IB 
Union Calendar No. 423 
109TH CONGRESS 
2D SESSION 
H. R. 6134 
[Report No. 109–704] 
To amend the Internal Revenue Code of 1986 to expand health coverage 
through the use of high deductible health plans and to encourage the 
use of health savings accounts. 
IN THE HOUSE OF REPRESENTATIVES 
SEPTEMBER 21, 2006 
Mr. CANTOR (for himself and Mr. RYAN of Wisconsin) introduced the 
following bill; which was referred to the Committee on Ways and Means 
SEPTEMBER 29, 2006 
Additional sponsor: Mr. PAUL 
SEPTEMBER 29, 2006 
Reported with an amendment, committed to the Committee of the Whole 
House on the State of the Union, and ordered to be printed 
[Strike out all after the enacting clause and insert the part printed in italic] 
[For text of introduced bill, see copy of bill as introduced on September 21, 2006] 
A BILL 
To amend the Internal Revenue Code of 1986 to expand 
health coverage through the use of high deductible health 
plans and to encourage the use of health savings ac-
counts. 
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Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Health Opportunity Pa-
tient Empowerment Act of 2006’’. 
SEC. 2. FSA AND HRA TERMINATIONS TO FUND HSAS. 
(a) IN GENERAL.—Section 106 of the Internal Revenue 
Code of 1986 (relating to contributions by employer to acci-
dent and health plans) is amended by adding at the end 
the following new subsection: 
‘‘(e) FSA 
AND
HRA TERMINATIONS
TO
FUND 
HSAS.— 
‘‘(1) IN GENERAL.—A plan shall not fail to be 
treated as a health flexible spending arrangement or 
health reimbursement arrangement under this section 
or section 105 merely because such plan provides for 
a qualified HSA distribution. 
‘‘(2) QUALIFIED HSA DISTRIBUTION.—The term 
‘qualified HSA distribution’ means a distribution 
from a health flexible spending arrangement or health 
reimbursement arrangement to the extent that such 
distribution— 
‘‘(A) does not exceed the lesser of the balance 
in such arrangement on September 21, 2006, or 
as of the date of such distribution, and 
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‘‘(B) is contributed by the employer directly 
to the health savings account of the employee be-
fore January 1, 2012. 
Such term shall not include more than 1 distribution 
with respect to any arrangement. 
‘‘(3) ADDITIONAL TAX FOR FAILURE TO MAIN-
TAIN HIGH DEDUCTIBLE HEALTH PLAN COVERAGE.— 
‘‘(A) IN GENERAL.—If, at any time during 
the testing period, the employee is not an eligible 
individual, then the amount of the qualified 
HSA distribution— 
‘‘(i) shall be includible in the gross in-
come of the employee for the taxable year in 
which occurs the first month in the testing 
period for which such employee is not an el-
igible individual, and 
‘‘(ii) the tax imposed by this chapter 
for such taxable year on the employee shall 
be increased by 10 percent of the amount 
which is so includible. 
‘‘(B) 
EXCEPTION
FOR
DISABILITY
OR 
DEATH.—Clauses (i) and (ii) of subparagraph 
(A) shall not apply if the employee ceases to be 
an eligible individual by reason of the death of 
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the employee or the employee becoming disabled 
(within the meaning of section 72(m)(7)). 
‘‘(4) DEFINITIONS
AND
SPECIAL
RULES.—For 
purposes of this subsection— 
‘‘(A) TESTING PERIOD.—The term ‘testing 
period’ means the period beginning with the 
month in which the qualified HSA distribution 
is contributed to the health savings account and 
ending on the last day of the 12th month fol-
lowing such month. 
‘‘(B) ELIGIBLE INDIVIDUAL.—The term ‘eli-
gible individual’ has the meaning given such 
term by section 223(c)(1). 
‘‘(C) TREATMENT AS ROLLOVER CONTRIBU-
TION.—A qualified HSA distribution shall be 
treated as a rollover contribution described in 
section 223(f)(5). 
‘‘(5) TAX TREATMENT RELATING TO DISTRIBU-
TIONS.—For purposes of this title— 
‘‘(A) IN GENERAL.—A qualified HSA dis-
tribution shall be treated as a payment described 
in subsection (d). 
