470 
aggregate amounts distributed from 
an eligible retirement plan in a tax-
able year (up to the amount excluded 
under paragraph (1)) shall be treated 
as includible in gross income (with-
out regard to subparagraph (A)) to 
the extent that such amount does not 
exceed the aggregate amount which 
would have been so includible if all 
amounts distributed from all eligible 
retirement plans were treated as 1 
contract for purposes of determining 
the inclusion of such distribution 
under section 72. Proper adjustments 
shall be made in applying section 72 
to other distributions in such taxable 
year and subsequent taxable years. 
‘‘(4) DEFINITIONS.—For purposes of 
this subsection— 
‘‘(A) ELIGIBLE RETIREMENT PLAN.— 
For purposes of paragraph (1), the 
term ‘eligible retirement plan’ means 
a 
governmental 
plan 
(within 
the 
meaning of section 414(d)) which is
471 
described in clause (iii), (iv), (v), or 
(vi) of subsection (c)(8)(B). 
‘‘(B) 
ELIGIBLE
RETIRED
PUBLIC 
SAFETY
OFFICER.—The term ‘eligible 
retired public safety officer’ means an 
individual who, by reason of dis-
ability or attainment of normal retire-
ment age, is separated from service 
as a public safety officer with the em-
ployer who maintains the eligible re-
tirement plan from which distribu-
tions subject to paragraph (1) are 
made. 
‘‘(C) PUBLIC SAFETY OFFICER.—The 
term ‘public safety officer’ shall have 
the same meaning given such term by 
section 1204(8)(A) of the Omnibus 
Crime Control and Safe Streets Act of 
1968 (42 U.S.C. 3796b(8)(A)). 
‘‘(D) QUALIFIED HEALTH INSURANCE 
PREMIUMS.—The term ‘qualified health 
insurance 
premiums’ 
means 
pre-
miums for coverage for the eligible 
retired 
public 
safety 
officer, 
his 
spouse, and dependents, by an acci-
472 
dent 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 
REQUIRED.—Paragraph (1) shall only 
apply to a distribution if payment of 
the premiums is made directly to the 
provider of the accident or health in-
surance 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 
paragraph (1), an election is de-
scribed in this paragraph if the elec-
tion is made by an employee after 
separation from service with respect
473 
to amounts not distributed from an 
eligible 
retirement 
plan 
to 
have 
amounts from such plan distributed 
in order to pay for qualified health 
insurance premiums. 
‘‘(B) SPECIAL
RULE.—A plan shall 
not be treated as violating the re-
quirements of section 401, or as en-
gaging in a prohibited transaction for 
purposes of section 503(b), merely be-
cause it provides for an election with 
respect to amounts that are otherwise 
distributable under the plan or mere-
ly because of a distribution made pur-
suant to an election described in sub-
paragraph (A). 
‘‘(7) COORDINATION
WITH
MEDICAL
EX-
PENSE DEDUCTION.—The amounts excluded 
from gross income under paragraph (1) 
shall not be taken into account under 
section 213. 
‘‘(8) COORDINATION
WITH
DEDUCTION 
FOR HEALTH INSURANCE COSTS OF SELF-EM-
PLOYED
INDIVIDUALS.—The amounts ex-
cluded from gross income under para-
474 
graph (1) shall not be taken into account 
under section 162(l).’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 403(a) of such Code (relat-
ing to taxability of beneficiary under a 
qualified annuity plan) is amended by in-
serting after paragraph (1) the following 
new paragraph: 
‘‘(2) SPECIAL
RULE
FOR
HEALTH
AND 
LONG-TERM
CARE
INSURANCE.—To the ex-
tent provided in section 402(l), paragraph 
(1) shall not apply to the amount distrib-
uted under the contract which is other-
wise includible in gross income under 
this subsection.’’. 
(2) Section 403(b) of such Code (relat-
ing to taxability of beneficiary under an-
nuity purchased by section 501(c)(3) orga-
nization 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 ex-
tent provided in section 402(l), paragraph 
(1) shall not apply to the amount distrib-