I 

111TH CONGRESS 

2D SESSION H. R. 6001 

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

of tax-free COBRA premium payment accounts, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 30, 2010 

Mr. PITTS introduced the following bill; which was referred to the Committee 

on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

for the establishment of tax-free COBRA premium payment 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. SHORT TITLE. 

4 This Act may be cited as the ‘‘COBRA Affordability 

5 Act of 2010’’. 

6 SEC. 2. COBRA PREMIUM PAYMENT ACCOUNTS. 

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

8 Internal Revenue Code of 1986 (relating to exempt organi9 zations) is amended by adding at the end the following 

10 new part: 


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1 ‘‘PART IX—COBRA PREMIUM PAYMENT 

2 ACCOUNTS 

‘‘Sec. 530A. COBRA Premium Payment Accounts. 

3 ‘‘SEC. 530A. COBRA PREMIUM PAYMENT ACCOUNTS. 

4 ‘‘(a) GENERAL RULE.—A COBRA premium payment 

5 account shall be exempt from taxation under this subtitle. 

6 Notwithstanding the preceding sentence, any COBRA pre7 mium payment account shall be subject to the taxes im8 posed by section 511 (relating to imposition of tax on un9 related business income of charitable, etc., organizations). 

10 ‘‘(b) COBRA PREMIUM PAYMENT ACCOUNT.—For 

11 purposes of this title, the term ‘COBRA premium payment 

12 account’ means a trust created or organized in the United 

13 States for the exclusive benefit of an individual or his 

14 beneficiaries, but only if the written governing instrument 

15 creating the trust meets the following requirements: 

16 ‘‘(1) Except in the case of a qualified rollover 

17 (as defined in subsection (f)(3)), no contribution will 

18 be accepted unless it is in cash, and contributions 

19 will not be accepted for the taxable year on behalf 

20 of any individual in excess of the amount in effect 

21 for such taxable year under section 224(b). 

22 ‘‘(2) The trustee is a bank (as defined in sec23 tion 408(n)). 

24 ‘‘(3) The trust funds may only be invested in 

25 interest-bearing securities of the United States. 


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1 ‘‘(4) The requirements of paragraphs (3) 

2 through (6) of section 408(a) are met. 

3 ‘‘(c) TAX TREATMENT OF DISTRIBUTIONS.— 

4 ‘‘(1) INCLUSION OF AMOUNTS IN GROSS IN5 COME.—Except as otherwise provided in this sub6 section, any amount paid or distributed out of a 

7 COBRA premium payment account shall be includ8 ible in the gross income of the payee or distributee, 

9 as the case may be, in the manner as provided in 

10 section 72. 

11 ‘‘(2) DISTRIBUTIONS FOR COBRA PREMIUM PAY12 MENTS.—No amount shall be includible in gross in13 come under paragraph (1) if the qualified COBRA 

14 premium payments of the designated beneficiary 

15 during the taxable year, reduced by any credit al16 lowed under this chapter with respect to such pay17 ments for the taxable year, are not less than the ag18 gregate distributions during the taxable year. 

19 ‘‘(3) DISTRIBUTIONS IN EXCESS OF PAY20 MENTS.—If such aggregate distributions exceed such 

21 payments (as so reduced) during the taxable year, 

22 the amount otherwise includible in gross income 

23 under paragraph (1) shall be reduced by the amount 

24 which bears the same ratio to the amount which 

25 would be includible in gross income under paragraph 


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1 (1) (without regard to this paragraph) as the quali2 fied COBRA premium payments (as so reduced) 

3 bear to such aggregate distributions. 

4 ‘‘(4) MEDICARE ELIGIBILITY.—Paragraph (2) 

5 shall not apply to any distribution to a beneficiary 

6 after the date on which such individual is entitled to 

7 benefits under part A of title XVIII of the Social Se8 curity Act or is enrolled under part B of such title. 

