[House Report 115-844]
[From the U.S. Government Publishing Office]


115th Congress }                                          { REPORT
                        HOUSE OF REPRESENTATIVES
  2d Session   }                                          { 115-844

======================================================================

             THE ``BIPARTISAN HSA IMPROVEMENT ACT OF 2018''

                                _______
                                

 July 19, 2018.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Brady of Texas, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 6305]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 6305) to amend the Internal Revenue Code of 1986 to 
improve access to health care through modernized health savings 
accounts, report favorably thereon with an amendment and 
recommend that the bill as amended do pass.




115th Congress }                                          { REPORT
                        HOUSE OF REPRESENTATIVES
  2d Session   }                                          { 115-844

======================================================================
 
                 BIPARTISAN HSA IMPROVEMENT ACT OF 2018

                                _______
                                

 July 19, 2018.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Brady of Texas, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 6305]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 6305) to amend the Internal Revenue Code of 1986 to 
improve access to health care through modernized health savings 
accounts, having considered the same, report favorably thereon 
with an amendment and recommend that the bill as amended do 
pass.

                                CONTENTS

                                                                   Page
 I. SUMMARY AND BACKGROUND............................................4
II. EXPLANATION OF THE BILL...........................................6
        A. Certain Employment Related Services Not Treated as 
            Disqualifying Coverage for Purposes of Health Savings 
            Accounts.............................................     6
        B. Contributions Permitted if Spouse Has a Health 
            Flexible Spending Account............................     8
        C. FSA and HRA Terminations or Conversions to Fund HSAs..    11
III.VOTES OF THE COMMITTEE...........................................15

IV. BUDGET EFFECTS OF THE BILL.......................................16
        A. Committee Estimate of Budgetary Effects...............    16
        B. Statement Regarding New Budget Authority and Tax 
            Expenditures Budget Authority........................    18
        C. Cost Estimate Prepared by the Congressional Budget 
            Office...............................................    18
 V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE.......18
        A. Committee Oversight Findings and Recommendations......    18
        B. Statement of General Performance Goals and Objectives.    18
        C. Information Relating to Unfunded Mandates.............    18
        D. Applicability of House Rule XXI 5(b)..................    19
        E. Tax Complexity Analysis...............................    19
        F. Congressional Earmarks, Limited Tax Benefits, and 
            Limited Tariff Benefits..............................    19
        G. Duplication of Federal Programs.......................    19
        H. Disclosure of Directed Rule Makings...................    19
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED............20
        B. Changes in Existing Law Proposed by the Bill, as 
            Reported.............................................    20
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Bipartisan HSA Improvement Act of 
2018''.

SEC. 2. CERTAIN EMPLOYMENT RELATED SERVICES NOT TREATED AS 
                    DISQUALIFYING COVERAGE FOR PURPOSES OF HEALTH 
                    SAVINGS ACCOUNTS.

  (a) In General.--Section 223(c)(1) of the Internal Revenue Code of 
1986 is amended by adding at the end the following new subparagraph:
                  ``(D) Special rule for qualified items and 
                services.--
                          ``(i) In general.--An individual shall not be 
                        treated as covered under a health plan for 
                        purposes of subparagraph (A)(ii) merely because 
                        the individual, in connection with the 
                        employment of the individual or the 
                        individual's spouse, receives (or is eligible 
                        to receive) qualified items and services at--
                                  ``(I) a healthcare facility located 
                                at a facility owned or leased by the 
                                employer of the individual (or of the 
                                individual's spouse), or operated 
                                primarily for the benefit of such 
                                employer's employees, or
                                  ``(II) a healthcare facility located 
                                within a supermarket, pharmacy, or 
                                similar retail establishment.
                          ``(ii) Qualified items and services 
                        defined.--For purposes of this subparagraph, 
                        the term `qualified items and services' means 
                        the following:
                                  ``(I) Physical examinations.
                                  ``(II) Immunizations, including 
                                injections of antigens provided by 
                                employees.
                                  ``(III) Drugs other than a prescribed 
                                drug (as such term is defined in 
                                section 213(d)(3)).
                                  ``(IV) Treatment for injuries 
                                occurring in the course of employment.
                                  ``(V) Drug testing, if required as a 
                                condition of employment.
                                  ``(VI) Hearing or vision screenings.
                                  ``(VII) Other similar items and 
                                services that do not provide 
                                significant benefits in the nature of 
                                medical care.
                          ``(iii) Aggregation.--For purposes of clause 
                        (i)(I), all persons treated as a single 
                        employer under subsection (b), (c), (m), or (o) 
                        of section 414 shall be treated as a single 
                        employer.''.
  (b) Effective Date.--The amendments made by this section shall apply 
to months beginning after December 31, 2018, in taxable years ending 
after such date.

SEC. 3. CONTRIBUTIONS PERMITTED IF SPOUSE HAS A HEALTH FLEXIBLE 
                    SPENDING ACCOUNT.

  (a) Contributions Permitted if Spouse Has a Health Flexible Spending 
Account.--Section 223(c)(1)(B) of the Internal Revenue Code of 1986 is 
amended by striking ``and'' at the end of clause (ii), by striking the 
period at the end of clause (iii) and inserting ``, and'', and by 
inserting after clause (iii) the following new clause:
                          ``(iv) coverage under a health flexible 
                        spending arrangement of the spouse of the 
                        individual for any plan year of such 
                        arrangement if the aggregate reimbursements 
                        under such arrangement for such year do not 
                        exceed the aggregate expenses which would be 
                        eligible for reimbursement under such 
                        arrangement if such expenses were determined 
                        without regard to any expenses paid or incurred 
                        with respect to such individual.''.
  (b) Effective Date.--The amendment made by this section shall apply 
to plan years beginning after December 31, 2018.

SEC. 4. 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, as amended by the 
preceding provisions of this Act, 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, and''.
  (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, 2018, in taxable years ending 
after such date.

                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    The bill H.R. 6305, as reported by the Committee on Ways 
and Means, expands access and enhances the utility of health 
savings accounts (HSAs) through three common-sense improvements 
to the rules governing HSAs: (1) clarifying that certain 
employment related services (such as on-site clinics) are not 
treated as disqualifying coverage for purposes of HSAs; (2) 
allowing an eligible individual to make HSA contributions if a 
spouse has a Flexible Spending Arrangement (FSA), provided that 
FSA does not also reimburse for expenses of the spouse with the 
HSA; and (3) allowing FSA and Health Reimbursement Account 
(HRA) terminations or conversions to fund HSAs.

                 B. Background and Need for Legislation

    According to a survey of 52 health insurers conducted by 
America's Health Insurance Plans (AHIP), 21.8 million people 
were covered by a High Deductible Health Plan (HDHP) with an 
HSA as of January 2017. These plans and accounts are an 
increasingly popular option for workers and enrollment growth 
shows no sign of slowing. A survey of employer-sponsored health 
benefits found that 17 percent of all employers offered a HDHP 
with an HSA in 2017 compared to 2 percent in 2005.
    HSA account holders are diverse. According to WageWorks, 
Inc., the administrator of benefits for more than 7 million 
people, the median household income for an HSA accountholder is 
$57,060. In addition, a JCT analysis found that of the tax 
returns that took an HSA deduction in 2015, 71 percent of the 
returns reported an income of $200,000 or less, and 28 percent 
reported an income of $75,000 or less. Account holders are also 
distributed across age groups, with nearly a third between the 
ages of 25-44 and another third of account holders between the 
ages 45-64.
    Most critically, research has consistently found that such 
coverage, which empowers individuals and families to be more 
engaged health care consumers, is capable of significantly 
reducing health care costs.
    In addition, FSAs are employer-established accounts to 
reimburse employees for qualified medical expenses. Under 
current law, FSAs can be used to reimburse expenses for the 
enrollee, their spouse, and dependents. This prohibits an FSA 
enrollee's spouse from contributing to an HSA, even when they 
are covered under two separate health plans.

                         C. Legislative History


Background

    H.R. 6305 was introduced on July 3, 2018 and was referred 
to the Committee on Ways and Means.

Committee action

    The Committee on Ways and Means marked up H.R. 6305, the 
``Bipartisan HSA Improvement Act of 2018,'' on July 11, 2018, 
and ordered the bill, as amended, favorably reported (with a 
quorum being present).

Committee hearings

    The policy issues associated with Health Savings Accounts 
(HSAs), Flexible Spending Accounts (FSAs), and Health 
Reimbursement Arrangements (HRAs) were discussed at the 
following Ways and Means hearings during the 114th and 115th 
Congress:
           Full Committee Hearing on the Tax Treatment 
        of Health Care (April 14, 2016)
           Subcommittee on Tax Policy Member Day 
        Hearing on Tax Legislation (May 12, 2016)
           Subcommittee on Health Member Day Hearing on 
        Tax-Related Proposals to Improve Health Care (May 17, 
        2016)
           Subcommittee on Health Hearing on Rising 
        Health Insurance Premiums Under the Affordable Care Act 
        (July 12, 2016)
           Subcommittee on Health Hearing on Lowering 
        Costs and Expanding Access to Health Care through 
        Consumer-Directed Health Plans (June 6, 2018)

                      II. EXPLANATION OF THE BILL


  A. Certain Employment Related Services Not Treated as Disqualifying 
            Coverage for Purposes of Health Savings Accounts


