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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 719 Introduced in House (IH)]

103d CONGRESS
  1st Session
                                H. R. 719

  To amend the Internal Revenue Code of 1986 to allow individuals an 
    exclusion for contributions made pursuant to a salary reduction 
   arrangement to accounts established pursuant to employer-provided 
                     family and medical leave plan.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                            February 2, 1993

 Mr. Grandy (for himself, Mr. Orton, Mr. Goodling, Ms. Dunn, Ms. Pryce 
  of Ohio, Mr. Rogers, and Mr. Kolbe) introduced the following bill; 
         which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL

 
  To amend the Internal Revenue Code of 1986 to allow individuals an 
    exclusion for contributions made pursuant to a salary reduction 
   arrangement to accounts established pursuant to employer-provided 
                     family and medical leave plan.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Family and Medical Leave Account Act 
of 1993''.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--The Congress finds that--
            (1) the number of single-parent households and two-parent 
        households in which the single parent or both parents work is 
        increasing significantly;
            (2) employers are increasingly crafting programs and 
        practices to address the work and family conflicts of their 
        employees; and
            (3) there have been some cases of inadequate job protection 
        for some employees who have serious health conditions that 
        prevent them from working for temporary periods.
    (b) Purposes.--The Congress therefore declares that the purposes of 
this Act are--
            (1) to balance the demands of the workplace with the needs 
        of families, to promote stability and economic security in 
        families, and to promote Federal interests in preserving family 
        integrity;
            (2) to promote increased opportunities for employees to 
        take reasonable leave for situations where they are physically 
        unable to perform work, or to care for an immediate family 
        member that is seriously ill, without loss of employment or 
        employment-related benefits; and
            (3) to accomplish such purposes in a manner which 
        accommodates the legitimate interests of employers, promotes 
        the development of creative policies and related benefit 
        programs which are preferred by employees and which take into 
        account the needs of both work and family.

SEC. 3. FAMILY AND MEDICAL LEAVE ACCOUNTS.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to items specifically excluded 
from gross income) is amended by redesignating section 137 as section 
138 and by inserting after section 136 the following new section:

``SEC. 137. FAMILY AND MEDICAL LEAVE ACCOUNTS.

