Qualified Health Savings Account Distribution Act of 2019

II 116TH CONGRESS 1ST SESSION S. 2440 To amend the Internal Revenue Code of 1986 to expand permissible distribu- tions from an employee’s health flexible spending account or health reimbursement arrangement to their health savings account. IN THE SENATE OF THE UNITED STATES AUGUST 1, 2019 Mr. SASSE 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 expand permissible distributions from an employee’s health flexi- ble spending account or health reimbursement arrange- ment to their health savings account. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Qualified Health Sav- 4 ings Account Distribution Act of 2019’’. 5 VerDate Sep 11 2014 04:39 Aug 15, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S2440.IS S2440 kjohnson on DSK79L0C42 with BILLS 2 •S 2440 IS SEC. 2. FSA AND HRA TERMINATIONS OR CONVERSIONS TO 1 FUND HSAS. 2 (a) IN GENERAL.—Section 106(e)(2) of the Internal 3 Revenue Code of 1986 is amended to read as follows: 4 ‘‘(2) QUALIFIED HSA DISTRIBUTION.—For pur- 5 poses of this subsection— 6 ‘‘(A) IN GENERAL.—The term ‘qualified 7 HSA distribution’ means, with respect to any 8 employee, a distribution from a health flexible 9 spending arrangement or health reimbursement 10 arrangement of such employee directly to a 11 health savings account of such employee if— 12 ‘‘(i) such distribution is made in con- 13 nection with such employee establishing 14 coverage under a high deductible health 15 plan (as defined in section 223(c)(2)) after 16 a significant period of not having such cov- 17 erage, and 18 ‘‘(ii) such arrangement is described in 19 section 223(c)(1)(B)(iii) with respect to 20 the portion of the plan year after such dis- 21 tribution is made. 22 ‘‘(B) DOLLAR LIMITATION.—The aggre- 23 gate amount of distributions from health flexi- 24 ble spending arrangements and health reim- 25 bursement arrangements of any employee which 26 VerDate Sep 11 2014 04:39 Aug 15, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S2440.IS S2440 kjohnson on DSK79L0C42 with BILLS 3 •S 2440 IS may be treated as qualified HSA distributions 1 in connection with an establishment of coverage 2 described in subparagraph (A)(i) shall not ex- 3 ceed an amount equal to the sum of— 4 ‘‘(i) the dollar amount in effect under 5 section 125(i)(1) (twice such amount in 6 the case of coverage which is described in 7 section 223(b)(2)(B)), plus 8 ‘‘(ii) an amount equal to the max- 9 imum unused amounts remaining at the 10 end of a plan year in a health flexible 11 spending arrangement which are permitted 12 to be paid or reimbursed to plan partici- 13 pants for qualified medical expenses in- 14 curred during the following plan year, as 15 provided in Internal Revenue Service No- 16 tice 2013–71 (as in effect on the date of 17 the enactment of the Qualified Health Sav- 18 ings Account Distribution Act of 2019).’’. 19 (b) CONVERSION TO HSA-COMPATIBLE ARRANGE- 20 MENT FOR REMAINDER OF PLAN YEAR.—Section 21 223(c)(1)(B)(iii) of such Code is amended to read as fol- 22 lows: 23 ‘‘(iii) coverage under a health flexible 24 spending arrangement or health reimburse- 25 VerDate Sep 11 2014 04:39 Aug 15, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2440.IS S2440 kjohnson on DSK79L0C42 with BILLS 4 •S 2440 IS ment arrangement for the portion of the 1 plan year after a qualified HSA distribu- 2 tion (as defined in section 106(e)(2), deter- 3 mined without regard to subparagraph 4 (A)(ii) thereof) is made, if the terms of 5 such arrangement which apply for such 6 portion of the plan year are such that, if 7 such terms applied for the entire plan 8 year, then such arrangement would not be 9 taken into account under subparagraph 10 (A)(ii) of this paragraph for such plan 11 year, and’’. 12 (c) INCLUSION OF QUALIFIED HSA DISTRIBUTIONS 13 ON W–2.— 14 (1) IN GENERAL.—Section 6051(a) of such 15 Code is amended by striking ‘‘and’’ at the end of 16 paragraph (16), by striking the period at the end of 17 paragraph (17) and inserting ‘‘, and’’, and by insert- 18 ing after paragraph (17) the following new para- 19 graph: 20 ‘‘(18) the amount of any qualified HSA dis- 21 tribution (as defined in section 106(e)(2)) with re- 22 spect to such employee.’’. 23 (2) CONFORMING AMENDMENT.—Section 24 6051(a)(12) of such Code is amended by inserting 25 VerDate Sep 11 2014 04:39 Aug 15, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2440.IS S2440 kjohnson on DSK79L0C42 with BILLS 5 •S 2440 IS ‘‘(other than any qualified HSA distribution, as de- 1 fined in section 106(e)(2))’’ before the comma at the 2 end. 3 (d) EFFECTIVE DATE.—The amendments made by 4 this section shall apply to distributions made after Decem- 5 ber 31, 2019, in taxable years ending after such date. 6 Æ VerDate Sep 11 2014 04:39 Aug 15, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6301 E:\BILLS\S2440.IS S2440 kjohnson on DSK79L0C42 with BILLS