HOUSE BILL No. 1448
DIGEST OF INTRODUCED BILL
Citations Affected: IC 5-10.3-3; IC 6-3-2-22; IC 6-8-13.
Synopsis: Indiana long term care savings plan. Establishes a long term
care savings plan (plan) for a participant to fund an account to pay
eligible long term care expenses of the participant. Authorizes the
board of trustees of the public employees' retirement fund (PERF
board) to administer the plan or enter into agreements with financial
institutions to receive participant contributions in the form of account
deposits. Limits plan contributions to $165,000 during a participant's
lifetime. Indexes the limitation for inflation. Provides a state income
tax deduction of $1,000 for an individual and $2,000 for a joint return
for contributions to the plan in a taxable year. Provides that qualified
withdrawals from the plan to pay eligible long term care expenses are
exempt from state income tax, and nonqualified withdrawals are
subject to a 10% penalty and state income tax on the amount
withdrawn. Establishes a long term care savings plan trust (trust)
administered and managed by the PERF board to invest participants'
contributions to the plan. Provides that the plan and the trust are not
obligations of the state.
Effective: July 1, 2009.
January 13, 2009, read first time and referred to Committee on Ways and Means.
First Regular Session 116th General Assembly (2009)
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between statutes enacted by the 2008 Regular Session of the General Assembly.
HOUSE BILL No. 1448
A BILL FOR AN ACT to amend the Indiana Code concerning
Be it enacted by the General Assembly of the State of Indiana:
SOURCE: IC 5-10.3-3-7; (09)IN1448.1.1. -->
SECTION 1. IC 5-10.3-3-7 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2009]: Sec. 7. The board shall do
all of the following:
(1) Appoint a director, subject to the approval of the governor.
(2) Appoint an actuary and employ or contract with employees,
auditors, technical experts, legal counsel, and other service
providers as it considers necessary to transact the business of the
fund, without the approval of any state officer.
(3) Fix the compensation of persons:
(A) appointed or employed by the board; or
(B) who contract with the board.
(4) Establish a general office in Indianapolis for board meetings
and for administrative personnel.
(5) Provide for the installation in the general office of a complete
system of books, accounts including reserve accounts, and records
in order to give effect to all the requirements of this article and to
assure the proper operation of the fund.
(6) Provide for a report at least annually, before June 1, to each
member of the amount credited to him in the annuity savings
account in each investment program under IC 5-10.2-2.
(7) With the advice of the actuary, adopt actuarial tables and
compile data needed for actuarial studies which are necessary for
the fund's operation.
(8) Act on applications for benefits and claims of error filed by
(9) Have the accounts of the fund audited annually by the state
board of accounts.
(10) Publish for the members a synopsis of the fund's condition.
(11) Adopt a budget on a calendar year or fiscal year basis that is
sufficient, as determined by the board, to perform the board's
duties and, as appropriate and reasonable, draw upon fund assets
to fund the budget.
(12) Expend money, including income from the fund's
investments, for effectuating the fund's purposes.
(13) Establish personnel programs and policies for its employees.
(14) Submit a report of its activities each year to the governor, the
pension management oversight commission, and the budget
committee before November 1 of each year. The report under this
subdivision must set forth a complete operating and financial
statement covering its operations during the most recent fiscal
year, including information on the following:
(A) Investment performance.
(B) Investment and administrative costs as a percentage of
assets under management.
(C) Investment asset allocation strategy.
(D) Member services.
(E) Member communications.
(15) Establish a code of ethics or decide to be under the
jurisdiction and rules adopted by the state ethics commission.
(16) Serve as the trustee for the Indiana long term care
savings plan trust established by IC 6-8-13-15.
SOURCE: IC 5-10.3-3-8; (09)IN1448.1.2. -->
SECTION 2. IC 5-10.3-3-8 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2009]: Sec. 8. (a) The board may
do any of the following:
(1) Establish and amend rules and regulations:
(A) for the administration and regulation of the fund and the
board's affairs; and
(B) to effectuate the powers and purposes of the board;
without adopting a rule under IC 4-22-2.
(2) Make contracts and sue and be sued as the board of trustees of
the public employees' retirement fund of Indiana.
(3) Delegate duties to its employees.
(4) Enter into agreements with one (1) or more insurance
companies to provide life, hospitalization, surgical, medical,
dental, vision, long term care, or supplemental Medicare
insurance, utilizing individual or group insurance policies for
retired members of the fund, and, upon authorization of the
respective member, deduct premium payments for such policies
from the members' retirement benefits and remit the payments to
the insurance companies.
