[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5317 Introduced in House (IH)]

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118th CONGRESS
  1st Session
                                H. R. 5317

To amend the Internal Revenue Code of 1986 to allow distributions from 
    a health flexible spending arrangement or health reimbursement 
  arrangement directly to a health savings account in connection with 
       establishing coverage under a high deductible health plan.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            August 29, 2023

Mrs. Steel (for herself, Ms. Manning, and Mr. Crenshaw) 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 allow distributions from 
    a health flexible spending arrangement or health reimbursement 
  arrangement directly to a health savings account in connection with 
       establishing coverage under a high deductible health plan.

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

SECTION 1. FSA AND HRA TERMINATIONS OR CONVERSIONS TO FUND HSAS.

    (a) In General.--Section 106(e)(2) of the Internal Revenue Code of 
1986 is amended to read as follows:
            ``(2) Qualified hsa distribution.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `qualified HSA 
                distribution' means, with respect to any employee, a 
                distribution from a health flexible spending 
                arrangement or health reimbursement arrangement of such 
                employee directly to a health savings account of such 
                employee if--
                            ``(i) such distribution is made in 
                        connection with such employee establishing 
                        coverage under a high deductible health plan 
                        (as defined in section 223(c)(2)) after a 
                        significant period of not having such coverage, 
                        and
                            ``(ii) such arrangement is described in 
                        section 223(c)(1)(B)(iii) with respect to the 
                        portion of the plan year after such 
                        distribution is made.
                    ``(B) Dollar limitation.--The aggregate amount of 
                distributions from health flexible spending 
                arrangements and health reimbursement arrangements of 
                any employee which may be treated as qualified HSA 
                distributions in connection with an establishment of 
                coverage described in subparagraph (A)(i) shall not 
                exceed the dollar amount in effect under section 
                125(i)(1) (twice such amount in the case of coverage 
                which is described in section 223(b)(2)(B)).''.
    (b) Partial Reduction of Limitation on Deductible HSA 
Contributions.--Section 223(b)(4) of such Code is amended by striking 
``and'' at the end of subparagraph (B), by striking the period at the 
end of subparagraph (C) and inserting ``, and'', and by inserting after 
subparagraph (C) the following new subparagraph:
                    ``(D) so much of any qualified HSA distribution (as 
                defined in section 106(e)(2)) made to a health savings 
                account of such individual during the taxable year as 
                does not exceed the aggregate increases in the balance 
                of the arrangement from which such distribution is made 
                which occur during the portion of the plan year which 
                precedes such distribution (other than any balance 
                carried over to such plan year and determined without 
                regard to any decrease in such balance during such 
                portion of the plan year).''.
    (c) Conversion to HSA-Compatible Arrangement for Remainder of Plan 
Year.--Section 223(c)(1)(B)(iii) of such Code is amended to read as 
follows:
                            ``(iii) coverage under a health flexible 
                        spending arrangement or health reimbursement 
                        arrangement for the portion of the plan year 
                        after a qualified HSA distribution (as defined 
                        in section 106(e)(2) determined without regard 
                        to subparagraph (A)(ii) thereof) is made, if 
                        the terms of such arrangement which apply for 
                        such portion of the plan year are such that, if 
                        such terms applied for the entire plan year, 
                        then such arrangement would not be taken into 
                        account under subparagraph (A)(ii) of this 
                        paragraph for such plan year.''.
    (d) Inclusion of Qualified HSA Distributions on W-2.--
            (1) In general.--Section 6051(a) of such Code is amended by 
        striking ``and'' at the end of paragraph (16), by striking the 
        period at the end of paragraph (17) and inserting ``, and'', 
        and by inserting after paragraph (17) the following new 
        paragraph:
            ``(18) the amount of any qualified HSA distribution (as 
        defined in section 106(e)(2)) with respect to such employee.''.
            (2) Conforming amendment.--Section 6051(a)(12) of such Code 
        is amended by inserting ``(other than any qualified HSA 
        distribution, as defined in section 106(e)(2))'' before the 
        comma at the end.
    (e) Effective Date.--The amendments made by this section shall 
apply to distributions made after December 31, 2023, in taxable years 
ending after such date.
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