‘‘(B) COMPARABILITY EXCISE TAX.— 
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‘‘(i) IN GENERAL.—Except as provided 
in clause (ii), section 4980G shall not apply 
to qualified HSA distributions. 
‘‘(ii) FAILURE TO OFFER TO ALL EM-
PLOYEES.—In the case of a qualified HSA 
distribution to any employee, the failure to 
offer such distribution to any eligible indi-
vidual covered under a high deductible 
health plan of the employer shall (notwith-
standing section 4980G(d)) be treated for 
purposes of section 4980G as a failure to 
meet the requirements of section 4980G(b).’’. 
(b) CERTAIN FSA COVERAGE DISREGARDED COV-
ERAGE.—Subparagraph (B) of section 223(c)(1) of such 
Code (relating to certain coverage disregarded) is amended 
by striking ‘‘and’’ at the end of clause (i), by striking the 
period at the end of clause (ii) and inserting ‘‘, and’’, and 
by inserting after clause (ii) the following new clause: 
‘‘(iii) for taxable years beginning after 
December 31, 2006, coverage under a health 
flexible spending arrangement during any 
period immediately following the end of a 
plan year of such arrangement during 
which unused benefits or contributions re-
maining at the end of such plan year may 
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be paid or reimbursed to plan participants 
for qualified benefit expenses incurred dur-
ing such period if— 
‘‘(I) the balance in such arrange-
ment at the end of such plan year is 
zero, or 
‘‘(II) the individual is making a 
qualified HSA distribution (as defined 
in section 106(e)) in an amount equal 
to the remaining balance in such ar-
rangement as of the end of such plan 
year, in accordance with rules pre-
scribed by the Secretary.’’. 
(c) APPLICATION OF SECTION.— 
(1) SUBSECTION (a).—The amendment made by 
subsection (a) shall apply to distributions on or after 
the date of the enactment of this Act. 
(2) SUBSECTION (b).—The amendment made by 
subsection (b) shall take effect on the date of the en-
actment of this Act. 
SEC. 3. REPEAL OF ANNUAL DEDUCTIBLE LIMITATION ON 
HSA CONTRIBUTIONS. 
(a) IN GENERAL.—Paragraph (2) of section 223(b) of 
the Internal Revenue Code of 1986 (relating to monthly lim-
itation) is amended— 
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(1) in subparagraph (A) by striking ‘‘the lesser 
of—’’ and all that follows and inserting ‘‘$2,250.’’, 
and 
(2) in subparagraph (B) by striking ‘‘the lesser 
of—’’ and all that follows and inserting ‘‘$4,500.’’. 
(b) 
CONFORMING
AMENDMENT.—Section 
223(d)(1)(A)(ii)(I) of such Code is amended by striking 
‘‘subsection 
(b)(2)(B)(ii)’’ 
and 
inserting 
‘‘subsection 
(b)(2)(B)’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2006. 
SEC. 4. MODIFICATION OF COST-OF-LIVING ADJUSTMENT. 
Paragraph (1) of section 223(g) of the Internal Rev-
enue Code of 1986 (relating to cost-of-living adjustment) is 
amended by adding at the end the following new flush sen-
tence: 
‘‘In the case of adjustments made for any taxable year 
beginning after 2007, section 1(f)(4) shall be applied 
for purposes of this paragraph by substituting ‘March 
31’ for ‘August 31’, and the Secretary shall publish 
the adjusted amounts under subsections (b)(2) and 
(c)(2)(A) for taxable years beginning in any calendar 
year no later than June 1 of the preceding calendar 
year.’’. 
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SEC. 5. CONTRIBUTION LIMITATION NOT REDUCED FOR 
PART-YEAR COVERAGE. 
