I 

109TH CONGRESS 

2D SESSION H. R. 5262 

To amend the Internal Revenue Code of 1986 to provide tax incentives 

for the payment of premiums for high deductible health plans, and 

for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 2, 2006 

Mr. CANTOR (for himself, Mr. SAM JOHNSON of Texas, Mr. HERGER, Mrs. 

BLACKBURN, Mr. BURGESS, Mr. PRICE of Georgia, and Mr. CAMP) 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 provide 

tax incentives for the payment of premiums for high 

deductible health plans, and for other purposes. 

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, ETC. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Tax Free Health Savings Act of 2006’’. 

6 (b) TABLE OF CONTENTS.—The table of contents for 

7 this Act is as follows: 

Sec. 1. Short title, etc. 

Sec. 2. Deduction of premiums for high deductible health plans. 


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Sec. 3. Credit for certain employment taxes paid with respect to premiums for 

high deductible health plans and contributions to health savings accounts. 

Sec. 4. Refundable credit for health insurance coverage under high deductible 

health plan. 

Sec. 5. Advance payment of credit as premium payment for high deductible 

health insurance. 

Sec. 6. Increase in contribution limits for health savings accounts. 

Sec. 7. Health reimbursement arrangements and spending arrangements in 

combination with health savings accounts. 

Sec. 8. Certain expenses treated as qualified medical expenses. 

Sec. 9. Exception to requirement for employers to make comparable health savings account contributions. 

1 SEC. 2. DEDUCTION OF PREMIUMS FOR HIGH DEDUCTIBLE 

2 HEALTH PLANS. 

3 (a) IN GENERAL.—Part VII of subchapter B of chap4 ter 1 of the Internal Revenue Code of 1986 (relating to 

5 additional itemized deductions for individuals) is amended 

6 by redesignating section 224 as section 225 and by insert7 ing after section 223 the following new section: 

8 ‘‘SEC. 224. PREMIUMS FOR HIGH DEDUCTIBLE HEALTH 

9 PLANS. 

10 ‘‘(a) DEDUCTION ALLOWED.—In the case of an indi11 vidual, there shall be allowed as a deduction for the tax12 able year the aggregate amount paid by the taxpayer as 

13 premiums under a high deductible health plan with respect 

14 to months during such year for which such individual is 

15 an eligible individual with respect to such health plan. 

16 ‘‘(b) DEFINITIONS.—For purposes of this section— 

17 ‘‘(1) ELIGIBLE INDIVIDUAL.—The term ‘eligible 

18 individual’ means an individual who— 

19 ‘‘(A) is described in section 223(c)(1), and 


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1 ‘‘(B) is the taxpayer or the taxpayer’s 

2 spouse and dependents. 

3 ‘‘(2) HIGH DEDUCTIBLE HEALTH PLAN.—The 

4 term ‘high deductible health plan’ has the meaning 

5 given such term by section 223(c)(2). 

6 ‘‘(c) SPECIAL RULES.— 

7 ‘‘(1) DEDUCTION LIMITS.— 

8 ‘‘(A) DEDUCTION ALLOWABLE FOR ONLY 1

9 PLAN.—For purposes of this section, in the 

10 case of an individual covered by more than 1 

11 high deductible health plan for any month, the 

12 individual may only take into account amounts 

13 paid for such month for the plan with the low14 est premium. 

15 ‘‘(B) PLANS COVERING INELIGIBLE INDI16 VIDUALS.—If 2 or more individuals are covered 

17 by a high deductible health plan for any month 

18 but only 1 of such individuals is an eligible indi19 vidual for such month, only 50 percent of the 

20 aggregate amount paid by such eligible indi21 vidual as premiums under the plan with respect 

22 to such month shall be taken into account for 

23 purposes of this section. 

24 ‘‘(2) GROUP HEALTH PLAN COVERAGE.— 


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1 ‘‘(A) IN GENERAL.—No deduction shall be 

2 allowed for an individual under subsection (a) 

3 for any amount paid for coverage under a high 

4 deductible health plan for a month if that indi5 vidual participates in any coverage under a 

6 group health plan (within the meaning of sec7 tion 5000 without regard to section 5000(d)). 

8 For purposes of the preceding sentence, an ar9 rangement which constitutes individual health 

10 insurance shall not be treated as a group health 

11 plan if such arrangement is a high deductible 

12 health plan (as defined in section 223(c)(2)), or 

13 is a payment by an employer or employee orga14 nization with respect to such high deductible 

15 health plan, notwithstanding that an employer 

16 or employee organization negotiates the cost or 

17 benefits of such arrangement. 

18 ‘‘(B) EXCEPTION FOR PLANS ONLY PRO19 VIDING CONTRIBUTIONS TO HEALTH SAVINGS

20 ACCOUNTS.—Subparagraph (A) shall not apply 

21 to an individual if the individual’s only coverage 

22 under a group health plan for a month consists 

23 of contributions by an employer to a health sav24 ings account with respect to which the indi25 vidual is the account beneficiary. 


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1 ‘‘(C) EXCEPTION FOR CERTAIN PER2 MITTED COVERAGE.—Subparagraph (A) shall 

3 not apply to an individual if the individual’s 

4 only coverage under a group health plan for a 

5 month is coverage described in clause (i) or (ii) 

6 of section 223(c)(1)(B). 

7 ‘‘(3) MEDICAL AND HEALTH SAVINGS AC8 COUNTS.—Subsection (a) shall not apply with re9 spect to any amount which is paid or distributed out 

10 of an Archer MSA or a health savings account which 

11 is not included in gross income under section 220(f) 

12 or 223(f), as the case may be. 

13 ‘‘(4) COORDINATION WITH DEDUCTION FOR

14 HEALTH INSURANCE OF SELF-EMPLOYED INDIVID15 UALS.—Any amount taken into account by the tax16 payer in computing the deduction under section 

17 162(l) shall not be taken into account under this 

18 section. 

19 ‘‘(5) COORDINATION WITH MEDICAL EXPENSE

20 DEDUCTION.—Any amount taken into account by 

21 the taxpayer in computing the deduction under this 

22 section shall not be taken into account under section 

23 213.’’. 

24 (b) DEDUCTION ALLOWED WHETHER OR NOT INDI25 VIDUAL ITEMIZES OTHER DEDUCTIONS.—Subsection (a) 


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1 of section 62 of such Code is amended by inserting before 

2 the last sentence at the end the following new paragraph: 

3 ‘‘(21) PREMIUMS FOR HIGH DEDUCTIBLE

4 HEALTH PLANS.—The deduction allowed by section 

5 224.’’. 

