Modifications of HSAs, Archer MSAs, and FSAs

(a)

COBRA coverage

(1)

HSA

Section 223(d)(2) of the Internal Revenue Code of 1986 is amended by adding at the end the following:

(E)

COBRA coverage

Subparagraph (B) shall not apply to amounts paid during calendar year 2020 for premiums for coverage under a group health plan pursuant to section 4980B(f).

(2)

FSA

Section 106 of such Code is amended by adding at the end the following:

(h)

FSA payments for cobra coverage

A plan shall not fail to be treated as a health flexible spending arrangement under this section merely because such plan provides for a distribution during calendar year 2020 to make payments for premiums for coverage under a group health plan pursuant to section 4980B(f).

(b)

Health insurance premiums for those not covered by employer-Sponsored health plan during 2020

(1)

HSA

Section 223(d)(2) of such Code, as amended by subsection (a), is amended by adding at the end the following:

(F)

Health insurance premiums for those not covered by employer-sponsored coverage in 2020

Subparagraph (B) shall not apply to amounts paid during calendar year 2020 for premiums for coverage under a health plan for any month for which the health plan of the individual—(i)is not an employer-sponsored health plan, and(ii)does not include coverage for abortions (other than any abortion necessary to save the life of the mother or any abortion with respect to a pregnancy that is the result of an act of rape or incest).

(2)

Archer MSA

Section 220(d)(2) of such Code is amended by adding at the end the following:

(D)

Health insurance premiums for those not covered by employer-sponsored coverage in 2020

Subparagraph (B) shall not apply to amounts paid during calendar year 2020 for premiums for coverage under a high deductible health plan for any month for which the health plan of the individual—(i)is not an employer-sponsored health plan, and(ii)does not include coverage for abortions (other than any abortion necessary to save the life of the mother or any abortion with respect to a pregnancy that is the result of an act of rape or incest).

(3)

FSA

Section 106 of such Code, as amended by subsection (a), is amended by adding at the end the following:

(i)

Health insurance premiums for those not eligible for employer-Sponsored coverage in 2020 and 2021

A plan shall not fail to be treated as a health flexible spending arrangement under this section merely because such plan provides for a distribution during calendar year 2020 or 2021 for premiums for coverage for medical expenses under an accident or health plan of a plan beneficiary if the beneficiary is not eligible for coverage by an employer-sponsored health plan. The preceding sentence shall only apply if the coverage does not include coverage for abortions (other than any abortion necessary to save the life of the mother or any abortion with respect to a pregnancy that is the result of an act of rape or incest).

(c)

HSAs without high deductible health plans for 2020 and 2021

Section 223 of such Code is amended by adding at the end the following:

(i)

Special rule for calendar years 2020 and 2021

(1)

In general

Notwithstanding subsection (c)(1)(A) and subject to paragraph (2), for calendar years 2020 and 2021, the term eligible individual means, with respect to any month, any individual if the individual is covered under any health plan, including any the following:(A)

Government sponsored programs

Coverage under—(i)The Medicare program under part A of title XVIII of the Social Security Act.(ii)The Medicaid program under title XIX of the Social Security Act.(iii)The CHIP program under title XXI of the Social Security Act or under a qualified CHIP look-alike program (as defined in section 2107(g) of the Social Security Act).(iv)Medical coverage under chapter 55 of title 10, United States Code, including coverage under the TRICARE program.(v)A health care program under chapter 17 or 18 of title 38, United States Code, as determined by the Secretary of Veterans Affairs, in coordination with the Secretary of Health and Human Services and the Secretary.(vi)A health plan under section 2504(e) of title 22, United States Code (relating to Peace Corps volunteers).(vii)The Non-appropriated Fund Health Benefits Program of the Department of Defense, established under section 349 of the National Defense Authorization Act for Fiscal Year 1995 (Public Law 103–337; 10 U.S.C. 1587 note).(B)

Employer-sponsored plan

Coverage under an eligible employer-sponsored plan.(C)

Plans in the Individual Market

Coverage under a health plan offered in the individual market within a State.(D)

Grandfathered health plan

Coverage under a grandfathered health plan.(E)

Coverage

Such other health benefits coverage, such as a State health benefits risk pool, as the Secretary of Health and Human Services, in coordination with the Secretary, recognizes for purposes of this subsection.(2)

Modifications

For purposes of paragraph (1), subsection (b)(8) shall be applied by substituting health plan for high deductible health plan each place it appears and subsection (c)(1)(B) shall not apply.

