[House Report 118-401]
[From the U.S. Government Publishing Office]


118th Congress }                                          { Report 
                        HOUSE OF REPRESENTATIVES
  2d Session   }                                          { 118-401

======================================================================
 
                 BIPARTISAN HSA IMPROVEMENT ACT OF 2023

                                _______
                                

 February 26, 2024.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

Mr. Smith of Missouri, from the Committee on Ways and Means, submitted 
                             the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 5688]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 5688) to amend the Internal Revenue Code of 1986 to 
improve health savings accounts, having considered the same, 
reports favorably thereon with an amendment and recommends that 
the bill as amended do pass.

                                CONTENTS

                                                                   Page
  I. SUMMARY AND BACKGROUND...........................................5
          A. Purpose and Summary.................................     5
          B. Background and Need for Legislation.................     5
          C. Legislative History.................................     5
          D. Designated Hearing..................................     5
 II. EXPLANATION OF THE BILL..........................................6
          A. Treatment of Direct Primary Care Service 
              Arrangements (sec. 2 of the bill and sec. 223 of 
              the Code)..........................................     6
          B. On-site Employee Clinics (sec. 3 of the bill and 
              sec. 223 of the Code)..............................     8
          C. Contributions Permitted if Spouse Has Health 
              Flexible Spending Arrangement (sec. 4 of the bill 
              and sec. 223 of the Code)..........................    10
          D. FSA and HRA Terminations or Conversions to Fund HSAs 
              (sec. 5 of the bill and secs. 106 and 223 of the 
              Code)..............................................    12
III. VOTES OF THE COMMITTEE..........................................15
 IV. BUDGET EFFECTS OF THE BILL......................................19
          A. Committee Estimate of Budgetary Effects.............    19
          B. Statement Regarding New Budget Authority and Tax 
              Expenditures Budget Authority......................    19
          C. Cost Estimate Prepared by the Congressional Budget 
              Office.............................................    20
  V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE......23
          A. Committee Oversight Findings and Recommendations....    23
          B. Statement of General Performance Goals and 
              Objectives.........................................    23
          C. Tax Complexity Analysis.............................    23
              1. Contributions permitted if spouse has health 
              flexible spending arrangement......................    23
              2. FSA and HRA terminations or conversions to fund 
              HSAs...............................................    24
          D. Information Relating to Unfunded Mandates...........    25
          E. Congressional Earmarks, Limited Tax Benefits, and 
              Limited Tariff Benefits............................    25
          F. Duplication of Federal Programs.....................    25
 VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED...........25
          A. Text of Existing Law Amended or Repealed by the 
              Bill, as Reported..................................    25
VII. DISSENTING VIEWS................................................46

    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 
2023''.

SEC. 2. TREATMENT OF DIRECT PRIMARY CARE SERVICE ARRANGEMENTS.

  (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:
                  ``(E) Treatment of direct primary care service 
                arrangements.--
                          ``(i) In general.--A direct primary care 
                        service arrangement shall not be treated as a 
                        health plan for purposes of subparagraph 
                        (A)(ii).
                          ``(ii) Direct primary care service 
                        arrangement.--For purposes of this paragraph--
                                  ``(I) In general.--The term `direct 
                                primary care service arrangement' 
                                means, with respect to any individual, 
                                an arrangement under which such 
                                individual is provided medical care (as 
                                defined in section 213(d)) consisting 
                                solely of primary care services 
                                provided by primary care practitioners 
                                (as defined in section 1833(x)(2)(A) of 
                                the Social Security Act, determined 
                                without regard to clause (ii) thereof), 
                                if the sole compensation for such care 
                                is a fixed periodic fee.
                                  ``(II) Limitation.--With respect to 
                                any individual for any month, such term 
                                shall not include any arrangement if 
                                the aggregate fees for all direct 
                                primary care service arrangements 
                                (determined without regard to this 
                                subclause) with respect to such 
                                individual for such month exceed $150 
                                (twice such dollar amount in the case 
                                of an individual with any direct 
                                primary care service arrangement (as so 
                                determined) that covers more than one 
                                individual).
                          ``(iii) Certain services specifically 
                        excluded from treatment as primary care 
                        services.--For purposes of this paragraph, the 
                        term `primary care services' shall not 
                        include--
                                  ``(I) procedures that require the use 
                                of general anesthesia,
                                  ``(II) prescription drugs (other than 
                                vaccines), and
                                  ``(III) laboratory services not 
                                typically administered in an ambulatory 
                                primary care setting.
                        The Secretary, after consultation with the 
                        Secretary of Health and Human Services, shall 
                        issue regulations or other guidance regarding 
                        the application of this clause.''.
  (b) Direct Primary Care Service Arrangement Fees Treated as Medical 
Expenses.--Section 223(d)(2)(C) of such Code is amended by striking 
``or'' at the end of clause (iii), by striking the period at the end of 
clause (iv) and inserting ``, or'', and by adding at the end the 
following new clause:
                          ``(v) any direct primary care service 
                        arrangement.''.
  (c) Inflation Adjustment.--Section 223(g)(1) of such Code is 
amended--
          (1) by inserting ``, (c)(1)(E)(ii)(II),'' after ``(b)(2)'' 
        each place it appears, and
          (2) in subparagraph (B), by inserting ``and (iii)'' after 
        ``clause (ii)'' in clause (i), by striking ``and'' at the end 
        of clause (i), by striking the period at the end of clause (ii) 
        and inserting ``, and'', and by inserting after clause (ii) the 
        following new clause:
                          ``(iii) in the case of the dollar amount in 
                        subsection (c)(1)(E)(ii)(II) for taxable years 
                        beginning in calendar years after 2026, 
                        `calendar year 2025'.''.
  (d) Reporting of Direct Primary Care Service Arrangement Fees on W-
2.--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) in the case of a direct primary care service 
        arrangement (as defined in section 223(c)(1)(E)(ii)) which is 
        provided in connection with employment, the aggregate fees for 
        such arrangement for such employee.''.
  (e) Effective Date.--The amendments made by this section shall apply 
to months beginning after December 31, 2025, in taxable years ending 
after such date.

SEC. 3. ON-SITE EMPLOYEE CLINICS.

  (a) In General.--Section 223(c)(1) of the Internal Revenue Code of 
1986, as amended by the preceding provisions of this Act, is amended by 
adding at the end the following new subparagraph:
                  ``(F) Special rule for qualified items and 
                services.--
                          ``(i) In general.--For purposes of 
                        subparagraph (A)(ii), an individual shall not 
                        be treated as covered under a health plan 
                        described in subclauses (I) and (II) of such 
                        subparagraph merely because the individual is 
                        eligible to receive, or receives, qualified 
                        items and services--
                                  ``(I) at a healthcare facility 
                                located at a facility owned or leased 
                                by the employer of the individual (or 
                                of the individual's spouse), or
                                  ``(II) at a healthcare facility 
                                operated primarily for the benefit of 
                                employees of the employer of the 
                                individual (or of the individual's 
                                spouse).
                          ``(ii) Qualified items and services 
                        defined.--For purposes of this subparagraph, 
                        the term `qualified items and services' means 
                        the following:
                                  ``(I) Physical examination.
                                  ``(II) Immunizations, including 
                                injections of antigens provided by 
                                employees.
                                  ``(III) Drugs or biologicals 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) Preventive care for chronic 
                                conditions (as defined in clause (iv)).
                                  ``(VI) Drug testing.
                                  ``(VII) Hearing or vision screenings 
                                and related services.
                          ``(iii) Aggregation.--For purposes of clause 
                        (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.
                          ``(iv) Preventive care for chronic 
                        conditions.--For purposes of this subparagraph, 
                        the term `preventive care for chronic 
                        conditions' means any item or service specified 
                        in the Appendix of Internal Revenue Service 
                        Notice 2019-45 which is prescribed to treat an 
                        individual diagnosed with the associated 
                        chronic condition specified in such Appendix 
                        for the purpose of preventing the exacerbation 
                        of such chronic condition or the development of 
                        a secondary condition, including any amendment, 
                        addition, removal, or other modification made 
                        by the Secretary (pursuant to the authority 
                        granted to the Secretary under paragraph 
                        (2)(C)) to the items or services specified in 
                        such Appendix subsequent to the date of 
                        enactment of this subparagraph.''.
  (b) Effective Date.--The amendments made by this section shall apply 
to months in taxable years beginning after December 31, 2025.

SEC. 4. CONTRIBUTIONS PERMITTED IF SPOUSE HAS HEALTH FLEXIBLE SPENDING 
                    ARRANGEMENT.

  (a) Contributions Permitted if Spouse Has a Health Flexible Spending 
Arrangement.--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 
adding at the end 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, 2025.

SEC. 5. 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 contributed 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)) if during the 4-year period 
                        preceding the date the employee so establishes 
                        coverage the employee was not covered under 
                        such a high deductible health plan, and
                          ``(ii) such arrangement is described in 
                        section 223(c)(1)(B)(vi) with respect to any 
                        portion of the plan year remaining after such 
                        distribution is made, if such employee remains 
                        enrolled in such arrangement.
                  ``(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) of such Code, as amended by this preceding 
provisions of this Act, is amended by striking ``and'' at the end of 
clause (iii), by striking the period at the end of clause (iv) and 
inserting ``, and'', and by adding at the end the following new clause:
                          ``(v) coverage under a health flexible 
                        spending arrangement or health reimbursement 
                        arrangement for the portion of the plan year 
                        after a qualified HSA distribution (as defined 
                        in section 106(e)(2) determined without regard 
                        to subparagraph (A)(ii) thereof) is made, if 
                        the terms of such arrangement which apply for 
                        such portion of the plan year are such that, if 
                        such terms applied for the entire plan year, 
                        then such arrangement would not be taken into 
                        account under subparagraph (A)(ii) of this 
                        paragraph for such plan year.''.
  (d) Inclusion of Qualified HSA Distributions on W-2.--
          (1) In general.--Section 6051(a) of such Code, as amended by 
        this preceding provisions of this Act, is amended by striking 
        ``and'' at the end of paragraph (17), by striking the period at 
        the end of paragraph (18) and inserting ``, and'', and by 
        inserting after paragraph (18) the following new paragraph:
          ``(19) 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, 2025, in taxable years ending 
after such date.

                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    The bill, H.R. 5688, the ``Bipartisan HSA Improvement Act 
of 2023,'' as ordered reported by the Committee on Ways and 
Means on September 28, 2023, would expand high deductible 
health plan health savings account eligibility to more 
populations and make technical changes to improve these 
accounts.

                 B. Background and Need for Legislation

    In order for an individual to be eligible to make 
contributions or to receive contributions from an employer to a 
health savings account (HSA), the individual must have a high 
deductible health plan (HDHP) and have no disqualifying health 
coverage.
    Currently, the Internal Revenue Service (``IRS'') may view 
direct primary care arrangements as a separate form of 
disqualifying health coverage that is incompatible with 
contributing to an HSA. The IRS also may view some services 
performed at a worksite health clinic as significant benefits 
in the nature of medical care, disqualifying individuals who 
receive these services from contributing to their HSA.
    Generally, individuals are not eligible for HSAs if their 
spouse is enrolled in a health Flexible Spending Arrangement 
(FSA).
    Currently, individuals cannot convert their health 
reimbursement arrangements (HRAs) or FSAs into HSAs.

                         C. Legislative History


Background

    H.R. 5688 was introduced on September 26, 2023, and was 
referred to the Committee on Ways and Means.

Committee hearings

    On May 16, 2023, the Committee held a Full Committee 
Hearing on ``Health Care Price Transparency: A Patient's Right 
to Know''.

