1.
(a)This Act may be cited
as the Health Savings and
Affordability Act of 2011
.
(b)Except as otherwise
expressly provided, whenever in this Act an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other provision, the
reference shall be considered to be made to a section or other provision of the
Internal Revenue Code of 1986.
2.Deduction for
qualified health insurance costs of individuals
(a)Part VII of subchapter B of chapter 1 (relating to
additional itemized deductions) is amended by redesignating section 224 as
section 225 and by inserting after section 223 the following new
section:
224.Costs of
qualified health insurance
(a)In the case of an individual, there shall be allowed as a
deduction an amount equal to the amount paid during the taxable year for
coverage for the taxpayer, his spouse, and dependents under qualified health
insurance.
(b)Qualified health
insuranceFor purposes of this section, the term qualified
health insurance means insurance which constitutes medical care; except
that such term shall not include any insurance if substantially all of its
coverage is of excepted benefits described in section 9832(c).
(c)
(1)Coordination
with medical deduction, etcAny amount paid by a taxpayer for
insurance to which subsection (a) applies shall not be taken into account in
computing the amount allowable to the taxpayer as a deduction under section
162(l) or 213(a). Any amount taken into account in determining the credit
allowed under section 35 or 36B shall not be taken into account for purposes of
this section.
(2)Deduction not
allowed for self-employment tax purposesThe deduction allowable
by reason of this section shall not be taken into account in determining an
individual’s net earnings from self-employment (within the meaning of section
1402(a)) for purposes of chapter
2.
.
(b)Deduction
allowed in computing adjusted gross incomeSubsection (a) of
section 62 is amended by inserting before the last sentence the following new
paragraph:
(22)Costs of
qualified health insuranceThe deduction allowed by section
224.
.
(c)The table of sections for part VII of subchapter B of
chapter 1 is amended by redesignating the item relating to section 224 as an
item relating to section 225 and inserting before such item the following new
item:
Sec. 224. Costs of qualified health
insurance.
.
(d)The amendments made by this section shall apply to taxable
years beginning after the date of the enactment of this Act.
3.Allow both
spouses to make catch-up contributions to the same hsa account
(a)Paragraph (3) of
section 223(b) is amended by adding at the end the following new
subparagraph:
(C)Special rule
where both spouses are eligible individuals with 1 accountIf—
(i)an
individual and the individual's spouse have both attained age 55 before the
close of the taxable year, and
(ii)the spouse is not
an account beneficiary of a health savings account as of the close of such
year,
the
additional contribution amount shall be 200 percent of the amount otherwise
determined under subparagraph
(B)..
(b)The amendment made by this section shall apply to taxable
years beginning after the date of the enactment of this Act.
4.Increase in hsa
contribution limitation
(a)Subsection (b) of
section 223 (relating to monthly limitation) is amended—
(1)by striking
$2,250
in paragraph (2)(A) and inserting the amount in
effect under subsection (c)(2)(A)(ii)(I)
, and
(2)by striking
$4,500
in paragraph (2)(B) and inserting the amount in
effect under subsection (c)(2)(A)(ii)(II)
.
(b)Paragraph (1) of section 223(g) is amended by striking
subsections (b)(2) and
and inserting
subsection
.
(c)The amendments made by this section shall apply to
contributions for taxable years beginning after the date of the enactment of
this Act.
5.Treatment of
family coverage plans having both individual and family deductibles
(a)Paragraph (2) of
section 223(c) (defining high deductible plan) is amended by adding at the end
the following new subparagraph:
(E)Family coverage
plans having both individual and family deductiblesIn the case of a family coverage plan
having a deductible (and the same deductible) for each covered individual and a
deductible for the family as a whole, the requirement of subparagraph (A)(i)
shall be treated as met if (without regard to this subparagraph)—
(i)the individual
deductible meets the requirement of subparagraph (A)(i)(I), or
(ii)the family deductible meets the requirement
of subparagraph
(A)(i)(II).
.
(b)The amendment made by
this section shall apply to taxable years beginning after the date of the
enactment of this Act.
