PEEPS Act

To amend the Internal Revenue Code of 1986 to create increased opportunities for savings to HSA, MSA, and FSA plans, to mitigate the financial strain on families caused by COVID–19, to provide for child nutrition, and for other purposes. 1. Short title This Act may be cited as the Pandemic Eradication and Enhanced Prevention through Savings Act PEEPS Act 2. Modifications of HSAs, Archer MSAs, and FSAs (a) COBRA coverage (1) HSA Section 223(d)(2) (E) COBRA coverage Subparagraph (B) shall not apply to amounts paid during calendar year 2020 for premiums for coverage under a group health plan pursuant to section 4980B(f). . (2) FSA Section 106 of such Code is amended by adding at the end the following: (h) FSA payments for cobra coverage A plan shall not fail to be treated as a health flexible spending arrangement under this section merely because such plan provides for a distribution during calendar year 2020 to make payments for premiums for coverage under a group health plan pursuant to section 4980B(f). . (b) Health insurance premiums for those not covered by employer-Sponsored health plan during 2020 (1) HSA Section 223(d)(2) of such Code, as amended by subsection (a), is amended by adding at the end the following: (F) Health insurance premiums for those not covered by employer-sponsored coverage in 2020 Subparagraph (B) shall not apply to amounts paid during calendar year 2020 for premiums for coverage under a health plan for any month for which the health plan of the individual— (i) is not an employer-sponsored health plan, and (ii) does not include coverage for abortions (other than any abortion necessary to save the life of the mother or any abortion with respect to a pregnancy that is the result of an act of rape or incest). . (2) Archer MSA Section 220(d)(2) of such Code is amended by adding at the end the following: (D) Health insurance premiums for those not covered by employer-sponsored coverage in 2020 Subparagraph (B) shall not apply to amounts paid during calendar year 2020 for premiums for coverage under a high deductible health plan for any month for which the health plan of the individual— (i) is not an employer-sponsored health plan, and (ii) does not include coverage for abortions (other than any abortion necessary to save the life of the mother or any abortion with respect to a pregnancy that is the result of an act of rape or incest). . (3) FSA Section 106 of such Code, as amended by subsection (a), is amended by adding at the end the following: (i) Health insurance premiums for those not eligible for employer-Sponsored coverage in 2020 and 2021 A plan shall not fail to be treated as a health flexible spending arrangement under this section merely because such plan provides for a distribution during calendar year 2020 or 2021 for premiums for coverage for medical expenses under an accident or health plan of a plan beneficiary if the beneficiary is not eligible for coverage by an employer-sponsored health plan. The preceding sentence shall only apply if the coverage does not include coverage for abortions (other than any abortion necessary to save the life of the mother or any abortion with respect to a pregnancy that is the result of an act of rape or incest). . (c) HSAs without high deductible health plans for 2020 and 2021 Section 223 of such Code is amended by adding at the end the following: (i) Special rule for calendar years 2020 and 2021 (1) In general Notwithstanding subsection (c)(1)(A) and subject to paragraph (2), for calendar years 2020 and 2021, the term eligible individual (A) Government sponsored programs Coverage under— (i) The Medicare program under part A of title XVIII of the Social Security Act. (ii) The Medicaid program under title XIX of the Social Security Act. (iii) The CHIP program under title XXI of the Social Security Act or under a qualified CHIP look-alike program (as defined in section 2107(g) of the Social Security Act). (iv) Medical coverage under chapter 55 (v) A health care program under chapter 17 or 18 of title 38, United States Code, as determined by the Secretary of Veterans Affairs, in coordination with the Secretary of Health and Human Services and the Secretary. (vi) A health plan under section 2504(e) of title 22, United States Code (relating to Peace Corps volunteers). (vii) The Non-appropriated Fund Health Benefits Program of the Department of Defense, established under section 349 of the National Defense Authorization Act for Fiscal Year 1995 ( Public Law 103–337 10 U.S.C. 1587 (B) Employer-sponsored plan Coverage under an eligible employer-sponsored plan. (C) Plans in the Individual Market Coverage under a health plan offered in the individual market within a State. (D) Grandfathered health plan Coverage under a grandfathered health plan. (E) Coverage Such other health benefits coverage, such as a State health benefits risk pool, as the Secretary of Health and Human Services, in coordination with the Secretary, recognizes