Committee action

    The Committee on Ways and Means marked up H.R. 5688, the 
``Bipartisan HSA Improvement Act of 2023,'' on September 28, 
2023, and ordered the bill, as amended, favorably reported 
(with a quorum being present).

                         D. Designated Hearing

    Pursuant to clause 3(c)(6) of rule XIII, the Committee on 
Ways and Means held a hearing on May 16, 2023, Ways and Means 
Hearing ``Health Care Price Transparency: A Patient's Right to 
Know'' which was used to develop and consider H.R. 5687.

                      II. EXPLANATION OF THE BILL


A. Treatment of Direct Primary Care Service Arrangements (sec. 2 of the 
                     bill and sec. 223 of the Code)


                              PRESENT LAW

Health savings accounts

    An individual may contribute to an HSA only if the 
individual is covered under a plan that meets the requirements 
for a high deductible health plan, as described below. In 
general, HSAs provide tax-favored treatment for current medical 
expenses, as well as the ability to save on a tax-favored basis 
for future medical expenses. In general, an HSA is a tax-exempt 
trust or custodial account created exclusively to pay for the 
qualified medical expenses of the account holder and his or her 
spouse and dependents.
    Within limits,\1\ contributions to an HSA made by or on 
behalf of an eligible individual (with the exception of 
contributions by the individual's employer) are deductible by 
the individual. HSA contributions made on behalf of an eligible 
individual by an employer are excludible from income and wages 
for employment tax purposes. Earnings on amounts in HSAs are 
not taxable. Distributions from an HSA for qualified medical 
expenses are not includible in 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 (age 65).
---------------------------------------------------------------------------
    \1\For 2023, the basic limit on annual contributions that can be 
made to an HSA is $3,850 in the case of self-only coverage and $7,750 
in the case of family coverage. Rev. Proc. 2022-24, 2022-20 I.R.B. 
1075, May 16, 2022. The basic annual contribution 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). Sec. 
223(b)(3).
---------------------------------------------------------------------------

High deductible health plans

    An HDHP is a health plan that has an annual deductible 
which is not less than $1,500 (for 2023) for self-only coverage 
(twice this amount for family coverage), and for which the sum 
of the annual deductible and other annual out-of-pocket 
expenses (other than premiums) for covered benefits does not 
exceed $7,500 (for 2023) for self-only coverage (twice this 
amount for family coverage).\2\ These dollar thresholds are 
adjusted for inflation.\3\
---------------------------------------------------------------------------
    \2\Ibid. Sec. 223(c)(2).
    \3\Sec. 223(g).
---------------------------------------------------------------------------
    An individual who is covered under an HDHP is eligible to 
contribute to an HSA, provided that while such individual is 
covered under the HDHP, the individual is not covered under any 
health plan that (1) is not an HDHP and (2) provides coverage 
for any benefit (subject to certain exceptions) covered under 
the HDHP.\4\
---------------------------------------------------------------------------
    \4\Sec. 223(c)(1).
---------------------------------------------------------------------------
    Various types of coverage are disregarded for this purpose, 
including coverage of any benefit provided by permitted 
insurance, coverage (whether through insurance or otherwise) 
for accidents, disability, dental care, vision care, or long-
term care, as well as certain limited coverage through health 
flexible spending arrangements.\5\ Permitted insurance means 
insurance 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, or such other similar liabilities 
as specified by the Secretary of the Treasury (the 
``Secretary'') under regulations. Permitted insurance also 
means insurance for a specified disease or illness and 
insurance paying a fixed amount per day (or other period) of 
hospitalization.\6\
---------------------------------------------------------------------------
    \5\Sec. 223(c)(1)(B).
    \6\Sec. 223(c)(3).
---------------------------------------------------------------------------
    Under a safe harbor, an HDHP is permitted to provide 
coverage for preventive care (within the meaning of section 
1861 of the Social Security Act, except as otherwise provided 
by the Secretary) before satisfaction of the minimum 
deductible.\7\ IRS guidance provides a safe harbor for the 
types of coverage that constitute preventive care for this 
purpose.\8\
---------------------------------------------------------------------------
    \7\Sec. 223(c)(2)(C).
    \8\Notice 2004-23, 2004-1 C.B. 725. See also Notice 2004-50, 2004-
33 I.R.B. 196, August 16, 2004, Q&A's-26 and 27; Notice 2008-59, 2008-
29 I.R.B. 123, July 21, 2008; Notice 2013-57, 2013-40 I.R.B. 293, 
September 30, 2013; and Notice 2019-45, 2019-32 I.R.B. 593, August 5, 
2019.
---------------------------------------------------------------------------
    After an individual has attained age 65 and becomes 
enrolled in Medicare benefits, contributions cannot be made to 
the individual's HSA.\9\
---------------------------------------------------------------------------
    \9\See sec. 223(b)(7), as interpreted by Notice 2004-2, 2004-2 
I.R.B. 269, January 12, 2004, corrected by Announcement 2004-67, 2004-
36 I.R.B. 459, September 7, 2004.
---------------------------------------------------------------------------

Direct primary care service arrangements

    Under present law, a direct primary care service 
arrangement may constitute other health coverage, depending on 
the specific attributes of the arrangement, and therefore an 
individual covered by a direct primary care service arrangement 
may not be eligible to contribute to an HSA.\10\
---------------------------------------------------------------------------
    \10\See IRS, Certain Medical Care Arrangements, proposed rule, 85 
Fed. Reg. 35398, June 10, 2020. In the proposed rule, the IRS proposed 
defining a direct primary care arrangement as a contract between an 
individual and one or more primary care physicians under which the 
physician or physicians agree to provide medical care for a fixed 
annual or periodic fee without billing a third party.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that direct primary care service 
arrangements are an important tool for families seeking access 
to low-cost, high-quality primary care, and that current law 
may impede the use of direct primary care service arrangements 
for patients and families who choose to enroll in and 
contribute to HSA eligible health plans. The Committee 
therefore believes it is vital to make clear that individuals 
enrolled in direct primary care service arrangements may 
continue to contribute to HSAs and may use HSA funds to pay for 
these types of arrangements.

                        EXPLANATION OF PROVISION

    Under the provision, a direct primary care service 
arrangement is not treated as a health plan that makes an 
individual ineligible to contribute to an HSA. For this 
purpose, a direct primary care service arrangement means, with 
respect to any individual, an arrangement under which such 
individual is provided medical care consisting solely of such 
primary care services provided by primary care 
practitioners\11\ if the sole compensation for such care is a 
fixed periodic fee. With respect to any individual for any 
month, the aggregate fees for all direct primary care service 
arrangements for such individual for such month cannot exceed 
$150 per month (in the case of an individual with any such 
arrangement that covers more than one individual, twice such 
dollar amount, or $300). The aggregate limits are adjusted 
annually for inflation.
---------------------------------------------------------------------------
    \11\As defined in sec. 1833(x)(2)(A) of the Social Security Act, 42 
U.S.C. 13951, without regard to clause (ii) thereof.
---------------------------------------------------------------------------
    For this purpose, the term ``primary care services''' does 
not include (1) procedures that require the use of general 
anesthesia, (2) prescription drugs other than vaccines 
(therefore, vaccines are permitted primary care services), and 
(3) laboratory services not typically administered in an 
ambulatory primary care setting. The Secretary, after 
consultation with the Secretary of Health and Human Services, 
is required to issue regulations or other guidance related to 
application of this rule.
    In addition, fees paid for any direct primary care service 
arrangement are treated as qualified medical expenses (and not 
the payment of insurance). The aggregate fees paid by the 
employer for direct primary care service arrangements provided 
to an employee in connection with employment are required to be 
reported on Form W-2.

                             EFFECTIVE DATE

    The provision applies to months beginning after December 
31, 2025, in taxable years ending after such date.

  B. On-site Employee Clinics (sec. 3 of the bill and sec. 223 of the 
                                 Code)


                              PRESENT LAW

    For a general description of HSAs and HDHPs, see Part A of 
this document.

On-site employee clinics

    On-site employer-sponsored health clinics generally 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 services or 
health care services at charges below fair market value from a 
clinic on an employer's premises does 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 that provides the following free 
health care services (in addition to disregarded coverage or 
preventive care) for employees does not provide significant 
benefits in the nature of medical 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 a 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 has 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.\12\
---------------------------------------------------------------------------
    \12\Notice 2008-59, 2008-29 I.R.B. 123, July 21, 2008, Q&A-10.
---------------------------------------------------------------------------

Preventive care

    The IRS has issued guidance providing a safe harbor for 
preventive care benefits allowed under an HDHP.\13\ In that 
guidance, the IRS defines preventive care as including, but not 
limited to (1) periodic health evaluations, including tests and 
diagnostic procedures ordered in connection with routine 
examinations, such as annual physicals; (2) routine prenatal 
and well- child care; (3) immunizations; (4) tobacco cessation 
programs; (5) obesity weight-loss programs; and (6) screening 
services (such as screening for cancer, heart and vascular 
diseases, infectious diseases, mental health conditions and 
substance abuse, metabolic, nutritional, and endocrine 
conditions, musculoskeletal disorders, obstetric and 
gynecologic conditions, pediatric conditions, and vision and 
hearing disorders).
---------------------------------------------------------------------------
    \13\Notice 2004-23, 2004-1 C.B. 725. See also Notice 2004-50, 2004-
33 I.R.B. 196, August 16, 2004; Notice 2008-59, 2008-29 I.R.B. 123, 
July 21, 2008; Notice 2013-57, 2013-40 I.R.B. 293, September 30, 2013; 
Notice 2018-12, 2018-12 I.R.B. 441, March 19, 2018; and Notice 2019-45, 
2019-32 I.R.B. 593, August 5, 2019.
---------------------------------------------------------------------------
    Although the guidance provides that preventive care does 
not generally include any service or benefit intended to treat 
an existing illness, injury or condition (with the exception of 
chronic conditions, as described below), any treatment that is 
incidental or ancillary to a safe harbor preventive care 
service or screening (in situations where it would be 
unreasonable or impracticable to perform another procedure to 
treat the condition), such as the removal of polyps during a 
diagnostic colonoscopy, also falls within the safe harbor. In 
addition, drugs or medications are considered to be preventive 
care when taken by a person who has developed risk factors for 
a disease that has not yet manifested itself or not yet become 
clinically apparent, or to prevent the reoccurrence of a 
disease from which a person has recovered.
    A 2019 executive order included a requirement that Treasury 
issue guidance to expand the ability of patients to select an 
HDHP that could be used with an HSA to cover, before the 
deductible, low-cost preventive care for individuals with 
chronic conditions.\14\ The IRS then issued guidance expanding 
the list of preventive care benefits permitted to be provided 
by an HDHP, without a deductible, to include limited preventive 
care for specified chronic conditions (including congestive 
heart failure, diabetes, coronary artery disease, osteoporosis 
and/or osteopenia, hypertension, asthma, diabetes, liver 
disease and/or bleeding disorders, heart disease, and 
depression).\15\
---------------------------------------------------------------------------
    \14\Executive Order 13877, ``Improving Price and Quality 
Transparency in American Healthcare to Put Patients First,'' 84 Fed. 
Reg. 30849, June 27, 2019.
    \15\Notice 2019-45, 2019-32 I.R.B. 593, August 5, 2019.
---------------------------------------------------------------------------
    Preventive care also encompasses such services that are 
required to be included by a group health plan or health 
insurance issuer offering group or individual health insurance 
coverage under section 2713 of the Public Health Service 
Act.\16\
---------------------------------------------------------------------------
    \16\Notice 2013-57, 2013-40 I.R.B. 293, September 30, 2013.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that on-site employee clinics can be 
an important way for employees and their spouses to access low-
cost health care. Employers may be hesitant to offer on-site 
clinics, however, because of uncertainty as to whether access 
to on-site clinics may prevent employees and their families 
from contributing to HSAs. Therefore, the Committee believes it 
is important to specify that on-site clinics may offer a 
variety of standard items and services without disqualifying 
employees and their spouses from contributing to HSAs.

