[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 1153 Introduced in Senate (IS)]

111th CONGRESS
  1st Session
                                S. 1153

To amend the Internal Revenue Code of 1986 to extend the exclusion from 
   gross income for employer-provided health coverage for employees' 
 spouses and dependent children to coverage provided to other eligible 
                 designated beneficiaries of employees.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 21, 2009

  Mr. Schumer (for himself, Ms. Cantwell, Mr. Menendez, Mr. Dodd, Mr. 
  Kerry, and Mr. Akaka) 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 extend the exclusion from 
   gross income for employer-provided health coverage for employees' 
 spouses and dependent children to coverage provided to other eligible 
                 designated beneficiaries of employees.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Tax Equity for Health Plan 
Beneficiaries Act of 2009''.

SEC. 2. APPLICATION OF ACCIDENT AND HEALTH PLANS TO ELIGIBLE 
              BENEFICIARIES.

    (a) Exclusion of Contributions.--Section 106 of the Internal 
Revenue Code of 1986 (relating to contributions by employer to accident 
and health plans) is amended by adding at the end the following new 
subsection:
    ``(f) Coverage Provided for Eligible Beneficiaries of Employees.--
            ``(1) In general.--Subsection (a) shall apply with respect 
        to any eligible beneficiary of the employee.
            ``(2) Eligible beneficiary.--For purposes of this 
        subsection, the term `eligible beneficiary' means any 
        individual who is eligible to receive benefits or coverage 
        under an accident or health plan.''.
    (b) Exclusion of Amounts Expended for Medical Care.--The first 
sentence of section 105(b) of such Code (relating to amounts expended 
for medical care) is amended--
            (1) by striking ``and his dependents'' and inserting ``his 
        dependents'', and
            (2) by inserting before the period the following: ``and any 
        eligible beneficiary (within the meaning of section 106(f)) 
        with respect to the taxpayer''.
    (c) Payroll Taxes.--
            (1) Section 3121(a)(2) of such Code is amended--
                    (A) by striking ``or any of his dependents'' in the 
                matter preceding subparagraph (A) and inserting ``, any 
                of his dependents, or any eligible beneficiary (within 
                the meaning of section 106(f)) with respect to the 
                employee'',
                    (B) by striking ``or any of his dependents,'' in 
                subparagraph (A) and inserting ``, any of his 
                dependents, or any eligible beneficiary (within the 
                meaning of section 106(f)) with respect to the 
                employee,'', and
                    (C) by striking ``and their dependents'' both 
                places it appears and inserting ``and such employees' 
                dependents and eligible beneficiaries (within the 
                meaning of section 106(f))''.
            (2) Section 3231(e)(1) of such Code is amended--
                    (A) by striking ``or any of his dependents'' and 
                inserting ``, any of his dependents, or any eligible 
                beneficiary (within the meaning of section 106(f)) with 
                respect to the employee,'', and
                    (B) by striking ``and their dependents'' both 
                places it appears and inserting ``and such employees' 
                dependents and eligible beneficiaries (within the 
                meaning of section 106(f))''.
            (3) Section 3306(b)(2) of such Code is amended--
                    (A) by striking ``or any of his dependents'' in the 
                matter preceding subparagraph (A) and inserting ``, any 
                of his dependents, or any eligible beneficiary (within 
                the meaning of section 106(f)) with respect to the 
                employee,'',
                    (B) by striking ``or any of his dependents'' in 
                subparagraph (A) and inserting ``, any of his 
                dependents, or any eligible beneficiary (within the 
                meaning of section 106(f)) with respect to the 
                employee'', and
                    (C) by striking ``and their dependents'' both 
                places it appears and inserting ``and such employees' 
                dependents and eligible beneficiaries (within the 
                meaning of section 106(f))''.
            (4) Section 3401(a) of such Code is amended by striking 
        ``or'' at the end of paragraph (22), by striking the period at 
        the end of paragraph (23) and inserting ``; or'', and by 
        inserting after paragraph (23) the following new paragraph:
            ``(24) for any payment made to or for the benefit of an 
        employee or any eligible beneficiary (within the meaning of 
        section 106(f)) if at the time of such payment it is reasonable 
        to believe that the employee will be able to exclude such 
        payment from income under section 106 or under section 105 by 
        reference in section 105(b) to section 106(f).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2009.

SEC. 3. EXPANSION OF DEPENDENCY FOR PURPOSES OF DEDUCTION FOR HEALTH 
              INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS.

