‘‘(D) 
QUALIFIED
HEALTH
INSURANCE 
PREMIUMS.—The term ‘qualified health insur-
ance premiums’ means premiums for coverage 
for the eligible retired public safety officer, his 
spouse, and dependents, by an accident or 
health insurance plan or qualified long-term 
care insurance contract (as defined in section 
7702B(b)). 
‘‘(5) SPECIAL
RULES.—For purposes of this 
subsection— 
‘‘(A) DIRECT PAYMENT TO INSURER RE-
QUIRED.—Paragraph (1) shall only apply to a 
distribution if payment of the premiums is 
made directly to the provider of the accident or 
health insurance plan or qualified long-term 
care insurance contract by deduction from a 
distribution from the eligible retirement plan. 
‘‘(B) RELATED PLANS TREATED AS 1.—All 
eligible retirement plans of an employer shall be 
treated as a single plan. 
‘‘(6) ELECTION DESCRIBED.— 
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), an election is described in this para-
graph if the election is made by an employee 
after separation from service with respect to
amounts not distributed from an eligible retire-
ment plan to have amounts from such plan dis-
tributed in order to pay for qualified health in-
surance premiums. 
‘‘(B) SPECIAL RULE.—A plan shall not be 
treated as violating the requirements of section 
401, or as engaging in a prohibited transaction 
for purposes of section 503(b), merely because 
it provides for an election with respect to 
amounts that are otherwise distributable under 
the plan or merely because of a distribution 
made pursuant to an election described in sub-
paragraph (A). 
‘‘(7) COORDINATION WITH MEDICAL EXPENSE 
DEDUCTION.—The amounts excluded from gross in-
come under paragraph (1) shall not be taken into 
account under section 213. 
‘‘(8) COORDINATION
WITH
DEDUCTION
FOR 
HEALTH INSURANCE COSTS OF SELF-EMPLOYED IN-
DIVIDUALS.—The amounts excluded from gross in-
come under paragraph (1) shall not be taken into 
account under section 162(l).’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 403(a) of such Code (relating to 
taxability of beneficiary under a qualified annuity
plan) is amended by inserting after paragraph (1) 
the following new paragraph: 
‘‘(2) SPECIAL RULE FOR HEALTH AND LONG- 
TERM CARE INSURANCE.—To the extent provided in 
section 402(l), paragraph (1) shall not apply to the 
amount distributed under the contract which is oth-
erwise includible in gross income under this sub-
section.’’. 
(2) Section 403(b) of such Code (relating to 
taxability of beneficiary under annuity purchased by 
section 501(c)(3) organization or public school) is 
amended by inserting after paragraph (1) the fol-
lowing new paragraph: 
‘‘(2) SPECIAL RULE FOR HEALTH AND LONG- 
TERM CARE INSURANCE.—To the extent provided in 
section 402(l), paragraph (1) shall not apply to the 
amount distributed under the contract which is oth-
erwise includible in gross income under this sub-
section.’’. 
(3) Section 457(a) of such Code (relating to 
year of inclusion in gross income) is amended by 
adding at the end the following new paragraph: 
‘‘(3) SPECIAL RULE FOR HEALTH AND LONG- 
TERM CARE INSURANCE.—To the extent provided in 
section 402(l), paragraph (1) shall not apply to
amounts otherwise includible in gross income under 
this subsection.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to distributions in taxable years 
beginning after December 31, 2004. 
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