CLARIFICATION OF SPECIAL RULE FOR CERTAIN GOVERNMENTAL PLANS.

SEC. 305. CLARIFICATION OF SPECIAL RULE FOR CERTAIN GOVERNMENTAL PLANS. (a) [26 U.S.C. 105] In General.—Paragraph (1) of section 105(j) is amended— (1) by striking “the taxpayer” and inserting “a qualified taxpayer”, and (2) by striking “deceased plan participant’s beneficiary” and inserting “deceased employee’s beneficiary (other than an individual described in paragraph (3)(B))”. (b) Qualified taxpayer.—Subsection (j) of section 105 is amended by adding at the end the following new paragraph: “(3) Qualified Taxpayer.—For purposes of paragraph (1), with respect to an accident or health plan described in paragraph (2), the term ‘qualified taxpayer’ means a taxpayer who is— “(A) an employee, or “(B) the spouse, dependent (as defined for purposes of subsection (b)), or child (as defined for purposes of such subsection) of an employee.” . (c) Application to Political Subdivisions of States.—Paragraph (2) of section 105(j) is amended— (1) by inserting “or established by or on behalf of a State or political subdivision thereof” after “public retirement system”, and (2) by inserting “or 501(c)(9)” after “section 115” in subparagraph (B). (d) [26 U.S.C. 105 note] Effective Date.—The amendments made by this section shall apply to payments after the date of the enactment of this Act.