Page:United States Statutes at Large Volume 120.djvu/1046

 PUBLIC LAW 109–280—AUG. 17, 2006

120 STAT. 1015

accident or health insurance plan or qualified long-term care insurance contract by deduction from a distribution from the eligible retirement plan. ‘‘(B) RELATED PLANS TREATED AS 1.—All eligible retirement plans of an employer shall be treated as a single plan. ‘‘(6) ELECTION DESCRIBED.— ‘‘(A) IN GENERAL.—For purposes of paragraph (1), an election is described in this paragraph if the election is made by an employee after separation from service with respect to amounts not distributed from an eligible retirement plan to have amounts from such plan distributed in order to pay for qualified health insurance premiums. ‘‘(B) SPECIAL RULE.—A plan shall not be treated as violating the requirements of section 401, or as engaging in a prohibited transaction for purposes of section 503(b), merely because it provides for an election with respect to amounts that are otherwise distributable under the plan or merely because of a distribution made pursuant to an election described in subparagraph (A). ‘‘(7) COORDINATION WITH MEDICAL EXPENSE DEDUCTION.— The amounts excluded from gross income under paragraph (1) shall not be taken into account under section 213. ‘‘(8) COORDINATION WITH DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS.—The amounts excluded from gross income under paragraph (1) shall not be taken into account under section 162(l).’’. (b) CONFORMING AMENDMENTS.— (1) Section 403(a) of such Code (relating to taxability of beneficiary under a qualified annuity plan) is amended by inserting after paragraph (1) the following new paragraph: ‘‘(2) SPECIAL RULE FOR HEALTH AND LONG-TERM CARE INSURANCE.—To the extent provided in section 402(l), paragraph (1) shall not apply to the amount distributed under the contract which is otherwise includible in gross income under this subsection.’’. (2) Section 403(b) of such Code (relating to taxability of beneficiary under annuity purchased by section 501(c)(3) organization or public school) is amended by inserting after paragraph (1) the following new paragraph: ‘‘(2) SPECIAL RULE FOR HEALTH AND LONG-TERM CARE INSURANCE.—To the extent provided in section 402(l), paragraph (1) shall not apply to the amount distributed under the contract which is otherwise includible in gross income under this subsection.’’. (3) Section 457(a) of such Code (relating to year of inclusion in gross income) is amended by adding at the end the following new paragraph: ‘‘(3) SPECIAL RULE FOR HEALTH AND LONG-TERM CARE INSURANCE.—In the case of a plan of an eligible employer described in subsection (e)(1)(A), to the extent provided in section 402(l), paragraph (1) shall not apply to amounts otherwise includible in gross income under this subsection.’’. (c) EFFECTIVE DATE.—The amendments made by this section shall apply to distributions in taxable years beginning after December 31, 2006.

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26 USC 403.

26 USC 402 note.

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