Health Savings Accounts

    An individual with a high deductible health plan (``HDHP'') 
and no other health plan (other than a plan that provides 
certain permitted insurance or permitted coverage)\1\ may 
establish a health savings account (``HSA'').\2\ Subject to 
limits, contributions to an HSA made by or on behalf of an 
eligible individual are deductible in determining adjusted 
gross income of the individual (that is, an ``above-the-line'' 
deduction). Contributions to an HSA by an employer for an 
employee (including salary reduction contributions made through 
a cafeteria plan) are excludible from income and from wages for 
employment tax purposes.
---------------------------------------------------------------------------
    \1\An individual with other coverage in addition to a high 
deductible health plan is still eligible for an HSA if such other 
coverage is ``permitted insurance'' or ``permitted coverage.''
    Permitted insurance is: (1) insurance if substantially all of the 
coverage provided under such insurance relates to (a) liabilities 
incurred under worker's compensation law, (b) tort liabilities, (c) 
liabilities relating to ownership or use of property (e.g., auto 
insurance), or (d) such other similar liabilities as the Secretary may 
prescribe by regulations; (2) insurance for a specified disease or 
illness; and (3) insurance that provides a fixed payment for 
hospitalization. Also see Notice 2004-50, 2004-33 IRB 1, Q & A-7 and Q 
& A-8 (``an eligible individual may be covered by an HDHP and also by 
permitted insurance for one or more specific diseases, such as cancer, 
diabetes, asthma or congestive heart failure, as long as the principal 
health coverage is provided by the HDHP''), but such coverage must be 
provided through insurance contracts and not on a self-insured basis.
    Pursuant to Q & A-10 of Notice 2004-50, coverage under a disease 
management program does not make an individual ineligible to contribute 
to an HSA as long as the program does not provide significant benefits 
in the nature of medical care or treatment so that it is not considered 
a ``health plan'' for purposes of Code section 223(c)(1). Where a 
disease management program provides evidence-based information, disease 
specific support, case monitoring and coordination of the care and 
treatment provided by a health plan including monitoring laboratory or 
other test results, telephone contacts or web-based reminders of health 
care schedules, and providing information to minimize health risks it 
is not considered a ``health plan.''
    Permitted coverage is coverage (whether provided through insurance 
or otherwise) for accidents, disability, dental care, vision care, or 
long-term care. With respect to coverage for years beginning after 
December 31, 2006, certain coverage under a Health FSA is disregarded 
in determining eligibility for an HSA.
    \2\Sec. 223.
---------------------------------------------------------------------------
    Distributions from an HSA that are used for qualified 
medical expenses are excludible from gross income. 
Distributions from an HSA that are not used for qualified 
medical expenses are includible in gross income and are subject 
to an additional tax of 20 percent. The 20-percent additional 
tax does not apply if the distribution is made after death, 
disability, or the individual attains the age of Medicare 
eligibility (i.e., age 65).
    A high deductible health plan (``HDHP'') is a health plan 
that has an annual deductible that is at least $1,350 for self-
only coverage or $2,700 for family coverage for 2018 and that 
limits the sum of the annual deductible and other payments that 
the individual must make with respect to covered benefits to no 
more than $6,650 in the case of self-only coverage and $13,300 
in the case of family coverage for 2018.
    Qualified medical expenses generally are defined as under 
Code section 213(d) and include expenses for diagnosis, cure, 
mitigation, treatment, or prevention of disease, including 
prescription drugs, transportation primarily for and essential 
to such care, and qualified long-term care expenses. Qualified 
medical expenses do not include expenses for insurance other 
than for (1) certain premiums paid for long-term care 
insurance, (2) premiums for health coverage during any period 
of continuation coverage required by Federal law, (3) premiums 
for health care coverage while an individual is receiving 
unemployment compensation under Federal or State law, and (4) 
premiums for individuals who have attained the age of Medicare 
eligibility, other than premiums for Medigap policies.
            Eligible individuals
    Eligible individuals for HSAs are individuals who are 
covered by a high deductible health plan and no other health 
plan that (1) is not a high deductible health plan and (2) 
provides coverage for any benefit which is covered under the 
high deductible health plan. After an individual has attained 
age 65 and becomes enrolled in Medicare benefits, contributions 
cannot be made to an HSA.\3\
---------------------------------------------------------------------------
    \3\See Sec. 223(b)(7), as interpreted by Notice 2004-2, 2004-2 
I.R.B. 269, corrected by Announcement 2004-67, 2004-36 I.R.B. 459.
---------------------------------------------------------------------------
            On-Site Employee Clinics
    On-site employer-sponsored health clinics may provide a 
range of health services to employees for free or at a reduced 
cost. Under IRS guidance, an otherwise eligible individual who 
has access to free health care or health care at charges below 
fair market value from a clinic on an employer's premises will 
not fail to be an eligible individual merely because of this 
free or reduced cost care as long as the clinic does not 
provide significant benefits in the nature of medical care in 
addition to disregarded coverage or preventive care.
    For example, an employer who provides the following free 
health care for employees does not provide significant benefits 
in the nature of medical care in addition to disregarded 
coverage or preventive care: (1) physicals and immunizations, 
(2) injecting antigens provided by employees, such as 
performing allergy injections, (3) a variety of aspirin and 
other nonprescription pain relievers, and (4) treatment for 
injuries caused by accidents at the plant. However, a hospital 
that permits its employees to receive care at its facilities 
for all their medical needs for free (when the employee does 
not have insurance) or that waives copays and deductibles (when 
the employee does have health insurance) provides significant 
benefits in the nature of medical care, and the hospital's 
employees fail to be eligible individuals for purposes of HSA 
contributions.\4\
---------------------------------------------------------------------------
    \4\Notice 2008-59, Q&A-10.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that coverage which would otherwise 
constitute a high deductible health plan should be treated as 
such for determining eligibility to make HSA contributions, and 
not disqualified merely by reason of offering certain 
employment related services. The Committee believes that 
employers must have the flexibility to offer quality health 
care in the setting that is best for them, like on-site or 
retail clinics and that individuals with HSAs should not be 
prevented from utilizing these same services.

                        EXPLANATION OF PROVISION

    Under the proposal, certain employment related services are 
not treated as coverage under a health plan for purposes of 
determining eligibility for health savings accounts. An 
individual is therefore not treated as covered under a health 
plan, merely because the individual receives, or is eligible to 
receive qualified items and services in connection with 
employment at an on-site or retail clinic. These qualified 
items and services include: physical examinations, 
immunizations, drugs other than a prescribed drug, and 
treatment for injuries occurring in the course of employment, 
drug testing as a condition of employment, hearing or vision 
screenings, and other similar items and services that do not 
provide significant benefits in the nature of medical care.

                             EFFECTIVE DATE

    The provision applies for months beginning after December 
31, 2018, in taxable years ending after such date.

  B. Contributions Permitted if Spouse Has a Health Flexible Spending 
                                Account


                              PRESENT LAW

Health Savings Accounts

    An individual with a high deductible health plan (``HDHP'') 
and no other health plan (other than a plan that provides 
certain permitted insurance or permitted coverage)\5\ may 
establish a health savings account (``HSA'').\6\ Subject to 
limits, contributions to an HSA made by or on behalf of an 
eligible individual are deductible in determining adjusted 
gross income of the individual (that is, an ``above-the-line'' 
deduction). Contributions to an HSA by an employer for an 
employee (including salary reduction contributions made through 
a cafeteria plan) are excludible from income and from wages for 
employment tax purposes.
---------------------------------------------------------------------------
    \5\An individual with other coverage in addition to a high 
deductible health plan is still eligible for an HSA if such other 
coverage is ``permitted insurance'' or ``permitted coverage.''
    Permitted insurance is: (1) insurance if substantially all of the 
coverage provided under such insurance relates to (a) liabilities 
incurred under worker's compensation law, (b) tort liabilities, (c) 
liabilities relating to ownership or use of property (e.g., auto 
insurance), or (d) such other similar liabilities as the Secretary may 
prescribe by regulations; (2) insurance for a specified disease or 
illness; and (3) insurance that provides a fixed payment for 
hospitalization. Also see Notice 2004-50, 2004-33 IRB 1, Q & A-7 and Q 
& A-8 (``an eligible individual may be covered by an HDHP and also by 
permitted insurance for one or more specific diseases, such as cancer, 
diabetes, asthma or congestive heart failure, as long as the principal 
health coverage is provided by the HDHP''), but such coverage must be 
provided through insurance contracts and not on a self-insured basis.
    Pursuant to Q & A-10 of Notice 2004-50, coverage under a disease 
management program does not make an individual ineligible to contribute 
to an HSA as long as the program does not provide significant benefits 
in the nature of medical care or treatment so that it is not considered 
a ``health plan'' for purposes of Code section 223(c)(1). Where a 
disease management program provides evidence-based information, disease 
specific support, case monitoring and coordination of the care and 
treatment provided by a health plan including monitoring laboratory or 
other test results, telephone contacts or web-based reminders of health 
care schedules, and providing information to minimize health risks it 
is not considered a ``health plan.''
    Permitted coverage is coverage (whether provided through insurance 
or otherwise) for accidents, disability, dental care, vision care, or 
long-term care. With respect to coverage for years beginning after 
December 31, 2006, certain coverage under a Health FSA is disregarded 
in determining eligibility for an HSA.
    \6\Sec. 223.
---------------------------------------------------------------------------
    HSA contributions for a year are subject to basic dollar 
limits that are also adjusted annually as needed to reflect 
annual cost-of-living increases. For 2018, the basic limit on 
annual contributions that can be made to an HSA is $3,450 in 
the case of self-only coverage and $6,900 in the case of family 
coverage. The basic annual contributions limits are increased 
by $1,000 for individuals who have attained age 55 by the end 
of the taxable year (referred to as ``catch-up'' 
contributions). Contributions, including catch-up 
contributions, cannot be made once an individual is enrolled in 
Medicare.
    Distributions from an HSA that are used for qualified 
medical expenses are excludible from gross income. 
Distributions from an HSA that are not used for qualified 
medical expenses are includible in gross income and are subject 
to an additional tax of 20 percent. The 20-percent additional 
tax does not apply if the distribution is made after death, 
disability, or the individual attains the age of Medicare 
eligibility (i.e., age 65).
    An HDHP is a health plan that has an annual deductible that 
is at least $1,350 for self-only coverage or $2,700 for family 
coverage for 2018 and that limits the sum of the annual 
deductible and other payments that the individual must make 
with respect to covered benefits to no more than $6,650 in the 
case of self-only coverage and $13,300 in the case of family 
coverage for 2018.
    Qualified medical expenses generally are defined as under 
Code section 213(d) and include expenses for diagnosis, cure, 
mitigation, treatment, or prevention of disease, including 
prescription drugs, transportation primarily for and essential 
to such care, and qualified long-term care expenses. Qualified 
medical expenses do not include expenses for insurance other 
than for (1) certain premiums paid for long-term care 
insurance, (2) premiums for health coverage during any period 
of continuation coverage required by Federal law, (3) premiums 
for health care coverage while an individual is receiving 
unemployment compensation under Federal or State law, and (4) 
premiums for individuals who have attained the age of Medicare 
eligibility, other than premiums for Medigap policies.
            Eligible individuals
    Eligible individuals for HSAs are individuals who are 
covered by an HDHP and no other health plan that (1) is not an 
HDHP and (2) provides coverage for any benefit which is covered 
under the HDHP. After an individual has attained age 65 and 
becomes enrolled in Medicare benefits, contributions cannot be 
made to an HSA.\7\
---------------------------------------------------------------------------
    \7\See Sec. 223(b)(7), as interpreted by Notice 2004-2, 2004-2 
I.R.B. 269, corrected by Announcement 2004-67, 2004-36 I.R.B. 459.
---------------------------------------------------------------------------
    If both spouses of a married couple are eligible 
individuals and either spouse has family coverage, both spouses 
are treated as having only family coverage, so that the annual 
contribution limit for family coverage applies. This annual 
contribution limit (without regard to any catch-up contribution 
amounts) is reduced by any Archer MSA contributions and then 
divided equally between the spouses unless they agree on a 
different division.\8\
---------------------------------------------------------------------------
    \8\Sec. 223(b)(5).
---------------------------------------------------------------------------
    If both spouses of a married couple are eligible 
individuals, each may contribute to an HSA, but are not 
permitted a joint HSA.\9\ Under the rule described above, 
however, the spouses may divide their annual contribution limit 
by allocating the entire amount to one spouse to be contributed 
to that spouse's HSA.\10\ This rule does not apply to catch-up 
contribution amounts.
---------------------------------------------------------------------------
    \9\Notice 2004-50, 2004-2 C.B. 196, Q&A-63.
    \10\Notice 2004-50, Q&A-32. Funds from that HSA can be used to pay 
qualified medical expenses for either spouse on a tax-free basis. 
Notice 2004-50, Q&A-36.
---------------------------------------------------------------------------
            Health flexible spending accounts
    In addition to offering health insurance, employers often 
agree to reimburse medical expenses of their employees (and 
their spouses and dependents). These arrangements are commonly 
used by employers to pay or reimburse employees for medical 
expenses that are not covered by health insurance. These 
arrangements include health flexible spending arrangements 
(``health FSAs'').
    Health FSAs typically are funded on a salary reduction 
basis under a cafeteria plan, meaning that employees are given 
the option to reduce their current cash compensation and 
instead have the amount made available for use in reimbursing 
the employee for his or her medical expenses. If the health FSA 
meets certain requirements, the compensation that is forgone is 
not includible in gross income or wages for payroll tax 
purposes.
    Under IRS guidance, an individual who is covered by an HDHP 
and a health FSA that pays or reimburses certain medical 
expenses that are not limited to the exceptions for permitted 
insurance, permitted coverage, or preventive care is generally 
not an eligible individual for the purpose of making deductible 
contributions to an HSA. Similarly, if the individual is 
covered by a health FSA sponsored by the employer of the 
individual's spouse, the individual is not an eligible 
individual.\11\
---------------------------------------------------------------------------
    \11\Rev. Rul. 2004-45.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that an individual should not be 
prevented from making HSA contributions merely because his 
spouse has a health FSA. Fixing this spousal penalty, while 
preventing double-dipping in tax benefits will ultimately help 
modernize health care delivery and give employers the freedom 
to innovate and improve their employees' health insurance.