6 (c) COORDINATION WITH SECTION 35 HEALTH IN7 SURANCE COSTS CREDIT.—Section 35(g)(2) of such Code 

8 is amended by striking ‘‘or 213’’ and inserting ‘‘, 213, 

9 or 224’’. 

10 (d) CLERICAL AMENDMENT.—The table of sections 

11 for part VII of subchapter B of chapter 1 of such Code 

12 is amended by redesignating the item relating to section 

13 224 as an item relating to section 225 and by inserting 

14 before such item the following new item: 

‘‘Sec. 224. Premiums for high deductible health plans.’’. 

15 (e) EFFECTIVE DATE.—The amendments made by 

16 this section shall apply to taxable years beginning after 

17 December 31, 2006. 

18 SEC. 3. CREDIT FOR CERTAIN EMPLOYMENT TAXES PAID 

19 WITH RESPECT TO PREMIUMS FOR HIGH DE20 DUCTIBLE HEALTH PLANS AND CONTRIBU21 TIONS TO HEALTH SAVINGS ACCOUNTS. 

22 (a) ALLOWANCE OF CREDIT.—Subpart C of part IV 

23 of subchapter A of chapter 1 of the Internal Revenue Code 

24 of 1986 (relating to refundable credits) is amended by reVerDate Aug 31 2005 08:13 May 03, 2006 Jkt 049200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H5262.IH H5262

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1 designating section 36 as section 37 and by inserting after 

2 section 35 the following new section: 

3 ‘‘SEC. 36. EMPLOYMENT TAXES PAID WITH RESPECT TO 

4 PREMIUMS FOR HIGH DEDUCTIBLE HEALTH 

5 PLANS AND CONTRIBUTIONS TO HEALTH 

6 SAVINGS ACCOUNTS. 

7 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in8 dividual, there shall be allowed as a credit against the tax 

9 imposed by this subtitle for the taxable year an amount 

10 equal to the product of— 

11 ‘‘(1) the sum of the rates of tax in effect under 

12 sections 3101(a), 3101(b), 3111(a), and 3111(b) for 

13 the calendar year in which the taxable year begins, 

14 multiplied by 

15 ‘‘(2) the sum of— 

16 ‘‘(A) the aggregate amount paid by such 

17 individual as premiums under a high deductible 

18 health plan which is allowed as a deduction 

19 under section 224 for the taxable year, and 

20 ‘‘(B) the aggregate amount paid to a 

21 health savings account of such individual which 

22 is allowed as a deduction under section 223 for 

23 the taxable year. 

24 ‘‘(b) CREDIT LIMITED TO CERTAIN EMPLOYMENT

25 TAXES.— 


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1 ‘‘(1) IN GENERAL.—The credit allowed under 

2 subsection (a) with respect to any individual for any 

3 taxable year shall not exceed the specified employ4 ment taxes with respect to such individual for such 

5 taxable year. 

6 ‘‘(2) SPECIFIED EMPLOYMENT TAXES.—For 

7 purposes of this subsection, the term ‘specified em8 ployment taxes’ means, with respect to any indi9 vidual for any taxable year, the sum of— 

10 ‘‘(A) the taxes imposed under sections 

11 3101(a), 3101(b), 3111(a), 3111(b), 3201(a), 

12 3211(a), and 3221(a) (taking into account any 

13 adjustments or refunds under section 6413) 

14 with respect to wages and compensation re15 ceived by such individual during the calendar 

16 year in which such taxable year begins, and 

17 ‘‘(B) the taxes imposed under subsections 

18 (a) and (b) of section 1401 with respect to the 

19 self-employment income of such individual for 

20 such taxable year. 

21 ‘‘(c) SPECIAL RULE FOR EMPLOYMENT COMPENSA22 TION IN EXCESS OF SOCIAL SECURITY CONTRIBUTION

23 BASE.— 

24 ‘‘(1) IN GENERAL.—If the aggregate amount of 

25 employment compensation received by any individual 


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1 during the calendar year in which the taxable year 

2 begins exceeds the contribution and benefit base (as 

3 determined under section 230 of the Social Security 

4 Act), the amount of the credit determined under 

5 subsection (a) (determined before application of sub6 section (b)) shall be equal to the sum of— 

7 ‘‘(A) the amount determined under sub8 section (a) by only taking into account so much 

9 of the amount determined under subsection 

10 (a)(2) as does not exceed such excess and by 

11 only taking into account the rates of tax in ef12 fect under section 3101(b) and 3111(b), and 

13 ‘‘(B) the amount determined under sub14 section (a) by only taking into account so much 

15 of the amount determined under subsection 

16 (a)(2) as is not taken into account under sub17 paragraph (A) and by taking into account each 

18 of the rates of tax referred to in subsection 

19 (a)(1). 

20 ‘‘(2) EMPLOYMENT COMPENSATION.—For pur21 poses of this subsection, the term ‘employment com22 pensation’ means, with respect to any individual for 

23 any taxable year, the sum of— 

24 ‘‘(A) the wages (as defined in section 

25 3121(a)) and compensation (as defined in secVerDate Aug 31 2005 08:13 May 03, 2006 Jkt 049200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H5262.IH H5262

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1 tion 3231(e)) received by such individual during 

2 the calendar year in which such taxable year 

3 begins, and 

4 ‘‘(B) the self-employment income (as de5 fined in section 1402(b)) of such individual for 

6 such taxable year.’’. 

7 (b) INCREASE IN ADDITIONAL TAX ON DISTRIBU8 TIONS NOT USED FOR QUALIFIED MEDICAL EXPENSES.— 

9 Paragraph (4) of section 223(f) of such Code (relating to 

10 additional tax on distributions not used for qualified med11 ical expenses) is amended to read as follows: 

12 ‘‘(4) ADDITIONAL TAX ON DISTRIBUTIONS NOT

13 USED FOR QUALIFIED MEDICAL EXPENSES.— 

14 ‘‘(A) IN GENERAL.—The tax imposed by 

15 this chapter on the account beneficiary for any 

16 taxable year in which there is a payment or dis17 tribution from a health savings account of such 

18 beneficiary which is includible in gross income 

19 under paragraph (2) shall be increased by 30 

20 percent of the amount which is so includible. 

21 ‘‘(B) EXCEPTION FOR DISABILITY OR

22 DEATH.—In the case of payments or distribu23 tions made after the account beneficiary be24 comes disabled within the meaning of section 

25 72(m)(7) or dies, subparagraph (A) shall be apVerDate Aug 31 2005 08:13 May 03, 2006 Jkt 049200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H5262.IH H5262

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1 plied by substituting ‘15 percent’ for ‘30 per2 cent’. 

