I
103D CONGRESS
1ST SESSION
H. R. 719
To amend the Internal Revenue Code of 1986 to allow individuals an exclusion
for contributions made pursuant to a salary reduction arrangement to
accounts established pursuant to employer-provided family and medical
leave plan.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 2, 1993
Mr. GRANDY (for himself, Mr. ORTON, Mr. GOODLING, Ms. DUNN, Ms. PRYCE
of Ohio, Mr. ROGERS, and Mr. KOLBE) 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 allow indi-
viduals an exclusion for contributions made pursuant
to a salary reduction arrangement to accounts estab-
lished pursuant to employer-provided family and medical
leave plan.
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 ‘‘Family and Medical
Leave Account Act of 1993’’.
SEC. 2. FINDINGS AND PURPOSES.
(a) FINDINGS.—The Congress finds that—
cies and related benefit programs which are pre-
ferred by employees and which take into account the
needs of both work and family.
SEC. 3. FAMILY AND MEDICAL LEAVE ACCOUNTS.
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
items specifically excluded from gross income) is amended
by redesignating section 137 as section 138 and by insert-
ing after section 136 the following new section:
‘‘SEC. 137. FAMILY AND MEDICAL LEAVE ACCOUNTS.
‘‘(a) GENERAL RULE.—For purposes of this subtitle,
no amount shall be included in the gross income of an
employee—
‘‘(1) by reason of an employer contribution to
a family and medical leave account for the benefit of
such employee (whether pursuant to a salary reduc-
tion arrangement or otherwise), or
‘‘(2) because the employee has an election
whether salary reduction contributions will be made
by such employer to such an account or received by
the employee in cash.
‘‘(b) LIMITATION.—The amount excluded from gross
income under subsection (a) for any taxable year shall not
exceed the amount which, when added to the amount in
the account as of the beginning of the taxable year, will
equal 1⁄2 of the employee’s compensation (as defined in
section 414(q)(7)) from such employer for the calendar
year ending with or within such taxable year. In applying
the preceding sentence, compensation in excess of $50,000
shall not be taken into account.
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) FAMILY AND MEDICAL LEAVE ACCOUNT.—
The term ‘family and medical leave account’ means
an account maintained by the employer exclusively
for the benefit of the individual for whose benefit the
account is established, but only if—
‘‘(A) the account is established pursuant to
a qualified family and medical leave plan of
such employer and such plan meets the require-
ments of subsection (d), and
‘‘(B) the written governing instrument cre-
ating the account meets the following require-
ments:
‘‘(i) No contribution will be accepted
unless it is in cash and contributions will
not be accepted for any taxable year in ex-
cess of the limitation under subsection (b).
‘‘(ii) Distributions from the account
may be made only by the employer and
only if—
‘‘(I) the distribution is a qualified
distribution (as defined in subsection
(e)(2)(B)),
‘‘(II) the employee dies or sepa-
rates from service, or
‘‘(III) the employee elects (as
provided in subsection (h)(1)) to dis-
continue participation in the qualified
family and medical leave plan of such
employer.
‘‘(iii) No part of the account assets
will be invested in life insurance contracts.
‘‘(iv) The interest of the individual in
the balance of his account is nonforfeit-
able.
‘‘(v) The assets of the account will not
be commingled with other property except
in a common trust fund or common invest-
ment fund.
‘‘(2) SALARY REDUCTION CONTRIBUTION.—The
term ‘salary reduction contribution’ means any em-
ployer contribution made pursuant to a salary reduc-
tion arrangement with an employee.
‘‘(3) EMPLOYEE; EMPLOYER.—The rules of
paragraphs (1) and (4) of section 401(c) shall apply
for purposes of this section. Section 1372 shall not
apply for purposes of this section.
‘‘(d) REQUIREMENTS.—The requirements of this sub-
section are met if the requirements of each of the following
paragraphs are met.
‘‘(1) ELIGIBILITY REQUIREMENTS.—
‘‘(A) IN GENERAL.—A qualified family and
medical leave plan of an employer satisfies the
requirements of this paragraph for any year
only if each employee who has performed at
least 1 year of service (as defined in section
411(a)(5)) for such employer is eligible to enter
into a salary reduction arrangement with such
employer for purposes of having contributions
made to a family and medical leave account.
‘‘(B) EXCLUDED
EMPLOYEES.—For pur-
poses of subparagraph (A), there shall be ex-
cluded—
‘‘(i) employees described in subpara-
graph (A) or (C) of section 410(b)(3),
‘‘(ii) employees who normally work
less than 171⁄2 hours per week, and
‘‘(iii) employees who elect under sub-
section (h)(1) to discontinue participation
in such plan.
