[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2351 Introduced in House (IH)]







108th CONGRESS
  1st Session
                                H. R. 2351

  To amend the Internal Revenue Code of 1986 to allow a deduction to 
 individuals for amounts contributed to health savings accounts and to 
  provide for the disposition of unused health benefits in cafeteria 
               plans and flexible spending arrangements.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              June 5, 2003

Mr. Thomas (for himself, Mr. Lipinski, Mrs. Johnson of Connecticut, Mr. 
Sam Johnson of Texas, Mr. Hayworth, Mr. Lewis of Kentucky, Mr. Brady of 
Texas, Mr. English, Mr. Sessions, Mr. Ose, Mr. Fossella, Mr. Paul, Mr. 
  Smith of New Jersey, Mr. Weldon of Florida, Mr. Ryun of Kansas, Mr. 
 DeLay, Mr. Toomey, Mr. Barton of Texas, Mr. Walsh, Mr. Ballenger, Mr. 
 Camp, Mr. Collins, Mr. Ryan of Wisconsin, Mr. Keller, Mr. Herger, Mr. 
Doolittle, Mr. DeMint, and Mr. Norwood) 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 a deduction to 
 individuals for amounts contributed to health savings accounts and to 
  provide for the disposition of 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. SHORT TITLE.

    This Act may be cited as the ``Health Savings Account Availability 
Act''.

SEC. 2. HEALTH SAVINGS ACCOUNTS.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to additional itemized 
deductions for individuals) is amended by redesignating section 223 as 
section 224 and by inserting after section 222 the following new 
section:

``SEC. 223. HEALTH SAVINGS ACCOUNTS.

