[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 1450 Introduced in Senate (IS)]






108th CONGRESS
  1st Session
                                S. 1450

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

                July 24 (legislative day, July 21), 2003

  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, with 
        respect to any plan year, not more than $500 of health benefits 
        which are unused at the end of such year 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 
                remuneration from employment.
            ``(2) Tax treatment of unused health benefits.--
                    ``(A) Carryforwards.--Amounts carried forward under 
                paragraph (1)(A) from a taxable year shall not be 
                includible in gross income for such taxable year.
                    ``(B) Remuneration.--Amounts paid as remuneration 
                from employment under paragraph (1)(B) shall be 
                includible in gross income.
            ``(3) Distribution of unused health benefits on behalf of 
        employee.--Paragraph (2)(B) shall not be construed to prevent--
                    ``(A) an exclusion from gross income to the extent 
                provided under this title with respect to any portion 
                of such remuneration that is contributed to a plan or 
                arrangement which is subject to section 402(g) or to an 
                eligible deferred compensation plan (as defined in 
                section 457(b)) of an eligible employer described in 
                section 457(e)(1)(A),
                    ``(B) a deduction (to the extent provided in 
                section 220) with respect to any portion of such 
                remuneration contributed to an Archer MSA, or
                    ``(C) any other deduction or exclusion allowable 
                under this title with respect to any portion of such 
                remuneration.
            ``(4) 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).
            ``(5) Unused health benefits.--For purposes of this 
        subsection, the term `unused health benefits' means the excess 
        of--
                    ``(A) the maximum amount of reimbursement allowable 
                for a plan year under a health flexible spending 
                arrangement, over
                    ``(B) the actual amount of reimbursement for 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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