‘‘(2) NONDISCRIMINATION REQUIREMENTS FOR
MATCHING CONTRIBUTIONS (IF ANY).—In the case of
an employer who makes contributions to the family
and medical leave account of any employee in addi-
tion to salary reduction contributions to such ac-
count, the qualified family and medical leave plan of
such employer satisfies the requirements of this
paragraph for any year only if—
‘‘(A) such additional contributions are
made on behalf of each employee who elects to
have such salary reduction contributions made,
and
‘‘(B) the amount of such additional con-
tributions for each employee is determined
using the same percentage of the salary reduc-
tion contributions.
‘‘(e) TREATMENT OF DISTRIBUTIONS.—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, any amount paid or distrib-
uted out of a family and medical leave account shall
be included in the gross income of the individual for
whose benefit such account was established. The
basis of the individual in such account shall be zero.
‘‘(2) 
ADDITIONAL
TAX
ON
CERTAIN
AMOUNTS.—
‘‘(A) IN
GENERAL.—If any distribution
which is not a qualified distribution is made
from a family and medical leave account during
any taxable year, the tax under this chapter for
such taxable year of the individual for whose
benefit such account was established shall be
increased by an amount equal to 10 percent of
the amount of such distribution.
‘‘(B) 
QUALIFIED
DISTRIBUTION.—For
purposes of subparagraph (A), the term ‘quali-
fied distribution’ means any distribution—
‘‘(i) which is made by the employer
during a period of qualified family or medi-
cal leave (as defined in section 426), and
‘‘(ii) the amount of which, when
added to the other qualified distributions
made to the individual during such period,
does not exceed the excess of—
‘‘(I) the amount which would be
the compensation of such individual
from the employer for such period
(determined on the basis of the aver-
age rate of compensation for such in-
dividual), over
‘‘(II) the compensation (if any)
received (or to be received) by to such
individual from such employer for
such period.
Such term shall not include any distribution
made during the 1-year period beginning on the
date such account was established.
‘‘(3) EXCESS CONTRIBUTIONS RETURNED BE-
FORE DUE DATE OF RETURN.—Paragraphs (1) and
(2) shall not apply to the distribution of any con-
tribution paid during a taxable year to a family and
medical leave account to the extent that such con-
tribution exceeds the amount excludable under sub-
section (a) if—
‘‘(A) such distribution is received on or be-
fore the day prescribed by law (including exten-
sions of time) for filing such individual’s return
for such taxable year,
‘‘(B) no exclusion is allowed under sub-
section (a) with respect to such excess contribu-
tion, and
‘‘(C) such distribution is accompanied by
the amount of net income attributable to such
excess contribution.
Any net income described in subparagraph (C) shall
be included in the gross income of the individual for
the taxable year in which it is received.
‘‘(f) TAX TREATMENT OF ACCOUNTS.—
‘‘(1) EXEMPTION
FROM
TAX.—A family and
medical leave account shall be exempt from taxation
under this subtitle unless such account has ceased to
be a family and medical leave account by reason of
paragraph (2). Notwithstanding the preceding sen-
tence, such an account shall be subject to the taxes
imposed by section 511 (relating to imposition of tax
on unrelated business income of charitable, etc. or-
ganizations).
‘‘(2) EFFECT OF PLEDGING ACCOUNT AS SECU-
RITY.—If, during any taxable year, the individual for
whose benefit a family and medical leave account
was established uses the account or any portion
thereof as security for a loan, the portion so used is
treated as distributed to that individual during a pe-
riod which is not a period of qualified family or
medical leave.
‘‘(g) SPECIAL RULES.—
‘‘(1) ELECTION
TO
DISCONTINUE
PARTICIPA-
TION IN QUALIFIED FAMILY AND MEDICAL LEAVE
PLAN.—Each employee who is a participant in a
qualified family and medical leave plan of the em-
ployer may elect to discontinue participation in such
plan. If such election is made—
‘‘(A) the employer shall distribute to the
employee the balance in any family and medical
leave account of such employee which is held by
the employer, and
‘‘(B) such employee may not participate in
the qualified family and medical leave plan of
such employer during the 2-year period begin-
ning on the date of such distribution.
‘‘(2) TREATMENT OF ACCOUNT ON SEPARATION
FROM SERVICE.—In the case of an employee who
separates from service—
‘‘(A) paragraphs (1) and (2) of subsection
(e) shall not apply to any transfer from any
family and medical leave account of such em-
ployee to another family and medical leave ac-
count of such employee (and subsection (b)
shall not apply to the receipt of such transfer
by such other account) if such transfer is made
not later than the 180th day after the date of
separation, and
‘‘(B) if all amounts in any family and med-
ical leave account with respect to the former
employer is not so transferred during such 180-
day period, the employer shall distribute to the
employee the balance in such account as of the
close of such period.
