applicable health benefits
(1) Qualified current retiree liabilities For purposes of this section— (A) In general The term “qualified current retiree liabilities” means, with respect to any taxable year, the aggregate amounts (including administrative expenses) which would have been allowable as a deduction to the employer for such taxable year with respect to applicable health benefits and applicable life insurance benefits provided during such taxable year if— (i) such benefits were provided directly by the employer, and (ii) the employer used the cash receipts and disbursements method of accounting. For purposes of the preceding sentence, the rule of section 419(c)(3)(B) shall apply. (B) Reductions for amounts previously set aside The amount determined under subparagraph (A) shall be reduced by the amount (determined separately for applicable health benefits and applicable life insurance benefits) which bears the same ratio to such amount as— (i) the value (as of the close of the plan year preceding the year of the qualified transfer) of the assets in all health benefits accounts or applicable life insurance accounts or welfare benefit funds (as defined in section 419(e)(1) ) set aside to pay for the qualified current retiree liability, bears to (ii) the present value of the qualified current retiree liabilities for all plan years (determined without regard to this subparagraph). (C) Applicable health benefits The term “applicable health benefits” means health benefits or coverage which are provided to— (i) retired employees who, immediately before the qualified transfer, are entitled to receive such benefits by reason of retirement and who are entitled to pension benefits under the plan, and (ii) their spouses and dependents. (D) Applicable life insurance benefits The term “applicable life insurance benefits” means group-term life insurance coverage provided to retired employees who, immediately before the qualified transfer, are entitled to receive such coverage by reason of retirement and who are entitled to pension benefits under the plan, but only to the extent that such coverage is provided under a policy for retired employees and the cost of such coverage is excludable from the retired employee’s gross income under section 79. (E) Key employees excluded If an employee is a key employee (within the meaning of section 416(i)(1) ) with respect to any plan year ending in a taxable year, such employee shall not be taken into account in computing qualified current retiree liabilities for such taxable year or in calculating applicable employer cost under subsection (c)(3)(B).