I 
111TH CONGRESS 
1ST SESSION H. R. 3508 
To amend the Internal Revenue Code of 1986 to provide for improved 
treatment of HSA account provisions, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 31, 2009 
Mr. PAULSEN (for himself, Mr. AKIN, Mr. BOUSTANY, Mr. BROWN of South 
Carolina, Mrs. MCMORRIS RODGERS, Mr. RYAN of Wisconsin, Mr. 
BRADY of Texas, Mr. CONAWAY, Mr. FRANKS of Arizona, Mr. PRICE of 
Georgia, Mr. KIRK, Mr. ROSKAM, Mrs. BIGGERT, Mr. MCCARTHY of Cali-
fornia, Mr. CASSIDY, Mrs. LUMMIS, Mr. ROONEY, Mr. DAVIS of Ken-
tucky, Mr. LANCE, Mr. PENCE, and Mrs. BACHMANN) introduced the fol-
lowing bill; which was referred to the Committee on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to provide 
for improved treatment of HSA account provisions, and 
for other purposes. 
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 ‘‘Healthy Savings Act 
of 2009’’. 
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SEC. 2. ALLOW BOTH SPOUSES TO MAKE CATCH-UP CON-
TRIBUTIONS TO THE SAME HSA ACCOUNT. 
(a) IN GENERAL.—Paragraph (3) of section 223(b) 
of the Internal Revenue Code of 1986 is amended by add-
ing at the end the following new subparagraph: 
‘‘(C) 
SPECIAL
RULE
WHERE
BOTH 
SPOUSES ARE ELIGIBLE INDIVIDUALS WITH 1 
ACCOUNT.—If— 
‘‘(i) an individual and the individual’s 
spouse have both attained age 55 before 
the close of the taxable year, and 
‘‘(ii) the spouse is not an account ben-
eficiary of a health savings account as of 
the close of such year, 
the additional contribution amount shall be 200 
percent of the amount otherwise determined 
under subparagraph (B).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 3. PROVISIONS RELATING TO MEDICARE. 
(a) INDIVIDUALS OVER AGE 65 ONLY ENROLLED IN 
MEDICARE PART A.—Section 223(b)(7) of the Internal 
Revenue Code of 1986 (relating to contribution limitation 
on Medicare eligible individuals) is amended by adding at 
the end the following new sentence: ‘‘This paragraph shall 
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not apply to any individual during any period the individ-
ual’s only entitlement to such benefits is an entitlement 
to hospital insurance benefits under part A of title XVIII 
of such Act pursuant to an enrollment for such hospital 
insurance benefits under section 226(a)(1) of such Act.’’. 
(b) MEDICARE BENEFICIARIES PARTICIPATING
IN 
MEDICARE ADVANTAGE MSA MAY CONTRIBUTE THEIR 
OWN MONEY TO THEIR MSA.—Subsection (b) of section 
138 of such Code is amended by striking paragraph (2) 
and by redesignating paragraphs (3) and (4) as para-
graphs (2) and (3), respectively. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 4. INDIVIDUALS ELIGIBLE FOR VETERANS BENEFITS 
FOR A SERVICE-CONNECTED DISABILITY. 
(a) IN GENERAL.—Section 223(c)(1) of the Internal 
Revenue Code of 1986 (defining eligible individual) is 
amended by adding at the end the following new subpara-
graph: 
‘‘(C) SPECIAL RULE FOR INDIVIDUALS ELI-
GIBLE
FOR
CERTAIN
VETERANS
BENEFITS.— 
For purposes of subparagraph (A)(ii), an indi-
vidual shall not be treated as covered under a 
health plan described in such subparagraph 
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merely because the individual receives periodic 
hospital care or medical services for a service- 
connected disability under any law administered 
by the Secretary of Veterans Affairs but only if 
the individual is not eligible to receive such care 
or services for any condition other than a serv-
ice-connected disability.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 5. INDIVIDUALS ELIGIBLE FOR INDIAN HEALTH SERV-
ICE ASSISTANCE. 
(a) IN GENERAL.—Section 223(c)(1) of the Internal 
Revenue Code of 1986, as amended by this Act, is amend-
ed by adding at the end the following new subparagraph: 
‘‘(D) SPECIAL RULE FOR INDIVIDUALS EL-
IGIBLE
FOR
ASSISTANCE
UNDER
INDIAN 
HEALTH SERVICE PROGRAMS.—For purposes of 
subparagraph (A)(ii), an individual shall not be 
treated as covered under a health plan de-
scribed in such subparagraph merely because 
the individual receives hospital care or medical 
services under a medical care program of the 
Indian Health Service or of a tribal organiza-
tion.’’. 
