I 111th CONGRESS 1st Session H. R. 1413 IN THE HOUSE OF REPRESENTATIVES March 10, 2009 Mr. Crowley (for himself and Mr. McHugh) 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 allow certain public employees a deduction for distributions from governmental plans for health and long-term care insurance, and for other purposes.

1.

Short title

This Act may be cited as the Healthcare Enhancement for Local Public Servants Act of 2009.

2.

Distributions from governmental plans for health and long-term care insurance allowed for other public employees

(a)

In general

(1)

Distributions allowed for other public employees

Paragraph (1) of section 402(l) of the Internal Revenue Code of 1986 (relating to distributions from governmental plans for health and long-term care insurance) is amended by striking retired public safety officer who makes the election described in paragraph (6) and inserting retired public employee. (2)

Retired public employee

(A)Paragraph (4) of section 402(l) of such Code is amended— (i)by striking (B) Eligible retired public safety officer.—The term eligible retired public safety officer means and all that follows through the period at the end and inserting the following: (B)

Eligible retired public employee

(i)

In general

The term eligible retired public employee means an individual, who by reason of disability or attainment of the earliest date on which he may retire and receive a retirement benefit from the governmental plan which is not reduced by reason of the individual’s age or years of service, separates from service as a public safety officer, public school personnel, or other public employee with the employer who maintains the eligible retirement plan from which distributions subject to paragraph (1) are made., (ii)by redesignating subparagraph (C) as clause (ii), by moving such clause (as so redesignated) 2 ems to the right, and by inserting after such clause (as so redesignated) the following new clauses: (iii)

Public school personnel

The term public school personnel shall have the same meaning given such term by section 4151(10) of the elementary and secondary education Act of 1965 (20 U.S.C. 7161(10)) whether employed by an institution of higher education (as defined in section 101 of the Higher Education Act of 1965 (20 U.S.C. 1001) or a local educational agency (as defined in section 9101 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 7801(26)). (iv)

Public employee

The term public employee means any employee of a State, political subdivision of a State, or agency or instrumentality of a State or political subdivision of a State.. (3)

Conforming amendment

(A)Subsection (l) of section 402 of such Code (as amended by this section) is amended by striking retired public safety officer in each place it appears and inserting retired public employee. (B)Subparagraph (D) of section 402(l)(4) of such Code is redesignated as subparagraph (C). (b)

Effective Date

The amendments made by this section shall apply to distributions in taxable years beginning after December 31, 2009.

3.

Distribution allowed as deduction rather than excluded from gross income

(a)

In general

(1)

Deduction allowed

Paragraph (1) of section 402(l) of the Internal Revenue Code of 1986 is amended by striking gross income of such employee for such taxable year does not include and all that follows through the period at the end and inserting the following: there shall be allowed as a deduction from gross income for the taxable year an amount equal to the aggregate amount of distributions from an eligible retirement plan of the individual in the taxable year to the extent that such amount does not exceed the amount paid by such employee or paid on behalf of such employee by deductions from distributions by the eligible retirement plan to the providers of the accident or health plans or qualified long-term care contracts for qualified health premiums for such taxable year. (2)

Deduction with respect to surviving spouse

Subsection (l) of section 402 of such Code is amended by striking paragraph (6) and inserting the following new paragraph: (6)

Special rule for surviving spouse

In the case of a deceased individual with respect to whom a deduction was allowed under paragraph (1) for the taxable year closed by reason of the individual’s death, the surviving spouse of such individual shall be treated as the employee with respect to the plan for purposes of paragraph (1) for all subsequent taxable years.. (b)

Deduction allowed whether or not taxpayer itemizes

Subsection (a) of section 62 of such Code is amended by inserting after paragraph (21) the following new paragraph: (22)

Distributions from governmental retirement plans for health and long-term care insurance for public employees

The deduction allowed by section 402(l).. (c)

Conforming Amendments

(1)Paragraph (1) of section 402(l) of such Code is amended by striking of the employee, his spouse, or dependents (as defined in section 152). (2)Paragraph (2) of section 402(l) of such Code is amended by striking The amount which may be excluded from gross income for the taxable year by reason of paragraph (1) and inserting The amount allowable as a deduction under paragraph (1) for the taxable year. (3)Paragraph (3) of section 402(l) of such Code is amended to read as follows: (3)

Distributions must be included in gross income

An amount shall be treated as a distribution for purposes of paragraph (1) only to the extent that such amount is included in gross income for the taxable year.. (4)Paragraph (7) and (8) of section 402(l) of such Code are each amended by striking The amounts excluded from gross income and inserting Any amount allowable as a deduction. (5)Subsection (a) of section 403 of such Code is amended by striking paragraph (2). (6)Subsection (a) of section 457 of such Code is amended by striking paragraph (3). (d)

Effective Date

The amendments made by this section shall apply to distributions in taxable years beginning after December 31, 2009.

4.

Further modifications relating to 402(l)

(a)

In General

(1)Subsection (l) of section 402 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph: (9)

Cost-of-living adjustment

In the case of taxable years beginning after December 31, 2009, the Secretary shall adjust the $3,000 amount under paragraph (2) at the same time and in the same manner as under section 415(d), except that the base period shall be the calendar quarter beginning July 1, 2008, and any increase under this paragraph which is not a multiple of $100 shall be rounded to the next lowest multiple of $100.. (2)Subparagraph (A) of section 402(l)(4) of such Code (defining eligible retirement plan) is amended to read as follows: (A)

Eligible retirement plan

For purposes of paragraph (1), the term eligible retirement plan means a plan described in— (i)subsection (c)(8)(B)(iii) (and is a governmental plan within the meaning of section 414(d)), (ii)subsection (c)(8)(B)(iv) (and is maintained by an employer which is a State, a political subdivision of a State, or an agency or instrumentality of a State or political subdivision of a State), (iii)subsection (c)(8)(B)(v), or (iv)subsection (c)(8)(B)(vi) (and is maintained by an employer which is a State, a political subdivision of a State, or an agency or instrumentality of a State or political subdivision of a State).. (3)Subparagraph (C) of section 402(l)(4) of such Code (as redesignated by this Act) is amended— (A)by inserting (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) after dependents, and (B)by striking insurance. (4)Paragraph (5) of section 402(l) of such Code is amended to read as follows: (5)

Related plans treated as 1 plan

For purposes of this subsection, all eligible retirement plans of an employer shall be treated as a single plan.. (b)

Effective Date

The amendments made by this section shall apply to distributions in taxable years beginning after December 31, 2009.