9 ‘‘(d) QUALIFIED COBRA PREMIUM PAYMENTS.— 

10 For purposes of this section— 

11 ‘‘(1) IN GENERAL.—The term ‘qualified 

12 COBRA premium payments’ means any premium 

13 paid for COBRA continuation coverage. 

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

15 term ‘COBRA continuation coverage’ means con16 tinuation coverage provided pursuant to part 6 of 

17 subtitle B of title I of the Employee Retirement In18 come Security Act of 1974 (other than under section 

19 609), title XXII of the Public Health Service Act, 

20 section 4980B of this title (other than subsection 

21 (f)(1) of such section insofar as it relates to pedi22 atric vaccines), or section 8905a of title 5, United 

23 States Code, or under a State program that provides 

24 comparable continuation coverage. Such term in25 cludes coverage under a health flexible spending arVerDate Mar 15 2010 00:46 Aug 03, 2010 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H6001.IH H6001

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1 rangement under a cafeteria plan within the mean2 ing of section 125 of the Internal Revenue Code of 

3 1986 if, at the time of the qualifying event (as de4 fined in section 4980B(f)(3)), the taxpayer was cov5 ered under such coverage. 

6 ‘‘(e) TAX TREATMENT OF ACCOUNTS.— 

7 ‘‘(1) LOSS OF EXEMPTION IN CASE OF PROHIB8 ITED TRANSACTIONS.—For purposes of this section, 

9 rules similar to the rules of section 408(e) shall 

10 apply. 

11 ‘‘(2) OTHER RULES TO APPLY.—Rules similar 

12 to the rules of paragraphs (4), (5), and (6) of sec13 tion 408(d) shall apply for purposes of this section. 

14 ‘‘(f) OTHER DEFINITIONS AND SPECIAL RULES.— 

15 For purposes of this section— 

16 ‘‘(1) ALL ACCOUNTS TREATED AS ONE AC17 COUNT.—All COBRA premium payment accounts of 

18 a qualified individual shall be treated as 1 account. 

19 ‘‘(2) TIME WHEN CONTRIBUTIONS DEEMED

20 MADE.—A taxpayer shall be deemed to have made a 

21 contribution to a COBRA premium payment account 

22 on the last day of the preceding taxable year if the 

23 contribution is made on account of such taxable year 

24 and is made not later than the time prescribed by 


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1 law for filing the return for such taxable year (not 

2 including extensions thereof). 

3 ‘‘(3) QUALIFIED ROLLOVERS.—The term ‘quali4 fied rollover’ means any amount paid from a 

5 COBRA premium payment account of a taxpayer 

6 into another such account established for the benefit 

7 of— 

8 ‘‘(A) such taxpayer, or 

9 ‘‘(B) any qualified individual who is— 

10 ‘‘(i) the spouse of such taxpayer, or 

11 ‘‘(ii) any dependent (as defined in sec12 tion 152) of the taxpayer. 

13 Rules similar to the rules of section 408(d)(3) shall 

14 apply for purposes of this paragraph. 

15 ‘‘(4) CUSTODIAL ACCOUNTS.—Rules similar to 

16 the rules of section 408(h) shall apply. 

17 ‘‘(5) REPORTS.—The trustee of a COBRA pre18 mium payment account shall make such reports re19 garding such account to the Secretary and to the in20 dividual for whom the account is maintained with re21 spect to contributions (and the years to which they 

22 relate), distributions, and such other matters as the 

23 Secretary may require under regulations. The re24 ports required by this paragraph— 


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1 ‘‘(A) shall be filed at such time and in 

2 such manner as the Secretary prescribes in 

3 such regulations, and 

4 ‘‘(B) shall be furnished to individuals— 

5 ‘‘(i) not later than January 31 of the 

6 calendar year following the calendar year 

7 to which such reports relate, and 

8 ‘‘(ii) in such manner as the Secretary 

9 prescribes in such regulations. 

10 ‘‘(6) INVESTMENT IN COLLECTIBLES TREATED

11 AS DISTRIBUTIONS.—Rules similar to the rules of 

12 section 408(m) shall apply. 