3 ‘‘(C) EXCEPTION FOR DISTRIBUTIONS

4 AFTER MEDICARE ELIGIBILITY.—In the case of 

5 payments or distributions made after the date 

6 on which the account beneficiary attains the 

7 age specified in section 1811 of the Social Secu8 rity Act, subparagraph (A) shall be applied by 

9 substituting ‘15 percent’ for ‘30 percent’.’’. 

10 (c) CONFORMING AMENDMENTS.— 

11 (1) Paragraph (2) of section 1324(b) of title 

12 31, United States Code, is amended by inserting ‘‘or 

13 section 36’’ after ‘‘section 35’’. 

14 (2) The table of sections for subpart C of part 

15 IV of subchapter A of chapter 1 of the Internal Rev16 enue Code of 1986 is amended by striking the item 

17 relating to section 36 and by inserting after the item 

18 relating to section 35 the following new items: 

‘‘Sec. 36. Employment taxes paid with respect to premiums for high deductible 

health plans and contributions to health savings accounts. 

‘‘Sec. 37. Overpayments of tax.’’. 

19 (d) EFFECTIVE DATE.—The amendments made by 

20 this section shall apply to taxable years beginning after 

21 December 31, 2006. 


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1 SEC. 4. REFUNDABLE CREDIT FOR HEALTH INSURANCE 

2 COVERAGE UNDER HIGH DEDUCTIBLE 

3 HEALTH PLAN. 

4 (a) ALLOWANCE OF CREDIT.—Subpart C of part IV 

5 of subchapter A of chapter 1 of the Internal Revenue Code 

6 of 1986 (as amended by this Act) is amended by inserting 

7 after section 36 the following new section: 

8 ‘‘SEC. 36A. HEALTH INSURANCE COVERAGE UNDER HIGH 

9 DEDUCTIBLE HEALTH PLAN. 

10 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in11 dividual, there shall be allowed as a credit against the tax 

12 imposed by this subtitle for the taxable year the aggregate 

13 amount paid in cash by the taxpayer for qualified coverage 

14 under a high deductible health plan for the taxpayer and 

15 the taxpayer’s spouse and dependents. 

16 ‘‘(b) LIMITATIONS.— 

17 ‘‘(1) IN GENERAL.—The amount allowable as a 

18 credit under subsection (a) for the taxable year shall 

19 not exceed the sum of the monthly limitations for 

20 months during such taxable year that the taxpayer 

21 or the taxpayer’s spouse or dependents is an eligible 

22 individual. 

23 ‘‘(2) MONTHLY LIMITATION.— 

24 ‘‘(A) IN GENERAL.—The monthly limita25 tion for any month is the credit percentage of 

1 26 ⁄12 of— 


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1 ‘‘(i) $1,111 in the case of qualified 

2 health insurance covering only 1 adult or 1 

3 or more children, 

4 ‘‘(ii) $2,222 in the case of qualified 

5 health insurance covering only 2 adults or 

6 1 adult and 1 or more children, and 

7 ‘‘(iii) $3,333 in the case of qualified 

8 health insurance covering at least 2 adults 

9 and 1 or more children or at least 3 

10 adults. 

11 ‘‘(B) SPECIAL RULE FOR MARRIED INDI12 VIDUALS.—In the case of a taxpayer who is 

13 married (within the meaning of section 7703) 

14 as of the close of the taxable year but does not 

15 file a joint return for such year and who does 

16 not live apart from such taxpayer’s spouse at 

17 all times during the taxable year, any dollar 

18 limitation imposed under subparagraph (A) 

19 shall be divided equally between the taxpayer 

20 and the taxpayer’s spouse unless they agree on 

21 a different division. 

22 ‘‘(3) CREDIT PERCENTAGE.—For purposes of 

23 paragraph (2), the credit percentage is 90 percent, 

24 reduced as provided in paragraphs (4) and (5). 


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1 ‘‘(4) PHASEOUT OF CREDIT PERCENTAGE FOR

2 COVERAGE OF 1 ADULT OR CHILDREN.— 

3 ‘‘(A) JOINT RETURN, SURVIVING SPOUSES, 

4 AND HEADS OF HOUSEHOLD.—If— 

5 ‘‘(i) coverage described in paragraph 

6 (2)(A)(i) is provided under qualified health 

7 insurance for any month in the taxable 

8 year, and 

9 ‘‘(ii) taxpayer is a married individual, 

10 surviving spouse (as defined in section 

11 2(a)), or head of household (as defined in 

12 section 2(b)) and has modified adjusted 

13 gross income in excess of $25,000 for the 

14 taxable year, 

15 the 90 percent in paragraph (3) shall be re16 duced by the number of percentage points 

17 which bears the same ratio to 90 percentage 

18 points as such excess bears to $15,000. 

19 ‘‘(B) SPECIAL RULE FOR MARRIED FILING

20 SEPARATE RETURN.—In the case of a married 

21 individual who has coverage described in para22 graph (2)(A)(i) for any month in the taxable 

23 year and who files a separate return for the 

24 taxable year, subparagraph (A) shall be applied 


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1 by substituting for each dollar amount therein 

2 one-half of such dollar amount. 

3 ‘‘(C) SINGLE RETURN.—In the case of any 

4 other return by an individual who has coverage 

5 described in paragraph (2)(A)(i) for any month 

6 in the taxable year, and if— 

7 ‘‘(i) the taxpayer has modified ad8 justed gross income in excess of $15,000 

9 for the taxable year but not in excess of 

10 $20,000, the 90 percent in paragraph (3) 

11 shall be reduced by the number of percent12 age points which bears the same ratio to 

13 40 percentage points as— 

14 ‘‘(I) the excess of modified ad15 justed gross income in excess of 

16 $15,000, bears to 

17 ‘‘(II) $5,000, or 

18 ‘‘(ii) the taxpayer has modified ad19 justed gross income in excess of $20,000 

20 for the taxable year, the 90 percent in 

21 paragraph (3) shall be reduced by the sum 

22 of 40 percentage points plus the number of 

23 percentage points which bears the same 

24 ratio to 50 percentage points as— 


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1 ‘‘(I) the excess of modified ad2 justed gross income in excess of 

3 $20,000, bears to 

4 ‘‘(II) $10,000. 