    ``(a) General Rule.--For purposes of this subtitle, no amount shall 
be included in the gross income of an employee--
            ``(1) by reason of an employer contribution to a family and 
        medical leave account for the benefit of such employee (whether 
        pursuant to a salary reduction arrangement or otherwise), or
            ``(2) because the employee has an election whether salary 
        reduction contributions will be made by such employer to such 
        an account or received by the employee in cash.
    ``(b) Limitation.--The amount excluded from gross income under 
subsection (a) for any taxable year shall not exceed the amount which, 
when added to the amount in the account as of the beginning of the 
taxable year, will equal \1/2\ of the employee's compensation (as 
defined in section 414(q)(7)) from such employer for the calendar year 
ending with or within such taxable year. In applying the preceding 
sentence, compensation in excess of $50,000 shall not be taken into 
account.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Family and medical leave account.--The term `family 
        and medical leave account' means an account maintained by the 
        employer exclusively for the benefit of the individual for 
        whose benefit the account is established, but only if--
                    ``(A) the account is established pursuant to a 
                qualified family and medical leave plan of such 
                employer and such plan meets the requirements of 
                subsection (d), and
                    ``(B) the written governing instrument creating the 
                account meets the following requirements:
                            ``(i) No contribution will be accepted 
                        unless it is in cash and contributions will not 
                        be accepted for any taxable year in excess of 
                        the limitation under subsection (b).
                            ``(ii) Distributions from the account may 
                        be made only by the employer and only if--
                                    ``(I) the distribution is a 
                                qualified distribution (as defined in 
                                subsection (e)(2)(B)),
                                    ``(II) the employee dies or 
                                separates from service, or
                                    ``(III) the employee elects (as 
                                provided in subsection (h)(1)) to 
                                discontinue participation in the 
                                qualified family and medical leave plan 
                                of such employer.
                            ``(iii) No part of the account assets will 
                        be invested in life insurance contracts.
                            ``(iv) The interest of the individual in 
                        the balance of his account is nonforfeitable.
                            ``(v) The assets of the account will not be 
                        commingled with other property except in a 
                        common trust fund or common investment fund.
            ``(2) Salary reduction contribution.--The term `salary 
        reduction contribution' means any employer contribution made 
        pursuant to a salary reduction arrangement with an employee.
            ``(3) Employee; employer.--The rules of paragraphs (1) and 
        (4) of section 401(c) shall apply for purposes of this section. 
        Section 1372 shall not apply for purposes of this section.
    ``(d) Requirements.--The requirements of this subsection are met if 
the requirements of each of the following paragraphs are met.
            ``(1) Eligibility requirements.--
                    ``(A) In general.--A qualified family and medical 
                leave plan of an employer satisfies the requirements of 
                this paragraph for any year only if each employee who 
                has performed at least 1 year of service (as defined in 
                section 411(a)(5)) for such employer is eligible to 
                enter into a salary reduction arrangement with such 
                employer for purposes of having contributions made to a 
                family and medical leave account.
                    ``(B) Excluded employees.--For purposes of 
                subparagraph (A), there shall be excluded--
                            ``(i) employees described in subparagraph 
                        (A) or (C) of section 410(b)(3),
                            ``(ii) employees who normally work less 
                        than 17\1/2\ hours per week, and
                            ``(iii) employees who elect under 
                        subsection (h)(1) to discontinue participation 
                        in such plan.
            ``(2) Nondiscrimination requirements for matching 
        contributions (if any).--In the case of an employer who makes 
        contributions to the family and medical leave account of any 
        employee in addition to salary reduction contributions to such 
        account, the qualified family and medical leave plan of such 
        employer satisfies the requirements of this paragraph for any 
        year only if--
                    ``(A) such additional contributions are made on 
                behalf of each employee who elects to have such salary 
                reduction contributions made, and
                    ``(B) the amount of such additional contributions 
                for each employee is determined using the same 
                percentage of the salary reduction contributions.
    ``(e) Treatment of Distributions.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, any amount paid or distributed out of a family and 
        medical leave account shall be included in the gross income of 
        the individual for whose benefit such account was established. 
        The basis of the individual in such account shall be zero.
            ``(2) Additional tax on certain amounts.--
                    ``(A) In general.--If any distribution which is not 
                a qualified distribution is made from a family and 
                medical leave account during any taxable year, the tax 
                under this chapter for such taxable year of the 
                individual for whose benefit such account was 
                established shall be increased by an amount equal to 10 
                percent of the amount of such distribution.
                    ``(B) Qualified distribution.--For purposes of 
                subparagraph (A), the term `qualified distribution' 
                means any distribution--
                            ``(i) which is made by the employer during 
                        a period of qualified family or medical leave 
                        (as defined in section 426), and
                            ``(ii) the amount of which, when added to 
                        the other qualified distributions made to the 
                        individual during such period, does not exceed 
                        the excess of--
                                    ``(I) the amount which would be the 
                                compensation of such individual from 
                                the employer for such period 
                                (determined on the basis of the average 
                                rate of compensation for such 
                                individual), over
                                    ``(II) the compensation (if any) 
                                received (or to be received) by to such 
                                individual from such employer for such 
                                period.
                Such term shall not include any distribution made 
                during the 1-year period beginning on the date such 
                account was established.
            ``(3) Excess contributions returned before due date of 
        return.--Paragraphs (1) and (2) shall not apply to the 
        distribution of any contribution paid during a taxable year to 
        a family and medical leave account to the extent that such 
        contribution exceeds the amount excludable under subsection (a) 
        if--
                    ``(A) such distribution is received on or before 
                the day prescribed by law (including extensions of 
                time) for filing such individual's return for such 
                taxable year,
                    ``(B) no exclusion is allowed under subsection (a) 
                with respect to such excess contribution, and
                    ``(C) such distribution is accompanied by the 
                amount of net income attributable to such excess 
                contribution.
        Any net income described in subparagraph (C) shall be included 
        in the gross income of the individual for the taxable year in 
        which it is received.
    ``(f) Tax Treatment of Accounts.--
            ``(1) Exemption from tax.--A family and medical leave 
        account shall be exempt from taxation under this subtitle 
        unless such account has ceased to be a family and medical leave 
        account by reason of paragraph (2). Notwithstanding the 
        preceding sentence, such an account shall be subject to the 
        taxes imposed by section 511 (relating to imposition of tax on 
        unrelated business income of charitable, etc. organizations).
            ``(2) Effect of pledging account as security.--If, during 
        any taxable year, the individual for whose benefit a family and 
        medical leave account was established uses the account or any 
        portion thereof as security for a loan, the portion so used is 
        treated as distributed to that individual during a period which 
        is not a period of qualified family or medical leave.
    ``(g) Special Rules.--
            ``(1) Election to discontinue participation in qualified 
        family and medical leave plan.--Each employee who is a 
        participant in a qualified family and medical leave plan of the 
        employer may elect to discontinue participation in such plan. 
        If such election is made--
                    ``(A) the employer shall distribute to the employee 
                the balance in any family and medical leave account of 
                such employee which is held by the employer, and
                    ``(B) such employee may not participate in the 
                qualified family and medical leave plan of such 
                employer during the 2-year period beginning on the date 
                of such distribution.
            ``(2) Treatment of account on separation from service.--In 
        the case of an employee who separates from service--
                    ``(A) paragraphs (1) and (2) of subsection (e) 
                shall not apply to any transfer from any family and 
                medical leave account of such employee to another 
                family and medical leave account of such employee (and 
                subsection (b) shall not apply to the receipt of such 
                transfer by such other account) if such transfer is 
                made not later than the 180th day after the date of 
                separation, and
                    ``(B) if all amounts in any family and medical 
                leave account with respect to the former employer is 
                not so transferred during such 180-day period, the 
                employer shall distribute to the employee the balance 
                in such account as of the close of such period.
        Any amount distributed to the employee under subparagraph (B) 
        may be rolled into an individual retirement plan of such 
        employee notwithstanding any other provision of law.
            ``(3) Treatment of account on death.--In the case of the 
        death of an employee, the employer shall distribute the balance 
        of any family and medical leave account of such employee to the 
        designated beneficiaries of such employee.
            ``(4) Community property laws.--This section shall be 
        applied without regard to any community property laws.
    ``(h) Reports.--The employer maintaining any family and medical 
leave account shall make such reports regarding such account to the 
Secretary and to the individual for whose benefit the account is 
maintained with respect to contributions, distributions, and such other 
matters as the Secretary may require under regulations. 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 those regulations.''

