HR 5688 — Bipartisan HSA Improvement Act of 2023

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

 A. Text of Existing Law Amended or Repealed by the Bill, as Reported

 With respect to the requirement of clause 3(e) of rule XIII 
of the Rules of the House of Representatives, changes in 
existing law made by the bill, as reported, this section was 
not made available to the Committee in time for the filing of 
this report.

 Changes in Existing Law Made by the Bill, as Reported

 In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, and existing law in which no 
change is proposed is shown in roman):

 INTERNAL REVENUE CODE OF 1986

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Subtitle A--Income Taxes

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CHAPTER 1--NORMAL TAXES AND SURTAXES

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Subchapter B--COMPUTATION OF TAXABLE INCOME

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PART III--ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME

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SEC. 106. CONTRIBUTIONS BY EMPLOYER TO ACCIDENT AND HEALTH PLANS.

 (a) General rule.--Except as otherwise provided in this 
section, gross income of an employee does not include employer-
provided coverage under an accident or health plan.
 (b) Contributions to Archer MSAs.--
 (1) In general.--In the case of an employee who is an 
 eligible individual, amounts contributed by such 
 employee's employer to any Archer MSA of such employee 
 shall be treated as employer-provided coverage for 
 medical expenses under an accident or health plan to 
 the extent such amounts do not exceed the limitation 
 under section 220(b)(1) (determined without regard to 
 this subsection) which is applicable to such employee 
 for such taxable year.
 (2) No constructive receipt.--No amount shall be 
 included in the gross income of any employee solely 
 because the employee may choose between the 
 contributions referred to in paragraph (1) and employer 
 contributions to another health plan of the employer.
 (3) Special rule for deduction of employer 
 contributions.--Any employer contribution to an Archer 
 MSA, if otherwise allowable as a deduction under this 
 chapter, shall be allowed only for the taxable year in 
 which paid.
 (4) Employer MSA contributions required to be shown 
 on return.--Every individual required to file a return 
 under section 6012 for the taxable year shall include 
 on such return the aggregate amount contributed by 
 employers to the Archer MSAs of such individual or such 
 individual's spouse for such taxable year.
 (5) MSA contributions not part of COBRA coverage.--
 Paragraph (1) shall not apply for purposes of section 
 4980B.
 (6) Definitions.--For purposes of this subsection, 
 the terms ``eligible individual'' and ``Archer MSA'' 
 have the respective meanings given to such terms by 
 section 220.
 (7) Cross reference.--For penalty on failure by 
 employer to make comparable contributions to the Archer 
 MSAs of comparable employees, see section 4980E.
 (c) Inclusion of long-term care benefits provided through 
flexible spending arrangements.--
 (1) In general.--Gross income of an employee shall 
 include employer-provided coverage for qualified long-
 term care services (as defined in section 7702B(c)) to 
 the extent that such coverage is provided through a 
 flexible spending or similar arrangement.
 (2) Flexible spending arrangement.--For purposes of 
 this subsection, a flexible spending arrangement is a 
 benefit program which provides employees with coverage 
 under which--
 (A) specified incurred expenses may be 
 reimbursed (subject to reimbursement maximums 
 and other reasonable conditions), and
 (B) the maximum amount of reimbursement which 
 is reasonably available to a participant for 
 such coverage is less than 500 percent of the 
 value of such coverage.
 In the case of an insured plan, the maximum amount 
 reasonably available shall be determined on the basis 
 of the underlying coverage.
 (d) Contributions to health savings accounts.--
 (1) In general.--In the case of an employee who is an 
 eligible individual (as defined in section 223(c)(1)), 
 amounts contributed by such employee's employer to any 
 health savings account (as defined in section 223(d)) 
 of such employee shall be treated as employer-provided 
 coverage for medical expenses under an accident or 
 health plan to the extent such amounts do not exceed 
 the limitation under section 223(b) (determined without 
 regard to this subsection) which is applicable to such 
 employee for such taxable year.
 (2) Special rules.--Rules similar to the rules of 
 paragraphs (2), (3), (4), and (5) of subsection (b) 
 shall apply for purposes of this subsection.
 (3) Cross reference.--For penalty on failure by 
 employer to make comparable contributions to the health 
 savings accounts of comparable employees, see section 
 4980G.
 (e) FSA and HRA terminations to fund HSAs.--
 (1) In general.--A plan shall not fail to be treated 
 as a health flexible spending arrangement or health 
 reimbursement arrangement under this section or section 
 105 merely because such plan provides for a qualified 
 HSA distribution.
 [(2) Qualified HSA distribution.--The term 
 ``qualified HSA distribution'' means a distribution 
 from a health flexible spending arrangement or health 
 reimbursement arrangement to the extent that such 
 distribution--
 [(A) does not exceed the lesser of the 
 balance in such arrangement on September 21, 
 2006, or as of the date of such distribution, 
 and
 [(B) is contributed by the employer directly 
 to the health savings account of the employee 
 before January 1, 2012.
 Such term shall not include more than 1 distribution 
 with respect to any arrangement.]
 (2) Qualified HSA distribution.--For purposes of this 
 subsection--
 (A) In general.--The term ``qualified HSA 
 distribution'' means, with respect to any 
 employee, a distribution from a health flexible 
 spending arrangement or health reimbursement 
 arrangement of such employee contributed 
 directly to a health savings account of such 
 employee if--
 (i) such distribution is made in 
 connection with such employee 
 establishing coverage under a high 
 deductible health plan (as defined in 
 section 223(c)(2)) if during the 4-year 
 period preceding the date the employee 
 so establishes coverage the employee 
 was not covered under such a high 
 deductible health plan, and
 (ii) such arrangement is described in 
 section 223(c)(1)(B)(vi) with respect 
 to any portion of the plan year 
 remaining after such distribution is 
 made, if such employee remains enrolled 
 in such arrangement.
 (B) Dollar limitation.--The aggregate amount 
 of distributions from health flexible spending 
 arrangements and health reimbursement 
 arrangements of any employee which may be 
 treated as qualified HSA distributions in 
 connection with an establishment of coverage 
 described in subparagraph (A)(i) shall not 
 exceed the dollar amount in effect under 
 section 125(i)(1) (twice such amount in the 
 case of coverage which is described in section 
 223(b)(2)(B)).
 (3) Additional tax for failure to maintain high 
 deductible health plan coverage.--
 (A) In general.--If, at any time during the 
 testing period, the employee is not an eligible 
 individual, then the amount of the qualified 
 HSA distribution--
 (i) shall be includible in the gross 
 income of the employee for the taxable 
 year in which occurs the first month in 
 the testing period for which such 
 employee is not an eligible individual, 
 and
 (ii) the tax imposed by this chapter 
 for such taxable year on the employee 
 shall be increased by 10 percent of the 
 amount which is so includible.
 (B) Exception for disability or death.--
 Clauses (i) and (ii) of subparagraph (A) shall 
 not apply if the employee ceases to be an 
 eligible individual by reason of the death of 
 the employee or the employee becoming disabled 
 (within the meaning of section 72(m)(7)).
 (4) Definitions and special rules.--For purposes of 
 this subsection--
 (A) Testing period.--The term ``testing 
 period'' means the period beginning with the 
 month in which the qualified HSA distribution 
 is contributed to the health savings account 
 and ending on the last day of the 12th month 
 following such month.
 (B) Eligible individual.--The term ``eligible 
 individual'' has the meaning given such term by 
 section 223(c)(1).
 (C) Treatment as rollover contribution.--A 
 qualified HSA distribution shall be treated as 
 a rollover contribution described in section 
 223(f)(5).
 (5) Tax treatment relating to distributions.--For 
 purposes of this title--
 (A) In general.--A qualified HSA distribution 
 shall be treated as a payment described in 
 subsection (d).
 (B) Comparability excise tax.--
 (i) In general.--Except as provided 
 in clause (ii), section 4980G shall not 
 apply to qualified HSA distributions.
 (ii) Failure to offer to all 
 employees.--In the case of a qualified 
 HSA distribution to any employee, the 
 failure to offer such distribution to 
 any eligible individual covered under a 
 high deductible health plan of the 
 employer shall (notwithstanding section 
 4980G(d)) be treated for purposes of 
 section 4980G as a failure to meet the 
 requirements of section 4980G(b).
 (f) Reimbursements for menstrual care products.--For purposes 
of this section and section 105, expenses incurred for 
menstrual care products (as defined in section 223(d)(2)(D)) 
shall be treated as incurred for medical care.
 (g) Qualified small employer health reimbursement 
arrangement.--For purposes of this section and section 105, 
payments or reimbursements from a qualified small employer 
health reimbursement arrangement (as defined in section 
9831(d)) of an individual for medical care (as defined in 
section 213(d)) shall not be treated as paid or reimbursed 
under employer-provided coverage for medical expenses under an 
accident or health plan if for the month in which such medical 
care is provided the individual does not have minimum essential 
coverage (within the meaning of section 5000A(f)).

