HR 8049 — Protecting Life in Health Savings Accounts Act

(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) 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 such individual to an Archer MSA 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 the amount equal to 1⁄12 of— (A) in the case of an individual who has self-only coverage under the high deductible health plan as of the first day of such month, 65 percent of the annual deductible under such coverage, and (B) in the case of an individual who has family coverage under the high deductible health plan as of the first day of such month, 75 percent of the annual deductible under such coverage. (3) 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) of this paragraph) shall be divided equally between them unless they agree on a different division. (4) Deduction not to exceed compensation (A) Employees The deduction allowed under subsection (a) for contributions as an eligible individual described in subclause (I) of subsection (c)(1)(A)(iii) shall not exceed such individual’s wages, salaries, tips, and other employee compensation which are attributable to such individual’s employment by the employer referred to in such subclause. (B) Self-employed individuals The deduction allowed under subsection (a) for contributions as an eligible individual described in subclause (II) of subsection (c)(1)(A)(iii) shall not exceed such individual’s earned income (as defined in section 401(c)(1)) derived by the taxpayer from the trade or business with respect to which the high deductible health plan is established. (C) Community property laws not to apply The limitations under this paragraph shall be determined without regard to community property laws. (5) Coordination with exclusion for employer contributions No deduction shall be allowed under this section for any amount paid for any taxable year to an Archer MSA of an individual if— (A) any amount is contributed to any Archer MSA of such individual for such year which is excludable from gross income under section 106(b), or (B) if such individual’s spouse is covered under the high deductible health plan covering such individual, any amount is contributed for such year to any Archer MSA of such spouse which is so excludable. (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. (c) Definitions 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, (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 pla...

(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:  For taxable years beginning in: The additional contribution amount is: 2004 $500   2005 $600   2006 $700   2007 $800   2008 $900   2009 and thereafter $1,000. (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)). 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 taxa...

(a) Requirements for qualification A trust created or organized in the United States and forming part of a stock bonus, pension, or profit-sharing plan of an employer for the exclusive benefit of his employees or their beneficiaries shall constitute a qualified trust under this section— (1) if contributions are made to the trust by such employer, or employees, or both, or by another employer who is entitled to deduct his contributions under section 404(a)(3)(B) (relating to deduction for contributions to profit-sharing and stock bonus plans), or by a charitable remainder trust pursuant to a qualified gratuitous transfer (as defined in section 664(g)(1)), for the purpose of distributing to such employees or their beneficiaries the corpus and income of the fund accumulated by the trust in accordance with such plan; (2) if under the trust instrument it is impossible, at any time prior to the satisfaction of all liabilities with respect to employees and their beneficiaries under the trust, for any part of the corpus or income to be (within the taxable year or thereafter) used for, or diverted to, purposes other than for the exclusive benefit of his employees or their beneficiaries (but this paragraph shall not be construed, in the case of a multiemployer plan, to prohibit the return of a contribution within 6 months after the plan administrator determines that the contribution was made by a mistake of fact or law (other than a mistake relating to whether the plan is described in section 401(a) or the trust which is part of such plan is exempt from taxation under section 501(a), or the return of any withdrawal liability payment determined to be an overpayment within 6 months of such determination)); (3) if the plan of which such trust is a part satisfies the requirements of section 410 (relating to minimum participation standards); and (4) if the contributions or benefits provided under the plan do not discriminate in favor of highly compensated employees (within the meaning of section 414(q)). For purposes of this paragraph, there shall be excluded from consideration employees described in section 410(b)(3)(A) and (C). (5) Special rules relating to nondiscrimination requirements.— (A) Salaried or clerical employees.— A classification shall not be considered discriminatory within the meaning of paragraph (4) or section 410(b)(2)(A)(i) merely because it is limited to salaried or clerical employees. (B) Contributions and benefits may bear uniform relationship to compensation.— A plan shall not be considered discriminatory within the meaning of paragraph (4) merely because the contributions or benefits of, or on behalf of, the employees under the plan bear a uniform relationship to the compensation (within the meaning of section 414(s)) of such employees. (C) Certain disparity permitted.— A plan shall not be considered discriminatory within the meaning of paragraph (4) merely because the contributions or benefits of, or on behalf of, the employees under the plan favor highly compensated employees (as defined in section 414(q)) in the manner permitted under subsection (l). (D) Integrated defined benefit plan.— (i) In general.— A defined benefit plan shall not be considered discriminatory within the meaning of paragraph (4) merely because the plan provides that the employer-derived accrued retirement benefit for any participant under the plan may not exceed the excess (if any) of— (I) the participant’s final pay with the employer, over (II) the employer-derived retirement benefit created under Federal law attributable to service by the participant with the employer.  For purposes of this clause, the employer-derived retirement benefit created under Federal law shall be treated as accruing ratably over 35 years. (ii) Final pay.— For purposes of this subparagraph, the participant’s final pay is the compensation (as defined in section 414(q)(4)) paid to the participant by the employer for any year— (I) which ends during the 5-year perio...