I 
109TH CONGRESS 
2D SESSION 
H. R. 6134 
To amend the Internal Revenue Code of 1986 to expand health coverage 
through the use of high deductible health plans and to encourage the 
use of health savings accounts. 
IN THE HOUSE OF REPRESENTATIVES 
SEPTEMBER 21, 2006 
Mr. CANTOR (for himself and Mr. RYAN of Wisconsin) 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 expand 
health coverage through the use of high deductible health 
plans and to encourage the use of health savings ac-
counts. 
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 ‘‘Health Opportunity 
Patient Empowerment Act of 2006’’. 
SEC. 2. FSA AND HRA TERMINATIONS TO FUND HSAS. 
(a) IN GENERAL.—Section 106 of the Internal Rev-
enue Code of 1986 (relating to contributions by employer 
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to accident and health plans) is amended by adding at the 
end the following new subsection: 
‘‘(e) FSA AND HRA TERMINATIONS
TO FUND 
HSAS.— 
‘‘(1) IN GENERAL.—A plan shall not fail to be 
treated as a health flexible spending arrangement or 
health reimbursement arrangement under this sec-
tion or section 105 merely because such plan pro-
vides for a qualified HSA distribution. 
‘‘(2) 
QUALIFIED
HSA
DISTRIBUTION.—The 
term ‘qualified HSA distribution’ means a distribu-
tion from a health flexible spending arrangement or 
health reimbursement arrangement to the extent 
that such distribution— 
‘‘(A) does not exceed the lesser of the bal-
ance in such arrangement on September 21, 
2006, or as of the date of such distribution, 
and 
‘‘(B) is contributed by the employer di-
rectly to the health savings account of the em-
ployee before January 1, 2012. 
Such term shall not include more than 1 distribution 
with respect to any arrangement. 
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‘‘(3) ADDITIONAL TAX FOR FAILURE TO MAIN-
TAIN
HIGH
DEDUCTIBLE
HEALTH
PLAN
COV-
ERAGE.— 
‘‘(A) IN GENERAL.—If, at any time during 
the testing period, the employee is not an eligi-
ble individual, then the amount of the qualified 
HSA distribution— 
‘‘(i) shall be includible in the gross in-
come of the employee for the taxable year 
in which occurs the first month in the test-
ing period for which such employee is not 
an eligible individual, and 
‘‘(ii) the tax imposed by this chapter 
for such taxable year on the employee shall 
be increased by 10 percent of the amount 
which is so includible. 
‘‘(B) EXCEPTION
FOR
DISABILITY
OR 
DEATH.—Clauses (i) and (ii) of subparagraph 
(A) shall not apply if the employee ceases to be 
an eligible individual by reason of the death of 
the employee or the employee becoming disabled 
(within the meaning of section 72(m)(7)). 
‘‘(4) DEFINITIONS AND SPECIAL RULES.—For 
purposes of this subsection— 
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‘‘(A) TESTING PERIOD.—The term ‘testing 
period’ means the period beginning with the 
month in which the qualified HSA distribution 
is contributed to the health savings account and 
ending on the last day of the 12th month fol-
lowing such month. 
‘‘(B) ELIGIBLE
INDIVIDUAL.—The term 
‘eligible individual’ has the meaning given such 
term by section 223(c)(1). 
‘‘(C) TREATMENT
AS
ROLLOVER
CON-
TRIBUTION.—A qualified HSA distribution shall 
be treated as a rollover contribution described 
in section 223(f)(5). 
‘‘(5) TAX TREATMENT RELATING TO DISTRIBU-
TIONS.—For purposes of this title— 
‘‘(A) IN GENERAL.—A qualified HSA dis-
tribution shall be treated as a payment de-
scribed in subsection (d). 
‘‘(B) COMPARABILITY EXCISE TAX.— 
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), section 4980G shall 
not apply to qualified HSA distributions. 
‘‘(ii) FAILURE TO OFFER TO ALL EM-
PLOYEES.—In the case of a qualified HSA 
distribution to any employee, the failure to 
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offer such distribution to any eligible indi-
vidual covered under a high deductible 
health plan of the employer shall (notwith-
standing section 4980G(d)) be treated for 
purposes of section 4980G as a failure to 
meet 
the 
requirements 
of 
section 
4980G(b).’’. 
