Bipartisan HSA Improvement Act of 2018

To amend the Internal Revenue Code of 1986 to improve access to health care through modernized health savings accounts. 1. Short title This Act may be cited as the Bipartisan HSA Improvement Act of 2018 2. Certain employment related services not treated as disqualifying coverage for purposes of health savings accounts (a) In general Section 223(c)(1) (D) Special rule for qualified items and services (i) In general An individual shall not be treated as covered under a health plan for purposes of subparagraph (A)(ii) merely because the individual, in connection with the employment of the individual or the individual’s spouse, receives (or is eligible to receive) qualified items and services at— (I) a healthcare facility located at a facility owned or leased by the employer of the individual (or of the individual’s spouse), or operated primarily for the benefit of such employer’s employees, or (II) a healthcare facility located within a supermarket, pharmacy, or similar retail establishment. (ii) Qualified items and services defined For purposes of this subparagraph, the term qualified items and services (I) Physical examinations. (II) Immunizations, including injections of antigens provided by employees. (III) Drugs other than a prescribed drug (as such term is defined in section 213(d)(3)). (IV) Treatment for injuries occurring in the course of employment. (V) Drug testing, if required as a condition of employment. (VI) Hearing or vision screenings. (VII) Other similar items and services that do not provide significant benefits in the nature of medical care. (iii) Aggregation For purposes of clause (i)(I), all persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as a single employer. . (b) Effective date The amendments made by this section shall apply to months beginning after December 31, 2018, in taxable years ending after such date. 3. Contributions permitted if spouse has a health flexible spending account (a) Contributions permitted if spouse has a health flexible spending account Section 223(c)(1)(B) and , and (iv) coverage under a health flexible spending arrangement of the spouse of the individual for any plan year of such arrangement if the aggregate reimbursements under such arrangement for such year do not exceed the aggregate expenses which would be eligible for reimbursement under such arrangement if such expenses were determined without regard to any expenses paid or incurred with respect to such individual. . (b) Effective date The amendment made by this section shall apply to plan years beginning after December 31, 2018. 4. FSA and HRA terminations or conversions to fund HSAs (a) In general Section 106(e)(2) (2) Qualified HSA distribution For purposes of this subsection— (A) In general The term qualified HSA distribution (i) such distribution is made in connection with such employee establishing coverage under a high deductible health plan (as defined in section 223(c)(2)) after a significant period of not having such coverage, and (ii) such arrangement is described in section 223(c)(1)(B)(iii) with respect to the portion of the plan year after such distribution is made. (B) Dollar limitation The aggregate amount of distributions from health flexible spending arrangements and health reimbursement arrangements of any employee which may be treated as qualified HSA distributions in connection with an establishment of coverage described in subparagraph (A)(i) shall not exceed the dollar amount in effect under section 125(i)(1) (twice such amount in the case of coverage which is described in section 223(b)(2)(B)). . (b) Partial reduction of limitation on deductible HSA contributions Section 223(b)(4) of such Code is amended by striking and , and (D) so much of any qualified HSA distribution (as defined in section 106(e)(2)) made to a health savings account of such individual during the taxable year as does not exceed the aggregate increases in the balance of the arrangement from which such distribution is made which occur during the portion of the plan year which precedes such distribution (other than any balance carried over to such plan year and determined without regard to any decrease in such balance during such portion of the plan year). . (c) Conversion to HSA-compatible arrangement for remainder of plan year Section 223(c)(1)(B)(iii) of such Code, as amended by the preceding provisions of this Act, is amended to read as follows: (iii) coverage under a health flexible spending arrangement or health reimbursement arrangement for the portion of the plan year after a qualified HSA distribution (as defined in section 106(e)(2) determined without regard to subparagraph (A)(ii) thereof) is made, if the terms of such arrangement which apply for such portion of the plan year are such that, if such terms applied for the entire plan year, then such arrangement would not be taken into account under subparagraph (A)(ii) of this paragraph for such plan year, and . (d) Inclusion of qualified HSA distributions on W–2 (1) In general Section 6051(a) of such Code is amended by striking and , and (18) the amount of any qualified HSA distribution (as defined in section 106(e)(2)) with respect to such employee. . (2) Conforming amendment Section 6051(a)(12) of such Code is amended by inserting (other than any qualified HSA distribution, as defined in section 106(e)(2)) (e) Effective date The amendments made by this section shall apply to distributions made after December 31, 2018, in taxable years ending after such date. July 19, 2018 Reported with an amendment, committed to the Committee of the Whole House on the State of the Union, and ordered to be printed

Summary: Bipartisan HSA Improvement Act of 2018 This bill amends the Internal Revenue Code to modify rules for health savings accounts (HSAs) regarding eligibility and interactions with other tax-favored health accounts. The bill specifies that receiving or being eligible to receive certain employment-related items and services at an employer-sponsored (e.g., an on-site clinic) or retail health care facility is not considered health care coverage that disqualifies an individual from participating in an HSA. The items and services include physical examinations, immunizations, drugs other than a prescribed drug, treatment for injuries occurring in the course of employment, drug testing as a condition of employment, hearing or vision screenings, and other similar items and services that do not provide significant benefits in the nature of medical care. The bill also (1) allows an eligible individual to make HSA contributions if a spouse has a flexible spending arrangement (FSA) as long as the FSA does not also reimburse the expenses of the spouse with the HSA, and (2) modifies the rules for using FSA or a health reimbursement arrangement terminations or conversions to establish an HSA.