plan’s annual out-of-pocket limitation, for 
services provided outside of such network 
shall not be taken into account for pur-
poses of subsection (b)(2).’’. 
(D) Section 223(g)(1) of such Code is 
amended by striking ‘‘subsections (b)(2) and 
(c)(2)(A)’’ and inserting ‘‘subsection (c)(2)(A)’’. 
(b) APPLICATION OF SPECIAL RULES FOR MARRIED 
INDIVIDUALS.—Paragraph (5) of section 223(b) of such 
Code (relating to special rule for married individuals) is 
amended to read as follows: 
‘‘(5) SPECIAL RULES FOR MARRIED INDIVID-
UALS.— 
‘‘(A) IN GENERAL.—In the case of individ-
uals who are married to each other and who are 
both eligible individuals, the limitation under 
paragraph (1) for each spouse shall be equal to 
the spouse’s applicable share of the combined 
marital limit. 
‘‘(B) COMBINED
MARITAL
LIMIT.—For 
purposes of subparagraph (A), the combined 
marital limit is the excess (if any) of— 
‘‘(i) the lesser of— 
‘‘(I) subject to subparagraph (C), 
the sum of the limitations computed 
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separately under paragraph (1) for 
each spouse (including any additional 
contribution amount under paragraph 
(3)), or 
‘‘(II) the dollar amount in effect 
under 
subsection 
(c)(2)(A)(ii)(II), 
over 
‘‘(ii) the aggregate amount paid to 
Archer MSAs of such spouses for the tax-
able year. 
‘‘(C) 
SPECIAL
RULE
WHERE
BOTH 
SPOUSES
HAVE
FAMILY
COVERAGE
UNDER 
SAME
PLAN.—For purposes of subparagraph 
(B)(i)(I), if either spouse has family coverage 
which covers both spouses, both spouses shall 
be treated as having only such coverage (and if 
both spouses each have such coverage under 
different plans, shall be treated as having only 
family coverage with the plan with respect to 
which the lowest amount is determined under 
paragraph (2)(A)(i)). 
‘‘(D) APPLICABLE SHARE.—For purposes 
of subparagraph (A), a spouse’s applicable 
share is one-half of the combined marital limit 
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unless both spouses agree on a different divi-
sion. 
‘‘(E) COUPLES
NOT
MARRIED
ENTIRE 
YEAR.—The Secretary shall prescribe rules for 
the application of this paragraph in the case of 
any taxable year for which the individuals were 
not married to each other during all months in-
cluded in the taxable year, including rules 
which allow individuals in appropriate cases to 
take into account coverage prior to marriage in 
computing the combined marital limit for pur-
poses of this paragraph.’’. 
(c) SELF-ONLY COVERAGE.—Section 223(c)(4) of 
such Code (defining family coverage) is amended to read 
as follows: 
‘‘(4) COVERAGE.— 
‘‘(A) FAMILY COVERAGE.—The term ‘fam-
ily coverage’ means any coverage other than 
self-only coverage. 
‘‘(B) SELF-ONLY
COVERAGE.—If more 
than 1 individual is covered by a high deduct-
ible health plan but only 1 of the individuals is 
an eligible individual, the coverage shall be 
treated as self-only coverage.’’. 
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(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2006. 
SEC. 7. HEALTH REIMBURSEMENT ARRANGEMENTS AND 
SPENDING ARRANGEMENTS IN COMBINATION 
WITH HEALTH SAVINGS ACCOUNTS. 
(a) IN GENERAL.—Subparagraph (B) of section 
223(c)(1) of the Internal Revenue Code of 1986 (relating 
to certain coverage disregarded) is amended by striking 
‘‘and’’ at the end of clause (i), by striking the period at 
the end of clause (ii) and inserting ‘‘, and’’, and by insert-
ing after clause (ii) the following new clause: 
‘‘(iii) coverage under a flexible spend-
ing arrangement or a health reimburse-
ment arrangement, or both, which meets 
the requirements of paragraph (6).’’. 
(b) COMBINATION HEALTH REIMBURSEMENT, SAV-
INGS, AND SPENDING ARRANGEMENTS.—Subsection (c) of 
section 223 of such Code (relating to definitions and spe-
cial rules) is amended by adding at the end the following 
new paragraph: 
‘‘(6) COMBINED LIMIT FOR CONTRIBUTIONS OR 
CREDITS TO HEALTH REIMBURSEMENT, ARRANGE-
MENTS AND SPENDING ARRANGEMENTS.— 
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‘‘(A) IN GENERAL.—In the case of cov-
erage under a flexible spending arrangement or 
a health reimbursement arrangement, or both, 
such coverage meets the requirements of this 
paragraph if, with respect to an individual— 
‘‘(i) the sum of— 
‘‘(I) the amount allowable as a 
deduction under subsection (a), 
‘‘(II) 
the 
salary 
reduction 
amount elected by the individual and, 
if applicable, the employer contribu-
tion or credit allocated to the indi-
vidual for the taxable year under the 
flexible spending arrangement (as de-
fined in section 106(c)(2)), plus 
‘‘(III) the amounts that the indi-
vidual is permitted, under the terms 
of the plan, to receive in reimburse-
ments for the taxable year under the 
health reimbursement arrangement, 
does not exceed 
‘‘(ii) the sum of the annual deductible 
and the other annual out-of-pocket ex-
penses (other than for premiums) required 
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to be paid under the plan by the eligible 
individual for covered benefits. 
‘‘(B) EXCEPTIONS FOR DISREGARDED COV-
ERAGE.—For purposes of subparagraph (A)— 
‘‘(i) CERTAIN
FLEXIBLE
SPENDING 
ARRANGEMENTS.—Any flexible spending 
arrangement salary reduction amounts or 
employer contributions or credits that are 
restricted by the employer to use for cov-
erage described in paragraph (1)(B) shall 
not be taken into account under subpara-
graph (A)(i)(II). 
‘‘(ii) CERTAIN
HEALTH
REIMBURSE-
MENT
ARRANGEMENTS.—Any reimburse-
ments from a health reimbursement ar-
rangement for coverage described in para-
graph (1)(B) shall not be taken into ac-
count under subparagraph (A)(i)(III). 
‘‘(C) TERMINATION.—Coverage shall not 
be treated as meeting the requirements of this 
paragraph for any taxable year beginning after 
December 31, 2011.’’. 
(c) ONE-TIME FSA AND HRA ROLLOVERS
TO 
HSAS.— 
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(1) IN GENERAL.—A plan shall not fail to be 
treated as a flexible spending arrangement or health 
reimbursement arrangement under section 105 or 
106 of the Internal Revenue Code of 1986 merely 
because— 
(A) such plan provides for a contribution 
to the health savings account (as defined in sec-
tion 223 of such Code) of the employee which 
meets the requirements of paragraph (2), and 
(B) such plan thereafter terminates with 
respect to such employee. 
(2) REQUIREMENTS.—A contribution meets the 
requirements of this paragraph if— 
(A) in the case of a flexible spending ar-
rangement (as defined in section 106(c)(2) of 
such Code) in existence on April ll, 2006, 
such contribution is the remaining balance in 
such arrangement as of the last day of the plan 
year ending in or before the taxable year in 
which such contribution is made, 
(B) in the case of a health reimbursement 
arrangement in existence on April ll, 2006, 
such contribution is the remaining balance of 
the amount to be received in reimbursements 
under such arrangement as of the last day of 
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the plan year ending in or before the taxable 
year in which such contribution is made, and 
(C) such contribution is made by the em-
ployer directly to the health savings account of 
the employee not later than 60 days after the 
end of the plan year of such flexible spending 
arrangement or health reimbursement arrange-
ment. 
(3) TREATMENT
AS
ROLLOVER
CONTRIBU-
TION.—For purposes of sections 223 and 4973 of 
such Code, a contribution which meets the require-
ments of paragraph (2) shall be treated as a rollover 
contribution described in section 223(f)(5) of such 
Code. 
(4) TAX TREATMENT RELATING TO CONTRIBU-
TIONS.—For purposes of this title— 
(A) INCOME TAX.—Gross income shall not 
include the amount of any contribution under 
this subsection. 
(B) EMPLOYMENT TAXES.—Amounts con-
tributed to a health savings account under this 
subsection shall be treated as a payment de-
scribed in section 106(d). 
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