Health Savings Accounts For All Act of 2020

II 116TH CONGRESS 2D SESSION S. 4367 To amend the Internal Revenue Code of 1986 to eliminate limitations on contributions to health savings accounts. IN THE SENATE OF THE UNITED STATES JULY 29, 2020 Mr. PAUL 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 eliminate limitations on contributions to health savings accounts. 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 ‘‘Health Savings Ac- 4 counts For All Act of 2020’’. 5 SEC. 2. REPEAL OF CONTRIBUTION LIMITATIONS. 6 (a) IN GENERAL.—Subsection (b) of section 223 of 7 the Internal Revenue Code of 1986 is amended to read 8 as follows: 9 VerDate Sep 11 2014 20:07 Aug 13, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S4367.IS S4367 pamtmann on DSKBC07HB2PROD with BILLS 2 •S 4367 IS ‘‘(b) DENIAL OF DEDUCTION TO DEPENDENTS.—No 1 deduction shall be allowed under this section to any indi- 2 vidual with respect to whom a deduction under section 151 3 is allowable to another taxpayer for a taxable year begin- 4 ning in the calendar year in which such individual’s tax- 5 able year begins.’’. 6 (b) CONFORMING AMENDMENTS.— 7 (1) Subparagraph (A) of section 223(d)(1) of 8 the Internal Revenue Code of 1986 is amended— 9 (A) by striking ‘‘subsection (f)(5)’’ and in- 10 serting ‘‘subsection (f)(4)’’, and 11 (B) by striking ‘‘accepted—’’ and all that 12 follows and inserting ‘‘accepted unless it is in 13 cash.’’. 14 (2) Subsection (f) of section 223 of such Code 15 is amended by striking paragraph (3) and by redes- 16 ignating paragraphs (4) through (8) as paragraphs 17 (3) through (7), respectively. 18 (3) Subsection (g) of section 223 of such Code 19 is amended— 20 (A) by striking ‘‘subsections (b)(2) and 21 (c)(2)(A)’’ both places it appears and inserting 22 ‘‘subsection (c)(2)(A)’’, and 23 (B) by amending subparagraph (B) to read 24 as follows: 25 VerDate Sep 11 2014 20:07 Aug 13, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S4367.IS S4367 pamtmann on DSKBC07HB2PROD with BILLS 3 •S 4367 IS ‘‘(B) the cost-of-living adjustment deter- 1 mined under section 1(f)(3) for the calendar 2 year in which such taxable year begins deter- 3 mined by substituting ‘calendar year 2003’ for 4 ‘calendar year 2016’ in subparagraph (A)(ii) 5 thereof.’’. 6 (4) Section 26(b)(2) of such Code is amended— 7 (A) by striking ‘‘, 223(b)(8)(B)(i)(II),’’ in 8 subparagraph (S), and 9 (B) by striking ‘‘223(f)(4)’’ in subpara- 10 graph (U) and inserting ‘‘223(f)(3)’’. 11 (5) Paragraph (1) of section 106(d) of such 12 Code is amended by striking ‘‘under an accident or 13 health plan’’ and all that follows and inserting 14 ‘‘under an accident or health plan.’’. 15 (6) Subparagraph (C) of section 106(e)(4) of 16 such Code is amended by striking ‘‘223(f)(5)’’ and 17 inserting ‘‘223(f)(4)’’. 18 (7) Subparagraph (C) of section 408(d)(9) of 19 such Code is amended— 20 (A) by striking ‘‘LIMITATIONS.—’’ in the 21 heading and all that follows through ‘‘(ii) ONE- 22 TIME TRANSFER.—’’ in clause (ii), and insert- 23 ing ‘‘ONE-TIME TRANSFER.—’’, 24 VerDate Sep 11 2014 20:07 Aug 13, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S4367.IS S4367 pamtmann on DSKBC07HB2PROD with BILLS 4 •S 4367 IS (B) by redesignating subclauses (I) and 1 (II) as clauses (i) and (ii) and moving such 2 clauses 2 ems to the left, and 3 (C) by striking ‘‘subclause (II)’’ in clause 4 (i), as so redesignated, and inserting ‘‘clause 5 (ii)’’. 6 (8) Section 4973 of such Code is amended by 7 striking subsection (g) and by redesignating sub- 8 section (h) as subsection (g). 9 (c) EFFECTIVE DATE.