II 

111TH CONGRESS 

1ST SESSION S. 1153 

To amend the Internal Revenue Code of 1986 to extend the exclusion from 

gross income for employer-provided health coverage for employees’ 

spouses and dependent children to coverage provided to other eligible 

designated beneficiaries of employees. 

IN THE SENATE OF THE UNITED STATES 

MAY 21, 2009 

Mr. SCHUMER (for himself, Ms. CANTWELL, Mr. MENENDEZ, Mr. DODD, Mr. 

KERRY, and Mr. AKAKA) 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 extend 

the exclusion from gross income for employer-provided 

health coverage for employees’ spouses and dependent 

children to coverage provided to other eligible designated 

beneficiaries of employees. 

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 ‘‘Tax Equity for Health 

5 Plan Beneficiaries Act of 2009’’. 


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1 SEC. 2. APPLICATION OF ACCIDENT AND HEALTH PLANS 

2 TO ELIGIBLE BENEFICIARIES. 

3 (a) EXCLUSION OF CONTRIBUTIONS.—Section 106 of 

4 the Internal Revenue Code of 1986 (relating to contribu5 tions by employer to accident and health plans) is amend6 ed by adding at the end the following new subsection: 

7 ‘‘(f) COVERAGE PROVIDED FOR ELIGIBLE BENE8 FICIARIES OF EMPLOYEES.— 

9 ‘‘(1) IN GENERAL.—Subsection (a) shall apply 

10 with respect to any eligible beneficiary of the em11 ployee. 

12 ‘‘(2) ELIGIBLE BENEFICIARY.—For purposes of 

13 this subsection, the term ‘eligible beneficiary’ means 

14 any individual who is eligible to receive benefits or 

15 coverage under an accident or health plan.’’. 

16 (b) EXCLUSION OF AMOUNTS EXPENDED FOR MED17 ICAL CARE.—The first sentence of section 105(b) of such 

18 Code (relating to amounts expended for medical care) is 

19 amended— 

20 (1) by striking ‘‘and his dependents’’ and in21 serting ‘‘his dependents’’, and 

22 (2) by inserting before the period the following: 

23 ‘‘and any eligible beneficiary (within the meaning of 

24 section 106(f)) with respect to the taxpayer’’. 

25 (c) PAYROLL TAXES.— 


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1 (1) Section 3121(a)(2) of such Code is amend2 ed— 

3 (A) by striking ‘‘or any of his dependents’’ 

4 in the matter preceding subparagraph (A) and 

5 inserting ‘‘, any of his dependents, or any eligi6 ble beneficiary (within the meaning of section 

7 106(f)) with respect to the employee’’, 

8 (B) by striking ‘‘or any of his dependents,’’ 

9 in subparagraph (A) and inserting ‘‘, any of his 

10 dependents, or any eligible beneficiary (within 

11 the meaning of section 106(f)) with respect to 

12 the employee,’’, and 

13 (C) by striking ‘‘and their dependents’’ 

14 both places it appears and inserting ‘‘and such 

15 employees’ dependents and eligible beneficiaries 

16 (within the meaning of section 106(f))’’. 

17 (2) Section 3231(e)(1) of such Code is amend18 ed— 

19 (A) by striking ‘‘or any of his dependents’’ 

20 and inserting ‘‘, any of his dependents, or any 

21 eligible beneficiary (within the meaning of sec22 tion 106(f)) with respect to the employee,’’, and 

23 (B) by striking ‘‘and their dependents’’ 

24 both places it appears and inserting ‘‘and such 


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1 employees’ dependents and eligible beneficiaries 

2 (within the meaning of section 106(f))’’. 

3 (3) Section 3306(b)(2) of such Code is amend4 ed— 

5 (A) by striking ‘‘or any of his dependents’’ 

6 in the matter preceding subparagraph (A) and 

7 inserting ‘‘, any of his dependents, or any eligi8 ble beneficiary (within the meaning of section 

9 106(f)) with respect to the employee,’’, 

10 (B) by striking ‘‘or any of his dependents’’ 

11 in subparagraph (A) and inserting ‘‘, any of his 

12 dependents, or any eligible beneficiary (within 

13 the meaning of section 106(f)) with respect to 

14 the employee’’, and 

15 (C) by striking ‘‘and their dependents’’ 

16 both places it appears and inserting ‘‘and such 

17 employees’ dependents and eligible beneficiaries 

18 (within the meaning of section 106(f))’’. 

19 (4) Section 3401(a) of such Code is amended 

20 by striking ‘‘or’’ at the end of paragraph (22), by 

21 striking the period at the end of paragraph (23) and 

22 inserting ‘‘; or’’, and by inserting after paragraph 

23 (23) the following new paragraph: 

24 ‘‘(24) for any payment made to or for the ben25 efit of an employee or any eligible beneficiary (within 


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1 the meaning of section 106(f)) if at the time of such 

2 payment it is reasonable to believe that the employee 

3 will be able to exclude such payment from income 

4 under section 106 or under section 105 by reference 

5 in section 105(b) to section 106(f).’’. 