SEC. 4. QUALIFIED FAMILY AND MEDICAL LEAVE PLANS.

    (a) In General.--Subchapter D of chapter 1 of the Internal Revenue 
Code of 1986 (relating to deferred compensation, etc.) is amended by 
adding at the end thereof the following new part:

         ``PART III--QUALIFIED FAMILY AND MEDICAL LEAVE PLANS.

                              ``Sec. 426. Qualified family and medical 
                                        leave plans.
                              ``Sec. 427. Certification requirements.
                              ``Sec. 428. Employment and benefits 
                                        protection.

``SEC. 426. QUALIFIED FAMILY AND MEDICAL LEAVE PLANS.

    ``(a) In General.--For purposes of this title, the term `qualified 
family and medical leave plan' means any plan which is maintained by an 
employer for the purpose of providing employees with family or medical 
leave and which meets the requirements of sections 427 and 428.
    ``(b) Qualified Family or Medical Leave.--For purposes of this 
section, the term `qualified family or medical leave' means any period 
of leave under a qualified family or medical leave plan of an employee 
(irrespective of whether, or the extent to which, pay is provided 
thereunder together with such leave) for 1 or more of the following 
reasons:
            ``(1) Because of the physical incapacitation of the 
        employee resulting from the employee's own serious health 
        condition, including medical disability associated with the 
        birth of a son or daughter of the employee.
            ``(2) In order to care for the employee's son, daughter, 
        spouse, or parent who has a serious health condition.
            ``(3) In order to care for a newborn son or daughter or a 
        newly adopted son or daughter under the age of 6.
    ``(c) Serious health condition.--For purposes of this section, the 
term `serious health condition' means a condition caused by an 
accident, disease, or health condition which--
            ``(1) poses imminent danger of death;
            ``(2) requires hospitalization relating to the birth of a 
        child or involving an organ transplant, limb amputation, or 
        other procedure of similar severity; or
            ``(3) a mental or physical condition which requires 
        constant in-home care.
    ``(d) Son or Daughter.--For purposes of this section, the term `son 
or daughter' of an employee means a biological, adopted, or foster 
child of the employee, a stepchild of the employee, or a child of which 
the employee has legal guardianship of the person, who is--
            ``(1) under 18 years of age, or
            ``(2) 18 years of age or older and incapable of self-care 
        because of mental or physical disability or required complete 
        bed rest.
    ``(e) Parent.--For purposes of this section, the term `parent' 
means the biological parent of the child or an individual who has legal 
guardianship of the person of the child when the child is a son or 
daughter.

``SEC. 427. CERTIFICATION REQUIREMENTS.

