S. 3626 (110th): Family and Retirement Health Investment Act of 2008

110th Congress, 2007–2009. Text as of Sep 26, 2008 (Introduced).

Status & Summary | PDF | Source: GPO

II

110th CONGRESS

2d Session

S. 3626

IN THE SENATE OF THE UNITED STATES

September 26 (legislative day, September 17), 2008

introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to improve access to health care through expanded health savings accounts, and for other purposes.

1.

Short title, etc

(a)

Short title

This Act may be cited as the Family and Retirement Health Investment Act of 2008.

(b)

Amendment of 1986 Code

Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.

(c)

Table of contents

The table of contents is as follows:

Sec. 1. Short title, etc.

Sec. 2. Allow both spouses to make catch-up contributions to the same HSA account.

Sec. 3. Provisions relating to Medicare.

Sec. 4. Individuals eligible for veterans benefits for a service-connected disability.

Sec. 5. Individuals eligible for Indian Health Service assistance.

Sec. 6. FSA and HRA termination to fund HSAS.

Sec. 7. Purchase of health insurance from HSA account.

Sec. 8. Special rule for certain medical expenses incurred before establishment of account.

Sec. 9. Preventive care prescription drug clarification.

Sec. 10. Certain exercise equipment and physical fitness programs treated as medical care.

Sec. 11. Certain nutritional and dietary supplements to be treated as medical care.

Sec. 12. Certain physician fees to be treated as medical care.

2.

Allow both spouses to make catch-up contributions to the same HSA account

(a)

In general

Paragraph (3) of section 223(b) is amended by adding at the end the following new subparagraph:

(C)

Special rule where both spouses are eligible individuals with 1 account

If—

(i)

an individual and the individual's spouse have both attained age 55 before the close of the taxable year, and

(ii)

the spouse is not an account beneficiary of a health savings account as of the close of such year,

the additional contribution amount shall be 200 percent of the amount otherwise determined under subparagraph (B).

.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

3.

Provisions relating to Medicare

(a)

Individuals over age 65 only enrolled in Medicare Part A

Section 223(b)(7) (relating to contribution limitation on Medicare eligible individuals) is amended by adding at the end the following new sentence: This paragraph shall not apply to any individual during any period the individual's only entitlement to such benefits is an entitlement to hospital insurance benefits under part A of title XVIII of such Act pursuant to an enrollment for such hospital insurance benefits under section 226(a)(1) of such Act..

(b)

Medicare beneficiaries participating in Medicare advantage MSA may contribute their own money to their MSA

Subsection (b) of section 138 is amended by striking paragraph (2) and by redesignating paragraphs (3) and (4) as paragraphs (2) and (3), respectively.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

4.

Individuals eligible for veterans benefits for a service-connected disability

(a)

In general

Section 223(c)(1) (defining eligible individual) is amended by adding at the end the following new subparagraph:

(C)

Special rule for individuals eligible for certain veterans benefits

For purposes of subparagraph (A)(ii), an individual shall not be treated as covered under a health plan described in such subparagraph merely because the individual receives periodic hospital care or medical services for a service-connected disability under any law administered by the Secretary of Veterans Affairs but only if the individual is not eligible to receive such care or services for any condition other than a service-connected disability.

.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

5.

Individuals eligible for Indian Health Service assistance

(a)

In general

Section 223(c)(1), as amended by section 4, is amended by adding at the end the following new subparagraph:

(D)

Special rule for individuals eligible for assistance under Indian Health Service programs

For purposes of subparagraph (A)(ii), an individual shall not be treated as covered under a health plan described in such subparagraph merely because the individual receives hospital care or medical services under a medical care program of the Indian Health Service or of a tribal organization.

.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

6.

FSA and HRA termination to fund HSAS

(a)

Eligible individuals include FSA and HRA participants

Section 223(c)(1)(B) is amended—

(1)

by striking and at the end of clause (ii),

(2)

by striking the period at the end of clause (iii) and inserting , and, and

(3)

by inserting after clause (iii) the following new clause:

(iv)

coverage under a health flexible spending arrangement or a health reimbursement arrangement in the plan year a qualified HSA distribution as described in section 106(e) is made on behalf of the individual if after the qualified HSA distribution is made and for the remaining duration of the plan year, the coverage provided under the health flexible spending arrangement or health reimbursement arrangement is converted to—

(I)

coverage that does not pay or reimburse any medical expense incurred before the minimum annual deductible under section 223(c)(2)(A)(i) (prorated for the period occurring after the qualified HSA distribution is made) is satisfied,