—The amendments made by 10 this section shall apply to taxable years beginning after 11 the date of the enactment of this Act. 12 SEC. 3. FREEDOM FROM MANDATE. 13 (a) IN GENERAL.—Section 223 of the Internal Rev- 14 enue Code of 1986, as amended by section 2, is further 15 amended by striking subsections (c) and (g) and by redes- 16 ignating subsections (d), (e), (f), and (h) as subsections 17 (c), (d), (e), and (f), respectively. 18 (b) CONFORMING AMENDMENTS.— 19 (1) Subsection (a) of section 223 of the Inter- 20 nal Revenue Code of 1986 is amended to read as fol- 21 lows: 22 ‘‘(a) DEDUCTION ALLOWED.—In the case of an indi- 23 vidual, there shall be allowed as a deduction for the tax- 24 able year an amount equal to the aggregate amount paid 25 VerDate Sep 11 2014 20:07 Aug 13, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S4367.IS S4367 pamtmann on DSKBC07HB2PROD with BILLS 5 •S 4367 IS in cash during such taxable year by or on behalf of such 1 individual to a health savings account of such individual.’’. 2 (2) Subsection (c)(1)(A) of section 223 of such 3 Code, as amended by section 2 and redesignated by 4 subsection (a), is further amended by striking ‘‘sub- 5 section (f)(4)’’ and inserting ‘‘subsection (e)(4)’’. 6 (3) Subparagraph (U) of section 26(b)(2) of 7 such Code, as amended by section 2, is further 8 amended by striking ‘‘section 223(f)(3)’’ and insert- 9 ing ‘‘section 223(e)(3)’’. 10 (4) Sections 35(g)(3), 220(f)(5)(A), 11 848(e)(1)(B)(v), 4973(a)(5), and 6051(a)(12) of 12 such Code are each amended by striking ‘‘section 13 223(d)’’ each place it appears and inserting ‘‘section 14 223(c)’’. 15 (5) Section 106(d)(1) of such Code is amend- 16 ed— 17 (A) by striking ‘‘who is an eligible indi- 18 vidual (as defined in section 223(c)(1))’’, and 19 (B) by striking ‘‘section 223(d)’’ and in- 20 serting ‘‘section 223(c)’’. 21 (6) Section 106(e) of such Code is amended— 22 (A) by striking paragraphs (3) and (4) and 23 by redesignating paragraph (5) as paragraph 24 (4), 25 VerDate Sep 11 2014 20:07 Aug 13, 2020 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S4367.IS S4367 pamtmann on DSKBC07HB2PROD with BILLS 6 •S 4367 IS (B) by inserting after paragraph (2) the 1 following new paragraph: 2 ‘‘(3) TREATMENT AS ROLLOVER CONTRIBU- 3 TION.—A qualified HSA distribution shall be treated 4 as a rollover contribution described in section 5 223(e)(4).’’, and 6 (C) by striking ‘‘to any eligible individual 7 covered under a high deductible health plan of 8 the employer’’ in paragraph (4)(B)(ii) (as so re- 9 designated) and inserting ‘‘to any employee 10 with respect to whom a health savings account 11 has been established’’. 12 (7) Section 408(d)(9)(A) of such Code is 13 amended by striking ‘‘who is an eligible individual 14 (as defined in section 223(c)) and’’. 15 (8) Section 877A(g)(6) of such Code is amend- 16 ed by striking ‘‘223(f)(4)’’ and inserting 17 ‘‘223(e)(4)’’. 18 (9) Section 4975 of such Code is amended— 19 (A) in subsection (c)(6)— 20 (i) by striking ‘‘section 223(d)’’ and 21 inserting ‘‘section 223(c)’’, and 22 (ii) by striking ‘‘section 223(e)(2)’’ 23 and inserting ‘‘section 223(d)(2)’’, and 24 VerDate Sep 11 2014 20:07 Aug 13, 2020 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S4367.IS S4367 pamtmann on DSKBC07HB2PROD with BILLS 7 •S 4367 IS (B) in subsection (e)(1)(E), by striking 1 ‘‘section 223(d)’’ and inserting ‘‘section 2 223(c)’’. 3 (10) Subsection (b) of section 4980G of such 4 Code is amended to read as follows: 5 ‘‘(b) RULES AND REQUIREMENTS.— 6 ‘‘(1) IN GENERAL.