6.FSA and HRA
termination to fund hsas
(a)Eligible
individuals include FSA and HRA participantsSection 223(c)(1)(B) is amended—
(1)by striking
and
at the end of clause (ii),
(2)by striking the
period at the end of clause (iii) and inserting , and
,
and
(3)by inserting after
clause (iii) the following new clause:
(iv)coverage under a health flexible spending
arrangement or a health reimbursement arrangement in the plan year a qualified
HSA distribution as described in section 106(e) is made on behalf of the
individual if after the qualified HSA distribution is made and for the
remaining duration of the plan year, the coverage provided under the health
flexible spending arrangement or health reimbursement arrangement is converted
to—
(I)coverage that does
not pay or reimburse any medical expense incurred before the minimum annual
deductible under section 223(c)(2)(A)(i) (prorated for the period occurring
after the qualified HSA distribution is made) is satisfied,
(II)coverage that,
after the qualified HSA distribution is made, does not pay or reimburse any
medical expense incurred after the qualified HSA distribution is made other
than preventive care as defined in section 223(c)(2)(C),
(III)coverage that,
after the qualified HSA distribution is made, pays or reimburses benefits for
coverage described in section 223(c)(1)(B)(ii) (but not through insurance or
for long-term care services),
(IV)coverage that,
after the qualified HSA distribution is made, pays or reimburses benefits for
permitted insurance as defined in section 223(c)(1)(B)(i) or coverage described
in section 223(c)(1)(B)(ii) (but not for long-term care services),
(V)coverage that,
after the qualified HSA distribution is made, pays or reimburses only those
medical expenses incurred after an individual's retirement (and no expenses
incurred before retirement), or
(VI)coverage that,
after the qualified HSA distribution is made, is suspended, pursuant to an
election made on or before the date the individual elects a qualified HSA
distribution or, if later, on the date of the individual enrolls in a high
deductible health plan (as defined in section 223(c)(2)), that does not pay or
reimburse, at any time, any medical expense incurred during the suspension
period except as defined in subclauses (I) through (V)
above.
.
(b)Qualified HSA
distribution shall not affect flexible spending
arrangementSection 106(e)(1) is amended to read as
follows:
(1)A plan shall not fail
to be treated as a health flexible spending arrangement under this section,
section 105, or section 125, or as a health reimbursement arrangement under
this section or section 105, merely because such plan provides for a qualified
HSA
distribution.
.
(c)FSA balances at
year end shall not forfeitSection 125(d)(2) is amended by adding
at the end the following new subparagraph:
(E)Exception for
qualified hsa distributionsSubparagraph (A) shall not apply to the
extent that there is an amount remaining in a health flexible spending account
at the end of a plan year that an individual elects to contribute to a health
savings account pursuant to a qualified HSA distribution (as defined in section
106(e)(2)).
.
(d)Simplification
of limitations on FSA and HRA rolloversSection 106(e)(2)
(relating to qualified HSA distribution) is amended to read as follows:
(2)Qualified hsa
distribution
(A)The term
qualified HSA distribution means a distribution from a health
flexible spending arrangement or health reimbursement arrangement to the extent
that such distribution does not exceed the lesser of—
(i)the balance in
such arrangement as of the date of such distribution, or
(ii)the amount
determined under subparagraph (B).
Such
term shall not include more than 1 distribution with respect to any
arrangement.(B)
(i)Distributions
from a health flexible spending arrangementA qualified HSA distribution from a health
flexible spending arrangement shall not exceed the applicable amount.
(ii)Distributions
from a health reimbursement arrangementA qualified HSA distribution from a health
reimbursement arrangement shall not exceed—
(I)the applicable
amount divided by 12, multiplied by
(II)the number of
months during which the individual is a participant in the health reimbursement
arrangement.
(iii)For purposes of this subparagraph, the applicable amount
is—
(I)$2,250 in the case
of an eligible individual who has self-only coverage under a high deductible
health plan at the time of such distribution, and
(II)$4,500 in the
case of an eligible individual who has family coverage under a high deductible
health plan at the time of such
distribution.
.
(e)Elimination of
additional tax for failure To maintain high deductible health plan
coverageSection 106(e) is amended—
(1)by striking
paragraph (3) and redesignating paragraphs (4) and (5) as paragraphs (3) and
(4), respectively, and
(2)by striking
subparagraph (A) of paragraph (3), as so redesignated, and redesignating
subparagraphs (B) and (C) of such paragraph as subparagraphs (A) and (B)
thereof, respectively.
