SENATE AMENDED
PRIOR PRINTER'S NOS. 99, 1493, 1922, PRINTER'S NO. 2567
2490
No. 107 Session of 2005
INTRODUCED BY PAYNE, BALDWIN, BASTIAN, BIRMELIN, BOYD, BROWNE,
BUNT, CAPPELLI, CAUSER, CRAHALLA, CREIGHTON, DALEY, DALLY,
DENLINGER, ELLIS, FAIRCHILD, FLEAGLE, GILLESPIE, GINGRICH,
HARHART, HARPER, HARRIS, HENNESSEY, HERMAN, HUTCHINSON,
JAMES, KILLION, LEH, MAHER, MAITLAND, MAJOR, S. MILLER,
RAYMOND, READSHAW, REICHLEY, SATHER, SCAVELLO, SCHRODER,
T. STEVENSON, TIGUE, TURZAI, WATSON, WILT, YUDICHAK, KENNEY,
PICKETT, PALLONE, REED, GERGELY, BARRAR, ARMSTRONG, NICKOL,
KAUFFMAN, MUSTIO, PETRARCA AND WRIGHT, JANUARY 25, 2005
AS AMENDED ON THIRD CONSIDERATION, IN SENATE, JULY 6, 2005
AN ACT
1 Authorizing the establishment and maintenance of health savings <--
2 accounts; providing for special tax provisions relating to
3 exclusions from personal income tax; and imposing
4 restrictions on health savings accounts.
5 AUTHORIZING THE ESTABLISHMENT AND MAINTENANCE OF HEALTH SAVINGS <--
6 ACCOUNTS; PROVIDING FOR SPECIAL TAX PROVISIONS; AND IMPOSING
7 RESTRICTIONS ON HEALTH SAVINGS ACCOUNTS.
8 The General Assembly of the Commonwealth of Pennsylvania
9 hereby enacts as follows:
10 Section 1. Short title. <--
11 This act shall be known and may be cited as the Health
12 Savings Account Act.
13 Section 2. Legislative intent.
14 It is the intent of the General Assembly to extend special
15 tax provisions to health savings accounts established pursuant
16 to section 223 of the Internal Revenue Code of 1986 (Public Law
1 99-514, 26 U.S.C. § 223).
2 Section 3. Definitions.
3 The following words and phrases when used in this act shall
4 have the meanings given to them in this section unless the
5 context clearly indicates otherwise:
6 "Account beneficiary." As defined in section 223(d)(3) of
7 the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C.
8 § 223(d)(3)).
9 "Excess contribution distribution." A distribution described
10 in section 223(f)(3) of the Internal Revenue Code of 1986
11 (Public Law 99-514, 26 U.S.C. § 223(f)(3)). The term shall not
12 include amounts of income attributable to such distribution.
13 "Health insurance policy." An individual or group health,
14 sickness or accident policy or subscriber contract or
15 certificate issued by an entity subject to any one of the
16 following:
17 (1) The act of May 17, 1921 (P.L.682, No.284), known as
18 The Insurance Company Law of 1921.
19 (2) The act of December 29, 1972 (P.L.1701, No.364),
20 known as the Health Maintenance Organization Act.
21 (3) The act of May 18, 1976 (P.L.123, No.54), known as
22 the Individual Accident and Sickness Insurance Minimum
23 Standards Act.
24 (4) 40 Pa.C.S. Ch. 61 (relating to hospital plan
25 corporations) or 63 (relating to professional health services
26 plan corporations).
27 "Health savings account." As defined in section 223(d) of
28 the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C.
29 § 223(d)).
30 "Qualified medical expenses." As defined in section 223(d)
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1 of the Internal Revenue Code of 1986 (Public Law 99-514, 26
2 U.S.C. § 223(d)).
3 Section 4. Special tax provisions.
4 (a) General rule.--The following shall be excluded from
5 taxation under Article III of the act of March 4, 1971 (P.L.6,
6 No.2), known as the Tax Reform Code of 1971:
7 (1) any contribution to a health savings account by an
8 account beneficiary or the employer of that account
9 beneficiary that conforms to section 223(a) and (b) of the
10 Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
11 223(a) and (b));
12 (2) any income of a health savings account;
13 (3) any amount paid or distributed out of a health
14 savings account that is used exclusively to pay the qualified
15 medical expenses of the account beneficiary; and
16 (4) any amount paid or distributed out of a health
17 savings account that is used exclusively to reimburse an
18 account beneficiary for qualified medical expenses.
19 (b) Taxable distributions.--The following shall be included
20 in the income of the account beneficiary and shall be subject to
21 taxation under Article III of the Tax Reform Code of 1971:
22 (1) Any amount paid or distributed out of a health
23 savings account that is used for any purpose other than to
24 pay the qualified medical expenses of the account
25 beneficiary.
26 (2) Any excess contribution distribution that has not
27 previously been included in the account beneficiary's income.
28 (3) Any amount of the account beneficiary's income
29 attributable to an excess contribution distribution.