—An employer meets the re- 7 quirements of this subsection for any calendar year 8 if the employer makes available comparable con- 9 tributions to the health savings accounts of all com- 10 parable participating employees for each coverage 11 period during such calendar year. 12 ‘‘(2) COMPARABLE CONTRIBUTIONS.— 13 ‘‘(A) IN GENERAL.—For purposes of para- 14 graph (1), the term ‘comparable contributions’ 15 means contributions— 16 ‘‘(i) which are the same amount, or 17 ‘‘(ii) if the employees are covered by a 18 health plan, which are the same percentage 19 of the annual deductible limit under the 20 plan covering the employees. 21 ‘‘(B) PART-YEAR EMPLOYEES.—In the 22 case of an employee who is employed by the em- 23 ployer for only a portion of the calendar year, 24 a contribution to the health savings account of 25 VerDate Sep 11 2014 20:07 Aug 13, 2020 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S4367.IS S4367 pamtmann on DSKBC07HB2PROD with BILLS 8 •S 4367 IS such employee shall be treated as comparable if 1 it is an amount which bears the same ratio to 2 the comparable amount (determined without re- 3 gard to this subparagraph) as such portion 4 bears to the entire calendar year. 5 ‘‘(3) COMPARABLE PARTICIPATING EMPLOY- 6 EES.—For purposes of paragraph (1), the term 7 ‘comparable participating employees’ means all em- 8 ployees who are covered (if at all) under the same 9 health plan of the employer and have the same cat- 10 egory of coverage. For purposes of the preceding 11 sentence, the categories of coverage are self-only and 12 family coverage. 13 ‘‘(4) PART-TIME EMPLOYEES.— 14 ‘‘(A) IN GENERAL.—Paragraph (3) shall 15 be applied separately with respect to part-time 16 employees and other employees. 17 ‘‘(B) PART-TIME EMPLOYEE.—For pur- 18 poses of subparagraph (A), the term ‘part-time 19 employee’ means any employee who is custom- 20 arily employed for fewer than 30 hours per 21 week.’’. 22 (11) Section 4980G(d) of such Code is amended 23 by striking ‘‘section 4980E’’ and inserting ‘‘this sec- 24 tion’’. 25 VerDate Sep 11 2014 20:07 Aug 13, 2020 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S4367.IS S4367 pamtmann on DSKBC07HB2PROD with BILLS 9 •S 4367 IS (12) Section 6693(a)(2)(C) of such Code is 1 amended by striking ‘‘section 223(h)’’ and inserting 2 ‘‘section 223(f)’’. 3 (c) EFFECTIVE DATE.—The amendments made by 4 this section shall apply to taxable years beginning after 5 the date of the enactment of this Act. 6 SEC. 4. ALLOWANCE OF DISTRIBUTIONS FOR PRESCRIP- 7 TION AND OVER-THE-COUNTER MEDICINES 8 AND DRUGS. 9 (a) HSAS.—Paragraph (2)(A) of section 223(c) of 10 the Internal Revenue Code of 1986, as redesignated by 11 section 3, is amended by adding at the end the following: 12 ‘‘The term ‘qualified medical expenses’ shall include an 13 amount paid for any prescription or over-the-counter med- 14 icine or drug.’’. 15 (b) ARCHER MSAS.—Section 220(d)(2)(A) of the In- 16 ternal Revenue Code of 1986 is amended— 17 (1) by striking ‘‘section 223(d)(2)(D)’’ and in- 18 serting ‘‘section 223(c)(2)(B)’’, and 19 (2) by adding at the end the following: ‘‘The 20 term ‘qualified medical expenses’ shall include an 21 amount paid for any prescription or over-the-counter 22 medicine or drug.’’. 23 (c) HEALTH FLEXIBLE SPENDING ARRANGEMENTS 24 AND HEALTH REIMBURSEMENT ARRANGEMENTS.—Sub- 25 VerDate Sep 11 2014 20:07 Aug 13, 2020 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S4367.IS S4367 pamtmann on DSKBC07HB2PROD with BILLS 10 •S 4367 IS section (f) of section 106 of the Internal Revenue Code 1 of 1986 is amended to read as follows: 2 ‘‘(f) REIMBURSEMENTS FOR ALL MEDICINES, 3 DRUGS, AND MENSTRUAL CARE PRODUCTS.