                        EXPLANATION OF PROVISION

    Under the proposal, an individual's eligibility for HSAs is 
determined without regard to whether or not the spouse of the 
individual has coverage under a health FSA for any taxable year 
as long as the aggregate reimbursements under the arrangement 
for the year do not exceed the total expenses which would be 
eligible for reimbursement if determined without regard to the 
individual's expenses paid or incurred.

                             EFFECTIVE DATE

    The provision applies to plan years beginning after 
December 31, 2018.

        C. FSA and HRA Terminations or Conversions To Fund HSAs


                              PRESENT LAW

Health savings accounts

    An individual with a high deductible health plan and no 
other health plan (other than a plan that provides certain 
permitted insurance or permitted coverage)\12\ may establish a 
health savings account (``HSA'').\13\ Subject to limits, 
contributions to an HSA made by or on behalf of an eligible 
individual are deductible in determining adjusted gross income 
of the individual (that is, an ``above-the-line'' deduction). 
Contributions to an HSA by an employer for an employee 
(including salary reduction contributions made through a 
cafeteria plan) are excludible from income and from wages for 
employment tax purposes.
---------------------------------------------------------------------------
    \12\An individual with other coverage in addition to a high 
deductible health plan is still eligible for an HSA if such other 
coverage is ``permitted insurance'' or ``permitted coverage.''
    Permitted insurance is: (1) insurance if substantially all of the 
coverage provided under such insurance relates to (a) liabilities 
incurred under worker's compensation law, (b) tort liabilities, (c) 
liabilities relating to ownership or use of property (e.g., auto 
insurance), or (d) such other similar liabilities as the Secretary may 
prescribe by regulations; (2) insurance for a specified disease or 
illness; and (3) insurance that provides a fixed payment for 
hospitalization. Also see Notice 2004-50, 2004-33 IRB 1, Q & A-7 and Q 
& A-8 (``an eligible individual may be covered by an HDHP and also by 
permitted insurance for one or more specific diseases, such as cancer, 
diabetes, asthma or congestive heart failure, as long as the principal 
health coverage is provided by the HDHP''), but such coverage must be 
provided through insurance contracts and not on a self-insured basis.
    Pursuant to Q & A-10 of Notice 2004-50, coverage under a disease 
management program does not make an individual ineligible to contribute 
to an HSA as long as the program does not provide significant benefits 
in the nature of medical care or treatment so that it is not considered 
a ``health plan'' for purposes of Code section 223(c)(1). Where a 
disease management program provides evidence-based information, disease 
specific support, case monitoring and coordination of the care and 
treatment provided by a health plan including monitoring laboratory or 
other test results, telephone contacts or web-based reminders of health 
care schedules, and providing information to minimize health risks it 
is not considered a ``health plan.''
    Permitted coverage is coverage (whether provided through insurance 
or otherwise) for accidents, disability, dental care, vision care, or 
long-term care. With respect to coverage for years beginning after 
December 31, 2006, certain coverage under a Health FSA is disregarded 
in determining eligibility for an HSA.
    \13\Sec. 223.
---------------------------------------------------------------------------
    HSA contributions for a year are subject to basic dollar 
limits that are also adjusted annually as needed to reflect 
annual cost-of-living increases. For 2018, the basic limit on 
annual contributions that can be made to an HSA is $3,450 in 
the case of self-only coverage and $6,900 in the case of family 
coverage. The basic annual contributions limits are increased 
by $1,000 for individuals who have attained age 55 by the end 
of the taxable year (referred to as ``catch-up'' 
contributions). Contributions, including catch-up 
contributions, cannot be made once an individual is enrolled in 
Medicare.
    Distributions from an HSA that are used for qualified 
medical expenses are excludible from gross income. 
Distributions from an HSA that are not used for qualified 
medical expenses are includible in gross income and are subject 
to an additional tax of 20 percent. The 20-percent additional 
tax does not apply if the distribution is made after death, 
disability, or the individual attains the age of Medicare 
eligibility (i.e., age 65).
    A high deductible health plan is a health plan that has an 
annual deductible that is at least $1,350 for self-only 
coverage or $2,700 for family coverage for 2018 and that limits 
the sum of the annual deductible and other payments that the 
individual must make with respect to covered benefits to no 
more than $6,650 in the case of self-only coverage and $13,300 
in the case of family coverage for 2018.
    Qualified medical expenses generally are defined as under 
Code section 213(d) and include expenses for diagnosis, cure, 
mitigation, treatment, or prevention of disease, including 
prescription drugs, transportation primarily for and essential 
to such care, and qualified long-term care expenses. Qualified 
medical expenses do not include expenses for insurance other 
than for (1) certain premiums paid for long-term care 
insurance, (2) premiums for health coverage during any period 
of continuation coverage required by Federal law, (3) premiums 
for health care coverage while an individual is receiving 
unemployment compensation under Federal or State law, and (4) 
premiums for individuals who have attained the age of Medicare 
eligibility, other than premiums for Medigap policies.
            Eligible individuals
    Eligible individuals for HSAs are individuals who are 
covered by a high deductible health plan and no other health 
plan that (1) is not a high deductible health plan and (2) 
provides coverage for any benefit which is covered under the 
high deductible health plan. After an individual has attained 
age 65 and becomes enrolled in Medicare benefits, contributions 
cannot be made to an HSA.\14\
---------------------------------------------------------------------------
    \14\See Sec. 223(b)(7), as interpreted by Notice 2004-2, 2004-2 
I.R.B. 269, corrected by Announcement 2004-67, 2004-36 I.R.B. 459.
---------------------------------------------------------------------------
            Health flexible spending accounts and health reimbursement 
                    arrangements
    In addition to offering health insurance, employers often 
agree to reimburse medical expenses of their employees (and 
their spouses and dependents). These arrangements are commonly 
used by employers to pay or reimburse employees for medical 
expenses that are not covered by health insurance. These 
arrangements include health flexible spending arrangements 
(``health FSAs'') and health reimbursement arrangements 
(``HRAs'').
    Health FSAs typically are funded on a salary reduction 
basis under a cafeteria plan, meaning that employees are given 
the option to reduce their current cash compensation and 
instead have the amount made available for use in reimbursing 
the employee for his or her medical expenses. If the health FSA 
meets certain requirements, the compensation that is forgone is 
not includible in gross income or wages for payroll tax 
purposes.
    Health FSAs that are funded on a salary reduction basis are 
subject to the requirements for cafeteria plans, including a 
requirement that amounts remaining in a health FSA at the end 
of a plan year must be forfeited by the employee (referred to 
as the ``use-it-or-lose-it rule'').\15\
---------------------------------------------------------------------------
    \15\Sec. 125(d)(2).
---------------------------------------------------------------------------
    Health reimbursement arrangements (``HRAs'') operate in a 
manner similar to health FSAs, in that they are an employer-
maintained arrangement that reimburses employees and their 
dependents\16\ for medical expenses. Some of the rules 
applicable to HRAs and health FSAs are similar (e.g., the 
amounts in the arrangements can only be used to reimburse 
medical expenses and not for other purposes), but the rules are 
not identical. In particular, HRAs cannot be funded on a salary 
reduction basis and the use-it-or-lose-it rule does not apply. 
Thus, amounts remaining at the end of the year may be carried 
forward to be used to reimburse medical expenses in following 
years.\17\ Unlike a health FSA, an HRA is permitted to 
reimburse an employee for health insurance premiums.
---------------------------------------------------------------------------
    \16\As defined in Sec. 152.
    \17\ Guidance with respect to HRAs, including the interaction of 
FSAs and HRAs in the case of an individual covered under both, is 
provided in IRS Notice 2002-45, 2002-2 C.B. 93.
---------------------------------------------------------------------------
            Interactions of health savings accounts with other health 
                    arrangements
    In general, an individual with an HDHP and no other health 
plan (other than a plan that provides certain permitted 
insurance, or permitted coverage) may establish an HSA. 
Permitted insurance is coverage under which substantially all 
of the coverage provided relates to liabilities incurred under 
workers' compensation laws, tort liabilities, liabilities 
relating to ownership or use of property, insurance for a 
specified disease or illness, and insurance that pays a fixed 
amount per day (or other period) of hospitalization. Permitted 
coverage is coverage for accidents, disability, dental care, 
vision care, or long-term care.\18\
---------------------------------------------------------------------------
    \18\Notice 2004-23.
---------------------------------------------------------------------------
    Under IRS guidance, a health FSA and an HRA are (with some 
exceptions) considered health plans under this definition and 
therefore, an individual who is covered by an HDHP and a 
general purpose health FSA or general purpose HRA that pays or 
reimburses qualified medical expenses,\19\ is not an eligible 
individual for the purpose of making contributions to an 
HSA.\20\ However, an individual does not fail to be an eligible 
individual for the purpose of making contributions to an HSA if 
the individual is covered under the following arrangements (or 
some combination of the following arrangements): (1) a limited-
purpose health FSA that pays or reimburses only permitted 
coverage or preventive care services, (2) a limited-purpose HRA 
that pays or reimburses benefits for permitted insurance, 
permitted coverage or preventive care services, (3) a suspended 
HRA that does not pay or reimburse any medical expense incurred 
during the suspension period except permitted insurance, 
permitted coverage, or preventive care services, (4) a post-
deductible health FSA or HRA, which does not pay or reimburse 
any medical expense incurred before the minimum annual 
deductible for a plan to be an HDHP.\21\
---------------------------------------------------------------------------
    \19\Defined in Sec. 213(d).
    \20\Rev. Rul. 2004-45.
    \21\As defined in Sec. 223(c)(2)(A)(i).
---------------------------------------------------------------------------
    If a general purpose health FSA allows reimbursement for 
expenses incurred during a grace period following the end of 
the plan year, an otherwise eligible individual participating 
in the health FSA is generally not eligible to make 
contributions to an HSA until the first day of the first month 
following the end of the grace period.\22\ However, if an 
individual has a zero balance in a general purpose health FSA, 
as determined on a cash basis,\23\ on the last day of the 
health FSA plan year, the individual does not fail to be an 
eligible individual as of the first day of the immediately 
following health FSA plan year solely because of coverage 
during a health FSA grace period. Similarly, an individual with 
a zero balance in a general purpose HRA, determined on a cash 
basis, on the last day of the HRA plan year, does not fail to 
be an eligible individual on the first day of the immediately 
following HRA plan year, as long as certain requirements are 
satisfied.\24\
---------------------------------------------------------------------------
    \22\Notice 2005-42, 2005-1, C.B. 1204.
    \23\``Cash basis'' means the balance as of any date, without taking 
into account expenses incurred that have not been reimbursed as of that 
date. Thus, pending claims, claims submitted, claims received or claims 
under review that have not been paid as of a date are not taken into 
account for purposes of determining the account balance as of that 
date.
    \24\These requirements are: (1) effective on the first of the 
immediately following HRA plan year, the employee elects to waive 
participation in the HRA, or (2) effective on or before the first day 
of the following HRA plan year, the employer terminates the general 
purpose HRA with respect to all employees, or (3) effective on or 
before the first day of the following HRA plan year, with respect to 
all employees, the employer converts the general purpose HRA to an HSA-
compatible HRA. See Rev. Rul. 2004-45.
---------------------------------------------------------------------------
    Coverage by an HSA-compatible health FSA or HRA (these 
include, limited-purpose health FSA or HRA, post-deductible 
health FSA or HRA, retirement HRA, or suspended HRA), does not 
affect an employee's eligibility to contribute to an HSA, 
including during a health FSA grace period.\25\ In addition, 
IRS guidance holds that an individual covered by an HDHP that 
does not provide prescription drug coverage, along with a 
separate prescription drug plan or rider that provides benefits 
before the minimum annual deductible of the HDHP has been 
satisfied is not eligible to contribute to HSAs.\26\
---------------------------------------------------------------------------
    \25\Rev. Rul. 2004-45.
    \26\See Rev. Rul. 2004-38, 2004-15.
---------------------------------------------------------------------------
            FSA and HRA terminations to fund HSAs
    The Health Opportunity Empowerment Act of 2006\27\ amended 
the Code to allow for certain amounts in a health FSA or HRA to 
be rolled over into an HSA with favorable tax treatment. To 
allow this, the plan must be amended in writing, the employee 
must elect the rollover, and the year-end balance must be 
frozen. In addition, funds must be transferred by the employer 
within two and a half months after the end of the plan year and 
result in a zero balance in the health FSA or HRA.\28\ The Act 
provides for distributions of an amount from a health FSA or 
HRA to an HSA (``qualified HSA distribution'') before January 
1, 2012. The distribution must not exceed the lesser of the 
balance in the health FSA or HRA on September 21, 2006, or as 
of the date of distribution.
---------------------------------------------------------------------------
    \27\The Health Opportunity Patient Empowerment Act of 2006, 
included in the Tax Relief and Health Care Act of 2006, Pub. L. No. 
109-432, sec. 302, December 20, 2006.
    \28\The IRS provided guidance on special transition relief for 
amounts remaining at the end of 2006. See Notice 2007-22.
---------------------------------------------------------------------------
    Under these rules, a qualified HSA distribution must be 
contributed directly to the HSA trustee by the employer. Only 
one qualified health distribution is allowed with respect to 
each health FSA or HRA of an individual. Qualified HSA 
distributions are not taken into account in applying the annual 
limit for HSA contributions. Qualified HSA distributions are 
treated as rollovers, and thus are not deductible.
    If an employee fails to remain HSA-eligible for 12 months 
(``the testing period''\29\) following the distribution, the 
employee is not eligible directly following the distribution, 
and the amount of the rollover is included in gross income and 
is subject to an additional 20 percent tax unless the 
individual dies or becomes disabled. Failure to remain an 
eligible individual does not require the withdrawal of the 
qualified HSA distribution, and the amount is not an excess 
contribution.
---------------------------------------------------------------------------
    \29\The testing period is defined to be the period beginning with 
the month in which the qualified HSA distribution is contributed to the 
HSA and ending on the last day of the 12th month following that month.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that streamlining the conversion of 
other tax-preferred health accounts to HSAs will make it easier 
for individuals to establish HSAs to save for their health care 
costs.