13 ‘‘(g) PENALTY FOR DISTRIBUTIONS NOT USED FOR

14 QUALIFIED COBRA PREMIUM PAYMENTS.— 

15 ‘‘(1) IN GENERAL.—If any amount distributed 

16 from a COBRA premium payment account is includ17 ible in gross income under subsection (c), the tax 

18 imposed by this chapter for the taxable year of such 

19 distribution shall be increased by 20 percent of such 

20 amount which is includible in gross income. For pur21 poses of the preceding sentence, distributions which 

22 are includible in gross income shall be treated as 

23 first attributable to amounts contributed under sub24 section (d) to the extent thereof. 


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1 ‘‘(2) EXCEPTION FOR CERTAIN DISTRIBU2 TIONS.—Paragraph (1) shall not apply to distribu3 tions which are— 

4 ‘‘(A) made to a beneficiary (or the estate 

5 of the account holder) on or after the death of 

6 the account holder, or 

7 ‘‘(B) attributable to the account holder’s 

8 being disabled within the meaning of section 

9 72(m)(7).’’. 

10 (b) DEDUCTION FOR CONTRIBUTIONS.— 

11 (1) IN GENERAL.—Part VII of subchapter B of 

12 chapter I of the Internal Revenue Code of 1986 (re13 lating to additional itemized deductions for individ14 uals) is amended by redesignating section 224 as 

15 section 225 and by inserting after section 223 the 

16 following new section: 

17 ‘‘SEC. 224. CONTRIBUTIONS TO COBRA PREMIUM PAYMENT 

18 ACCOUNT. 

19 ‘‘(a) ALLOWANCE OF DEDUCTION.—In the case of an 

20 individual, there shall be allowed as a deduction for the 

21 taxable year an amount equal to the contributions of the 

22 individual to a COBRA premium payment account. 

23 ‘‘(b) MAXIMUM AMOUNT OF DEDUCTION.— 


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1 ‘‘(1) DOLLAR LIMITATION.—The amount allow2 able as a deduction under subsection (a) for a tax3 able year shall not exceed the lesser of— 

4 ‘‘(A) $2,500, 

5 ‘‘(B) the amount equal to the excess of— 

6 ‘‘(i) the aggregate contributions to all 

7 COBRA premium payment accounts of the 

8 individual for all prior taxable years, over 

9 ‘‘(ii) $11,814 ($27,286 in the case of 

10 a joint return), or 

11 ‘‘(C) an amount equal to the compensation 

12 includible in the individual’s gross income for 

13 such taxable year. 

14 ‘‘(2) LIMITATION BASED ON ADJUSTED GROSS

15 INCOME.— 

16 ‘‘(A) IN GENERAL.—Each of the dollar 

17 limitations contained in subparagraphs (A) and 

18 (B) of paragraph (1) for such taxable year shall 

19 be reduced (but not below zero) by the amount 

20 determined under subparagraph (B). 

21 ‘‘(B) AMOUNT OF REDUCTION.— 

22 ‘‘(i) IN GENERAL.—The amount de23 termined under this subparagraph with re24 spect to any dollar limitation shall be the 


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1 amount which bears the same ratio to such 

2 limitation as— 

3 ‘‘(I) the excess of— 

4 ‘‘(aa) the taxpayer’s ad5 justed gross income for such tax6 able year, over 

7 ‘‘(bb) the applicable dollar 

8 amount, bears to 

9 ‘‘(II) $10,000 ($20,000 in the 

10 case of a joint return). 

11 ‘‘(ii) NO REDUCTION BELOW $200

12 UNTIL COMPLETE PHASE-OUT.—No dollar 

13 limitation shall be reduced below $200 

14 under paragraph (1) unless (without re15 gard to this subparagraph) such limitation 

16 is reduced to zero. 

17 ‘‘(iii) ROUNDING.—Any amount deter18 mined under this subparagraph which is 

19 not a multiple of $10 shall be rounded to 

20 the next lowest $10. 