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(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 6. FSA AND HRA TERMINATION TO FUND HSAS. 
(a) ELIGIBLE INDIVIDUALS INCLUDE FSA AND HRA 
PARTICIPANTS.—Section 223(c)(1)(B) of the Internal 
Revenue Code of 1986 is amended— 
(1) by striking ‘‘and’’ at the end of clause (ii), 
(2) by striking the period at the end of clause 
(iii) and inserting ‘‘, and’’, and 
(3) by inserting after clause (iii) the following 
new clause: 
‘‘(iv) coverage under a health flexible 
spending arrangement or a health reim-
bursement arrangement in the plan year a 
qualified HSA distribution as described in 
section 106(e) is made on behalf of the in-
dividual if after the qualified HSA dis-
tribution is made and for the remaining 
duration of the plan year, the coverage 
provided under the health flexible spending 
arrangement or health reimbursement ar-
rangement is converted to— 
‘‘(I) coverage that does not pay 
or reimburse any medical expense in-
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curred before the minimum annual de-
ductible under section 223(c)(2)(A)(i) 
(prorated for the period occurring 
after the qualified HSA distribution is 
made) is satisfied, 
‘‘(II) coverage that, after the 
qualified HSA distribution is made, 
does not pay or reimburse any med-
ical expense incurred after the quali-
fied HSA distribution is made other 
than preventive care as defined in sec-
tion 223(c)(2)(3), 
‘‘(III) coverage that, after the 
qualified HSA distribution is made, 
pays or reimburses benefits for cov-
erage 
described 
in 
section 
223(c)(1)(B)(ii) (but not through in-
surance or for long-term care serv-
ices), 
‘‘(IV) coverage that, after the 
qualified HSA distribution is made, 
pays or reimburses benefits for per-
mitted insurance as defined in section 
223(c)(1)(B)(i) or coverage described 
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in section 223(c)(1)(B)(ii) (but not 
for long-term care services), 
‘‘(V) coverage that, after the 
qualified HSA distribution is made, 
pays or reimburses only those medical 
expenses incurred after an individual’s 
retirement (and no expenses incurred 
before retirement), or 
‘‘(VI) coverage that, after the 
qualified HSA distribution is made, is 
suspended, pursuant to an election 
made on or before the date the indi-
vidual elects a qualified HSA distribu-
tion or, if later, on the date of the in-
dividual enrolls in a high deductible 
health plan (as defined in section 
223(c)(2)), that does not pay or reim-
burse, at any time, any medical ex-
pense incurred during the suspension 
period except as defined in subclauses 
(I) through (V) above.’’. 
(b) QUALIFIED HSA DISTRIBUTION SHALL NOT AF-
FECT
FLEXIBLE
SPENDING
ARRANGEMENT.—Section 
106(e)(1) of such Code is amended to read as follows: 
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‘‘(1) IN GENERAL.—A plan shall not fail to be 
treated as a health flexible spending arrangement 
under this section, section 105, or section 125, or as 
a health reimbursement arrangement under this sec-
tion or section 105, merely because such plan pro-
vides for a qualified HSA distribution.’’. 
(c) FSA BALANCES AT YEAR END SHALL NOT FOR-
FEIT.—Section 125(d)(2) of such Code is amended by 
adding at the end the following new subparagraph: 
‘‘(E) EXCEPTION FOR QUALIFIED HSA DIS-
TRIBUTIONS.—Subparagraph 
(A) 
shall 
not 
apply to the extent that there is an amount re-
maining in a health flexible spending account at 
the end of a plan year that an individual elects 
to contribute to a health savings account pursu-
ant to a qualified HSA distribution (as defined 
in section 106(e)(2)).’’. 
(d) SIMPLIFICATION OF LIMITATIONS ON FSA AND 
HRA ROLLOVERS.—Section 106(e)(2) of such Code (re-
lating to qualified HSA distribution) is amended to read 
as follows: 
‘‘(2) QUALIFIED HSA DISTRIBUTION.— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
HSA distribution’ means a distribution from a 
health flexible spending arrangement or health 
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pant in the health reimbursement ar-
rangement. 