                        EXPLANATION OF PROVISION

    Under the provision, qualified items and services received 
by an eligible individual at (1) a health care facility located 
at a facility owned or leased by the eligible individual's 
employer (or the employer of the individual's spouse) or (2) at 
a health care facility operated primarily for the benefit of 
employees of the individual's employer (or the employees of the 
individual's spouse's employer) are not treated as coverage 
under a health plan for purposes of determining the 
individual's eligibility to contribute to an HSA. Qualified 
items and services include: (1) physical examinations, (2) 
immunizations, including injections of antigens provided by 
employees, (3) drugs or biologicals other than a prescribed 
drug, (4) treatment for injuries occurring in the course of the 
individual's employment, (5) preventive care for chronic 
conditions,\17\ (6) drug testing, and (7) hearing or vision 
screenings and related services.
---------------------------------------------------------------------------
    \17\Defined as any item or service specified in the Appendix of 
Notice 2019-45 (including any amendment, addition, removal or other 
modification made by the Secretary to that Appendix subsequent to the 
date of enactment of the provision) which is prescribed to treat an 
individual diagnosed with an associated chronic condition for the 
purpose of preventing (1) the exacerbation of such condition or (2) the 
development of a secondary condition.
---------------------------------------------------------------------------
    All entities treated as a single employer\18\ under the 
Code are treated as a single employer under this provision.
---------------------------------------------------------------------------
    \18\Under sec. 414(b), (c), (m) or (o).
---------------------------------------------------------------------------

                             EFFECTIVE DATE

    The provision applies to months in taxable years beginning 
after December 31, 2025.

   C. Contributions Permitted if Spouse Has Health Flexible Spending 
       Arrangement (sec. 4 of the bill and sec. 223 of the Code)


                              PRESENT LAW

Flexible spending arrangements

    An FSA generally is defined as a benefit program which 
provides employees with coverage under which specific incurred 
expenses may be reimbursed (subject to reimbursement maximums 
and other conditions) and the maximum amount of reimbursement 
reasonably available is less than 500 percent of the value of 
such coverage.\19\ An FSA under a cafeteria plan\20\ allows an 
employee to make salary reduction contributions for use in 
receiving reimbursements for certain incurred expenses.\21\ The 
arrangement can also include non-elective employer 
contributions (known as employer flex-credits) that the 
employer makes available for every employee eligible to 
participate in the employer's cafeteria plan, to be used only 
for certain tax-excludable benefits (but not as cash or a 
taxable benefit).\22\ Types of expenses that may be reimbursed 
under a flexible spending arrangement in a cafeteria plan 
include medical expenses (a ``health FSA'') and dependent care 
expenses.
---------------------------------------------------------------------------
    \19\See sec. 106(c)(2) and Prop. Treas. Reg. sec. 1.125-5(a).
    \20\A cafeteria plan is a separate written plan of an employer 
under which all participants are employees, and participants are 
permitted to choose among at least one permitted taxable benefit (for 
example, current cash compensation) and at least one qualified benefit. 
Sec. 125(d). Qualified benefits are generally employer-provided 
benefits that are not includible in gross income by reason of an 
express provision of the Code. Sec. 125(f). Examples of qualified 
benefits include employer-provided health coverage (including a health 
FSA), group term life insurance coverage not in excess of $50,000, and 
benefits under a dependent care assistance program.
    \21\Sec. 125 and Prop. Treas. Reg. sec. 1.125-5.
    \22\Prop. Treas. Reg. sec. 1.125-5(b).
---------------------------------------------------------------------------
    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 generally must be forfeited by the employee 
(referred to as the ``use-it-or-lose-it rule'').\23\ However, a 
cafeteria plan may allow a grace period not to exceed two and 
one-half months immediately following the end of the plan year 
during which unused amounts may be paid or reimbursed to 
participants for qualified expenses incurred during the grace 
period.\24\ Alternatively, a cafeteria plan may permit up to 
$610 (for 2023) of unused amounts remaining in a health FSA at 
the end of a plan year to be paid or reimbursed to plan 
participants for qualifying medical expenses during the 
following plan year.\25\ Such a carryover is not permitted in a 
dependent care FSA. A cafeteria plan may only permit a 
carryover of amounts in a health FSA if the plan does not also 
allow a grace period with respect to the health FSA.
---------------------------------------------------------------------------
    \23\Sec. 125(d)(2).
    \24\Notice 2005-42, 2005-1 C.B. 1204, and Prop. Treas. Reg. sec. 
1.125-1(e).
    \25\Rev. Proc. 2022-38, 2022-45 I.R.B. 445, November 7, 2022; 
Notice 2020-33, 2020-22 I.R.B. 868, May 26, 2020; Notice 2013-71, 2013-
47 I.R.B. 532, November 18, 2013.
---------------------------------------------------------------------------
            Health FSAs
    In order for coverage and reimbursements under a health FSA 
to qualify for tax-favored treatment, the health FSA must 
qualify as an accident and health plan.\26\ Under the Code, the 
value of employer-provided health coverage under an accident or 
health plan is generally excludable from gross income,\27\ as 
are reimbursements under the plan for medical care expenses for 
employees, their spouses, and their dependents.\28\ A health 
FSA may only reimburse medical expenses as defined in section 
213(d).
---------------------------------------------------------------------------
    \26\Secs. 105 and 106; Prop. Treas. Reg. sec. 1.125-5(k)(1).
    \27\Sec. 106. Health coverage provided to active members of the 
uniformed services, military retirees, and their dependents are 
excludable from gross income under section 134. That section provides 
an exclusion for ``qualified military benefits,'' defined as benefits 
received by reason of status or service as a member of the uniformed 
services and which were excludable from gross income on September 9, 
1986, under any provision of law, regulation, or administrative 
practice then in effect.
    \28\Sec. 105(b).
---------------------------------------------------------------------------
    A benefit provided under a cafeteria plan through employer 
contributions to a health FSA is not treated as a qualified 
benefit unless the cafeteria plan provides that an employee may 
not elect salary reduction contributions in excess of $2,500, 
adjusted for inflation, for any taxable year.\29\ For taxable 
year 2023, the limit is $3,050.
---------------------------------------------------------------------------
    \29\Sec. 125(i).
---------------------------------------------------------------------------

Health savings accounts and high deductible health plans

    For a general description of HSAs and HDHPs, see Part A of 
this document.

                           REASONS FOR CHANGE

    The Committee wishes to help working families by improving 
access to tax-advantaged health care accounts such as HSAs. The 
Committee believes that an individual should not be ineligible 
for an HSA merely because the individual's spouse is covered 
under a health FSA. Thus, the Committee believes that a 
spouse's coverage under a health FSA should not prevent an 
individual from being eligible for an HSA, provided that the 
spouse's FSA is not used to cover the individual's medical 
expenses.

                        EXPLANATION OF PROVISION

    The provision provides that for purposes of determining 
whether an individual is eligible to contribute to an HSA, 
coverage under the employee's spouse's health FSA for any plan 
year of such FSA is disregarded, provided that certain 
requirements are met. To qualify for this exception, the 
aggregate reimbursements under the health FSA for the plan year 
must not exceed the aggregate expenses that would be eligible 
for reimbursement under the FSA if the expenses were determined 
without regard to any expenses paid or incurred with respect to 
the otherwise HSA-eligible individual.

                             EFFECTIVE DATE

    The provision is effective for plan years beginning after 
December 31, 2025.

D. FSA and HRA Terminations or Conversions to Fund HSAs (sec. 5 of the 
                bill and secs. 106 and 223 of the Code)


                              PRESENT LAW

Flexible spending arrangements

    For a general description of FSAs, see Part C of this 
document.

Health reimbursement arrangements

    HRAs operate in a manner similar to health FSAs, in that 
they are employer-maintained arrangements that reimburse 
employees and their dependents\30\ 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 in an HRA at the end of 
the year may be carried forward to be used to reimburse medical 
expenses in following years.\31\ Unlike a health FSA, an HRA is 
permitted to reimburse an employee for health insurance 
premiums.
---------------------------------------------------------------------------
    \30\As defined in sec. 152.
    \31\Guidance with respect to HRAs, including the interaction of 
FSAs and HRAs in the case of an individual covered under both, is 
provided in Notice 2002-45, 2002-2 C.B. 93.
---------------------------------------------------------------------------

Health savings accounts and high deductible health plans

    For a general description of HSAs and HDHPs, see Part A of 
this document.
            Interactions of health savings accounts with FSAs and HRAs
    Individuals who are covered by a health plan that is not an 
HDHP generally are not eligible to contribute to an HSA. Under 
IRS guidance, a health FSA and an HRA are generally considered 
health plans under this definition.\32\ However, FSA and HRA 
terminations could be used to fund HSAs within a certain period 
(as described further below). In addition, 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 HSA-compatible 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, or (4) a post-deductible 
health FSA or HRA, which does not pay or reimburse medical 
expenses incurred below the minimum annual deductible for a 
plan to be an HDHP.\33\
---------------------------------------------------------------------------
    \32\Rev. Rul. 2004-45, 2004-1 C.B. 971.
    \33\As defined in sec. 223(c)(2)(A)(i). Rev. Rul. 2004-45, 2004-1 
C.B. 971.
---------------------------------------------------------------------------
    If a general purpose health FSA allows reimbursement for 
expenses incurred during a grace period following the end of 
the plan year, a participant 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.\34\ 
However, this rule does not apply if the participant has a zero 
balance in the general purpose health FSA on the last day of 
the health FSA plan year (as determined on a cash 
basis\35\).\36\ Thus, in that case the individual's FSA 
coverage during the grace period does not cause the individual 
to fail to be eligible to contribute to an HSA, and the 
individual (if otherwise eligible) would be eligible to 
contribute to the HSA as of the first day after the end of the 
health FSA plan year. 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.\37\ Coverage by an HSA-compatible health FSA or HRA 
does not affect an employee's eligibility to contribute to an 
HSA, including during a health FSA grace period.\38\
---------------------------------------------------------------------------
    \34\Notice 2005-42, 2005-1 C.B. 1204.
    \35\``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.
    \36\Sec. 223(c)(1)(B)(iii)(I).
    \37\One of the following requirements must be satisfied: (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, 2004-1 
C.B. 971.
    \38\Rev. Rul. 2004-45, 2004-1 C.B. 971.
---------------------------------------------------------------------------
            FSA and HRA terminations to fund HSAs
    The Health Opportunity Empowerment Act of 2006\39\ 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 
(``qualified HSA distributions''). However, such distributions 
were permitted only for contributions made to an HSA before 
January 1, 2012.\40\
---------------------------------------------------------------------------
    \39\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.
    \40\Sec. 106(e)(2)(B).
---------------------------------------------------------------------------
    As implemented by the IRS, a plan implementing the 
provision must be amended in writing, the employee must elect 
the rollover, and the year-end balance must be frozen.\41\ The 
amount of the qualified HSA distribution may not exceed the 
lesser of the balance in the health FSA or HRA on September 21, 
2006 or the date of distribution.\42\ 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.\43\
---------------------------------------------------------------------------
    \41\Notice 2007-22, 2007-1 C.B. 670.
    \42\Sec. 106(e)(2)(A).
    \43\The IRS provided guidance on special transition relief for 
amounts remaining at the end of 2006. See Notice 2007-22, 2007-1 C.B. 
670.
---------------------------------------------------------------------------
    In addition, a qualified HSA distribution must be 
contributed directly to the HSA trustee by the employer.\44\ 
Only one qualified HSA 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.
---------------------------------------------------------------------------
    \44\Sec. 106(e).
---------------------------------------------------------------------------
    If an employee fails to remain HSA-eligible for 12 months 
(the ``testing period'')\45\ 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.\46\ Failure to remain an 
eligible individual does not require the withdrawal of the 
qualified HSA distribution, and the amount is not an excess 
contribution.
---------------------------------------------------------------------------
    \45\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.
    \46\Sec. 106(e)(3).
---------------------------------------------------------------------------
    An individual making a qualified HSA distribution from a 
health FSA does not fail to be eligible to participate in an 
HSA at the beginning of the next plan year merely because the 
health FSA includes a grace period, provided that the qualified 
HSA distribution equals the remaining balance in the FSA at the 
end of the FSA plan year and is made at the end of such plan 
year.\47\
---------------------------------------------------------------------------
    \47\Sec. 223(c)(1)(B)(iii)(II); Notice 2007-22, 2007-1 C.B. 670.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    To improve access to health care savings through HSAs, the 
Committee believes it is important to increase flexibility for 
individuals with health FSAs of HRAs seeking to enroll in HSAs. 
Therefore, the Committee believes that individuals who wish to 
convert their health FSA or HRA to an HSA should be permitted 
to do so.