(b) APPLICATION OF SECTION.—This section shall 
apply to distributions on or after the date of the enact-
ment of this Act. 
SEC. 3. REPEAL OF ANNUAL DEDUCTIBLE LIMITATION ON 
HSA CONTRIBUTIONS. 
(a) IN GENERAL.—Paragraph (2) of section 223(b) 
of the Internal Revenue Code of 1986 (relating to monthly 
limitation) is amended— 
(1) in subparagraph (A) by striking ‘‘the lesser 
of—’’ and all that follows and inserting ‘‘$2,250.’’, 
and 
(2) in subparagraph (B) by striking ‘‘the lesser 
of—’’ and all that follows and inserting ‘‘$4,500.’’. 
(b) 
CONFORMING
AMENDMENT.—Section 
223(d)(1)(A)(ii)(I) of such Code is amended by striking 
‘‘subsection (b)(2)(B)(ii)’’ and inserting ‘‘subsection 
(b)(2)(B)’’. 
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(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2006. 
SEC. 4. MODIFICATION OF COST-OF-LIVING ADJUSTMENT. 
Paragraph (1) of section 223(g) of the Internal Rev-
enue Code of 1986 (relating to cost-of-living adjustment) 
is amended by adding at the end the following new flush 
sentence: 
‘‘In the case of adjustments made for any taxable 
year beginning after 2008, section 1(f)(4) shall be 
applied for purposes of this paragraph by sub-
stituting ‘March 31’ for ‘August 31’, and the Sec-
retary shall publish the adjusted amounts under sub-
sections (b)(2) and (c)(2)(A) for taxable years begin-
ning in any calendar year no later than June 1 of 
the preceding calendar year.’’. 
SEC. 5. CONTRIBUTION LIMITATION NOT REDUCED FOR 
PART-YEAR COVERAGE. 
(a) INCREASE IN LIMIT FOR INDIVIDUALS BECOMING 
ELIGIBLE
INDIVIDUALS
AFTER
BEGINNING
OF
THE 
YEAR.—Subsection (b) of section 223 of the Internal Rev-
enue Code of 1986 (relating to limitations) is amended 
by adding at the end the following new paragraph: 
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‘‘(8) INCREASE IN LIMIT FOR INDIVIDUALS BE-
COMING ELIGIBLE INDIVIDUALS AFTER THE BEGIN-
NING OF THE YEAR.— 
‘‘(A) IN GENERAL.—For purposes of com-
puting the limitation under paragraph (1) for 
any taxable year, an individual who is an eligi-
ble individual during the last month of such 
taxable year shall be treated— 
‘‘(i) as having been an eligible indi-
vidual during each of the months in such 
taxable year, and 
‘‘(ii) as having been enrolled, during 
each of the months such individual is 
treated as an eligible individual solely by 
reason of clause (i), in the same high de-
ductible health plan in which the individual 
was enrolled for the last month of such 
taxable year. 
‘‘(B) FAILURE
TO
MAINTAIN
HIGH
DE-
DUCTIBLE HEALTH PLAN COVERAGE.— 
‘‘(i) IN
GENERAL.—If, at any time 
during the testing period, the individual is 
not an eligible individual, then— 
‘‘(I) gross income of the indi-
vidual for the taxable year in which 
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occurs the first month in the testing 
period for which such individual is not 
an eligible individual is increased by 
the aggregate amount of all contribu-
tions to the health savings account of 
the individual which could not have 
been made but for subparagraph (A), 
and 
‘‘(II) the tax imposed by this 
chapter for any taxable year on the 
individual shall be increased by 10 
percent of the amount of such in-
crease. 
‘‘(ii) EXCEPTION FOR DISABILITY OR 
DEATH.—Subclauses (I) and (II) of clause 
(i) shall not apply if the individual ceased 
to be an eligible individual by reason of the 
death of the individual or the individual 
becoming disabled (within the meaning of 
section 72(m)(7)). 
