2023 Laws of Puerto Rico › TITLE THIRTEEN - Taxation and Finance (§§ 1 — 33423) › Subtitle 17 - Internal Revenue Code of 2011 (§§ 30001 — 33423) › PART II - Income Taxes (§§ 30041 — 30622) › Chapter 1010 - Estates and Trusts (§§ 30391 — 30419) › Subchapter A - Employee Trusts (§§ 30391 — 30396) › § 30394 - Health savings accounts with a high annual deductible health plan

(a) For purposes of the Code, a health savings account with a high annual deductible health plan shall be a plan that complies with the provisions of this section.
(b) Limitations.—
(1) In general.— In the case of an individual who is an eligible individual for any month during the taxable year, there shall be allowed as a contribution for the taxable year an amount equal to the aggregate amount paid in cash during such taxable year by or on behalf of such individual to a health savings account of such individual. Provided, That said contribution by or for an individual for the taxable year shall not exceed the sum of the limitations set forth in clause (2) of this subsection.
(2) Annual limitation.— For purposes of this section, the contributions to a health savings accounts with a qualified high deductible health plan shall be limited to the following limitations:
(A) In the case of an individual who has an individual coverage under a high annual deductible health plan during the taxable year, the maximum annual contribution allowed shall be three thousand one hundred dollars ($3,100).
(B) In the case of an eligible individual who has family coverage under a high annual deductible health plan during the taxable year, the maximum annual contribution allowed shall be six thousand two hundred dollars ($6,200).
(C) Amounts deposited in a health savings account for each taxable year that exceed the limits established in this subsection, shall be deemed to be:
(i) Income subject to taxation if such excess amounts were contributed by an employer for the benefit of an employee, as provided in § 30102(a)(2)(D) of this title.
(ii) In the case of individuals making direct contributions to a health savings accounts, the amounts in excess to the limitations set forth in this subsection shall not be deductible under § 30135(a)(4)(B) of this title (related to medical expenses).
(3) Additional contributions for individuals age fifty-five (55) or older.—
(A) In general.— Any individual who has attained the age of fifty-five (55) before the close of the taxable year, the limitation established under paragraphs (A) and (B) of clause (2) above, shall be increased by the additional contribution amount.
(B) Additional contribution.— For purposes of this section, an additional contribution is the amount determined according to the following table:
For annual contributions beginning in The additional portion is: 2009 $500 2010 $600 2011 $700 2012 $800 2013 $900 2014 and subsequent years $1,000
(4) Special rule for married individuals.— In the case of married individuals, if either spouse has coverage under a family health insurance plan, both spouses shall be treated as having only family coverage.
(5) Deduction to dependents not allowed.— No contributions shall be allowed to any individual with respect to whom a deduction is allowable to another taxpayer for the taxable year beginning in the taxable year of said individual.
(6) Eligible individuals under the Federal Medicare Program.— The limitations in this subsection for any taxable year with respect to an individual shall be zero for each year said individual is entitled to the benefits under Title XVIII of the Social Security Act and for each month thereafter.
(c) Definitions and special rules.—
(1) Eligible individual.—
(A) In general.— For purposes of this section, the term “eligible individual” means, with respect to any year, any individual if:
(i) Said individual is covered under a high deductible health plan during the taxable year or during a consecutive term of twelve (12) months, including that part of the taxable year for which the contributions are made.
(ii) Such individual is not, while covered under a high deductible health plan, covered under any health plan:
(I) Which is not a high deductible health plan, and
(II) which provides coverage for any benefit covered under the high deductible health plan.
(iii) is not covered under Medicare or Tricare; or
(iv) has not received medical benefits through the Department of Veteran Affairs (VA) during the past three (3) months, or
(v) is not claimed as dependent in the income tax return of another person.
(B) Excluded coverage.— Paragraph (A)(ii) shall not apply to:
(i) Coverage for any benefit provided by permitted insurance, and
(ii) coverage for accidents, disability, dental care, vision care, or long-term care, whether through insurance or otherwise.
(2) High deductible health plan.—
(A) In general.— The term “high deductible health plan” means a health plan:
(i) Which has an annual deductible that is not less than:
(I) Five hundred dollars ($500) for individual coverage, and
(II) one thousand dollars ($1,000) for family or couple coverage,
(ii) Provided, That the Secretary may modify the limitations set forth in subparagraph (i) of this paragraph through regulations.
(B) Exclusion of certain plans.— Said definition shall not include health plans if substantially all of their coverage is that coverage described in clause (1)(B) of this subsection.
(C) Deductible shall not apply to preventive care.— A plan shall not fail to be treated as a high deductible health plan by reason of failing to have a deductible for preventive care, to wit, care that tends to provide preventive care services for health conditions such as routine exams, immunizations pursuant to the protocols of the Department of Health, prenatal care, smoking cessation programs, obesity control, mammograms, prostate tests, and other similar tests, other than treatment for preexisting conditions or injuries. These services shall be subject to the corresponding copayment.
