Sec. 517. FSA and HRA interaction with HSAs
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Subparagraph
(B)of section 223(c)(1) 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: coverage under a health flexible spending arrangement or a health reimbursement arrangement in the plan year a qualified HSA distribution as described in section 106(e) is made on behalf of the individual if after the qualified HSA distribution is made and for the remaining duration of the plan year, the coverage provided under the health flexible spending arrangement or health reimbursement arrangement is converted to— coverage that does not pay or reimburse 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, coverage that, after the qualified HSA distribution is made, does not pay or reimburse any medical expense incurred after the qualified HSA distribution is made other than preventive care as defined in paragraph (2)(C), coverage that, after the qualified HSA distribution is made, pays or reimburses benefits for coverage described in clause
(ii)(but not through insurance or for long-term care services), coverage that, after the qualified HSA distribution is made, pays or reimburses benefits for permitted insurance or coverage described in clause
(ii)(but not for long-term care services), coverage that, after the qualified HSA distribution is made, pays or reimburses only those medical expenses incurred after an individual’s retirement (and no expenses incurred before retirement), or coverage that, after the qualified HSA distribution 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 a high deductible health plan, that does not pay or reimburse, at any time, any medical expense incurred during the suspension period except as defined in the preceding subclauses of this clause. . Paragraph
(1)of section 106(e) is amended to read as follows: A plan shall not fail to be treated as a health flexible spending arrangement under this section, section 105, or section 125, or as a health reimbursement arrangement under this section or section 105, merely because such plan provides for a qualified HSA distribution. . Paragraph
(2)of section 125(d) is amended by adding at the end the following new subparagraph: Subparagraph
(A)shall not apply to the extent that there is an amount remaining in a health flexible spending account at the end of a plan year that an individual elects to contribute to a health savings account pursuant to a qualified HSA distribution (as defined in section 106(e)(2)). . Paragraph
(2)of section 106(e) is amended to read as follows: The term qualified HSA distribution means a distribution from a health flexible spending arrangement or health reimbursement arrangement to the extent that such distribution does not exceed the lesser of— the balance in such arrangement as of the date of such distribution, or the amount determined under subparagraph (B). Such term shall not include more than 1 distribution with respect to any arrangement. A qualified HSA distribution from a health flexible spending arrangement shall not exceed the applicable amount. A qualified HSA distribution from a health reimbursement arrangement shall not exceed— the applicable amount divided by 12, multiplied by the number of months during which the individual is a participant in the health reimbursement arrangement. For purposes of this subparagraph, the applicable amount is— $2,250 in the case of an eligible individual who has self-only coverage under a high deductible health plan at the time of such distribution, and $4,500 in the case of an eligible individual who has family coverage under a high deductible health plan at the time of such distribution. . Subsection
(e)of section 106 is amended— by striking paragraph
(3)and redesignating paragraphs
(4)and
(5)as paragraphs
(3)and (4), respectively, and by striking subparagraph
(A)of paragraph (3), as so redesignated, and redesignating subparagraphs
(B)and
(C)of such paragraph as subparagraphs
(A)and
(B)thereof, respectively. Subsection
(e)of section 106 , as amended by this section, is amended by adding at the end the following new paragraph: A plan shall not fail to be a health flexible spending arrangement or health reimbursement arrangement under this section or section 105 merely because the plan converts coverage for individuals who enroll in a high deductible health plan described in section 223(c)(2) to coverage described in section 223(c)(1)(B)(iv). Coverage for such individuals may be converted as of the date of enrollment in the high deductible health plan, without regard to the period of coverage under the health flexible spending arrangement or health reimbursement arrangement, and without requiring any change in coverage to individuals who do not enroll in a high deductible health plan. . Subsection
(e)of section 106 , as amended by this section, is amended by adding at the end the following new paragraph: In the case of any taxable year beginning after December 31, 2013, each of the dollar amounts in paragraph (2)(B)(iii) shall be increased by an amount equal to such dollar amount, multiplied by the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which such taxable year begins by substituting calendar year 2012 for calendar year 1992 in subparagraph
(B)thereof. If any increase under paragraph
(1)is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50. . Subparagraph
(B)of section 223(c)(1), as amended by this section, is amended— by striking and at the end of clause (iii), by striking the period at the end of clause
(iv)and inserting , and , and by inserting after clause
(iv)the following new clause: any coverage (including prospective coverage) under a health plan that is not a high deductible health plan which is disclaimed in writing, at the time of the creation or organization of the health savings account, including by execution of a trust described in subsection (d)(1) through a governing instrument that includes such a disclaimer, or by acceptance of an amendment to such a trust that includes such a disclaimer. . The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.