Any amount distributed to the employee under sub-
paragraph (B) may be rolled into an individual re-
tirement plan of such employee notwithstanding any
other provision of law.
‘‘(3) TREATMENT OF ACCOUNT ON DEATH.—In
the case of the death of an employee, the employer
shall distribute the balance of any family and medi-
cal leave account of such employee to the designated
beneficiaries of such employee.
‘‘(4) COMMUNITY PROPERTY LAWS.—This sec-
tion shall be applied without regard to any commu-
nity property laws.
‘‘(h) REPORTS.—The employer maintaining any fam-
ily and medical leave account shall make such reports re-
garding such account to the Secretary and to the individ-
ual for whose benefit the account is maintained with re-
spect to contributions, distributions, and such other mat-
ters as the Secretary may require under regulations. The
reports required by this subsection shall be filed at such
time and in such manner and furnished to such individuals
at such time and in such manner as may be required by
those regulations.’’
SEC. 4. QUALIFIED FAMILY AND MEDICAL LEAVE PLANS.
(a) IN GENERAL.—Subchapter D of chapter 1 of the
Internal Revenue Code of 1986 (relating to deferred com-
pensation, etc.) is amended by adding at the end thereof
the following new part:
‘‘PART III—QUALIFIED FAMILY AND MEDICAL
LEAVE PLANS.
‘‘Sec. 426. Qualified family and medical leave plans.
‘‘Sec. 427. Certification requirements.
‘‘Sec. 428. Employment and benefits protection.
‘‘SEC. 426. QUALIFIED FAMILY AND MEDICAL LEAVE PLANS.
‘‘(a) IN GENERAL.—For purposes of this title, the
term ‘qualified family and medical leave plan’ means any
plan which is maintained by an employer for the purpose
of providing employees with family or medical leave and
which meets the requirements of sections 427 and 428.
‘‘(b) QUALIFIED FAMILY OR MEDICAL LEAVE.—For
purposes of this section, the term ‘qualified family or med-
ical leave’ means any period of leave under a qualified
family or medical leave plan of an employee (irrespective
of whether, or the extent to which, pay is provided there-
under together with such leave) for 1 or more of the fol-
lowing reasons:
‘‘(1) Because of the physical incapacitation of
the employee resulting from the employee’s own seri-
ous health condition, including medical disability as-
sociated with the birth of a son or daughter of the
employee.
‘‘(2) In order to care for the employee’s son,
daughter, spouse, or parent who has a serious health
condition.
‘‘(3) In order to care for a newborn son or
daughter or a newly adopted son or daughter under
the age of 6.
‘‘(c) SERIOUS HEALTH CONDITION.—For purposes of
this section, the term ‘serious health condition’ means a
condition caused by an accident, disease, or health condi-
tion which—
‘‘(1) poses imminent danger of death;
‘‘(2) requires hospitalization relating to the
birth of a child or involving an organ transplant,
limb amputation, or other procedure of similar se-
verity; or
‘‘(3) a mental or physical condition which re-
quires constant in-home care.
‘‘(d) SON OR DAUGHTER.—For purposes of this sec-
tion, the term ‘son or daughter’ of an employee means a
biological, adopted, or foster child of the employee, a step-
child of the employee, or a child of which the employee
has legal guardianship of the person, who is—
‘‘(1) under 18 years of age, or
‘‘(2) 18 years of age or older and incapable of
self-care because of mental or physical disability or
required complete bed rest.
‘‘(e) PARENT.—For purposes of this section, the term
‘parent’ means the biological parent of the child or an indi-
vidual who has legal guardianship of the person of the
child when the child is a son or daughter.
‘‘SEC. 427. CERTIFICATION REQUIREMENTS.
‘‘(a) IN GENERAL.—A family and medical leave plan
shall not be treated as meeting the requirements of this
section unless the plan provides—
‘‘(1) that the employer may require that a claim
for leave described in paragraph (1) or (2) of section
426(b) be supported by certification issued by the
health care provider of the employee or of the em-
ployee’s son, daughter, spouse, or parent, whichever
is appropriate, and
‘‘(2) that the employee must provide a copy of
such certification to the employer.
