Long-term care contracts purchased with retirement plan distributions

(a)

In general

Section 402 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

(m)

Distributions with respect to long-Term care insurance

(1)

Exclusion

(A)

In general

Gross income of an individual for the taxable year does not include any distribution from an eligible retirement plan to the extent that the aggregate amount of such distributions does not exceed the amount paid by or assessed to such individual during the taxable year for or with respect to coverage described in subparagraph (B) for the individual, the individual’s spouse, or a dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of the individual.(B)

Coverage described

Coverage described in this subparagraph is—(i)a qualified long-term care insurance contract (as defined in section 7702B(b)) covering qualified long-term care services (as defined in section 7702B(c)), and(ii)coverage of the risk that an insured individual would become a chronically ill individual (within the meaning of section 101(g)(4)(B)) under a rider or other provision of a life insurance contract which satisfies the requirements of section 101(g)(3) (determined without regard to subparagraph (D) thereof).(2)

Limitation

(A)

In general

The amount excluded from gross income under paragraph (1) for any taxable year shall not exceed $2,500 with respect to payments for coverage for any insured individual.(B)

Exclusion available only to 1 taxpayer

The exclusion under paragraph (1) shall be allowed to only 1 taxpayer for any taxable year with respect to any 1 insured individual.(C)

Adjustment for inflation

(i)

In general

In the case of any taxable year beginning after December 31, 2021, the $2,500 amount in subparagraph (A) shall be increased by an amount equal to—(I)such dollar amount, multiplied by(II)the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2020 for calendar year 2016 in subparagraph (A)(ii) thereof.(ii)

Rounding

If any increase determined under clause (i) is not a multiple of $10, such increase shall be rounded to the nearest multiple of $10.(3)

Eligible retirement plan

For purposes of this subsection, the term eligible retirement plan means any plan which—(A)is described in clause (i), (ii), (iv), (v), or (vi) of subsection (c)(8)(B), or(B)is a defined contribution plan described in clause (iii) of subsection (c)(8)(B).(4)

Distributions must otherwise be includible

Rules similar to the rules of subsection (l)(3) shall apply for purposes of this subsection.(5)

Separately stated portions of a contract

For purposes of this subsection, the amount taken into account as paid during the taxable year for coverage described in paragraph (1)(B)(i) includes premiums paid and charges assessed during such taxable year for any such coverage which is treated as a separate contract under section 7702B(e)(1), if such separate contract is a qualified long-term care insurance contract (as defined in section 7702B(b)).(6)

Coordination with other deductions

The amounts excluded from gross income under paragraph (1) shall not be taken into account under section 162(l) or 213.

(b)

Amounts treated as required minimum distribution

Section 401(a)(9) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph:

(J)

Treatment of distributions for long-term care insurance

For purposes of this title, if a distribution is required under this paragraph for a taxable year, any distribution which is excluded from gross income under section 402(m) for the taxable year shall be treated as a distribution required under this paragraph.

(c)

Conforming amendments

(1)Section 401(k)(2)(B)(i) of the Internal Revenue Code of 1986 is amended by striking or at the end of subclause (V), by adding or at the end of subclause (VI), and by adding at the end the following new subclause:

(VII)as provided in section 402(m),

(2)Section 403(b)(11) of such Code is amended by striking or at the end of subparagraph (C), by striking the period at the end of subparagraph (D) and inserting , or, and by inserting after subparagraph (D) the following new subparagraph:

(E)for distributions to which section 402(m) applies.

(3)Section 457(d)(1)(A) of such Code is amended by striking or at the end of clause (iii), by striking the comma at the end of clause (iv) and inserting , or, and by adding at the end the following new clause:

(v)as provided in section 402(m),

(d)

Reporting

(1)

In general

Subpart B of part III of subchapter A of chapter 61 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

6050Z.

Certain withdrawals from qualified arrangements for long-term care insurance

(a)

Requirement of reporting

Any issuer of a qualified long-term care insurance contract (as defined in section 7702B(b)), including a rider or other provision that is treated as a qualified long-term care insurance contract under section 7702B(e)(1), or of coverage described in section 402(m)(1)(B)(ii), shall make a return, according to forms or regulations prescribed by the Secretary, setting forth for each insured individual—(1)the aggregate amount of premiums and charges paid for the contract or coverage covering such individual during the calendar year,(2)the name, address, and TIN of the owner of the contract, if applicable, and(3)the name, address, and TIN of the insured under the contract.(b)

Statement To be furnished to persons with respect to whom information is required

Every person required to make a return under subsection (a) shall furnish to each individual whose name is required to be set forth in such return a written statement showing—(1)the name, address, and phone number of the information contact of the issuer of the qualified long-term care insurance contract or coverage described in section 402(m)(1)(B)(ii), and(2)the aggregate amount of premiums and charges paid under the contract or coverage covering the insured individual during the calendar year.

The written statement required under the preceding sentence shall be furnished to the individual or individuals on or before January 31 of the year following the calendar year for which the return required under subsection (a) was required to be made.

(c)

Contracts or coverage covering more than one insured

In the case of contracts or coverage covering more than one insured, the return and statement required by subsections (a) and (b) shall identify only the portion of the premium that is properly allocable to the insured in respect of whom the return or statement is made.

(2)

Clerical amendment

The table of sections for subpart B of part III of subchapter A of chapter 61 of such Code is amended by adding after the item relating to section 6050Y the following new item:

Sec. 6050Z. Certain withdrawals from qualified arrangements for long-term care insurance.

(e)

Effective date

The amendment made by this section shall apply to distributions received after the date of the enactment of this Act.

Information about long-term care insurance

Section 516 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1146) is amended—(1)in the section heading, by inserting

and participation in long-term care insurance

after

savings

;(2)in subsection (a), by inserting and long-term care insurance after income savings;(3)in subsection (c)—(A)in paragraph (1), by striking ; and and inserting a semicolon;(B)in paragraph (2), by striking the period and inserting ; and; and(C)by adding at the end the following:

(3)a description of long-term care insurance arrangements, and information regarding matters relevant to enrolling in such insurance, including—(A)a fact sheet for employers, in an easily accessible format; and(B)a fact sheet for workers, in an easily accessible format.

; and

(4)in subsection (d)—(A)in the matter preceding paragraph (1), by inserting and long-term care insurance before the period at the end of the first sentence;(B)in paragraph (3), by adding and after the semicolon;(C)in paragraph (4), by striking ; and and inserting a period;(D)by redesignating paragraphs (1) through (4) as subparagraphs (A) through (D), respectively, and adjusting the margins accordingly;(E)by redesignating paragraph (5) as paragraph (3);(F)by inserting before subparagraph (A), as so redesignated, the following:

(1)With respect to retirement income savings—

;

(G)by inserting before paragraph (3), as so redesignated by subparagraph (E), the following:

(2)With respect to long-term care insurance—(A)a description in simple terms of the common types of long-term care insurance available to both individuals and employers (specifically including small employers), including information on the tax benefits of such insurance under the Internal Revenue Code of 1986; and(B)materials explaining to employers in simple terms, the characteristics and operation of the different long-term care insurance for their workers and what the basic legal requirements are under this Act and the Internal Revenue Code of 1986, including the steps to enroll in such insurance and including links to the fact sheets described in subsection (c)(3).

; and

(H)in paragraph (3), as so redesignated by subparagraph (E)—(i)by striking links to other and inserting Links to other; and(ii)by inserting and long-term care insurance after retirement income savings arrangements.