I 
112TH CONGRESS 
1ST SESSION H. R. 1004 
To amend the Internal Revenue Code of 1986 to increase participation in 
medical flexible spending arrangements. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 10, 2011 
Mr. BOUSTANY (for himself, Mr. LARSON of Connecticut, Mr. PAULSEN, Mr. 
JOHNSON of Illinois, Mr. BISHOP of Georgia, and Mr. BURTON of Indi-
ana) 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 increase 
participation in medical flexible spending arrangements. 
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 ‘‘Medical FSA Improve-
ment Act of 2011’’. 
SEC. 2. ADDITION OF TAXABLE DISTRIBUTIONS. 
(a) TREATMENT OF AMOUNTS EXPENDED FOR MED-
ICAL CARE.—Section 105 of the Internal Revenue Code 
of 1986 (relating to amounts received under accident and 
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health plans) is amended by inserting at the end the fol-
lowing new subsection: 
‘‘(k) AMOUNTS PAID UNDER MEDICAL FLEXIBLE 
SPENDING ARRANGEMENTS.— 
‘‘(1) APPLICATION
OF
SUBSECTION (b) AND 
SECTION 106.—For purposes of subsection (b) and 
section 106, a plan shall not fail to be treated as 
flexible spending arrangement solely because such 
plan, in addition to reimbursing expenses incurred 
for medical care (as defined in subsection (b)) dur-
ing the plan year, distributes for the plan year all 
or a portion of the employee’s balance. 
‘‘(2) LIMITATION.—Paragraph (1) shall apply 
only in the case that the balance under such ar-
rangement for a plan year is distributed after the 
close of the plan year to which the balance relates 
and not later than the end of the 7th month fol-
lowing the close of such plan year. 
‘‘(3) TAX TREATMENT OF DISTRIBUTION.—Any 
distribution to which paragraph (1) applies shall be 
treated as remuneration of the employee for employ-
ment for the taxable year in which it is distributed. 
‘‘(4) FLEXIBLE
SPENDING
ARRANGEMENT.— 
The term ‘flexible spending arrangement’ means a 
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benefit program within the meaning of section 
106(c)(2) (relating to long-term care benefits).’’. 
(b) ADDITIONAL DEFERRED COMPENSATION EXCEP-
TION.—Paragraph (2) of section 125(d) of such Code (re-
lating to deferred compensation under a cafeteria plan) 
is amended by inserting at the end the following new sub-
paragraph: 
‘‘(E) EXCEPTION FOR CERTAIN FLEXIBLE 
SPENDING ARRANGEMENTS.—Subparagraph (A) 
shall not apply to a flexible spending arrange-
ment (within the meaning of section 106(c)(2)) 
as a result of amounts being distributed to the 
covered employee in accordance with section 
105(k).’’. 
(c) CONFORMING AMENDMENT.—Section 409A(d)(1) 
of such Code is amended by striking ‘‘and’’ at the end 
of subparagraph (A), by striking the period at the end 
of subparagraph (B) and inserting ‘‘, and’’, and by adding 
at the end the following: 
‘‘(C) a flexible spending arrangement 
which is subject to section 105(k).’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to plan years beginning after De-
cember 31, 2012. 
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(e) TRANSITION RULES.—In the case of plan years 
that begin before the date of the enactment of this Act, 
in implementing the amendments made by this section a 
flexible spending arrangement may allow an individual to 
make a new election or to revise an existing election under 
such arrangement so long as such new or revised election 
is made within 90 days after the date of the enactment 
of this Act. 
Æ 
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