(a) INCREASE IN LIMIT FOR INDIVIDUALS BECOMING 
ELIGIBLE
INDIVIDUALS
AFTER
BEGINNING
OF
THE 
YEAR.—Subsection (b) of section 223 of the Internal Rev-
enue Code of 1986 (relating to limitations) is amended by 
adding at the end the following new paragraph: 
‘‘(8) INCREASE IN LIMIT FOR INDIVIDUALS BE-
COMING ELIGIBLE INDIVIDUALS AFTER THE BEGIN-
NING OF THE YEAR.— 
‘‘(A) IN GENERAL.—For purposes of com-
puting the limitation under paragraph (1) for 
any taxable year, an individual who is an eligi-
ble individual during the last month of such tax-
able year shall be treated— 
‘‘(i) as having been an eligible indi-
vidual during each of the months in such 
taxable year, and 
‘‘(ii) as having been enrolled, during 
each of the months such individual is treat-
ed as an eligible individual solely by reason 
of clause (i), in the same high deductible 
health plan in which the individual was en-
rolled for the last month of such taxable 
year. 
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‘‘(B) FAILURE TO MAINTAIN HIGH DEDUCT-
IBLE HEALTH PLAN COVERAGE.— 
‘‘(i) IN
GENERAL.—If, at any time 
during the testing period, the individual is 
not an eligible individual, then— 
‘‘(I) gross income of the indi-
vidual for the taxable year in which 
occurs the first month in the testing 
period for which such individual is not 
an eligible individual is increased by 
the aggregate amount of all contribu-
tions to the health savings account of 
the individual which could not have 
been made but for subparagraph (A), 
and 
‘‘(II) the tax imposed by this 
chapter for any taxable year on the in-
dividual shall be increased by 10 per-
cent of the amount of such increase. 
‘‘(ii) EXCEPTION FOR DISABILITY OR 
DEATH.—Subclauses (I) and (II) of clause 
(i) shall not apply if the individual ceased 
to be an eligible individual by reason of the 
death of the individual or the individual be-
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coming disabled (within the meaning of sec-
tion 72(m)(7)). 
‘‘(iii) TESTING
PERIOD.—The term 
‘testing period’ means the period beginning 
with the last month of the taxable year re-
ferred to in subparagraph (A) and ending 
on the last day of the 12th month following 
such month.’’. 
(b) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2006. 
SEC. 6. EXCEPTION TO REQUIREMENT FOR EMPLOYERS TO 
MAKE COMPARABLE HEALTH SAVINGS AC-
COUNT CONTRIBUTIONS. 
(a) IN GENERAL.—Section 4980G of the Internal Rev-
enue Code of 1986 (relating to failure of employer to make 
comparable health savings account contributions) is amend-
ed by adding at the end the following new subsection: 
‘‘(d) EXCEPTION.—For purposes of applying section 
4980E to a contribution to a health savings account of an 
employee who is not a highly compensated employee (as de-
fined in section 414(q)), highly compensated employees shall 
not be treated as comparable participating employees.’’. 
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(b) EFFECTIVE DATE.—The amendment made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2006. 
SEC. 7. ONE-TIME DISTRIBUTION FROM INDIVIDUAL RE-
TIREMENT PLANS TO FUND HSAS. 
(a) IN GENERAL.—Subsection (d) of section 408 of the 
Internal Revenue Code of 1986 (relating to taxability of 
beneficiary of employees’ trust) is amended by adding at 
the end the following new paragraph: 
‘‘(9) DISTRIBUTION FOR HEALTH SAVINGS AC-
COUNT FUNDING.— 
‘‘(A) IN GENERAL.—In the case of an indi-
vidual who is an eligible individual (as defined 
in section 223(c)) and who elects the application 
of this paragraph for a taxable year, gross in-
come of the individual for the taxable year does 
not include a qualified HSA funding distribu-
tion to the extent such distribution is otherwise 
includible in gross income. 
‘‘(B) QUALIFIED HSA FUNDING DISTRIBU-
TION.—For purposes of this paragraph, the term 
‘qualified HSA funding distribution’ means a 
distribution from an individual retirement plan 
(other than a plan described in subsection (k) or 
(p)) of the employee to the extent that such dis-
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tribution is contributed to the health savings ac-
count of the individual in a direct trustee-to- 
trustee transfer. 
