SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘COBRA Coverage Ex-
tension and Affordability Act of 2001’’.
SEC. 2. EXTENSION OF BASIC COBRA CONTINUATION PE-
RIOD FROM 18 MONTHS TO 5 YEARS.
(a) INTERNAL REVENUE CODE AMENDMENTS.—Sec-
tion 4980B(f)(2) of the Internal Revenue Code of 1986
is amended—
(1) by amending subclause (I) of subparagraph
(B)(i) to read as follows:
‘‘(I) GENERAL
RULE.—In the
case of a qualifying event not de-
scribed in paragraph (3)(F), the date
which is 60 months after the date of
the qualifying event.’’;
(2) in subparagraph (B)(i)—
(A) by striking subclause (II);
(B) by striking subclauses (IV) and all
that follows;
(C) by redesignating subclause (III) as
subclause (II); and
(D) in subclause (II), as so redesignated,
by inserting before the period at the end the
following: ‘‘or, in such case and if later, 60
months after the date of the qualifying event’’;
and
(3) by striking the last sentence in subpara-
graph (C).
(b) ERISA AMENDMENTS.—Section 602 of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1162) is amended—
(1) by amending clause (i) of paragraph (2)(A)
to read as follows:
‘‘(i) GENERAL RULE.—In the case of
a qualifying event not described in section
603(6), the date which is 60 months after
the date of the qualifying event.’’;
(2) in paragraph (2)(A)—
(A) by striking clause (ii);
(B) by striking clause (iv) and all that fol-
lows;
(C) by redesignating clause (iii) as clause
(ii); and
(D) in clause (ii), as so redesignated, by
striking ‘‘36 months after the date of the death
of the covered employee’’ and inserting ‘‘the
later of (I) 36 months after the date of the
death of the covered employee, or (II) 60
months after the date of the qualifying event’’;
and
(3) by striking the last sentence in paragraph
(3).
(c) PHSA AMENDMENTS.—Section 2202 of the Pub-
lic Health Service Act 429 U.S.C. 300bb–2) is amended—
(1) by amending subparagraph (A) of para-
graph (2)(A) to read as follows:
‘‘(A) MAXIMUM REQUIRED PERIOD.—The
date which is 60 months after the date of the
qualifying event.’’; and
(2) by striking the last sentence of paragraph
(3).
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning on or after
January 1, 2002, with respect to individuals whose period
of extended coverage has not otherwise expired as of the
first day of the first such plan year.
SEC. 3. FURTHER EXTENSION OF COBRA CONTINUATION
COVERAGE FOR INDIVIDUALS AGE 55 OR
OLDER.
(a) INTERNAL REVENUE CODE AMENDMENTS.—Sec-
tion 4980B(f)(2) of the Internal Revenue Code of 1986
is amended—
(1) in subparagraph (B)(i), by inserting ‘‘.—
Subject to subparagraph (F)(i)—’’ after ‘‘PERIOD’’;
(2) in subparagraph (C)(i), by inserting ‘‘sub-
ject to subparagraph (F)(ii),’’ after ‘‘(i)’’; and
(3) by adding at the end the following new sub-
paragraph:
‘‘(F) EXTENSION OF COVERAGE FOR INDI-
VIDUALS AGE 55 OR OLDER.—In the case of an
individual who attains the age of 55 on the date
the period of extended coverage under this sec-
tion would otherwise end by virtue of the appli-
cation of a durational limitation in subpara-
graph (B)(i)—
‘‘(i) such durational limitations shall
no longer apply to the individual; and
‘‘(ii) during the period of any ex-
tended coverage solely by reason of the ap-
plication of clause (i), in applying subpara-
graph (C)(i) any reference in such sub-
paragraph to ‘102 percent’ is deemed a
reference to ‘125 percent’.’’.
(b) ERISA AMENDMENTS.—Section 602 of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1162) is amended—
(1) in paragraph (2)(A), by inserting ‘‘Subject
to paragraph (6)(A)—’’ after ‘‘PERIOD.—’’;
(2) in paragraph (3)(A), by inserting ‘‘subject
to paragraph (6)(B),’’ after ‘‘(A)’’; and
(3) by adding at the end the following new
paragraph:
‘‘(6) EXTENSION OF COVERAGE FOR INDIVID-
UALS AGE 55 OR OLDER.—In the case of an indi-
vidual who attains the age of 55 on the date the pe-
riod of extended coverage under this section would
otherwise end by virtue of the application of a
durational limitation in paragraph (2)(A)—
‘‘(A) such durational limitations shall no
longer apply to the individual; and
‘‘(B) during the period of any extended
coverage solely by reason of the application of
subparagraph (A), in applying paragraph
(3)(A) any reference in such paragraph to ‘102
percent’ is deemed a reference to ‘125 per-
cent’.’’.
(c) PHSA AMENDMENTS.—Section 2202 of the Pub-
lic Health Service Act (42 U.S.C. 300bb–2) is amended—
(1) in paragraph (2)(A), by inserting ‘‘Subject
to paragraph (6)(A)—’’ after ‘‘PERIOD.—’’;
(2) in paragraph (3)(A), by inserting ‘‘subject
to paragraph (6)(B),’’ after ‘‘(A)’’; and
(3) by adding at the end the following new
paragraph:
‘‘(6) EXTENSION OF COVERAGE FOR INDIVID-
UALS AGE 55 OR OLDER.—In the case of an indi-
vidual who attains the age of 55 on the date the pe-
riod of extended coverage under this section would
otherwise end by virtue of the application of a
durational limitation in paragraph (2)(A)—
‘‘(A) such durational limitations shall no
longer apply to the individual; and
‘‘(B) during the period of any extended
coverage solely by reason of the application of
subparagraph (A), in applying paragraph
(3)(A) any reference in such paragraph to ‘102
percent’ is deemed a reference to ‘125 per-
cent’.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section apply with respect to plan years beginning on
or after January 1, 2002, with respect to individuals
whose period of extended coverage otherwise ends on or
after first day of the first such plan year.
SEC. 4. 50 PERCENT REFUNDABLE TAX CREDIT TOWARDS
PREMIUMS FOR COBRA CONTINUATION COV-
ERAGE.
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to nonrefundable personal credits) is
amended by inserting after section 25A the following new
section:
‘‘SEC. 25B. COBRA CONTINUATION COVERAGE PREMIUMS.
‘‘(a) IN GENERAL.—In the case of an individual,
there shall be allowed as a credit against the tax imposed
by this chapter for the taxable year an amount equal to
50 percent of the amount paid during such year as con-
tinuation health coverage premiums.
‘‘(b) CONTINUATION HEALTH COVERAGE PREMIUMS
DEFINED.—For purposes of this section, the term ‘con-
tinuation health coverage premiums’ means, for any pe-
riod, premiums paid for continuation coverage (as defined
in section 4980B(f)) under a group health plan for such
period but only if failure to offer such coverage to the tax-
payer for such period would constitute a failure by such
health plan to meet the requirements of section
4980B(f).’’
(b) CLERICAL AMENDMENT.—The table of sections
for subpart A of part IV of subchapter A of chapter 1
of such Code is amended by inserting after the item relat-
ing to section 25A the following new item:
‘‘Sec. 25B. COBRA continuation coverage premiums.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001, for premiums for months beginning
with January 2002.
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