(II)

coverage that, after the qualified HSA distribution is made, does not pay or reimburse any medical expense incurred after the qualified HSA distribution is made other than preventive care as defined in section 223(c)(2)(3),

(III)

coverage that, after the qualified HSA distribution is made, pays or reimburses benefits for coverage described in section 223(c)(1)(B)(ii) (but not through insurance or for long-term care services),

(IV)

coverage that, after the qualified HSA distribution is made, pays or reimburses benefits for permitted insurance as defined in section 223(c)(1)(B)(i) or coverage described in section 223(c)(1)(B)(ii) (but not for long-term care services),

(V)

coverage that, after the qualified HSA distribution is made, pays or reimburses only those medical expenses incurred after an individual’s retirement (and no expenses incurred before retirement), or

(VI)

coverage that, after the qualified HSA distribution is made, is suspended, pursuant to an election made on or before the date the individual elects a qualified HSA distribution or, if later, on the date of the individual enrolls in a high deductible health plan (as defined in section 223(c)(2)), that does not pay or reimburse, at any time, any medical expense incurred during the suspension period except as defined in subclauses (I) through (V) above.

.

(b)

Qualified HSA distribution shall not affect flexible spending arrangement

Section 106(e)(1) is amended to read as follows:

(1)

In general

A plan shall not fail to be treated as a health flexible spending arrangement under this section, section 105, or section 125, or as a health reimbursement arrangement under this section or section 105, merely because such plan provides for a qualified HSA distribution.

.

(c)

FSA balances at year end shall not forfeit

Section 125(d)(2) is amended by adding at the end the following new subparagraph:

(E)

Exception for qualified HSA distributions

Subparagraph (A) shall not apply to the extent that there is an amount remaining in a health flexible spending account at the end of a plan year that an individual elects to contribute to a health savings account pursuant to a qualified HSA distribution (as defined in section 106(e)(2)).

.

(d)

Simplification of limitations on FSA and HRA rollovers

Section 106(e)(2) (relating to qualified HSA distribution) is amended to read as follows:

(2)

Qualified HSA distribution

(A)

In general

The term qualified HSA distribution means a distribution from a health flexible spending arrangement or health reimbursement arrangement to the extent that such distribution does not exceed the lesser of—

(i)

the balance in such arrangement as of the date of such distribution, or

(ii)

the amount determined under subparagraph (B).

Such term shall not include more than 1 distribution with respect to any arrangement.
(B)

Dollar limitations

(i)

Distributions from a health flexible spending arrangement

A qualified HSA distribution from a health flexible spending arrangement shall not exceed the applicable amount.

(ii)

Distributions from a health reimbursement arrangement

A qualified HSA distribution from a health reimbursement arrangement shall not exceed—

(I)

the applicable amount divided by 12, multiplied by

(II)

the number of months during which the individual is a participant in the health reimbursement arrangement.

(iii)

Applicable amount

For purposes of this subparagraph, the applicable amount is—

(I)

$2,250 in the case of an eligible individual who has self-only coverage under a high deductible health plan at the time of such distribution, and

(II)

$4,500 in the case of an eligible individual who has family coverage under a high deductible health plan at the time of such distribution.

.

(e)

Elimination of additional tax for failure To maintain high deductible health plan coverage

Section 106(e) is amended—

(1)

by striking paragraph (3) and redesignating paragraphs (4) and (5) as paragraphs (3) and (4), respectively, and

(2)

by striking subparagraph (A) of paragraph (3), as so redesignated, and redesignating subparagraphs (B) and (C) of such paragraph as subparagraphs (A) and (B) thereof, respectively.

(f)

Limited purpose FSAs and HRAs

Section 106(e), as amended by this section, is amended by adding at the end the following new paragraph:

(5)

Limited purpose FSAs and HRAs

A plan shall not fail to be a health flexible spending arrangement or health reimbursement arrangement under this section or section 105 merely because the plan converts coverage for individuals who enroll in a high deductible health plan described in section 223(c)(2) to coverage described in section 223(c)(1)(B)(iv). Coverage for such individuals may be converted as of the date of enrollment in the high deductible health plan, without regard to the period of coverage under the health flexible spending arrangement or health reimbursement arrangement, and without requiring any change in coverage to individuals who do not enroll in a high deductible health plan.

.

(g)

Distribution amounts adjusted for cost-of-living

Section 106(e), as amended by this section, is amended by adding at the end the following new paragraph:

(6)

Cost-of-living adjustment

(A)

In general

In the case of any taxable year beginning after December 31, 2008, each of the dollar amounts in paragraph (2)(B)(iii) shall be increased by an amount equal to such dollar amount, multiplied by the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which such taxable year begins by substituting calendar year 2007 for calendar year 1992 in subparagraph (B) thereof.

