Senate Retirement Bill Could Include LTCI Premium Provision

The Amendment

Sen. Patrick Toomey, R-Pa., who proposed the new retirement plan LTCI premium payment amendment, is also the sponsor of S. 2415, the Long-Term Care Affordability Act.

Like the new amendment, S. 2415 would let workers use the assets in 401(k) plans and other defined contribution retirement plans to pay LTCI premiums.

S. 2415 also includes a section that would require workers to get a notice explaining how the U.S. long-term care financing system works and telling them about the existence of private LTCI coverage.

This is the text of the Senate Finance Committee summary of the new amendment:

Short Title: To allow individuals to withdrawal funds from their retirement accounts to pay for long-term care insurance and to exclude such withdrawals from gross income, up to $2,500 annually.

Description of Amendment: This amendment would exclude from gross income 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 the individual during the taxable year for a long-term care insurance contract. Such exclusion is permitted only for one taxpayer for any taxable year with respect to any one insured individual, and the amount excluded from income with respect to an insured individual may not exceed $2,500 (adjusted for inflation). The term "eligible retirement plan" includes a qualified retirement plan that is a defined contribution plan, a section 403(a) annuity plan, a section 403(b) plan, a governmental section 457(b) plan, or an IRA. The qualifying coverage may be for the individual or the individual's spouse or dependent.

At press time, it was not clear whether the proposed amendment would also include the S. 2415 explanatory notice requirement.

Pictured: Sen. Pat Toomey, R-Pa. (Photo: Toomey)