for purposes of this subsection. (2) Modifications For purposes of paragraph (1), subsection (b)(8) shall be applied by substituting health plan high deductible health plan . (d) Waiver of carryover limitation on FSA 2020 funds Section 106 of such Code, as amended by the preceding provisions of this section, is amended by adding at the end the following: (j) FSA carryover without limitation on 2020 contributions There shall be no limitation on the amount of funds contributed during 2020 to a health flexible spending arrangement under this section that may be carried over to the succeeding plan year. . (e) Premium for benefits under Medicare for 2020 (1) HSA Section 223(d)(2) of such Code, as amended by the preceding provisions of this section, is amended by adding at the end the following: (G) Premiums for benefits under Medicare for 2020 Subparagraph (B) shall not apply to amounts paid during calendar year 2020 for any monthly premium for benefits under part A of title XVIII of the Social Security Act, any monthly premium for benefits under part B of such title, any monthly premium under a Medicare Advantage plan under part C of such title, or any monthly premium under a prescription drug plan under part D of such title. . (2) Archer MSA Section 220(d)(2) of such Code, as amended by the preceding provisions of this section, is amended by adding at the end the following: (F) Premiums for benefits under Medicare for 2020 Subparagraph (B) shall not apply to amounts paid during calendar year 2020 for any monthly premium for benefits under part A of title XVIII of the Social Security Act, any monthly premium for benefits under part B of such title, any monthly premium under a Medicare Advantage plan under part C of such title, or any monthly premium under a prescription drug plan under part D of such title. . (3) FSA Section 106 of such Code, as amended by the preceding provisions of this section, is amended by adding at the end the following: (k) FSA payments for benefits under Medicare for 2020 A plan shall not fail to be treated as a health flexible spending arrangement under this section merely because such plan provides for a distribution during calendar year 2020 for any monthly premium for benefits under part A of title XVIII of the Social Security Act, any monthly premium for benefits under part B of such title, any monthly premium under a Medicare Advantage plan under part C of such title, or any monthly premium under a prescription drug plan under part D of such title. . (f) Payment of non-Dependent medical expenses in 2020 (1) HSA (A) Medical expenses Section 223(d)(2) of such Code, as amended by the preceding provisions of this section, is amended by adding at the end the following: (F) Non-dependent medical expenses in 2020 During calendar year 2020, subparagraph (A) shall be applied without regard to the requirement that medical care be for the individual, the spouse of such individual, and any dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of such individual. . (B) Rollover Section 223(f)(5) of such Code is amended by adding at the end the following: (C) Rollover gifts Notwithstanding the preceding provisions of this paragraph, an amount is described in this paragraph as a rollover contribution in the case of a taxable year beginning in 2020 and paragraph (2) shall not apply to any amount paid or distributed from a health savings account of a beneficiary to a health savings account of an individual who is not such beneficiary, the spouse of such beneficiary, or any dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of such beneficiary, to the extent— (i) the amount received is paid into the health savings account for the benefit of such individual not later than the 60th day after the day on which the account beneficiary receives the payment or distribution, and (ii) the aggregate amount of such transfers to all other individuals does not exceed $2,020 in 2020. . (C) Donations to qualified charity Section 223(f) of such Code is amended by adding at the end the following: (9) Donations to qualified charity (A) Donations allowable Paragraph (2) shall not apply to any amount paid or distributed from a health savings account to the extent the amount (not to exceed $10,000) is a qualified charitable contribution made by the account beneficiary during the taxable year. (B) Qualified charitable contribution For purposes of subparagraph (A), the term qualified charitable contribution (i) which is made in cash, (ii) for which a deduction is allowable under section 170 (determined without regard to subsection (b) thereof and to subparagraph (C) of this paragraph), and (iii) which is— (I) made to an organization described in section 170(b)(1)(A), and (II) not— (aa) to an organization described in section 509(a)(3), or (bb) for the establishment of a new, or maintenance of an existing, donor advised fund (as defined in section 4966(d)(2)). (C) Denial of deduction No