| ACTION FROM THE COMMITTEE ON WAYS AND MEANSFOR IMMEDIATE RELEASE June 20, 2003 FC 9-A | CONTACT: (202) 225-3625 |
Thomas Announces Committee Action on H.R. 2351, the “Health Savings Account Availability Act”Congressman
Bill Thomas (R-CA), Chairman of the Committee on Ways and Means, today
announced that on Thursday, June 19, 2003, the Committee ordered favorably
reported, H.R. 2351, “the Health Savings Account Availability Act,” as amended, by recorded vote of 23-16.
DESCRIPTION OF H.R. 2351
AS APPROVED:
- The bill would create new,
tax-preferred personal savings accounts, called Health Savings
Accounts (HSAs), to help families save for qualified health care and medical
expenses.
- The HSAs could be established by
individuals who meet the income requirements and are either uninsured or
covered by a “minimum deductible” health plan. The HSAs would not be tied to
an employer plan – any individual who meets the eligibility requirements could
open an HSA.
- A “minimum deductible” plan would
be one that has a deductible of at least $500 for self-coverage policies and
$1,000 for family coverage policies.
- Contributions would begin to
phase-out for single individuals with incomes above $45,000 ($50,000 in 2005
and thereafter) and for married couples and heads of households with incomes
above $65,000 ($80,000 in 2007 and thereafter). These would be the same income
limits that apply to deductible Individual Retirement Account contributions.
- The HSAs could be offered under an
employer’s cafeteria plan. A cafeteria plan is an employer-sponsored benefit
package that offers employees a choice between taking cash (on a taxable basis)
or receiving qualified benefits, such as dependent care and group-term life
insurance, on a tax-free basis.
- Individuals, family members, and employers could contribute to an HSA.
In addition, up to $500 of unused balances in a Flexible Spending Account (FSA) could be transferred to an HSA.
- The maximum annual contribution to
an HSA would be $2,000 for individuals with self-coverage policies and $4,000
for individuals with family coverage. The limits for uninsured individuals
would be $2,000 if the individual has no dependents and $4,000 otherwise.
- Individuals age 55 and older could make catch-up contributions to
their HSAs.
- The HSAs would be tax-preferred.
- Contributions made by the account
holder or the employer would be tax-deductible. They would be tax-free if the HSA is offered under a cafeteria plan. Rollovers from an FSA would also be
made on a tax-free basis.
- Investment earnings in an HSA
would accrue tax-free.
- Distributions from an HSA would be
tax-free if used for qualified medical expenses.
- Contributions made by a family
member would not be deductible. However, investment earnings on these
contributions would accrue tax-free.
- Qualified medical expenses would
be expenses incurred for the individual,
the individual's spouse, or the individual's dependents as long as they are not
reimbursed by insurance or otherwise. The following expenses would qualify:
- Amounts paid for the diagnosis,
cure, mitigation, treatment or prevention of disease, including prescription
drugs,
- Transportation primarily for and
essential to medical care referred to above (such as ambulances),
- Qualified long-term care services
and long-term care insurance,
- Continuation health coverage
required by Federal law,
- Health insurance when the
individual is receiving unemployment compensation,
- Health insurance for the uninsured
(that meets the minimum deductible requirements), and
- Retiree health insurance after age
65, including Medicare Part B premiums.
- Nonqualified distributions would be subject to income tax and a
15-percent penalty. The 15-percent
penalty would not apply in the case of distributions made after age 65 or
distributions made due to death or disability.
- The HSA assets would be
transferred to a designated surviving spouse upon the death of the account
holder. Otherwise, the assets would be included in the deceased beneficiary’s
estate.
- The bill would modify the
“use-it-or-lose-it rules” for FSAs. Under the bill, up to $500 of unused
balances in a FSA would be carried forward in the FSA, or transferred to an
HSA. If the individual were not eligible to contribute to an HSA in a
given year, up to $500 of unused balances could be transferred to a
qualified pension plan.
- The bill would clarify that payments to medical service providers
through the use of debt, credit, and stored-value cards are not
reportable by the employer on Form 1099-MISC under section 6041.
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