(D) Special rules for preferred provider organization plans and health service organization plans.— In the case of a plan using a directory or network of preferred providers under contract with the plan or of a network of a health services organization under Chapter 19 of the Insurance Code of Puerto Rico, the annual deductible of said plan for services provided outside of said network of plan providers shall be different from the initial deductible of the high deductible health plan. Disbursements paid to by the insured for services provided outside of the network of providers shall not [be] treated as eligible expenses to be accrued to the initial deductible, these shall only be treated as eligible expenses, to the initial deductible of the plan, those established and underwritten as such by the insurance company.
(3) Permitted insurance.— The term “permitted insurance” means:
(A) Insurance if substantially all of the coverage provided under such insurance relates to:
(i) Liabilities incurred under the Workers Compensation Act;
(ii) risks and liabilities for damage and injury;
(iii) expenses and liabilities relating to ownership or use of property, or
(iv) other similar liabilities as the Secretary may establish by regulations.
(B) Insurance for a specified disease or illness.
(C) Insurance paying a fixed amount per day (or other period) of hospitalization or covering high deductible amounts.
(4) Family coverage.— The term “family coverage” means any coverage other than individual coverage.
(d) Health savings accounts.— For purposes of this section:
(1) In general.— The term “health savings account” means an account created exclusively for the purpose of paying the qualified medical expenses of the account holder or beneficiary, but only if the insurance contract meets the following requirements:
(A) Except in the case of a rollover contribution described in this section, no contribution shall be accepted:
(i) Unless it is in cash, or
(ii) if, when added to previous contributions for the calendar year, it exceeds the sum of the contributions allowed under subsection (b) of this section.
(B) The health savings account may be created by an insurance company and health services organization authorized to do business in Puerto Rico and pursuant to the Insurance Code of Puerto Rico and by a financial institution with a license issued as such by the Officer of the Insurance Commissioner or by a cooperative savings and credit union with a license issued by the Public Corporation for the Supervision and Insurance of Cooperatives in Puerto Rico (hereinafter “COSSEC”) that complies with the laws and regulations in effect with respect to similar accounts created in trusts such as individual retirement accounts or other entities authorized by the Secretary, such as non-financial and deposit institutions.
(C) No part of the assets of the health savings account shall be invested in life insurance contracts.
(D) The assets of the health savings account shall be deposited in a trust whose trustee shall be a bank duly licensed by the Office of the Commissioner of Financial Institutions of Puerto Rico or any person who demonstrates to the satisfaction of the Secretary that the manner in which said person shall administer the trust shall be consistent with the requirements of this section. The assets of a health savings account shall also be contributed to an insurance company or health services organization, in which case, it shall not be necessary to transfer the funds to a trust. In this case, the funds shall be part of the general assets of the insurance company or a separate account as established by the insurance company.
(E) The interest of the individual in the balance in his/her account is non-forfeitable.
(2) Qualified medical expenses.— Medical expenses include those associated with the diagnosis, cure, mitigation, treatment or prevention of an illness, as well as those expenses related to medical treatment for any bodily part or function. This includes the cost of the equipment, accessories, and equipment to make diagnosis for such purposes. It also includes dental and vision expenses other than payment for insurance premiums.
Medical care expenses shall be primarily to alleviate or prevent an illness or physical or mental defect. These do not include those expenses that are merely necessary for the general health of a person such as nutritional supplements. Provided, That the immunizations required by the Department of Health shall be deemed to be qualified medical expenses.
Medical expenses include the expenses incurred in obtaining transportation to receive medical care. It also includes expenses incurred to obtain qualified extended-care services.
(A) In general.— The term “qualified medical expenses” means, with respect to an account beneficiary, the amounts paid by said beneficiary for medical care for him/herself, his/her spouse or any qualified dependent under the policy. For purposes of this subsection, the term “medical care” means:
(i) Diagnosis, cure, mitigation, treatment or prevention of illnesses.
(ii) Any medical intervention that affects any structure or function of the body.
(iii) Transportation expenses incurred mainly for and essentially to what is described in subparagraphs (i) and (ii).
(iv) Mammograms, prenatal and well-childcare, immunizations for children and adults, smoking cessation programs, obesity and weight loss programs, and preventive care programs, chiropractors, osteopaths and naturopaths and other healthcare professionals. It may be used to pay the premium of a health plan free of taxes if the individual losses his/her coverage due to unemployment, for individuals covered under Medicare (to pay Medicare premiums and, Part A deductibles and Part B copayments, which provide coverage complementary to Medicare, Medicare HM and pharmacy copayment and coinsurance) and for long-term care related expenses.
(v) Wellness care.— Products and services that are proactively promoted to healthy persons for them to be healthier and feel better or to reduce aging effects or prevent illnesses.
(B) In addition to the qualified medical expenses, those incurred in the care of children between 0 and 14 years of age and elderly whether in their own homes or in elderly care centers shall be treated as qualified medical expenses.
(3) Account beneficiary.— The term “account beneficiary” means the individual on whose behalf the health savings account was established.