deduction shall be allowed for a distribution which is a contribution made pursuant to this paragraph. . (2) Archer MSA (A) Non-dependent medical expenses in 2020 Section 220(d)(2) of such Code, as amended by the preceding provisions of this section, is amended by adding at the end the following: (E) Non-dependent medical expenses in 2020 During calendar year 2020, subparagraph (A) shall be applied without regard to the requirement that medical care be for the individual, the spouse of such individual, and any dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of such individual. . (B) Rollover Section 220(f)(5) of such Code is amended by adding at the end the following: (C) Rollover gifts Notwithstanding the preceding provisions of this paragraph, an amount is described in this paragraph as a rollover contribution in the case of a taxable year beginning in 2020 and paragraph (2) shall not apply to any amount paid or distributed from a health savings account of a beneficiary to a health savings account of an individual who is not such beneficiary, the spouse of such beneficiary, or any dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of such beneficiary, to the extent— (i) the amount received is paid into the health savings account for the benefit of such individual not later than the 60th day after the day on which the account beneficiary receives the payment or distribution, and (ii) the aggregate amount of such transfers to all other individuals does not exceed $2,020 in 2020. . (C) Donations to qualified charity Section 220(f) of such Code is amended by adding at the end the following: (9) Donations to qualified charity (A) Donations allowable Paragraph (2) shall not apply to any amount paid or distributed from a health savings account to the extent the amount (not to exceed $10,000) is a qualified charitable contribution made by the account beneficiary during the taxable year. (B) Qualified charitable contribution For purposes of subparagraph (A), the term qualified charitable contribution (i) which is made in cash, (ii) for which a deduction is allowable under section 170 (determined without regard to subsection (b) thereof and to subparagraph (C) of this paragraph), and (iii) which is— (I) made to an organization described in section 170(b)(1)(A), and (II) not— (aa) to an organization described in section 509(a)(3), or (bb) for the establishment of a new, or maintenance of an existing, donor advised fund (as defined in section 4966(d)(2)). (C) Denial of deduction No deduction shall be allowed for a distribution which is a contribution made pursuant to this paragraph. . (g) Cafeteria plans Section 125 of such Code is amended by redesignating subsections (k) and (l) as subsections (l) and (m), respectively, and by inserting after subsection (j) the following new subsection: (k) Additional employer contributions (1) In general A plan shall not fail to be treated as a cafeteria plan under this section merely because the employer makes contributions to employee health savings accounts during plan years beginning in 2020 or 2021 without regard to choices made by participants. (2) Applicable rules For purposes of paragraph (1)— (A) subsections (b) and (c) shall apply with respect to such contributions, (B) the dollar limitation in subsection (i)(1) shall not apply with respect to such contributions, and (C) in the case of an eligible employer (as defined in subsection (j)(5)), the requirements of subsection (j) shall apply, except that such contributions shall be treated as in addition to contributions required under subsection (j)(3)(A). . (h) Expansion of allowable medical expenses for 2020 (1) HSA Section 223(d)(2) of such Code, as amended by the preceding provisions of this section, is amended by adding at the end the following: (H) Additional allowable medical expenses for 2020 For calendar year 2020, amounts paid for masks, testing supplies, pain relievers and fever reducing OTC products, and for child nutrition shall be treated as paid for medical care. . (2) Archer MSA Section 220(d)(2) of such Code, as amended by the preceding provisions of this section, is amended by adding at the end the following: (G) Additional allowable medical expenses for 2020 For calendar year 2020, amounts paid for masks, testing supplies, pain relievers and fever reducing OTC products, and for child nutrition shall be treated as paid for medical care. . (3) FSA Section 106 of such Code, as amended by the preceding provisions of this section, is amended by adding at the end the following: (k) Additional allowable medical expenses for 2020 For calendar year 2020, amounts paid for masks, testing supplies, pain relievers and fever reducing OTC products, and for child nutrition shall be treated as paid for medical care. . (i) Increase HSA and MSA contribution limits for 2020 (1) HSA Section 223(b) of such Code is amended by adding at the end the following: (9) Increase in contribution limits for 2020 In