IB 
Union Calendar No. 330 
118TH CONGRESS 
2D SESSION 
H. R. 5688 
[Report No. 118–401] 
To amend the Internal Revenue Code of 1986 to improve health savings 
accounts. 
IN THE HOUSE OF REPRESENTATIVES 
SEPTEMBER 26, 2023 
Mr. SMUCKER (for himself and Mr. BLUMENAUER) introduced the following 
bill; which was referred to the Committee on Ways and Means 
FEBRUARY 26, 2024 
Reported with an amendment, committed to the Committee of the Whole 
House on the State of the Union, and ordered to be printed 
[Strike out all after the enacting clause and insert the part printed in italic] 
[For text of introduced bill, see copy of bill as introduced on September 26, 2023] 
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A BILL 
To amend the Internal Revenue Code of 1986 to improve 
health savings accounts. 
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solely of primary care services pro-
vided by primary care practitioners 
(as defined in section 1833(x)(2)(A) of 
the Social Security Act, determined 
without regard to clause (ii) thereof), if 
the sole compensation for such care is 
a fixed periodic fee. 
‘‘(II) LIMITATION.—With respect 
to any individual for any month, such 
term shall not include any arrange-
ment if the aggregate fees for all direct 
primary care service arrangements (de-
termined without regard to this sub-
clause) with respect to such individual 
for such month exceed $150 (twice such 
dollar amount in the case of an indi-
vidual with any direct primary care 
service arrangement (as so determined) 
that covers more than one individual). 
‘‘(iii) CERTAIN
SERVICES
SPECIFI-
CALLY
EXCLUDED
FROM
TREATMENT
AS 
PRIMARY CARE SERVICES.—For purposes of 
this paragraph, the term ‘primary care 
services’ shall not include— 
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‘‘(I) procedures that require the 
use of general anesthesia, 
‘‘(II) prescription drugs (other 
than vaccines), and 
‘‘(III) 
laboratory 
services 
not 
typically administered in an ambula-
tory primary care setting. 
The Secretary, after consultation with the 
Secretary of Health and Human Services, 
shall issue regulations or other guidance re-
garding the application of this clause.’’. 
(b) DIRECT PRIMARY CARE SERVICE ARRANGEMENT 
FEES
TREATED
AS
MEDICAL
EXPENSES.—Section 
223(d)(2)(C) of such Code is amended by striking ‘‘or’’ at 
the end of clause (iii), by striking the period at the end 
of clause (iv) and inserting ‘‘, or’’, and by adding at the 
end the following new clause: 
‘‘(v) any direct primary care service 
arrangement.’’. 
(c) INFLATION ADJUSTMENT.—Section 223(g)(1) of 
such Code is amended— 
(1) by inserting ‘‘, (c)(1)(E)(ii)(II),’’ after 
‘‘(b)(2)’’ each place it appears, and 
(2) in subparagraph (B), by inserting ‘‘and 
(iii)’’ after ‘‘clause (ii)’’ in clause (i), by striking 
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‘‘and’’ at the end of clause (i), by striking the period 
at the end of clause (ii) and inserting ‘‘, and’’, and 
by inserting after clause (ii) the following new clause: 
‘‘(iii) in the case of the dollar amount 
in subsection (c)(1)(E)(ii)(II) for taxable 
years beginning in calendar years after 
2026, ‘calendar year 2025’.’’. 
(d) REPORTING OF DIRECT PRIMARY CARE SERVICE 
ARRANGEMENT FEES ON W-2.—Section 6051(a) of such 
Code is amended by striking ‘‘and’’ at the end of paragraph 
(16), by striking the period at the end of paragraph (17) 
and inserting ‘‘, and’’, and by inserting after paragraph 
(17) the following new paragraph: 
‘‘(18) in the case of a direct primary care service 
arrangement (as defined in section 223(c)(1)(E)(ii)) 
which is provided in connection with employment, the 
aggregate fees for such arrangement for such em-
ployee.’’. 
(e) EFFECTIVE DATE.—The amendments made by this 
section shall apply to months beginning after December 31, 
2025, in taxable years ending after such date. 
SEC. 3. ON-SITE EMPLOYEE CLINICS. 
