106(c)) that is a qualified benefit and only permits 
reimbursement for expenses for medical care (as de-
fined in section 213(d)(1)) (without regard to sub-
paragraphs (C) and (D) thereof). 
‘‘(4) UNUSED
HEALTH
BENEFITS.—For pur-
poses of this subsection, the term ‘unused health 
benefits’ means the excess of—
‘‘(A) the maximum amount of reimburse-
ment allowable during a plan year under a 
health flexible spending arrangement, over 
‘‘(B) the actual amount of reimbursement 
during such year under such arrangement.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to taxable years beginning after 
December 31, 2005. 
SEC. 4. STRENGTHENING HEALTH SAVINGS ACCOUNTS. 
(a) REPEAL
OF
REQUIREMENT
FOR
COVERAGE 
UNDER HIGH DEDUCTIBLE HEALTH PLAN.—
(1) IN GENERAL.—Section 223 of the Internal 
Revenue Code of 1986 (relating to health savings ac-
counts) is amended by striking subsections (a), (b), 
and (c) and inserting the following: 
‘‘(a) DEDUCTION ALLOWED.—In the case of an indi-
vidual, there shall be allowed as a deduction for the tax-
able year an amount equal to the aggregate amount paid
in cash during such taxable year by or on behalf of such 
individual to a health savings account of such individual. 
‘‘(b) LIMITATIONS.— 
‘‘(1) IN GENERAL.—The amount allowable as a 
deduction to a taxpayer under subsection (a) for the 
taxable year shall not exceed $8,000 ($16,000 in the 
case of a joint return). 
‘‘(2) COORDINATION WITH OTHER CONTRIBU-
TIONS.—The limitation which would (but for this 
paragraph) apply under this subsection to a tax-
payer for any taxable year shall be reduced (but not 
below zero) by the sum of— 
‘‘(A) the aggregate amount paid for such 
taxable year to Archer MSAs of the taxpayer, 
and 
‘‘(B) the aggregate amount contributed to 
health savings accounts of the taxpayer which is 
excludable from the taxpayer’s gross income for 
such taxable year under section 106(d) (and 
such amount shall not be allowed as a deduc-
tion under subsection (a)). 
‘‘(3) DENIAL
OF
DEDUCTION
TO
DEPEND-
ENTS.—No deduction shall be allowed under this 
section to any individual with respect to whom a de-
duction under section 151 is allowable to another
taxpayer for a taxable year beginning in the cal-
endar year in which such individual’s taxable year 
begins.’’. 
(2) CONFORMING AMENDMENTS.— 
(A) Section 223 of such Code is amended 
by redesignating subsections (d), (e), (f), (g), 
and (h) as subsections (c), (d), (e), (f), and (g), 
respectively. 
(B) Section 223(f) of such Code (as redes-
ignated by subparagraph (A)) is amended to 
read as follows: 
‘‘(f) COST-OF-LIVING ADJUSTMENT.— 
‘‘(1) IN GENERAL.—In the case of any taxable 
year beginning in a calendar year after 2006, each 
dollar amount in subsection (b)(1) shall be increased 
by an amount equal to— 
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar 
year in which such taxable year begins, deter-
mined by substituting ‘calendar year 2006’ for 
‘calendar year 1992’ in subparagraph (B) 
thereof.
‘‘(2) ROUNDING.—If any increase under para-
graph (1) is not a multiple of $50, such increase 
shall be rounded to the nearest multiple of $50.’’. 
(C) Section 26(b)(2)(S) of such Code is 
amended by striking ‘‘section 223(f)(4)’’ and 
inserting ‘‘section 223(e)(4)’’. 
(D) Each of the following sections of such 
Code is amended by striking ‘‘section 223(d)’’ 
and inserting ‘‘section 223(c)’’: 
(i) Section 35(g)(3). 
(ii) Section 106(d)(1). 
(iii) Section 220(f)(5)(A). 
(iv) Section 848(e)(1)(B)(v). 
(v) Section 4973(a)(5). 
(vi) Section 4973(g). 
(vii) Section 4975(c)(6). 
(viii) Section 4975(e)(1)(E). 
(ix) Section 6051(a)(12). 
(E) Section 4973(g) of such Code is 
amended— 
(i) in paragraph (1) by striking ‘‘sec-
tion 223(f)(5)’’ and inserting ‘‘section 
223(e)(5)’’,