21 ‘‘(C) ADJUSTED GROSS INCOME; APPLICA22 BLE DOLLAR AMOUNT.—For purposes of this 

23 paragraph— 


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1 ‘‘(i) ADJUSTED GROSS INCOME.—Ad2 justed gross income of any taxpayer shall 

3 be determined— 

4 ‘‘(I) after application of sections 

5 86 and 469, and 

6 ‘‘(II) without regard to sections 

7 135, 137, 199, 221, 222, and 911 or 

8 the deduction allowable under this 

9 section. 

10 ‘‘(ii) APPLICABLE DOLLAR AMOUNT.— 

11 The term ‘applicable dollar amount’ 

12 means, with respect to a taxable year, the 

13 applicable amount determined under sec14 tion 219(g)(3)(B) for the taxable year. 

15 ‘‘(c) OTHER LIMITATIONS AND RESTRICTIONS.— 

16 ‘‘(1) BENEFICIARY MUST NOT BE MEDICARE

17 ELIGIBLE.—No deduction shall be allowed under 

18 this section with respect to any contribution to a 

19 COBRA premium payment account for the benefit 

20 of an individual after the date on which such indi21 vidual is entitled to benefits under part A of title 

22 XVIII of the Social Security Act or is enrolled under 

23 part B of such title. 

24 ‘‘(2) RECONTRIBUTED AMOUNTS.—No deduc25 tion shall be allowed under this section with respect 


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1 to a rollover contribution described in section 

2 530A(f)(3). 

3 ‘‘(3) DENIAL OF DEDUCTION FOR AMOUNT

4 CONTRIBUTED TO INHERITED ACCOUNTS.—No de5 duction shall be allowed under this section with re6 spect to any amount paid to an inherited COBRA 

7 premium payment account (within the meaning of 

8 section 408(d)(3)(C)(ii)) by reason of the last sen9 tence of section 530A(f)(3). 

10 ‘‘(d) COBRA PREMIUM PAYMENT ACCOUNT.—For 

11 purposes of this section, the term ‘COBRA premium pay12 ment account’ has the meaning given such term by section 

13 530A. 

14 ‘‘(e) APPLICABLE DEFINITIONS AND RULES.—For 

15 purposes of this section, definitions and rules similar to 

16 the definitions and rules of section 219(f) (other than 

17 paragraphs (5) and (8)) shall apply. 

18 ‘‘(f) INFLATION ADJUSTMENT.—In the case of any 

19 taxable year beginning after December 31, 2011, each dol20 lar amount in subsection (b)(1) shall be increased by an 

21 amount equal to the product of— 

22 ‘‘(1) such amount, and 

23 ‘‘(2) the cost-of-living adjustment determined 

24 under section 213(d)(10)(B) for the calendar year in 

25 which the taxable year begins by substituting ‘calVerDate Mar 15 2010 00:46 Aug 03, 2010 Jkt 089200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H6001.IH H6001

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1 endar year 2010’ for ‘calendar year 1997’ in clause 

2 (i) thereof. 

3 If any amount as adjusted under the preceding sentence 

4 is not a multiple of $100, such amount shall be rounded 

5 to the nearest multiple of $100. 

6 ‘‘(g) REGULATIONS.—The Secretary shall issue such 

7 regulations as may be necessary or appropriate to carry 

8 out this section.’’. 

9 (2) CLERICAL AMENDMENT.—The table of sec10 tions for part VII of subchapter B of chapter 1 of 

11 such Code is amended by striking the item relating 

12 to section 224 and inserting the following: 

‘‘Sec. 224. Contributions to COBRA premium payment account. 

‘‘Sec. 225. Cross reference.’’. 

13 (c) TAX ON EXCESS CONTRIBUTIONS.— 

14 (1) TAX IMPOSED.—Subsection (a) of section 

15 4973 of such Code is amended by striking ‘‘or’’ at 

16 the end of paragraph (4), by redesignating para17 graph (5) as paragraph (6), and by inserting after 

18 paragraph (4) the following new paragraph: 

19 ‘‘(5) a COBRA premium payment account 

20 (within the meaning of section 530A(b)), or’’. 