                        EXPLANATION OF PROVISION

    The provision amends the rules permitting certain amounts 
in a health FSA or HRA to be rolled over into an HSA by no 
longer requiring such rollovers to be completed by January 1, 
2012. Rather, under the provision, a ``qualified HSA 
distribution'' is a distribution from an employee's health FSA 
or HRA contributed directly to an employee's HSA if (1) such 
distribution is made in connection with the employee 
establishing coverage under an HDHP, and (2) during the four-
year period preceding the establishment of such coverage, the 
employee was not covered under an HDHP. In addition, if the 
qualified HSA distribution is made before the end of the plan 
year, the health FSA or HRA from which the distribution is made 
must be converted to an HSA-compatible FSA or HRA, as 
applicable, for the portion of the plan year after the 
distribution is made, if the individual remains enrolled in the 
health FSA or HRA.
    Under the provision, the aggregate amount of qualified HSA 
distributions may not exceed the total annual limit on FSA 
contributions ($3,050 in 2023)\48\ or twice this amount in the 
case of an eligible individual who has family coverage under an 
HDHP. The provision does not limit individuals to one qualified 
HSA distribution, as under the prior rule. Qualified HSA 
distributions also reduce the amount of deductible 
contributions that an individual is permitted to make to an HSA 
during the taxable year.\49\
---------------------------------------------------------------------------
    \48\Sec. 125(i).
    \49\The deductible contribution limit with respect to an HSA is 
reduced by so much of any qualified HSA distribution made by an 
individual during the taxable year that does not exceed the aggregate 
increases in the balance of the arrangement from which the distribution 
is made that occur during the portion of the plan year preceding the 
distribution (other than any balance carried over to such plan year and 
determined without regard to any decrease in the balance during such 
portion of the plan year).
---------------------------------------------------------------------------
    The provision 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 provision provides that the amount of any 
qualified HSA distribution is to be included on the information 
to be reported on Form W-2.\50\
---------------------------------------------------------------------------
    \50\Sec. 6051(a).
---------------------------------------------------------------------------

                             EFFECTIVE DATE

    The provision is effective for distributions made after 
December 31, 2025, in taxable years ending after such date.

                      III. VOTES OF THE COMMITTEE

    Pursuant to clause 3(b) of rule XIII of the Rules of the 
House of the Representatives, the following statement is made 
concerning the vote of the Committee on Ways and Means in its 
consideration of H.R. 5688, the ``Bipartisan HSA Improvement 
Act of 2023,'' on September 28, 2023.
    The vote on the amendment offered by Mr. Doggett to the 
amendment in the nature of a substitute to H.R. 5688, which 
would eliminate the exception from the additional tax on Health 
Savings Account distributions used for non-qualifying medical 
expenses after Medicare eligibility was not agreed to by a roll 
call vote of 18 yeas to 23 nays (with a quorum being present). 
The vote was as follows:

----------------------------------------------------------------------------------------------------------------
           Representative              Yea     Nay    Present       Representative       Yea     Nay    Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO).....................  ......      X   .........  Mr. Neal.............      X   ......  .........
Mr. Buchanan.......................  ......      X   .........  Mr. Doggett..........      X   ......  .........
Mr. Smith (NE).....................  ......      X   .........  Mr. Thompson.........      X   ......  .........
Mr. Kelly..........................  ......      X   .........  Mr. Larson...........      X   ......  .........
Mr. Schweikert.....................  ......      X   .........  Mr. Blumenauer.......      X   ......  .........
Mr. LaHood.........................  ......      X   .........  Mr. Pascrell.........      X   ......  .........
Dr. Wenstrup.......................  ......      X   .........  Mr. Davis............      X   ......  .........
Mr. Arrington......................  ......  ......  .........  Ms. Sanchez..........      X   ......  .........
Dr. Ferguson.......................  ......      X   .........  Mr. Higgins..........      X   ......  .........
Mr. Estes..........................  ......      X   .........  Ms. Sewell...........      X   ......  .........
Mr. Smucker........................  ......      X   .........  Ms. DelBene..........      X   ......  .........
Mr. Hern...........................  ......  ......  .........  Ms. Chu..............      X   ......  .........
Ms. Miller.........................  ......      X   .........  Ms. Moore............      X   ......  .........
Dr. Murphy.........................  ......      X   .........  Mr. Kildee...........      X   ......  .........
Mr. Kustoff........................  ......      X   .........  Mr. Beyer............      X   ......  .........
Mr. Fitzpatrick....................  ......      X   .........  Mr. Evans............      X   ......  .........
Mr. Steube.........................  ......      X   .........  Mr. Schneider........      X   ......  .........
Ms. Tenney.........................  ......      X   .........  Mr. Panetta..........      X   ......  .........
Mrs. Fischbach.....................  ......      X
Mr. Moore..........................  ......      X
Mrs. Steel.........................  ......      X
Ms. Van Duyne......................  ......      X
Mr. Feenstra.......................  ......      X
Ms. Malliotakis....................  ......      X
Mr. Carey..........................  ......      X
----------------------------------------------------------------------------------------------------------------

    In compliance with the Rules 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. 5688, the ``Bipartisan HSA Improvement 
Act of 2023,'' on September 28, 2023.
    The vote on the amendment offered by Mr. Larson to the 
amendment in the nature of a substitute to H.R. 5688, which 
would ensure the protection of the Social Security Trust Fund 
was not agreed to by a roll call vote of 17 yeas to 24 nays 
(with a quorum being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
           Representative              Yea     Nay    Present       Representative       Yea     Nay    Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO).....................  ......      X   .........  Mr. Neal.............      X   ......  .........
Mr. Buchanan.......................  ......      X   .........  Mr. Doggett..........      X   ......  .........
Mr. Smith (NE).....................  ......      X   .........  Mr. Thompson.........      X   ......  .........
Mr. Kelly..........................  ......      X   .........  Mr. Larson...........      X   ......  .........
Mr. Schweikert.....................  ......      X   .........  Mr. Blumenauer.......      X   ......  .........
Mr. LaHood.........................  ......      X   .........  Mr. Pascrell.........      X   ......  .........
Dr. Wenstrup.......................  ......      X   .........  Mr. Davis............      X   ......  .........
Mr. Arrington......................  ......      X   .........  Ms. Sanchez..........      X   ......  .........
Dr. Ferguson.......................  ......      X   .........  Mr. Higgins..........      X   ......  .........
Mr. Estes..........................  ......      X   .........  Ms. Sewell...........      X   ......  .........
Mr. Smucker........................  ......      X   .........  Ms. DelBene..........      X   ......  .........
Mr. Hern...........................  ......      X   .........  Ms. Chu..............      X   ......  .........
Ms. Miller.........................  ......      X   .........  Ms. Moore............  ......  ......  .........
Dr. Murphy.........................  ......      X   .........  Mr. Kildee...........      X   ......  .........
Mr. Kustoff........................  ......      X   .........  Mr. Beyer............      X   ......  .........
Mr. Fitzpatrick....................  ......  ......  .........  Mr. Evans............      X   ......  .........
Mr. Steube.........................  ......      X   .........  Mr. Schneider........      X   ......  .........
Ms. Tenney.........................  ......      X   .........  Mr. Panetta..........      X   ......  .........
Mrs. Fischbach.....................  ......      X
Mr. Moore..........................  ......      X
Mrs. Steel.........................  ......      X
Ms. Van Duyne......................  ......      X
Mr. Feenstra.......................  ......      X
Ms. Malliotakis....................  ......      X
Mr. Carey..........................  ......      X
----------------------------------------------------------------------------------------------------------------

    In compliance with the Rules of the House of 
Representatives, this following statement is made concerning 
the vote of the Committee on Ways and Means during the markup 
consideration of H.R. 5688, the ``Bipartisan HSA Improvement 
Act of 2023,'' on September 28, 2023.
    The vote on the amendment offered by Ms. Chu to the 
amendment in the nature of a substitute to H.R. 5688, which 
would require that nothing in H.R. 5688 shall be construed to 
prevent Health Savings Accounts from Covering all needed 
reproductive and sexual health care was not agreed to by a roll 
call vote of 16 yeas to 24 nays (with a quorum being present). 
The vote was as follows:

----------------------------------------------------------------------------------------------------------------
           Representative              Yea     Nay    Present       Representative       Yea     Nay    Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO).....................  ......      X   .........  Mr. Neal.............      X   ......  .........
Mr. Buchanan.......................  ......      X   .........  Mr. Doggett..........      X   ......  .........
Mr. Smith (NE).....................  ......      X   .........  Mr. Thompson.........      X   ......  .........
Mr. Kelly..........................  ......      X   .........  Mr. Larson...........      X   ......  .........
Mr. Schweikert.....................  ......      X   .........  Mr. Blumenauer.......      X   ......  .........
Mr. LaHood.........................  ......      X   .........  Mr. Pascrell.........  ......  ......  .........
Dr. Wenstrup.......................  ......      X   .........  Mr. Davis............  ......  ......  .........
Mr. Arrington......................  ......      X   .........  Ms. Sanchez..........      X   ......  .........
Dr. Ferguson.......................  ......      X   .........  Mr. Higgins..........      X   ......  .........
Mr. Estes..........................  ......      X   .........  Ms. Sewell...........      X   ......  .........
Mr. Smucker........................  ......      X   .........  Ms. DelBene..........      X   ......  .........
Mr. Hern...........................  ......      X   .........  Ms. Chu..............      X   ......  .........
Ms. Miller.........................  ......      X   .........  Ms. Moore............      X   ......  .........
Dr. Murphy.........................  ......      X   .........  Mr. Kildee...........      X   ......  .........
Mr. Kustoff........................  ......      X   .........  Mr. Beyer............      X   ......  .........
Mr. Fitzpatrick....................  ......      X   .........  Mr. Evans............      X   ......  .........
Mr. Steube.........................  ......      X   .........  Mr. Schneider........      X   ......  .........
Ms. Tenney.........................  ......  ......  .........  Mr. Panetta..........      X   ......  .........
Mrs. Fischbach.....................  ......      X
Mr. Moore..........................  ......      X
Mrs. Steel.........................  ......      X
Ms. Van Duyne......................  ......      X
Mr. Feenstra.......................  ......      X
Ms. Malliotakis....................  ......      X
Mr. Carey..........................  ......      X
----------------------------------------------------------------------------------------------------------------

