I
106TH CONGRESS
1ST SESSION
H. R. 275
To amend the Internal Revenue Code of 1986 to provide for an exception
from penalty tax and exclusion from income for certain amounts with-
drawn from certain retirement plans for qualified long-term care insur-
ance and a credit for taxpayers with certain persons requiring custodial
care in their households.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 6, 1999
Mr. SMITH of New Jersey (for himself and Mr. SHAYS) 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 an exception from penalty tax and exclusion from
income for certain amounts withdrawn from certain re-
tirement plans for qualified long-term care insurance and
a credit for taxpayers with certain persons requiring
custodial care in their households.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE AND AMENDMENT OF 1986 CODE.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Long-Term Care Advancement Act of 1999’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
SEC. 2. EXCEPTION FROM PENALTY TAX AND EXCLUSION
FROM INCOME FOR AMOUNTS WITHDRAWN
FROM CERTAIN RETIREMENT PLANS FOR
QUALIFIED LONG-TERM CARE INSURANCE.
(a) EXCEPTION FROM PENALTY TAX.—Paragraph
(2) of section 72(t) (relating to 10-percent additional tax
on early distributions from qualified retirement plans) is
amended by adding at the end the following new subpara-
graph:
‘‘(G) PREMIUMS
FOR
QUALIFIED
LONG-
TERM CARE INSURANCE CONTRACTS.—
‘‘(i) IN
GENERAL.—Distributions to
an individual from an individual retirement
plan, or from amounts attributable to em-
ployer contributions made pursuant to
elective deferrals described in subpara-
graph (A) or (C) of section 402(g)(3), to
the extent such distributions do not exceed
the premiums for a qualified long-term
care insurance contract for such individual
or the spouse of such individual. In apply-
ing subparagraph (B), such premiums
shall be treated as amounts not paid for
medical care.
‘‘(ii) NO DOUBLE BENEFIT.—No de-
duction shall be allowed under section 213
for any amount described in this subpara-
graph unless the taxpayer elects to have
this subparagraph not apply to such
amount.
‘‘(iii) QUALIFIED
LONG-TERM
CARE
INSURANCE CONTRACT.—For purposes of
this subparagraph, the term ‘qualified
long-term care insurance contract’ has the
meaning given such term by section
7702B(b), except that such term includes
only such contracts which are licensed for
sale in the State in which the policy was
purchased.’’
(b) EXCLUSION FROM INCOME FOR AMOUNTS WITH-
DRAWN FROM CERTAIN PLANS TO PAY LONG-TERM
CARE PREMIUMS.—Part III of subchapter B of chapter
1 (relating to items specifically excluded from gross in-
come) is amended by redesignating section 139 as section
140 and by inserting after section 138 the following new
section:
‘‘SEC. 139. DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT
PLANS 
AND 
SECTION 
401(k) 
PLANS 
FOR
LONG-TERM CARE INSURANCE.
‘‘(a) GENERAL RULE.—The amount which would
(but for this section) be includible in the gross income of
an individual for the taxable year by reason of distribu-
tions from any individual retirement plan (within the
meaning of section 7701(a)(37)) or qualified cash or de-
ferred arrangement (within the meaning of section
401(k)) shall be reduced (but not below zero) by the eligi-
ble long-term care premiums (as defined in section
213(d)(10)) paid by such individual during such taxable
year for any qualified long-term care insurance contract
covering such individual or the spouse of such individual.
‘‘(b) SPECIAL RULES FOR SECTION 401(k) PLANS.—
‘‘(1) WITHDRAWALS
CANNOT
EXCEED
ELEC-
TIVE CONTRIBUTIONS UNDER QUALIFIED CASH OR
DEFERRED ARRANGEMENT.—This section shall not
apply to any distribution from a qualified cash or
deferred arrangement (within the meaning of section
401(k)) 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 DISQUALI-
FICATION.—A plan shall not be treated as failing to
satisfy the requirements of section 401, and an ar-
rangement shall not be treated as failing to be a
qualified cash or deferred arrangement (within the
meaning of section 401(k)), merely because under
the plan or arrangement distributions are permitted
which are excludable from gross income by reason of
this section.
‘‘(c) QUALIFIED LONG-TERM CARE INSURANCE CON-
TRACT.—For purposes of this section, the term ‘qualified
long-term care insurance contract’ has the meaning given
such term by section 7702B(b), except that such term in-
cludes only such contracts which are licensed for sale in
the State in which the taxpayer purchased the policy.’’
(c) DISTRIBUTIONS
PERMITTED
FROM
CERTAIN
PLANS TO PAY LONG-TERM CARE PREMIUMS.—
(1) Section 401(k)(2)(B)(i) is amended by
striking ‘‘or’’ at the end of subclause (III), by strik-
ing ‘‘and’’ at the end of subclause (IV) and inserting
‘‘or’’, and by inserting after subclause (IV) the fol-
lowing new subclause: