(3) by striking ‘‘or’’ at the end of subparagraph 
(C)(iii) and by striking subparagraph (C)(iv) and in-
serting the following: 
‘‘(iv) an HSA-qualified health plan, or 
‘‘(v) any health insurance under title 
XVIII of the Social Security Act, other 
than a Medicare supplemental policy (as 
defined in section 1882 of such Act).’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to insurance pur-
chased after the date of the enactment of this Act in tax-
able years beginning after such date. 
SEC. 302. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES 
INCURRED BEFORE ESTABLISHMENT OF AC-
COUNT. 
(a) IN GENERAL.—Paragraph (2) of section 223(d) 
is amended by adding at the end the following new sub-
paragraph: 
‘‘(E) TREATMENT
OF
CERTAIN
MEDICAL 
EXPENSES INCURRED BEFORE ESTABLISHMENT 
OF ACCOUNT.—If a health savings account is 
established during the 60-day period beginning 
on the date that coverage of the account bene-
ficiary under an HSA-qualified health plan be-
gins, then, solely for purposes of determining 
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whether an amount paid is used for a qualified 
medical expense, such account shall be treated 
as having been established on the date that 
such coverage begins.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply with respect to coverage beginning 
after the date of the enactment of this Act. 
SEC. 303. PREVENTIVE CARE PRESCRIPTION DRUG CLARI-
FICATION. 
(a) CLARIFY
USE
OF
DRUGS
IN
PREVENTIVE 
CARE.—Subparagraph (C) of section 223(c)(2) is amend-
ed by adding at the end the following: ‘‘Preventive care 
shall include prescription 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 
December 31, 2023. 
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TITLE 
IV—MISCELLANEOUS 
PROVISIONS 
RELATING 
TO 
TAX-PREFERRED HEALTH AC-
COUNTS 
SEC. 401. FSA AND HRA INTERACTION WITH HSAS. 
(a) ELIGIBLE INDIVIDUALS INCLUDE FSA AND HRA 
PARTICIPANTS.—Subparagraph (B) of section 223(c)(1) 
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 arrangement is con-
verted solely to one or more of the fol-
lowing: 
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‘‘(I) POST-DEDUCTIBLE
FSA
OR 
HRA.—A health flexible spending ar-
rangement or a health reimbursement 
arrangement that does not pay or re-
imburse any medical expense incurred 
before the minimum annual deductible 
under paragraph (2)(A)(i) (prorated 
for the period occurring after the 
qualified HSA distribution is made) is 
satisfied. 
‘‘(II) PREVENTATIVE
CARE.—A 
health flexible spending arrangement 
or a health reimbursement arrange-
ment that, after the qualified HSA 
distribution is made, does not pay or 
reimburse any medical expense in-
curred after the qualified HSA dis-
tribution is made other than preven-
tive care as defined in paragraph 
(2)(C). 
‘‘(III) 
LIMITED
PURPOSE 
HEALTH
FSA.—A 
health 
flexible 
spending arrangement that, after the 
qualified HSA distribution is made, 
pays or reimburses benefits for cov-
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erage described in clause (ii) (but not 
through insurance or for long-term 
care services). 
‘‘(IV) LIMITED PURPOSE HRA.— 
A health reimbursement arrangement 
that, after the qualified HSA distribu-
tion is made, pays or reimburses bene-
fits for permitted insurance or cov-
erage described in clause (ii) (but not 
for long-term care services). 
‘‘(V) 
RETIREMENT
HRA.—A 
health reimbursement arrangement 
that, after the qualified HSA distribu-
tion is made, pays or reimburses only 
those medical expenses incurred after 
an individual’s retirement (and no ex-
penses incurred before retirement). 
‘‘(VI) 
SUSPENDED
HRA.—A 
health reimbursement arrangement 
that, after the qualified HSA distribu-
tion is made, is suspended, pursuant 
to an election made on or before the 
date the individual elects a qualified 
HSA distribution or, if later, on the 
date of the individual enrolls in an 
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HSA-qualified health plan, that does 
not pay or reimburse, at any time, 
any medical expense incurred during 
the suspension period except as de-
scribed in the preceding subclauses of 
this clause.’’. 
(b) QUALIFIED HSA DISTRIBUTION SHALL NOT AF-
FECT FLEXIBLE SPENDING ARRANGEMENT.—Paragraph 
(1) of section 106(e) is amended to read as follows: 
‘‘(1) IN GENERAL.—A plan shall not fail to be 
treated as— 
‘‘(A) a health flexible spending arrange-
ment under this section, section 105, or section 
125, 
‘‘(B) a health reimbursement arrangement 
under this section or section 105, or 
‘‘(C) an accident or health plan, 
merely because such plan provides for a qualified 
HSA distribution.’’. 
(c) FSA BALANCES AT YEAR END SHALL NOT FOR-
FEIT.—Paragraph (2) of section 125(d) 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-
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