    In compliance with the Rules of the House of 
Representatives, this following statement is made concerning 
the vote of the Committee on Ways and Means during the markup 
consideration of H.R. 5688, the ``Bipartisan HSA Improvement 
Act of 2023,'' on September 28, 2023.
    The vote on the amendment offered by Mr. Kildee to the 
amendment in the nature of a substitute to H.R. 5688, which 
would place an income cap onbeing able to use the tax advantage 
of HSAs was not agreed to by a roll call vote of 17 yeas to 24 
nays with 1 voting present (with a quorum being present). The 
vote was as follows:

----------------------------------------------------------------------------------------------------------------
           Representative              Yea     Nay    Present       Representative       Yea     Nay    Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO).....................  ......      X   .........  Mr. Neal.............      X   ......  .........
Mr. Buchanan.......................  ......      X   .........  Mr. Doggett..........  ......  ......         X
Mr. Smith (NE).....................  ......      X   .........  Mr. Thompson.........      X   ......  .........
Mr. Kelly..........................  ......      X   .........  Mr. Larson...........      X   ......  .........
Mr. Schweikert.....................  ......      X   .........  Mr. Blumenauer.......      X   ......  .........
Mr. LaHood.........................  ......      X   .........  Mr. Pascrell.........      X   ......  .........
Dr. Wenstrup.......................  ......      X   .........  Mr. Davis............      X   ......  .........
Mr. Arrington......................  ......      X   .........  Ms. Sanchez..........      X   ......  .........
Dr. Ferguson.......................  ......      X   .........  Mr. Higgins..........      X   ......  .........
Mr. Estes..........................  ......      X   .........  Ms. Sewell...........      X   ......  .........
Mr. Smucker........................  ......      X   .........  Ms. DelBene..........      X   ......  .........
Mr. Hern...........................  ......      X   .........  Ms. Chu..............      X   ......  .........
Ms. Miller.........................  ......      X   .........  Ms. Moore............      X   ......  .........
Dr. Murphy.........................  ......      X   .........  Mr. Kildee...........      X   ......  .........
Mr. Kustoff........................  ......      X   .........  Mr. Beyer............      X   ......  .........
Mr. Fitzpatrick....................  ......      X   .........  Mr. Evans............      X   ......  .........
Mr. Steube.........................  ......      X   .........  Mr. Schneider........      X   ......  .........
Ms. Tenney.........................  ......  ......  .........  Mr. Panetta..........      X   ......  .........
Mrs. Fischbach.....................  ......      X
Mr. Moore..........................  ......      X
Mrs. Steel.........................  ......      X
Ms. Van Duyne......................  ......      X
Mr. Feenstra.......................  ......      X
Ms. Malliotakis....................  ......      X
Mr. Carey..........................  ......      X
----------------------------------------------------------------------------------------------------------------

    In compliance with the Rules of the House of 
Representatives, this following statement is made concerning 
the vote of the Committee on Ways and Means during the markup 
consideration of H.R. 5688, the ``Bipartisan HSA Improvement 
Act of 2023,'' on September 28, 2023.
    The vote on the amendment offered by Mr. Pascrell to the 
amendment in the nature of a substitute to H.R. 5688, which 
would add to H.R. 5688 a new section that prevents the bill 
from taking effect until the Secretary of the Treasury 
certifies that the cap on the State and Local Tax (SALT) 
deduction will not result in an increase in the tax liability 
of any taxpayer with an adjusted gross income less than $50,000 
in calendar year 2023, 2024, or 2025 was not agreed to by a 
roll call vote of 16 yeas to 24 nays (with a quorum being 
present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
           Representative              Yea     Nay    Present       Representative       Yea     Nay    Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO).....................  ......      X   .........  Mr. Neal.............      X   ......  .........
Mr. Buchanan.......................  ......      X   .........  Mr. Doggett..........  ......      X   .........
Mr. Smith (NE).....................  ......      X   .........  Mr. Thompson.........      X   ......  .........
Mr. Kelly..........................  ......      X   .........  Mr. Larson...........      X   ......  .........
Mr. Schweikert.....................  ......      X   .........  Mr. Blumenauer.......      X   ......  .........
Mr. LaHood.........................  ......      X   .........  Mr. Pascrell.........      X   ......  .........
Dr. Wenstrup.......................  ......      X   .........  Mr. Davis............      X   ......  .........
Mr. Arrington......................  ......      X   .........  Ms. Sanchez..........      X   ......  .........
Dr. Ferguson.......................  ......      X   .........  Mr. Higgins..........      X   ......  .........
Mr. Estes..........................  ......      X   .........  Ms. Sewell...........      X   ......  .........
Mr. Smucker........................  ......      X   .........  Ms. DelBene..........      X   ......  .........
Mr. Hern...........................  ......      X   .........  Ms. Chu..............      X   ......  .........
Ms. Miller.........................  ......      X   .........  Ms. Moore............      X   ......  .........
Dr. Murphy.........................  ......      X   .........  Mr. Kildee...........      X   ......  .........
Mr. Kustoff........................  ......      X   .........  Mr. Beyer............      X   ......  .........
Mr. Fitzpatrick....................  ......      X   .........  Mr. Evans............      X   ......  .........
Mr. Steube.........................  ......      X   .........  Mr. Schneider........      X   ......  .........
Ms. Tenney.........................  ......  ......  .........  Mr. Panetta..........      X   ......  .........
Mrs. Fischbach.....................  ......      X
Mr. Moore..........................  ......      X
Mrs. Steel.........................  ......      X
Ms. Van Duyne......................  ......      X
Mr. Feenstra.......................  ......      X
Ms. Malliotakis....................  ......      X
Mr. Carey..........................  ......      X
----------------------------------------------------------------------------------------------------------------

    In compliance with the Rules of the House of 
Representatives, this following statement is made concerning 
the vote of the Committee on Ways and Means during the markup 
consideration of H.R. 5688, the ``Bipartisan HSA Improvement 
Act of 2023,'' on September 28, 2023.
    H.R. 5688 was ordered favorably reported to the House of 
Representatives as amended by a roll call vote of 28 yeas to 14 
nays (with a quorum being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
           Representative              Yea     Nay    Present       Representative       Yea     Nay    Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO).....................      X   ......  .........  Mr. Neal.............  ......      X   .........
Mr. Buchanan.......................      X   ......  .........  Mr. Doggett..........  ......      X   .........
Mr. Smith (NE).....................      X   ......  .........  Mr. Thompson.........  ......      X   .........
Mr. Kelly..........................      X   ......  .........  Mr. Larson...........  ......      X   .........
Mr. Schweikert.....................      X   ......  .........  Mr. Blumenauer.......      X   ......  .........
Mr. LaHood.........................      X   ......  .........  Mr. Pascrell.........  ......      X   .........
Dr. Wenstrup.......................      X   ......  .........  Mr. Davis............  ......      X   .........
Mr. Arrington......................      X   ......  .........  Ms. Sanchez..........  ......      X   .........
Dr. Ferguson.......................      X   ......  .........  Mr. Higgins..........  ......      X   .........
Mr. Estes..........................      X   ......  .........  Ms. Sewell...........      X   ......  .........
Mr. Smucker........................      X   ......  .........  Ms. DelBene..........  ......      X   .........
Mr. Hern...........................      X   ......  .........  Ms. Chu..............  ......      X   .........
Ms. Miller.........................      X   ......  .........  Ms. Moore............  ......      X   .........
Dr. Murphy.........................      X   ......  .........  Mr. Kildee...........  ......      X   .........
Mr. Kustoff........................      X   ......  .........  Mr. Beyer............  ......      X   .........
Mr. Fitzpatrick....................      X   ......  .........  Mr. Evans............  ......      X   .........
Mr. Steube.........................      X   ......  .........  Mr. Schneider........      X   ......  .........
Ms. Tenney.........................  ......  ......  .........  Mr. Panetta..........      X   ......  .........
Mrs. Fischbach.....................      X   ......
Mr. Moore..........................      X   ......
Mrs. Steel.........................      X   ......
Ms. Van Duyne......................      X   ......
Mr. Feenstra.......................      X   ......
Ms. Malliotakis....................      X   ......
Mr. Carey..........................      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. 5688, as 
reported. The estimate prepared by the Congressional Budget 
Office (CBO) is included below.

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.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the CBO, the following statement by CBO is 
provided.




    The bill would:
           Expand eligibility for health savings 
        accounts (HSAs)
           Allow distributions in certain circumstances 
        from health flexible spending arrangements or health 
        reimbursement arrangements into HSAs
    Estimated budgetary effects would mainly stem from:
           Reduced collections of individual income 
        taxes because of contributions made by newly eligible 
        HSA participants
           Reduced collections of income and employment 
        taxes because of exclusions for employer contributions 
        to employees' HSAs
    Areas of significant uncertainty include:
           Anticipating the number of people who would 
        contribute to HSAs and projecting the amounts 
        distributed from various arrangements into HSAs
    The Congressional Budget Act of 1974, as amended, 
stipulates that revenue estimates provided by the staff of the 
Joint Committee on Taxation (JCT) will be the official 
estimates for all tax legislation considered by the Congress. 
As such, CBO incorporates those estimates into its cost 
estimates of the effects of legislation. All of the estimates 
for the revenue provisions of H.R. 5688 were provided by JCT.
    Bill summary: H.R. 5688 would amend the Internal Revenue 
Code to expand eligibility for health savings accounts (HSAs) 
and, in certain circumstances, allow distributions from health 
flexible spending arrangements (FSAs) and health reimbursement 
arrangements (HRAs) into HSAs. The bill's provisions would 
affect tax years beginning after December 31, 2025.
    Estimated federal cost: The estimated budgetary effect of 
H.R. 5688 is shown in Table 1. The costs of the legislation 
fall within budget function 800 (general government).

                                                   TABLE 1.--ESTIMATED BUDGETARY EFFECTS OF H.R. 5688
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    By fiscal year, billions of dollars--
                                                   -----------------------------------------------------------------------------------------------------
                                                     2024    2025    2026    2027    2028    2029    2030    2031    2032    2033   2024-2028  2024-2033
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Decreases in Revenues
Estimated Revenues:...............................       0       0    -0.6    -1.2    -1.5    -1.7    -1.8    -1.9    -2.0    -2.2      -3.3      -12.9
    On-Budget.....................................       0       0    -0.5    -0.9    -1.1    -1.2    -1.3    -1.4    -1.5    -1.6      -2.4       -9.5
    Off-Budget....................................       0       0    -0.2    -0.3    -0.4    -0.4    -0.5    -0.5    -0.5    -0.6      -0.9       -3.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Staff of the Joint Committee on Taxation.
Enacting the bill would increase spending subject to appropriation by less than $500,000 in every year and over the 2024-2028 period. Any spending would
  be subject to the availability of appropriated funds.
Components may not sum to totals because of rounding.

