[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2526 Introduced in House (IH)]
111th CONGRESS
1st Session
H. R. 2526
To amend the Internal Revenue Code of 1986 to increase participation in
medical flexible spending arrangements.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
May 20, 2009
Mr. Larson of Connecticut (for himself, Mr. Camp, Mr. Kind, and Mr.
Boustany) 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 increase participation in
medical 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 ``Medical FSA Improvement Act of
2009''.
SEC. 2. ADDITION OF TAXABLE DISTRIBUTIONS.
(a) Treatment of Amounts Expended for Medical Care.--Section 105 of
the Internal Revenue Code of 1986 (relating to amounts received under
accident and health plans) is amended by inserting at the end the
following new subsection:
``(k) Amounts Paid Under Medical Flexible Spending Arrangements.--
``(1) Application of subsection (b).--For purposes of
subsection (b) and section 106, a plan shall not fail to be
treated as flexible spending arrangement solely because such
plan, in addition to reimbursing expenses incurred for medical
care (as defined in subsection (b)) during the plan year,
distributes for the plan year the lesser of--
``(A) all or a portion of the employee's balance,
or
``(B) $1,500.
``(2) Limitation.--Paragraph (1) shall apply only in the
case that the balance under such arrangement for a plan year is
distributed after the close of the plan year to which the
balance relates and not later than the end of the 7th month
following the close of such plan year.
``(3) Tax treatment of distribution.--Any distribution to
which paragraph (1) applies shall be treated as remuneration of
the employee for emploment for the taxable year in which it is
distributed.
``(4) Flexible spending arrangement.--The term `flexible
spending arrangement' means a benefit program within the
meaning of section 106(c)(2) (relating to long-term care
benefits).
``(5) Termination.--Paragraph (1) shall not apply to any
distribution for a plan year beginning after December 31,
2011.''.
(b) Additional Deferred Compensation Exception.--Paragraph (2) of
section 125(d) of such Code (relating to deferred compensation under a
cafeteria plan) is amended by inserting at the end the following new
subparagraph:
``(E) Exception for certain flexible spending
arrangements.--Subparagraph (A) shall not apply to a
flexible spending arrangement (within the meaning of
section 106(c)(2)) as a result of amounts being
distributed to the covered employee in accordance with
section 105(k).''.
(c) Conforming Amendment.--Section 409A(d)(1) of such Code is
amended by striking ``and'' at the end of subparagraph (A), by striking
the period at the end of subparagraph (B) and inserting ``, and'', and
by adding at the end the following:
``(C) a flexible spending arrangement which is
subject to section 105(k).''.
(d) Effective Date.--The amendments made by this section shall
apply to plan years beginning after December 31, 2008.
(e) Transition Rules.--In the case of plan years that begin before
the date of the enactment of this Act, in implementing the amendments
made by this section a flexible spending arrangement may allow an
individual to make a new election or to revise an existing election
under such arrangement so long as such new or revised election is made
within 90 days after the date of the enactment of this Act.
SEC. 3. SELF-EMPLOYED INDIVIDUALS.
(a) In General.--Subsection (d) of section 125 of the Internal
Revenue Code of 1986 (defining cafeteria plan) is amended by adding at
the end the following new paragraph:
``(3) Employee to include self-employed.--In the case of a
medical flexible spending arrangement--
``(A) In general.--The term `employee' includes an
individual who is an employee within the meaning of
section 401(c)(1) (relating to self-employed
individuals).
``(B) Limitation.--The amount which may be excluded
under subsection (a) with respect to a participant in a
cafeteria plan by reason of being an employee under
subparagraph (A) shall not exceed the lesser of--
``(i) the employee's earned income (within
the meaning of section 401(c)) derived from the
trade or business with respect to which the
cafeteria plan is established, or
``(ii) $5,000.''.
(b) Application to Benefits Which May Be Provided Under Cafeteria
Plan.--
(1) Accident and health plans.--Subsection (g) of section
105 of such Code is amended to read as follows:
``(g) Employee Includes Self-Employed.--For purposes of this
section, the term `employee' includes an individual who is an employee
within the meaning of section 401(c)(1) (relating to self-employed
individuals).''.
(2) Contributions by employers to accident and health
plans.--
(A) In general.--Section 106 of such Code is
amended by adding after subsection (e) the following
new subsection:
``(f) Employer To Include Self-Employed.--
``(1) In general.--For purposes of this section, in the
case of a medical flexible spending account the term `employee'
includes an individual who is an employee within the meaning of
section 401(c)(1) (relating to self-employed individuals).
``(2) Limitation.--The amount which may be excluded under
subsection (a) with respect to an individual treated as an
employee by reason of paragraph (1) shall not exceed the lesser
of--
``(A) the employee's earned income (within the
meaning of section 401(c)) derived from the trade or
business with respect to which the accident or health
insurance was established, or
``(B) $5,000.
``(3) Tax treatment of distribution.--Any distribution to
which 105(k) applies shall be treated as self-employment income
(as defined in section 1402(b)) of the employee for the taxable
year in which it is distributed.
``(4) Election.--Paragraph (1) shall not apply for any
taxable year if the employee elects to have paragraph (1) not
apply for such taxable year.''.
(B) Coordination with section 106(f).--Paragraph
(2) of section 162(l) of such Code is amended by adding
at the end the following new subparagraph:
``(D) Coordination with section 106(f).--No
deduction shall be allowed under paragraph (1) for any
amount with respect to which an election is in effect
under section 106(f)(4).''.
(c) Effective Date.--The amendments made by this section shall
apply to plan years beginning after December 31, 2008.
(d) Transition Rules.--In the case of plan years that begin before
the date of the enactment of this Act, in implementing the amendments
made by this section a flexible spending arrangement may allow an
individual to make an election under such arrangement so long as such
election is made within 90 days after the date of the enactment of this
Act.
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