(f)Limited purpose
FSAs and HRAsSection 106(e), as amended by this section, is
amended by adding at the end the following new paragraph:
(5)Limited purpose
fsas and hrasA plan shall
not fail to be a health flexible spending arrangement or health reimbursement
arrangement under this section or section 105 merely because the plan converts
coverage for individuals who enroll in a high deductible health plan described
in section 223(c)(2) to coverage described in section 223(c)(1)(B)(iv).
Coverage for such individuals may be converted as of the date of enrollment in
the high deductible health plan, without regard to the period of coverage under
the health flexible spending arrangement or health reimbursement arrangement,
and without requiring any change in coverage to individuals who do not enroll
in a high deductible health
plan.
.
(g)Distribution
amounts adjusted for cost-of-LivingSection 106(e), as amended by
this section, is amended by adding at the end the following new
paragraph:
(6)Cost-of-living
adjustment
(A)In the case of any
taxable year beginning after December 31, 2011, each of the dollar amounts in
paragraph (2)(B)(iii) shall be increased by an amount equal to such dollar
amount, multiplied by 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 2010
for calendar year 1992
in
subparagraph (B) thereof.
(B)If
any increase under subparagraph (A) is not a multiple of $50, such increase
shall be rounded to the nearest multiple of
$50.
.
(h)Disclaimer of
disqualifying coverageSection 223(c)(1)(B), as amended by this
section, is amended—
(1)by striking
and
at the end of clause (iii),
(2)by striking the
period at the end of clause (iv) and inserting , and
, and
(3)by inserting after
clause (iv) the following new clause:
(v)any coverage (including prospective
coverage) under a health plan that is not a high deductible health plan which
is disclaimed in writing, at the time of the creation or organization of the
health savings account, including by execution of a trust described in
subsection (d)(1) through a governing instrument that includes such a
disclaimer, or by acceptance of an amendment to such a trust that includes such
a
disclaimer.
.
(i)The amendments made by
this section shall apply to taxable years beginning after the date of the
enactment of this Act.
7.Purchase of
health insurance from hsa account
(a)Paragraph (2) of
section 223(d) (defining qualified medical expenses) is amended to read as
follows:
(2)Qualified
medical expenses
(A)The term qualified medical expenses means,
with respect to an account beneficiary, amounts paid by such beneficiary for
medical care (as defined in section 213(d)) for any individual covered by a
high deductible health plan of the account beneficiary, but only to the extent
such amounts are not compensated for by insurance or otherwise.
(B)Health insurance
may not be purchased from accountExcept as provided in
subparagraph (C), subparagraph (A) shall not apply to any payment for
insurance.
(C)Subparagraph
(B) shall not apply to any expense for coverage under—
(i)a
health plan during any period of continuation coverage required under any
Federal law,
(ii)a
qualified long-term care insurance contract (as defined in section
7702B(b)),
(iii)a health plan
during any period in which the individual is receiving unemployment
compensation under any Federal or State law,
(iv)a
high deductible health plan, or
(v)any health
insurance under title XVIII of the Social Security Act, other than a Medicare
supplemental policy (as defined in section 1882 of such
Act).
.
(b)The amendment made by
this section shall apply with respect to insurance purchased after the date of
the enactment of this Act in taxable years beginning after such date.
8.Certain exercise
equipment and physical fitness programs treated as medical care
(a)Subsection (d) of
section 213 is amended by adding at the end the following new paragraph:
(12)Exercise
equipment and physical fitness programs
(A)The term
medical care shall include amounts paid—
(i)to
purchase or use equipment used in a program (including a self-directed program)
of physical exercise,
(ii)to participate,
or receive instruction, in a program of physical exercise, and
(iii)for membership
dues in a fitness club the primary purpose of which is to provide access to
equipment and facilities for physical exercise.
(B)Amounts treated as medical care under
subparagraph (A) shall not exceed $1,200 with respect to any individual for any
taxable
year.
.
(b)The amendment made by this section shall apply to taxable
years beginning after the date of the enactment of this Act.