[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 3113 Introduced in Senate (IS)]







107th CONGRESS
  2d Session
                                S. 3113

To amend the Internal Revenue Code of 1986 to provide additional choice 
   regarding unused health benefits in cafeteria plans and flexible 
                         spending arrangements.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            October 15, 2002

  Mr. Ensign 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 provide additional choice 
   regarding unused health benefits in cafeteria plans and flexible 
                         spending arrangements.

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

SECTION 1. DISPOSITION OF UNUSED HEALTH BENEFITS IN 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:
    ``(h) Carryforwards or Payments of Certain Unused Health 
Benefits.--
            ``(1) In general.--For purposes of this title, a plan or 
        other arrangement shall not fail to be treated as a cafeteria 
        plan solely because qualified benefits under such plan include 
        a health flexible spending arrangement under which not more 
        than $500 of unused health benefits may be--
                    ``(A) carried forward to the succeeding plan year 
                of such health flexible spending arrangement, or
                    ``(B) paid to or on behalf of an employee as 
                compensation as of the end of such plan year or upon 
                the termination of, or failure to re-enroll in, such 
                plan or arrangement.
            ``(2) Distribution of unused health benefits on behalf of 
        employee.--For purposes of paragraph (1)(B), unused health 
        benefits paid as compensation on behalf of an employee by the 
        employer shall be--
                    ``(A) includible in gross income and wages of the 
                employee, whether or not a deduction for such payment 
                is allowable under this title to the employee, and
                    ``(B) excludable from--
                            ``(i) gross income to the extent provided 
                        under section 402(e), 457(a) (with respect to 
                        contributions to an eligible deferred 
                        compensation plan (as defined in section 
                        457(b)) of an eligible employer described in 
                        section 457(e)(1)(A)), or 220, and
                            ``(ii) wages to the extent otherwise 
                        provided for amounts so excludable.
            ``(3) Health flexible spending arrangement.--For purposes 
        of this subsection, the term `health flexible spending 
        arrangement' means a flexible spending arrangement (as defined 
        in section 106(c)) that is a qualified benefit and only permits 
        reimbursement for expenses for medical care (as defined in 
        section 213(d)(1) (without regard to subparagraphs (C) and (D) 
        thereof)).
            ``(4) Unused health benefits.--For purposes of this 
        subsection, the term `unused health benefits' means the excess 
        of--
                    ``(A) the maximum amount of reimbursement allowable 
                during a plan year under a health flexible spending 
                arrangement, over
                    ``(B) the actual amount of reimbursement during 
                such year under such arrangement.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 2003.
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