(B)

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)

Disclaimer of disqualifying coverage

Section 223(c)(1)(B), as amended by this section, is amended—

(1)

by striking and at the end of clause (iii),

(2)

by striking the period at the end of clause (iv) and inserting , and, and

(3)

by inserting after clause (iv) the following new clause:

(v)

any coverage (including prospective coverage) under a health plan that is not a high deductible health plan which is disclaimed in writing, at the time of the creation or organization of the health savings account, including by execution of a trust described in subsection (d)(1) through a governing instrument that includes such a disclaimer, or by acceptance of an amendment to such a trust that includes such a disclaimer.

.

(i)

Effective date

The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

7.

Purchase of health insurance from HSA account

(a)

In general

Paragraph (2) of section 223(d) (defining qualified medical expenses) is amended to read as follows:

(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 any individual covered by a high deductible health plan of the account beneficiary, but only to the extent such amounts are not compensated for by insurance or otherwise.

(B)

Health insurance may not be purchased from account

Except as provided in subparagraph (C), 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 any period in which the individual is receiving unemployment compensation under any Federal or State law,

(iv)

a high deductible health plan, or

(v)

any health insurance under title XVIII of the Social Security Act, other than a Medicare supplemental policy (as defined in section 1882 of such Act).

.

(b)

Effective date

The amendment made by this section shall apply with respect to insurance purchased after the date of the enactment of this Act in taxable years beginning after such date.

8.

Special rule for certain medical expenses incurred before establishment of account

Paragraph (2) of section 223(d), as amended by section 7, is amended by adding at the end the following new subparagraph:

(D)

Certain medical expenses incurred before establishment of account treated as qualified

An expense shall not fail to be treated as a qualified medical expense solely because such expense was incurred before the establishment of the health savings account if such expense was incurred—

(i)

during either—

(I)

the taxable year in which the health savings account was established, or

(II)

the preceding taxable year in the case of a health savings account established after the taxable year in which such expense was incurred but before the time prescribed by law for filing the return for such taxable year (not including extensions thereof), and

(ii)

for medical care of an individual during a period that such individual was covered by a high deductible health plan and met the requirements of subsection (c)(1)(A)(ii) (after application of subsection (c)(1)(B)).

.

9.

Preventive care prescription drug clarification

(a)

Clarify use of drugs in preventive care

Subparagraph (C) of section 223(c)(2) is amended by adding at the end the following: Preventive care shall include prescription and over-the-counter drugs and medicines which have the primary purpose of preventing the onset of, further deterioration from, or complications associated with chronic conditions, illnesses, or diseases..

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2003.

10.

Certain exercise equipment and physical fitness programs treated as medical care

(a)

In general

Subsection (d) of section 213 is amended by adding at the end the following new paragraph:

(12)

Exercise equipment and physical fitness programs

(A)

In general

The term medical care shall include amounts paid—

(i)

to purchase or use equipment used in a program (including a self-directed program) of physical exercise,

(ii)

to participate, or receive instruction, in a program of physical exercise, and

(iii)

for membership dues in a fitness club the primary purpose of which is to provide access to equipment and facilities for physical exercise.

(B)

Limitation

Amounts treated as medical care under subparagraph (A) shall not exceed $1,000 with respect to any individual for any taxable year.

.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

11.

Certain nutritional and dietary supplements to be treated as medical care

(a)

In general

Subsection (d) of section 213, as amended by section 10, is amended by adding at the end the following new paragraph:

(13)

Nutritional and dietary supplements

(A)

In general

The term medical care shall include amounts paid to purchase herbs, vitamins, minerals, homeopathic remedies, meal replacement products, and other dietary and nutritional supplements.

(B)

Limitation

Amounts treated as medical care under subparagraph (A) shall not exceed $1,000 with respect to any individual for any taxable year.

(C)

Meal replacement product

For purposes of this paragraph, the term meal replacement product means any product that—

(i)

is permitted to bear labeling making a claim described in section 403(r)(3) of the Federal Food, Drug, and Cosmetic Act, and

(ii)

is permitted to claim under such section that such product is low in fat and is a good source of protein, fiber, and multiple essential vitamins and minerals.

.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

12.

Certain physician fees to be treated as medical care

(a)

In general

Subsection (d) of section 213, as amended by sections 10 and 11, is amended by adding at the end the following new paragraph:

(14)

Pre-paid physician fees

The term medical care shall include amounts paid by patients to their primary physician in advance for the right to receive medical services on an as-needed basis.

.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.