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PART VII--ADDITIONAL ITEMIZED DEDUCTIONS FOR INDIVIDUALS

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SEC. 223. HEALTH SAVINGS ACCOUNTS.

 (a) Deduction allowed.--In the case of an individual who is 
an eligible individual for any month during the taxable year, 
there shall be allowed as a deduction for the taxable year an 
amount equal to the aggregate amount paid in cash during such 
taxable year by or on behalf of such individual to a health 
savings account of such individual.
 (b) Limitations.--
 (1) In general.--The amount allowable as a deduction 
 under subsection (a) to an individual for the taxable 
 year shall not exceed the sum of the monthly 
 limitations for months during such taxable year that 
 the individual is an eligible individual.
 (2) Monthly limitation.--The monthly limitation for 
 any month is 1/12 of--
 (A) in the case of an eligible individual who 
 has self-only coverage under a high deductible 
 health plan as of the first day of such month, 
 $2,250.
 (B) in the case of an eligible individual who 
 has family coverage under a high deductible 
 health plan as of the first day of such month, 
 $4,500.
 (3) Additional contributions for individuals 55 or 
 older.--
 (A) In general.--In the case of an individual 
 who has attained age 55 before the close of the 
 taxable year, the applicable limitation under 
 subparagraphs (A) and (B) of paragraph (2) 
 shall be increased by the additional 
 contribution amount.
 (B) Additional contribution amount.--For 
 purposes of this section, the additional 
 contribution amount is the amount determined in 
 accordance with the following table:
 (4) Coordination with other contributions.--The 
 limitation which would (but for this paragraph) apply 
 under this subsection to an individual for any taxable 
 year shall be reduced (but not below zero) by the sum 
 of--
 (A) the aggregate amount paid for such 
 taxable year to Archer MSAs of such individual,
 (B) the aggregate amount contributed to 
 health savings accounts of such individual 
 which is excludable from the taxpayer's gross 
 income for such taxable year under section 
 106(d) (and such amount shall not be allowed as 
 a deduction under subsection (a)), [and]
 (C) the aggregate amount contributed to 
 health savings accounts of such individual for 
 such taxable year under section 408(d)(9) (and 
 such amount shall not be allowed as a deduction 
 under subsection (a))[.], and
 (D) so much of any qualified HSA distribution 
 (as defined in section 106(e)(2)) made to a 
 health savings account of such individual 
 during the taxable year as does not exceed the 
 aggregate increases in the balance of the 
 arrangement from which such distribution is 
 made which occur during the portion of the plan 
 year which precedes such distribution (other 
 than any balance carried over to such plan year 
 and determined without regard to any decrease 
 in such balance during such portion of the plan 
 year).
 Subparagraph (A) shall not apply with respect to any 
 individual to whom paragraph (5) applies.
 (5) Special rule for married individuals.--In the 
 case of individuals who are married to each other, if 
 either spouse has family coverage--
 (A) both spouses shall be treated as having 
 only such family coverage (and if such spouses 
 each have family coverage under different 
 plans, as having the family coverage with the 
 lowest annual deductible), and
 (B) the limitation under paragraph (1) (after 
 the application of subparagraph (A) and without 
 regard to any additional contribution amount 
 under paragraph (3))--
 (i) shall be reduced by the aggregate 
 amount paid to Archer MSAs of such 
 spouses for the taxable year, and
 (ii) after such reduction, shall be 
 divided equally between them unless 
 they agree on a different division.
 (6) Denial of deduction to dependents.--No deduction 
 shall be allowed under this section to any individual 
 with respect to whom a deduction under section 151 is 
 allowable to another taxpayer for a taxable year 
 beginning in the calendar year in which such 
 individual's taxable year begins.
 (7) Medicare eligible individuals.--The limitation 
 under this subsection for any month with respect to an 
 individual shall be zero for the first month such 
 individual is entitled to benefits under title XVIII of 
 the Social Security Act and for each month thereafter.
 (8) Increase in limit for individuals becoming 
 eligible individuals after the beginning of the year.--
 (A) In general.--For purposes of computing 
 the limitation under paragraph (1) for any 
 taxable year, an individual who is an eligible 
 individual during the last month of such 
 taxable year shall be treated--
 (i) as having been an eligible 
 individual during each of the months in 
 such taxable year, and
 (ii) as having been enrolled, during 
 each of the months such individual is 
 treated as an eligible individual 
 solely by reason of clause (i), in the 
 same high deductible health plan in 
 which the individual was enrolled for 
 the last month of such taxable year.
 (B) Failure to maintain high deductible 
 health plan coverage.--
 (i) In general.--If, at any time 
 during the testing period, the 
 individual is not an eligible 
 individual, then--
 (I) gross income of the 
 individual for the taxable year 
 in which occurs the first month 
 in the testing period for which 
 such individual is not an 
 eligible individual is 
 increased by the aggregate 
 amount of all contributions to 
 the health savings account of 
 the individual which could not 
 have been made but for 
 subparagraph (A), and
 (II) the tax imposed by this 
 chapter for any taxable year on 
 the individual shall be 
 increased by 10 percent of the 
 amount of such increase.
 (ii) Exception for disability or 
 death.--Subclauses (I) and (II) of 
 clause (i) shall not apply if the 
 individual ceased to be an eligible 
 individual by reason of the death of 
 the individual or the individual 
 becoming disabled (within the meaning 
 of section 72(m)(7)).
 (iii) Testing period.--The term 
 ``testing period'' means the period 
 beginning with the last month of the 
 taxable year referred to in 
 subparagraph (A) and ending on the last 
 day of the 12th month following such 
 month.
 (c) Definitions and special rules.--For purposes of this 
section--
 (1) Eligible individual.--
 (A) In general.--The term ``eligible 
 individual'' means, with respect to any month, 
 any individual if--
 (i) such individual is covered under 
 a high deductible health plan as of the 
 1st day of such month, and
 (ii) such individual is not, while 
 covered under a high deductible health 
 plan, covered under any health plan--
 (I) which is not a high 
 deductible health plan, and
 (II) which provides coverage 
 for any benefit which is 
 covered under the high 
 deductible health plan.
 (B) Certain coverage disregarded.--
 Subparagraph (A)(ii) shall be applied without 
 regard to--
 (i) coverage for any benefit provided 
 by permitted insurance,
 (ii) coverage (whether through 
 insurance or otherwise) for accidents, 
 disability, dental care, vision care, 
 long-term care, or (in the case of 
 months or plan years to which paragraph 
 (2)(E) applies) telehealth and other 
 remote care, [and]
 (iii) for taxable years beginning 
 after December 31, 2006, coverage under 
 a health flexible spending arrangement 
 during any period immediately following 
 the end of a plan year of such 
 arrangement during which unused 
 benefits or contributions remaining at 
 the end of such plan year may be paid 
 or reimbursed to plan participants for 
 qualified benefit expenses incurred 
 during such period if--
 (I) the balance in such 
 arrangement at the end of such 
 plan year is zero, or