(4) The contributions to a savings account with respect to a taxable year shall be made not later than the due date for filing the income tax return of the owner of the account, including any extension for the filing thereof.
(5) Other applicable rules.— The Secretary shall promulgate any rules that he/she may deem necessary with respect to a rollover contribution and the payments or contributions of the employer and other similar contributions.
(e) Exemptions on health savings accounts.— Income derived from an insurance company or bank which originate from the investment of the funds in a separate account that is part of a health savings account shall be exempt from income taxes under this Code.
(f) Tax treatment of distributions.—
(1) Amounts used for qualified medical expenses.— Any amount paid or distributed from a health savings account which is used exclusively to pay for the qualified medical expenses of any beneficiary of the account or which is a rollover contribution shall not be included in the gross income.
(2) Amounts used for unqualified medical expenses.— Any amount paid or distributed out of a health savings account which is not used exclusively to pay for the qualified medical expenses of the owner of the account, shall be included in gross income, provided, that any distributions made after the taxpayer has attained the age of sixty-five (65) shall be exempt from taxation, and also in the case of a distribution made to another account by means of a rollover.
(3) Excess contributions returned before the due date of return.—
(A) In general.— In the event of any excess contribution to a health savings account of an individual for any taxable year, the preceding clause (2) shall not apply to distributions from health savings account of such individual, provided that said distributions do not exceed the aggregate excess contributions to all such accounts of such individual for such year, if:
(i) Said distribution is received by the individual on or before the last day prescribed by law for filing the tax return of the individual for said taxable year, including extensions, and
(ii) said distribution is accompanied by the amount of net income attributable to such excess contribution.
Any net income described in subparagraph (ii) shall be included in the gross income attributable to said excess contribution.
(B) Excess contribution.— For purposes of paragraph (A), the term “excess contribution” means any contribution (other than a rollover contribution) that is neither excludable from gross income nor deductible under this Code.
(4) Additional tax on distributions not used for qualified medical expenses.—
(A) In general.— The tax imposed by this chapter on the account beneficiary for any taxable year, in which there is a payment or distribution from a health savings account of said beneficiary which is includible in gross income under clause (2) of this subsection shall be increased by ten percent (10%) of the amount which is so includible.
(B) Exception for disability or death.— Paragraph (A) shall not apply if the payment or distribution is made due to the disability or death of the beneficiary.
(C) Exception for distributions after medicare eligibility.— Paragraph (A) shall not apply to any payment or distribution after the date on which the account beneficiary attains the age specified by the Medicare Program to be eligible under said program and as specified in Section 1811 of the Social Security Act.
(5) Rollover contribution.— An amount paid or distributed shall be deemed to be a rollover contribution if it is an amount paid or distributed from a health savings account, if the total amount received (in money or in other type of property) is paid into a health savings account for the benefit of such individual not later than sixty (60) days after he/she has received said payment or distribution.
(6) Coordination with medical expense deduction.— For purposes of determining the amount of the deduction under this Code, any payment or distribution out of a health savings account for qualified medical expenses shall not be treated as an expense paid for medical care.
(7) Transfer of account incident to divorce.— The transfer of an individual’s interest in a health savings account to an individual’s spouse or former spouse under a divorce decree or separation instrument shall not be considered a taxable transfer made by such individual notwithstanding any other provision of this Code, and such interest shall, after such transfer, be treated as a health savings account with respect to which such spouse or former spouse is the account beneficiary.
(8) Treatment after the death of account beneficiary.—
(A) Treatment if designated beneficiary is spouse.— If the account beneficiary’s surviving spouse acquires the account holder’s interest in a health savings account by reason of being the designated beneficiary of such account at the death of the account beneficiary, such health savings account shall be treated as if the spouse were the account beneficiary.
(B) Other cases.—
(i) In general.— If, by reason of the death of the account holder, any person acquires the account holder’s interest in a health savings account in a case to which paragraph (A) does not apply:
(I) Such account shall cease to be a health savings account as of the date of death, and
(II) an amount equal to the fair market value of the assets in such account shall be treated as distributed to the decedent on the date before his/her death.
(ii) Special rules; reduction of inclusion for predeath expenses.— The amount includible in gross income under subparagraph (i) shall be reduced by the amount of qualified medical expenses which were incurred by the decedent before the date of the decedent’s death.
(g) Reports.— The Secretary may require:
(1) The insurance company or the trustee of a trust who maintains a health savings account to make any report regarding such account to the Secretary and to the account beneficiary with respect to contributions, distributions, the return of excess contributions, and any other matters as the Secretary determines appropriate, and
(2) any person who provides an individual with a high annual deductible health plan to make such reports to the Secretary and to the account beneficiary with respect to such plan as the Secretary determines appropriate.
The reports required by this subsection shall be filed at such date and in such manner as required by the Secretary.
History —Jan. 31, 2011, No. 1, § 1081.04, retroactive to Jan. 1, 2011; Dec. 10, 2011, No. 232, § 98.