    ``(a) In General.--A family and medical leave plan shall not be 
treated as meeting the requirements of this section unless the plan 
provides--
            ``(1) that the employer may require that a claim for leave 
        described in paragraph (1) or (2) of section 426(b) be 
        supported by certification issued by the health care provider 
        of the employee or of the employee's son, daughter, spouse, or 
        parent, whichever is appropriate, and
            ``(2) that the employee must provide a copy of such 
        certification to the employer.
    ``(b) Sufficient Certification.--Such certification shall be 
treated as sufficient if it states--
            ``(1) the date on which the serious health condition 
        commenced,
            ``(2) the probable duration of the condition,
            ``(3) the appropriate medical facts within the provider's 
        knowledge regarding the condition, and
            ``(4)(A) for purposes of leave described in section 
        426(b)(1), a statement that the employee is unable to perform 
        the functions of the employee's position, and
            ``(B) for purposes of leave described in section 426(b)(2), 
        an estimate of the amount of time that the eligible employee is 
        needed to care for the son, daughter, spouse, or parent.
    ``(c) Second Opinion.--A family and medical leave plan shall not be 
treated as meeting the requirements of this section unless the plan 
provides--
            ``(1) that, in any case in which the employer has reason to 
        doubt the validity of the certification provided in accordance 
        with subsection (a) for leave described in paragraph (1) or (2) 
        of section 426(b), the employer may require, at its own 
        expense, that the employee obtain the opinion of a second 
        health care provider designated or approved by the employer 
        concerning any information certified in accordance with 
        subsection (a) for such leave, and
            ``(2) that any health care provider designated or approved 
        pursuant to paragraph (1) may not be employed on a regular 
        basis by the employer.
    ``(d) Resolution of Conflicting Opinions.--A family and medical 
leave plan shall not be treated as meeting the requirements of this 
section unless the plan provides--
            ``(1) that, in any case in which the second opinion 
        described in subsection (c) differs from the original 
        certification provided under subsection (a), the employer may 
        require, at its own expense, that the employee obtain the 
        opinion of a third health care provider designated or approved 
        jointly by the employer and the employee concerning the 
        information certified in accordance with subsection (a), and
            ``(2) that the opinion of the third health care provider 
        concerning the information certified in accordance with 
        subsection (a) will be considered to be final and will be 
        binding on the employer and the employee.
    ``(e) Health Care Provider.--For purposes of this section, the term 
`health care provider' means a doctor of medicine or osteopathy legally 
authorized to practice medicine and surgery by the State in which the 
doctor performs such function or action.

``SEC. 428. EMPLOYMENT AND BENEFITS PROTECTION.

    ``(a) Restoration to Position.--
            ``(1) In general.--A family and medical leave plan shall 
        not be treated as meeting the requirements of this section 
        unless, under the plan--
                    ``(A) any employee who takes leave under the plan 
                for its intended purpose is entitled, upon return from 
                such leave--
                            ``(i) to be restored by the employer to the 
                        position of employment held by the employee 
                        when the leave commenced, or
                            ``(ii) to be restored to an equivalent 
                        position with equivalent employment benefits, 
                        pay, and other terms and conditions of 
                        employment, and
                    ``(B) the taking of leave under the plan does not 
                result in the loss of any employment benefit earned 
                before the date on which the leave commenced.
            ``(2) Nothing in this subsection shall be construed to 
        require a family and medical leave plan to provide for the 
        entitlement of any restored employee to--
                    ``(A) the accrual of any seniority or employment 
                benefits during any period of leave, or
                    ``(B) any right, benefit, or position of employment 
                other than any right, benefit, or position to which the 
                employee would have been entitled had the employee not 
                taken the leave.
            ``(3) As a condition to restoration under the plan pursuant 
        to paragraph (1)(A), the plan shall not be treated as meeting 
        the requirements of this section unless the plan provides that 
        the employer may have a policy that requires each employee to 
        receive certification from the employee's health care provider 
        that the employee is able to resume work, except that nothing 
        in this paragraph shall supersede a valid State or local law or 
        a collective bargaining agreement that governs the return to 
        work of employees taking leave under section 426(b).
    ``(b) Maintenance of Health Benefits.--
            ``(1) In general.--A family and medical leave plan shall 
        not be treated as meeting the requirements of this section 
        unless, under the plan, during any period an eligible employee 
        takes leave under a family and medical leave plan, if such 
        employee is also covered under a group health plan maintained 
        by the employer at the time such leave commences, the employer 
        must maintain coverage under such group health plan for the 
        duration of such leave at the level and under the conditions 
        coverage would have been provided if the employee had continued 
        in employment continuously from the date the employee commenced 
        the leave until the date the employee is restored under the 
        family and medical leave plan pursuant to subsection (a).
            ``(2) Reimbursement of employer for providing continued 
        health coverage.--In any case in which--
                    ``(A) an employee is a participant in a group 
                health plan maintained by the employer and there is in 
                effect an election by the employee to participate in a 
                family and medical leave plan, and
                    ``(B) under such family and medical leave plan the 
                employer is required to make at least a matching 
                employer contribution to the plan with respect to each 
                employee contribution of such employee,
        nothing in this Act or title I of the Employee Retirement 
        Income Security Act of 1974 shall be construed to preclude such 
        family and medical leave plan from providing for reimbursement 
        to the employer for the cost to the employer of coverage of 
        such employee maintained under such group health plan for the 
        duration of the leave taken by such employee.
    ``(c) No Bar to Agreement Concerning Alternative Employment.--
            ``(1) In general.--Nothing in this part or title I of the 
        Employee Retirement Income Security Act of 1974 or any family 
        and medical leave plan shall be construed to prohibit an 
        employer maintaining such a plan and an employee covered under 
        such plan from mutually agreeing to alternative employment of 
        the employee throughout the period during which the employee 
        would be entitled to leave under such plan. A family and 
        medical leave plan shall not be treated as meeting the 
        requirements of this section unless, under the plan, any such 
        period of alternative employment does not cause a reduction in 
        the period of temporary leave to which the employee is entitled 
        under the plan pursuant to section 426(b).
            ``(2) The employer may request that, for purposes of 
        paragraph (1), certification required under the plan pursuant 
        to section 427(a) that is issued in any case involving leave 
        described in section 426(b)(1) include an explanation of the 
        extent to which the eligible employee is unable to perform the 
        functions of the employee's position.''