    ``(a) Deduction Allowed.--In the case of an individual who is an 
eligible individual for any month during the taxable year, there shall 
be allowed as a deduction for the taxable year an amount equal to the 
aggregate amount paid in cash during such taxable year by such 
individual to a health savings account of such individual.
    ``(b) Limitations.--
            ``(1) In general.--The amount allowable as a deduction 
        under subsection (a) to an individual for the taxable year 
        shall not exceed the sum of the monthly limitations for months 
        during such taxable year that the individual is an eligible 
        individual.
            ``(2) Monthly limitation.--The monthly limitation for any 
        month is the amount equal to \1/12\ of the annual deductible 
        (as of the first day of such month) of the individual's 
        coverage under the high deductible health plan.
            ``(3) Coordination with employer and msa contributions.--
        The limitation which would (but for this paragraph) apply under 
        this subsection to the taxpayer for any taxable year shall be 
        reduced (but not below zero) by the sum of--
                    ``(A) the aggregate amount which would (but for 
                subsections (b) and (d) of section 106) be includible 
                in the taxpayer's gross income for such taxable year, 
                and
                    ``(B) the aggregate amount paid during such taxable 
                by such individual to Archer MSAs of such individual.
            ``(4) Special rules for married individuals, dependents, 
        and medicare eligible individuals.--Rules similar to the rules 
        of paragraphs (3), (6), and (7) of section 220(b) shall apply 
        for purposes of this section.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Eligible individual.--
                    ``(A) In general.--The term `eligible individual' 
                means, with respect to any month, any individual if--
                            ``(i) such individual is covered under a 
                        high deductible health plan as of the 1st day 
                        of such month, and
                            ``(ii) such individual is not, while 
                        covered under a high deductible health plan, 
                        covered under any health plan--
                                    ``(I) which is not a high 
                                deductible health plan, and
                                    ``(II) which provides coverage for 
                                any benefit which is covered under the 
                                high deductible health plan.
                    ``(B) Certain coverage disregarded.--Subparagraph 
                (A)(ii) shall be applied without regard to--
                            ``(i) coverage for any benefit provided by 
                        permitted insurance, and
                            ``(ii) coverage (whether through insurance 
                        or otherwise) for accidents, disability, dental 
                        care, vision care, or long-term care.
            ``(2) High deductible health plan.--
                    ``(A) In general.--The term `high deductible health 
                plan' means a health plan--
                            ``(i) in the case of self-only coverage, 
                        which has an annual deductible which is not 
                        less than $1,000 and not more than $2,250,
                            ``(ii) in the case of family coverage, 
                        which has an annual deductible which is not 
less than $2,000 and not more than $4,500, and
                            ``(iii) the annual out-of-pocket expenses 
                        required to be paid under the plan (other than 
                        for premiums) for covered benefits does not 
                        exceed--
                                    ``(I) $3,000 for self-only 
                                coverage, and
                                    ``(II) $5,500 for family coverage.
                    ``(B) Special rules.--
                            ``(i) Exclusion of certain plans.--Such 
                        term does not include a health plan if 
                        substantially all of its coverage is coverage 
                        described in paragraph (1)(B).
                            ``(ii) Safe harbor for absence of 
                        preventive care deductible.--A plan shall not 
                        fail to be treated as a high deductible health 
                        plan by reason of failing to have a deductible 
                        for preventive care.
                    ``(C) Treatment of network services.--
                            ``(i) In general.--In the case of a health 
                        plan which is a preferred provider organization 
                        plan and which would (without regard to 
                        services provided outside such organization's 
                        network of providers described in clause 
                        (iii)(I)) be a high deductible health plan, 
                        such plan shall not fail to be a high 
                        deductible health plan because--
                                    ``(I) the annual deductible for 
                                services provided outside such network 
                                exceeds the applicable maximum dollar 
                                amount in clause (i) or (ii) of 
                                subparagraph (A), or
                                    ``(II) the annual out-of-pocket 
                                expenses required to be paid for 
                                services provided outside such network 
                                exceeds the applicable dollar amount in 
                                subparagraph (A)(iii).
                            ``(ii) Annual deductible.--The annual 
                        deductible taken into account under subsection 
                        (b)(2) with respect to a plan which is a high 
                        deductible health plan by reason of clause (i) 
                        shall be the annual deductible for services 
                        provided within such network.
                            ``(iii) Preferred provider organization 
                        plan defined.--In this subparagraph, the term 
                        `preferred provider organization plan' means a 
                        health plan that--
                                    ``(I) has a network of providers 
                                that have agreed to a contractually 
                                specified reimbursement for covered 
                                benefits with the organization offering 
                                the plan,
                                    ``(II) provides for reimbursement 
                                for all covered benefits regardless of 
                                whether such benefits are provided 
                                within such network of providers, and
                                    ``(III) is offered by an 
                                organization that is not licensed or 
                                organized under State law as a health 
                                maintenance organization.
            ``(3) Permitted insurance.--The term `permitted insurance' 
        has the meaning given such term in section 220(c)(3).
            ``(4) Family coverage.--The term `family coverage' has the 
        meaning given such term in section 220(c)(5).
            ``(5) Archer msa.--The term `Archer MSA' has the meaning 
        given such term in section 220(d).
    ``(d) Health Savings Account.--For purposes of this section--
            ``(1) In general.--The term `health savings account' means 
        a trust created or organized in the United States as a health 
        savings account exclusively for the purpose of paying the 
        qualified medical expenses of the account holder, but only if 
        the written governing instrument creating the trust meets the 
        requirements described in section 220(d)(1) (applied without 
        regard to `75 percent of' in subparagraph (A)(ii) thereof).
            ``(2) Qualified medical expenses.--The term `qualified 
        medical expenses' has the meaning given such term in section 
        220(d)(2).
            ``(3) Account holder.--The term `account holder' means the 
        individual on whose behalf the health savings account was 
        established.
            ``(4) Certain rules to apply.--Rules similar to the 
        following rules shall apply for purposes of this section:
                    ``(A) Section 219(d)(2) (relating to no deduction 
                for rollovers).
                    ``(B) Section 219(f)(3) (relating to time when 
                contributions deemed made).
                    ``(C) Except as provided in section 106(b), section 
                219(f)(5) (relating to employer payments).
