Sen. George Allen, R-Va., introduced a bill in the Senate Thursday that would allow individuals to use their 401(k) and 403(b) plans to buy long term care insurance.[@@]

“Currently, thousands of Virginians and millions of Americans are saving in their retirement plans to have a comfortable life once they become seniors, be it 401(k) and 403(b) accounts,” Allen said while introducing the bill.

Allen noted that more than 53 million Americans have 401(k) and 403(b) accounts with a total of $2.4 trillion in assets.

“These are untapped funds that individuals should be allowed to use to help pay for their future health care needs,” Allen said.

Today, most account holders must pay a 10% excise tax if they want to use retirement account funds to buy LTC insurance, Allen said.

Allen’s bill, S.B. 1706, and is similar to a bill introduced by Rep. Lee Terry, R-Neb., in the House.

Both bills have drawn the support of the Council for Affordable Health Insurance, Alexandria, Va.

According to Allen, encouraging the purchase of private long term care coverage could reduce Medicaid’s future institutional-care expenses by more than $40 billion annually while providing more options for individuals.