                        EXPLANATION OF PROVISION

    The proposal defines ``qualified HSA distribution'' as a 
distribution from an employee's health FSA or HRA directly to 
an employee's HSA if such distribution is made in connection 
with the employee establishing coverage under an HDHP after a 
significant period of not having such coverage.
    The aggregate amount of qualified HSA distributions may not 
exceed the total annual limit on FSA contributions ($2,650 in 
2018)\30\ or twice this amount in the case of an eligible 
individual who has family coverage under an HDHP.
---------------------------------------------------------------------------
    \30\Sec. 125(i).
---------------------------------------------------------------------------
    The statutory annual contribution limits to an HSA are 
$2,250 for an individual with single coverage or $4,500 for an 
individual with family coverage and indexed for cost-of-living 
adjustments. The contribution limits for 2018 are $3,450 for 
self-only HDHP coverage, and $6,900 for an individual with 
family coverage. The proposal allows deductible HSA 
contributions up to these limits for a given year, reduced by 
the amount of the qualified HSA distribution attributable to 
that year.
    The proposal also specifies that if a general-purpose 
health FSA or HRA is converted to an HSA-compatible FSA or HRA, 
coverage under this health FSA or HRA for the portion of the 
plan year after a qualified HSA distribution is made is 
disregarded in determining whether the individual is eligible 
to make deductible contributions to an HSA.
    Finally, the proposal provides that the amount of any 
qualified HSA distribution is to be included on the information 
to be reported on Form W-2.\31\
---------------------------------------------------------------------------
    \31\Sec. 6051(a)
---------------------------------------------------------------------------

                             EFFECTIVE DATE

    The proposal is effective for distributions made after 
December 31, 2018, in taxable years ending after such date.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the House of 
Representatives, the following statement is made concerning the 
vote of the Committee on Ways and Means during the markup 
consideration of H.R. 6305, the `Bipartisan HSA Improvement Act 
of 2018,' on July 11, 2018.
    H.R. 6305 was ordered favorably reported to the House of 
Representatives as amended by an amendment in the nature of a 
substitute offered by Chairman Brady by a roll call vote of 26 
yeas to 13 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
           Representative               Yea     Nay    Present      Representative        Yea     Nay    Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady...........................       X  ......  ........  Mr. Neal..............  ......       X  ........
Mr. Johnson.........................       X  ......  ........  Mr. Levin.............  ......       X  ........
Mr. Nunes...........................       X  ......  ........  Mr. Lewis.............  ......       X  ........
Mr. Reichert........................       X  ......  ........  Mr. Doggett...........  ......       X  ........
Mr. Roskam..........................       X  ......  ........  Mr. Thompson..........  ......       X  ........
Mr. Buchanan........................       X  ......  ........  Mr. Larson............  ......       X  ........
Mr. Smith (NE)......................       X  ......  ........  Mr. Blumenauer........       X  ......  ........
Ms. Jenkins.........................  ......  ......  ........  Mr. Kind..............       X  ......  ........
Mr. Paulsen.........................       X  ......  ........  Mr. Pascrell..........  ......       X  ........
Mr. Marchant........................       X  ......  ........  Mr. Crowley...........  ......       X  ........
Ms. Black...........................       X  ......  ........  Mr. Davis.............  ......       X  ........
Mr. Reed............................       X  ......  ........  Ms. Sanchez...........  ......       X  ........
Mr. Kelly...........................       X  ......  ........  Mr. Higgins...........  ......       X  ........
Mr. Renacci.........................       X  ......  ........  Ms. Sewell............       X  ......  ........
Ms. Noem............................       X  ......  ........  Ms. DelBene...........  ......       X  ........
Mr. Holding.........................       X  ......  ........  Ms. Chu...............  ......       X  ........
Mr. Smith (MO)......................       X  ......  ........
Mr. Rice............................       X  ......  ........
Mr. Schweikert......................       X  ......  ........
Ms. Walorski........................       X  ......  ........
Mr. Curbelo.........................       X  ......  ........
Mr. Bishop..........................       X  ......  ........
Mr. LaHood..........................       X  ......  ........
Mr. Wenstrup........................       X  ......  ........
----------------------------------------------------------------------------------------------------------------

                     IV. BUDGET EFFECTS OF THE BILL


               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the bill, H.R. 6305, as 
reported.
    The bill, as reported, is estimated to have the following 
effect on Federal fiscal year budget receipts for the period 
2019-2028:

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               FISCAL YEARS  [Millions of Dollars]
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                            Item                                 2019       2020       2021       2022       2023       2024       2025       2026       2027       2028     2019-23    2019-28
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Certain Employment Related Services Not treated as                 -165       -248       -274       -310       -350       -392       -440       -518       -588       -655     -1,347     -3,939
 Disqualifying Coverage for Purposes of Health Savings
 Accounts\1\................................................
Contributions Permitted if Spouse has a Health Flexible              -1         -2         -2         -2         -2         -2         -2         -2         -2         -2         -8        -18
 Spending Account\1\........................................
FSA and HRA Terminations or Conversions to Fund Health              -11        -28        -28        -29        -30        -31        -32        -38        -38        -39       -127       -302
 Savings Accounts\1\........................................
                                                             -----------------------------------------------------------------------------------------------------------------------------------
    Total...................................................       -177       -278       -304       -341       -382       -425       -474       -555       -628       -696     -1,482     -4,259
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
NOTE: Details may not add to totals due to rounding.
\1\Estimate includes the following off-budget effects:


------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 2019       2020       2021       2022       2023       2024       2025       2026       2027       2028     2019-23    2019-28
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Certain Employment Related Services Not treated as                  -36        -49        -53        -61        -70        -80        -92       -107       -126       -149       -269       -823
 Disqualifying Coverage for Purposes of Health Savings
 Accounts\1\................................................
Contributions Permitted if Spouse has a Health Flexible             \2\        \2\        \2\        \2\        \2\         -1         -1         -1         -1         -1         -2         -5
 Spending Account\1\........................................
Flexible Spending Arrangement and Health Savings Account             -3         -7         -8         -8         -8         -9         -9         -9         -9        -10        -34        -80
 Terminations or Conversions to Fund Health Savings
 Accounts\1\................................................
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\2\Loss of less than $500,000.

    Pursuant to clause 8 of rule XIII of the Rules of the House 
of Representatives, the following statement is made by the 
Joint Committee on Taxation with respect to the provisions of 
the bill amending the Internal Revenue Code of 1986: The gross 
budgetary effect (before incorporating macroeconomic effects) 
in any fiscal year is less than 0.25 percent of the current 
projected gross domestic product of the United States for that 
fiscal year; therefore, the bill is not ``major legislation'' 
for purposes of requiring that the estimate include the 
budgetary effects of changes in economic output, employment, 
capital stock and other macroeconomic variables.

B. Statement Regarding New Budget Authority and Tax Expenditures Budget 
                               Authority

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
bill involves no new or increased budget authority. The 
Committee further states that the revenue-reducing tax 
provision involves a new tax expenditure. See Part IV.A., 
above.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(d) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the bill, H.R. 6138, as 
reported. As of the filing of this report, the Committee had 
not received an estimate prepared by the Congressional Budget 
Office (CBO).

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE


          A. Committee Oversight Findings and Recommendations

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee advises that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated into 
the description portions of this report.

        B. Statement of General Performance Goals and Objectives

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
bill contains no measure that authorizes funding, so no 
statement of general performance goals and objectives for which 
any measure authorizes funding is required.

              C. Information Relating to Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

                D. Applicability of House Rule XXI 5(b)

    Rule XXI 5(b) of the Rules of the House of Representatives 
provides, in part, that ``A bill or joint resolution, 
amendment, or conference report carrying a Federal income tax 
rate increase may not be considered as passed or agreed to 
unless so determined by a vote of not less than three-fifths of 
the Members voting, a quorum being present.'' The Committee has 
carefully reviewed the bill and states that the bill does not 
involve any Federal income tax rate increases within the 
meaning of the rule.