                    ``(D) Section 408(g) (relating to community 
                property laws).
                    ``(E) Section 408(h) (relating to custodial 
                accounts).
    ``(e) Tax Treatment of Accounts.--
            ``(1) In general.--A health savings account is exempt from 
        taxation under this subtitle unless such account has ceased to 
        be a health savings account. Notwithstanding the preceding 
        sentence, any such account is subject to the taxes imposed by 
        section 511 (relating to imposition of tax on unrelated 
        business income of charitable, etc. organizations).
            ``(2) Account terminations.--Rules similar to the rules of 
        paragraphs (2) and (4) of section 408(e) shall apply to health 
        savings accounts, and any amount treated as distributed under 
        such rules shall be treated as not used to pay qualified 
        medical expenses.
    ``(f) Tax Treatment of Distributions.--
            ``(1) Amounts used for qualified medical expenses.--Any 
        amount paid or distributed out of a health savings account 
        which is used exclusively to pay qualified medical expenses of 
        any account holder shall not be includible in gross income.
            ``(2) Inclusion of amounts not used for qualified medical 
        expenses.--Any amount paid or distributed out of a health 
        savings account which is not used exclusively to pay the 
        qualified medical expenses of the account holder shall be 
        included in the gross income of such holder.
            ``(3) Excess contributions returned before due date of 
        return.--
                    ``(A) In general.--If any excess contribution is 
                contributed for a taxable year to any health savings 
                account of an individual, paragraph (2) shall not apply 
                to distributions from the health savings accounts of 
                such individual (to the extent such distributions do 
                not exceed the aggregate excess contributions to all 
                such accounts of such individual for such year) if--
                            ``(i) such distribution is received by the 
                        individual on or before the last day prescribed 
                        by law (including extensions of time) for 
                        filing such individual's return for such 
                        taxable year, and
                            ``(ii) such distribution is accompanied by 
                        the amount of net income attributable to such 
                        excess contribution.
                Any net income described in clause (ii) shall be 
                included in the gross income of the individual for the 
                taxable year in which it is received.
                    ``(B) Excess contribution.--For purposes of 
                subparagraph (A), the term `excess contribution' means 
                any contribution (other than a rollover contribution) 
                which is neither excludable from gross income under 
                section 106(d) nor deductible under this section.
            ``(4) Additional tax on distributions not used for 
        qualified medical expenses.--
                    ``(A) In general.--The tax imposed by this chapter 
                on the account holder for any taxable year in which 
                there is a payment or distribution from a health 
                savings account of such holder which is includible in 
                gross income under paragraph (2) shall be increased by 
                15 percent of the amount which is so includible.
                    ``(B) Exception for disability or death.--
                Subparagraph (A) shall not apply if the payment or 
                distribution is made after the account holder becomes 
                disabled within the meaning of section 72(m)(7) or 
                dies.
                    ``(C) Exception for distributions after medicare 
                eligibility.--Subparagraph (A) shall not apply to any 
                payment or distribution after the date on which the 
                account holder attains the age specified in section 
                1811 of the Social Security Act.
            ``(5) Rollover contribution.--An amount is described in 
        this paragraph as a rollover contribution if it meets the 
        requirements of subparagraphs (A) and (B).
                    ``(A) In general.--Paragraph (2) shall not apply to 
                any amount paid or distributed from an Archer MSA or a 
                health savings account to the account holder to the 
                extent the amount received is paid into a health 
                savings account for the benefit of such holder not 
                later than the 60th day after the day on which the 
                holder receives the payment or distribution.
                    ``(B) Limitation.--This paragraph shall not apply 
                to any amount described in subparagraph (A) received by 
                an individual from an Archer MSA or a health savings 
                account if, at any time during the 1-year period ending 
                on the day of such receipt, such individual received 
                any other amount described in subparagraph (A) from an 
                Archer MSA or a health savings account which was not 
                includible in the individual's gross income because of 
                the application of this paragraph.
            ``(6) Additional tax; special rules.--Rules similar to the 
        rules of paragraphs (6), (7), and (8) of section 220(f) shall 
        apply for purposes of this section.
    ``(g) Cost-of-Living Adjustment.--
            ``(1) In general.--In the case of any taxable year 
        beginning in a calendar year after 1998, each dollar amount in 
        subsection (c)(2) shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                such taxable year begins by substituting `calendar year 
                1997' for `calendar year 1992' in subparagraph (B) 
                thereof.
            ``(2) Special rules.--In the case of the $1,000 amount in 
        subsection (c)(2)(A)(i) and the $2,000 amount in subsection 
        (c)(2)(A)(ii), paragraph (1)(B) shall be applied by 
        substituting `calendar year 2002' for `calendar year 1997'.
            ``(3) Rounding.--If any increase under paragraph (1) or (2) 
        is not a multiple of $50, such increase shall be rounded to the 
        nearest multiple of $50.
    ``(h) Reports.--The Secretary may require the trustee of a health 
savings account to make such reports regarding such account to the 
Secretary and to the account holder with respect to contributions, 
distributions, and such other matters as the Secretary determines 
appropriate. The reports required by this subsection shall be filed at 
such time and in such manner and furnished to such individuals at such 
time and in such manner as may be required by the Secretary.''.
    (b) Deduction Allowed Whether or Not Individual Itemizes Other 
Deductions.--Subsection (a) of section 62 of such Code is amended by 
inserting after paragraph (18) the following new paragraph:
            ``(19) Health savings accounts.--The deduction allowed by 
        section 223.''.
    (c) Rollovers From Archer MSAs Permitted.--Subparagraph (A) of 
section 220(f)(5) of such Code (relating to rollover contribution) is 
amended by inserting ``or a health savings account (as defined in 
section 223(d))'' after ``paid into an Archer MSA''.
    (d) Exclusions for Employer Contributions to Medical Savings 
Accounts.--
            (1) Exclusion from income tax.--Section 106 of such Code 
        (relating to contributions by employer to accident and health 
        plans) is amended by adding at the end the following new 
        subsection:
    ``(d) Contributions to Health Savings Accounts.--
            ``(1) In general.--In the case of an employee who is an 
        eligible individual, amounts contributed by such employee's 
        employer to any health savings account of such employee shall 
        be treated as employer-provided coverage for medical expenses 
        under an accident or health plan to the extent such amounts do 
        not exceed the excess of--
                    ``(A) the limitation under section 223(b)(1) 
                (determined without regard to this subsection) which is 
                applicable to such employee for such taxable year, over
                    ``(B) the aggregate amount treated as employer-
                provided coverage for medical expenses under an 
                accident or health plan under subsection (b).
            ``(2) Special rules.--Rules similar to the rules of 
        paragraphs (2), (3), (4), and (5) of subsection (b) shall apply 
        for purposes of this subsection.
            ``(3) Definitions.--For purposes of this subsection, the 
        terms `eligible individual' and `health savings account' have 
        the respective meanings given to such terms by section 223.
            ``(4) Cross reference.--

