To amend the Internal Revenue Code of 1986 to allow a refundable credit against income tax to subsidize the cost of COBRA continuation coverage for certain individuals.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Health Care COBRA OffSet Tax Savings 
Act of 2005'' or the ``Health Care COSTS Act of 2005'' .

SEC. 2. REFUNDABLE CREDIT TO SUBSIDIZE COST OF COBRA CONTINUATION 
              COVERAGE FOR CERTAIN INDIVIDUALS.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to refundable credits) 
is amended by inserting after section 35 the following new section:

``SEC. 35A. CREDIT TO SUBSIDIZE COST OF COBRA CONTINUATION COVERAGE FOR 
              CERTAIN INDIVIDUALS.

    ``(a) Allowance of Credit.--In the case of an eligible individual, 
there shall be allowed as a credit against the tax imposed by this 
subtitle an amount equal to 50 percent of the amount of the premium 
which would (but for this section) be required to be paid by such 
individual during the taxable year for COBRA continuation coverage 
under a group health plan.
    ``(b) Eligible Individual.--For purposes of this section--
            ``(1) In general.--The term `eligible individual' means any 
        individual--
                    ``(A) who receives COBRA continuation coverage 
                under a group health plan by reason of a qualifying 
                event described in section 4980B(f)(3), and
                    ``(B) the modified adjusted gross income (as 
                defined in section 221(b)(2)(C)) of whom for the 
                taxable year does not exceed the applicable amount.
            ``(2) Applicable amount.--For purposes of paragraph (1), 
        the applicable amount is $30,000 increased by $10,000--
                    ``(A) for the spouse of the taxpayer, and
                    ``(B) for each individual who is a dependent (as 
                defined in section 152) of the taxpayer.
    ``(c) Assignment of Credit to Plan Administrator.--The Secretary 
shall prescribe regulations which permit eligible individuals to assign 
the credit under this section to the administrator of the plan under 
which COBRA continuation coverage is being provided. The credit so 
assigned by an individual shall be treated by the administrator as a 
premium payment by such individual.
    ``(d) Other Definitions.--For purposes of this section--
            ``(1) Administrator.--The term `administrator' has the 
        meaning given such term in section 3(16) of the Employee 
        Retirement Income Security Act of 1974.
            ``(2) COBRA continuation coverage.--The term `COBRA 
        continuation coverage' means the first 18 months of 
        continuation coverage provided pursuant to--
                    ``(A) section 4980B (other than subsection (f)(1) 
                of such section insofar as it relates to pediatric 
                vaccines),
                    ``(B) title XXII of the Public Health Service Act,
                    ``(C) part 6 of subtitle B of title I of the 
                Employee Retirement Income Security Act of 1974 (other 
                than under section 609),
                    ``(D) section 8905a of title 5, United States Code, 
                or
                    ``(E) a State program that provides continuation 
                coverage comparable to such continuation coverage.
            ``(3) Group health plan.--The term `group health plan' has 
        the meaning given such term in section 9832(a).''.
    (b) Clerical Amendment.--The table of sections for such subpart C 
is amended by inserting after the item relating to section 35 the 
following new item:

``Sec. 35A. Credit to subsidize cost of COBRA continuation coverage for 
                            certain individuals.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 3. CHANGE IN COBRA NOTICE.

    (a) Notices.--
            (1) General notices.--In the case of notices provided under 
        sections 606 of the Employee Retirement Income Security Act of 
        1974, section 2206 of the Public Health Service Act, and 
        section 4980B(f)(6) of the Internal Revenue Code of 1986 with 
        respect to individuals who become entitled to elect COBRA 
        continuation coverage after the date of the enactment of this 
        Act, such notices shall include an additional notification to 
        the recipient of the availability of the subsidy provided under 
        section 35A of the Internal Revenue Code of 1986.
            (2) Alternative notice.--In the case of COBRA continuation 
        coverage to which the notice provisions described in paragraph 
        (1) do not apply, the Secretary of Labor shall, in coordination 
        with administrators of the group health plans (or other 
        entities) who provide or administer the COBRA continuation 
        coverage involved, assure provision of such notice.
            (3) Form.--The requirement of the additional notification 
        under this subsection may be met by amendment of existing 
        notice forms or by inclusion of a separate document with the 
        notice otherwise required.
    (b) Specific Requirements.--Each additional notification under 
subsection (a) shall include--
            (1) a description of the eligibility requirements for 
        premium assistance under section 35A of the Internal Revenue 
        Code of 1986,
            (2) the name, address, and telephone number necessary to 
        contact the plan administrator and any other person maintaining 
        relevant information in connection with the premium assistance, 
        and
            (3) the following statement displayed in a prominent 
        manner: ``You may be eligible to receive assistance with 
        payment of 50 percent of your COBRA continuation coverage 
        premiums for a duration of not to exceed 18 months.''.
    (c) Model Notices.--The Secretary of Labor shall prescribe models 
for the additional notification required under this section.

Summary: Health Care COBRA OffSet Tax Savings Act of 2005 or the Health Care COSTS Act of 2005 - Amends the Internal Revenue Code to allow certain individual taxpayers a refundable tax credit for 50% of the premium for COBRA continuation coverage under a group health plan. Requires notice of the availability of this tax credit to individuals entitled to COBRA continuation coverage.