I 
109TH CONGRESS 
1ST SESSION H. R. 2063
To amend the Internal Revenue Code of 1986 to permit one-time, tax-
free distributions from retirement plans to fund health savings accounts. 
IN THE HOUSE OF REPRESENTATIVES 
MAY 3, 2005
Mr. SHUSTER 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 permit 
one-time, tax-free distributions from retirement plans to 
fund health savings accounts.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. ONE-TIME DISTRIBUTION FROM RETIREMENT 
PLANS 
TO 
FUND 
HEALTH 
SAVINGS 
AC-
COUNTS. 
(a) IN GENERAL.—Section 402 of the Internal Rev-
enue Code of 1986 (relating to taxability of beneficiary 
of employees’ trust) is amended by adding at the end the 
following new subsection: 
‘‘(l) HSA FUNDING DISTRIBUTION.—
‘‘(1) IN GENERAL.—In the case of an employee 
who is an eligible individual and who elects the ap-
plication of this subsection for a taxable year, gross 
income of the employee for the taxable year does not 
include a qualified HSA funding distribution. 
‘‘(2) QUALIFIED
HSA
FUNDING
DISTRIBU-
TION.—For purposes of this subsection, the term 
‘qualified HSA funding distribution’ means a dis-
tribution from an eligible retirement plan of the em-
ployee to the extent that such distribution is contrib-
uted to the health savings account of the employee 
not later than the 60th day after the day on which 
the employee receives such distribution or in a direct 
trustee-to-trustee transfer. 
‘‘(3) LIMITATION.—
‘‘(A) 
MAXIMUM
DOLLAR
LIMITATIONS 
BASED ON COVERAGE IN EFFECT AT TIME OF 
CONTRIBUTION.—The amount excluded from 
gross income by paragraph (1) shall not ex-
ceed—
‘‘(i) in the case of an individual who 
has self-only coverage under a high deduct-
ible health plan as of the first day of the 
month in which the qualified HSA funding 
distribution is contributed to the health
savings account of the employee, the lesser 
of—
‘‘(I) the amount specified under 
clause (i) of section 223(b)(2)(A), or 
‘‘(II) the amount in effect for the 
taxable year under clause (ii) of sec-
tion 223(b)(2)(A) (determined without 
regard to paragraphs (3) and (4)(C) 
of section 223(b)), reduced by any 
amount contributed to such account 
for such taxable year before the date 
of the qualified HSA funding distribu-
tion contribution, and 
‘‘(ii) in the case of an individual who 
has family coverage under a high deduct-
ible health plan as of the first day of the 
month in which the qualified HSA funding 
distribution is contributed to the health 
savings account of the employee, the lesser 
of—
‘‘(I) the amount specified under 
clause (i) of section 223(b)(2)(B), or 
‘‘(II) the amount in effect for the 
taxable year under clause (ii) of sec-
tion 223(b)(2)(B) (determined with-
out regard to paragraphs (3) and 
(4)(C) of section 223(b)), reduced by 
any amount contributed to such ac-
count for such taxable year before the 
date of the qualified HSA funding dis-
tribution contribution. 
‘‘(B) ONE-TIME TRANSFER.—The election 
under paragraph (1) shall apply to the taxable 
year for which made and all subsequent taxable 
years. Such an election, once made, shall be ir-
revocable. 
‘‘(4) DISTRIBUTIONS MUST OTHERWISE BE IN-
CLUDIBLE.—
‘‘(A) IN GENERAL.—An amount shall be 
treated as a distribution for purposes of para-
graph (1) only to the extent that such amount 
would be includible in gross income without re-
gard to paragraph (1). 
‘‘(B) APPLICATION OF SECTION 72.—Not-
withstanding section 72, in determining the ex-
tent to which an amount is treated as a dis-
tribution for purposes of subparagraph (A), the 
aggregate amounts distributed from an eligible 
retirement plan in a taxable year shall be treat-
ed as includible in gross income (without regard
to subparagraph (A)) to the extent that such 
amount does not exceed the aggregate amount 
which would have been so includible if all 
amounts distributed from all eligible retirement 
plans were treated as 1 contract for purposes of 
determining the inclusion of such distribution 
under section 72. Proper adjustments shall be 
made in applying section 72 to other distribu-
tions in such taxable year and subsequent tax-
able years. 
‘‘(5) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) ELIGIBLE RETIREMENT PLAN.—The 
term ‘eligible retirement plan’ has the meaning 
given such term by subsection (c)(8)(B), except 
that such term shall also include an eligible de-
ferred compensation plan maintained by an eli-
gible 
employer 
described 
in 
section 
457(e)(1)(B). 
‘‘(B) ELIGIBLE
INDIVIDUAL.—The term 
‘eligible individual’ has the meaning given such 
term by section 223(c)(1). 
‘‘(6) SPECIAL
RULES.—For purposes of this 
subsection—
‘‘(A) RELATED PLANS TREATED AS 1.—All 
eligible retirement plans of an employer shall be 
treated as a single plan. 
‘‘(B) SURVIVING SPOUSES, DEPENDENTS, 
AND ALTERNATE PAYEES.—With respect to an 
eligible retirement plan of an employer, a sur-
viving spouse, a dependent of the surviving 
spouse, or alternate payee (as defined in section 
414(p)(8)) of a former employee shall be treat-
ed in the same manner as the former em-
ployee.’’. 
(b) COORDINATION WITH LIMITATION
ON CON-
TRIBUTIONS TO HEALTH SAVINGS ACCOUNTS.—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 following new sub-
paragraph: 
‘‘(C) the aggregate amount contributed to 
health savings accounts of such individual for 
such taxable year under section 402(l) (and 
such amount shall not be allowed as a deduc-
tion under subsection (a)).’’.