(a) IN GENERAL.—Section 223(c)(1) of the Internal 
Revenue Code of 1986, as amended by the preceding provi-
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sions of this Act, is amended by adding at the end the fol-
lowing new subparagraph: 
‘‘(F) SPECIAL RULE FOR QUALIFIED ITEMS 
AND SERVICES.— 
‘‘(i) IN
GENERAL.—For purposes of 
subparagraph (A)(ii), an individual shall 
not be treated as covered under a health 
plan described in subclauses (I) and (II) of 
such subparagraph merely because the indi-
vidual is eligible to receive, or receives, 
qualified items and services— 
‘‘(I) at a healthcare facility lo-
cated at a facility owned or leased by 
the employer of the individual (or of 
the individual’s spouse), or 
‘‘(II) at a healthcare facility oper-
ated primarily for the benefit of em-
ployees of the employer of the indi-
vidual (or of the individual’s spouse). 
‘‘(ii) QUALIFIED ITEMS AND SERVICES 
DEFINED.—For purposes of this subpara-
graph, the term ‘qualified items and serv-
ices’ means the following: 
‘‘(I) Physical examination. 
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‘‘(II) Immunizations, including 
injections of antigens provided by em-
ployees. 
‘‘(III) Drugs or biologicals other 
than a prescribed drug (as such term is 
defined in section 213(d)(3)). 
‘‘(IV) Treatment for injuries oc-
curring in the course of employment. 
‘‘(V) Preventive care for chronic 
conditions (as defined in clause (iv)). 
‘‘(VI) Drug testing. 
‘‘(VII) 
Hearing 
or 
vision 
screenings and related services. 
‘‘(iii) AGGREGATION.—For purposes of 
clause (i), all persons treated as a single 
employer under subsection (b), (c), (m), or 
(o) of section 414 shall be treated as a single 
employer. 
‘‘(iv) PREVENTIVE CARE FOR CHRONIC 
CONDITIONS.—For purposes of this subpara-
graph, the term ‘preventive care for chronic 
conditions’ means any item or service speci-
fied in the Appendix of Internal Revenue 
Service Notice 2019–45 which is prescribed 
to treat an individual diagnosed with the 
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associated chronic condition specified in 
such Appendix for the purpose of preventing 
the exacerbation of such chronic condition 
or the development of a secondary condition, 
including any amendment, addition, re-
moval, or other modification made by the 
Secretary (pursuant to the authority grant-
ed to the Secretary under paragraph (2)(C)) 
to the items or services specified in such Ap-
pendix subsequent to the date of enactment 
of this subparagraph.’’. 
(b) EFFECTIVE DATE.—The amendments made by this 
section shall apply to months in taxable years beginning 
after December 31, 2025. 
SEC. 4. CONTRIBUTIONS PERMITTED IF SPOUSE HAS 
HEALTH 
FLEXIBLE 
SPENDING 
ARRANGE-
MENT. 
(a) CONTRIBUTIONS PERMITTED IF SPOUSE HAS A 
HEALTH FLEXIBLE SPENDING ARRANGEMENT.—Section 
223(c)(1)(B) of the Internal Revenue Code of 1986 is 
amended by striking ‘‘and’’ at the end of clause (ii), by 
striking the period at the end of clause (iii) and inserting 
‘‘, and’’, and by adding at the end the following new clause: 
‘‘(iv) coverage under a health flexible 
spending arrangement of the spouse of the 
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individual for any plan year of such ar-
rangement if the aggregate reimbursements 
under such arrangement for such year do 
not exceed the aggregate expenses which 
would be eligible for reimbursement under 
such arrangement if such expenses were de-
termined without regard to any expenses 
paid or incurred with respect to such indi-
vidual.’’. 
(b) EFFECTIVE DATE.—The amendment made by this 
section shall apply to plan years beginning after December 
31, 2025. 
SEC. 5. FSA AND HRA TERMINATIONS OR CONVERSIONS TO 
FUND HSAs. 
