[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 27 Introduced in House (IH)]







106th CONGRESS
  1st Session
                                 H. R. 27

 To amend the Internal Revenue Code of 1986 to allow the carryover of 
unused nontaxable benefits under cafeteria plans and flexible spending 
                 arrangements, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            January 6, 1999

  Mr. Dreier 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 allow the carryover of 
unused nontaxable benefits under cafeteria plans and flexible spending 
                 arrangements, and for other purposes.

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

SECTION 1. CARRYOVER OF UNUSED BENEFITS FROM CAFETERIA PLANS AND 
              FLEXIBLE SPENDING ARRANGEMENTS.

    (a) In General.--Section 125 of the Internal Revenue Code of 1986 
(relating to cafeteria plans) is amended by redesignating subsections 
(h) and (i) as subsections (i) and (j), respectively, and by inserting 
after subsection (g) the following new subsection:
    ``(h) Allowance of Carryovers of Unused Benefits to Later Taxable 
Years.--
            ``(1) In general.--For purposes of this title--
                    ``(A) a plan or other arrangement shall not fail to 
                be treated as a cafeteria plan or flexible spending or 
                similar arrangement, and
                    ``(B) no amount shall be required to be included in 
                gross income by reason of this section or any other 
                provision of this chapter,
        solely because under such plan or other arrangement any 
        nontaxable benefit which is unused as of the close of a taxable 
        year may be carried forward to 1 or more succeeding taxable 
        years.
            ``(2) Limitation.--Paragraph (1) shall not apply to amounts 
        carried from a plan to the extent such amounts exceed $500 
        (applied on an annual basis). For purposes of this paragraph, 
        all plans and arrangements maintained by an employer or any 
        related person shall be treated as 1 plan.
            ``(3) Allowance of rollover.--
                    ``(A) In general.--Each flexible spending or 
                similar arrangement which permits a carryover under 
                paragraph (1) of an amount of unused benefit shall 
                provide that each participant may elect, in lieu of a 
                carryover of such amount, to have such amount 
                distributed to the participant.
                    ``(B) Amounts not included in income.--Any 
                distribution under subparagraph (A) shall not be 
                included in gross income to the extent that such amount 
                is transferred in a trustee-to-trustee transfer, or is 
                contributed within 60 days of the date of the 
                distribution, to--
                            ``(i) an individual retirement plan,
                            ``(ii) a qualified cash or deferred 
                        arrangement described in section 401(k),
                            ``(iii) a plan under which amounts are 
                        contributed by an individual's employer for an 
                        annuity contract described in section 403(b),
                            ``(iv) an eligible deferred compensation 
                        plan described in section 457,
                            ``(v) a medical savings account (within the 
                        meaning of section 220), or
                            ``(vi) an education individual retirement 
                        account (within the meaning of section 530(b)).
                Any amount rolled over under this subparagraph shall be 
                treated as a rollover contribution for the taxable year 
                from which the unused amount would otherwise be 
                carried.
                    ``(C) Treatment of rollover.--Any amount rolled 
                over under subparagraph (B) shall be treated as an 
                eligible rollover under section 219, 220, 401(k), 
                403(b), 457, or 530, whichever is applicable, and shall 
                not be taken into account in applying any limitation 
                (or participation requirement) on contributions under 
                such section or any other provision of this chapter for 
                the taxable year of the rollover.
            ``(4) Cost-of-living adjustment.--In the case of any 
        taxable year beginning in a calendar year after 1999, the $500 
        amount under paragraph (2) shall be adjusted at the same time 
        and in the same manner as under section 415(d)(2), except that 
        the base period taken into account shall be the calendar 
        quarter beginning October 1, 1998, and any increase which is 
        not a multiple of $50 shall be rounded to the next lowest 
        multiple of $50.''
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1998.
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