5 ‘‘(5) PHASEOUT OF CREDIT PERCENTAGE FOR

6 COVERAGE OF 2 OR MORE ADULTS AND CHIL7 DREN.— 

8 ‘‘(A) IN GENERAL.—If— 

9 ‘‘(i) coverage described in clause (ii) 

10 or (iii) of paragraph (2)(A) is provided 

11 under qualified health insurance for any 

12 month in the taxable year, and 

13 ‘‘(ii) the taxpayer has modified ad14 justed gross income in excess of $25,000 

15 for the taxable year, 

16 the 90 percent in paragraph (3) shall be re17 duced by the number of percentage points 

18 which bears the same ratio to 90 percentage 

19 points as such excess bears to $35,000. 

20 ‘‘(B) SPECIAL RULE FOR MARRIED FILING

21 SEPARATE RETURN.—In the case of a married 

22 individual filing a separate return, subpara23 graph (A) shall be applied by substituting for 

24 each dollar amount therein one-half of such dol25 lar amount. 


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1 ‘‘(6) ROUNDING.—Any percentage resulting 

2 from a reduction under paragraphs (4) and (5) shall 

3 be rounded to the nearest one-tenth of a percent. 

4 ‘‘(7) MODIFIED ADJUSTED GROSS INCOME.— 

5 For purposes of this subsection, the term ‘modified 

6 adjusted gross income’ means adjusted gross income 

7 determined— 

8 ‘‘(A) without regard to this section and 

9 sections 911, 931, and 933, and 

10 ‘‘(B) after application of sections 86, 135, 

11 137, 219, 221, and 469. 

12 ‘‘(8) ADULT.—For purposes of this subsection, 

13 the term ‘adult’ means an individual who is the tax14 payer, the taxpayer’s spouse, or a dependent of the 

15 taxpayer who has attained age 24 as of the close of 

16 the taxable year. 

17 ‘‘(9) CHILD.—For purposes of this subsection, 

18 the term ‘child’ means a dependent of the taxpayer 

19 who has not attained age 24 as of the close of the 

20 taxable year. 

21 ‘‘(c) QUALIFIED COVERAGE UNDER A HIGH DE22 DUCTIBLE HEALTH PLAN.—For purposes of this section, 

23 the term ‘qualified coverage under a high deductible health 

24 plan’ means coverage under a high deductible health plan 

25 (as defined in section 223(c)(2)) for any month for which 


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1 each individual covered under such plan is an eligible indi2 vidual. 

3 ‘‘(d) ELIGIBLE INDIVIDUAL.—For purposes of this 

4 section— 

5 ‘‘(1) IN GENERAL.—The term ‘eligible indi6 vidual’ means, with respect to any month, an indi7 vidual who— 

8 ‘‘(A) is described in section 223(c)(1) and 

9 is not covered by a group health plan, and 

10 ‘‘(B) does not have other specified cov11 erage. 

12 ‘‘(2) GROUP HEALTH PLAN.—The term ‘group 

13 health plan’ has the meaning given such term by 

14 section 5000 without regard to subsection (d) there15 of. For purposes of the preceding sentence, an ar16 rangement which constitutes individual health insur17 ance shall not be treated as a group health plan if 

18 such arrangement is a high deductible health plan 

19 (as defined in section 223(c)(2)), or is a payment by 

20 an employer or employee organization with respect 

21 to such high deductible health plan, notwithstanding 

22 that an employer or employee organization nego23 tiates the cost or benefits of such arrangement. 


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1 ‘‘(3) OTHER SPECIFIED COVERAGE.—An indi2 vidual has other specified coverage for any month if, 

3 as of the first day of such month— 

4 ‘‘(A) MEDICARE, MEDICAID, SCHIP.—Such 

5 individual— 

6 ‘‘(i) is entitled to benefits under part 

7 A of title XVIII of the Social Security Act 

8 or enrolled under part B of such title, 

9 ‘‘(ii) is enrolled in the program under 

10 title XIX of the Social Security Act (other 

11 than under section 1928 of such Act), or 

12 ‘‘(iii) is enrolled in the program under 

13 title XXI of the Social Security Act. 

14 ‘‘(B) IMPRISONMENT.—Such individual is 

15 imprisoned under Federal, State, or local au16 thority. 

17 ‘‘(C) PHYSICAL PRESENCE REQUIRE18 MENTS.—Such individual is present in the 

19 United States on fewer than 183 days during 

20 the taxable year (determined in accordance with 

21 section 7701(b)(7)). 

22 ‘‘(e) OTHER DEFINITIONS.— 

23 ‘‘(1) DEPENDENTS.—For purposes of this sec24 tion— 


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1 ‘‘(A) DEPENDENT DEFINED.—The term 

2 ‘dependent’ has the meaning given such term by 

3 section 152 (determined without regard to sub4 sections (b)(1), (b)(2), and (d)(1)(B) thereof). 

5 ‘‘(B) SPECIAL RULE FOR DEPENDENT

6 CHILD OF DIVORCED PARENTS.—An individual 

7 who is a child to whom section 152(e) applies 

8 shall be treated as a dependent of the custodial 

9 parent for a coverage month unless the custo10 dial and noncustodial parent provide otherwise. 

11 ‘‘(C) DENIAL OF CREDIT TO DEPEND12 ENTS.—No credit shall be allowed under this 

13 section to any individual with respect to whom 

14 a deduction under section 151(c) is allowable to 

15 another taxpayer for a taxable year beginning 

16 in the calendar year in which such individual’s 

17 taxable year begins. 

18 ‘‘(f) INFLATION ADJUSTMENTS.— 

19 ‘‘(1) CREDIT AND HEALTH INSURANCE

20 AMOUNTS.—In the case of any taxable year begin21 ning after 2007, each dollar amount referred to in 

22 subsection (b)(2)(A) shall be increased by an 

23 amount equal to— 

24 ‘‘(A) such dollar amount, multiplied by 


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1 ‘‘(B) the cost-of-living adjustment deter2 mined under section 213(d)(10)(B)(ii) for the 

3 calendar year in which the taxable year begins, 

4 determined by substituting ‘2006’ for ‘1996’ in 

5 subclause (II) thereof. 

6 If any amount as adjusted under the preceding sen7 tence is not a multiple of $10, such amount shall be 

8 rounded to the nearest multiple of $10. 