 (II) the individual is making 
 a qualified HSA distribution 
 (as defined in section 106(e)) 
 in an amount equal to the 
 remaining balance in such 
 arrangement as of the end of 
 such plan year, in accordance 
 with rules prescribed by the 
 Secretary[.],
 (iv) coverage under a health flexible 
 spending arrangement of the spouse of 
 the individual for any plan year of 
 such arrangement if the aggregate 
 reimbursements under such arrangement 
 for such year do not exceed the 
 aggregate expenses which would be 
 eligible for reimbursement under such 
 arrangement if such expenses were 
 determined without regard to any 
 expenses paid or incurred with respect 
 to such individual, and
 (v) coverage under a health flexible 
 spending arrangement or health 
 reimbursement arrangement for the 
 portion of the plan year after a 
 qualified HSA distribution (as defined 
 in section 106(e)(2) determined without 
 regard to subparagraph (A)(ii) thereof) 
 is made, if the terms of such 
 arrangement which apply for such 
 portion of the plan year are such that, 
 if such terms applied for the entire 
 plan year, then such arrangement would 
 not be taken into account under 
 subparagraph (A)(ii) of this paragraph 
 for such plan year.
 (C) Special rule for individuals eligible for 
 certain veterans benefits.--An individual shall 
 not fail to be treated as an eligible 
 individual for any period merely because the 
 individual receives hospital care or medical 
 services under any law administered by the 
 Secretary of Veterans Affairs for a service-
 connected disability (within the meaning of 
 section 101(16) of title 38, United States 
 Code).
 (D) Special rule for individuals receiving 
 benefits subject to surprise billing 
 statutes.--An individual shall not fail to be 
 treated as an eligible individual for any 
 period merely because the individual receives 
 benefits for medical care subject to and in 
 accordance with section 9816 or 9817, section 
 2799A-1 or 2799A-2 of the Public Health Service 
 Act, or section 716 or 717 of the Employee 
 Retirement Income Security Act of 1974, or any 
 State law providing similar protections to such 
 individual.
 (E) Treatment of direct primary care service 
 arrangements.--
 (i) In general.--A direct primary 
 care service arrangement shall not be 
 treated as a health plan for purposes 
 of subparagraph (A)(ii).
 (ii) Direct primary care service 
 arrangement.--For purposes of this 
 paragraph--
 (I) In general.--The term 
 ``direct primary care service 
 arrangement'' means, with 
 respect to any individual, an 
 arrangement under which such 
 individual is provided medical 
 care (as defined in section 
 213(d)) consisting solely of 
 primary care services provided 
 by primary care practitioners 
 (as defined in section 
 1833(x)(2)(A) of the Social 
 Security Act, determined 
 without regard to clause (ii) 
 thereof), if the sole 
 compensation for such care is a 
 fixed periodic fee.
 (II) Limitation.--With 
 respect to any individual for 
 any month, such term shall not 
 include any arrangement if the 
 aggregate fees for all direct 
 primary care service 
 arrangements (determined 
 without regard to this 
 subclause) with respect to such 
 individual for such month 
 exceed $150 (twice such dollar 
 amount in the case of an 
 individual with any direct 
 primary care service 
 arrangement (as so determined) 
 that covers more than one 
 individual).
 (iii) Certain services specifically 
 excluded from treatment as primary care 
 services.--For purposes of this 
 paragraph, the term ``primary care 
 services'' shall not include--
 (I) procedures that require 
 the use of general anesthesia,
 (II) prescription drugs 
 (other than vaccines), and
 (III) laboratory services not 
 typically administered in an 
 ambulatory primary care 
 setting.
 The Secretary, after consultation with 
 the Secretary of Health and Human 
 Services, shall issue regulations or 
 other guidance regarding the 
 application of this clause.
 (F) Special rule for qualified items and 
 services.--
 (i) In general.--For purposes of 
 subparagraph (A)(ii), an individual 
 shall not be treated as covered under a 
 health plan described in subclauses (I) 
 and (II) of such subparagraph merely 
 because the individual is eligible to 
 receive, or receives, qualified items 
 and services--
 (I) at a healthcare facility 
 located at a facility owned or 
 leased by the employer of the 
 individual (or of the 
 individual's spouse), or
 (II) at a healthcare facility 
 operated primarily for the 
 benefit of employees of the 
 employer of the individual (or 
 of the individual's spouse).
 (ii) Qualified items and services 
 defined.--For purposes of this 
 subparagraph, the term ``qualified 
 items and services'' means the 
 following:
 (I) Physical examination.
 (II) Immunizations, including 
 injections of antigens provided 
 by employees.
 (III) Drugs or biologicals 
 other than a prescribed drug 
 (as such term is defined in 
 section 213(d)(3)).
 (IV) Treatment for injuries 
 occurring in the course of 
 employment.
 (V) Preventive care for 
 chronic conditions (as defined 
 in clause (iv)).
 (VI) Drug testing.
 (VII) Hearing or vision 
 screenings and related 
 services.
 (iii) Aggregation.--For purposes of 
 clause (i), all persons treated as a 
 single employer under subsection (b), 
 (c), (m), or (o) of section 414 shall 
 be treated as a single employer.
 (iv) Preventive care for chronic 
 conditions.--For purposes of this 
 subparagraph, the term ``preventive 
 care for chronic conditions'' means any 
 item or service specified in the 
 Appendix of Internal Revenue Service 
 Notice 2019-45 which is prescribed to 
 treat an individual diagnosed with the 
 associated chronic condition specified 
 in such Appendix for the purpose of 
 preventing the exacerbation of such 
 chronic condition or the development of 
 a secondary condition, including any 
 amendment, addition, removal, or other 
 modification made by the Secretary 
 (pursuant to the authority granted to 
 the Secretary under paragraph (2)(C)) 
 to the items or services specified in 
 such Appendix subsequent to the date of 
 enactment of this subparagraph.
 (2) High deductible health plan.--
 (A) In general.--The term ``high deductible 
 health plan'' means a health plan--
 (i) which has an annual deductible 
 which is not less than--
 (I) $1,000 for self-only 
 coverage, and
 (II) twice the dollar amount 
 in subclause (I) for family 
 coverage, and
 (ii) the sum of the annual deductible 
 and the other annual out-of-pocket 
 expenses required to be paid under the 
 plan (other than for premiums) for 
 covered benefits does not exceed--
 (I) $5,000 for self-only 
 coverage, and
 (II) twice the dollar amount 
 in subclause (I) for family 
 coverage.
 (B) Exclusion of certain plans.--Such term 
 does not include a health plan if substantially 
 all of its coverage is coverage described in 
 paragraph (1)(B).
 (C) Safe harbor for absence of preventive 
 care deductible.--A plan shall not fail to be 
 treated as a high deductible health plan by 
 reason of failing to have a deductible for 
 preventive care (within the meaning of section 
 1861 of the Social Security Act, except as 
 otherwise provided by the Secretary).
 (D) Special rules for network plans.--In the 
 case of a plan using a network of providers--
 (i) Annual out-of-pocket 
 limitation.--Such plan shall not fail 
 to be treated as a high deductible 
 health plan by reason of having an out-
 of-pocket limitation for services 
 provided outside of such network which 
 exceeds the applicable limitation under 
 subparagraph (A)(ii).
 (ii) Annual deductible.--Such plan's 
 annual deductible for services provided 
 outside of such network shall not be 