SEC. 5. TECHNICAL AMENDMENTS.

    (a) Tax on Excess Contributions.--Section 4973 of the Internal 
Revenue Code of 1986 (relating to tax on excess contributions to 
individual retirement accounts, certain section 403(b) contracts, and 
certain individual retirement annuities) is amended--
            (1) by inserting ``family and medical leave accounts,'' 
        after ``accounts,'' in the heading of such section,
            (2) by redesignating paragraph (2) of subsection (a) as 
        paragraph (3) and by inserting after paragraph (1) the 
        following:
            ``(2) a family and medical leave account (within the 
        meaning of section 220(c)),'',
            (3) by striking ``or'' at the end of paragraph (1) of 
        subsection (a), and
            (4) by adding at the end thereof the following new 
        subsection:
    ``(d) Excess Contributions to Family and Medical Leave Accounts.--
For purposes of this section, in the case of a family and medical leave 
account, the term `excess contributions' means the amount by which the 
amount contributed for the taxable year to the account exceeds the 
amount excludable under section 220 for such taxable year. For purposes 
of this subsection, any contribution which is distributed out of the 
family and medical leave account in a distribution to which section 
220(e)(3) applies shall be treated as an amount not contributed.''
    (b) Failure To Provide Reports on Family and Medical Leave 
Accounts.--Section 6693 of such Code (relating to failure to provide 
reports on individual retirement account or annuities) is amended--
            (1) by inserting ``or on family and medical leave 
        accounts'' after ``annuities'' in the heading of such section, 
        and
            (2) by adding at the end of subsection (a) the following: 
        ``The person required by section 220(i) to file a report 
        regarding a family and medical leave account at the time and in 
        the manner required by such section shall pay a penalty of $50 
        for each failure unless it is shown that such failure is due to 
        reasonable cause.''
    (c) Clerical Amendments.--
            (1) The table of sections for part III of subchapter B of 
        chapter 1 of such Code is amended by striking the item relating 
        to section 137 and inserting the following:

                              ``Sec. 137. Family and medical leave 
                                        accounts.
                              ``Sec. 138. Cross references to other 
                                        Acts.''
            (2) The table of sections for chapter 43 of such Code is 
        amended by striking the item relating to section 4973 and 
        inserting the following:

                              ``Sec. 4973. Tax on excess contributions 
                                        to individual retirement 
                                        accounts, family and medical 
                                        leave accounts, certain 403(b) 
                                        contracts, and certain 
                                        individual retirement 
                                        annuities.''
            (3) The table of sections for subchapter B of chapter 68 of 
        such Code is amended by inserting ``or on family and medical 
        leave accounts'' after ``annuities'' in the item relating to 
        section 6693.
            (4) The table of parts for subchapter D of chapter 1 of 
        such Code is amended by adding at the end thereof the following 
        new item:

                              ``Part III--Qualified family and medical 
                                        leave plans''.

SEC. 6. EFFECTIVE DATE.

    The amendments made by this Act shall apply to taxable years 
beginning after December 31, 1992.

                                 <all>

HR 719 IH----2
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