(5) Enter into agreements with one (1) or more insurance
companies to provide annuities for retired members of the fund,
and, upon a member's authorization, transfer the amount credited
to the member in the annuity savings account to the insurance
(6) For the 1977 police officers' and firefighters' pension and
disability fund, deduct from benefits paid and remit to the
appropriate entities amounts authorized by IC 36-8-8-17.2.
(7) Whenever the fund's membership is sufficiently large for
actuarial valuation, establish an employer's contribution rate for
all employers, including employers with special benefit provisions
for certain employees.
(8) Amortize prior service liability over a period of forty (40)
years or less.
(9) Recover payments made under false or fraudulent
(10) Administer the Indiana long term care savings plan
established by IC 6-8-13-12.
(10) (11) Exercise all powers necessary, convenient, or
appropriate to carry out and effectuate its public and corporate
purposes and to conduct its business.
(b) An agreement under subsection (a)(4) may be for a duration of
three (3) years.
(c) This subsection does not apply to investments of the board. A
contract under subsection (a)(2) may be for a term of not more than
five (5) years, with an ability to renew thereafter.
(d) The board's powers and the fund's powers specified in this
chapter shall be interpreted broadly to effectuate the purposes of this
chapter and may not be construed as a limitation of powers.
SOURCE: IC 6-3-2-22; (09)IN1448.1.3. -->
SECTION 3. IC 6-3-2-22 IS ADDED TO THE INDIANA CODE
AS A NEW
SECTION TO READ AS FOLLOWS [EFFECTIVE JULY
1, 2009]: Sec. 22. (a) As used in this section, "account" means an
account established for a participant in the Indiana long term care
savings plan trust under IC 6-8-13-15(e).
(b) As used in this section, "eligible long term care expense" has
the meaning set forth in IC 6-8-13-2.
(c) As used in this section, "nonqualified withdrawal" means a
withdrawal or distribution from an account that is not a qualified
(d) As used in this section, "participant" has the meaning set
forth in IC 6-8-13-6.
(e) As used in this section, "qualified withdrawal" means a
withdrawal or distribution from an account that is made:
(1) to pay for eligible long term care expenses, excluding any
withdrawals or distributions used to pay for eligible long term
care expenses if the withdrawals or distributions are made
from an account that is terminated less than twelve (12)
months after the account is opened;
(2) as a result of the death or disability of the participant; or
(3) to transfer a participant's account to the participant's
(f) Each taxable year, a participant who makes a contribution
to an account may deduct from the individual's adjusted gross
income (as defined in IC 6-3-1-3.5(a)) the lesser of:
(1) the amount of the contribution made by the participant
during the taxable year; or
(2) one thousand dollars ($1,000).
(g) Notwithstanding subsection (f), a husband and wife filing a
joint adjusted income tax return for a particular taxable year may
not claim a deduction under this section of more than two thousand
(h) The following are exempt from the adjusted gross income
tax imposed by IC 6-3-1 through IC 6-3-7:
(1) A qualified withdrawal from an account.
(2) Earnings from a participant's contributions that are
credited to a participant.
(i) A nonqualified withdrawal from an account is subject to a
ten percent (10%) penalty and payment of adjusted gross income
tax imposed by IC 6-3-1 through IC 6-3-7 on the amount of the
withdrawal. A payment under this subsection shall be reported by
the participant on the participant's annual state income tax return
for any taxable year in which a nonqualified withdrawal is made.
(j) A nonresident participant who is not required to file an
annual income tax return for a taxable year in which a
nonqualified withdrawal is made shall make any required payment
on the form required under IC 6-3-4-1(2). If the nonresident
participant does not make the required payment, the department
shall issue a demand notice in accordance with IC 6-8.1-8-2.
SOURCE: IC 6-8-13; (09)IN1448.1.4. -->
SECTION 4. IC 6-8-13 IS ADDED TO THE INDIANA CODE AS
CHAPTER TO READ AS FOLLOWS [EFFECTIVE JULY
Chapter 13. Indiana Long Term Care Savings Plan
Sec. 1. As used in this chapter, "account" means a long term
care savings account established under section 15(e) of this
Sec. 2. As used in this chapter, "eligible long term care expense"
(1) an expense paid by a participant for long term care
provided to the participant; or
(2) a premium paid by a participant who is at least fifty (50)
years of age for a qualified long term care policy for the
Sec. 3. As used in this chapter, "financial institution" has the
meaning set forth in IC 5-13-4-10.
Sec. 4. As used in this chapter, "Internal Revenue Code" has the
meaning set forth in IC 6-3-1-11.
Sec. 5. As used in this chapter,"long term care" has the meaning
set forth in IC 12-15-39.6-1.
Sec. 6. As used in this chapter, "participant" means an
individual who is participating in the plan.
Sec. 7. As used in this chapter, "PERF board" refers to the
board of trustees of the public employees' retirement fund
established by IC 5-10.3-2-1.
