S. 2440 - Qualified Health Savings Account Distribution Act of 2019

116TH CONGRESS
1ST SESSION

S. 2440

To amend the Internal Revenue Code of 1986 to expand permissible
distributions 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 flexible spending account or health reimbursement arrangement to their health savings account.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the “Qualified Health Savings Account Distribution Act of 2019”.

SEC. 2. FSA AND HRA TERMINATIONS OR CONVERSIONS TO FUND HSAS.

(a) IN GENERAL. — Section 106(e)(2) of the Internal Revenue Code of 1986 is amended to read as follows:

“(2) QUALIFIED HSA DISTRIBUTION. — For purposes of this subsection —

“(A) IN GENERAL. — The term 'qualified HSA distribution' means, with respect to any employee, a distribution from a health flexible spending-arrangement or health reimbursement arrangement of such employee directly to a health savings account of such employee if —

(i) such distribution is made in connection with such employee establishing coverage under a high deductible health plan (as defined in section 223(c)(2)) after a significant period of not having such coverage, and

“(ii) such arrangement is described in section 223(c)(1)(B)(iii) with respect to the portion of the plan year after such distribution is made.

'(B) DOLLAR LIMITATION. — The aggregate amount of distributions from health flexible spending arrangements and health reimbursement arrangements of any employee which may be treated as qualified HSA distributions in connection with an establishment of coverage described in subparagraph (A)(i) shall not exceed an amount equal to the sum of —

“(i) the dollar amount in effect under section 125(i)(1) (twice such amount in the case of coverage which is described in section 223(b)(2)(B)), plus

“(ii) an amount equal to the maximum unused amounts remaining at the end of a plan year in a health flexible spending arrangement which are permitted to be paid or reimbursed to plan participants far qualified medical expenses incurred during the following plan year, as provided in Internal Revenue Service Notice 2013-71 (as in effect on the date of the enactment of the Qualified Health Savings Account Distribution Act of 2019).”.

(b) CONVERSION TO HSA-COMPATIBLE ARRANGEMENT FOR REMAINDER OF PLAN YEAR. — Section 223(c)(1)(B)(iii) of such Code is amended to read as follows:

"(iii) coverage under a health flexible spending arrangement or health reimbursement arrangement for the portion of the plan year after a qualified HSA distribution (as defined in section 106(e)(2), determined without regard to subparagraph (A)(ii) thereof) is made, if the terms of such arrangement which apply for such portion of the plan year are such that, if such terms applied for the entire plan year, then such arrangement would not be taken into account under subparagraph (A)(ii) of this paragraph for such plan year, and”.

(c) INCLUSION OF QUALIFIED HSA DISTRIBUTIONS ON W-2. —

(1) IN GENERAL. — Section 6051(a) of such Code is amended by striking “and” at the end of paragraph (16), by striking' the period at the end of paragraph (17) and inserting and”, and by inserting after paragraph (17) the following new paragraph:

“(18) the amount of any qualified HSA distribution (as defined in section 106(e)(2)) with respect to such employee.”.

(2) CONFORMING AMENDMENT. — Section 6051(a)(12) of such Code is amended by inserting “(other than any qualified HSA distribution, as defined in section 106(e)(2))” before the comma at the end.

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to distributions made after December 31, 2019, in taxable years ending after such date.