(a) IN GENERAL.—Section 106(e)(2) of the Internal 
Revenue Code of 1986 is amended to read as follows: 
‘‘(2) QUALIFIED HSA DISTRIBUTION.—For pur-
poses of this subsection— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
HSA distribution’ means, with respect to any 
employee, a distribution from a health flexible 
spending arrangement or health reimbursement 
arrangement of such employee contributed di-
rectly to a health savings account of such em-
ployee if— 
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‘‘(i) such distribution is made in con-
nection with such employee establishing cov-
erage under a high deductible health plan 
(as defined in section 223(c)(2)) if during 
the 4-year period preceding the date the em-
ployee so establishes coverage the employee 
was not covered under such a high deduct-
ible health plan, and 
‘‘(ii) such arrangement is described in 
section 223(c)(1)(B)(vi) with respect to any 
portion of the plan year remaining after 
such distribution is made, if such employee 
remains enrolled in such arrangement. 
‘‘(B) DOLLAR LIMITATION.—The aggregate 
amount of distributions from health flexible 
spending arrangements and health reimburse-
ment arrangements of any employee which may 
be treated as qualified HSA distributions in con-
nection with an establishment of coverage de-
scribed in subparagraph (A)(i) shall not exceed 
the dollar amount in effect under section 
125(i)(1) (twice such amount in the case of cov-
erage 
which 
is 
described 
in 
section 
223(b)(2)(B)).’’. 
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(b) PARTIAL REDUCTION OF LIMITATION ON DEDUCT-
IBLE HSA CONTRIBUTIONS.—Section 223(b)(4) of such 
Code is amended by striking ‘‘and’’ at the end of subpara-
graph (B), by striking the period at the end of subpara-
graph (C) and inserting ‘‘, and’’, and by inserting after 
subparagraph (C) the following new subparagraph: 
‘‘(D) so much of any qualified HSA dis-
tribution (as defined in section 106(e)(2)) made 
to a health savings account of such individual 
during the taxable year as does not exceed the 
aggregate increases in the balance of the arrange-
ment from which such distribution is made 
which occur during the portion of the plan year 
which precedes such distribution (other than any 
balance carried over to such plan year and deter-
mined without regard to any decrease in such 
balance during such portion of the plan year).’’. 
(c) CONVERSION TO HSA-COMPATIBLE ARRANGEMENT 
FOR REMAINDER OF PLAN YEAR.—Section 223(c)(1)(B) of 
such Code, as amended by this preceding provisions of this 
Act, is amended by striking ‘‘and’’ at the end of clause (iii), 
by striking the period at the end of clause (iv) and inserting 
‘‘, and’’, and by adding at the end the following new clause: 
‘‘(v) coverage under a health flexible 
spending arrangement or health reimburse-
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ment arrangement for the portion of the 
plan year after a qualified HSA distribu-
tion (as defined in section 106(e)(2) deter-
mined without regard to subparagraph 
(A)(ii) thereof) is made, if the terms of such 
arrangement which apply for such portion 
of the plan year are such that, if such terms 
applied for the entire plan year, then such 
arrangement would not be taken into ac-
count under subparagraph (A)(ii) of this 
paragraph for such plan year.’’. 
(d) INCLUSION OF QUALIFIED HSA DISTRIBUTIONS 
ON W–2.— 
(1) IN GENERAL.—Section 6051(a) of such Code, 
as amended by this preceding provisions of this Act, 
is amended by striking ‘‘and’’ at the end of para-
graph (17), by striking the period at the end of para-
graph (18) and inserting ‘‘, and’’, and by inserting 
after paragraph (18) the following new paragraph: 
‘‘(19) the amount of any qualified HSA distribu-
tion (as defined in section 106(e)(2)) with respect to 
such employee.’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
6051(a)(12) of such Code is amended by inserting 
‘‘(other than any qualified HSA distribution, as de-
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fined in section 106(e)(2))’’ before the comma at the 
end. 
(e) EFFECTIVE DATE.—The amendments made by this 
section shall apply to distributions made after December 31, 
2025, in taxable years ending after such date. 
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Union Calendar No. 330 
118TH CONGRESS 
2D SESSION 
H. R. 5688 
[Report No. 118–401] 
A BILL 
To amend the Internal Revenue Code of 1986 to 
improve health savings accounts. 
FEBRUARY 26, 2024 
Reported with an amendment, committed to the Com-
mittee of the Whole House on the State of the Union, 
and ordered to be printed 
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