                       E. Tax Complexity Analysis

    Section 4022(b) of the Internal Revenue Service 
Restructuring and Reform Act of 1998 (``IRS Reform Act'') 
requires the staff of the Joint Committee on Taxation (in 
consultation with the Internal Revenue Service and the Treasury 
Department) to provide a tax complexity analysis. The 
complexity analysis is required for all legislation reported by 
the Senate Committee on Finance, the House Committee on Ways 
and Means, or any committee of conference if the legislation 
includes a provision that directly or indirectly amends the 
Internal Revenue Code of 1986 and has widespread applicability 
to individuals or small businesses.
    Pursuant to clause 3(h)(1) of rule XIII of the Rules of the 
House of Representatives, the staff of the Joint Committee on 
Taxation has determined that a complexity analysis is not 
required under section 4022(b) of the IRS Reform Act because 
the bill contains no provisions that amend the Internal Revenue 
Code of 1986 and that have ``widespread applicability'' to 
individuals or small businesses, within the meaning of the 
rule.

  F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
                                Benefits

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                   G. Duplication of Federal Programs

    In compliance with Sec. 3(c)(5) of rule XIII of the Rules 
of the House of Representatives, the Committee states that no 
provision of the bill establishes or reauthorizes: (1) a 
program of the Federal Government known to be duplicative of 
another Federal program, (2) a program included in any report 
from the Government Accountability Office to Congress pursuant 
to section 21 of Public Law 111-139, or (3) a program related 
to a program identified in the most recent Catalog of Federal 
Domestic Assistance, published pursuant to section 6104 of 
title 31, United States Code.

                 H. Disclosure of Directed Rule Makings

    In compliance with Sec. 3(i) of H. Res. 5 (115th Congress), 
the following statement is made concerning directed rule 
makings: The Committee advises that the bill requires no 
directed rule makings within the meaning of such section.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED


      B. Changes in Existing Law Proposed by the Bill, as Reported

    In compliance with clause 3(e)(1)(B) of rule XIII of the 
Rules of the House of Representatives, changes in existing law 
proposed by the bill, as reported, are shown as follows 
(existing law proposed to be omitted is enclosed in black 
brackets, new matter is printed in italic, existing law in 
which no change is proposed is shown in roman):

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

                     INTERNAL REVENUE CODE OF 1986




           *       *       *       *       *       *       *
Subtitle A--Income Taxes

           *       *       *       *       *       *       *


CHAPTER 1--NORMAL TAXES AND SURTAXES

           *       *       *       *       *       *       *


Subchapter B--Computation of Taxable Income

           *       *       *       *       *       *       *


PART III--ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME

           *       *       *       *       *       *       *



SEC. 106. CONTRIBUTIONS BY EMPLOYER TO ACCIDENT AND HEALTH PLANS.

  (a) General rule.--Except as otherwise provided in this 
section, gross income of an employee does not include employer-
provided coverage under an accident or health plan.
  (b) Contributions to Archer MSAs.--
          (1) In general.--In the case of an employee who is an 
        eligible individual, amounts contributed by such 
        employee's employer to any Archer MSA of such employee 
        shall be treated as employer-provided coverage for 
        medical expenses under an accident or health plan to 
        the extent such amounts do not exceed the limitation 
        under section 220(b)(1) (determined without regard to 
        this subsection) which is applicable to such employee 
        for such taxable year.
          (2) No constructive receipt.--No amount shall be 
        included in the gross income of any employee solely 
        because the employee may choose between the 
        contributions referred to in paragraph (1) and employer 
        contributions to another health plan of the employer.
          (3) Special rule for deduction of employer 
        contributions.--Any employer contribution to an Archer 
        MSA, if otherwise allowable as a deduction under this 
        chapter, shall be allowed only for the taxable year in 
        which paid.
          (4) Employer MSA contributions required to be shown 
        on return.--Every individual required to file a return 
        under section 6012 for the taxable year shall include 
        on such return the aggregate amount contributed by 
        employers to the Archer MSAs of such individual or such 
        individual's spouse for such taxable year.
          (5) MSA contributions not part of COBRA coverage.--
        Paragraph (1) shall not apply for purposes of section 
        4980B.
          (6) Definitions.--For purposes of this subsection, 
        the terms ``eligible individual'' and ``Archer MSA'' 
        have the respective meanings given to such terms by 
        section 220.
          (7) Cross reference.--For penalty on failure by 
        employer to make comparable contributions to the Archer 
        MSAs of comparable employees, see section 4980E.
  (c) Inclusion of long-term care benefits provided through 
flexible spending arrangements.--
          (1) In general.--Gross income of an employee shall 
        include employer-provided coverage for qualified long-
        term care services (as defined in section 7702B(c)) to 
        the extent that such coverage is provided through a 
        flexible spending or similar arrangement.
          (2) Flexible spending arrangement.--For purposes of 
        this subsection, a flexible spending arrangement is a 
        benefit program which provides employees with coverage 
        under which--
                  (A) specified incurred expenses may be 
                reimbursed (subject to reimbursement maximums 
                and other reasonable conditions), and
                  (B) the maximum amount of reimbursement which 
                is reasonably available to a participant for 
                such coverage is less than 500 percent of the 
                value of such coverage.
        In the case of an insured plan, the maximum amount 
        reasonably available shall be determined on the basis 
        of the underlying coverage.
  (d) Contributions to health savings accounts.--
          (1) In general.--In the case of an employee who is an 
        eligible individual (as defined in section 223(c)(1)), 
        amounts contributed by such employee's employer to any 
        health savings account (as defined in section 223(d)) 
        of such employee shall be treated as employer-provided 
        coverage for medical expenses under an accident or 
        health plan to the extent such amounts do not exceed 
        the limitation under section 223(b) (determined without 
        regard to this subsection) which is applicable to such 
        employee for such taxable year.
          (2) Special rules.--Rules similar to the rules of 
        paragraphs (2), (3), (4), and (5) of subsection (b) 
        shall apply for purposes of this subsection.
          (3) Cross reference.--For penalty on failure by 
        employer to make comparable contributions to the health 
        savings accounts of comparable employees, see section 
        4980G.
  (e) FSA and HRA Terminations to Fund HSAs.--
          (1) In general.--A plan shall not fail to be treated 
        as a health flexible spending arrangement or health 
        reimbursement arrangement under this section or section 
        105 merely because such plan provides for a qualified 
        HSA distribution.
          [(2) Qualified HSA distribution.--The term 
        ``qualified HSA distribution'' means a distribution 
        from a health flexible spending arrangement or health 
        reimbursement arrangement to the extent that such 
        distribution--
                  [(A) does not exceed the lesser of the 
                balance in such arrangement on September 21, 
                2006, or as of the date of such distribution, 
                and
                  [(B) is contributed by the employer directly 
                to the health savings account of the employee 
                before January 1, 2012.
        Such term shall not include more than 1 distribution 
        with respect to any arrangement.]
          (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)).
          (3) Additional tax for failure to maintain high 
        deductible health plan coverage.--
                  (A) In general.--If, at any time during the 
                testing period, the employee is not an eligible 
                individual, then the amount of the qualified 
                HSA distribution--
                          (i) shall be includible in the gross 
                        income of the employee for the taxable 
                        year in which occurs the first month in 
                        the testing period for which such 
                        employee is not an eligible individual, 
                        and
                          (ii) the tax imposed by this chapter 
                        for such taxable year on the employee 
                        shall be increased by 10 percent of the 
                        amount which is so includible.
                  (B) Exception for disability or death.--
                Clauses (i) and (ii) of subparagraph (A) shall 
                not apply if the employee ceases to be an 
                eligible individual by reason of the death of 
                the employee or the employee becoming disabled 
                (within the meaning of section 72(m)(7)).
          (4) Definitions and special rules.--For purposes of 
        this subsection--
                  (A) Testing period.--The term ``testing 
                period'' means the period beginning with the 
                month in which the qualified HSA distribution 
                is contributed to the health savings account 
                and ending on the last day of the 12th month 
                following such month.
                  (B) Eligible individual.--The term ``eligible 
                individual'' has the meaning given such term by 
                section 223(c)(1).
                  (C) Treatment as rollover contribution.--A 
                qualified HSA distribution shall be treated as 
                a rollover contribution described in section 
                223(f)(5).
          (5) Tax treatment relating to distributions.--For 
        purposes of this title--
                  (A) In general.--A qualified HSA distribution 
                shall be treated as a payment described in 
                subsection (d).
                  (B) Comparability excise tax.--
                          (i) In general.--Except as provided 
                        in clause (ii), section 4980G shall not 
                        apply to qualified HSA distributions.
                          (ii) Failure to offer to all 
                        employees.--In the case of a qualified 
                        HSA distribution to any employee, the 
                        failure to offer such distribution to 
                        any eligible individual covered under a 
                        high deductible health plan of the 
                        employer shall (notwithstanding section 
                        4980G(d)) be treated for purposes of 
                        section 4980G as a failure to meet the 
                        requirements of section 4980G(b).
  (f) Reimbursements for medicine restricted to prescribed 
drugs and insulin.--For purposes of this section and section 
105, reimbursement for expenses incurred for a medicine or a 
drug shall be treated as a reimbursement for medical expenses 
only if such medicine or drug is a prescribed drug (determined 
without regard to whether such drug is available without a 
prescription) or is insulin.
  (g) Qualified small employer health reimbursement 
arrangement.--For purposes of this section and section 105, 
payments or reimbursements from a qualified small employer 
health reimbursement arrangement (as defined in section 
9831(d)) of an individual for medical care (as defined in 
section 213(d)) shall not be treated as paid or reimbursed 
under employer-provided coverage for medical expenses under an 
accident or health plan if for the month in which such medical 
care is provided the individual does not have minimum essential 
coverage (within the meaning of section 5000A(f)).

           *       *       *       *       *       *       *


PART VII--ADDITIONAL ITEMIZED DEDUCTIONS FOR INDIVIDUALS

           *       *       *       *       *       *       *



SEC. 223. HEALTH SAVINGS ACCOUNTS.

