[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4007 Introduced in House (IH)]






108th CONGRESS
  2d Session
                                H. R. 4007

To amend the Internal Revenue Code of 1986 to allow amounts in a health 
flexible spending arrangement that are unused during a plan year to be 
carried over to subsequent plan years or deposited into certain health 
                          or retirement plans.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 18, 2004

  Mr. Royce (for himself, Mr. Dreier, Mr. Paul, and Mr. Rohrabacher) 
 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 amounts in a health 
flexible spending arrangement that are unused during a plan year to be 
carried over to subsequent plan years or deposited into certain health 
                          or retirement plans.

    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 subsection 
(h) as subsection (i) and by inserting after subsection (g) the 
following new subsection:
    ``(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,
                    ``(B) to the extent permitted by sections 223, 
                contributed on behalf of the employee to a health 
                savings account (as defined in section 223(d)), 
                maintained for the benefit of such employee, or
                    ``(C) contributed to a qualified retirement plan 
                (as defined in section 4974(c)), or an eligible 
                deferred compensation plan (as defined in section 
                457(b)) of an eligible employer described in section 
                457(e)(1)(A).
            ``(2) Special rules for treatment of contributions to 
        health and retirement plans.--For purposes of this title, 
        contributions under subparagraph (B) or (C) of paragraph (1)--
                    ``(A) shall be treated as a contribution made by 
                the employee (and includible in the gross income of 
                such employee) in the case of a contribution to a 
                health savings account,
                    ``(B) shall be treated as elective deferrals (as 
                defined in section 402(g)(3)) in the case of 
                contributions to a qualified cash or deferred 
                arrangement (as defined in section 401(k)) or to an 
                annuity contract described in section 403(b),
                    ``(C) shall be treated as employer contributions to 
                which the employee has a nonforfeitable right in the 
                case of a plan (other than a plan described in 
                subparagraph (A)) which is described in section 401(a) 
                which includes a trust exempt from tax under section 
                501(a),
                    ``(D) shall be treated as deferred compensation in 
                the case of contributions to an eligible deferred 
                compensation plan (as defined in section 457(b)), and
                    ``(E) shall be treated in the manner designated for 
                purposes of section 408 or 408A in the case of 
                contributions to an individual retirement plan.
            ``(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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