 taken into account for purposes of 
 subsection (b)(2).
 (E) Safe harbor for absence of deductible for 
 telehealth.--In the case of--
 (i) months beginning after March 31, 
 2022, and before January 1, 2023, and
 (ii) plan years beginning on or 
 before December 31, 2021, or after 
 December 31, 2022, and before January 
 1, 2025,
 a plan shall not fail to be treated as a high 
 deductible health plan by reason of failing to 
 have a deductible for telehealth and other 
 remote care services.
 (F) Special rule for surprise billing.--A 
 plan shall not fail to be treated as a high 
 deductible health plan by reason of providing 
 benefits for medical care in accordance with 
 section 9816 or 9817, section 2799A-1 or 2799A-
 2 of the Public Health Service Act, or section 
 716 or 717 of the Employee Retirement Income 
 Security Act of 1974, or any State law 
 providing similar protections to individuals, 
 prior to the satisfaction of the deductible 
 under paragraph (2)(A)(i).
 (G) Safe harbor for absence of deductible for 
 certain insulin products.--
 (i) In general.--A plan shall not 
 fail to be treated as a high deductible 
 health plan by reason of failing to 
 have a deductible for selected insulin 
 products.
 (ii) Selected insulin products.--For 
 purposes of this subparagraph--
 (I) In general.--The term 
 ``selected insulin products'' 
 means any dosage form (such as 
 vial, pump, or inhaler dosage 
 forms) of any different type 
 (such as rapid-acting, short-
 acting, intermediate-acting, 
 long-acting, ultra long-acting, 
 and premixed) of insulin.
 (II) Insulin.--The term 
 ``insulin'' means insulin that 
 is licensed under subsection 
 (a) or (k) of section 351 of 
 the Public Health Service Act 
 (42 U.S.C. 262) and continues 
 to be marketed under such 
 section, including any insulin 
 product that has been deemed to 
 be licensed under section 
 351(a) of such Act pursuant to 
 section 7002(e)(4) of the 
 Biologics Price Competition and 
 Innovation Act of 2009 (Public 
 Law 111-148) and continues to 
 be marketed pursuant to such 
 licensure.
 (3) Permitted insurance.--The term ``permitted 
 insurance'' means--
 (A) insurance if substantially all of the 
 coverage provided under such insurance relates 
 to--
 (i) liabilities incurred under 
 workers' compensation laws,
 (ii) tort liabilities,
 (iii) liabilities relating to 
 ownership or use of property, or
 (iv) such other similar liabilities 
 as the Secretary may specify by 
 regulations,
 (B) insurance for a specified disease or 
 illness, and
 (C) insurance paying a fixed amount per day 
 (or other period) of hospitalization.
 (4) Family coverage.--The term ``family coverage'' 
 means any coverage other than self-only coverage.
 (5) Archer MSA.--The term ``Archer MSA'' has the 
 meaning given such term in section 220(d).
 (d) Health savings account.--For purposes of this section--
 (1) In general.--The term ``health savings account'' 
 means a trust created or organized in the United States 
 as a health savings account exclusively for the purpose 
 of paying the qualified medical expenses of the account 
 beneficiary, but only if the written governing 
 instrument creating the trust meets the following 
 requirements:
 (A) Except in the case of a rollover 
 contribution described in subsection (f)(5) or 
 section 220(f)(5), no contribution will be 
 accepted--
 (i) unless it is in cash, or
 (ii) to the extent such contribution, 
 when added to previous contributions to 
 the trust for the calendar year, 
 exceeds the sum of--
 (I) the dollar amount in 
 effect under subsection 
 (b)(2)(B), and
 (II) the dollar amount in 
 effect under subsection 
 (b)(3)(B).
 (B) The trustee is a bank (as defined in 
 section 408(n)), an insurance company (as 
 defined in section 816), or another person who 
 demonstrates to the satisfaction of the 
 Secretary that the manner in which such person 
 will administer the trust will be consistent 
 with the requirements of this section.
 (C) No part of the trust assets will be 
 invested in life insurance contracts.
 (D) The assets of the trust will not be 
 commingled with other property except in a 
 common trust fund or common investment fund.
 (E) The interest of an individual in the 
 balance in his account is nonforfeitable.
 (2) Qualified medical expenses.--
 (A) In general.--The term ``qualified medical 
 expenses'' means, with respect to an account 
 beneficiary, amounts paid by such beneficiary 
 for medical care (as defined in section 213(d)) 
 for such individual, the spouse of such 
 individual, and any dependent (as defined in 
 section 152, determined without regard to 
 subsections (b)(1), (b)(2), and (d)(1)(B) 
 thereof) of such individual, but only to the 
 extent such amounts are not compensated for by 
 insurance or otherwise. For purposes of this 
 subparagraph, amounts paid for menstrual care 
 products shall be treated as paid for medical 
 care.
 (B) Health insurance may not be purchased 
 from account.--Subparagraph (A) shall not apply 
 to any payment for insurance.
 (C) Exceptions.--Subparagraph (B) shall not 
 apply to any expense for coverage under--
 (i) a health plan during any period 
 of continuation coverage required under 
 any Federal law,
 (ii) a qualified long-term care 
 insurance contract (as defined in 
 section 7702B(b)),
 (iii) a health plan during a period 
 in which the individual is receiving 
 unemployment compensation under any 
 Federal or State law, [or]
 (iv) in the case of an account 
 beneficiary who has attained the age 
 specified in section 1811 of the Social 
 Security Act, any health insurance 
 other than a medicare supplemental 
 policy (as defined in section 1882 of 
 the Social Security Act)[.], or
 (v) any direct primary care service 
 arrangement.
 (D) Menstrual care product.--For purposes of 
 this paragraph, the term ``menstrual care 
 product'' means a tampon, pad, liner, cup, 
 sponge, or similar product used by individuals 
 with respect to menstruation or other genital-
 tract secretions.
 (3) Account beneficiary.--The term ``account 
 beneficiary'' means the individual on whose behalf the 
 health savings account was established.
 (4) Certain rules to apply.--Rules similar to the 
 following rules shall apply for purposes of this 
 section:
 (A) Section 219(d)(2) (relating to no 
 deduction for rollovers).
 (B) Section 219(f)(3) (relating to time when 
 contributions deemed made).
 (C) Except as provided in section 106(d), 
 section 219(f)(5) (relating to employer 
 payments).
 (D) Section 408(g) (relating to community 
 property laws).
 (E) Section 408(h) (relating to custodial 
 accounts).
 (e) Tax treatment of accounts.--
 (1) In general.--A health savings account is exempt 
 from taxation under this subtitle unless such account 
 has ceased to be a health savings account. 
 Notwithstanding the preceding sentence, any such 
 account is subject to the taxes imposed by section 511 
 (relating to imposition of tax on unrelated business 
 income of charitable, etc. organizations).
 (2) Account terminations.--Rules similar to the rules 
 of paragraphs (2) and (4) of section 408(e) shall apply 
 to health savings accounts, and any amount treated as 
 distributed under such rules shall be treated as not 
 used to pay qualified medical expenses.
 (f) Tax treatment of distributions.--
 (1) Amounts used for qualified medical expenses.--Any 
 amount paid or distributed out of a health savings 
 account which is used exclusively to pay qualified 
 medical expenses of any account beneficiary shall not 
 be includible in gross income.
 (2) Inclusion of amounts not used for qualified 
 medical expenses.--Any amount paid or distributed out 
 of a health savings account which is not used 
 exclusively to pay the qualified medical expenses of 