(d)

Waiver of carryover limitation on FSA 2020 funds

Section 106 of such Code, as amended by the preceding provisions of this section, is amended by adding at the end the following:

(j)

FSA carryover without limitation on 2020 contributions

There shall be no limitation on the amount of funds contributed during 2020 to a health flexible spending arrangement under this section that may be carried over to the succeeding plan year.

(e)

Premium for benefits under Medicare for 2020

(1)

HSA

Section 223(d)(2) of such Code, as amended by the preceding provisions of this section, is amended by adding at the end the following:

(G)

Premiums for benefits under Medicare for 2020

Subparagraph (B) shall not apply to amounts paid during calendar year 2020 for any monthly premium for benefits under part A of title XVIII of the Social Security Act, any monthly premium for benefits under part B of such title, any monthly premium under a Medicare Advantage plan under part C of such title, or any monthly premium under a prescription drug plan under part D of such title.

(2)

Archer MSA

Section 220(d)(2) of such Code, as amended by the preceding provisions of this section, is amended by adding at the end the following:

(F)

Premiums for benefits under Medicare for 2020

(3)

FSA

Section 106 of such Code, as amended by the preceding provisions of this section, is amended by adding at the end the following:

(k)

FSA payments for benefits under Medicare for 2020

A plan shall not fail to be treated as a health flexible spending arrangement under this section merely because such plan provides for a distribution during calendar year 2020 for any monthly premium for benefits under part A of title XVIII of the Social Security Act, any monthly premium for benefits under part B of such title, any monthly premium under a Medicare Advantage plan under part C of such title, or any monthly premium under a prescription drug plan under part D of such title.

(f)

Payment of non-Dependent medical expenses in 2020

(1)

HSA

(A)

Medical expenses

Section 223(d)(2) of such Code, as amended by the preceding provisions of this section, is amended by adding at the end the following:

(F)

Non-dependent medical expenses in 2020

During calendar year 2020, subparagraph (A) shall be applied without regard to the requirement that medical care be for the individual, the spouse of such individual, and any dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of such individual.

(B)

Rollover

Section 223(f)(5) of such Code is amended by adding at the end the following:

(C)

Rollover gifts

Notwithstanding the preceding provisions of this paragraph, an amount is described in this paragraph as a rollover contribution in the case of a taxable year beginning in 2020 and paragraph (2) shall not apply to any amount paid or distributed from a health savings account of a beneficiary to a health savings account of an individual who is not such beneficiary, the spouse of such beneficiary, or any dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of such beneficiary, to the extent—(i)the amount received is paid into the health savings account for the benefit of such individual not later than the 60th day after the day on which the account beneficiary receives the payment or distribution, and(ii)the aggregate amount of such transfers to all other individuals does not exceed $2,020 in 2020.

(C)

Donations to qualified charity

Section 223(f) of such Code is amended by adding at the end the following:

(9)

Donations to qualified charity

(A)

Donations allowable

Paragraph (2) shall not apply to any amount paid or distributed from a health savings account to the extent the amount (not to exceed $10,000) is a qualified charitable contribution made by the account beneficiary during the taxable year.(B)

Qualified charitable contribution

For purposes of subparagraph (A), the term qualified charitable contribution means a charitable contribution (as defined in section 170(c))—(i)which is made in cash,(ii)for which a deduction is allowable under section 170 (determined without regard to subsection (b) thereof and to subparagraph (C) of this paragraph), and(iii)which is—(I)made to an organization described in section 170(b)(1)(A), and(II)not—(aa)to an organization described in section 509(a)(3), or(bb)for the establishment of a new, or maintenance of an existing, donor advised fund (as defined in section 4966(d)(2)).(C)

Denial of deduction

No deduction shall be allowed for a distribution which is a contribution made pursuant to this paragraph.