9 ‘‘(2) INCOME PHASEOUT AMOUNTS.—In the 

10 case of any taxable year beginning after 2007, each 

11 dollar amount referred to in paragraphs (4) and (5) 

12 of subsection (b) shall be increased by an amount 

13 equal to— 

14 ‘‘(A) such dollar amount, multiplied by 

15 ‘‘(B) the cost-of-living adjustment deter16 mined under section 1(f)(3) for the calendar 

17 year in which the taxable year begins, deter18 mined by substituting ‘calendar year 2006’ for 

19 ‘calendar year 1992’ in subparagraph (B) 

20 thereof. 

21 If any amount as adjusted under the preceding sen22 tence is not a multiple of $50, such amount shall be 

23 rounded to the next lowest multiple of $50. 

24 ‘‘(g) SPECIAL RULES.— 


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1 ‘‘(1) COORDINATION WITH DEDUCTION FOR

2 PREMIUMS FOR HIGH DEDUCTIBLE HEALTH

3 PLANS.—No credit shall be allowable under this sec4 tion for a taxable year if a deduction is allowed 

5 under section 224 for the taxable year. 

6 ‘‘(2) COORDINATION WITH DEDUCTION FOR

7 HEALTH INSURANCE COSTS OF SELF-EMPLOYED IN8 DIVIDUALS.—No credit shall be allowable under this 

9 section for a taxable year if a deduction is allowed 

10 under section 162(l) for the taxable year. 

11 ‘‘(3) COORDINATION WITH ADVANCE PAY12 MENT.—Rules similar to the rules of section 

13 35(g)(1) shall apply to any credit to which this sec14 tion applies. 

15 ‘‘(4) COORDINATION WITH SECTION 35.—If a 

16 taxpayer is eligible for the credit allowed under this 

17 section and section 35 for any month, the taxpayer 

18 shall elect which credit is to be allowed with respect 

19 to such month. 

20 ‘‘(h) EXPENSES MUST BE SUBSTANTIATED.—A pay21 ment for insurance to which subsection (a) applies may 

22 be taken into account under this section only if the tax23 payer substantiates such payment in such form as the Sec24 retary may prescribe. 


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1 ‘‘(i) REGULATIONS.—The Secretary shall prescribe 

2 such regulations as may be necessary to carry out the pur3 poses of this section.’’. 

4 (b) CONFORMING AMENDMENTS.— 

5 (1) Paragraph (2) of section 1324(b) of title 

6 31, United States Code, as amended by this Act, is 

7 amended by inserting ‘‘or section 36A’’ after ‘‘sec8 tion 36’’. 

9 (2) The table of sections for subpart C of part 

10 IV of subchapter A of chapter 1 of the Internal Rev11 enue Code of 1986 (as amended by this Act) is 

12 amended by inserting after the item relating to sec13 tion 36 the following new item: 

‘‘Sec. 36A. Health insurance coverage under high deductible health plan.’’. 

14 (c) EFFECTIVE DATES.—The amendments made by 

15 this section shall apply to taxable years beginning after 

16 December 31, 2006. 

17 SEC. 5. ADVANCE PAYMENT OF CREDIT AS PREMIUM PAY18 MENT FOR HIGH DEDUCTIBLE HEALTH IN19 SURANCE. 

20 (a) IN GENERAL.—Chapter 77 of the Internal Rev21 enue Code of 1986 (relating to miscellaneous provisions) 

22 is amended by adding at the end the following: 


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1 ‘‘SEC. 7529. ADVANCE PAYMENT OF CREDIT AS PREMIUM 

2 PAYMENT FOR HIGH DEDUCTIBLE HEALTH 

3 INSURANCE. 

4 ‘‘Not later than January 1, 2008, the Secretary shall 

5 establish a program for making payments to providers of 

6 qualified coverage under a high deductible health plan (as 

7 defined by subsection (c) of section 36A) on behalf of indi8 viduals eligible for the credit under section 36A. Such pay9 ments shall be made on the basis of modified adjusted 

10 gross income of eligible individuals for the preceding tax11 able year.’’. 

12 (b) DISCLOSURE OF RETURN INFORMATION FOR

13 PURPOSES OF ADVANCE PAYMENT OF CREDIT AS PRE14 MIUMS FOR HIGH DEDUCTIBLE HEALTH INSURANCE.— 

15 (1) IN GENERAL.—Subsection (l) of section 

16 6103 of such Code is amended by adding at the end 

17 the following new paragraph: 

18 ‘‘(21) DISCLOSURE OF RETURN INFORMATION

19 FOR PURPOSES OF ADVANCE PAYMENT OF CREDIT

20 AS PREMIUMS FOR HIGH DEDUCTIBLE HEALTH IN21 SURANCE.—The Secretary may, on behalf of individ22 uals eligible for the credit under section 36A, dis23 close to a provider of qualified coverage under a high 

24 deductible health plan (as defined by subsection (c) 

25 of section 36A), and persons acting on behalf of 

26 such provider, return information with respect to 


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1 any such individual and the spouse and dependents 

2 of such individual only to the extent necessary (as 

3 prescribed by regulations issued by the Secretary) to 

4 carry out the program established by section 7529 

5 (relating to advance payment of credit as premium 

6 payment for high deductible health insurance).’’. 

7 (2) CONFIDENTIALITY OF INFORMATION.— 

8 Paragraph (3) of section 6103(a) of such Code is 

9 amended by striking ‘‘or (20)’’ and inserting ‘‘(20), 

10 or (21)’’. 

11 (3) UNAUTHORIZED DISCLOSURE.—Paragraph 

12 (2) of section 7213(a) of such Code is amended by 

13 striking ‘‘or (20)’’ and inserting ‘‘(20), or (21)’’. 

14 (c) INFORMATION REPORTING.— 

15 (1) IN GENERAL.—Subpart B of part III of 

16 subchapter A of chapter 61 of such Code (relating 

17 to information concerning transactions with other 

18 persons) is amended by inserting after section 

19 6050T the following new section: 

20 ‘‘SEC. 6050U. RETURNS RELATING TO CREDIT FOR HEALTH 

21 INSURANCE COVERAGE UNDER HIGH DE22 DUCTIBLE HEALTH PLAN. 

23 ‘‘(a) REQUIREMENT OF REPORTING.—Every person 

24 who is entitled to receive payments for any month of any 

25 calendar year under section 7529 (relating to advance payVerDate Aug 31 2005 08:13 May 03, 2006 Jkt 049200 PO 00000 Frm 00025 Fmt 6652 Sfmt 6201 E:\BILLS\H5262.IH H5262

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1 ment of credit as premium payment for high deductible 

2 health insurance) with respect to any individual shall, at 

3 such time as the Secretary may prescribe, make the return 

4 described in subsection (b) with respect to each such indi5 vidual. 

