II 

116TH CONGRESS 

1ST SESSION S. 2440 

To amend the Internal Revenue Code of 1986 to expand permissible distributions from an employee’s health flexible spending account or health 

reimbursement arrangement to their health savings account. 

IN THE SENATE OF THE UNITED STATES 

AUGUST 1, 2019 

Mr. SASSE 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 

permissible distributions from an employee’s health flexible spending account or health reimbursement arrangement to their health savings account. 

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 ‘‘Qualified Health Sav5 ings Account Distribution Act of 2019’’. 


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1 SEC. 2. FSA AND HRA TERMINATIONS OR CONVERSIONS TO 

2 FUND HSAS. 

3 (a) IN GENERAL.—Section 106(e)(2) of the Internal 

4 Revenue Code of 1986 is amended to read as follows: 

5 ‘‘(2) QUALIFIED HSA DISTRIBUTION.—For pur6 poses of this subsection— 

7 ‘‘(A) IN GENERAL.—The term ‘qualified 

8 HSA distribution’ means, with respect to any 

9 employee, a distribution from a health flexible 

10 spending arrangement or health reimbursement 

11 arrangement of such employee directly to a 

12 health savings account of such employee if— 

13 ‘‘(i) such distribution is made in con14 nection with such employee establishing 

15 coverage under a high deductible health 

16 plan (as defined in section 223(c)(2)) after 

17 a significant period of not having such cov18 erage, and 

19 ‘‘(ii) such arrangement is described in 

20 section 223(c)(1)(B)(iii) with respect to 

21 the portion of the plan year after such dis22 tribution is made. 

23 ‘‘(B) DOLLAR LIMITATION.—The aggre24 gate amount of distributions from health flexi25 ble spending arrangements and health reim26 bursement arrangements of any employee which 


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1 may be treated as qualified HSA distributions 

2 in connection with an establishment of coverage 

3 described in subparagraph (A)(i) shall not ex4 ceed an amount equal to the sum of— 

5 ‘‘(i) the dollar amount in effect under 

6 section 125(i)(1) (twice such amount in 

7 the case of coverage which is described in 

8 section 223(b)(2)(B)), plus 

9 ‘‘(ii) an amount equal to the max10 imum unused amounts remaining at the 

11 end of a plan year in a health flexible 

12 spending arrangement which are permitted 

13 to be paid or reimbursed to plan partici14 pants for qualified medical expenses in15 curred during the following plan year, as 

16 provided in Internal Revenue Service No17 tice 2013–71 (as in effect on the date of 

18 the enactment of the Qualified Health Sav19 ings Account Distribution Act of 2019).’’. 

20 (b) CONVERSION TO HSA-COMPATIBLE ARRANGE21 MENT FOR REMAINDER OF PLAN YEAR.—Section 

22 223(c)(1)(B)(iii) of such Code is amended to read as fol23 lows: 

24 ‘‘(iii) coverage under a health flexible 

25 spending arrangement or health reimburseVerDate Sep 11 2014 04:39 Aug 15, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2440.IS S2440

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1 ment arrangement for the portion of the 

2 plan year after a qualified HSA distribu3 tion (as defined in section 106(e)(2), deter4 mined without regard to subparagraph 

5 (A)(ii) thereof) is made, if the terms of 

6 such arrangement which apply for such 

7 portion of the plan year are such that, if 

8 such terms applied for the entire plan 

9 year, then such arrangement would not be 

10 taken into account under subparagraph 

11 (A)(ii) of this paragraph for such plan 

12 year, and’’. 

13 (c) INCLUSION OF QUALIFIED HSA DISTRIBUTIONS

14 ON W–2.— 

15 (1) IN GENERAL.—Section 6051(a) of such 

16 Code is amended by striking ‘‘and’’ at the end of 

17 paragraph (16), by striking the period at the end of 

18 paragraph (17) and inserting ‘‘, and’’, and by insert19 ing after paragraph (17) the following new para20 graph: 

21 ‘‘(18) the amount of any qualified HSA dis22 tribution (as defined in section 106(e)(2)) with re23 spect to such employee.’’. 

24 (2) CONFORMING AMENDMENT.—Section 

25 6051(a)(12) of such Code is amended by inserting 


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1 ‘‘(other than any qualified HSA distribution, as de2 fined in section 106(e)(2))’’ before the comma at the 

3 end. 

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

5 this section shall apply to distributions made after Decem6 ber 31, 2019, in taxable years ending after such date. 

Æ 


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