Sec. 8. As used in this chapter, "plan" refers to the Indiana long
term care savings plan established by section 12(a) of this chapter.
Sec. 9. As used in this chapter, "qualified long term care policy"
has the meaning set forth IC 12-15-39.6-5.
Sec. 10. As used in this chapter, "taxable year" has the meaning
set forth in IC 6-3-1-16.
Sec. 11. As used in this chapter, "trust" refers to the Indiana
long term care savings plan trust established by section 15(a) of
Sec. 12. (a) The Indiana long term care savings plan is created
for the purpose of funding by a participant on a tax-favored basis
an account to pay eligible long term care expenses of the
(b) The PERF board may:
(1) administer the plan; or
(2) enter into agreements with one (1) or more financial
institutions to receive contributions in the form of account
Sec. 13. (a) After December 31, 2009, an individual may
participate in the plan:
(1) by entering into a participation agreement with the PERF
board, if the PERF board administers the plan; or
(2) by making contributions to an account with a financial
institution with which the PERF board has an agreement
under section 12(b)(2) of this chapter.
(b) A participant may make contributions to the plan
established under section 12(a) of this chapter. However, a
participant may not contribute more than one hundred sixty-five
thousand dollars ($165,000) to the plan during the participant's
lifetime. The dollar amount of the maximum lifetime contribution
must be adjusted annually for inflation in accordance with section
151 of the Internal Revenue Code.
(c) A participation agreement must provide the following:
(1) That the agreement may be:
(A) canceled by a participant; or
(B) transferred to a participant's spouse:
upon the terms and conditions set by the PERF board.
(2) That a participant is the owner of contributions made to
the plan, plus credited earnings on the contributions, unless
the participant transfers the agreement.
(3) That if:
(A) a participant cancels the agreement; or
(B) the plan established by section 12(a) of this chapter is
a participant is entitled to receive the amount of the
participant's contributions to the plan plus credited earnings
on the participant's contributions. A participant may not
receive more than the fair market value of the participant's
account on the date the participant's account is liquidated.
Sec. 14. IC 6-3-2-22 governs state income tax treatment of
contributions to, investment earnings or interest on, withdrawals
from, and distributions from the plan established under this
Sec 15. (a) The Indiana long term care savings plan trust is
established, separate and distinct from all other entities, and shall
be maintained for the purposes of providing a source of money to
(1) a participant's eligible long term care expenses; and
(2) the costs of administering the plan.
(b) The PERF board is the trustee of the trust and is responsible
for the administration, operation, and maintenance of the trust.
(c) The trust consists of the following:
(1) Each participant's contributions to the plan.
(2) All earnings on investments or deposits of the plan.
(3) All gifts, grants, devises, or bequests in money, property,
or other form made to the plan.
(4) All contributions or payments to the plan made in a
manner provided by the general assembly.
(d) The administrative costs of the plan shall be paid from the
earnings of the trust before the earnings are credited to
(e) The PERF board shall establish an account for each
participant. Each participant's account shall be credited with:
(1) the contributions made to the plan by the participant; and
(2) after the costs described in subsection (d), the earnings
attributable to the balance of the account.
Sec. 16. (a) The PERF board has all powers necessary to carry
out and effectuate the purposes, objectives, and provisions of the
trust established by section 15(a) of this chapter, including the
PERF board's powers under IC 5-10.3-3-7 and IC 5-10.3-3-8.
(b) The PERF board has the fiduciary responsibility to make all
decisions regarding the investment of the money in the trust,
including the selection of all investment options and the approval
of all fees and other costs charged to trust assets, including the
costs of administration, operation, and maintenance of the trust,
subject to the limitations and restrictions set forth in IC 5-10.3-5-3.
(c) The assets in the trust may be comingled or pooled with
other public funds managed by the PERF board for investment
(d) In addition to the PERF board's powers under IC 5-10.3-3-7
and IC 5-10.3-3-8, the PERF board may do any of the following:
(1) Select and enter into agreements with individuals and
entities to provide investment advice and management of the
assets held by the trust.
(2) Establish investment guidelines, objectives, and
performance standards for the assets held by the trust.
(3) Approve a fee, commission, or expense that directly or
indirectly affects the return on investment of the assets of the
Sec. 17. The PERF board may adopt rules under IC 5-10.3-3-8
that it considers appropriate or necessary to implement this
Sec. 18. This chapter may not be construed as an obligation of
the state to assume any responsibility for the Indiana long term
care savings plan or the Indiana long term care savings plan trust
established by this chapter.
SOURCE: ; (09)IN1448.1.5. -->
SECTION 5. [EFFECTIVE JULY 1, 2009] IC 6-3-2-22, as added
by this act, applies to taxable years beginning after December 31,