(iii) Toileting and bathing.--Each of the 
                        following shall be treated as 1 activity:
                                    ``(I) The act of going to the 
                                toilet room for bowel and bladder 
                                function, transferring on and off the 
                                toilet, cleaning after elimination, and 
                                arranging clothes or the ability to 
                                voluntarily control bowel and bladder 
                                function, or in the event of 
                                incontinence, the ability to maintain a 
                                reasonable level of personal hygiene.
                                    ``(II) The overall complex behavior 
                                of getting water and cleansing the 
                                whole body, including turning on the 
                                water for a bath, shower, or sponge 
                                bath, getting to, in, and out of a tub 
                                or shower, and washing and drying 
                                oneself.
                            ``(iv) Transfer.--The process of getting in 
                        and out of bed or in and out of a chair or 
                        wheelchair.
                            ``(v) Eating.--The process of getting food 
                        from a plate or its equivalent into the mouth.
            ``(3) Qualified facility.--The term `qualified facility' 
        means--
                    ``(A) a nursing, rehabilitative, hospice, or adult 
                day care facility (including a hospital, retirement 
                home, nursing home, skilled nursing facility, 
                intermediate care facility, or similar institution--
                            ``(i) which is licensed under State law, or
                            ``(ii) which is a certified facility for 
                        purposes of title XVIII or XIX of the Social 
                        Security Act, or
                    ``(B) an individual's home if a licensed health 
                care practitioner certifies that without home care the 
                individual would have to be cared for in a facility 
                described in subparagraph (A).
            ``(4) Maintenance or personal care services.--The term 
        `maintenance or personal care services' means any care the 
        primary purpose of which is to provide needed assistance with 
        any of the activities of daily living described in paragraph 
        (2)(B).
            ``(5) Licensed health care practitioner.--The term 
        `licensed health care practitioner' means any physician (as 
        defined in section 1861(r) 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) Continuation Coverage Excise Tax Not To Apply.--This section 
shall not apply in determining whether section 4980B (relating to 
failure to satisfy continuation coverage requirements of group health 
plans) applies.
    ``(e) Inflation Adjustment of $200 Benefit Limit.--
            ``(1) In general.--In the case of a calendar year after 
        1995, the $200 amount contained in subsection (b)(1)(B) shall 
        be increased for such calendar year by the medical care cost 
        adjustment 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.
            ``(2) Medical care cost adjustment.--For purposes of 
        paragraph (1), the medical care cost adjustment for any 
        calendar year is the percentage (if any) by which--
                    ``(A) the medical care component of the Consumer 
                Price Index (as defined in section 1(f)(5)) for August 
                of the preceding calendar year, exceeds
                    ``(B) such component for August of 1994.''
    (b) Clerical Amendment.--The table of sections for such subpart E 
is amended by inserting after the item relating to section 818 the 
following new item:

                              ``Sec. 818A. Treatment of long-term care 
                                        insurance or plans.''

SEC. 302. EXCLUSION FOR BENEFITS PROVIDED UNDER LONG-TERM CARE 
              INSURANCE; EXCLUSION FOR EMPLOYER-PROVIDED COVERAGE.

    (a) In General.--Subsection (a) of section 104 of the Internal 
Revenue Code of 1986 (relating to compensation for injuries or 
sickness) is amended by striking ``and'' at the end of paragraph (4), 
by striking the period at the end of paragraph (5) and inserting ``, 
and'', and by inserting after paragraph (4) the following new 
paragraph:
            ``(6) benefits under a long-term care insurance contract 
        (as defined in section 818A(b)).''
    (b) Exclusion for Employer-Provided Coverage.--Section 106 of such 
Code (relating to contributions by employer to accident and health 
plans) is amended by adding at the end thereof the following sentence: 
``For purposes of the preceding sentence, the term `accident or health 
plan'' includes a long-term care insurance contract (as defined in 
section 818A(b)).''

SEC. 303. QUALIFIED LONG-TERM SERVICES TREATED AS MEDICAL CARE.