‘‘(iii) 
APPLICABLE
AMOUNT.—For 
purposes of this subparagraph, the applica-
ble amount is— 
‘‘(I) $2,250 in the case of an eli-
gible individual who has self-only cov-
erage under a high deductible health 
plan at the time of such distribution, 
and 
‘‘(II) $4,500 in the case of an eli-
gible individual who has family cov-
erage under a high deductible health 
plan at the time of such distribu-
tion.’’. 
(e) ELIMINATION OF ADDITIONAL TAX FOR FAILURE 
TO MAINTAIN HIGH DEDUCTIBLE HEALTH PLAN COV-
ERAGE.—Section 106(e) of such Code is amended— 
(1) by striking paragraph (3) and redesignating 
paragraphs (4) and (5) as paragraphs (3) and (4), 
respectively, and 
(2) by striking subparagraph (A) of paragraph 
(3), as so redesignated, and redesignating subpara-
graphs (B) and (C) of such paragraph as subpara-
graphs (A) and (B) thereof, respectively. 
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(f) LIMITED PURPOSE FSAS AND HRAS.—Section 
106(e) of such Code, as amended by this section, is 
amended by adding at the end the following new para-
graph: 
‘‘(5) LIMITED PURPOSE FSAS AND HRAS.—A 
plan shall not fail to be a health flexible spending 
arrangement or health reimbursement arrangement 
under this section or section 105 merely because the 
plan converts coverage for individuals who enroll in 
a high deductible health plan described in section 
223(c)(2) 
to 
coverage 
described 
in 
section 
223(c)(1)(B)(iv). Coverage for such individuals may 
be converted as of the date of enrollment in the high 
deductible health plan, without regard to the period 
of coverage under the health flexible spending ar-
rangement or health reimbursement arrangement, 
and without requiring any change in coverage to in-
dividuals who do not enroll in a high deductible 
health plan.’’. 
(g) DISTRIBUTION AMOUNTS ADJUSTED FOR COST- 
OF-LIVING.—Section 106(e) of such Code, as amended by 
this section, is amended by adding at the end the following 
new paragraph: 
‘‘(6) COST-OF-LIVING ADJUSTMENT.— 
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‘‘(A) IN
GENERAL.—In the case of any 
taxable year beginning after December 31, 
2010, each of the dollar amounts in paragraph 
(2)(B)(iii) shall be increased by an amount 
equal to such dollar amount, multiplied by the 
cost-of-living adjustment determined under sec-
tion 1(f)(3) for the calendar year in which such 
taxable year begins by substituting ‘calendar 
year 2009’ for ‘calendar year 1992’ in subpara-
graph (B) thereof. 
‘‘(B) ROUNDING.—If any increase under 
paragraph (1) is not a multiple of $50, such in-
crease shall be rounded to the nearest multiple 
of $50.’’. 
(h) DISCLAIMER OF DISQUALIFYING COVERAGE.— 
Section 223(c)(1)(B) of such Code, as amended by this 
section, is amended— 
(1) by striking ‘‘and’’ at the end of clause (iii), 
(2) by striking the period at the end of clause 
(iv) and inserting ‘‘, and’’, and 
(3) by inserting after clause (iv) the following 
new clause: 
‘‘(v) any coverage (including prospec-
tive coverage) under a health plan that is 
not a high deductible health plan which is 
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disclaimed in writing, at the time of the 
creation or organization of the health sav-
ings account, including by execution of a 
trust 
described 
in 
subsection 
(d)(1) 
through a governing instrument that in-
cludes such a disclaimer, or by acceptance 
of an amendment to such a trust that in-
cludes such a disclaimer.’’. 
(i) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 7. PURCHASE OF HEALTH INSURANCE FROM HSA AC-
COUNT. 
(a) IN GENERAL.—Paragraph (2) of section 223(d) 
of the Internal Revenue Code of 1986 (defining qualified 
medical expenses) is amended— 
(1) by striking subparagraphs (B) and (C), 
(2) by inserting ‘‘ and including payment for in-
surance)’’ after ‘‘section 213(d)’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
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SEC. 8. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES 
INCURRED BEFORE ESTABLISHMENT OF AC-
COUNT. 
