II 109th CONGRESS 1st Session S. 484 IN THE SENATE OF THE UNITED STATES March 1, 2005 Mr. Warner (for himself and Ms. Collins) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to allow Federal civilian and military retirees to pay health insurance premiums on a pretax basis and to allow a deduction for TRICARE supplemental premiums.

1.

Pretax payment of health insurance premiums by Federal civilian and military retirees

(a)

In general

Subsection (g) of section 125 of the Internal Revenue Code of 1986 (relating to cafeteria plans) is amended by adding at the end the following new paragraph: (5)

Health insurance premiums of Federal civilian and military retirees

(A)

FEHBP premiums

Nothing in this section shall prevent the benefits of this section from being allowed to an annuitant, as defined in paragraph (3) of section 8901, title 5, United States Code, with respect to a choice between the annuity or compensation referred to in such paragraph and benefits under the health benefits program established by chapter 89 of such title 5. (B)

TRICARE premiums

Nothing in this section shall prevent the benefits of this section from being allowed to an individual receiving retired or retainer pay by reason of being a member or former member of the uniformed services of the United States with respect to a choice between such pay and benefits under the health benefits programs established by chapter 55 of title 10, United States Code. . (b)

Effective date

The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

2.

Deduction for TRICARE supplemental premiums

(a)

In general

Part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to additional itemized deductions for individuals) is amended by redesignating section 224 as section 225 and by inserting after section 223 the following new section:

224.

TRICARE supplemental premiums or enrollment fees

(a)

Allowance of deduction

In the case of an individual, there shall be allowed as a deduction the amounts paid during the taxable year by the taxpayer for insurance purchased as supplemental coverage to the health benefits programs established by chapter 55 of title 10, United States Code, for the taxpayer and the taxpayer’s spouse and dependents. (b)

Coordination with medical deduction

Any amount allowed as a deduction under subsection (a) shall not be taken into account in computing the amount allowable to the taxpayer as a deduction under section 213(a).

. (b)

Deduction allowed whether or not individual itemizes other deductions

Subsection (a) of section 62 of the Internal Revenue Code of 1986 (defining adjusted gross income) is amended by redesignating paragraph (19) (as added by section 703(a) of the American Jobs Creation Act of 2004) as paragraph (20) and by inserting after paragraph (20) (as so redesignated) the following new paragraph: (21)

TRICARE supplemental premiums or enrollment fees

The deduction allowed by section 224. . (c)

Clerical amendment

The table of sections for part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by striking the last item and inserting the following new items: Sec. 224. TRICARE supplemental premiums or enrollment fees. Sec. 225. Cross reference. . (d)

Effective date

The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

3.

Implementation

(a)

FEHBP premium conversion option for Federal civilian retirees

The Director of the Office of Personnel Management shall take such actions as the Director considers necessary so that the option made possible by section 125(g)(5)(A) of the Internal Revenue Code of 1986 shall be offered beginning with the first open enrollment period, afforded under section 8905(g)(1) of title 5, United States Code, which begins not less than 90 days after the date of the enactment of this Act. (b)

TRICARE premium conversion option for military retirees

The Secretary of Defense, after consulting with the other administering Secretaries (as specified in section 1073 of title 10, United States Code), shall take such actions as the Secretary considers necessary so that the option made possible by section 125(g)(5)(B) of the Internal Revenue Code of 1986 shall be offered beginning with the first open enrollment period afforded under health benefits programs established under chapter 55 of such title, which begins not less than 90 days after the date of the enactment of this Act.