    (a) General Rule.--Paragraph (1) of section 213(d) of the Internal 
Revenue Code of 1986 (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 818A(c)), or''.
    (b) Technical Amendments.--
            (1) Subparagraph (D) of section 213(d)(1) of such Code (as 
        redesignated by subsection (a)) is amended by striking 
        ``subparagraphs (A) and (B)'' and inserting ``subparagraphs 
        (A), (B), and (C)''.
            (2)(A) Paragraph (1) of section 213(d) of such Code is 
        amended by adding at the end thereof the following new flush 
        sentence:
        ``In the case of a long-term care insurance contract (as 
        defined in section 818A), only eligible long-term care premiums 
        (as defined in paragraph (10)) shall be taken into account 
        under subparagraph (D).''
            (B) Subsection (d) of section 213 is amended by adding at 
        the end the following new paragraph:
            ``(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 long-term 
                care insurance contract (as defined in section 818A) 
                covering an individual, to the extent such amount does 
                not exceed the limitation determined under the 
                following table:

                    ``In the case of an individual
                                                                       
                      with an attained age before the
                                                         The limitation
                      close of the taxable year of:
                                                                    is:
                          40 or less.................              $200
                          More than 40 but not more                 375
                            than 50.
                          More than 50 but not more                 750
                            than 60.
                          More than 60 but not more               1,600
                            than 70.
                          More than 70...............            2,000.
                    ``(B) Indexing.--
                            ``(i) In general.--In the case of any 
                        taxable year beginning in a calendar year after 
                        1995, each dollar amount contained in paragraph 
                        (1) 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 adjustment.--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 
                                1994.''
            (3) Paragraph (6) of section 213(d) of such Code 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) of such Code is amended 
        by striking ``subparagraphs (A) and (B)'' and inserting 
        ``subparagraphs (A), (B), and (C)''.

SEC. 304. CERTAIN EXCHANGES OF LIFE INSURANCE CONTRACTS FOR LONG-TERM 
              CARE INSURANCE CONTRACTS NOT TAXABLE.

    Subsection (a) of section 1035 of the Internal Revenue Code of 1986 
(relating to certain exchanges of insurance contracts) is amended by 
striking the period at the end of paragraph (3) and inserting ``; or'', 
and by adding at the end thereof the following new paragraph:
            ``(4) a contract of life insurance or an endowment or 
        annuity contract for a long-term care insurance contract (as 
        defined in section 818A).''

SEC. 305. EXCLUSION FROM GROSS INCOME FOR AMOUNTS WITHDRAWN FROM 
              INDIVIDUAL RETIREMENT PLANS OR 401(k) PLANS FOR LONG-TERM 
              CARE INSURANCE.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to items specifically excluded 
from gross income) is amended by redesignating section 137 as section 
138 and by inserting after section 136 the following new section:

``SEC. 137. DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT ACCOUNTS AND 
              SECTION 401(k) PLANS FOR LONG-TERM CARE INSURANCE.

    ``(a) General Rule.--The amount includible in the gross income of 
an individual for the taxable year by reason of qualified distributions 
during such taxable year shall not exceed the excess of--
            ``(1) the amount which would (but for this section) be so 
        includible by reason of such distributions, over
            ``(2) the aggregate premiums paid by such individual during 
        such taxable year for any long-term care insurance contract (as 
        defined in section 818A) for the benefit of such individual or 
        the spouse of such individual.
    ``(b) Qualified Distribution.--For purposes of this section, the 
term `qualified distribution' means any distribution to an individual 
from an individual retirement account or a section 401(k) plan if such 
individual has attained age 59\1/2\ on or before the date of the 
distribution (and, in the case of a distribution used to pay premiums 
for the benefit of the spouse of such individual, such spouse has 
attained age 59\1/2\ on or before the date of the distribution).
    ``(c) Definitions.--For purposes of this section--
            ``(1) Individual retirement account.--The term `individual 
        retirement account' has the meaning given such term by section 
        408(a).
            ``(2) Section 401(k) plan.--The term `section 401(k) plan' 
        means any employer plan which meets the requirements of section 
        401(a) and which includes a qualified cash or deferred 
        arrangement (as defined in section 401(k)).
    ``(d) Special Rules for Section 401(k) Plans.--
            ``(1) Withdrawals cannot exceed elective contributions 
        under qualified cash or deferred arrangement.--This section 
        shall not apply to any distribution from a section 401(k) plan 
        to the extent the aggregate amount of such distributions for 
        the use described in subsection (a) exceeds the aggregate 
        employer contributions made pursuant to the employee's election 
        under section 401(k)(2).
            ``(2) Withdrawals not to cause disqualification.--A plan 
        shall not be treated as failing to satisfy the requirements of 
        section 401, and an arrangement shall not be treated as failing 
        to be a qualified cash or deferred arrangement (as defined in 
        section 401(k)(2)), merely because under the plan or 
        arrangement distributions are permitted which are excludable 
        from gross income by reason of this section.''
    (b) Conforming Amendments.--
            (1) Section 401(k) of such Code is amended by adding at the 
        end the following new paragraph:
            ``(11) Cross reference.--