the case of any taxable year beginning in calendar year 2020, the amount allowed as a deduction under subsection (a) shall be 120 percent of the amount allowed as a deduction under subsection (a) without regard to this paragraph. . (2) Archer MSA Section 220(b) of such Code is amended by adding at the end the following: (8) Increase in contribution limits for 2020 In the case of any taxable year beginning in calendar year 2020, the amount allowed as a deduction under subsection (a) shall be 120 percent of the amount allowed as a deduction under subsection (a) without regard to this paragraph. . (j) Increase HSA and MSA contribution limits for beneficiaries hospitalized or testing positive for COVID–19 (1) HSA Section 223(b) of such Code, as amended by the preceding provisions of this section, is amended by adding at the end the following: (10) Increase in contribution limits hospitalized or testing positive for COVID–19 In the case of any taxable year beginning in calendar year 2020 or 2021 in which the account beneficiary or any individual described in paragraph (2)(A) is hospitalized or tests positive for COVID–19, the amount allowed as a deduction under subsection (a) shall, be 300 percent of the amount allowed as a deduction under subsection (a) without regard to this paragraph and paragraph (9). . (2) Archer MSA Section 220(b) of such Code is amended by adding at the end the following: (9) Increase in contribution limits for beneficiaries hospitalized or testing positive for COVID–19 In the case of any taxable year beginning in calendar year 2020 or 2021 in which the account beneficiary or any individual described in paragraph (2)(A) is hospitalized or tests positive for COVID–19, the amount allowed as a deduction under subsection (a) shall, be 300 percent of the amount allowed as a deduction under subsection (a) without regard to this paragraph and paragraph (8). . (k) Effective date The amendments made by this Act shall apply to years ending after the date of the enactment of this Act. 3. Disallowance of costs for abortion (a) HSA Paragraph (2) of section 223(d) (I) Disallowance of costs for abortion Such term shall not include any amounts paid for any abortion or premiums of any health insurance that includes coverage of abortion, other than— (i) in the case of a physical disorder, physical injury, or physical illness which would, as certified by a physician, place the pregnant individual in danger of death unless an abortion is performed, including a life-endangering physical condition caused by or arising from the pregnancy itself, and (ii) in the case of a pregnancy resulting from an act of rape or incest. . (b) Archer MSA Paragraph (2) of section 220(d) of such, as amended by the preceding provisions of this Act, is amended by adding at the end the following new subparagraph: (H) Disallowance of costs for abortion Such term shall not include any amounts paid for any abortion or premiums of any health insurance that includes coverage of abortion, other than— (i) in the case of a physical disorder, physical injury, or physical illness which would, as certified by a physician, place the pregnant individual in danger of death unless an abortion is performed, including a life-endangering physical condition caused by or arising from the pregnancy itself, and (ii) in the case of a pregnancy resulting from an act of rape or incest. . (c) FSA Section 106 of such Code, as amended by the preceding provisions of this section, is amended by adding at the end the following: (l) Disallowance of costs for abortion A plan shall not be treated as a health flexible spending arrangement under this section if such plan provides for any reimbursement of amounts paid for any abortion or premiums of any health insurance that includes coverage of abortion, other than— (1) in the case of a physical disorder, physical injury, or physical illness which would, as certified by a physician, place the pregnant individual in danger of death unless an abortion is performed, including a life-endangering physical condition caused by or arising from the pregnancy itself, and (2) in the case of a pregnancy resulting from an act of rape or incest. . (d) Effective date The amendment made by this section shall apply to taxable years beginning after December 31, 2020.

Summary: Pandemic Eradication and Enhanced Prevention through Savings Act or the PEEPS Act This bill allows payment in 2020 of health insurance premiums from specified health care plans, including flexible savings accounts. It also allows payment of premiums in 2020 and 2021 for individuals not eligible for employer-sponsored coverage and allows participation in health savings accounts that do not require payment of a deductible. The bill denies coverage as a medical expense, for purposes of a health savings account, the cost of an abortion or the cost of insurance that includes abortion coverage, with exceptions for rape, incest, or health of the mother.