To amend the Internal Revenue Code of 1986 to provide special disposition rules for unused benefits in flexible spending arrangements of individuals for calendar year 2020.

I 116TH CONGRESS 2D SESSION H. R. 7149 To amend the Internal Revenue Code of 1986 to provide special disposition rules for unused benefits in flexible spending arrangements of individuals for calendar year 2020. IN THE HOUSE OF REPRESENTATIVES JUNE 11, 2020 Mr. PALMER (for himself, Mr. COOK, Mr. HAGEDORN, Mrs. WAGNER, Mr. ADERHOLT, Mr. STIVERS, Mr. BALDERSON, Mr. PERRY, Mr. GIBBS, and Mr. STEWART) introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to provide special disposition rules for unused benefits in flexible spending arrangements of individuals for calendar year 2020. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SPECIAL DISPOSITION RULES FOR UNUSED 3 BENEFITS IN FLEXIBLE SPENDING ARRANGE- 4 MENTS OF INDIVIDUALS IN PLAN YEAR 2020. 5 (a) FSAS MUST ALLOW DISTRIBUTION OR ROLL- 6 OVER IN 2020.—For purposes of sections 106, 125, and 7 VerDate Sep 11 2014 04:10 Jun 28, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H7149.IH H7149 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 7149 IH 129 of the Internal Revenue Code of 1986, a flexible 1 spending arrangement must allow a qualified 2020 dis- 2 tribution or rollover. 3 (b) TAXES APPLIED TO CERTAIN DISTRIBUTIONS.— 4 For purposes of sections 125(a) and 129(a) of such Code, 5 such sections shall not apply to any benefit distributed 6 from a flexible spending arrangement for a use other than 7 the qualifying benefit for which such arrangement was es- 8 tablished. 9 (c) SPECIAL RULE FOR DISPOSITION OF UNUSED 10 BENEFITS.—For purposes of such Code, a plan shall not 11 fail to be treated as a cafeteria plan, health flexible spend- 12 ing arrangement, or dependent care flexible spending ar- 13 rangement merely because such arrangement provides for 14 a qualified 2020 distribution or rollover. 15 (d) QUALIFIED 2020 DISTRIBUTION OR ROLL- 16 OVER.—For purposes of this section, the term ‘‘qualified 17 2020 distribution or rollover’’ means, for plan year 2020, 18 any distribution at any time to an individual of all or a 19 portion of the balance in the employee’s account under 20 such arrangement, or the rollover of the balance in the 21 employee’s account to plan year 2021. 22 (e) APPLICATION.—This section shall only apply to 23 distributions or rollovers in plan year 2020. 24 VerDate Sep 11 2014 04:10 Jun 28, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H7149.IH H7149 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 7149 IH SEC. 2. CHANGE IN ELECTION AMOUNT. 1 (a) IN GENERAL.—A plan or other arrangement that 2 otherwise satisfies all applicable requirements of sections 3 106 and 125 of the Internal Revenue Code of 1986 (in- 4 cluding any rules or regulations thereunder) shall not fail 5 to be treated as a cafeteria plan or health flexible spending 6 arrangement merely because such plan or arrangement al- 7 lows an employee to make, with respect to the remaining 8 portion of a period of coverage within the applicable pe- 9 riod— 10 (1) an election modifying the amount of such 11 employee’s contributions to such a health flexible 12 spending arrangement (without regard to any 13 change in status), or 14 (2) an election modifying the amount of such 15 employee’s elective paid time off. Any election as 16 modified under paragraph (1) shall not exceed the 17 limitation applicable under section 125(i) for the 18 taxable year. 19 (b) ONE-TIME APPLICATION.—Paragraphs (1) and 20 (2) of subsection (a) shall each apply to only 1 election 21 change described in such paragraph with respect to an em- 22 ployee (in addition to any other election changes during 23 a period of coverage permitted under the plan or arrange- 24 ment without regard to this section). 25 VerDate Sep 11 2014 04:10 Jun 28, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H7149.IH H7149 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 7149 IH (c) APPLICABLE PERIOD.—For purposes of this sec- 1 tion, the term ‘‘applicable period’’ means the period begin- 2 ning on the date of the enactment of this Act and ending 3 on December 31, 2020. 4 SEC. 3. EXTENSION OF GRACE PERIODS, ETC. 5 (a) IN GENERAL.—A plan or other arrangement that 6 otherwise satisfies all applicable requirements of sections 7 106, 125, or 129 of the Internal Revenue Code (including 8 any rules or regulations thereunder) shall not fail to be 9 treated as a cafeteria plan, health flexible spending ar- 10 rangement, or dependent care flexible spending arrange- 11 ment (whichever is applicable) merely because such plan 12 or arrangement extends the grace period for the plan year 13 ending in 2020 to 12 months after the end of such plan 14 year, with respect to unused benefits or contributions re- 15 maining in a health flexible spending arrangement or a 16 dependent care flexible spending arrangement. 17 (b) POST-TERMINATION REIMBURSEMENTS FROM 18 HEALTH FSAS.—A plan or other arrangement that other- 19 wise satisfies all applicable requirements of sections 106 20 and 125 of the Internal Revenue Code of 1986 (including 21 any rules or regulations thereunder) shall not fail to be 22 treated as a cafeteria plan or health flexible spending ar- 23 rangement merely because such plan or arrangement al- 24 lows (under rules similar to the rules applicable to depend- 25 VerDate Sep 11 2014 04:10 Jun 28, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H7149.IH H7149 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 7149 IH ent care flexible spending arrangements) an employee who 1 ceases participation in the plan during calendar year 2020 2 to continue to receive reimbursements from unused bene- 3 fits or contributions through the end of the plan year (in- 4 cluding any grace period, taking into account any modi- 5 fication of a grace period permitted under subsection (a)). 6 (c) DEFINITIONS.—Any term used in this section 7 which is also used in section 106, 125, or 129 of the Inter- 8 nal Revenue Code of 1986 or the rules or regulations 9 thereunder shall have the same meaning as when used in 10 such section or rules or regulations. 11 Æ VerDate Sep 11 2014 04:10 Jun 28, 2020 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6301 E:\BILLS\H7149.IH H7149 kjohnson on DSK79L0C42PROD with BILLS