    Basis of estimate: The Congressional Budget Act of 1974, as 
amended, stipulates that revenue estimates provided by the 
staff of the Joint Committee on Taxation (JCT) are the official 
estimates for all tax legislation considered by the Congress. 
CBO therefore incorporates such estimates into its cost 
estimates of the effects of legislation. JCT provided the 
revenue estimates presented here for H.R. 5688.\1\
---------------------------------------------------------------------------
    \1\See Joint Committee on Taxation, Estimated Revenue Effects of 
H.R. 5688, the ``Bipartisan HSA Improvement Act of 2023,'' JCX-40-23 
(September 26, 2023), www.jct.gov/publications/2023/jcx-40-23. For more 
about the provisions, see Joint Committee on Taxation, Description of 
H.R. 5688, the ``Bipartisan HSA Improvement Act of 2023,'' JCX 39 23 
(September 26, 2023), www.jct.gov/publications/2023/jcx-39-23.
---------------------------------------------------------------------------
    For this estimate, CBO and JCT assume that the bill will be 
enacted in fiscal year 2024 and that its provisions will affect 
tax years beginning in 2026.
    Revenues: H.R. 5688 would modify HSAs, tax-favored savings 
accounts used to cover medical expenses for people enrolled in 
a high-deductible health plan (HDHP), a type of health 
insurance plan with large deductibles and low monthly premiums. 
Contributions to HSAs are deductible from individual income 
taxes, and contributions on behalf of employees are excludable 
both from individual income taxes and from employment taxes. 
H.R. 5688 would reduce revenues from income tax and payroll tax 
receipts by increasing tax-exempt contributions to HSAs.
    Sections 2, 3, and 4 would expand eligibility for HSAs. 
Under current law, people who are in an HDHP and also have 
additional coverage are not generally eligible to contribute to 
an HSA. H.R. 5688 would expand eligibility to people with 
certain types of additional coverage, such as an arrangement 
with a practitioner to provide primary care services for a 
fixed periodic fee (called a direct primary care service 
arrangement), access through an employer to primary care 
services at an on-site or retail clinic, or access to a 
spouse's FSA. The bill also would treat fees for direct primary 
care service arrangements as medical expenses, allowing 
participants to pay for the service from an HSA.
    Section 5 would allow rollovers from a health FSA or HRA 
directly into an HSA if coverage is established under an HDHP 
when an enrollee has been without such coverage for a four-year 
period. The section sets the allowable amount of such qualified 
HSA distributions up to the total annual limit on FSA 
contributions ($3,050 in 2023, or twice that amount in the case 
of an eligible person who has family coverage under an HDHP). 
Such rollovers would reduce the amount allowable for tax-
deductible contributions to an HSA during a given year.
    JCT estimates that enacting the bill would decrease 
revenues by $12.9 billion over the 2024-2033 period. That 
change includes a reduction of $3.4 billion in off-budget 
revenues (from Social Security payroll taxes).
    Spending subject to appropriation: CBO estimates that 
implementing H.R. 5688 would increase the Internal Revenue 
Service's administrative costs by less than $500,000 over the 
2024-2028 period. That spending would be subject to the 
availability of appropriated funds.
    Uncertainty: JCT's estimates of the budgetary effects of 
H.R. 5688 are uncertain because they are made on the basis of 
underlying projections and other factors that could change 
significantly. In particular, the estimates rely in part on 
CBO's economic projections for the next decade under current 
law and on expectations of the way taxpayers might respond to 
changes in tax law. In this case, the uncertainty involves how 
many people would contribute to an HSA and the amount of 
distributions from various arrangements into HSAs.
    Pay-As-You-Go Considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. Only on-budget changes to outlays or revenues are 
subject to pay-as-you-go procedures. The net changes in 
revenues that are subject to those procedures are shown in 
Table 2.

  TABLE 2.--CBO's ESTIMATE OF THE STATUTORY PAY-AS-YOU-GO EFFECTS OF H.R. 5688, THE BIPARTISAN HSA IMPROVEMENT ACT OF 2023, AS ORDERED REPORTED BY THE
                                                 HOUSE COMMITTEE ON WAYS AND MEANS ON SEPTEMBER 28, 2023
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                         By fiscal year, billions of dollars--
                                                             -------------------------------------------------------------------------------------------
                                                               2024   2025   2026   2027   2028   2029   2030   2031   2032   2033  2024-2028  2024-2033
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          NET INCREASE IN THE ON-BUDGET DEFICIT
 
Pay-As-You-Go Effect........................................      0      0    0.5    0.9    1.1    1.2    1.3    1.4    1.5    1.6       2.4        9.5
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Increase in long-term net direct spending and deficits: JCT 
estimates that enacting H.R. 5688 would not increase net direct 
spending in any of the four consecutive 10-year periods 
beginning in 2034.
    JCT estimates that enacting H.R. 5688 would increase on-
budget deficits by more than $5 billion in at least one of the 
four consecutive 10-year periods beginning in 2034.
    Mandates: JCT has determined that H.R. 5688 would not 
impose intergovernmental or private-sector mandates as defined 
in the Unfunded Mandates Reform Act.
    Estimate prepared by: Federal Revenues: Kathleen Burke, 
Staff of the Joint Committee on Taxation; Federal Costs: 
Matthew Pickford; Mandates: Andrew Laughlin, Staff of the Joint 
Committee on Taxation.
    Estimate reviewed by: Robert Reese, Chief, Natural and 
Physical Resources Cost Estimates Unit; Joshua Shakin, Chief, 
Revenue Estimating Unit; Kathleen FitzGerald, Chief, Public and 
Private Mandates Unit; H. Samuel Papenfuss, Deputy Director of 
Budget Analysis; John McClelland, Director of Tax Analysis.
    Estimate approved by: Phillip L. Swagel, Director, 
Congressional Budget Office.

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


          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives, the Committee made findings and 
recommendations that are reflected in 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 does not authorize funding, so no statement of general 
performance goals and objectives is required.

                       C. Tax Complexity Analysis

    Section 4022(b) of the Internal Revenue Service Reform and 
Restructuring Act of 1998 (the ``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 
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, for each such provision identified by 
the staff of the Joint Committee on Taxation, a summary 
description of the provision is provided below along with an 
estimate of the number and type of affected taxpayers, and a 
discussion regarding the relevant complexity and administrative 
issues.
    Following the analysis of the staff of the Joint Committee 
on Taxation are the comments of the IRS and Treasury regarding 
the provision included in the complexity analysis.

             LIST OF PROVISIONS IN THE COMPLEXITY ANALYSIS

1. Contributions permitted if spouse has health flexible spending 
        arrangement

            Summary description of provision
    Section 4 of the bill provides that for purposes of 
determining whether an individual is eligible to contribute to 
an HSA, coverage under the employee's health FSA for any plan 
year of such FSA is disregarded, provided that certain 
requirements are met. In order to qualify for this exception, 
the aggregate reimbursements under the health FSA for the plan 
year must not exceed the aggregate expenses that would be 
eligible for reimbursement under the FSA if the expenses were 
determined without regard to any expenses paid or incurred with 
respect to the otherwise HSA-eligible individual. This 
provision is effective for plan years beginning after December 
31, 2025.
            Number of affected taxpayers
    It is estimated that the provision will affect over 10 
percent of taxpayers during the budget window.
            Discussion
    The IRS will need to modify its forms and publications to 
reflect the provision. It will need to update information on 
its website and provide communications to external 
stakeholders. It will also need to issue guidance under the 
provision, and may need to make IT programming changes to 
process form changes. Additionally, taxpayers enrolled in a 
spousal FSA may need to keep additional records regarding 
incurred medical expenses.

2. FSA and HRA terminations or conversions to fund HSAs

            Summary description of provision
    Section 5 of the bill permits amounts in a health FSA or 
HRA to be rolled over into an HSA if (1) the distribution is 
made in connection with the employee establishing coverage 
under an HDHP, and (2) during the four-year period preceding 
the establishment of such coverage, the employee was not 
covered under an HDHP (``four-year rule''). Limits apply to the 
amount that may be rolled over, and the distribution must be 
reported on Form W-2. In addition, if the qualified HSA 
distribution is made before the end of the plan year, and the 
individual remains enrolled in the health FSA or HRA after the 
distribution, the health FSA or HRA from which the distribution 
is made must be converted to an HSA-compatible FSA or HRA, as 
applicable, for the portion of the plan year after the 
distribution is made. The provision is effective for 
distributions made after December 31, 2025, in taxable years 
ending after such date.
            Number of affected taxpayers
    It is estimated that the provision will affect over 10 
percent of taxpayers during the budget window.
            Discussion
    Enforcement of the four-year rule may be challenging. In 
order to determine whether an individual has been covered under 
an HDHP for the four-year period, the IRS will need to rely on 
the individual's reporting of this information on the Form 
8889, and it will be difficult for the IRS to collect and 
verify the necessary information for an individual over a 
period of years.
    The IRS will also need to modify its forms and publications 
to reflect the provision. It will need to issue guidance under 
the provision, and it may need to make IT programming changes 
to process form changes. It will need to coordinate with the 
Social Security Administration on changes to the Form W-2. In 
addition, the IRS will need to develop a comprehensive 
communication strategy to ensure that IRS employees and 
taxpayers understand the change. Taxpayers may need to keep 
additional records regarding rollovers and conversions of FSAs 
and HRAs to HSA-compatible arrangements.
            Comments from IRS and Treasury

              D. 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.

  E. 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.

                   F. Duplication of Federal Programs

    In compliance with clause 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 the Federal Program 
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No. 
98-169).

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


  A. Text of Existing Law Amended or Repealed by the Bill, as Reported

    With respect to the requirement of clause 3(e) of rule XIII 
of the Rules of the House of Representatives, changes in 
existing law made by the bill, as reported, this section was 
not made available to the Committee in time for the filing of 
this report.

