[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 1404 Introduced in Senate (IS)]

112th CONGRESS
  1st Session
                                S. 1404

To amend the Internal Revenue Code of 1986 to increase participation in 
                medical flexible spending arrangements.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 21, 2011

 Mr. Cardin (for himself and Mr. Enzi) 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 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 
2011''.

SEC. 2. ADDITION OF TAXABLE DISTRIBUTIONS.

    (a) Treatment of Amounts Expended for Medical Care.--Section 105 of 
the Internal Revenue Code of 1986 is amended by inserting at the end 
the following new subsection:
    ``(k) Amounts Paid Under Medical Flexible Spending Arrangements.--
            ``(1) Application of subsection (b) and section 106.--For 
        purposes of subsection (b) and section 106, a plan shall not 
        fail to be treated as a 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 to the employee all or a portion of the 
        employee's balance for the plan year.
            ``(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 employment 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).''.
    (b) Additional Deferred Compensation Exception.--Paragraph (2) of 
section 125(d) of the Internal Revenue Code of 1986 is amended by 
inserting at the end the following new subparagraph:
                    ``(E) Exception for certain flexible spending 
                arrangements.--Amounts distributed to the covered 
                employee from a flexible spending arrangement (within 
                the meaning of section 106(c)(2)) in accordance with 
                the limitations under section 105(k) shall not be 
                treated as deferred compensation for purposes of 
                subparagraph (A).''.
    (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, 2012.
    (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.
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