PRIOR PRINTER'S NOS. 99, 1493 PRINTER'S NO. 1922
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 AND PETRARCA, JANUARY 25, 2005
AS AMENDED ON THIRD CONSIDERATION, HOUSE OF REPRESENTATIVES,
MAY 9, 2005
AN ACT
1 Authorizing the establishment and maintenance of health savings
2 accounts; providing an exclusion from State income tax FOR <--
3 SPECIAL TAX PROVISIONS RELATING TO EXCLUSIONS FROM PERSONAL
4 INCOME TAX; and imposing restrictions on health savings
5 accounts.
6 The General Assembly of the Commonwealth of Pennsylvania
7 hereby enacts as follows:
8 Section 1. Short title.
9 This act shall be known and may be cited as the Health
10 Savings Account Act.
11 Section 2. Legislative intent.
12 It is the intent of the General Assembly to extend special
13 tax provisions to health savings accounts established pursuant
14 to section 223 of the Internal Revenue Code of 1986 (Public Law
15 99-514, 26 U.S.C. § 223).
1 Section 3. Definitions.
2 The following words and phrases when used in this act shall
3 have the meanings given to them in this section unless the
4 context clearly indicates otherwise:
5 "ACCOUNT BENEFICIARY." AS DEFINED IN SECTION 223(D)(3) OF <--
6 THE INTERNAL REVENUE CODE OF 1986 (PUBLIC LAW 99-514, 26 U.S.C.
7 § 223(D)(3)).
8 "Excess contribution distribution." A distribution described
9 in section 223(f)(3) of the Internal Revenue Code of 1986
10 (Public Law 99-514, 26 U.S.C. § 223(f)(3)). The term shall not
11 include amounts of income attributable to such distribution.
12 "Health insurance policy." An individual or group health,
13 sickness or accident policy or subscriber contract or
14 certificate issued by an entity subject to any one of the
15 following:
16 (1) The act of May 17, 1921 (P.L.682, No.284), known as
17 The Insurance Company Law of 1921.
18 (2) The act of December 29, 1972 (P.L.1701, No.364),
19 known as the Health Maintenance Organization Act.
20 (3) The act of May 18, 1976 (P.L.123, No.54), known as
21 the Individual Accident and Sickness Insurance Minimum
22 Standards Act.
23 (4) 40 Pa.C.S. Ch. 61 (relating to hospital plan
24 corporations) or 63 (relating to professional health services
25 plan corporations).
26 "Health savings account." As defined in section 223(d) of
27 the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C.
28 § 223(d)).
29 "Qualified medical expenses." As defined in section 223(d)
30 of the Internal Revenue Code of 1986 (Public Law 99-514, 26
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1 U.S.C. § 223(d)).
2 Section 4. State income tax exclusion. <--
3 (a) General rule.--Coverage under a health savings account,
4 any income of a health savings account, any excess contribution
5 distribution and any payment or distribution from a health
6 savings account that is used exclusively to pay qualified
7 medical expenses and money reimbursed to an account holder or an
8 employee for qualified health expenses shall be excluded from
9 taxation under Article III of the act of March 4, 1971 (P.L.6,
10 No.2), known as the Tax Reform Code of 1971.
11 (b) Nonqualified payments or distributions.--A payment or
12 distribution from a health savings account that is used for any
13 purpose other than to pay qualified medical expenses shall be
14 included in the income of the account holder under Article III
15 of the Tax Reform Code of 1971 to the extent that the amounts
16 paid or distributed were not previously included in income. The
17 cost recovery method shall be used to determine the portion of
18 the payment or distribution to be included in income.
19 SECTION 4. SPECIAL TAX PROVISIONS. <--
20 (A) GENERAL RULE.--THE FOLLOWING SHALL BE EXCLUDED FROM
21 TAXATION UNDER ARTICLE III OF THE ACT OF MARCH 4, 1971 (P.L.6,
22 NO.2), KNOWN AS THE TAX REFORM CODE OF 1971:
23 (1) ANY CONTRIBUTION TO A HEALTH SAVINGS ACCOUNT BY AN
24 ACCOUNT BENEFICIARY OR THE EMPLOYER OF THAT ACCOUNT
25 BENEFICIARY THAT CONFORMS TO SECTION 223(A) AND (B) OF THE
26 INTERNAL REVENUE CODE OF 1986 (PUBLIC LAW 99-514, 26 U.S.C. §
27 223(A) AND (B));
28 (2) ANY INCOME OF A HEALTH SAVINGS ACCOUNT;