                                ``For penalty on failure by employer to 
make comparable contributions to the health savings accounts of 
comparable employees, see section 4980G.''.
            (2) Exclusion from employment taxes.--
                    (A) Railroad retirement tax.--Subsection (e) of 
                section 3231 of such Code is amended by adding at the 
                end the following new paragraph:
            ``(11) Health savings account contributions.--The term 
        `compensation' shall not include any payment made to or for the 
        benefit of an employee if at the time of such payment it is 
        reasonable to believe that the employee will be able to exclude 
        such payment from income under section 106(d).''.
                    (B) Unemployment tax.--Subsection (b) of section 
                3306 of such Code is amended by striking ``or'' at the 
                end of paragraph (16), by striking the period at the 
                end of paragraph (17) and inserting ``; or'', and by 
                inserting after paragraph (17) the following new 
                paragraph:
            ``(18) any payment made to or for the benefit of an 
        employee if at the time of such payment it is reasonable to 
        believe that the employee will be able to exclude such payment 
        from income under section 106(d).''.
                    (C) Withholding tax.--Subsection (a) of section 
                3401 of such Code is amended by striking ``or'' at the 
                end of paragraph (20), by striking the period at the 
                end of paragraph (21) and inserting ``; or'', and by 
                inserting after paragraph (21) the following new 
                paragraph:
            ``(22) any payment made to or for the benefit of an 
        employee if at the time of such payment it is reasonable to 
        believe that the employee will be able to exclude such payment 
        from income under section 106(d).''
            (3) Employer contributions required to be shown on w-2.--
        Subsection (a) of section 6051 of such Code is amended by 
        striking ``and'' at the end of paragraph (10), by striking the 
        period at the end of paragraph (11) and inserting ``, and'', 
        and by inserting after paragraph (11) the following new 
        paragraph:
            ``(12) the amount contributed to any health savings account 
        (as defined in section 223(d)) of such employee or such 
        employee's spouse.''.
            (4) Penalty for failure of employer to make comparable 
        health savings account contributions.--
                    (A) In general.--Chapter 43 of such Code is amended 
                by adding after section 4980F the following new 
                section:

``SEC. 4980G. FAILURE OF EMPLOYER TO MAKE COMPARABLE HEALTH SAVINGS 
              ACCOUNT CONTRIBUTIONS.

    ``(a) General Rule.--In the case of an employer who makes a 
contribution to the health savings account of any employee with respect 
to coverage under a high deductible health plan of the employer during 
a calendar year, there is hereby imposed a tax on the failure of such 
employer to meet the requirements of subsection (d) for such calendar 
year.
    ``(b) Amount of Tax.--The amount of the tax imposed by subsection 
(a) on any failure for any calendar year is the amount equal to 35 
percent of the aggregate amount contributed by the employer to health 
savings accounts of employees for taxable years of such employees 
ending with or within such calendar year.
    ``(c) Waiver by Secretary.--In the case of a failure which is due 
to reasonable cause and not to willful neglect, the Secretary may waive 
part or all of the tax imposed by subsection (a) to the extent that the 
payment of such tax would be excessive relative to the failure 
involved.
    ``(d) Employer Required To Make Comparable Health Savings Account 
Contributions for All Participating Employees.--An employer meets the 
requirements of this subsection for any calendar year if the employer 
meets the requirements of section 4980E(d) applied by substituting 
`health savings account' for `Archer MSA' each place it appears.
    ``(e) Controlled Groups.--For purposes of this section, all persons 
treated as a single employer under subsection (b), (c), (m), or (o) of 
section 414 shall be treated as 1 employer.
    ``(f) Definitions.--Terms used in this section which are also used 
in section 223 have the respective meanings given such terms in section 
223.''.
                    (B) Clerical amendment.--The table of sections for 
                chapter 43 of such Code is amended by adding after the 
                item relating to section 4980F the following new item:

``Sec. 4980G. Failure of employer to make comparable health savings 
                            account contributions.''.
    (e) Tax on Excess Contributions.--Section 4973 of such Code 
(relating to tax on excess contributions to certain tax-favored 
accounts and annuities) is amended--
            (1) by striking ``or'' at the end of paragraph (3) of 
        subsection (a),
            (2) by inserting ``or'' at the end of paragraph (4) of 
        subsection (a),
            (3) by inserting after paragraph (4) of subsection (a) the 
        following new paragraph:
            ``(5) a health savings account (within the meaning of 
        section 223(d)),'', and
            (4) by adding at the end the following new subsection:
    ``(g) Excess Contributions to Health Savings Accounts.--For 
purposes of this section, in the case of health savings accounts 
(within the meaning of section 223(d)), the term `excess contributions' 
means the sum of--
            ``(1) the aggregate amount contributed for the taxable year 
        to the accounts (other than rollover contributions referred to 
        in section 223(f)(3)) which is neither excludable from gross 
        income under section 106(d) nor allowable as a deduction under 
        section 223 for such year, and
            ``(2) the amount determined under this subsection for the 
        preceding taxable year, reduced by the sum of--
                    ``(A) the distributions out of the accounts which 
                were included in gross income under section 223(f)(2), 
                and
                    ``(B) the excess (if any) of--
                            ``(i) the maximum amount allowable as a 
                        deduction under section 223(b)(1) (determined 
                        without regard to section 106(d)) for the 
                        taxable year, over
                            ``(ii) the amount contributed to the 
                        accounts for the taxable year.
For purposes of this subsection, any contribution which is distributed 
out of the health savings account in a distribution to which section 
223(f)(3) applies shall be treated as an amount not contributed.''.
    (f) Tax on Prohibited Transactions.--
            (1) Section 4975 of such Code (relating to tax on 
        prohibited transactions) is amended by adding at the end of 
        subsection (c) the following new paragraph:
            ``(6) Special rule for health savings accounts.--An 
        individual for whose benefit a health savings account (within 
        the meaning of section 223(d)) is established shall be exempt 
        from the tax imposed by this section with respect to any 
        transaction concerning such account (which would otherwise be 
        taxable under this section) if, with respect to such 
        transaction, the account ceases to be a health savings account 
        by reason of the application of section 223(e)(2) to such 
        account.''.
            (2) Paragraph (1) of section 4975(e) of such Code is 
        amended by redesignating subparagraphs (E) and (F) as 
        subparagraphs (F) and (G), respectively, and by inserting after 
        subparagraph (D) the following new subparagraph:
                    ``(E) a health savings account described in section 
                223(d),''.
    (g) Failure To Provide Reports on Health Savings Accounts.--
Paragraph (2) of section 6693(a) of such Code (relating to reports) is 
amended by redesignating subparagraphs (C) and (D) as subparagraphs (D) 
and (E), respectively, and by inserting after subparagraph (B) the 
following new subparagraph:
                    ``(C) section 223(h) (relating to health savings 
                accounts),''.
    (h) Exception From Capitalization of Policy Acquisition Expenses.--
Subparagraph (B) of section 848(e)(1) of such Code (defining specified 
insurance contract) is amended by striking ``and'' at the end of clause 
(iii), by striking the period at the end of clause (iv) and inserting 
``, and'', and by adding at the end the following new clause:
                            ``(v) any contract which is a health 
                        savings account (as defined in section 
                        223(d)).''.
    (i) Clerical Amendment.--The table of sections for part VII of 
subchapter B of chapter 1 of such Code is amended by striking the last 
item and inserting the following:

``Sec. 223. Medical savings accounts.
``Sec. 224. Cross reference.''.
    (j) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2003.

SEC. 3. 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) Contributions 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) contributed on behalf of an employee to a 
                qualified retirement plan (as defined in section 
                4974(c)), an eligible deferred compensation plan (as 
                defined in section 457(b)), or a health savings account 
                (as defined in section 223(d)).
            ``(2) Contribution of unused health benefits on behalf of 
        employee.--For purposes of this title, contributions on behalf 
        of an employee described in paragraph (1) shall be treated as 
        elective contributions made pursuant to a choice by the 
        employee between such contributions and compensation which 
        would otherwise be includible in the gross income of the 
        employee. Contributions described in paragraph (1) shall be 
        excluded from the gross income of the employee, or included in 
        the gross income of the employee and allowed as a deduction by 
        the employee, to the extent that elective contributions would 
        be treated in that manner under this title.
            ``(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, with respect to an employee, the term `unused 
        health benefits' means the excess of--
                    ``(A) the maximum amount of reimbursement allowable 
                to the employee during a plan year under a health 
                flexible spending arrangement, taking into account any 
                election by the employee, 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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