         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 italics, 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 contributed 
                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)) if during the 4-year 
                        period preceding the date the employee 
                        so establishes coverage the employee 
                        was not covered under such a high 
                        deductible health plan, and
                          (ii) such arrangement is described in 
                        section 223(c)(1)(B)(vi) with respect 
                        to any portion of the plan year 
                        remaining after such distribution is 
                        made, if such employee remains enrolled 
                        in such arrangement.
                  (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 menstrual care products.--For purposes 
of this section and section 105, expenses incurred for 
menstrual care products (as defined in section 223(d)(2)(D)) 
shall be treated as incurred for medical care.
  (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:
          (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, 
                        long-term care, or (in the case of 
                        months or plan years to which paragraph 
                        (2)(E) applies) telehealth and other 
                        remote 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[.],
                          (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, and
                          (v) 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.
                  (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 individuals receiving 
                benefits subject to surprise billing 
                statutes.--An individual shall not fail to be 
                treated as an eligible individual for any 
                period merely because the individual receives 
                benefits for medical care subject to and in 
                accordance with section 9816 or 9817, section 
                2799A-1 or 2799A-2 of the Public Health Service 
                Act, or section 716 or 717 of the Employee 
                Retirement Income Security Act of 1974, or any 
                State law providing similar protections to such 
                individual.
                  (E) Treatment of direct primary care service 
                arrangements.--
                          (i) In general.--A direct primary 
                        care service arrangement shall not be 
                        treated as a health plan for purposes 
                        of subparagraph (A)(ii).
                          (ii) Direct primary care service 
                        arrangement.--For purposes of this 
                        paragraph--
                                  (I) In general.--The term 
                                ``direct primary care service 
                                arrangement'' means, with 
                                respect to any individual, an 
                                arrangement under which such 
                                individual is provided medical 
                                care (as defined in section 
                                213(d)) consisting solely of 
                                primary care services provided 
                                by primary care practitioners 
                                (as defined in section 
                                1833(x)(2)(A) of the Social 
                                Security Act, determined 
                                without regard to clause (ii) 
                                thereof), if the sole 
                                compensation for such care is a 
                                fixed periodic fee.
                                  (II) Limitation.--With 
                                respect to any individual for 
                                any month, such term shall not 
                                include any arrangement if the 
                                aggregate fees for all direct 
                                primary care service 
                                arrangements (determined 
                                without regard to this 
                                subclause) with respect to such 
                                individual for such month 
                                exceed $150 (twice such dollar 
                                amount in the case of an 
                                individual with any direct 
                                primary care service 
                                arrangement (as so determined) 
                                that covers more than one 
                                individual).
                          (iii) Certain services specifically 
                        excluded from treatment as primary care 
                        services.--For purposes of this 
                        paragraph, the term ``primary care 
                        services'' shall not include--
                                  (I) procedures that require 
                                the use of general anesthesia,
                                  (II) prescription drugs 
                                (other than vaccines), and
                                  (III) laboratory services not 
                                typically administered in an 
                                ambulatory primary care 
                                setting.
                        The Secretary, after consultation with 
                        the Secretary of Health and Human 
                        Services, shall issue regulations or 
                        other guidance regarding the 
                        application of this clause.
                  (F) Special rule for qualified items and 
                services.--
                          (i) In general.--For purposes of 
                        subparagraph (A)(ii), an individual 
                        shall not be treated as covered under a 
                        health plan described in subclauses (I) 
                        and (II) of such subparagraph merely 
                        because the individual is eligible to 
                        receive, or receives, qualified items 
                        and services--
                                  (I) at a healthcare facility 
                                located at a facility owned or 
                                leased by the employer of the 
                                individual (or of the 
                                individual's spouse), or
                                  (II) at a healthcare facility 
                                operated primarily for the 
                                benefit of employees of the 
                                employer of the individual (or 
                                of the individual's spouse).
                          (ii) Qualified items and services 
                        defined.--For purposes of this 
                        subparagraph, the term ``qualified 
                        items and services'' means the 
                        following:
                                  (I) Physical examination.
                                  (II) Immunizations, including 
                                injections of antigens provided 
                                by employees.
                                  (III) Drugs or biologicals 
                                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) Preventive care for 
                                chronic conditions (as defined 
                                in clause (iv)).
                                  (VI) Drug testing.
                                  (VII) Hearing or vision 
                                screenings and related 
                                services.
                          (iii) Aggregation.--For purposes of 
                        clause (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.
                          (iv) Preventive care for chronic 
                        conditions.--For purposes of this 
                        subparagraph, the term ``preventive 
                        care for chronic conditions'' means any 
                        item or service specified in the 
                        Appendix of Internal Revenue Service 
                        Notice 2019-45 which is prescribed to 
                        treat an individual diagnosed with the 
                        associated chronic condition specified 
                        in such Appendix for the purpose of 
                        preventing the exacerbation of such 
                        chronic condition or the development of 
                        a secondary condition, including any 
                        amendment, addition, removal, or other 
                        modification made by the Secretary 
                        (pursuant to the authority granted to 
                        the Secretary under paragraph (2)(C)) 
                        to the items or services specified in 
                        such Appendix subsequent to the date of 
                        enactment of this subparagraph.
          (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).
                  (E) Safe harbor for absence of deductible for 
                telehealth.--In the case of--
                          (i) months beginning after March 31, 
                        2022, and before January 1, 2023, and
                          (ii) plan years beginning on or 
                        before December 31, 2021, or after 
                        December 31, 2022, and before January 
                        1, 2025,
                a plan shall not fail to be treated as a high 
                deductible health plan by reason of failing to 
                have a deductible for telehealth and other 
                remote care services.
                  (F) Special rule for surprise billing.--A 
                plan shall not fail to be treated as a high 
                deductible health plan by reason of providing 
                benefits for medical care in accordance with 
                section 9816 or 9817, section 2799A-1 or 2799A-
                2 of the Public Health Service Act, or section 
                716 or 717 of the Employee Retirement Income 
                Security Act of 1974, or any State law 
                providing similar protections to individuals, 
                prior to the satisfaction of the deductible 
                under paragraph (2)(A)(i).
                  (G) Safe harbor for absence of deductible for 
                certain insulin products.--
                          (i) In general.--A plan shall not 
                        fail to be treated as a high deductible 
                        health plan by reason of failing to 
                        have a deductible for selected insulin 
                        products.
                          (ii) Selected insulin products.--For 
                        purposes of this subparagraph--
                                  (I) In general.--The term 
                                ``selected insulin products'' 
                                means any dosage form (such as 
                                vial, pump, or inhaler dosage 
                                forms) of any different type 
                                (such as rapid-acting, short-
                                acting, intermediate-acting, 
                                long-acting, ultra long-acting, 
                                and premixed) of insulin.
                                  (II) Insulin.--The term 
                                ``insulin'' means insulin that 
                                is licensed under subsection 
                                (a) or (k) of section 351 of 
                                the Public Health Service Act 
                                (42 U.S.C. 262) and continues 
                                to be marketed under such 
                                section, including any insulin 
                                product that has been deemed to 
                                be licensed under section 
                                351(a) of such Act pursuant to 
                                section 7002(e)(4) of the 
                                Biologics Price Competition and 
                                Innovation Act of 2009 (Public 
                                Law 111-148) and continues to 
                                be marketed pursuant to such 
                                licensure.
          (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. For purposes of this 
                subparagraph, amounts paid for menstrual care 
                products shall be treated as paid for medical 
                care.
                  (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)[.], or
                          (v) any direct primary care service 
                        arrangement.
                  (D) Menstrual care product.--For purposes of 
                this paragraph, the term ``menstrual care 
                product'' means a tampon, pad, liner, cup, 
                sponge, or similar product used by individuals 
                with respect to menstruation or other genital-
                tract secretions.
          (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), (c)(1)(E)(ii)(II), 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) 
                        and (iii), ``calendar year 1997'', 
                        [and]
                          (ii) in the case of each dollar 
                        amount in subsection (c)(2)(A), 
                        ``calendar year 2003''[.], and
                          (iii) in the case of the dollar 
                        amount in subsection (c)(1)(E)(ii)(II) 
                        for taxable years beginning in calendar 
                        years after 2026, ``calendar year 
                        2025''.
        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), 
        (c)(1)(E)(ii)(II), 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.

           *       *       *       *       *       *       *


Subtitle F--Procedure and Administration

           *       *       *       *       *       *       *


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 
        subsection (g)), 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[.], 
          (18) in the case of a direct primary care service 
        arrangement (as defined in section 223(c)(1)(E)(ii)) 
        which is provided in connection with employment, the 
        aggregate fees for such arrangement for such employee, 
        and
          (19) 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).
  (g) Applicable employer-sponsored coverage.--For purposes of 
subsection (a)(14)--
          (1) In general.--The term ``applicable employer-
        sponsored coverage'' means, with respect to any 
        employee, coverage under any group health plan made 
        available to the employee by an employer which is 
        excludable from the employee's gross income under 
        section 106, or would be so excludable if it were 
        employer-provided coverage (within the meaning of such 
        section 106).
          (2) Exceptions.--The term ``applicable employer-
        sponsored coverage'' shall not include--
                  (A) any coverage (whether through insurance 
                or otherwise) described in section 9832(c)(1) 
                (other than subparagraph (G) thereof) or for 
                long-term care,
                  (B) any coverage under a separate policy, 
                certificate, or contract of insurance which 
                provides benefits substantially all of which 
                are for treatment of the mouth (including any 
                organ or structure within the mouth) or for 
                treatment of the eye, or
                  (C) any coverage described in section 
                9832(c)(3) the payment for which is not 
                excludable from gross income and for which a 
                deduction under section 162(l) is not 
                allowable.
          (3) Coverage includes employee paid portion.--
        Coverage shall be treated as applicable employer-
        sponsored coverage without regard to whether the 
        employer or employee pays for the coverage.
          (4) Governmental plans included.--Applicable 
        employer-sponsored coverage shall include coverage 
        under any group health plan established and maintained 
        primarily for its civilian employees by the Government 
        of the United States, by the government of any State or 
        political subdivision thereof, or by any agency or 
        instrumentality of any such government.