 the account beneficiary shall be included in the gross 
 income of such beneficiary.
 (3) Excess contributions returned before due date of 
 return.--
 (A) In general.--If any excess contribution 
 is contributed for a taxable year to any health 
 savings account of an individual, paragraph (2) 
 shall not apply to distributions from the 
 health savings accounts of such individual (to 
 the extent such distributions do not exceed the 
 aggregate excess contributions to all such 
 accounts of such individual for such year) if--
 (i) such distribution is received by 
 the individual on or before the last 
 day prescribed by law (including 
 extensions of time) for filing such 
 individual's return for such taxable 
 year, and
 (ii) such distribution is accompanied 
 by the amount of net income 
 attributable to such excess 
 contribution.
 Any net income described in clause (ii) shall 
 be included in the gross income of the 
 individual for the taxable year in which it is 
 received.
 (B) Excess contribution.--For purposes of 
 subparagraph (A), the term ``excess 
 contribution'' means any contribution (other 
 than a rollover contribution described in 
 paragraph (5) or section 220(f)(5)) which is 
 neither excludable from gross income under 
 section 106(d) nor deductible under this 
 section.
 (4) Additional tax on distributions not used for 
 qualified medical expenses.--
 (A) In general.--The tax imposed by this 
 chapter on the account beneficiary for any 
 taxable year in which there is a payment or 
 distribution from a health savings account of 
 such beneficiary which is includible in gross 
 income under paragraph (2) shall be increased 
 by 20 percent of the amount which is so 
 includible.
 (B) Exception for disability or death.--
 Subparagraph (A) shall not apply if the payment 
 or distribution is made after the account 
 beneficiary becomes disabled within the meaning 
 of section 72(m)(7) or dies.
 (C) Exception for distributions after 
 medicare eligibility.--Subparagraph (A) shall 
 not apply to any payment or distribution after 
 the date on which the account beneficiary 
 attains the age specified in section 1811 of 
 the Social Security Act.
 (5) Rollover contribution.--An amount is described in 
 this paragraph as a rollover contribution if it meets 
 the requirements of subparagraphs (A) and (B).
 (A) In general.--Paragraph (2) shall not 
 apply to any amount paid or distributed from a 
 health savings account to the account 
 beneficiary to the extent the amount received 
 is paid into a health savings account for the 
 benefit of such beneficiary not later than the 
 60th day after the day on which the beneficiary 
 receives the payment or distribution.
 (B) Limitation.--This paragraph shall not 
 apply to any amount described in subparagraph 
 (A) received by an individual from a health 
 savings account if, at any time during the 1-
 year period ending on the day of such receipt, 
 such individual received any other amount 
 described in subparagraph (A) from a health 
 savings account which was not includible in the 
 individual's gross income because of the 
 application of this paragraph.
 (6) Coordination with medical expense deduction.--For 
 purposes of determining the amount of the deduction 
 under section 213, any payment or distribution out of a 
 health savings account for qualified medical expenses 
 shall not be treated as an expense paid for medical 
 care.
 (7) Transfer of account incident to divorce.--The 
 transfer of an individual's interest in a health 
 savings account to an individual's spouse or former 
 spouse under a divorce or separation instrument 
 described in clause (i) of section 121(d)(3)(C) shall 
 not be considered a taxable transfer made by such 
 individual notwithstanding any other provision of this 
 subtitle, and such interest shall, after such transfer, 
 be treated as a health savings account with respect to 
 which such spouse is the account beneficiary.
 (8) Treatment after death of account beneficiary.--
 (A) Treatment if designated beneficiary is 
 spouse.--If the account beneficiary's surviving 
 spouse acquires such beneficiary's interest in 
 a health savings account by reason of being the 
 designated beneficiary of such account at the 
 death of the account beneficiary, such health 
 savings account shall be treated as if the 
 spouse were the account beneficiary.
 (B) Other cases.--
 (i) In general.--If, by reason of the 
 death of the account beneficiary, any 
 person acquires the account 
 beneficiary's interest in a health 
 savings account in a case to which 
 subparagraph (A) does not apply--
 (I) such account shall cease 
 to be a health savings account 
 as of the date of death, and
 (II) an amount equal to the 
 fair market value of the assets 
 in such account on such date 
 shall be includible if such 
 person is not the estate of 
 such beneficiary, in such 
 person's gross income for the 
 taxable year which includes 
 such date, or if such person is 
 the estate of such beneficiary, 
 in such beneficiary's gross 
 income for the last taxable 
 year of such beneficiary.
 (ii) Special rules.--
 (I) Reduction of inclusion 
 for predeath expenses.--The 
 amount includible in gross 
 income under clause (i) by any 
 person (other than the estate) 
 shall be reduced by the amount 
 of qualified medical expenses 
 which were incurred by the 
 decedent before the date of the 
 decedent's death and paid by 
 such person within 1 year after 
 such date.
 (II) Deduction for estate 
 taxes.--An appropriate 
 deduction shall be allowed 
 under section 691(c) to any 
 person (other than the decedent 
 or the decedent's spouse) with 
 respect to amounts included in 
 gross income under clause (i) 
 by such person.
 (g) Cost-of-living adjustment.--
 (1) In general.--Each dollar amount in subsections 
 (b)(2), (c)(1)(E)(ii)(II), and (c)(2)(A) shall be 
 increased by an amount equal to--
 (A) such dollar amount, multiplied by
 (B) the cost-of-living adjustment determined 
 under section 1(f)(3) for the calendar year in 
 which such taxable year begins determined by 
 substituting for ``calendar year 2016'' in 
 subparagraph (A)(ii) thereof--
 (i) except as provided in clause (ii) 
 and (iii), ``calendar year 1997'', 
 [and]
 (ii) in the case of each dollar 
 amount in subsection (c)(2)(A), 
 ``calendar year 2003''[.], and
 (iii) in the case of the dollar 
 amount in subsection (c)(1)(E)(ii)(II) 
 for taxable years beginning in calendar 
 years after 2026, ``calendar year 
 2025''.
 In the case of adjustments made for any taxable year 
 beginning after 2007, section 1(f)(4) shall be applied 
 for purposes of this paragraph by substituting ``March 
 31'' for ``August 31'', and the Secretary shall publish 
 the adjusted amounts under subsections (b)(2), 
 (c)(1)(E)(ii)(II), and (c)(2)(A) for taxable years 
 beginning in any calendar year no later than June 1 of 
 the preceding calendar year.
 (2) Rounding.--If any increase under paragraph (1) is 
 not a multiple of $50, such increase shall be rounded 
 to the nearest multiple of $50.
 (h) Reports.--The Secretary may require--
 (1) the trustee of a health savings account to make 
 such reports regarding such account to the Secretary 
 and to the account beneficiary with respect to 
 contributions, distributions, the return of excess 
 contributions, and such other matters as the Secretary 
 determines appropriate, and
 (2) any person who provides an individual with a high 
 deductible health plan to make such reports to the 
 Secretary and to the account beneficiary with respect 
 to such plan as the Secretary determines appropriate.
The reports required by this subsection shall be filed at such 
time and in such manner and furnished to such individuals at 
such time and in such manner as may be required by the 
Secretary.