(2)

Archer MSA

(A)

Non-dependent medical expenses in 2020

Section 220(d)(2) of such Code, as amended by the preceding provisions of this section, is amended by adding at the end the following:

(E)

Non-dependent medical expenses in 2020

(B)

Rollover

Section 220(f)(5) of such Code is amended by adding at the end the following:

(C)

Rollover gifts

(C)

Donations to qualified charity

Section 220(f) of such Code is amended by adding at the end the following:

(9)

Donations to qualified charity

(A)

Donations allowable

Qualified charitable contribution

Denial of deduction

No deduction shall be allowed for a distribution which is a contribution made pursuant to this paragraph.

(g)

Cafeteria plans

Section 125 of such Code is amended by redesignating subsections (k) and (l) as subsections (l) and (m), respectively, and by inserting after subsection (j) the following new subsection:

(k)

Additional employer contributions

(1)

In general

A plan shall not fail to be treated as a cafeteria plan under this section merely because the employer makes contributions to employee health savings accounts during plan years beginning in 2020 or 2021 without regard to choices made by participants.(2)

Applicable rules

For purposes of paragraph (1)—(A)subsections (b) and (c) shall apply with respect to such contributions,(B)the dollar limitation in subsection (i)(1) shall not apply with respect to such contributions, and(C)in the case of an eligible employer (as defined in subsection (j)(5)), the requirements of subsection (j) shall apply, except that such contributions shall be treated as in addition to contributions required under subsection (j)(3)(A).

(h)

Expansion of allowable medical expenses for 2020

(1)

HSA

Section 223(d)(2) of such Code, as amended by the preceding provisions of this section, is amended by adding at the end the following:

(H)

Additional allowable medical expenses for 2020

For calendar year 2020, amounts paid for masks, testing supplies, pain relievers and fever reducing OTC products, and for child nutrition shall be treated as paid for medical care.

(2)

Archer MSA

Section 220(d)(2) of such Code, as amended by the preceding provisions of this section, is amended by adding at the end the following:

(G)

Additional allowable medical expenses for 2020

For calendar year 2020, amounts paid for masks, testing supplies, pain relievers and fever reducing OTC products, and for child nutrition shall be treated as paid for medical care.

(3)

FSA

Section 106 of such Code, as amended by the preceding provisions of this section, is amended by adding at the end the following:

(k)

Additional allowable medical expenses for 2020

For calendar year 2020, amounts paid for masks, testing supplies, pain relievers and fever reducing OTC products, and for child nutrition shall be treated as paid for medical care.

(i)

Increase HSA and MSA contribution limits for 2020

(1)

HSA

Section 223(b) of such Code is amended by adding at the end the following:

(9)

Increase in contribution limits for 2020

In the case of any taxable year beginning in calendar year 2020, the amount allowed as a deduction under subsection (a) shall be 120 percent of the amount allowed as a deduction under subsection (a) without regard to this paragraph.

(2)

Archer MSA

Section 220(b) of such Code is amended by adding at the end the following:

(8)

Increase in contribution limits for 2020

(j)

Increase HSA and MSA contribution limits for beneficiaries hospitalized or testing positive for COVID–19

(1)

HSA

Section 223(b) of such Code, as amended by the preceding provisions of this section, is amended by adding at the end the following:

(10)

Increase in contribution limits hospitalized or testing positive for COVID–19

In the case of any taxable year beginning in calendar year 2020 or 2021 in which the account beneficiary or any individual described in paragraph (2)(A) is hospitalized or tests positive for COVID–19, the amount allowed as a deduction under subsection (a) shall, be 300 percent of the amount allowed as a deduction under subsection (a) without regard to this paragraph and paragraph (9).

(2)

Archer MSA

Section 220(b) of such Code is amended by adding at the end the following:

(9)

Increase in contribution limits for beneficiaries hospitalized or testing positive for COVID–19

(k)

Effective date

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