—For pur- 4 poses of this section and section 105— 5 ‘‘(1) reimbursement for expenses incurred for 6 any prescription or over-the-counter medicine or 7 drug shall be treated as a reimbursement for med- 8 ical expenses, and 9 ‘‘(2) expenses incurred for menstrual care prod- 10 ucts (as defined in section 223(c)(2)(B)) shall be 11 treated as incurred for medical care.’’. 12 (d) EFFECTIVE DATES.— 13 (1) DISTRIBUTIONS FROM SAVINGS AC- 14 COUNTS.—The amendments made by subsections (a) 15 and (b) shall apply to amounts paid in taxable years 16 beginning after the date of the enactment of this 17 Act. 18 (2) REIMBURSEMENTS.—The amendment made 19 by subsection (c) shall apply to expenses incurred in 20 plan years beginning after the date of the enactment 21 of this Act. 22 VerDate Sep 11 2014 20:07 Aug 13, 2020 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S4367.IS S4367 pamtmann on DSKBC07HB2PROD with BILLS 11 •S 4367 IS SEC. 5. PURCHASE OF HEALTH INSURANCE FROM HSA. 1 (a) IN GENERAL.—Paragraph (2) of section 223(c) 2 of the Internal Revenue Code of 1986, as redesignated by 3 section 3, is amended— 4 (1) by striking subparagraphs (B) and (C), and 5 (2) by redesignating subparagraph (D) as sub- 6 paragraph (B). 7 (b) CONFORMING AMENDMENT.—Paragraph (2) of 8 section 223(c) of the Internal Revenue Code of 1986, as 9 amended by the preceding sections of this Act, is further 10 amended by striking ‘‘and any dependent (as defined in 11 section 152, determined without regard to subsections 12 (b)(1), (b)(2), and (d)(1)(B) thereof) of such individual’’ 13 and inserting ‘‘any dependent (as defined in section 152, 14 determined without regard to subsections (b)(1), (b)(2), 15 and (d)(1)(B) thereof) of such individual, and any child 16 (as defined in section 152(f)(1)) of such individual who 17 has not attained the age of 27 before the end of such indi- 18 vidual’s taxable year’’. 19 (c) EFFECTIVE DATE.—The amendments made by 20 this section shall apply with respect to insurance pur- 21 chased after the date of the enactment of this Act in tax- 22 able years beginning after such date. 23 VerDate Sep 11 2014 20:07 Aug 13, 2020 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S4367.IS S4367 pamtmann on DSKBC07HB2PROD with BILLS 12 •S 4367 IS SEC. 6. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES 1 INCURRED BEFORE ESTABLISHMENT OF AC- 2 COUNT. 3 (a) IN GENERAL.—Paragraph (2) of section 223(c) 4 of the Internal Revenue Code of 1986, as amended and 5 redesignated by the preceding sections of this Act, is fur- 6 ther amended by adding at the end the following new sub- 7 paragraph: 8 ‘‘(C) CERTAIN MEDICAL EXPENSES IN- 9 CURRED BEFORE ESTABLISHMENT OF ACCOUNT 10 TREATED AS QUALIFIED.—An expense shall not 11 fail to be treated as a qualified medical expense 12 solely because such expense was incurred before 13 the establishment of the health savings account 14 if such expense was incurred— 15 ‘‘(i) during either— 16 ‘‘(I) the taxable year in which the 17 health savings account was estab- 18 lished, or 19 ‘‘(II) the preceding taxable year, 20 in the case of a health savings ac- 21 count established after the taxable 22 year in which such expense was in- 23 curred but before the time prescribed 24 by law for filing the return for such 25 VerDate Sep 11 2014 20:07 Aug 13, 2020 Jkt 099200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S4367.IS S4367 pamtmann on DSKBC07HB2PROD with BILLS 13 •S 4367 IS taxable year (not including extensions 1 thereof), and 2 ‘‘(ii) for medical care which (but for 3 the fact that it was incurred before the es- 4 tablishment of the account) otherwise 5 mee [Text truncated for display. 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