 * * * * * * *

Subtitle F--Procedure and Administration

 * * * * * * *

CHAPTER 61--INFORMATION AND RETURNS

 * * * * * * *

Subchapter A--RETURNS AND RECORDS

 * * * * * * *

PART III--INFORMATION RETURNS

 * * * * * * *

 Subpart C--INFORMATION REGARDING WAGES PAID EMPLOYEES

SEC. 6051. RECEIPTS FOR EMPLOYEES.

 (a) Requirement.--Every person required to deduct and 
withhold from an employee a tax under section 3101 or 3402, or 
who would have been required to deduct and withhold a tax under 
section 3402 (determined without regard to subsection (n)) if 
the employee had claimed no more than one withholding 
exemption, or every employer engaged in a trade or business who 
pays remuneration for services performed by an employee, 
including the cash value of such remuneration paid in any 
medium other than cash, shall furnish to each such employee in 
respect of the remuneration paid by such person to such 
employee during the calendar year, on or before January 31 of 
the succeeding year, or, if his employment is terminated before 
the close of such calendar year, within 30 days after the date 
of receipt of a written request from the employee if such 30-
day period ends before January 31, a written statement showing 
the following:
 (1) the name of such person,
 (2) the name of the employee (and an identifying 
 number for the employee if wages as defined in section 
 3121(a) have been paid),
 (3) the total amount of wages as defined in section 
 3401(a),
 (4) the total amount deducted and withheld as tax 
 under section 3402,
 (5) the total amount of wages as defined in section 
 3121(a),
 (6) the total amount deducted and withheld as tax 
 under section 3101,
 (8) the total amount of elective deferrals (within 
 the meaning of section 402(g)(3)) and compensation 
 deferred under section 457, including the amount of 
 designated Roth contributions (as defined in section 
 402A),
 (9) the total amount incurred for dependent care 
 assistance with respect to such employee under a 
 dependent care assistance program described in section 
 129(d),
 (10) in the case of an employee who is a member of 
 the Armed Forces of the United States, such employee's 
 earned income as determined for purposes of section 32 
 (relating to earned income credit),
 (11) the amount contributed to any Archer MSA (as 
 defined in section 220(d)) of such employee or such 
 employee's spouse,
 (12) the amount contributed to any health savings 
 account (as defined in section 223(d)) of such employee 
 or such employee's spouse (other than any qualified HSA 
 distribution, as defined in section 106(e)(2)),
 (13) the total amount of deferrals for the year under 
 a nonqualified deferred compensation plan (within the 
 meaning of section 409A(d)),
 (14) the aggregate cost (determined under rules 
 similar to the rules of section 4980B(f)(4)) of 
 applicable employer-sponsored coverage (as defined in 
 subsection (g)), except that this paragraph shall not 
 apply to--
 (A) coverage to which paragraphs (11) and 
 (12) apply, or
 (B) the amount of any salary reduction 
 contributions to a flexible spending 
 arrangement (within the meaning of section 
 125),
 (15) the total amount of permitted benefit (as 
 defined in section 9831(d)(3)(C)) for the year under a 
 qualified small employer health reimbursement 
 arrangement (as defined in section 9831(d)(2)) with 
 respect to the employee,
 (16) the amount includible in gross income under 
 subparagraph (A) of section 83(i)(1) with respect to an 
 event described in subparagraph (B) of such section 
 which occurs in such calendar year, [and]
 (17) the aggregate amount of income which is being 
 deferred pursuant to elections under section 83(i), 
 determined as of the close of the calendar year[.], 
 (18) in the case of a direct primary care service 
 arrangement (as defined in section 223(c)(1)(E)(ii)) 
 which is provided in connection with employment, the 
 aggregate fees for such arrangement for such employee, 
 and
 (19) the amount of any qualified HSA distribution (as 
 defined in section 106(e)(2)) with respect to such 
 employee.
In the case of compensation paid for service as a member of a 
uniformed service, the statement shall show, in lieu of the 
amount required to be shown by paragraph (5), the total amount 
of wages as defined in section 3121(a), computed in accordance 
with such section and section 3121(i)(2). In the case of 
compensation paid for service as a volunteer or volunteer 
leader within the meaning of the Peace Corps Act, the statement 
shall show, in lieu of the amount required to be shown by 
paragraph (5), the total amount of wages as defined in section 
3121(a), computed in accordance with such section and section 
3121(i)(3). In the case of tips received by an employee in the 
course of his employment, the amounts required to be shown by 
paragraphs (3) and (5) shall include only such tips as are 
included in statements furnished to the employer pursuant to 
section 6053(a). The amounts required to be shown by paragraph 
(5) shall not include wages which are exempted pursuant to 
sections 3101(c) and 3111(c) from the taxes imposed by sections 
3101 and 3111. In the case of the amounts required to be shown 
by paragraph (13), the Secretary may (by regulation) establish 
a minimum amount of deferrals below which paragraph (13) does 
not apply.
 (b) Special rule as to compensation of members of Armed 
Forces.--In the case of compensation paid for service as a 
member of the Armed Forces, the statement required by 
subsection (a) shall be furnished if any tax was withheld 
during the calendar year under section 3402, or if any of the 
compensation paid during such year is includible in gross 
income under chapter 1, or if during the calendar year any 
amount was required to be withheld as tax under section 3101. 
In lieu of the amount required to be shown by paragraph (3) of 
subsection (a), such statement shall show as wages paid during 
the calendar year the amount of such compensation paid during 
the calendar year which is not excluded from gross income under 
chapter 1 (whether or not such compensation constituted wages 
as defined in section 3401(a)).
 (c) Additional requirements.--The statements required to be 
furnished pursuant to this section in respect of any 
remuneration shall be furnished at such other times, shall 
contain such other information, and shall be in such form as 
the Secretary may by regulations prescribe. The statements 
required under this section shall also show the proportion of 
the total amount withheld as tax under section 3101 which is 
for financing the cost of hospital insurance benefits under 
part A of title XVIII of the Social Security Act.
 (d) Statements to constitute information returns.--A 
duplicate of any statement made pursuant to this section and in 
accordance with regulations prescribed by the Secretary shall, 
when required by such regulations, be filed with the Secretary.
 (e) Railroad employees.--
 (1) Additional requirement.--Every person required to 
 deduct and withhold tax under section 3201 from an 
 employee shall include on or with the statement 
 required to be furnished such employee under subsection 
 (a) a notice concerning the provisions of this title 
 with respect to the allowance of a credit or refund of 
 the tax on wages imposed by section 3101(b) and the tax 
 on compensation imposed by section 3201 or 3211 which 
 is treated as a tax on wages imposed by section 
 3101(b).
 (2) Information to be supplied to employees.--Each 
 person required to deduct and withhold tax under 
 section 3201 during any year from an employee who has 
 also received wages during such year subject to the tax 
 imposed by section 3101(b) shall, upon request of such 
 employee, furnish to him a written statement showing--
 (A) the total amount of compensation with 
 respect to which the tax imposed by section 
 3201 was deducted,
 (B) the total amount deducted as tax under 
 section 3201, and
 (C) the portion of the total amount deducted 
 as tax under section 3201 which is for 
 financing the cost of hospital insurance under 
 part A of title XVIII of the Social Security 
 Act.
 (f) Statements required in case of sick pay paid by third 
parties.--
 (1) Statements required from payor.--
 (A) In general.--If, during any calendar 
 year, any person makes a payment of third-party 
 sick pay to an employee, such person shall, on 
 or before January 15 of the succeeding year, 
 furnish a written statement to the employer in 
 respect of whom such payment was made showing--
 (i) the name and, if there is 
 withholding under section 3402(o), the 
 social security number of such 
 employee,
 (ii) the total amount of the third-
 party sick pay paid to such employee 
 during the calendar year, and
 (iii) the total amount (if any) 
 deducted and withheld from such sick 
 pay under section 3402.
 For purposes of the preceding sentence, the 
 term ``third-party sick pay'' means any sick 
 pay (as defined in section 3402(o)(2)(C)) which 
 does not constitute wages for purposes of 
 chapter 24 (determined without regard to 
 section 3402(o)(1)).
 (B) Special rules.--
 (i) Statements are in lieu of other 
 reporting requirements.--The reporting 
 requirements of subparagraph (A) with 
 respect to any payments shall, with 
 respect to such payments, be in lieu of 
 the requirements of subsection (a) and 
 of section 6041.
 (ii) Penalties made applicable.--For 
 purposes of sections 6674 and 7204, the 
 statements required to be furnished by 
 subparagraph (A) shall be treated as 
 statements required under this section 
 to be furnished to employees.
 (2) Information required to be furnished by 
 employer.--Every employer who receives a statement 
 under paragraph (1)(A) with respect to sick pay paid to 
 any employee during any calendar year shall, on or 
 before January 31 of the succeeding year, furnish a 
 written statement to such employee showing--
 (A) the information shown on the statement 
 furnished under paragraph (1)(A), and
 (B) if any portion of the sick pay is 
 excludable from gross income under section 
 104(a)(3), the portion which is not so 
 excludable and the portion which is so 
 excludable.
 To the extent practicable, the information required 
 under the preceding sentence shall be furnished on or 
 with the statement (if any) required under subsection 
 (a).
 (g) Applicable employer-sponsored coverage.--For purposes of 
subsection (a)(14)--
 (1) In general.--The term ``applicable employer-
 sponsored coverage'' means, with respect to any 
 employee, coverage under any group health plan made 
 available to the employee by an employer which is 
 excludable from the employee's gross income under 
 section 106, or would be so excludable if it were 
 employer-provided coverage (within the meaning of such 
 section 106).
 (2) Exceptions.--The term ``applicable employer-
 sponsored coverage'' shall not include--
 (A) any coverage (whether through insurance 
 or otherwise) described in section 9832(c)(1) 
 (other than subparagraph (G) thereof) or for 
 long-term care,
 (B) any coverage under a separate policy, 
 certificate, or contract of insurance which 
 provides benefits substantially all of which 
 are for treatment of the mouth (including any 
 organ or structure within the mouth) or for 
 treatment of the eye, or
 (C) any coverage described in section 
 9832(c)(3) the payment for which is not 
 excludable from gross income and for which a 
 deduction under section 162(l) is not 
 allowable.
 (3) Coverage includes employee paid portion.--
 Coverage shall be treated as applicable employer-
 sponsored coverage without regard to whether the 
 employer or employee pays for the coverage.
 (4) Governmental plans included.--Applicable 
 employer-sponsored coverage shall include coverage 
 under any group health plan established and maintained 
 primarily for its civilian employees by the Government 
 of the United States, by the government of any State or 
 political subdivision thereof, or by any agency or 
 instrumentality of any such government.