    (a) In General.--Paragraph (1) of section 162(l) of the Internal 
Revenue Code of 1986 (relating to special rules for health insurance 
costs of self-employed individuals) is amended to read as follows:
            ``(1) Allowance of deduction.--In the case of a taxpayer 
        who is an employee within the meaning of section 401(c)(1), 
        there shall be allowed as a deduction under this section an 
        amount equal to the amount paid during the taxable year for 
        insurance which constitutes medical care for--
                    ``(A) the taxpayer,
                    ``(B) the taxpayer's spouse,
                    ``(C) the taxpayer's dependents, and
                    ``(D) any individual who--
                            ``(i) satisfies the age requirements of 
                        section 152(c)(3)(A),
                            ``(ii) bears a relationship to the taxpayer 
                        described in section 152(d)(2)(H), and
                            ``(iii) meets the requirements of section 
                        152(d)(1)(C), and
                    ``(E) one individual who--
                            ``(i) does not satisfy the age requirements 
                        of section 152(c)(3)(A),
                            ``(ii) bears a relationship to the taxpayer 
                        described in section 152(d)(2)(H),
                            ``(iii) meets the requirements of section 
                        152(d)(1)(D), and
                            ``(iv) is not the spouse of the taxpayer 
                        and does not bear any relationship to the 
                        taxpayer described in subparagraphs (A) through 
                        (G) of section 152(d)(2).''.
    (b) Conforming Amendment.--Subparagraph (B) of section 162(l)(2) of 
such Code is amended by inserting ``, any dependent, or individual 
described in subparagraph (D) or (E) of paragraph (1) with respect to'' 
after ``spouse''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2009.

SEC. 4. EXTENSION TO ELIGIBLE BENEFICIARIES OF SICK AND ACCIDENT 
              BENEFITS PROVIDED TO MEMBERS OF A VOLUNTARY EMPLOYEES' 
              BENEFICIARY ASSOCIATION AND THEIR DEPENDENTS.

    (a) In General.--Section 501(c)(9) of the Internal Revenue Code of 
1986 (relating to list of exempt organizations) is amended by adding at 
the end the following new sentence: ``For purposes of providing for the 
payment of sick and accident benefits to members of such an association 
and their dependents, the term `dependents' shall include any 
individual who is an eligible beneficiary (within the meaning of 
section 106(f)), as determined under the terms of a medical benefit, 
health insurance, or other program under which members and their 
dependents are entitled to sick and accident benefits.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2009.

SEC. 5. FLEXIBLE SPENDING ARRANGEMENTS AND HEALTH REIMBURSEMENT 
              ARRANGEMENTS.

    The Secretary of Treasury shall issue guidance of general 
applicability providing that medical expenses that otherwise qualify--
            (1) for reimbursement from a flexible spending arrangement 
        under regulations in effect on the date of the enactment of 
        this Act may be reimbursed from an employee's flexible spending 
        arrangement, notwithstanding the fact that such expenses are 
        attributable to any individual who is not the employee's spouse 
        or dependent (within the meaning of section 105(b) of the 
        Internal Revenue Code of 1986) but is an eligible beneficiary 
        (within the meaning of section 106(f) of such Code) under the 
        flexible spending arrangement with respect to the employee, and
            (2) for reimbursement from a health reimbursement 
        arrangement under regulations in effect on the date of the 
        enactment of this Act may be reimbursed from an employee's 
        health reimbursement arrangement, notwithstanding the fact that 
        such expenses are attributable to an individual who is not a 
        spouse or dependent (within the meaning of section 105(b) of 
        such Code) but is an eligible beneficiary (within the meaning 
        of section 106(f) of such Code) under the health reimbursement 
        arrangement with respect to the employee.

SEC. 6. EXTENSION OF QUALIFIED MEDICAL EXPENSES FROM HEALTH SAVINGS 
              ACCOUNTS.

    (a) In General.--Subparagraph (A) of section 223(d)(2) of the 
Internal Revenue Code of 1986 (relating to qualified medical expenses) 
is amended--
            (1) by striking ``and any dependent'' and inserting ``any 
        dependent'', and
            (2) by inserting ``, and any qualified beneficiary'' after 
        ``thereof)''.
    (b) Qualified Beneficiary.--Section 223(d)(2) of such Code is 
amended by inserting after subparagraph (C) the following new 
subparagraph:
                    ``(D) Qualified beneficiary.--For purposes of 
                subparagraph (A), the term `qualified beneficiary' 
                means any individual who is described in subparagraph 
                (D) or (E) of section 162(l)(1).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2009.
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