‘‘(b) SUFFICIENT
CERTIFICATION.—Such certifi-
cation shall be treated as sufficient if it states—
‘‘(1) the date on which the serious health condi-
tion commenced,
‘‘(2) the probable duration of the condition,
‘‘(3) the appropriate medical facts within the
provider’s knowledge regarding the condition, and
‘‘(4)(A) for purposes of leave described in sec-
tion 426(b)(1), a statement that the employee is un-
able to perform the functions of the employee’s posi-
tion, and
‘‘(B) for purposes of leave described in section
426(b)(2), an estimate of the amount of time that
the eligible employee is needed to care for the son,
daughter, spouse, or parent.
‘‘(c) SECOND OPINION.—A family and medical leave
plan shall not be treated as meeting the requirements of
this section unless the plan provides—
‘‘(1) that, in any case in which the employer
has reason to doubt the validity of the certification
provided in accordance with subsection (a) for leave
described in paragraph (1) or (2) of section 426(b),
the employer may require, at its own expense, that
the employee obtain the opinion of a second health
care provider designated or approved by the em-
ployer concerning any information certified in ac-
cordance with subsection (a) for such leave, and
‘‘(2) that any health care provider designated or
approved pursuant to paragraph (1) may not be em-
ployed on a regular basis by the employer.
‘‘(d) RESOLUTION OF CONFLICTING OPINIONS.—A
family and medical leave plan shall not be treated as meet-
ing the requirements of this section unless the plan pro-
vides—
‘‘(1) that, in any case in which the second opin-
ion described in subsection (c) differs from the origi-
nal certification provided under subsection (a), the
employer may require, at its own expense, that the
employee obtain the opinion of a third health care
provider designated or approved jointly by the em-
ployer and the employee concerning the information
certified in accordance with subsection (a), and
‘‘(2) that the opinion of the third health care
provider concerning the information certified in ac-
cordance with subsection (a) will be considered to be
final and will be binding on the employer and the
employee.
‘‘(e) HEALTH CARE PROVIDER.—For purposes of
this section, the term ‘health care provider’ means a doc-
tor of medicine or osteopathy legally authorized to practice
medicine and surgery by the State in which the doctor per-
forms such function or action.
‘‘SEC. 428. EMPLOYMENT AND BENEFITS PROTECTION.
‘‘(a) RESTORATION TO POSITION.—
‘‘(1) IN GENERAL.—A family and medical leave
plan shall not be treated as meeting the require-
ments of this section unless, under the plan—
‘‘(A) any employee who takes leave under
the plan for its intended purpose is entitled,
upon return from such leave—
‘‘(i) to be restored by the employer to
the position of employment held by the em-
ployee when the leave commenced, or
‘‘(ii) to be restored to an equivalent
position with equivalent employment bene-
fits, pay, and other terms and conditions of
employment, and
‘‘(B) the taking of leave under the plan
does not result in the loss of any employment
benefit earned before the date on which the
leave commenced.
‘‘(2) Nothing in this subsection shall be con-
strued to require a family and medical leave plan to
provide for the entitlement of any restored employee
to—
‘‘(A) the accrual of any seniority or em-
ployment benefits during any period of leave, or
‘‘(B) any right, benefit, or position of em-
ployment other than any right, benefit, or posi-
tion to which the employee would have been en-
titled had the employee not taken the leave.
‘‘(3) As a condition to restoration under the
plan pursuant to paragraph (1)(A), the plan shall
not be treated as meeting the requirements of this
section unless the plan provides that the employer
may have a policy that requires each employee to re-
ceive certification from the employee’s health care
provider that the employee is able to resume work,
except that nothing in this paragraph shall super-
sede a valid State or local law or a collective bar-
gaining agreement that governs the return to work
of employees taking leave under section 426(b).
‘‘(b) MAINTENANCE OF HEALTH BENEFITS.—
‘‘(1) IN GENERAL.—A family and medical leave
plan shall not be treated as meeting the require-
ments of this section unless, under the plan, during
any period an eligible employee takes leave under a
family and medical leave plan, if such employee is
also covered under a group health plan maintained
by the employer at the time such leave commences,
the employer must maintain coverage under such
group health plan for the duration of such leave at
the level and under the conditions coverage would
have been provided if the employee had continued in
employment continuously from the date the em-
ployee commenced the leave until the date the em-
ployee is restored under the family and medical leave
plan pursuant to subsection (a).
‘‘(2) REIMBURSEMENT OF EMPLOYER FOR PRO-
VIDING
CONTINUED
HEALTH
COVERAGE.—In any
case in which—
‘‘(A) an employee is a participant in a
group health plan maintained by the employer
and there is in effect an election by the em-
ployee to participate in a family and medical
leave plan, and
‘‘(B) under such family and medical leave
plan the employer is required to make at least
a matching employer contribution to the plan
with respect to each employee contribution of
such employee,
nothing in this Act or title I of the Employee Retire-
ment Income Security Act of 1974 shall be con-
strued to preclude such family and medical leave
plan from providing for reimbursement to the em-
ployer for the cost to the employer of coverage of
such employee maintained under such group health
plan for the duration of the leave taken by such em-
ployee.