  (a) Deduction allowed.--In the case of an individual who is 
an eligible individual for any month during the taxable year, 
there shall be allowed as a deduction for the taxable year an 
amount equal to the aggregate amount paid in cash during such 
taxable year by or on behalf of such individual to a health 
savings account of such individual.
  (b) Limitations.--
          (1) In general.--The amount allowable as a deduction 
        under subsection (a) to an individual for the taxable 
        year shall not exceed the sum of the monthly 
        limitations for months during such taxable year that 
        the individual is an eligible individual.
          (2) Monthly limitation.--The monthly limitation for 
        any month is \1/12\ of--
                  (A) in the case of an eligible individual who 
                has self- only coverage under a high deductible 
                health plan as of the first day of such month, 
                $2,250.
                  (B) in the case of an eligible individual who 
                has family coverage under a high deductible 
                health plan as of the first day of such month, 
                $4,500.
          (3) Additional contributions for individuals 55 or 
        older.--
                  (A) In general.--In the case of an individual 
                who has attained age 55 before the close of the 
                taxable year, the applicable limitation under 
                subparagraphs (A) and (B) of paragraph (2) 
                shall be increased by the additional 
                contribution amount.
                  (B) Additional contribution amount.--For 
                purposes of this section, the additional 
                contribution amount is the amount determined in 
                accordance with the following table:


 
------------------------------------------------------------------------
                                     The additional contribution amount
  For taxable years beginning in:                    is:
------------------------------------------------------------------------
2004                                $500
2005                                $600
2006                                $700
2007                                $800
2008                                $900
2009 and thereafter                 $1,000.
------------------------------------------------------------------------

          (4) Coordination with other contributions.--The 
        limitation which would (but for this paragraph) apply 
        under this subsection to an individual for any taxable 
        year shall be reduced (but not below zero) by the sum 
        of--
                  (A) the aggregate amount paid for such 
                taxable year to Archer MSAs of such individual,
                  (B) the aggregate amount contributed to 
                health savings accounts of such individual 
                which is excludable from the taxpayer's gross 
                income for such taxable year under section 
                106(d) (and such amount shall not be allowed as 
                a deduction under subsection (a)), [and]
                  (C) the aggregate amount contributed to 
                health savings accounts of such individual for 
                such taxable year under section 408(d)(9) (and 
                such amount shall not be allowed as a deduction 
                under subsection (a))[.], and
                  (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).
        Subparagraph (A) shall not apply with respect to any 
        individual to whom paragraph (5) applies.
          (5) Special rule for married individuals.--In the 
        case of individuals who are married to each other, if 
        either spouse has family coverage--
                  (A) both spouses shall be treated as having 
                only such family coverage (and if such spouses 
                each have family coverage under different 
                plans, as having the family coverage with the 
                lowest annual deductible), and
                  (B) the limitation under paragraph (1) (after 
                the application of subparagraph (A) and without 
                regard to any additional contribution amount 
                under paragraph (3))--
                          (i) shall be reduced by the aggregate 
                        amount paid to Archer MSAs of such 
                        spouses for the taxable year, and
                          (ii) after such reduction, shall be 
                        divided equally between them unless 
                        they agree on a different division.
          (6) Denial of deduction to dependents.--No deduction 
        shall be allowed under this section to any individual 
        with respect to whom a deduction under section 151 is 
        allowable to another taxpayer for a taxable year 
        beginning in the calendar year in which such 
        individual's taxable year begins.
          (7) Medicare eligible individuals.--The limitation 
        under this subsection for any month with respect to an 
        individual shall be zero for the first month such 
        individual is entitled to benefits under title XVIII of 
        the Social Security Act and for each month thereafter.
          (8) Increase in limit for individuals becoming 
        eligible individuals after the beginning of the year.--
                  (A) In general.--For purposes of computing 
                the limitation under paragraph (1) for any 
                taxable year, an individual who is an eligible 
                individual during the last month of such 
                taxable year shall be treated--
                          (i) as having been an eligible 
                        individual during each of the months in 
                        such taxable year, and
                          (ii) as having been enrolled, during 
                        each of the months such individual is 
                        treated as an eligible individual 
                        solely by reason of clause (i), in the 
                        same high deductible health plan in 
                        which the individual was enrolled for 
                        the last month of such taxable year.
                  (B) Failure to maintain high deductible 
                health plan coverage.--
                          (i) In general.--If, at any time 
                        during the testing period, the 
                        individual is not an eligible 
                        individual, then--
                                  (I) gross income of the 
                                individual for the taxable year 
                                in which occurs the first month 
                                in the testing period for which 
                                such individual is not an 
                                eligible individual is 
                                increased by the aggregate 
                                amount of all contributions to 
                                the health savings account of 
                                the individual which could not 
                                have been made but for 
                                subparagraph (A), and
                                  (II) the tax imposed by this 
                                chapter for any taxable year on 
                                the individual shall be 
                                increased by 10 percent of the 
                                amount of such increase.
                          (ii) Exception for disability or 
                        death.--Subclauses (I) and (II) of 
                        clause (i) shall not apply if the 
                        individual ceased to be an eligible 
                        individual by reason of the death of 
                        the individual or the individual 
                        becoming disabled (within the meaning 
                        of section 72(m)(7)).
                          (iii) Testing period.--The term 
                        ``testing period'' means the period 
                        beginning with the last month of the 
                        taxable year referred to in 
                        subparagraph (A) and ending on the last 
                        day of the 12th month following such 
                        month.
  (c) Definitions and special rules.--For purposes of this 
section--
          (1) Eligible individual.--
                  (A) In general.--The term ``eligible 
                individual'' means, with respect to any month, 
                any individual if--
                          (i) such individual is covered under 
                        a high deductible health plan as of the 
                        1st day of such month, and
                          (ii) such individual is not, while 
                        covered under a high deductible health 
                        plan, covered under any health plan--
                                  (I) which is not a high 
                                deductible health plan, and
                                  (II) which provides coverage 
                                for any benefit which is 
                                covered under the high 
                                deductible health plan.
                  (B) Certain coverage disregarded.--
                Subparagraph (A)(ii) shall be applied without 
                regard to--
                          (i) coverage for any benefit provided 
                        by permitted insurance,
                          (ii) coverage (whether through 
                        insurance or otherwise) for accidents, 
                        disability, dental care, vision care, 
                        or long-term care, [and]
                          [(iii) for taxable years beginning 
                        after December 31, 2006, coverage under 
                        a health flexible spending arrangement 
                        during any period immediately following 
                        the end of a plan year of such 
                        arrangement during which unused 
                        benefits or contributions remaining at 
                        the end of such plan year may be paid 
                        or reimbursed to plan participants for 
                        qualified benefit expenses incurred 
                        during such period if--
                                  [(I) the balance in such 
                                arrangement at the end of such 
                                plan year is zero, or
                                  [(II) the individual is 
                                making a qualified HSA 
                                distribution (as defined in 
                                section 106(e)) in an amount 
                                equal to the remaining balance 
                                in such arrangement as of the 
                                end of such plan year, in 
                                accordance with rules 
                                prescribed by the Secretary.]
                          (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, and
                          (iv) coverage under a health flexible 
                        spending arrangement of the spouse of 
                        the individual for any plan year of 
                        such arrangement if the aggregate 
                        reimbursements under such arrangement 
                        for such year do not exceed the 
                        aggregate expenses which would be 
                        eligible for reimbursement under such 
                        arrangement if such expenses were 
                        determined without regard to any 
                        expenses paid or incurred with respect 
                        to such individual.
                  (C) Special rule for individuals eligible for 
                certain veterans benefits.--An individual shall 
                not fail to be treated as an eligible 
                individual for any period merely because the 
                individual receives hospital care or medical 
                services under any law administered by the 
                Secretary of Veterans Affairs for a service-
                connected disability (within the meaning of 
                section 101(16) of title 38, United States 
                Code).
                  (D) Special rule for qualified items and 
                services.--
                          (i) In general.--An individual shall 
                        not be treated as covered under a 
                        health plan for purposes of 
                        subparagraph (A)(ii) merely because the 
                        individual, in connection with the 
                        employment of the individual or the 
                        individual's spouse, receives (or is 
                        eligible to receive) qualified items 
                        and services at--
                                  (I) a healthcare facility 
                                located at a facility owned or 
                                leased by the employer of the 
                                individual (or of the 
                                individual's spouse), or 
                                operated primarily for the 
                                benefit of such employer's 
                                employees, or
                                  (II) a healthcare facility 
                                located within a supermarket, 
                                pharmacy, or similar retail 
                                establishment.
                          (ii) Qualified items and services 
                        defined.--For purposes of this 
                        subparagraph, the term ``qualified 
                        items and services'' means the 
                        following:
                                  (I) Physical examinations.
                                  (II) Immunizations, including 
                                injections of antigens provided 
                                by employees.
                                  (III) Drugs other than a 
                                prescribed drug (as such term 
                                is defined in section 
                                213(d)(3)).
                                  (IV) Treatment for injuries 
                                occurring in the course of 
                                employment.
                                  (V) Drug testing, if required 
                                as a condition of employment.
                                  (VI) Hearing or vision 
                                screenings.
                                  (VII) Other similar items and 
                                services that do not provide 
                                significant benefits in the 
                                nature of medical care.
                          (iii) Aggregation.--For purposes of 
                        clause (i)(I), all persons treated as a 
                        single employer under subsection (b), 
                        (c), (m), or (o) of section 414 shall 
                        be treated as a single employer.
          (2) High deductible health plan.--
                  (A) In general.--The term ``high deductible 
                health plan'' means a health plan--
                          (i) which has an annual deductible 
                        which is not less than--
                                  (I) $1,000 for self-only 
                                coverage, and
                                  (II) twice the dollar amount 
                                in subclause (I) for family 
                                coverage, and
                          (ii) the sum of the annual deductible 
                        and the other annual out-of-pocket 
                        expenses required to be paid under the 
                        plan (other than for premiums) for 
                        covered benefits does not exceed--
                                  (I) $5,000 for self-only 
                                coverage, and
                                  (II) twice the dollar amount 
                                in subclause (I) for family 
                                coverage.
                  (B) Exclusion of certain plans.--Such term 
                does not include a health plan if substantially 
                all of its coverage is coverage described in 
                paragraph (1)(B).
                  (C) Safe harbor for absence of preventive 
                care deductible.--A plan shall not fail to be 
                treated as a high deductible health plan by 
                reason of failing to have a deductible for 
                preventive care (within the meaning of section 
                1861 of the Social Security Act, except as 
                otherwise provided by the Secretary).
                  (D) Special rules for network plans.--In the 
                case of a plan using a network of providers--
                          (i) Annual out-of-pocket 
                        limitation.--Such plan shall not fail 
                        to be treated as a high deductible 
                        health plan by reason of having an out-
                        of-pocket limitation for services 
                        provided outside of such network which 
                        exceeds the applicable limitation under 