21 (2) EXCESS CONTRIBUTIONS.—Section 4973 of 

22 such Code is amended by adding at the end the fol23 lowing subsection: 


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1 ‘‘(h) COBRA PREMIUM PAYMENT ACCOUNTS.—For 

2 purposes of this section, in the case of COBRA premium 

3 payment accounts, the term ‘excess contributions’ means 

4 the sum of— 

5 ‘‘(1) the excess (if any) of— 

6 ‘‘(A) the amount contributed for the tax7 able year to the accounts (other than a quali8 fied rollover, as defined in section 530A(f)(3)), 

9 over 

10 ‘‘(B) the amount allowable under section 

11 224 for such contributions, and 

12 ‘‘(2) the amount determined under this sub13 section for the preceding taxable year reduced by the 

14 sum of— 

15 ‘‘(A) the distributions out of the accounts 

16 for the taxable year which were included in the 

17 gross income of the payee under section 

18 530A(c)(1), 

19 ‘‘(B) the distributions out of the accounts 

20 for the taxable year to which rules similar to 

21 the rules of section 408(d)(5) apply by reason 

22 of section 530A(e)(2), and 

23 ‘‘(C) the excess (if any) of the maximum 

24 amount allowable as a contribution under sec25 tion 224 for the taxable year over the amount 


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1 contributed to the account for the taxable year 

2 (other than a contribution under section 

3 530A(f)(3)). 

4 For purposes of this subsection, any contribution which 

5 is distributed from the COBRA premium payment account 

6 in a distribution to which rules similar to the rules of sec7 tion 408(d)(4) apply by reason of section 530A(e)(2) shall 

8 be treated as an amount not contributed.’’. 

9 (d) TAX ON PROHIBITED TRANSACTIONS.—Section 

10 4975 of such Code is amended— 

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

12 following paragraph: 

13 ‘‘(7) SPECIAL RULE FOR COBRA PREMIUM PAY14 MENT ACCOUNTS.—An individual for whose benefit a 

15 COBRA premium payment account is established 

16 and any contributor to such account shall be exempt 

17 from the tax imposed by this section with respect to 

18 any transaction concerning such account (which 

19 would otherwise be taxable under this section) if, 

20 with respect to such transaction, the account ceases 

21 to be a COBRA premium payment account by rea22 son of the application of section 530A(e)(1) to such 

23 account.’’, and 

24 (2) in subsection (e)(1), by striking ‘‘or’’ at the 

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1 graph (G) as subparagraph (H), and by inserting 

2 after subparagraph (F) the following new subpara3 graph: 

4 ‘‘(G) a COBRA premium payment account 

5 described in section 530A(b), or’’. 

6 (e) FAILURE TO PROVIDE REPORTS ON COBRA 

7 PREMIUM PAYMENT ACCOUNTS.—Paragraph (2) of sec8 tion 6693(a) of such Code is amended by striking ‘‘and’’ 

9 at the end of subparagraph (D), by striking the period 

10 and inserting ‘‘, and’’ at the end of subparagraph (E), 

11 and by inserting after subparagraph (E) the following new 

12 subparagraph: 

13 ‘‘(F) section 530A(f)(5) (relating to 

14 COBRA premium payment accounts).’’. 

15 (f) PENALTY NOT PART OF REGULAR TAX.—Para16 graph (2) of section 26(b) of such Code is amended by 

17 striking ‘‘and’’ at the end of subparagraph (W), by strik18 ing the period at the end of subparagraph (X) and insert19 ing ‘‘, and’’, and by inserting after subparagraph (X) the 

20 following new subparagraph: 

21 ‘‘(Y) section 530A(g) (relating to penalty 

22 for distributions not used for Qualified COBRA 

23 premium payments).’’. 


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1 (g) CLERICAL AMENDMENT.—The table of parts for 

2 subchapter F of chapter 1 of such Code is amended by 

3 adding at the end the following new item: 

‘‘PART IX. COBRA PREMIUM PAYMENT ACCOUNTS.’’. 