30 (c) Individual or group health insurance policy.--Any
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1 payment by a person to purchase an individual health insurance
2 policy, and any payment by a person to secure coverage under a
3 group health insurance policy for the person, a spouse or a
4 dependent shall be excluded from taxation under Article III of
5 the act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform
6 Code of 1971.
7 Section 5. Mandated benefits.
8 (a) General rule.--A health insurance policy that would
9 qualify as a high deductible health plan under section 223(c)(2)
10 of the Internal Revenue Code of 1986 (Public Law 99-514, 26
11 U.S.C. § 223(c)(2)) shall be subject to any provision of law
12 mandating a minimum health insurance benefit or reimbursement.
13 (b) Exception.--A health insurance policy that would qualify
14 as a high deductible health plan under section 223(c) of the
15 Internal Revenue Code of 1986, when offered in conjunction with
16 a health savings account, shall not be subject to any provision
17 of law which restricts or limits deductibles or copayments for
18 mandated minimum health insurance benefits or reimbursements
19 except to the extent such provision mandates benefits for
20 preventive care, as determined by the standards set forth by the
21 Internal Revenue Service.
22 Section 6. Applicability.
23 Section 4 shall apply to taxable years beginning after
24 December 31, 2004.
25 Section 7. Effective date.
26 This act shall take effect in 60 days.
27 SECTION 1. SHORT TITLE. <--
28 THIS ACT SHALL BE KNOWN AND MAY BE CITED AS THE HEALTH
29 SAVINGS ACCOUNT ACT.
30 SECTION 2. LEGISLATIVE INTENT.
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1 IT IS THE INTENT OF THE GENERAL ASSEMBLY TO EXTEND SPECIAL
2 TAX PROVISIONS TO HEALTH SAVINGS ACCOUNTS ESTABLISHED IN THIS
3 COMMONWEALTH PURSUANT TO SECTION 223 OF THE INTERNAL REVENUE
4 CODE OF 1986 (PUBLIC LAW 99-514, 26 U.S.C. § 223).
5 SECTION 3. DEFINITIONS.
6 THE FOLLOWING WORDS AND PHRASES WHEN USED IN THIS ACT SHALL
7 HAVE THE MEANINGS GIVEN TO THEM IN THIS SECTION UNLESS THE
8 CONTEXT CLEARLY INDICATES OTHERWISE:
9 "ACCOUNT BENEFICIARY." AS DEFINED IN SECTION 223(D)(3) OF
10 THE INTERNAL REVENUE CODE OF 1986 (PUBLIC LAW 99-514, 26 U.S.C.
11 § 223(D)(3)).
12 "EXCESS CONTRIBUTION DISTRIBUTION." A DISTRIBUTION DESCRIBED
13 IN SECTION 223(F)(3) OF THE INTERNAL REVENUE CODE OF 1986
14 (PUBLIC LAW 99-514, 26 U.S.C. § 223(F)(3)). THE TERM SHALL NOT
15 INCLUDE AMOUNTS OF INCOME ATTRIBUTABLE TO SUCH DISTRIBUTION.
16 "HEALTH INSURANCE POLICY." AN INDIVIDUAL OR GROUP HEALTH,
17 SICKNESS OR ACCIDENT POLICY OR SUBSCRIBER CONTRACT OR
18 CERTIFICATE ISSUED BY AN ENTITY SUBJECT TO ANY ONE OF THE
19 FOLLOWING:
20 (1) THE ACT OF MAY 17, 1921 (P.L.682, NO.284), KNOWN AS
21 THE INSURANCE COMPANY LAW OF 1921.
22 (2) THE ACT OF DECEMBER 29, 1972 (P.L.1701, NO.364),
23 KNOWN AS THE HEALTH MAINTENANCE ORGANIZATION ACT.
24 (3) THE ACT OF MAY 18, 1976 (P.L.123, NO.54), KNOWN AS
25 THE INDIVIDUAL ACCIDENT AND SICKNESS INSURANCE MINIMUM
26 STANDARDS ACT.
27 (4) 40 PA.C.S. CH. 61 (RELATING TO HOSPITAL PLAN
28 CORPORATIONS) OR 63 (RELATING TO PROFESSIONAL HEALTH SERVICES
29 PLAN CORPORATIONS).
30 "HEALTH SAVINGS ACCOUNT." AS DEFINED IN SECTION 223(D) OF
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1 THE INTERNAL REVENUE CODE OF 1986 (PUBLIC LAW 99-514, 26 U.S.C.
2 § 223(D)).