‘‘(c) NO BAR TO AGREEMENT CONCERNING ALTER-
NATIVE EMPLOYMENT.—
‘‘(1) IN
GENERAL.—Nothing in this part or
title I of the Employee Retirement Income Security
Act of 1974 or any family and medical leave plan
shall be construed to prohibit an employer maintain-
ing such a plan and an employee covered under such
plan from mutually agreeing to alternative employ-
ment of the employee throughout the period during
which the employee would be entitled to leave under
such plan. A family and medical leave plan shall not
be treated as meeting the requirements of this sec-
tion unless, under the plan, any such period of alter-
native employment does not cause a reduction in the
period of temporary leave to which the employee is
entitled under the plan pursuant to section 426(b).
‘‘(2) The employer may request that, for pur-
poses of paragraph (1), certification required under
the plan pursuant to section 427(a) that is issued in
any case involving leave described in section
426(b)(1) include an explanation of the extent to
which the eligible employee is unable to perform the
functions of the employee’s position.’’
SEC. 5. TECHNICAL AMENDMENTS.
(a) TAX ON EXCESS CONTRIBUTIONS.—Section 4973
of the Internal Revenue Code of 1986 (relating to tax on
excess contributions to individual retirement accounts, cer-
tain section 403(b) contracts, and certain individual re-
tirement annuities) is amended—
(1) by inserting ‘‘FAMILY
AND
MEDICAL
LEAVE ACCOUNTS,’’ after ‘‘ACCOUNTS,’’ in the
heading of such section,
(2) by redesignating paragraph (2) of sub-
section (a) as paragraph (3) and by inserting after
paragraph (1) the following:
‘‘(2) a family and medical leave account (within
the meaning of section 220(c)),’’,
(3) by striking ‘‘or’’ at the end of paragraph
(1) of subsection (a), and
(4) by adding at the end thereof the following
new subsection:
‘‘(d) EXCESS CONTRIBUTIONS TO FAMILY AND MED-
ICAL LEAVE ACCOUNTS.—For purposes of this section, in
the case of a family and medical leave account, the term
‘excess contributions’ means the amount by which the
amount contributed for the taxable year to the account
exceeds the amount excludable under section 220 for such
taxable year. For purposes of this subsection, any con-
tribution which is distributed out of the family and medi-
cal leave account in a distribution to which section
220(e)(3) applies shall be treated as an amount not con-
tributed.’’
(b) FAILURE TO PROVIDE REPORTS ON FAMILY AND
MEDICAL LEAVE ACCOUNTS.—Section 6693 of such Code
(relating to failure to provide reports on individual retire-
ment account or annuities) is amended—
(1) by inserting ‘‘OR ON FAMILY AND MEDI-
CAL LEAVE ACCOUNTS’’ after ‘‘ANNUITIES’’ in
the heading of such section, and
(2) by adding at the end of subsection (a) the
following: ‘‘The person required by section 220(i) to
file a report regarding a family and medical leave
account at the time and in the manner required by
such section shall pay a penalty of $50 for each fail-
ure unless it is shown that such failure is due to rea-
sonable cause.’’
(c) CLERICAL AMENDMENTS.—
(1) The table of sections for part III of sub-
chapter B of chapter 1 of such Code is amended by
striking the item relating to section 137 and insert-
ing the following:
‘‘Sec. 137. Family and medical leave accounts.
‘‘Sec. 138. Cross references to other Acts.’’
(2) The table of sections for chapter 43 of such
Code is amended by striking the item relating to sec-
tion 4973 and inserting the following:
‘‘Sec. 4973. Tax on excess contributions to individual retirement
accounts, family and medical leave accounts, certain
403(b) contracts, and certain individual retirement
annuities.’’
(3) The table of sections for subchapter B of
chapter 68 of such Code is amended by inserting ‘‘or
on family and medical leave accounts’’ after ‘‘annu-
ities’’ in the item relating to section 6693.
(4) The table of parts for subchapter D of
chapter 1 of such Code is amended by adding at the
end thereof the following new item:
‘‘Part III—Qualified family and medical leave plans’’.
SEC. 6. EFFECTIVE DATE.
The amendments made by this Act shall apply to tax-
able years beginning after December 31, 1992.
Æ
HR 719 IH——2