6 ‘‘(b) FORM AND MANNER OF RETURNS.—A return 

7 is described in this subsection if such return— 

8 ‘‘(1) is in such form as the Secretary may pre9 scribe, and 

10 ‘‘(2) contains— 

11 ‘‘(A) the name, address, and TIN of each 

12 individual referred to in subsection (a), 

13 ‘‘(B) the number of months for which 

14 amounts were entitled to be received with re15 spect to such individual under section 7529 (re16 lating to advance payment of credit as premium 

17 payment for high deductible health insurance), 

18 ‘‘(C) the amount entitled to be received for 

19 each such month, and 

20 ‘‘(D) such other information as the Sec21 retary may prescribe. 

22 ‘‘(c) STATEMENTS TO BE FURNISHED TO INDIVID23 UALS WITH RESPECT TO WHOM INFORMATION IS RE24 QUIRED.—Every person required to make a return under 

25 subsection (a) shall furnish to each individual whose name 


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1 is required to be set forth in such return a written state2 ment showing— 

3 ‘‘(1) the name and address of the person re4 quired to make such return and the phone number 

5 of the information contact for such person, and 

6 ‘‘(2) the information required to be shown on 

7 the return with respect to such individual. 

8 The written statement required under the preceding sen9 tence shall be furnished on or before January 31 of the 

10 year following the calendar year for which the return 

11 under subsection (a) is required to be made.’’. 

12 (2) ASSESSABLE PENALTIES.— 

13 (A) Subparagraph (B) of section 

14 6724(d)(1) of such Code (relating to defini15 tions) is amended by redesignating clauses (xiii) 

16 through (xviii) as clauses (xiv) through (xix), 

17 respectively, and by inserting after clause (xii) 

18 the following new clause: 

19 ‘‘(xiii) section 6050U (relating to re20 turns relating to credit for health insur21 ance coverage under high deductible health 

22 plan),’’. 

23 (B) Paragraph (2) of section 6724(d) of 

24 such Code is amended by striking ‘‘or’’ at the 

25 end of subparagraph (AA), by striking the peVerDate Aug 31 2005 08:13 May 03, 2006 Jkt 049200 PO 00000 Frm 00027 Fmt 6652 Sfmt 6201 E:\BILLS\H5262.IH H5262

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1 riod at the end of subparagraph (BB) and in2 serting ‘‘, or’’, and by adding after subpara3 graph (BB) the following new subparagraph: 

4 ‘‘(CC) section 6050U (relating to returns 

5 relating to credit for health insurance coverage 

6 under high deductible health plan).’’. 

7 (d) CLERICAL AMENDMENTS.— 

8 (1) The table of sections for chapter 77 of such 

9 Code is amended by adding at the end the following 

10 new item: 

‘‘Sec. 7529. Advance payment of credit as premium payment for high deductible health insurance.’’. 

11 (2) The table of sections for subpart B of part 

12 III of subchapter A of chapter 61 of such Code is 

13 amended by adding at the end the following new 

14 item: 

‘‘Sec. 6050U. Returns relating to credit for health insurance coverage under 

high deductible health plan.’’. 

15 (e) EFFECTIVE DATE.—The amendments made by 

16 this section shall take effect on the date of the enactment 

17 of this Act. 

18 SEC. 6. INCREASE IN CONTRIBUTION LIMITS FOR HEALTH 

19 SAVINGS ACCOUNTS. 

20 (a) INCREASE IN MONTHLY LIMIT.— 

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

22 223(b) of the Internal Revenue Code of 1986 (relatVerDate Aug 31 2005 08:13 May 03, 2006 Jkt 049200 PO 00000 Frm 00028 Fmt 6652 Sfmt 6201 E:\BILLS\H5262.IH H5262

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1 ing to monthly limitation) is amended to read as fol2 lows: 

3 ‘‘(2) MONTHLY LIMITATION.— 

4 ‘‘(A) IN GENERAL.—In the case of an eligi5 ble individual who has coverage under a high 

6 deductible health plan, the monthly limitation 

for any month of such coverage is 1 7 ⁄12 of the 

8 lesser of— 

9 ‘‘(i) the sum of the annual deductible 

10 and the other annual out-of-pocket ex11 penses (other than for premiums) required 

12 to be paid under the plan by the eligible 

13 individual for covered benefits, or 

14 ‘‘(ii) in the case of an eligible indi15 vidual with— 

16 ‘‘(I) self-only coverage, the dollar 

17 amount in effect under subclause (I) 

18 of subsection (c)(2)(A)(ii), or 

19 ‘‘(II) family coverage, the dollar 

20 amount in effect under subclause (II) 

21 of subsection (c)(2)(A)(ii). 

22 ‘‘(B) SPECIAL RULES RELATING TO OUT23 OF-POCKET EXPENSES.— 

24 ‘‘(i) REDUCTION FOR SEPARATE

25 PLAN.—The annual out-of-pocket expenses 


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1 taken into account under subparagraph 

2 (A)(i) with respect to any eligible indi3 vidual shall be reduced by any out-of-pock4 et expense payable under a separate plan 

5 covering the individual. 

6 ‘‘(ii) SECRETARIAL AUTHORITY.—The 

7 Secretary may by regulations provide that 

8 annual out-of-pocket expenses will not be 

9 taken into account under subparagraph 

10 (A)(i) to the extent that there is only a re11 mote likelihood that such amounts will be 

12 required to be paid.’’. 

13 (2) CONFORMING AMENDMENTS.— 

14 (A) Section 223(b)(3)(A) of such Code is 

15 amended by striking ‘‘subparagraphs (A) and 

16 (B) of’’. 

17 (B) Section 223(d)(1)(A)(ii)(I) of such 

18 Code is amended by striking ‘‘subsection 

19 (b)(2)(B)(ii)’’ and inserting ‘‘subsection 

20 (c)(2)(A)(ii)(II)’’. 

21 (C) Section 223(c)(2)(D)(ii) of such Code 

22 is amended to read as follows: 

23 ‘‘(ii) CERTAIN ITEMS DISREGARDED

24 IN COMPUTING MONTHLY LIMITATION.— 

25 Such plan’s annual deductible, and such 


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1 plan’s annual out-of-pocket limitation, for 

2 services provided outside of such network 

3 shall not be taken into account for pur4 poses of subsection (b)(2).’’. 

5 (D) Section 223(g)(1) of such Code is 

6 amended by striking ‘‘subsections (b)(2) and 

7 (c)(2)(A)’’ and inserting ‘‘subsection (c)(2)(A)’’. 

