I
103D CONGRESS
2D SESSION
H. R. 5106
To amend the Internal Revenue Code of 1986 to provide an exclusion from
gross income for amounts contributed by an employer to medical incen-
tives accounts of employees.
IN THE HOUSE OF REPRESENTATIVES
SEPTEMBER 26, 1994
Mr. SAXTON 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 provide
an exclusion from gross income for amounts contributed
by an employer to medical incentives accounts of employ-
ees.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION. 1. MEDICAL INCENTIVES ACCOUNTS.
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 is amended
by redesignating section 137 as section 138 and by insert-
ing after section 136 the following new section:
‘‘SEC. 137. MEDICAL INCENTIVES ACCOUNTS.
‘‘(a) EXCLUSION.—Gross income of an employee
shall not include any amount contributed during the tax-
able year by the employer to a medical incentives account
of such employee.
‘‘(b) LIMITATIONS.—
‘‘(1) MAXIMUM EXCLUSION.—
‘‘(A) IN
GENERAL.—Subsection (a) shall
not apply to contributions for the taxable year
in excess of $3,000.
‘‘(B) 
MEDICAL
CARE
COST
ADJUST-
MENT.—
‘‘(i) IN GENERAL.—In the case of any
taxable year beginning in a calendar year
after 1994, the dollar amount in subpara-
graph (A) shall be increased for such cal-
endar year by the medical care cost adjust-
ment for such calendar year.
‘‘(ii) MEDICAL
CARE
COST
ADJUST-
MENT.—For purposes of clause (i), the
medical care cost adjustment for any cal-
endar year is the percentage (if any) by
which—
‘‘(I) the medical care component
of the Consumer Price Index (as de-
fined in section 1(f)(5)) for August of
the preceding calendar year, exceeds
‘‘(II) such component for August
of 1993.
If any increase under the preceding sen-
tence is not a multiple of $50, such in-
crease shall be rounded to the nearest mul-
tiple of $50.
‘‘(2) EMPLOYEE
MUST
HAVE
EMPLOYER-PRO-
VIDED
HEALTH
INSURANCE.—Subsection (a) shall
not apply to any employee unless—
‘‘(A) such employee is covered under insur-
ance which constitutes medical care (as defined
in section 213(d)), and
‘‘(B) any portion of the cost of such insur-
ance is provided by such employee’s employer.
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) MEDICAL
INCENTIVES
ACCOUNT.—The
term ‘medical incentives account’ means a trust cre-
ated or organized in the United States exclusively
for the purpose of paying (or reimbursing) the medi-
cal expenses of the account beneficiary, the spouse
of such beneficiary, or any dependent (as defined in
section 152) of such beneficiary, but only if the writ-
ten governing instrument creating the trust meets
the following requirements:
‘‘(A) No contribution will be accepted un-
less it is in cash, and contributions will not be
accepted for the taxable year in excess of the
limitation under subsection (b)(1).
‘‘(B) The trustee is a bank (as defined in
section 408(n)) or another person who dem-
onstrates to the satisfaction of the Secretary
that the manner in which such person will ad-
minister the trust will be consistent with the re-
quirements of this section.
‘‘(C) The interest of an individual in the
balance in his account is nonforfeitable.
‘‘(D) No part of the trust assets will be in-
vested in life insurance contracts.
‘‘(E) The assets of the trust will not be
commingled with other property except in a
common trust fund or common investment
fund.
‘‘(2) MEDICAL EXPENSES.—The term ‘medical
expenses’ means, with respect to the account bene-
ficiary, the amount paid by such beneficiary during
the taxable year which would be allowable as a de-