(a) IN GENERAL.—Paragraph (2) of section 223(d) 
of the Internal Revenue Code of 1986, as amended by this 
Act, is amended by adding at the end the following new 
subparagraph: 
‘‘(B) CERTAIN
MEDICAL
EXPENSES
IN-
CURRED BEFORE ESTABLISHMENT OF ACCOUNT 
TREATED AS QUALIFIED.—An expense shall not 
fail to be treated as a qualified medical expense 
solely because such expense was incurred before 
the establishment of the health savings account 
if such expense was incurred— 
‘‘(i) during either— 
‘‘(I) the taxable year in which the 
health savings account was estab-
lished, or 
‘‘(II) the preceding taxable year 
in the case of a health savings ac-
count established after the taxable 
year in which such expense was in-
curred but before the time prescribed 
by law for filing the return for such 
taxable year (not including extensions 
thereof), and 
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‘‘(ii) for medical care of an individual 
during a period that such individual was 
covered by a high deductible health plan 
and met the requirements of subsection 
(c)(1)(A)(ii) (after application of sub-
section (c)(1)(B)).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to health savings accounts estab-
lished during taxable years beginning after the date of the 
enactment of this Act. 
SEC. 9. PREVENTIVE CARE PRESCRIPTION DRUG CLARI-
FICATION. 
(a) CLARIFY
USE
OF
DRUGS
IN
PREVENTIVE 
CARE.—Subparagraph (C) of section 223(c)(2) of the In-
ternal Revenue Code of 1986 is amended by adding at the 
end the following: ‘‘Preventive care shall include prescrip-
tion and over-the-counter drugs and medicines which have 
the primary purpose of preventing the onset of, further 
deterioration from, or complications associated with 
chronic conditions, illnesses, or diseases.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
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SEC. 10. QUALIFIED MEDICAL EXPENSES. 
(a) CERTAIN EXERCISE EQUIPMENT AND PHYSICAL 
FITNESS PROGRAMS TREATED AS MEDICAL CARE.— 
(1) IN
GENERAL.—Subsection (d) of section 
213 of the Internal Revenue Code of 1986 is amend-
ed by adding at the end the following new para-
graph: 
‘‘(12) EXERCISE
EQUIPMENT
AND
PHYSICAL 
FITNESS PROGRAMS.— 
‘‘(A) IN
GENERAL.—The term ‘medical 
care’ shall include amounts paid— 
‘‘(i) to purchase or use equipment 
used in a program (including a self-di-
rected program) of physical exercise, 
‘‘(ii) to participate, or receive instruc-
tion, in a program of physical exercise, and 
‘‘(iii) for membership dues in a fitness 
club the primary purpose of which is to 
provide access to equipment and facilities 
for physical exercise. 
‘‘(B) LIMITATION.—Amounts treated as 
medical care under subparagraph (A) shall not 
exceed $1,000 with respect to any individual for 
any taxable year.’’. 
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(2) EFFECTIVE DATE.—The amendment made 
by this subsection shall apply to taxable years begin-
ning after the date of the enactment of this Act. 
(b) CERTAIN NUTRITIONAL AND DIETARY SUPPLE-
MENTS TO BE TREATED AS MEDICAL CARE.— 
(1) IN
GENERAL.—Subsection (d) of section 
213 of such Code, as amended by subsection (a), is 
amended by adding at the end the following new 
paragraph: 
‘‘(13) NUTRITIONAL
AND
DIETARY
SUPPLE-
MENTS.— 
‘‘(A) IN
GENERAL.—The term ‘medical 
care’ shall include amounts paid to purchase 
herbs, vitamins, minerals, homeopathic rem-
edies, meal replacement products, and other di-
etary and nutritional supplements. 
‘‘(B) LIMITATION.—Amounts treated as 
medical care under subparagraph (A) shall not 
exceed $1,000 with respect to any individual for 
any taxable year. 
‘‘(C) MEAL
REPLACEMENT
PRODUCT.— 
For purposes of this paragraph, the term ‘meal 
replacement product’ means any product that— 
‘‘(i) is permitted to bear labeling mak-
ing a claim described in section 403(r)(3) 
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of the Federal Food, Drug, and Cosmetic 
Act, and 
‘‘(ii) is permitted to claim under such 
section that such product is low in fat and 
is a good source of protein, fiber, and mul-
tiple essential vitamins and minerals.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by this subsection shall apply to taxable years begin-
ning after the date of the enactment of this Act. 
Æ 
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