8 (b) APPLICATION OF SPECIAL RULES FOR MARRIED

9 INDIVIDUALS.—Paragraph (5) of section 223(b) of such 

10 Code (relating to special rule for married individuals) is 

11 amended to read as follows: 

12 ‘‘(5) SPECIAL RULES FOR MARRIED INDIVID13 UALS.— 

14 ‘‘(A) IN GENERAL.—In the case of individ15 uals who are married to each other and who are 

16 both eligible individuals, the limitation under 

17 paragraph (1) for each spouse shall be equal to 

18 the spouse’s applicable share of the combined 

19 marital limit. 

20 ‘‘(B) COMBINED MARITAL LIMIT.—For 

21 purposes of subparagraph (A), the combined 

22 marital limit is the excess (if any) of— 

23 ‘‘(i) the lesser of— 

24 ‘‘(I) subject to subparagraph (C), 

25 the sum of the limitations computed 


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1 separately under paragraph (1) for 

2 each spouse (including any additional 

3 contribution amount under paragraph 

4 (3)), or 

5 ‘‘(II) the dollar amount in effect 

6 under subsection (c)(2)(A)(ii)(II), 

7 over 

8 ‘‘(ii) the aggregate amount paid to 

9 Archer MSAs of such spouses for the tax10 able year. 

11 ‘‘(C) SPECIAL RULE WHERE BOTH

12 SPOUSES HAVE FAMILY COVERAGE UNDER

13 SAME PLAN.—For purposes of subparagraph 

14 (B)(i)(I), if either spouse has family coverage 

15 which covers both spouses, both spouses shall 

16 be treated as having only such coverage (and if 

17 both spouses each have such coverage under 

18 different plans, shall be treated as having only 

19 family coverage with the plan with respect to 

20 which the lowest amount is determined under 

21 paragraph (2)(A)(i)). 

22 ‘‘(D) APPLICABLE SHARE.—For purposes 

23 of subparagraph (A), a spouse’s applicable 

24 share is one-half of the combined marital limit 


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1 unless both spouses agree on a different divi2 sion. 

3 ‘‘(E) COUPLES NOT MARRIED ENTIRE

4 YEAR.—The Secretary shall prescribe rules for 

5 the application of this paragraph in the case of 

6 any taxable year for which the individuals were 

7 not married to each other during all months in8 cluded in the taxable year, including rules 

9 which allow individuals in appropriate cases to 

10 take into account coverage prior to marriage in 

11 computing the combined marital limit for pur12 poses of this paragraph.’’. 

13 (c) SELF-ONLY COVERAGE.—Section 223(c)(4) of 

14 such Code (defining family coverage) is amended to read 

15 as follows: 

16 ‘‘(4) COVERAGE.— 

17 ‘‘(A) FAMILY COVERAGE.—The term ‘fam18 ily coverage’ means any coverage other than 

19 self-only coverage. 

20 ‘‘(B) SELF-ONLY COVERAGE.—If more 

21 than 1 individual is covered by a high deduct22 ible health plan but only 1 of the individuals is 

23 an eligible individual, the coverage shall be 

24 treated as self-only coverage.’’. 


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1 (d) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2006. 

4 SEC. 7. HEALTH REIMBURSEMENT ARRANGEMENTS AND 

5 SPENDING ARRANGEMENTS IN COMBINATION 

6 WITH HEALTH SAVINGS ACCOUNTS. 

7 (a) IN GENERAL.—Subparagraph (B) of section 

8 223(c)(1) of the Internal Revenue Code of 1986 (relating 

9 to certain coverage disregarded) is amended by striking 

10 ‘‘and’’ at the end of clause (i), by striking the period at 

11 the end of clause (ii) and inserting ‘‘, and’’, and by insert12 ing after clause (ii) the following new clause: 

13 ‘‘(iii) coverage under a flexible spend14 ing arrangement or a health reimburse15 ment arrangement, or both, which meets 

16 the requirements of paragraph (6).’’. 

17 (b) COMBINATION HEALTH REIMBURSEMENT, SAV18 INGS, AND SPENDING ARRANGEMENTS.—Subsection (c) of 

19 section 223 of such Code (relating to definitions and spe20 cial rules) is amended by adding at the end the following 

21 new paragraph: 

22 ‘‘(6) COMBINED LIMIT FOR CONTRIBUTIONS OR

23 CREDITS TO HEALTH REIMBURSEMENT, ARRANGE24 MENTS AND SPENDING ARRANGEMENTS.— 


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1 ‘‘(A) IN GENERAL.—In the case of cov2 erage under a flexible spending arrangement or 

3 a health reimbursement arrangement, or both, 

4 such coverage meets the requirements of this 

5 paragraph if, with respect to an individual— 

6 ‘‘(i) the sum of— 

7 ‘‘(I) the amount allowable as a 

8 deduction under subsection (a), 

9 ‘‘(II) the salary reduction 

10 amount elected by the individual and, 

11 if applicable, the employer contribu12 tion or credit allocated to the indi13 vidual for the taxable year under the 

14 flexible spending arrangement (as de15 fined in section 106(c)(2)), plus 

16 ‘‘(III) the amounts that the indi17 vidual is permitted, under the terms 

18 of the plan, to receive in reimburse19 ments for the taxable year under the 

20 health reimbursement arrangement, 

21 does not exceed 

22 ‘‘(ii) the sum of the annual deductible 

23 and the other annual out-of-pocket ex24 penses (other than for premiums) required 


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1 to be paid under the plan by the eligible 

2 individual for covered benefits. 

3 ‘‘(B) EXCEPTIONS FOR DISREGARDED COV4 ERAGE.—For purposes of subparagraph (A)— 

5 ‘‘(i) CERTAIN FLEXIBLE SPENDING

6 ARRANGEMENTS.—Any flexible spending 

7 arrangement salary reduction amounts or 

8 employer contributions or credits that are 

9 restricted by the employer to use for cov10 erage described in paragraph (1)(B) shall 

11 not be taken into account under subpara12 graph (A)(i)(II). 

13 ‘‘(ii) CERTAIN HEALTH REIMBURSE14 MENT ARRANGEMENTS.—Any reimburse15 ments from a health reimbursement ar16 rangement for coverage described in para17 graph (1)(B) shall not be taken into ac18 count under subparagraph (A)(i)(III). 