                        subparagraph (A)(ii).
                          (ii) Annual deductible.--Such plan's 
                        annual deductible for services provided 
                        outside of such network shall not be 
                        taken into account for purposes of 
                        subsection (b)(2).
          (3) Permitted insurance.--The term ``permitted 
        insurance'' means--
                  (A) insurance if substantially all of the 
                coverage provided under such insurance relates 
                to--
                          (i) liabilities incurred under 
                        workers' compensation laws,
                          (ii) tort liabilities,
                          (iii) liabilities relating to 
                        ownership or use of property, or
                          (iv) such other similar liabilities 
                        as the Secretary may specify by 
                        regulations,
                  (B) insurance for a specified disease or 
                illness, and
                  (C) insurance paying a fixed amount per day 
                (or other period) of hospitalization.
          (4) Family coverage.--The term ``family coverage'' 
        means any coverage other than self-only coverage.
          (5) Archer MSA.--The term ``Archer MSA'' has the 
        meaning given such term in section 220(d).
  (d) Health savings account.--For purposes of this section--
          (1) In general.--The term ``health savings account'' 
        means a trust created or organized in the United States 
        as a health savings account exclusively for the purpose 
        of paying the qualified medical expenses of the account 
        beneficiary, but only if the written governing 
        instrument creating the trust meets the following 
        requirements:
                  (A) Except in the case of a rollover 
                contribution described in subsection (f)(5) or 
                section 220(f)(5), no contribution will be 
                accepted--
                          (i) unless it is in cash, or
                          (ii) to the extent such contribution, 
                        when added to previous contributions to 
                        the trust for the calendar year, 
                        exceeds the sum of--
                                  (I) the dollar amount in 
                                effect under subsection 
                                (b)(2)(B), and
                                  (II) the dollar amount in 
                                effect under subsection 
                                (b)(3)(B).
                  (B) The trustee is a bank (as defined in 
                section 408(n)), an insurance company (as 
                defined in section 816), or another person who 
                demonstrates to the satisfaction of the 
                Secretary that the manner in which such person 
                will administer the trust will be consistent 
                with the requirements of this section.
                  (C) No part of the trust assets will be 
                invested in life insurance contracts.
                  (D) The assets of the trust will not be 
                commingled with other property except in a 
                common trust fund or common investment fund.
                  (E) The interest of an individual in the 
                balance in his account is nonforfeitable.
          (2) Qualified medical expenses.--
                  (A) In general.--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 such individual, the spouse of such 
                individual, and any dependent (as defined in 
                section 152, determined without regard to 
                subsections (b)(1), (b)(2), and (d)(1)(B) 
                thereof) of such individual, but only to the 
                extent such amounts are not compensated for by 
                insurance or otherwise. Such term shall include 
                an amount paid for medicine or a drug only if 
                such medicine or drug is a prescribed drug 
                (determined without regard to whether such drug 
                is available without a prescription) or is 
                insulin.
                  (B) Health insurance may not be purchased 
                from account.--Subparagraph (A) shall not apply 
                to any payment for insurance.
                  (C) Exceptions.--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 a period 
                        in which the individual is receiving 
                        unemployment compensation under any 
                        Federal or State law, or
                          (iv) in the case of an account 
                        beneficiary who has attained the age 
                        specified in section 1811 of the Social 
                        Security Act, any health insurance 
                        other than a medicare supplemental 
                        policy (as defined in section 1882 of 
                        the Social Security Act).
          (3) Account beneficiary.--The term ``account 
        beneficiary'' means the individual on whose behalf the 
        health savings account was established.
          (4) Certain rules to apply.--Rules similar to the 
        following rules shall apply for purposes of this 
        section:
                  (A) Section 219(d)(2) (relating to no 
                deduction for rollovers).
                  (B) Section 219(f)(3) (relating to time when 
                contributions deemed made).
                  (C) Except as provided in section 106(d), 
                section 219(f)(5) (relating to employer 
                payments).
                  (D) Section 408(g) (relating to community 
                property laws).
                  (E) Section 408(h) (relating to custodial 
                accounts).
  (e) Tax treatment of accounts.--
          (1) In general.--A health savings account is exempt 
        from taxation under this subtitle unless such account 
        has ceased to be a health savings account. 
        Notwithstanding the preceding sentence, any such 
        account is subject to the taxes imposed by section 511 
        (relating to imposition of tax on unrelated business 
        income of charitable, etc. organizations).
          (2) Account terminations.--Rules similar to the rules 
        of paragraphs (2) and (4) of section 408(e) shall apply 
        to health savings accounts, and any amount treated as 
        distributed under such rules shall be treated as not 
        used to pay qualified medical expenses.
  (f) Tax treatment of distributions.--
          (1) Amounts used for qualified medical expenses.--Any 
        amount paid or distributed out of a health savings 
        account which is used exclusively to pay qualified 
        medical expenses of any account beneficiary shall not 
        be includible in gross income.
          (2) Inclusion of amounts not used for qualified 
        medical expenses.--Any amount paid or distributed out 
        of a health savings account which is not used 
        exclusively to pay the qualified medical expenses of 
        the account beneficiary shall be included in the gross 
        income of such beneficiary.
          (3) Excess contributions returned before due date of 
        return.--
                  (A) In general.--If any excess contribution 
                is contributed for a taxable year to any health 
                savings account of an individual, paragraph (2) 
                shall not apply to distributions from the 
                health savings accounts of such individual (to 
                the extent such distributions do not exceed the 
                aggregate excess contributions to all such 
                accounts of such individual for such year) if--
                          (i) such distribution is received by 
                        the individual on or before the last 
                        day prescribed by law (including 
                        extensions of time) for filing such 
                        individual's return for such taxable 
                        year, and
                          (ii) such distribution is accompanied 
                        by the amount of net income 
                        attributable to such excess 
                        contribution.
                Any net income described in clause (ii) shall 
                be included in the gross income of the 
                individual for the taxable year in which it is 
                received.
                  (B) Excess contribution.--For purposes of 
                subparagraph (A), the term ``excess 
                contribution'' means any contribution (other 
                than a rollover contribution described in 
                paragraph (5) or section 220(f)(5)) which is 
                neither excludable from gross income under 
                section 106(d) nor deductible under this 
                section.
          (4) Additional tax on distributions not used for 
        qualified medical expenses.--
                  (A) In general.--The tax imposed by this 
                chapter on the account beneficiary for any 
                taxable year in which there is a payment or 
                distribution from a health savings account of 
                such beneficiary which is includible in gross 
                income under paragraph (2) shall be increased 
                by 20 percent of the amount which is so 
                includible.
                  (B) Exception for disability or death.--
                Subparagraph (A) shall not apply if the payment 
                or distribution is made after the account 
                beneficiary becomes disabled within the meaning 
                of section 72(m)(7) or dies.
                  (C) Exception for distributions after 
                medicare eligibility.--Subparagraph (A) shall 
                not apply to any payment or distribution after 
                the date on which the account beneficiary 
                attains the age specified in section 1811 of 
                the Social Security Act.
          (5) Rollover contribution.--An amount is described in 
        this paragraph as a rollover contribution if it meets 
        the requirements of subparagraphs (A) and (B).
                  (A) In general.--Paragraph (2) shall not 
                apply to any amount paid or distributed from a 
                health savings account to the account 
                beneficiary to the extent the amount received 
                is paid into a health savings account for the 
                benefit of such beneficiary not later than the 
                60th day after the day on which the beneficiary 
                receives the payment or distribution.
                  (B) Limitation.--This paragraph shall not 
                apply to any amount described in subparagraph 
                (A) received by an individual from a health 
                savings account if, at any time during the 1-
                year period ending on the day of such receipt, 
                such individual received any other amount 
                described in subparagraph (A) from a health 
                savings account which was not includible in the 
                individual's gross income because of the 
                application of this paragraph.
          (6) Coordination with medical expense deduction.--For 
        purposes of determining the amount of the deduction 
        under section 213, any payment or distribution out of a 
        health savings account for qualified medical expenses 
        shall not be treated as an expense paid for medical 
        care.
          (7) Transfer of account incident to divorce.--The 
        transfer of an individual's interest in a health 
        savings account to an individual's spouse or former 
        spouse under a divorce or separation instrument 
        described in clause (i) of section 121(d)(3)(C) shall 
        not be considered a taxable transfer made by such 
        individual notwithstanding any other provision of this 
        subtitle, and such interest shall, after such transfer, 
        be treated as a health savings account with respect to 
        which such spouse is the account beneficiary.
          (8) Treatment after death of account beneficiary.--
                  (A) Treatment if designated beneficiary is 
                spouse.--If the account beneficiary's surviving 
                spouse acquires such beneficiary's interest in 
                a health savings account by reason of being the 
                designated beneficiary of such account at the 
                death of the account beneficiary, such health 
                savings account shall be treated as if the 
                spouse were the account beneficiary.
                  (B) Other cases.--
                          (i) In general.--If, by reason of the 
                        death of the account beneficiary, any 
                        person acquires the account 
                        beneficiary's interest in a health 
                        savings account in a case to which 
                        subparagraph (A) does not apply--
                                  (I) such account shall cease 
                                to be a health savings account 
                                as of the date of death, and
                                  (II) an amount equal to the 
                                fair market value of the assets 
                                in such account on such date 
                                shall be includible if such 
                                person is not the estate of 
                                such beneficiary, in such 
                                person's gross income for the 
                                taxable year which includes 
                                such date, or if such person is 
                                the estate of such beneficiary, 
                                in such beneficiary's gross 
                                income for the last taxable 
                                year of such beneficiary.
                          (ii) Special rules.--
                                  (I) Reduction of inclusion 
                                for predeath expenses.--The 
                                amount includible in gross 
                                income under clause (i) by any 
                                person (other than the estate) 
                                shall be reduced by the amount 
                                of qualified medical expenses 
                                which were incurred by the 
                                decedent before the date of the 
                                decedent's death and paid by 
                                such person within 1 year after 
                                such date.
                                  (II) Deduction for estate 
                                taxes.--An appropriate 
                                deduction shall be allowed 
                                under section 691(c) to any 
                                person (other than the decedent 
                                or the decedent's spouse) with 
                                respect to amounts included in 
                                gross income under clause (i) 
                                by such person.
  (g) Cost-of-living adjustment.--
          (1) In general.--Each dollar amount in subsections 
        (b)(2) and (c)(2)(A) shall be increased by an amount 
        equal to--
                  (A) such dollar amount, multiplied by
                  (B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in 
                which such taxable year begins determined by 
                substituting for ``calendar year 2016'' in 
                subparagraph (A)(ii) thereof--
                          (i) except as provided in clause 
                        (ii), ``calendar year 1997'', and
                          (ii) in the case of each dollar 
                        amount in subsection (c)(2)(A), 
                        ``calendar year 2003''.
        In the case of adjustments made for any taxable year 
        beginning after 2007, section 1(f)(4) shall be applied 
        for purposes of this paragraph by substituting ``March 
        31'' for ``August 31'', and the Secretary shall publish 
        the adjusted amounts under subsections (b)(2) and 
        (c)(2)(A) for taxable years beginning in any calendar 
        year no later than June 1 of the preceding calendar 
        year.
          (2) Rounding.--If any increase under paragraph (1) is 
        not a multiple of $50, such increase shall be rounded 
        to the nearest multiple of $50.
  (h) Reports.--The Secretary may require--
          (1) the trustee of a health savings account to make 
        such reports regarding such account to the Secretary 
        and to the account beneficiary with respect to 
        contributions, distributions, the return of excess 
        contributions, and such other matters as the Secretary 
        determines appropriate, and
          (2) any person who provides an individual with a high 
        deductible health plan to make such reports to the 
        Secretary and to the account beneficiary with respect 
        to such plan as the Secretary determines appropriate.
The reports required by this subsection shall be filed at such 
time and in such manner and furnished to such individuals at 
such time and in such manner as may be required by the 
Secretary.

