II

106TH CONGRESS

1ST SESSION S. 1350

To amend the Internal Revenue Code of 1986 to expand the availability

of medical savings accounts.

IN THE SENATE OF THE UNITED STATES

JULY 12, 1999

Mr. GRASSLEY (for himself and Mr. TORRICELLI) introduced the following

bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to expand

the availability of medical savings accounts.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Medical Savings Ac5 count Improvement Act of 1999’’.

6 SEC. 2. EXPANSION OF AVAILABILITY OF MEDICAL SAV7 INGS ACCOUNTS.

8 (a) REPEAL OF LIMITATIONS ON NUMBER OF MED9 ICAL SAVINGS ACCOUNTS.—
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1 (1) IN GENERAL.—Subsections (i) and (j) of

2 section 220 of the Internal Revenue Code of 1986

3 are hereby repealed.

4 (2) CONFORMING AMENDMENTS.—

5 (A) Paragraph (1) of section 220(c) of

6 such Code is amended by striking subparagraph

7 (D).

8 (B) Section 138 of such Code (relating to

9 Medicare+Choice MSA) is amended by striking

10 subsection (f).

11 (b) AVAILABILITY NOT LIMITED TO ACCOUNTS FOR

12 EMPLOYEES OF SMALL EMPLOYERS AND SELF-EM13 PLOYED INDIVIDUALS.—

14 (1) IN GENERAL.—Section 220(c)(1)(A) of the

15 Internal Revenue Code of 1986 (relating to eligible

16 individual) is amended to read as follows:

17 ‘‘(A) IN GENERAL.—The term ‘eligible in18 dividual’ means, with respect to any month, any

19 individual if—

20 ‘‘(i) such individual is covered under a

21 high deductible health plan as of the 1st

22 day of such month, and

23 ‘‘(ii) such individual is not, while cov24 ered under a high deductible health plan,

25 covered under any health plan—
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1 ‘‘(I) which is not a high deduct2 ible health plan, and

3 ‘‘(II) which provides coverage for

4 any benefit which is covered under the

5 high deductible health plan.’’

6 (2) CONFORMING AMENDMENTS.—

7 (A) Section 220(c)(1) of such Code is

8 amended by striking subparagraph (C).

9 (B) Section 220(c) of such Code is amend10 ed by striking paragraph (4) (defining small

11 employer) and by redesignating paragraph (5)

12 as paragraph (4).

13 (C) Section 220(b) of such Code is amend14 ed by striking paragraph (4) (relating to deduc15 tion limited by compensation) and by redesig16 nating paragraphs (5), (6), and (7) as para17 graphs (4), (5), and (6), respectively.

18 (c) INCREASE IN AMOUNT OF DEDUCTION ALLOWED

19 FOR CONTRIBUTIONS TO MEDICAL SAVINGS ACCOUNTS.—

20 (1) IN GENERAL.—Paragraph (2) of section

21 220(b) of such Code is amended to read as follows:

22 ‘‘(2) MONTHLY LIMITATION.—The monthly limitation for any month is the amount equal to 1 23 ⁄12 of

24 the annual deductible (as of the first day of such
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1 month) of the individual’s coverage under the high

2 deductible health plan.’’.

3 (2) CONFORMING AMENDMENT.—Clause (ii) of

4 section 220(d)(1)(A) of such Code is amended by

5 striking ‘‘75 percent of’’.

6 (d) BOTH EMPLOYERS AND EMPLOYEES MAY CON7 TRIBUTE TO MEDICAL SAVINGS ACCOUNTS.—Paragraph

8 (4) of section 220(b) of such Code, as redesignated by sub9 section (b)(2)(C), is amended to read as follows:

10 ‘‘(4) COORDINATION WITH EXCLUSION FOR EM11 PLOYER CONTRIBUTIONS.—The limitation which

12 would (but for this paragraph) apply under this sub13 section to the taxpayer for any taxable year shall be

14 reduced (but not below zero) by the amount which

15 would (but for section 106(b)) be includible in the

16 taxpayer’s gross income for such taxable year.’’.

17 (e) REDUCTION OF PERMITTED DEDUCTIBLES

18 UNDER HIGH DEDUCTIBLE HEALTH PLANS.—

19 (1) IN GENERAL.—Subparagraph (A) of section

20 220(c)(2) of such Code (defining high deductible

21 health plan) is amended—

22 (A) by striking ‘‘$1,500’’ and inserting

23 ‘‘$1,000’’, and

24 (B) by striking ‘‘$3,000’’ in clause (ii) and

25 inserting ‘‘$2,000’’.
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1 (2) CONFORMING AMENDMENT.—Subsection (g)

2 of section 220 of such Code is amended—

3 (A) by striking ‘‘1998’’ and inserting

4 ‘‘1999’’; and

5 (B) by striking ‘‘1997’’ and inserting

6 ‘‘1998’’.

7 (f) MEDICAL SAVINGS ACCOUNTS MAY BE OFFERED

8 UNDER CAFETERIA PLANS.—Subsection (f) of section

9 125 of such Code is amended by striking ‘‘106(b),’’.

10 (g) EFFECTIVE DATE.—The amendments made by

11 this section shall apply to taxable years ending after the

12 date of the enactment of this Act.

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