19 ‘‘(C) TERMINATION.—Coverage shall not 

20 be treated as meeting the requirements of this 

21 paragraph for any taxable year beginning after 

22 December 31, 2011.’’. 

23 (c) ONE-TIME FSA AND HRA ROLLOVERS TO

24 HSAS.— 


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1 (1) IN GENERAL.—A plan shall not fail to be 

2 treated as a flexible spending arrangement or health 

3 reimbursement arrangement under section 105 or 

4 106 of the Internal Revenue Code of 1986 merely 

5 because— 

6 (A) such plan provides for a contribution 

7 to the health savings account (as defined in sec8 tion 223 of such Code) of the employee which 

9 meets the requirements of paragraph (2), and 

10 (B) such plan thereafter terminates with 

11 respect to such employee. 

12 (2) REQUIREMENTS.—A contribution meets the 

13 requirements of this paragraph if— 

14 (A) in the case of a flexible spending ar15 rangement (as defined in section 106(c)(2) of 

16 such Code) in existence on April ll, 2006, 

17 such contribution is the remaining balance in 

18 such arrangement as of the last day of the plan 

19 year ending in or before the taxable year in 

20 which such contribution is made, 

21 (B) in the case of a health reimbursement 

22 arrangement in existence on April ll, 2006, 

23 such contribution is the remaining balance of 

24 the amount to be received in reimbursements 

25 under such arrangement as of the last day of 


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1 the plan year ending in or before the taxable 

2 year in which such contribution is made, and 

3 (C) such contribution is made by the em4 ployer directly to the health savings account of 

5 the employee not later than 60 days after the 

6 end of the plan year of such flexible spending 

7 arrangement or health reimbursement arrange8 ment. 

9 (3) TREATMENT AS ROLLOVER CONTRIBU10 TION.—For purposes of sections 223 and 4973 of 

11 such Code, a contribution which meets the require12 ments of paragraph (2) shall be treated as a rollover 

13 contribution described in section 223(f)(5) of such 

14 Code. 

15 (4) TAX TREATMENT RELATING TO CONTRIBU16 TIONS.—For purposes of this title— 

17 (A) INCOME TAX.—Gross income shall not 

18 include the amount of any contribution under 

19 this subsection. 

20 (B) EMPLOYMENT TAXES.—Amounts con21 tributed to a health savings account under this 

22 subsection shall be treated as a payment de23 scribed in section 106(d). 


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1 (C) COMPARABILITY EXCISE TAX.—Section 

2 4980G shall not apply to contributions made 

3 under this subsection. 

4 (5) TERMINATION.—This paragraph shall not 

5 apply to any taxable year beginning after December 

6 31, 2011. 

7 (d) EFFECTIVE DATE.—The amendments made by 

8 this section shall apply to taxable years beginning after 

9 December 31, 2006. 

10 SEC. 8. CERTAIN EXPENSES TREATED AS QUALIFIED MED11 ICAL EXPENSES. 

12 (a) PREMIUMS FOR NON-GROUP HIGH DEDUCTIBLE

13 HEALTH PLANS TREATED AS QUALIFIED MEDICAL EX14 PENSES.—Subparagraph (C) of section 223(d)(2) of the 

15 Internal Revenue Code of 1986 is amended by striking 

16 ‘‘or’’ at the end of clause (iii), by striking the period at 

17 the end of clause (iv) and inserting ‘‘, or’’, and by adding 

18 at the end the following new clause: 

19 ‘‘(v) in the case of any individual who 

20 meets the requirements of subsection 

21 (c)(1)(A)(ii) (after application of sub22 section (c)(1)(B)) and section 224(c)(2), a 

23 high deductible health plan.’’. 

24 (b) SPECIAL RULE FOR CERTAIN MEDICAL EX25 PENSES INCURRED BEFORE ESTABLISHMENT OF ACVerDate Aug 31 2005 08:13 May 03, 2006 Jkt 049200 PO 00000 Frm 00039 Fmt 6652 Sfmt 6201 E:\BILLS\H5262.IH H5262

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1 COUNT.—Paragraph (2) of section 223(d) of such Code 

2 is amended by adding at the end the following new sub3 paragraph: 

4 ‘‘(E) CERTAIN MEDICAL EXPENSES IN5 CURRED BEFORE ESTABLISHMENT OF ACCOUNT

6 TREATED AS QUALIFIED.—An expense shall not 

7 fail to be treated as a qualified medical expense 

8 solely because such expense was incurred before 

9 the establishment of the health savings account 

10 if such expense was incurred— 

11 ‘‘(i) during either— 

12 ‘‘(I) the taxable year in which the 

13 health savings account was estab14 lished, or 

15 ‘‘(II) the preceding taxable year 

16 in the case of a health savings ac17 count established after the taxable 

18 year in which such expense was in19 curred but before the time prescribed 

20 by law for filing the return for such 

21 taxable year (not including extensions 

22 thereof), and 

23 ‘‘(ii) for medical care of an individual 

24 during a period that such individual was 

25 covered by a high deductible health plan 


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1 and met the requirements of subsection 

2 (c)(1)(A)(ii) (after application of sub3 section (c)(1)(B)).’’. 

4 (c) EFFECTIVE DATE.—The amendments made by 

5 this section shall apply to taxable years beginning after 

6 December 31, 2006. 

7 SEC. 9. EXCEPTION TO REQUIREMENT FOR EMPLOYERS TO 

8 MAKE COMPARABLE HEALTH SAVINGS AC9 COUNT CONTRIBUTIONS. 

10 (a) IN GENERAL.—Section 4980G of the Internal 

11 Revenue Code of 1986 (relating to failure of employer to 

12 make comparable health savings account contributions) is 

13 amended by adding at the end the following new sub14 section: 

15 ‘‘(d) EXCEPTION.— 

16 ‘‘(1) IN GENERAL.—To the extent that an em17 ployer’s contributions to the health savings accounts 

18 of qualified employees exceed the employer’s com19 parable contributions to the health savings accounts 

20 of other employees, this section shall not apply with 

21 respect to the employer’s contributions to the health 

22 savings accounts of qualified employees. 

23 ‘‘(2) QUALIFIED EMPLOYEE.—For purposes of 

24 this subsection, with respect to an employer, the 

25 term ‘qualified employee’ means an individual— 


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1 ‘‘(A) reasonably expected to incur a higher 

2 level of medical expenses than the majority of 

3 the employer’s other employees due to a dis4 ease, illness, or other medical condition, and 

5 ‘‘(B) with respect to whom such elevated 

6 expenses are reasonably expected to continue 

7 over a period in excess of 1 year.’’. 

8 (b) EFFECTIVE DATE.—The amendment made by 

9 this section shall apply to taxable years beginning after 

10 December 31, 2006. 

Æ 


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