29 (3) ANY AMOUNT PAID OR DISTRIBUTED OUT OF A HEALTH
30 SAVINGS ACCOUNT THAT IS USED EXCLUSIVELY TO PAY THE QUALIFIED
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1 MEDICAL EXPENSES OF THE ACCOUNT BENEFICIARY; AND
2 (4) ANY AMOUNT PAID OR DISTRIBUTED OUT OF A HEALTH
3 SAVINGS ACCOUNT THAT IS USED EXCLUSIVELY TO REIMBURSE AN
4 ACCOUNT BENEFICIARY FOR QUALIFIED MEDICAL EXPENSES.
5 (B) TAXABLE DISTRIBUTIONS.--THE FOLLOWING SHALL BE INCLUDED
6 IN THE INCOME OF THE ACCOUNT BENEFICIARY AND SHALL BE SUBJECT TO
7 TAXATION UNDER ARTICLE III OF THE TAX REFORM CODE OF 1971:
8 (1) ANY AMOUNT PAID OR DISTRIBUTED OUT OF A HEALTH
9 SAVINGS ACCOUNT THAT IS USED FOR ANY PURPOSE OTHER THAN TO
10 PAY THE QUALIFIED MEDICAL EXPENSES OF THE ACCOUNT
11 BENEFICIARY.
12 (2) ANY EXCESS CONTRIBUTION DISTRIBUTION THAT HAS NOT
13 PREVIOUSLY BEEN INCLUDED IN THE ACCOUNT BENEFICIARY'S INCOME.
14 (3) ANY AMOUNT OF THE ACCOUNT BENEFICIARY'S INCOME
15 ATTRIBUTABLE TO AN EXCESS CONTRIBUTION DISTRIBUTION.
16 (C) INDIVIDUAL OR GROUP HEALTH INSURANCE POLICY.--ANY
17 PAYMENT BY A PERSON TO PURCHASE AN INDIVIDUAL HEALTH INSURANCE
18 POLICY, AND ANY PAYMENT BY A PERSON TO SECURE COVERAGE UNDER A
19 GROUP HEALTH INSURANCE POLICY FOR THE PERSON, A SPOUSE OR A
20 DEPENDENT SHALL BE EXCLUDED FROM TAXATION UNDER ARTICLE III OF
21 THE ACT OF MARCH 4, 1971 (P.L.6, NO.2), KNOWN AS THE TAX REFORM
22 CODE OF 1971.
23 Section 5. Mandated benefits.
24 (a) General rule.--A health insurance policy that would
25 qualify as a high deductible health plan under section 223(c)(2)
26 of the Internal Revenue Code of 1986 (Public Law 99-514, 26
27 U.S.C. § 223(c)(2)) shall be subject to any provision of law
28 mandating a minimum health insurance benefit or reimbursement.
29 (b) Construction.--Nothing in this act shall be construed to <--
30 prohibit or prevent a health insurance policy that would qualify
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1 as a high deductible health plan under section 223(c)(2) of the
2 Internal Revenue Code of 1986 from applying deductibles or
3 copayments to benefits offered under these mandated minimum
4 health insurance benefits.
5 (B) EXCEPTION.--A HEALTH INSURANCE POLICY THAT WOULD QUALIFY <--
6 AS A HIGH DEDUCTIBLE HEALTH PLAN UNDER SECTION 223(C) OF THE
7 INTERNAL REVENUE CODE OF 1986, WHEN OFFERED IN CONJUNCTION WITH
8 A HEALTH SAVINGS ACCOUNT, SHALL NOT BE SUBJECT TO ANY PROVISION
9 OF LAW WHICH RESTRICTS OR LIMITS DEDUCTIBLES OR COPAYMENTS FOR
10 MANDATED MINIMUM HEALTH INSURANCE BENEFITS OR REIMBURSEMENTS
11 EXCEPT TO THE EXTENT SUCH PROVISION MANDATES BENEFITS FOR
12 PREVENTIVE CARE, AS DETERMINED BY THE STANDARDS SET FORTH BY THE
13 INTERNAL REVENUE SERVICE.
14 Section 6. Applicability.
15 Section 4 shall apply to taxable years beginning after
16 December 31, 2004.
17 Section 7. Effective date.
18 This act shall take effect in 60 days.
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