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

5 this section shall apply to taxable years beginning after 

6 December 31, 2010. 

7 SEC. 3. COBRA ELECTION OF DIFFERENT COVERAGE. 

8 (a) IN GENERAL.—Paragraph (2) of section 

9 4980B(f) of the Internal Revenue Code of 1986 is amend10 ed by adding at the end the following: 

11 ‘‘(F) ELECTION OF DIFFERENT COV12 ERAGE.— 

13 ‘‘(i) IN GENERAL.—In lieu of subpara14 graph (A), coverage meets the require15 ments of this subparagraph if the qualified 

16 beneficiary may elect to enroll in coverage 

17 under a plan offered by the employer in18 volved, or the employee organization in19 volved (including, for this purpose, a joint 

20 board of trustees of a multiemployer trust 

21 affiliated with one or more multiemployer 

22 plans), that is different than coverage 

23 under the plan in which such individual 

24 was enrolled at the time the qualifying 

25 event occurred. 


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1 ‘‘(ii) REQUIREMENTS.—A qualified 

2 beneficiary may make an election under 

3 clause (i) only if— 

4 ‘‘(I) the employer involved has 

5 made a determination that such em6 ployer will permit qualified bene7 ficiaries to enroll in different coverage 

8 as provided for this subparagraph, 

9 ‘‘(II) the premium for such dif10 ferent coverage does not exceed the 

11 premium for coverage in which the in12 dividual was enrolled at the time the 

13 qualifying event occurred, 

14 ‘‘(III) the different coverage in 

15 which the individual elects to enroll is 

16 coverage that is also offered to the ac17 tive employees of the employer at the 

18 time at which such election is made, 

19 and 

20 ‘‘(IV) the different coverage is 

21 coverage other than nonqualifying cov22 erage. 

23 ‘‘(iii) NONQUALIFYING COVERAGE DE24 SCRIBED.—For purposes of clause (ii)(IV), 


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1 the term ‘nonqualifying coverage’ means 

2 coverage which is— 

3 ‘‘(I) coverage that provides only 

4 dental, vision, counseling, or referral 

5 services (or a combination of such 

6 services), 

7 ‘‘(II) a flexible spending arrange8 ment (as defined in section 106(c)(2)) 

9 in which the individual is not a partic10 ipant on the date of the qualifying 

11 event, or 

12 ‘‘(III) coverage that provides cov13 erage for services or treatments fur14 nished in an on-site medical facility 

15 maintained by the employer and that 

16 consists primarily of first-aid services, 

17 prevention and wellness care, or simi18 lar care (or a combination of such 

19 care). 

20 ‘‘(iv) FSA CONTRIBUTIONS.—For 

21 purposes of this paragraph, an employer 

22 making contributions to a flexible spending 

23 arrangement (as so defined) of an em24 ployee prior to the qualifying event is not 

25 obligated to continue making contributions 


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1 to such arrangement of such employee 

2 after the qualifying event.’’. 

3 (b) EFFECTIVE DATE.— 

4 (1) IN GENERAL.—The amendment made by 

5 this section shall apply with respect to qualifying 

6 events occurring on or after the date of the enact7 ment of this Act. 

8 (2) QUALIFYING EVENTS BEFORE ENACT9 MENT.—In the case of a qualifying event occurring 

10 before the date of the enactment of this Act, if the 

11 election period specified in section 4980B(f)(5) of 

12 the Internal Revenue Code of 1986 with respect to 

13 such qualifying event has not expired on the date of 

14 the enactment of this Act, then the amendment 

15 made by this section shall apply with respect to such 

16 qualifying event and such election period shall not 

17 expire until the later of— 

18 (A) the 60-day period beginning on the 

19 date of the enactment of this Act, or 

20 (B) the date on which such election would 

21 expire under section 4980B(f)(5) without re22 gard to subparagraph (A). 

Æ 


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