Title: Bipartisan HSA Improvement Act of 2018
Policy area: Taxation

Summary:
Bipartisan HSA Improvement Act of 2018
This bill amends the Internal Revenue Code to modify rules for health savings accounts (HSAs) regarding eligibility and interactions with other tax-favored health accounts.
The bill specifies that receiving or being eligible to receive certain employment-related items and services at an employer-sponsored (e.g., an on-site clinic) or retail health care facility is not considered health care coverage that disqualifies an individual from participating in an HSA. The items and services include
The bill also (1) allows an eligible individual to make HSA contributions if a spouse has a flexible spending arrangement (FSA) as long as the FSA does not also reimburse the expenses of the spouse with the HSA, and (2) modifies the rules for using FSA or a health reimbursement arrangement terminations or conversions to establish an HSA.

[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6305 Introduced in House (IH)]

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115th CONGRESS
  2d Session
                                H. R. 6305

To amend the Internal Revenue Code of 1986 to improve access to health 
            care through modernized health savings accounts.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              July 3, 2018

 Mr. Kelly of Pennsylvania (for himself and Mr. Blumenauer) 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 improve access to health 
            care through modernized health savings accounts.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Bipartisan HSA Improvement Act of 
2018''.

SEC. 2. CERTAIN EMPLOYMENT RELATED SERVICES NOT TREATED AS 
              DISQUALIFYING COVERAGE FOR PURPOSES OF HEALTH SAVINGS 
              ACCOUNTS.

    (a) In General.--Section 223(c)(1) of the Internal Revenue Code of 
1986 is amended by adding at the end the following new subparagraph:
                    ``(D) Special rule for qualified items and 
                services.--
                            ``(i) In general.--An individual shall not 
                        be treated as covered under a health plan for 
                        purposes of subparagraph (A)(ii) merely because 
                        the individual, in connection with the 
                        employment of the individual or the 
                        individual's spouse, receives (or is eligible 
                        to receive) qualified items and services at--
                                    ``(I) a healthcare facility located 
                                at a facility owned or leased by the 
                                employer of the individual (or of the 
                                individual's spouse), or operated 
                                primarily for the benefit of such 
                                employer's employees, or
                                    ``(II) a healthcare facility 
                                located within a supermarket, pharmacy, 
                                or similar retail establishment.
                            ``(ii) Qualified items and services 
                        defined.--For purposes of this subparagraph, 
                        the term `qualified items and services' means 
                        the following:
                                    ``(I) Physical examinations.
                                    ``(II) Immunizations, including 
                                injections of antigens provided by 
                                employees.
                                    ``(III) Drugs other than a 
                                prescribed drug (as such term is 
                                defined in section 213(d)(3)).
                                    ``(IV) Treatment for injuries 
                                occurring in the course of employment.
                                    ``(V) Drug testing, if required as 
                                a condition of employment.
                                    ``(VI) Hearing or vision 
                                screenings.
                                    ``(VII) Other similar items and 
                                services that do not provide 
                                significant benefits in the nature of 
                                medical care.
                            ``(iii) Aggregation.--For purposes of 
                        clause (i)(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.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to months beginning after December 31, 2018, in taxable years 
ending after such date.

SEC. 3. CONTRIBUTIONS PERMITTED IF SPOUSE HAS A HEALTH FLEXIBLE 
              SPENDING ACCOUNT.

    (a) Contributions Permitted if Spouse Has a Health Flexible 
Spending Account.--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 inserting after clause (iii) the following new clause:
                            ``(iv) coverage under a health flexible 
                        spending arrangement of the spouse of the 
                        individual for any plan year of such 
                        arrangement 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 determined 
                        without regard to any expenses paid or incurred 
                        with respect to such individual.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to plan years beginning after December 31, 2018.

SEC. 4. 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 purposes 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 directly to a health savings account of such 
                employee if--
                            ``(i) such distribution is made in 
                        connection with such employee establishing 
                        coverage under a high deductible health plan 
                        (as defined in section 223(c)(2)) after a 
                        significant period of not having such coverage, 
                        and
                            ``(ii) such arrangement is described in 
                        section 223(c)(1)(B)(iii) with respect to the 
                        portion of the plan year after such 
                        distribution is made.
                    ``(B) Dollar limitation.--The aggregate amount of 
                distributions from health flexible spending 
                arrangements and health reimbursement arrangements of 
                any employee which may be treated as qualified HSA 
                distributions in connection with an establishment of 
                coverage described in subparagraph (A)(i) shall not 
                exceed the dollar amount in effect under section 
                125(i)(1) (twice such amount in the case of coverage 
                which is described in section 223(b)(2)(B)).''.
    (b) Partial Reduction of Limitation on Deductible HSA 
Contributions.--Section 223(b)(4) of such Code is amended by striking 
``and'' at the end of subparagraph (B), by striking the period at the 
end of subparagraph (C) and inserting ``, and'', and by inserting after 
subparagraph (C) the following new subparagraph:
                    ``(D) so much of any qualified HSA distribution (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 arrangement 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 determined 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)(iii) of such Code, as amended by the 
preceding provisions of this Act, is amended to read as follows:
                            ``(iii) coverage under a health flexible 
                        spending arrangement or health reimbursement 
                        arrangement for the portion of the plan year 
                        after a qualified HSA distribution (as defined 
                        in section 106(e)(2) determined 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 
                        account under subparagraph (A)(ii) of this 
                        paragraph for such plan year, and''.
    (d) Inclusion of Qualified HSA Distributions on W-2.--
            (1) In general.--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) the amount of any qualified HSA distribution (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 defined in section 106(e)(2))'' before the 
        comma at the end.
    (e) Effective Date.--The amendments made by this subsection shall 
apply to distributions made after December 31, 2018, in taxable years 
ending after such date.
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