‘‘(C) LIMITATIONS.— 
‘‘(i) MAXIMUM DOLLAR LIMITATION.— 
The amount excluded from gross income by 
subparagraph (A) shall not exceed the excess 
of— 
‘‘(I) the annual limitation under 
section 223(b) computed on the basis of 
the type of coverage under the high de-
ductible health plan covering the indi-
vidual at the time of the qualified 
HSA funding distribution, over 
‘‘(II) in the case of a distribution 
described in clause (ii)(II), the amount 
of the earlier qualified HSA funding 
distribution. 
‘‘(ii) ONE-TIME TRANSFER.— 
‘‘(I) IN GENERAL.—Except as pro-
vided in subclause (II), an individual 
may make an election under subpara-
graph (A) only for one qualified HSA 
funding distribution during the life-
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time of the individual. Such an elec-
tion, once made, shall be irrevocable. 
‘‘(II) CONVERSION
FROM
SELF- 
ONLY
TO
FAMILY
COVERAGE.—If a 
qualified HSA funding distribution is 
made during a month in a taxable 
year during which an individual has 
self-only coverage under a high deduct-
ible health plan as of the first day of 
the month, the individual may elect to 
make an additional qualified HSA 
funding distribution during a subse-
quent month in such taxable year dur-
ing which the individual has family 
coverage under a high deductible health 
plan as of the first day of the subse-
quent month. 
‘‘(D) FAILURE TO MAINTAIN HIGH DEDUCT-
IBLE HEALTH PLAN COVERAGE.— 
‘‘(i) IN
GENERAL.—If, at any time 
during the testing period, the individual is 
not an eligible individual, then the aggre-
gate amount of all contributions to the 
health savings account of the individual 
made under subparagraph (A)— 
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‘‘(I) shall be includible in the 
gross income of the individual for the 
taxable year in which occurs the first 
month in the testing period for which 
such individual is not an eligible indi-
vidual, and 
‘‘(II) the tax imposed by this 
chapter for any taxable year on the in-
dividual shall be increased by 10 per-
cent of the amount which is so includ-
ible. 
‘‘(ii) EXCEPTION FOR DISABILITY OR 
DEATH.—Subclauses (I) and (II) of clause 
(i) shall not apply if the individual ceased 
to be an eligible individual by reason of the 
death of the individual or the individual be-
coming disabled (within the meaning of sec-
tion 72(m)(7)). 
‘‘(iii) TESTING
PERIOD.—The term 
‘testing period’ means the period beginning 
with the month in which the qualified HSA 
funding distribution is contributed to a 
health savings account and ending on the 
last day of the 12th month following such 
month. 
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‘‘(E) APPLICATION
OF
SECTION
72.—Not-
withstanding section 72, in determining the ex-
tent to which an amount is treated as otherwise 
includible in gross income for purposes of sub-
paragraph (A), the aggregate amount distributed 
from an individual retirement plan shall be 
treated as includible in gross income to the ex-
tent that such amount does not exceed the aggre-
gate amount which would have been so includible 
if all amounts from all individual retirement 
plans were distributed. Proper adjustments shall 
be made in applying section 72 to other distribu-
tions in such taxable year and subsequent tax-
able years.’’. 
(b) COORDINATION WITH LIMITATION ON CONTRIBU-
TIONS TO HSAS.—Section 223(b)(4) of such Code (relating 
to coordination with other contributions) is amended by 
striking ‘‘and’’ at the end of subparagraph (A), by striking 
the period at the end of subparagraph (B) and inserting 
‘‘, and’’, and by inserting after subparagraph (B) the fol-
lowing new subparagraph: 
‘‘(C) the aggregate amount contributed to 
health savings accounts of such individual for 
such taxable year under section 408(d)(9) (and 
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such amount shall not be allowed as a deduction 
under subsection (a)).’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2006. 
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Union Calendar No. 423 
109TH CONGRESS 
2D SESSION 
H. R. 6134 
[Report No. 109–704] 
A BILL 
To amend the Internal Revenue Code of 1986 to 
expand health coverage through the use of high 
deductible health plans and to encourage the use 
of health savings accounts. 
SEPTEMBER 29, 2006 
Reported with an amendment, committed to the Com-
mittee of the Whole House on the State of the Union, 
and ordered to be printed 
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