3 "QUALIFIED MEDICAL EXPENSES." AS DEFINED IN SECTION 223(D)
4 OF THE INTERNAL REVENUE CODE OF 1986 (PUBLIC LAW 99-514, 26
5 U.S.C. § 223(D)).
6 SECTION 4. SPECIAL TAX PROVISIONS.
7 (A) GENERAL RULE.--THE FOLLOWING SHALL BE EXCLUDED FROM
8 TAXATION UNDER ARTICLE III OF THE ACT OF MARCH 4, 1971 (P.L.6,
9 NO.2), KNOWN AS THE TAX REFORM CODE OF 1971:
10 (1) ANY CONTRIBUTION TO A HEALTH SAVINGS ACCOUNT BY AN <--
11 ACCOUNT BENEFICIARY OR THE EMPLOYER OF THAT ACCOUNT
12 BENEFICIARY THAT CONFORMS TO SECTION 223(A) AND (B) OF THE
13 INTERNAL REVENUE CODE OF 1986 (PUBLIC LAW 99-514, 26 U.S.C. §
14 223(A) AND (B));
15 (2) (1) ANY INCOME OF A HEALTH SAVINGS ACCOUNT;
16 (3) (2) ANY AMOUNT PAID OR DISTRIBUTED OUT OF A HEALTH <--
17 SAVINGS ACCOUNT THAT IS USED EXCLUSIVELY TO PAY THE QUALIFIED
18 MEDICAL EXPENSES OF THE ACCOUNT BENEFICIARY; AND
19 (4) (3) ANY AMOUNT PAID OR DISTRIBUTED OUT OF A HEALTH <--
20 SAVINGS ACCOUNT THAT IS USED EXCLUSIVELY TO REIMBURSE AN
21 ACCOUNT BENEFICIARY FOR QUALIFIED MEDICAL EXPENSES.
22 (B) TAXABLE DISTRIBUTIONS.--THE FOLLOWING SHALL BE INCLUDED
23 IN THE INCOME OF THE ACCOUNT BENEFICIARY AND SHALL BE SUBJECT TO
24 TAXATION UNDER ARTICLE III OF THE TAX REFORM CODE OF 1971:
25 (1) ANY AMOUNT PAID OR DISTRIBUTED OUT OF A HEALTH
26 SAVINGS ACCOUNT THAT IS USED FOR ANY PURPOSE OTHER THAN TO
27 PAY THE QUALIFIED MEDICAL EXPENSES OF THE ACCOUNT
28 BENEFICIARY.
29 (2) ANY EXCESS CONTRIBUTION DISTRIBUTION THAT HAS NOT
30 PREVIOUSLY BEEN INCLUDED IN THE ACCOUNT BENEFICIARY'S INCOME.
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1 (3) ANY AMOUNT OF THE ACCOUNT BENEFICIARY'S INCOME
2 ATTRIBUTABLE TO AN EXCESS CONTRIBUTION DISTRIBUTION.
3 SECTION 5. MANDATED BENEFITS.
4 (A) GENERAL RULE.--A EXCEPT AS OTHERWISE PROVIDED UNDER <--
5 SUBSECTION (B), A HEALTH INSURANCE POLICY THAT WOULD QUALIFY AS
6 A HIGH DEDUCTIBLE HEALTH PLAN UNDER SECTION 223(C)(2) OF THE
7 INTERNAL REVENUE CODE OF 1986 (PUBLIC LAW 99-514, 26 U.S.C. §
8 223(C)(2)) SHALL BE SUBJECT TO ANY PROVISION OF LAW MANDATING A
9 MINIMUM HEALTH INSURANCE BENEFIT OR REIMBURSEMENT.
10 (B) CONSTRUCTION.--NOTHING IN THIS ACT SHALL BE CONSTRUED TO <--
11 PROHIBIT OR PREVENT A HEALTH INSURANCE POLICY THAT WOULD QUALIFY
12 AS A HIGH DEDUCTIBLE HEALTH PLAN UNDER SECTION 223(C)(2) OF THE
13 INTERNAL REVENUE CODE OF 1986 FROM APPLYING DEDUCTIBLES OR
14 COPAYMENTS TO BENEFITS OFFERED UNDER THESE MANDATED MINIMUM
15 HEALTH INSURANCE BENEFITS.
16 (B) EXCEPTION.--A HEALTH INSURANCE POLICY THAT WOULD QUALIFY <--
17 AS A HIGH DEDUCTIBLE HEALTH PLAN UNDER SECTION 223(C) OF THE
18 INTERNAL REVENUE CODE OF 1986, WHEN OFFERED IN CONJUNCTION WITH
19 A HEALTH SAVINGS ACCOUNT, SHALL NOT BE SUBJECT TO ANY PROVISION
20 OF LAW WHICH RESTRICTS OR LIMITS DEDUCTIBLES FOR MANDATED
21 MINIMUM HEALTH INSURANCE BENEFITS OR REIMBURSEMENTS EXCEPT TO
22 THE EXTENT SUCH PROVISION MANDATES BENEFITS FOR PREVENTIVE CARE,
23 AS DETERMINED BY THE STANDARDS SET FORTH BY THE INTERNAL REVENUE
24 SERVICE.
25 SECTION 6. APPLICABILITY.
26 SECTION 4 SHALL APPLY TO TAXABLE YEARS BEGINNING AFTER
27 DECEMBER 31, 2004.
28 SECTION 7. EFFECTIVE DATE.
29 THIS ACT SHALL TAKE EFFECT IN 60 DAYS.
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