[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 2883 Introduced in Senate (IS)]

111th CONGRESS
  1st Session
                                S. 2883

     To amend the Internal Revenue Code of 1986 to provide for the 
 distribution of remaining balances in flexible spending arrangements 
                   upon termination from employment.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           December 15, 2009

  Mr. Johanns 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 for the 
 distribution of remaining balances in flexible spending arrangements 
                   upon termination from employment.

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

SECTION 1. DISTRIBUTION OF REMAINING BALANCES IN FLEXIBLE SPENDING 
              ARRANGEMENTS UPON TERMINATION FROM EMPLOYMENT.

    (a) In General.--Section 125 of the Internal Revenue Code of 1986 
is amended by redesignating subsections (i) and (j) as subsections (j) 
and (k), respectively, and by inserting after subsection (h) the 
following new subsection:
    ``(i) Distribution of Remaining Balances in Flexible Spending 
Arrangements Upon Termination From Employment.--
            ``(1) In general.--For purposes of this title, a plan or 
        other arrangement shall not fail to be treated as a health 
        flexible spending arrangement or a dependent care flexible 
        spending arrangement solely because under the plan or 
        arrangement a participant is permitted access to any unused 
        balance in the participant's accounts under such plan or 
        arrangement in the manner provided under paragraph (2).
            ``(2) Distribution upon termination.--
                    ``(A) In general.--A plan or arrangement shall 
                permit a participant (or any designated heir of the 
                participant) to receive a cash payment equal to the 
                aggregate unused account balances in the plan or 
                arrangement as of the date the individual is separated 
                (including by death or disability) from employment with 
                the employer maintaining the plan or arrangement.
                    ``(B) Inclusion in income.--Any payment under 
                subparagraph (A) shall be includible in gross income 
                for the taxable year in which such payment is 
                distributed to the employee.
            ``(3) Terms relating to flexible spending arrangements.--
        For purposes of this section--
                    ``(A) Flexible spending arrangements.--A flexible 
                spending arrangement is a benefit program which 
                provides employees with coverage under which specified 
                incurred expenses may be reimbursed (subject to 
                reimbursement maximums and other reasonable 
                conditions).
                    ``(B) Health and dependent care arrangements.--The 
                terms `health flexible spending arrangement' and 
                `dependent care flexible spending arrangement' means 
                any flexible spending arrangement (or portion thereof) 
                which provides payments for expenses incurred for 
                medical care (as defined in section 213(d)) or 
                dependent care (within the meaning of section 129), 
                respectively.''.
    (b) Conforming Amendments.--
            (1) The heading for section 125 of the Internal Revenue 
        Code of 1986 is amended by inserting ``and flexible spending 
        arrangements'' after ``plans''.
            (2) The item relating to section 125 in the table of 
        sections for part III of subchapter B of chapter 1 of such Code 
        is amended by inserting ``and flexible spending arrangements'' 
        after ``plans''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.
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