 * * * * * * *

 VII. DISSENTING VIEWS

 H.R. 5688 (Smucker, R-PA-11 and Blumenauer, D-OR-3) 
includes a series of provisions intended to incentivize use of 
health savings accounts (HSAs), which are tax-preferred savings 
accounts that are paired with high-deductible health plans 
(HDHPs). HDHPs, as the name implies, are health plans that have 
high deductibles, requiring Americans to pay thousands of 
dollars out-of-pocket before insurance begins. More 
specifically, this bill allows individuals participating in a 
direct primary care arrangement or receiving qualified items 
and services at a worksite health clinic to contribute to an 
HSA. It also allows an individual to maintain an HSA even if 
the individual's spouse has a Flexible Spending Account (FSA) 
provided each spouse is under a separate health insurance plan. 
Finally, H.R. 5688 allows distributions from an FSA or Health 
Reimbursement Arrangement (HRA) directly to an HSA in 
connection with establishing coverage under an HDHP. According 
to the Joint Committee on Taxation, this bill would cost 
American taxpayers $12.95 billion over 10 years--and the 
provisions do not take effect until 2026.
 This legislation neither lowers out-of-pocket health care 
costs nor improves insurance coverage. These provisions do 
nothing to lower the cost of care or provide coverage to the 
millions of underinsured or uninsured Americans. HSAs are not 
health insurance but tax- preferred savings accounts: 
Contributions are pretax, assets grow tax-free, and 
distributions are not taxed for qualified medical expenses.\1\ 
The fundamental premise behind HSAs is that individuals should 
be responsible for saving for their own health care needs, 
which is a flawed approach because even paying for non-
catastrophic events is beyond the reach of most American 
families. The American Hospital Association points to the 
prevalence of HDHPs as one of the paramount drivers of medical 
debt. Twenty percent of employers that offer HDHPs do not 
contribute to an HSA for their employees, and most firms offer 
a modest $400 to $799 for individual coverage.\2\ This trend 
leaves employees at risk for all or most of the cost of the 
deductible. Thus, individuals with incomes below $75,000 who 
have HDHPs are likely to forgo needed medical care, 
specifically low-cost primary care services.\3\ Unlike the 
Republican approach to health care, the Democrats' Inflation 
Reduction Act made key investments to lower prescription drug 
prices, reduce patients' out-of-pocket health costs, reduce 
insurance premiums, and enhance the tax credits that make 
insurance coverage affordable for more than 13 million 
Americans.\4\
---------------------------------------------------------------------------
 \1\Joseph Slife & Matt Bell, A Health Savings Account: The Other 
``Retirement Account,'' SOUND MIND INVESTING (Jan. 27, 2023), https://
soundmindinvesting.com/articles/a-health-savings-account-the-other-
retirement-account.
 \2\2022 employer health benefits survey - section 8: High-
deductible health plans with savings option. KFF. (2022, October 27). 
https://www.kff.org/report-section/ehbs-2022-section-8-high-
deductible-health-plans-with-savings-option/
#::text=ENROLLMENT%20IN%20HDHP%2
FHRAS%20AND%20HSA%2DQUALIFIED%20HDHPS&text=Enrollment%20in%20HDHP
%2FSOs%20has,HSA%2Dqualified%20HDHPs%20in%202022.
 \3\Schnettler, T. (2022, July 19). Impact of high deductible health 
plans on Health Care Utilization. Vital Record. https://
vitalrecord.tamhsc.edu/impact-of-high-deductible-health-plans-on-
health-care-utilization/.
 \4\The Inflation Reduction Act Turns One: Millions of Americans Are 
Saving On Health Care, With More To Come. PROTECT OUR CARE, (2023). 
https://www.protectourcare.org/wp-content/uploads/2023/08/IRA-First-
Anniversary-Fact-Sheet.pdf.
---------------------------------------------------------------------------
 HSAs provide little benefit for the average American 
family. While 75 percent of HSA account holders live in ZIP 
codes with a median household income of less than $100,00, only 
four percent of all HSA contributions come from households with 
incomes $50,000 or below, demonstrating that most lower and 
middle income Americans with an account do not actually 
contribute to it.\5\\6\ In contrast, 77 percent of 
contributions to HSAs come from households with incomes over 
$100,000 and 44 percent from households with incomes over 
$200,000.\7\ People with incomes over $100,000 represent 78 
percent of participants maxing out HSA contributions.\8\
---------------------------------------------------------------------------
 \5\2022 Devenir & HSA Council Demographic Survey. DEVENIR RESEARCH 
(July, 13, 2023), https://www.devenir.com/wp-content/uploads/2022-
Devenir-and-HSA-Council-Demographic-Report.pdf.
 \6\Gideon Lukens, House Bills Expanding HSAs Would Boost High-
Income Tax Breaks--Not Affordability of Care, CENTER ON BUDGET AND 
POLICY PRIORITIES (Sep. 27, 2023), https://www.cbpp.org/blog/house-
bills-expanding-hsas-would-boost-high-income-tax-breaks-not-
affordability-of-
care#::text=Two%20bills%20due%20for%20House,costing%20over%20%2470%20
billion%20combined%2C.
 \7\Gideon Lukens, House Bills Expanding HSAs Would Boost High-
Income Tax Breaks--Not Affordability of Care, CENTER ON BUDGET AND 
POLICY PRIORITIES (Sep. 27, 2023), https://www.cbpp.org/blog/house-
bills-expanding-hsas-would-boost-high-income-tax-breaks-not-
affordability-of-
care#::text=Two%20bills%20due%20for%20House,costing%20over%20%2470%20
billion%20combined%2C.
 \8\Gideon Lukens, Expanding Health Savings Accounts Would Boost Tax 
Shelters, Not Access to Care, CENTER ON BUDGET AND POLICY PRIORIITES 
(June 22, 2023). https://www.cbpp.org/research/health/expanding-health-
savings-accounts-would-boost-tax-shelters-not-access-to-care.
---------------------------------------------------------------------------
 HSAs exacerbate health disparities. This legislation does 
nothing to reduce health disparities or address the 
generational wealth gaps and poorer health outcomes for people 
of color. A typical White family in 2019 had eight times the 
wealth of a typical Black family and five times the wealth of a 
typical Latino family. The median wealth of White households 
was $171,000, compared with $17,100 for Black households and 
$20,600 for Latino households.\9\ Thus, people of color benefit 
from the tax benefits of HSAs far less than White people, as 
the preferential tax treatment accrues inequitably along income 
lines and is disproportionately out of reach for many people of 
color. Account balances, contributions, and distributions from 
HSA accounts differ significantly by race, and HSA expansion 
will only exacerbate the health equity and wealth gap.\10\
---------------------------------------------------------------------------
 \9\Dorothy Brown, The Whiteness of Wealth: How the Tax System 
Impoverishes Black Americans--And How We Can Fix It 18 (2021).
 \10\Spiegel, J. Examining HSAs through a DEI lens. EMPLOYEE BENEFIT 
RESEARCH INSTITUTE, (2022, April 7).
---------------------------------------------------------------------------
 HSAs impact solvency of Medicare and Social Security Trust 
Funds. HSAs have multiple tax advantages for accumulating 
wealth. Contributions to HSAs are made with pretax dollars (in 
most states), assets grow tax-free, and distributions are tax-
free if used to pay for qualified medical expenses or as 
reimbursement for such expenses. These tax giveaways will cost 
the federal government more than $180 billion over the next 10 
years, disproportionately benefitting the wealthy--and H.R. 
5688 would add another $12.95 billion to that total over the 
next decade.\11\ Because employer contributions to HSAs are not 
subject to the payroll tax imposed on either the employer or 
the employee, expanding their use will inevitably reduce 
contributions into the Medicare and Social Security Trust 
Funds, harming America's seniors and people with disabilities. 
Closing the Medicaid coverage gap or extending marketplace 
premium tax credits for the next 10 years would cost about the 