                                ``For provision permitting tax-free 
withdrawals for payment of long-term care premiums, see section 137.''
            (2) Section 408(d) of such Code is amended by adding at the 
        end the following new paragraph:
            ``(8) Cross reference.--

                                ``For provision permitting tax-free 
withdrawals from individual retirement accounts for payment of long-
term care premiums, see section 137.''
            (3) The table of sections for such part III is amended by 
        striking the last item and inserting the following new items:

                              ``Sec. 137. Distributions from individual 
                                        retirement accounts and section 
                                        401(k) plans for long-term care 
                                        insurance.
                              ``Sec. 138. Cross references to other 
                                        Acts.''

SEC. 306. TAX TREATMENT OF ACCELERATED DEATH BENEFITS UNDER LIFE 
              INSURANCE CONTRACTS.

    Section 101 of the Internal Revenue Code of 1986 (relating to 
certain death benefits) is amended by adding at the end thereof the 
following new subsection:
    ``(g) Treatment of Certain Accelerated Death Benefits.--
            ``(1) In general.--For purposes of this section, any amount 
        paid or advanced to an individual under a life insurance 
        contract on the life of an insured--
                    ``(A) who is a terminally ill individual, or
                    ``(B) who is a chronically ill individual (as 
                defined in section 818A(c)(2)) who is confined to a 
                qualified facility (as defined in section 
                818A(c)(3)(A)),
        shall be treated as an amount paid by reason of the death of 
        such insured.
            ``(2) Terminally ill individual.--For purposes of this 
        subsection, 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 12 months or less.
            ``(3) Physician.--For purposes of this subsection, the term 
        `physician' has the meaning given to such term by section 
        213(d)(4).''

SEC. 307. EFFECTIVE DATE.

    The amendments made by this title shall apply to taxable years 
beginning after December 31, 1995.

                  TITLE IV--SENIOR CITIZEN COMMUNITIES

SEC. 401. DEFINITION OF HOUSING FOR OLDER PERSONS.

    Subparagraph (C) of section 807(b)(2) of the Fair Housing Act (42 
U.S.C. 3607(b)(2)) is amended to read as follows:
            ``(C) that meets the following requirements:
                    ``(i) The housing is in a facility or community 
                intended and operated for the occupancy of at least 80 
                percent of the occupied units by at least one person 55 
                years of age or older.
                    ``(ii) The housing facility or community publishes 
                and adheres to policies and procedures that demonstrate 
                the intent required under clause (i), whether or not 
                such policies and procedures are set forth in the 
                governing documents of such facility or community.
                    ``(iii) The housing facility or community complies 
                with rules made by the Secretary for the verification 
                of occupancy. Such rules shall allow for that 
                verification by reliable surveys and affidavits and 
                shall include examples of the types of policies and 
                procedures relevant to a determination of compliance 
                with the requirement of clause (ii). Such surveys and 
                affidavits shall be admissible in administrative and 
                judicial proceedings for the purposes of such 
                verification.''.

SEC. 402. GOOD FAITH ATTEMPT AT COMPLIANCE DEFENSE AGAINST CIVIL MONEY 
              DAMAGES.

    Section 807(b) of the Fair Housing Act (42 U.S.C. 3607(b)) is 
amended by adding at the end the following:
    ``(5) An individual who engages in conduct with a reasonable good 
faith reliance on the existence of the exemption of this subsection 
relating to housing for older persons is not personally liable for 
money damages for a violation of this Act that such an exemption would 
have vitiated. For purposes of this paragraph, a person engaged in the 
business of residential real estate transactions is presumed to have 
such a good faith reliance if that person has no actual knowledge that 
the facility or community is not or will not be eligible for such 
exception and the facility or community gives such person a written 
certification stating the compliance of the facility or community with 
the requirements for such exception.''.
                                 <all>
S 30 IS----2
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