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Subtitle F--Procedure and Administration

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CHAPTER 61--INFORMATION AND RETURNS

           *       *       *       *       *       *       *


Subchapter A--Returns and Records

           *       *       *       *       *       *       *


PART III--INFORMATION RETURNS

           *       *       *       *       *       *       *



Subpart C--Information Regarding Wages Paid Employees

           *       *       *       *       *       *       *



SEC. 6051. RECEIPTS FOR EMPLOYEES.

  (a) Requirement.--Every person required to deduct and 
withhold from an employee a tax under section 3101 or 3402, or 
who would have been required to deduct and withhold a tax under 
section 3402 (determined without regard to subsection (n)) if 
the employee had claimed no more than one withholding 
exemption, or every employer engaged in a trade or business who 
pays remuneration for services performed by an employee, 
including the cash value of such remuneration paid in any 
medium other than cash, shall furnish to each such employee in 
respect of the remuneration paid by such person to such 
employee during the calendar year, on or before January 31 of 
the succeeding year, or, if his employment is terminated before 
the close of such calendar year, within 30 days after the date 
of receipt of a written request from the employee if such 30-
day period ends before January 31, a written statement showing 
the following:
          (1) the name of such person,
          (2) the name of the employee (and an identifying 
        number for the employee if wages as defined in section 
        3121(a) have been paid),
          (3) the total amount of wages as defined in section 
        3401(a),
          (4) the total amount deducted and withheld as tax 
        under section 3402,
          (5) the total amount of wages as defined in section 
        3121(a),
          (6) the total amount deducted and withheld as tax 
        under section 3101,
          (8) the total amount of elective deferrals (within 
        the meaning of section 402(g)(3)) and compensation 
        deferred under section 457, including the amount of 
        designated Roth contributions (as defined in section 
        402A),
          (9) the total amount incurred for dependent care 
        assistance with respect to such employee under a 
        dependent care assistance program described in section 
        129(d),
          (10) in the case of an employee who is a member of 
        the Armed Forces of the United States, such employee's 
        earned income as determined for purposes of section 32 
        (relating to earned income credit),
          (11) the amount contributed to any Archer MSA (as 
        defined in section 220(d)) of such employee or such 
        employee's spouse,
          (12) the amount contributed to any health savings 
        account (as defined in section 223(d)) of such employee 
        or such employee's spouse (other than any qualified HSA 
        distribution, as defined in section 106(e)(2)),
          (13) the total amount of deferrals for the year under 
        a nonqualified deferred compensation plan (within the 
        meaning of section 409A(d)),
          (14) the aggregate cost (determined under rules 
        similar to the rules of section 4980B(f)(4)) of 
        applicable employer-sponsored coverage (as defined in 
        section 4980I(d)(1)), except that this paragraph shall 
        not apply to--
                  (A) coverage to which paragraphs (11) and 
                (12) apply, or
                  (B) the amount of any salary reduction 
                contributions to a flexible spending 
                arrangement (within the meaning of section 
                125),
          (15) the total amount of permitted benefit (as 
        defined in section 9831(d)(3)(C)) for the year under a 
        qualified small employer health reimbursement 
        arrangement (as defined in section 9831(d)(2)) with 
        respect to the employee,
          (16) the amount includible in gross income under 
        subparagraph (A) of section 83(i)(1) with respect to an 
        event described in subparagraph (B) of such section 
        which occurs in such calendar year, [and]
          (17) the aggregate amount of income which is being 
        deferred pursuant to elections under section 83(i), 
        determined as of the close of the calendar year[.], and
          (18) the amount of any qualified HSA distribution (as 
        defined in section 106(e)(2)) with respect to such 
        employee.
In the case of compensation paid for service as a member of a 
uniformed service, the statement shall show, in lieu of the 
amount required to be shown by paragraph (5), the total amount 
of wages as defined in section 3121(a), computed in accordance 
with such section and section 3121(i)(2). In the case of 
compensation paid for service as a volunteer or volunteer 
leader within the meaning of the Peace Corps Act, the statement 
shall show, in lieu of the amount required to be shown by 
paragraph (5), the total amount of wages as defined in section 
3121(a), computed in accordance with such section and section 
3121(i)(3). In the case of tips received by an employee in the 
course of his employment, the amounts required to be shown by 
paragraphs (3) and (5) shall include only such tips as are 
included in statements furnished to the employer pursuant to 
section 6053(a). The amounts required to be shown by paragraph 
(5) shall not include wages which are exempted pursuant to 
sections 3101(c) and 3111(c) from the taxes imposed by sections 
3101 and 3111. In the case of the amounts required to be shown 
by paragraph (13), the Secretary may (by regulation) establish 
a minimum amount of deferrals below which paragraph (13) does 
not apply.
  (b) Special Rule as to Compensation of Members of Armed 
Forces.--In the case of compensation paid for service as a 
member of the Armed Forces, the statement required by 
subsection (a) shall be furnished if any tax was withheld 
during the calendar year under section 3402, or if any of the 
compensation paid during such year is includible in gross 
income under chapter 1, or if during the calendar year any 
amount was required to be withheld as tax under section 3101. 
In lieu of the amount required to be shown by paragraph (3) of 
subsection (a), such statement shall show as wages paid during 
the calendar year the amount of such compensation paid during 
the calendar year which is not excluded from gross income under 
chapter 1 (whether or not such compensation constituted wages 
as defined in section 3401(a)).
  (c) Additional Requirements.--The statements required to be 
furnished pursuant to this section in respect of any 
remuneration shall be furnished at such other times, shall 
contain such other information, and shall be in such form as 
the Secretary may by regulations prescribe. The statements 
required under this section shall also show the proportion of 
the total amount withheld as tax under section 3101 which is 
for financing the cost of hospital insurance benefits under 
part A of title XVIII of the Social Security Act.
  (d) Statements to Constitute Information Returns.--A 
duplicate of any statement made pursuant to this section and in 
accordance with regulations prescribed by the Secretary shall, 
when required by such regulations, be filed with the Secretary.
  (e) Railroad Employees.--
          (1) Additional requirement.--Every person required to 
        deduct and withhold tax under section 3201 from an 
        employee shall include on or with the statement 
        required to be furnished such employee under subsection 
        (a) a notice concerning the provisions of this title 
        with respect to the allowance of a credit or refund of 
        the tax on wages imposed by section 3101(b) and the tax 
        on compensation imposed by section 3201 or 3211 which 
        is treated as a tax on wages imposed by section 
        3101(b).
          (2) Information to be supplied to employees.--Each 
        person required to deduct and withhold tax under 
        section 3201 during any year from an employee who has 
        also received wages during such year subject to the tax 
        imposed by section 3101(b) shall, upon request of such 
        employee, furnish to him a written statement showing--
                  (A) the total amount of compensation with 
                respect to which the tax imposed by section 
                3201 was deducted,
                  (B) the total amount deducted as tax under 
                section 3201, and
                  (C) the portion of the total amount deducted 
                as tax under section 3201 which is for 
                financing the cost of hospital insurance under 
                part A of title XVIII of the Social Security 
                Act.
  (f) Statements Required in Case of Sick Pay Paid by Third 
Parties.--
          (1) Statements required from payor.--
                  (A) In general.--If, during any calendar 
                year, any person makes a payment of third-party 
                sick pay to an employee, such person shall, on 
                or before January 15 of the succeeding year, 
                furnish a written statement to the employer in 
                respect of whom such payment was made showing--
                          (i) the name and, if there is 
                        withholding under section 3402(o), the 
                        social security number of such 
                        employee,
                          (ii) the total amount of the third-
                        party sick pay paid to such employee 
                        during the calendar year, and
                          (iii) the total amount (if any) 
                        deducted and withheld from such sick 
                        pay under section 3402.
                For purposes of the preceding sentence, the 
                term ``third-party sick pay'' means any sick 
                pay (as defined in section 3402(o)(2)(C)) which 
                does not constitute wages for purposes of 
                chapter 24 (determined without regard to 
                section 3402(o)(1)).
                  (B) Special rules.--
                          (i) Statements are in lieu of other 
                        reporting requirements.--The reporting 
                        requirements of subparagraph (A) with 
                        respect to any payments shall, with 
                        respect to such payments, be in lieu of 
                        the requirements of subsection (a) and 
                        of section 6041.
                          (ii) Penalties made applicable.--For 
                        purposes of sections 6674 and 7204, the 
                        statements required to be furnished by 
                        subparagraph (A) shall be treated as 
                        statements required under this section 
                        to be furnished to employees.
          (2) Information required to be furnished by 
        employer.--Every employer who receives a statement 
        under paragraph (1)(A) with respect to sick pay paid to 
        any employee during any calendar year shall, on or 
        before January 31 of the succeeding year, furnish a 
        written statement to such employee showing--
                  (A) the information shown on the statement 
                furnished under paragraph (1)(A), and
                  (B) if any portion of the sick pay is 
                excludable from gross income under section 
                104(a)(3), the portion which is not so 
                excludable and the portion which is so 
                excludable.
        To the extent practicable, the information required 
        under the preceding sentence shall be furnished on or 
        with the statement (if any) required under subsection 
        (a).

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                             MINORITY VIEWS

               H.R. 6305 Bipartisan Improvements to HSAs

    H.R. 6305 (Kelly, R-PA and Blumenauer, D-OR) allows: (1) an 
individual to roll over Flexible Spending Account (FSA) and 
limited Health Reimbursement Accounts (HRAs; up to the annual 
Health Savings Account (HSA) contribution amount) at time of 
transition to an HSA-eligible High-Deductible Health Plan 
(HDEIP); (2) an individual to maintain an HSA even if his/her 
spouse has an FSA, provided each spouse is under separate 
health insurance plans; and (3) employees to participate in an 
HSA even if his/her employer offers an on-site health clinic.
    H.R. 6305 does not undo sabotage, premium hikes, and 
benefit cuts Republicans have caused over the past 18 months. 
This bill was one in a series of 11 bills the Committee marked 
up that Republicans claim will help lower health care costs for 
consumers. This legislation does not undo the disruption and 
sabotage the Republicans have continued to inflict on the 
American health care system. Instead of focusing on expansion 
of HSAs and HDHPs, Democrats encourage the Committee to 
redirect its attention to legislation that could actually 
ensure that uninsured, low-income, and vulnerable people have 
real access to care. For example H.R. 5155, sponsored by Reps. 
Pallone, Neal, and Scott would protect people with preexisting 
conditions, lower premiums for Americans, and improve 
affordability of health coverage.
    Legislation busts the deficit to benefit the wealthy, 
again. Altogether the 11 bills the Committee marked up would 
add another $92 billion in unoffset tax cuts to the deficit. 
Attempts to expand HSAs (and encourage more enrollment in plans 
with high deductibles, covering very few up-front health costs) 
represent a continuation of Republicans' platform of shifting 
families into health plans that provide fewer health benefits 
and higher out-of-pocket costs--while providing greater tax 
benefits for higher-income individuals and corporate special 
interests. According to 2014 Treasury data, only five percent 
of families with adjusted gross income of under $100,000 held 
money in an HSA, and those users' average account balances were 
$1,700.
    HDHPs and HSAs do not promote healthy behavior. It is 
widely acknowledged that HSAs and HDHPs lead consumers to delay 
care. They do not encourage individuals to make better health 
care decisions, as Republicans' ``skin in the game'' talking 
points assert. Decades of research shows that exposure to high 
out-of-pocket costs leads consumers to delay or forgo both 
necessary and unnecessary care. Delaying care and increasing 
costs run counter to Democratic policy goals of better 
coordinated, high-value affordable care for American families. 
This legislation demonstrates why HDHPs in their current format 
do not allow consumers to see value in their health insurance.
    According to the American Hospital Association, ``Hospitals 
and health systems report that increased enrollment in HDHPs 
over the past several years has reduced access to care and 
subjected patients to costs they cannot afford. In addition, 
patients enrolled in HDHPs appear to delay care until they have 
reached their deductible or are in an emergency situation, 
which could lead to poorer health outcomes.''
    HSAs mostly benefit high-income taxpayers while doing 
little to help moderate-income families or the uninsured. High-
income people can best afford to save for health care expenses 
and are, therefore, the most likely to contribute to HSAs. 
Higher income filers are much more likely to establish HSAs 
than lower income filers--70 percent of HSA contributions come 
from households with incomes over $100,000, according to the 
Joint Commission on Taxation (JCT)--and they are also likelier 
to max out their contributions. Additionally, high-income 
individuals receive the biggest tax benefit for each dollar 
contributed to an HSA because the value of a tax deduction 
rises with an individual's tax bracket. More than 44 percent of 
Americans cannot afford a $400 emergency visit. For these 
families, it is unlikely they have excess income to devote to a 
tax-preferred account.
    JCT estimates the cost of this bill to be $4.3 billion over 
10 years. With this bill, Republicans are adding more tax cuts 
and increasing the deficit. Republicans are using the deficit, 
which they keep making larger with cuts for the wealthy, to 
justify their deep cuts to Medicare and Medicaid. Republicans 
are already proposing to cut Medicare and Medicaid by nearly a 
trillion dollars to try to pay for the tax cuts they have 
already enacted. This bill will only add fuel to the fire.
                                   Richard E. Neal,
                                           Ranking Member

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