120 STAT. 1010
PUBLIC LAW 109–280—AUG. 17, 2006
SEC. 843. ALLOWANCE OF RESERVE FOR MEDICAL BENEFITS OF PLANS SPONSORED BY BONA FIDE ASSOCIATIONS. 26 USC 419A.
26 USC 419A note.
(a) IN GENERAL.—Section 419A(c) of the Internal Revenue Code of 1986 (relating to account limit) is amended by adding at the end the following new paragraph: ‘‘(6) ADDITIONAL RESERVE FOR MEDICAL BENEFITS OF BONA FIDE ASSOCIATION PLANS.— ‘‘(A) IN GENERAL.—An applicable account limit for any taxable year may include a reserve in an amount not to exceed 35 percent of the sum of— ‘‘(i) the qualified direct costs, and ‘‘(ii) the change in claims incurred but unpaid, for such taxable year with respect to medical benefits (other than post-retirement medical benefits). ‘‘(B) APPLICABLE ACCOUNT LIMIT.—For purposes of this subsection, the term ‘applicable account limit’ means an account limit for a qualified asset account with respect to medical benefits provided through a plan maintained by a bona fide association (as defined in section 2791(d)(3) of the Public Health Service Act (42 U.S.C. 300gg– 91(d)(3)).’’. (b) EFFECTIVE DATE.—The amendment made by this section shall apply to taxable years beginning after December 31, 2006. SEC. 844. TREATMENT OF ANNUITY AND LIFE INSURANCE CONTRACTS WITH A LONG-TERM CARE INSURANCE FEATURE.
(a) EXCLUSION FROM GROSS INCOME.—Subsection (e) of section 72 of the Internal Revenue Code of 1986 (relating to amounts not received as annuities) is amended by redesignating paragraph (11) as paragraph (12) and by inserting after paragraph (10) the following new paragraph: ‘‘(11) SPECIAL RULES FOR CERTAIN COMBINATION CONTRACTS PROVIDING LONG-TERM CARE INSURANCE.—Notwithstanding paragraphs (2), (5)(C), and (10), in the case of any charge against the cash value of an annuity contract or the cash surrender value of a life insurance contract made as payment for coverage under a qualified long-term care insurance contract which is part of or a rider on such annuity or life insurance contract— ‘‘(A) the investment in the contract shall be reduced (but not below zero) by such charge, and ‘‘(B) such charge shall not be includible in gross income.’’. (b) TAX-FREE EXCHANGES AMONG CERTAIN INSURANCE POLICIES.— (1) ANNUITY CONTRACTS CAN INCLUDE QUALIFIED LONGTERM CARE INSURANCE RIDERS.—Paragraph (2) of section 1035(b) of such Code is amended by adding at the end the following new sentence: ‘‘For purposes of the preceding sentence, a contract shall not fail to be treated as an annuity contract solely because a qualified long-term care insurance contract is a part of or a rider on such contract.’’. (2) LIFE INSURANCE CONTRACTS CAN INCLUDE QUALIFIED LONG-TERM CARE INSURANCE RIDERS.—Paragraph (3) of section 1035(b) of such Code is amended by adding at the end the following new sentence: ‘‘For purposes of the preceding sentence, a contract shall not fail to be treated as a life insurance
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