same as continuing to fund HSAs.\12\
---------------------------------------------------------------------------
 \11\Gideon Lukens, Expanding Health Savings Accounts Would Boost 
Tax Shelters, Not Access to Care, CENTER ON BUDGET AND POLICY 
PRIORIITES (June 22, 2023). https://www.cbpp.org/research/health/
expanding-health-savings-accounts-would-boost-tax-shelters-not-access-
to-care.
 \12\House GOP Health Care Bills Benefit the Wealthy and Diminish 
Affordable Care Act Protections, PROTECT OUR CARE (June 7, 22023). 
https://www.protectourcare.org/house-gop-health-care-bills-benefit-the-
wealthy-and-diminish-affordable-care-act-protections/.
---------------------------------------------------------------------------
 HSAs are a tax shelter for the wealthy. HSAs 
disproportionately benefit wealthy Americans--and this 
legislation seeks to make HSAs more attractive. People with 
higher incomes receive the biggest tax benefit for each dollar 
contributed to an HSA because the value of a tax deduction 
rises with an individual's tax bracket.\13\ People with income 
in the lowest tax brackets save up to 12 cents on the dollar in 
federal income taxes for their HSA contributions.\14\ By 
comparison, those earning over half a million dollars save 37 
cents for each dollar in federal income taxes put into an 
HSA.\15\ At age 65, withdrawals can be used for any purpose 
with no penalty. This loophole means HSA funds can be used for 
any non-medical expenses after age 65 without paying a penalty 
for non-medical use. HSA funds can be used to cover day-to-day 
expenses, pay for home renovations, or even finance a new 
boat.\16\\17\ Investment advisors see a lucrative opportunity 
and are now marketing HSAs as retirement and wealth 
accumulation products, not health care accounts.\18\ Democrats 
offered an amendment to H.R. 5688 to close this tax loophole, 
but the majority rejected the changes. Republicans would rather 
exacerbate disparities by giving away billions to the wealthy.
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 \13\Ryan Ermey, This savings account offers a `triple tax 
benefit'--but 88% of users are missing out, CNBC (Feb. 9, 2023), 
https://www.cnbc.com/2023/02/09/health-savings-accounts-how-to-save-
for-retirement.html.
 \14\Gideon Lukens, Expanding Health Savings Accounts Would Boost 
Tax Shelters, Not Access to Care, CENTER ON BUDGET AND POLICY 
PRIORIITES (June 22, 2023). https://www.cbpp.org/research/health/
expanding-health-savings-accounts-would-boost-tax-shelters-not-access-
to-care.
 \15\Id.
 \16\How to avoid penalties on an HSA withdrawal, BENEFIT RESOURCE 
(Aug 4, 2022), https://www.benefitresource.com/blog/how-to-avoid-
penalties-on-an-hsa-withdrawal/.
 \17\5 ways HSAs can help with your retirement, FIDELITY (Dec. 7, 
2022), https://www.fidelity.com/viewpoints/wealth-management/hsas-and-
your-retirement.
 \18\Id.
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 Low-and middle-income Americans often cannot take advantage 
of the tax benefits of HSAs in the same way wealthy Americans 
do. Those with higher incomes can afford to take on the risk of 
a high deductible and are more likely to establish HSAs 
compared to low-income consumers. For those who have little to 
contribute, given fees and extremely low interest rates, these 
accounts may offer little value. Some account holders could 
actually be losing money. Six of seven major institutions 
require a minimum balance to invest their HSA contributions, 
some up to $2,000. Some accounts offer paltry returns of only 
0.01 percent on money invested.\19\ Nearly half of American 
families do not have enough money in the bank to pay a $1,000 
medical bill in the next 30 days, let alone fund an account 
that might earn less interest than a checking account.\20\
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 \19\What is the standard interest rate for a Lively HSA? LIVELY 
(Aug 21, 2023), https://support.livelyme.com/hc/en-us/articles/
4405466272667-What-is-the-standard-interest-rate-for-a-Lively-HSA-.
 \20\Sara Collins, Lauren Haynes, & Relebohile Masitha, The State of 
U.S. Health Insurance in 2022, THE COMMONWEALTH FUND (Sep. 29, 2022), 
https://www.commonwealthfund.org/publications/issue-briefs/2022/sep/
state-us-health-insurance-2022-biennial-survey.
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Amendments
 Mr. Doggett (D-TX) offered an amendment to close a loophole 
whereby those over 65 years of age can spend HSA balances on 
non-health luxury items without penalty. Under current law, HSA 
funds can be used for anything--luxury items, like a yacht, a 
vacation home, a swimming pool--once an HSA account holder 
turns 65. In fact, investment advisors are even advertising the 
fact when they sell these accounts. This amendment would have 
ended that practice, eliminating the current law loophole that 
exempts HSAs distributions used for non- qualifying medical 
expenses. The amendment was defeated by Republicans on a party 
line roll- call vote (18 yeas to 23 nays).
 Mr. Larson (D-CT) offered an amendment to ensure the 
provisions would not take effect unless the Secretary of the 
Treasury, in consultation with the Social Security 
Administration, ensured the Social Security Trust Funds would 
not be affected by implementation of the policies. Because 
employer contributions to HSAs are not subject to the payroll 
tax imposed on either the employer or the employee, expanding 
their use will inevitably reduce contributions into the 
Medicare and Social Security Trust Funds, harming America's 
seniors and people with disabilities. The amendment was 
defeated by Republicans on a party line roll-call vote (18 yeas 
to 24 nays).
 Ms. Chu (D-CA) offered an amendment to require that nothing 
in H.R. 5688 shall be construed to prevent individuals from 
using their HSAs to cover vital reproductive and sexual health 
care. Women's access to health care is under attack by 
extremist Republicans. With the fall of Roe, needed health care 
services are no longer available for millions of women. This 
amendment simply would have ensured that women can use their 
HSAs to pay for needed health items and services, such as 
contraception or out-of-state travel costs to receive 
miscarriage- or abortion-related services. The amendment was 
defeated by Republicans on a party line roll-call vote (16 yeas 
to 24 nays).
 Mr. Kildee (D-MI) offered an amendment to prevent 
individuals with adjusted gross incomes above $400,000 from 
taking a tax deduction. Given that the benefits of HSAs 
disproportionately accrue to the wealthy who are able to use 
these accounts for tax shelters rather than to make health 
services more affordable, this amendment would limit the tax 
advantages of the accounts to those most in need. The amendment 
was defeated by Republicans on a party line roll-call vote (16 
yeas to 24 nays).
 Mr. Pascrell (D-NJ) offered an amendment to increase the 
cap on the State and Local Tax deduction to $60,000 for single 
filers and $120,000 for married couples filing jointly, and 
adjust the cap each year for the cost-of-living. The amendment 
was ruled non-germane. The appeal of the ruling of the chair 
was defeated. Restoring the State and Local Tax deduction is a 
matter of fairness. It properly measures a taxpayer's income, 
prevents double taxation, and it ends the Republican policy of 
penalizing states that raise adequate funds to provide crucial 
services such as police, fire protection, quality public 
schools, and social services to their citizens.
 Mr. Pascrell (D-NJ) offered an amendment to add to H.R. 
5688 a new section that prevents the bill from taking effect 
until the Secretary of the Treasury certifies that the cap on 
the State and Local Tax (SALT) deduction will not result in an 
increase in the tax liability of any taxpayer with an adjusted 
gross income less than $50,000 in calendar years 2023, 2024, or 
2025. The amendment was defeated by Republicans on a party line 
roll-call vote (16 yeas to 24 nays).
 Sincerely,
 Richard E. Neal,
 Ranking Member.