6 (d) EFFECTIVE DATE.—The amendments made by 

7 this section shall apply to taxable years beginning after 

8 December 31, 2009. 

9 SEC. 3. EXPANSION OF DEPENDENCY FOR PURPOSES OF 

10 DEDUCTION FOR HEALTH INSURANCE COSTS 

11 OF SELF-EMPLOYED INDIVIDUALS. 

12 (a) IN GENERAL.—Paragraph (1) of section 162(l) 

13 of the Internal Revenue Code of 1986 (relating to special 

14 rules for health insurance costs of self-employed individ15 uals) is amended to read as follows: 

16 ‘‘(1) ALLOWANCE OF DEDUCTION.—In the case 

17 of a taxpayer who is an employee within the mean18 ing of section 401(c)(1), there shall be allowed as a 

19 deduction under this section an amount equal to the 

20 amount paid during the taxable year for insurance 

21 which constitutes medical care for— 

22 ‘‘(A) the taxpayer, 

23 ‘‘(B) the taxpayer’s spouse, 

24 ‘‘(C) the taxpayer’s dependents, and 

25 ‘‘(D) any individual who— 


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1 ‘‘(i) satisfies the age requirements of 

2 section 152(c)(3)(A), 

3 ‘‘(ii) bears a relationship to the tax4 payer described in section 152(d)(2)(H), 

5 and 

6 ‘‘(iii) meets the requirements of sec7 tion 152(d)(1)(C), and 

8 ‘‘(E) one individual who— 

9 ‘‘(i) does not satisfy the age require10 ments of section 152(c)(3)(A), 

11 ‘‘(ii) bears a relationship to the tax12 payer described in section 152(d)(2)(H), 

13 ‘‘(iii) meets the requirements of sec14 tion 152(d)(1)(D), and 

15 ‘‘(iv) is not the spouse of the taxpayer 

16 and does not bear any relationship to the 

17 taxpayer described in subparagraphs (A) 

18 through (G) of section 152(d)(2).’’. 

19 (b) CONFORMING AMENDMENT.—Subparagraph (B) 

20 of section 162(l)(2) of such Code is amended by inserting 

21 ‘‘, any dependent, or individual described in subparagraph 

22 (D) or (E) of paragraph (1) with respect to’’ after 

23 ‘‘spouse’’. 


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

2 this section shall apply to taxable years beginning after 

3 December 31, 2009. 

4 SEC. 4. EXTENSION TO ELIGIBLE BENEFICIARIES OF SICK 

5 AND ACCIDENT BENEFITS PROVIDED TO 

6 MEMBERS OF A VOLUNTARY EMPLOYEES’ 

7 BENEFICIARY ASSOCIATION AND THEIR DE8 PENDENTS. 

9 (a) IN GENERAL.—Section 501(c)(9) of the Internal 

10 Revenue Code of 1986 (relating to list of exempt organiza11 tions) is amended by adding at the end the following new 

12 sentence: ‘‘For purposes of providing for the payment of 

13 sick and accident benefits to members of such an associa14 tion and their dependents, the term ‘dependents’ shall in15 clude any individual who is an eligible beneficiary (within 

16 the meaning of section 106(f)), as determined under the 

17 terms of a medical benefit, health insurance, or other pro18 gram under which members and their dependents are enti19 tled to sick and accident benefits.’’. 

20 (b) EFFECTIVE DATE.—The amendments made by 

21 this section shall apply to taxable years beginning after 

22 December 31, 2009. 


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1 SEC. 5. FLEXIBLE SPENDING ARRANGEMENTS AND HEALTH 

2 REIMBURSEMENT ARRANGEMENTS. 

3 The Secretary of Treasury shall issue guidance of 

4 general applicability providing that medical expenses that 

5 otherwise qualify— 

6 (1) for reimbursement from a flexible spending 

7 arrangement under regulations in effect on the date 

8 of the enactment of this Act may be reimbursed 

9 from an employee’s flexible spending arrangement, 

10 notwithstanding the fact that such expenses are at11 tributable to any individual who is not the employ12 ee’s spouse or dependent (within the meaning of sec13 tion 105(b) of the Internal Revenue Code of 1986) 

14 but is an eligible beneficiary (within the meaning of 

15 section 106(f) of such Code) under the flexible 

16 spending arrangement with respect to the employee, 

17 and 

18 (2) for reimbursement from a health reimburse19 ment arrangement under regulations in effect on the 

20 date of the enactment of this Act may be reimbursed 

21 from an employee’s health reimbursement arrange22 ment, notwithstanding the fact that such expenses 

23 are attributable to an individual who is not a spouse 

24 or dependent (within the meaning of section 105(b) 

25 of such Code) but is an eligible beneficiary (within 

26 the meaning of section 106(f) of such Code) under 


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1 the health reimbursement arrangement with respect 

2 to the employee. 

3 SEC. 6. EXTENSION OF QUALIFIED MEDICAL EXPENSES 

4 FROM HEALTH SAVINGS ACCOUNTS. 

5 (a) IN GENERAL.—Subparagraph (A) of section 

6 223(d)(2) of the Internal Revenue Code of 1986 (relating 

7 to qualified medical expenses) is amended— 

8 (1) by striking ‘‘and any dependent’’ and in9 serting ‘‘any dependent’’, and 

10 (2) by inserting ‘‘, and any qualified bene11 ficiary’’ after ‘‘thereof)’’. 

12 (b) QUALIFIED BENEFICIARY.—Section 223(d)(2) of 

13 such Code is amended by inserting after subparagraph (C) 

14 the following new subparagraph: 

15 ‘‘(D) QUALIFIED BENEFICIARY.—For pur16 poses of subparagraph (A), the term ‘qualified 

17 beneficiary’ means any individual who is de18 scribed in subparagraph (D) or (E) of section 

19 162(l)(1).’’. 

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

21 this section shall apply to taxable years beginning after 

22 December 31, 2009. 

Æ 


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