[Congressional Record Volume 149, Number 41 (Thursday, March 13, 2003)]
[Senate]
[Page S3742]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. WARNER (for himself and Ms. Collins):
  S. 623. 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; to the Committee on Finance.
  Mr. WARNER. Mr. President, today I am introducing legislation to 
provide some relief for our Nation's retired Federal employees from the 
severe increases in Federal Employee Health Benefit, FEHB, program 
premiums. This measure extends premium conversion to federal and 
military retirees, allowing them to pay their health insurance premiums 
with pre-tax dollars.
  Over 9 million Federal employees, retirees and their families are 
covered under FEHBP. In 2003 premiums are expected to rise an average 
of 11 percent, the third year in a row the average increase has 
exceeded 10 percent.
  The increasing cost of health care is a critical issue, especially to 
retirees living on a fixed income. The 2003 Cost of Living Adjustment, 
COLA, for Federal civil service annuitants is only 1.4 percent, the 
lowest since a 1.3 percent increase in 1999. The modest COLA is 
completely diminished by increased health care costs.
  In the fall of 2000 premium conversion became available to current 
federal employees who participate in the Federal Employees Health 
Benefits Program. It is a benefit already available to many private 
sector employees. While premium conversion does not directly affect the 
amount of the FEHBP premium, it helps to offset some of the increase by 
reducing an individual's federal tax liability.
  Extending this benefit to federal retirees requires a change in the 
tax law, specifically Section 125 of the Internal Revenue Code. This 
legislation makes the necessary change in the tax code.
  Under the legislation, the benefit is concurrently afforded to our 
Nation's military retirees as well to assist with increasing health 
care costs.
  A number of organizations representing Federal and military retirees 
are strongly behind this initiative, including the National Association 
of Retired Federal Employees, the Military Coalition, the Fleet Reserve 
Association, and the Association of the U.S. Army.
  I encourage my colleagues to support this critical legislation and 
show their support for our Nation's dedicated Federal civilian and 
military retirees. I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 623

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

     SECTION 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.

     SEC. 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 223 as section 224 and by inserting 
     after section 222 the following new section:

     ``SEC. 223. 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 such Code 
     is amended by inserting after paragraph (18) the following 
     new paragraph:
       ``(19) Tricare supplemental premiums or enrollment fees.--
     The deduction allowed by section 223.''
       (c) Clerical Amendment.--The table of sections for part VII 
     of subchapter B of chapter 1 of such Code is amended by 
     striking the last item and inserting the following new items:

``Sec. 223. TRICARE supplemental premiums or enrollment fees.
``Sec. 224. 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.

     SEC. 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.
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