‘‘(iii) TESTING
PERIOD.—The term 
‘testing period’ means the period beginning 
with the last month of the taxable year re-
ferred to in subparagraph (A) and ending 
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on the last day of the 12th month fol-
lowing such month.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2006. 
SEC. 6. EXCEPTION TO REQUIREMENT FOR EMPLOYERS TO 
MAKE COMPARABLE HEALTH SAVINGS AC-
COUNT CONTRIBUTIONS. 
(a) IN GENERAL.—Section 4980G of the Internal 
Revenue Code of 1986 (relating to failure of employer to 
make comparable health savings account contributions) is 
amended by adding at the end the following new sub-
section: 
‘‘(d) EXCEPTION.—For purposes of applying section 
4980E to a contribution to a health savings account of 
an employee who is not a highly compensated employee 
(as defined in section 414(q)), highly compensated em-
ployees shall not be treated as comparable participating 
employees.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2006. 
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SEC. 7. ONE-TIME DISTRIBUTION FROM INDIVIDUAL RE-
TIREMENT PLANS TO FUND HSAS. 
(a) IN GENERAL.—Subsection (d) of section 408 of 
the Internal Revenue Code of 1986 (relating to taxability 
of beneficiary of employees’ trust) is amended by adding 
at the end the following new paragraph: 
‘‘(9) DISTRIBUTION FOR HEALTH SAVINGS AC-
COUNT FUNDING.— 
‘‘(A) IN GENERAL.—In the case of an indi-
vidual who is an eligible individual (as defined 
in section 223(c)) and who elects the applica-
tion of this paragraph for a taxable year, gross 
income of the individual for the taxable year 
does not include a qualified HSA funding dis-
tribution to the extent such distribution is oth-
erwise includible in gross income. 
‘‘(B) QUALIFIED HSA FUNDING DISTRIBU-
TION.—For purposes of this paragraph, the 
term ‘qualified HSA funding distribution’ 
means a distribution from an individual retire-
ment plan (other than a plan described in sub-
section (k) or (p)) of the employee to the extent 
that such distribution is contributed to the 
health savings account of the individual in a di-
rect trustee-to-trustee transfer. 
‘‘(C) LIMITATIONS.— 
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‘‘(i) 
MAXIMUM
DOLLAR
LIMITA-
TION.—The amount excluded from gross 
income by subparagraph (A) shall not ex-
ceed the excess of— 
‘‘(I) the annual limitation under 
section 223(b) computed on the basis 
of the type of coverage under the high 
deductible health plan covering the in-
dividual at the time of the qualified 
HSA funding distribution, over 
‘‘(II) in the case of a distribution 
described 
in 
clause 
(ii)(II), 
the 
amount of the earlier qualified HSA 
funding distribution. 
‘‘(ii) ONE-TIME TRANSFER.— 
‘‘(I) IN
GENERAL.—Except as 
provided in subclause (II), an indi-
vidual may make an election under 
subparagraph (A) only for one quali-
fied HSA funding distribution during 
the lifetime of the individual. Such an 
election, once made, shall be irrev-
ocable. 
‘‘(II) CONVERSION
FROM
SELF- 
ONLY
TO
FAMILY
COVERAGE.—If a 
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qualified HSA funding distribution is 
made during a month in a taxable 
year during which an individual has 
self-only coverage under a high de-
ductible health plan as of the first day 
of the month, the individual may elect 
to make an additional qualified HSA 
funding distribution during a subse-
quent month in such taxable year dur-
ing which the individual has family 
coverage under a high deductible 
health plan as of the first day of the 
subsequent month. 
‘‘(D) FAILURE
TO
MAINTAIN
HIGH
DE-
DUCTIBLE HEALTH PLAN COVERAGE.— 
‘‘(i) IN
GENERAL.—If, at any time 
during the testing period, the individual is 
not an eligible individual, then the aggre-
gate amount of all contributions to the 
health savings account of the individual 
made under subparagraph (A)— 
‘‘(I) shall be includible in the 
gross income of the individual for the 
taxable year in which occurs the first 
month in the testing period for which 
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