           *       *       *       *       *       *       *


                         VII. DISSENTING VIEWS

    H.R. 5688 (Smucker, R-PA-11 and Blumenauer, D-OR-3) 
includes a series of provisions intended to incentivize use of 
health savings accounts (HSAs), which are tax-preferred savings 
accounts that are paired with high-deductible health plans 
(HDHPs). HDHPs, as the name implies, are health plans that have 
high deductibles, requiring Americans to pay thousands of 
dollars out-of-pocket before insurance begins. More 
specifically, this bill allows individuals participating in a 
direct primary care arrangement or receiving qualified items 
and services at a worksite health clinic to contribute to an 
HSA. It also allows an individual to maintain an HSA even if 
the individual's spouse has a Flexible Spending Account (FSA) 
provided each spouse is under a separate health insurance plan. 
Finally, H.R. 5688 allows distributions from an FSA or Health 
Reimbursement Arrangement (HRA) directly to an HSA in 
connection with establishing coverage under an HDHP. According 
to the Joint Committee on Taxation, this bill would cost 
American taxpayers $12.95 billion over 10 years--and the 
provisions do not take effect until 2026.
    This legislation neither lowers out-of-pocket health care 
costs nor improves insurance coverage. These provisions do 
nothing to lower the cost of care or provide coverage to the 
millions of underinsured or uninsured Americans. HSAs are not 
health insurance but tax- preferred savings accounts: 
Contributions are pretax, assets grow tax-free, and 
distributions are not taxed for qualified medical expenses.\1\ 
The fundamental premise behind HSAs is that individuals should 
be responsible for saving for their own health care needs, 
which is a flawed approach because even paying for non-
catastrophic events is beyond the reach of most American 
families. The American Hospital Association points to the 
prevalence of HDHPs as one of the paramount drivers of medical 
debt. Twenty percent of employers that offer HDHPs do not 
contribute to an HSA for their employees, and most firms offer 
a modest $400 to $799 for individual coverage.\2\ This trend 
leaves employees at risk for all or most of the cost of the 
deductible. Thus, individuals with incomes below $75,000 who 
have HDHPs are likely to forgo needed medical care, 
specifically low-cost primary care services.\3\ Unlike the 
Republican approach to health care, the Democrats' Inflation 
Reduction Act made key investments to lower prescription drug 
prices, reduce patients' out-of-pocket health costs, reduce 
insurance premiums, and enhance the tax credits that make 
insurance coverage affordable for more than 13 million 
Americans.\4\
---------------------------------------------------------------------------
    \1\Joseph Slife & Matt Bell, A Health Savings Account: The Other 
``Retirement Account,'' SOUND MIND INVESTING (Jan. 27, 2023), https://
soundmindinvesting.com/articles/a-health-savings-account-the-other-
retirement-account.
    \2\2022 employer health benefits survey - section 8: High-
deductible health plans with savings option. KFF. (2022, October 27). 
https://www.kff.org/report-section/ehbs-2022-section-8-high-
deductible-health-plans-with-savings-option/
#::text=ENROLLMENT%20IN%20HDHP%2
FHRAS%20AND%20HSA%2DQUALIFIED%20HDHPS&text=Enrollment%20in%20HDHP
%2FSOs%20has,HSA%2Dqualified%20HDHPs%20in%202022.
    \3\Schnettler, T. (2022, July 19). Impact of high deductible health 
plans on Health Care Utilization. Vital Record. https://
vitalrecord.tamhsc.edu/impact-of-high-deductible-health-plans-on-
health-care-utilization/.
    \4\The Inflation Reduction Act Turns One: Millions of Americans Are 
Saving On Health Care, With More To Come. PROTECT OUR CARE, (2023). 
https://www.protectourcare.org/wp-content/uploads/2023/08/IRA-First-
Anniversary-Fact-Sheet.pdf.
---------------------------------------------------------------------------
    HSAs provide little benefit for the average American 
family. While 75 percent of HSA account holders live in ZIP 
codes with a median household income of less than $100,00, only 
four percent of all HSA contributions come from households with 
incomes $50,000 or below, demonstrating that most lower and 
middle income Americans with an account do not actually 
contribute to it.\5\\6\ In contrast, 77 percent of 
contributions to HSAs come from households with incomes over 
$100,000 and 44 percent from households with incomes over 
$200,000.\7\ People with incomes over $100,000 represent 78 
percent of participants maxing out HSA contributions.\8\
---------------------------------------------------------------------------
    \5\2022 Devenir & HSA Council Demographic Survey. DEVENIR RESEARCH 
(July, 13, 2023), https://www.devenir.com/wp-content/uploads/2022-
Devenir-and-HSA-Council-Demographic-Report.pdf.
    \6\Gideon Lukens, House Bills Expanding HSAs Would Boost High-
Income Tax Breaks--Not Affordability of Care, CENTER ON BUDGET AND 
POLICY PRIORITIES (Sep. 27, 2023), https://www.cbpp.org/blog/house-
bills-expanding-hsas-would-boost-high-income-tax-breaks-not-
affordability-of-
care#::text=Two%20bills%20due%20for%20House,costing%20over%20%2470%20
billion%20combined%2C.
    \7\Gideon Lukens, House Bills Expanding HSAs Would Boost High-
Income Tax Breaks--Not Affordability of Care, CENTER ON BUDGET AND 
POLICY PRIORITIES (Sep. 27, 2023), https://www.cbpp.org/blog/house-
bills-expanding-hsas-would-boost-high-income-tax-breaks-not-
affordability-of-
care#::text=Two%20bills%20due%20for%20House,costing%20over%20%2470%20
billion%20combined%2C.
    \8\Gideon Lukens, Expanding Health Savings Accounts Would Boost Tax 
Shelters, Not Access to Care, CENTER ON BUDGET AND POLICY PRIORIITES 
(June 22, 2023). https://www.cbpp.org/research/health/expanding-health-
savings-accounts-would-boost-tax-shelters-not-access-to-care.
---------------------------------------------------------------------------
    HSAs exacerbate health disparities. This legislation does 
nothing to reduce health disparities or address the 
generational wealth gaps and poorer health outcomes for people 
of color. A typical White family in 2019 had eight times the 
wealth of a typical Black family and five times the wealth of a 
typical Latino family. The median wealth of White households 
was $171,000, compared with $17,100 for Black households and 
$20,600 for Latino households.\9\ Thus, people of color benefit 
from the tax benefits of HSAs far less than White people, as 
the preferential tax treatment accrues inequitably along income 
lines and is disproportionately out of reach for many people of 
color. Account balances, contributions, and distributions from 
HSA accounts differ significantly by race, and HSA expansion 
will only exacerbate the health equity and wealth gap.\10\
---------------------------------------------------------------------------
    \9\Dorothy Brown, The Whiteness of Wealth: How the Tax System 
Impoverishes Black Americans--And How We Can Fix It 18 (2021).
    \10\Spiegel, J. Examining HSAs through a DEI lens. EMPLOYEE BENEFIT 
RESEARCH INSTITUTE, (2022, April 7).
---------------------------------------------------------------------------
    HSAs impact solvency of Medicare and Social Security Trust 
Funds. HSAs have multiple tax advantages for accumulating 
wealth. Contributions to HSAs are made with pretax dollars (in 
most states), assets grow tax-free, and distributions are tax-
free if used to pay for qualified medical expenses or as 
reimbursement for such expenses. These tax giveaways will cost 
the federal government more than $180 billion over the next 10 
years, disproportionately benefitting the wealthy--and H.R. 
5688 would add another $12.95 billion to that total over the 
next decade.\11\ Because employer contributions to HSAs are not 
subject to the payroll tax imposed on either the employer or 
the employee, expanding their use will inevitably reduce 
contributions into the Medicare and Social Security Trust 
Funds, harming America's seniors and people with disabilities. 
Closing the Medicaid coverage gap or extending marketplace 
premium tax credits for the next 10 years would cost about the 
same as continuing to fund HSAs.\12\
---------------------------------------------------------------------------
    \11\Gideon Lukens, Expanding Health Savings Accounts Would Boost 
Tax Shelters, Not Access to Care, CENTER ON BUDGET AND POLICY 
PRIORIITES (June 22, 2023). https://www.cbpp.org/research/health/
expanding-health-savings-accounts-would-boost-tax-shelters-not-access-
to-care.
    \12\House GOP Health Care Bills Benefit the Wealthy and Diminish 
Affordable Care Act Protections, PROTECT OUR CARE (June 7, 22023). 
https://www.protectourcare.org/house-gop-health-care-bills-benefit-the-
wealthy-and-diminish-affordable-care-act-protections/.
---------------------------------------------------------------------------
    HSAs are a tax shelter for the wealthy. HSAs 
disproportionately benefit wealthy Americans--and this 
legislation seeks to make HSAs more attractive. People with 
higher incomes 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.\13\ People with income 
in the lowest tax brackets save up to 12 cents on the dollar in 
federal income taxes for their HSA contributions.\14\ By 
comparison, those earning over half a million dollars save 37 
cents for each dollar in federal income taxes put into an 
HSA.\15\ At age 65, withdrawals can be used for any purpose 
with no penalty. This loophole means HSA funds can be used for 
any non-medical expenses after age 65 without paying a penalty 
for non-medical use. HSA funds can be used to cover day-to-day 
expenses, pay for home renovations, or even finance a new 
boat.\16\\17\ Investment advisors see a lucrative opportunity 
and are now marketing HSAs as retirement and wealth 
accumulation products, not health care accounts.\18\ Democrats 
offered an amendment to H.R. 5688 to close this tax loophole, 
but the majority rejected the changes. Republicans would rather 
exacerbate disparities by giving away billions to the wealthy.
---------------------------------------------------------------------------
    \13\Ryan Ermey, This savings account offers a `triple tax 
benefit'--but 88% of users are missing out, CNBC (Feb. 9, 2023), 
https://www.cnbc.com/2023/02/09/health-savings-accounts-how-to-save-
for-retirement.html.
    \14\Gideon Lukens, Expanding Health Savings Accounts Would Boost 
Tax Shelters, Not Access to Care, CENTER ON BUDGET AND POLICY 
PRIORIITES (June 22, 2023). https://www.cbpp.org/research/health/
expanding-health-savings-accounts-would-boost-tax-shelters-not-access-
to-care.
    \15\Id.
    \16\How to avoid penalties on an HSA withdrawal, BENEFIT RESOURCE 
(Aug 4, 2022), https://www.benefitresource.com/blog/how-to-avoid-
penalties-on-an-hsa-withdrawal/.
    \17\5 ways HSAs can help with your retirement, FIDELITY (Dec. 7, 
2022), https://www.fidelity.com/viewpoints/wealth-management/hsas-and-
your-retirement.
    \18\Id.
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    Low-and middle-income Americans often cannot take advantage 
of the tax benefits of HSAs in the same way wealthy Americans 
do. Those with higher incomes can afford to take on the risk of 
a high deductible and are more likely to establish HSAs 
compared to low-income consumers. For those who have little to 
contribute, given fees and extremely low interest rates, these 
accounts may offer little value. Some account holders could 
actually be losing money. Six of seven major institutions 
require a minimum balance to invest their HSA contributions, 
some up to $2,000. Some accounts offer paltry returns of only 
0.01 percent on money invested.\19\ Nearly half of American 
families do not have enough money in the bank to pay a $1,000 
medical bill in the next 30 days, let alone fund an account 
that might earn less interest than a checking account.\20\
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    \19\What is the standard interest rate for a Lively HSA? LIVELY 
(Aug 21, 2023), https://support.livelyme.com/hc/en-us/articles/
4405466272667-What-is-the-standard-interest-rate-for-a-Lively-HSA-.
    \20\Sara Collins, Lauren Haynes, & Relebohile Masitha, The State of 
U.S. Health Insurance in 2022, THE COMMONWEALTH FUND (Sep. 29, 2022), 
https://www.commonwealthfund.org/publications/issue-briefs/2022/sep/
state-us-health-insurance-2022-biennial-survey.
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Amendments
    Mr. Doggett (D-TX) offered an amendment to close a loophole 
whereby those over 65 years of age can spend HSA balances on 
non-health luxury items without penalty. Under current law, HSA 
funds can be used for anything--luxury items, like a yacht, a 
vacation home, a swimming pool--once an HSA account holder 
turns 65. In fact, investment advisors are even advertising the 
fact when they sell these accounts. This amendment would have 
ended that practice, eliminating the current law loophole that 
exempts HSAs distributions used for non- qualifying medical 
expenses. The amendment was defeated by Republicans on a party 
line roll- call vote (18 yeas to 23 nays).
    Mr. Larson (D-CT) offered an amendment to ensure the 
provisions would not take effect unless the Secretary of the 
Treasury, in consultation with the Social Security 
Administration, ensured the Social Security Trust Funds would 
not be affected by implementation of the policies. Because 
employer contributions to HSAs are not subject to the payroll 
tax imposed on either the employer or the employee, expanding 
their use will inevitably reduce contributions into the 
Medicare and Social Security Trust Funds, harming America's 
seniors and people with disabilities. The amendment was 
defeated by Republicans on a party line roll-call vote (18 yeas 
to 24 nays).
    Ms. Chu (D-CA) offered an amendment to require that nothing 
in H.R. 5688 shall be construed to prevent individuals from 
using their HSAs to cover vital reproductive and sexual health 
care. Women's access to health care is under attack by 
extremist Republicans. With the fall of Roe, needed health care 
services are no longer available for millions of women. This 
amendment simply would have ensured that women can use their 
HSAs to pay for needed health items and services, such as 
contraception or out-of-state travel costs to receive 
miscarriage- or abortion-related services. The amendment was 
defeated by Republicans on a party line roll-call vote (16 yeas 
to 24 nays).
    Mr. Kildee (D-MI) offered an amendment to prevent 
individuals with adjusted gross incomes above $400,000 from 
taking a tax deduction. Given that the benefits of HSAs 
disproportionately accrue to the wealthy who are able to use 
these accounts for tax shelters rather than to make health 
services more affordable, this amendment would limit the tax 
advantages of the accounts to those most in need. The amendment 
was defeated by Republicans on a party line roll-call vote (16 
yeas to 24 nays).
    Mr. Pascrell (D-NJ) offered an amendment to increase the 
cap on the State and Local Tax deduction to $60,000 for single 
filers and $120,000 for married couples filing jointly, and 
adjust the cap each year for the cost-of-living. The amendment 
was ruled non-germane. The appeal of the ruling of the chair 
was defeated. Restoring the State and Local Tax deduction is a 
matter of fairness. It properly measures a taxpayer's income, 
prevents double taxation, and it ends the Republican policy of 
penalizing states that raise adequate funds to provide crucial 
services such as police, fire protection, quality public 
schools, and social services to their citizens.
    Mr. Pascrell (D-NJ) offered an amendment to add to H.R. 
5688 a new section that prevents the bill from taking effect 
until the Secretary of the Treasury certifies that the cap on 
the State and Local Tax (SALT) deduction will not result in an 
increase in the tax liability of any taxpayer with an adjusted 
gross income less than $50,000 in calendar years 2023, 2024, or 
2025. The amendment was defeated by Republicans on a party line 
roll-call vote (16 yeas to 24 nays).
            Sincerely,
                                           Richard E. Neal,
                                                    Ranking Member.

                                  [all]