H. Rept. 112-517 - 112th Congress (2011-2012)
June 05, 2012, As Reported by the Ways and Means Committee

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House Report 112-517 - HEALTH SAVINGS ACCOUNTS IMPROVEMENTS ACT OF 2012




[House Report 112-517]
[From the U.S. Government Printing Office]


112th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     112-517

======================================================================



 
            HEALTH SAVINGS ACCOUNTS IMPROVEMENTS ACT OF 2012

                                _______
                                

  June 5, 2012.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

            Mr. Camp, from the Committee on Ways and Means, 
                        submitted the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 5858]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 5858) to amend the Internal Revenue Code of 1986 to 
improve health savings accounts, and for other purposes, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
  I. Summary and Background...........................................3
 II. Explanation of Provision.........................................5
          A. Saver's Credit for Contributions to Health Savings 
              Accounts (sec. 2 of the bill and sec. 25B of the 
              Code)..............................................     5
          B. Special Rule for Certain Medical Expenses Incurred 
              Before Establishment of Health Savings Account 
              (sec. 3 of the bill and sec. 223 of the Code)......     8
          C. Allow Both Spouses to Make Catch-Up Contributions to 
              the Same HSA (sec. 4 of the bill and sec. 223 of 
              the Code)..........................................     9
          D. Individuals Eligible for Veterans Benefits for a 
              Service-Connected Disability (sec. 5 of the bill 
              and sec. 223 of the Code)..........................    11
          E. Distributions by Certain Early Retirees for Health 
              Coverage Treated as Qualified Medical Expense (sec. 
              6 of the bill and sec. 223 of the Code)............    12
III. Votes of the Committee..........................................13
 IV. Budget Effects of the Provision.................................14
  V. Other Matters To Be Discussed Under the Rules of the House......21
 VI. Changes in Existing Law Made by the Bill, as Reported...........22
VII. Dissenting Views................................................27

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE, ETC.

  (a) Short Title.--This Act may be cited as the ``Health Savings 
Accounts Improvements Act of 2012''.
  (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title, etc.
Sec. 2. Saver's credit for contributions to health savings accounts.
Sec. 3. Special rule for certain medical expenses incurred before 
establishment of account.
Sec. 4. Allow both spouses to make catch-up contributions to the same 
health savings account.
Sec. 5. Individuals eligible for veterans benefits for a service-
connected disability.
Sec. 6. Distributions by certain early retirees for health coverage 
treated as qualified medical expense.

SEC. 2. SAVER'S CREDIT FOR CONTRIBUTIONS TO HEALTH SAVINGS ACCOUNTS.

  (a) Allowance of Credit.--Subsection (a) of section 25B of the 
Internal Revenue Code of 1986 is amended by inserting ``aggregate 
qualified HSA contributions and'' after ``so much of the''.
  (b) Qualified HSA Contributions.--Subsection (d) of section 25B of 
such Code is amended by redesignating paragraph (2) as paragraph (3) 
and by inserting after paragraph (1) the following new paragraph:
          ``(2) Qualified hsa contributions.--The term `qualified HSA 
        contribution' means, with respect to any taxable year, any 
        contribution to a health savings account (as defined in section 
        223(d)(1)) if--
                  ``(A) such contribution is allowable as a deduction 
                to the taxpayer under section 223(a) for such taxable 
                year, or
                  ``(B) such contribution is made by an employer of the 
                taxpayer at the election of the taxpayer under a 
                cafeteria plan (as defined in section 125(d)) and is 
                not includible in the gross income of the taxpayer by 
                reason of section 125.''.
  (c) Reporting of HSA Elective Contributions.--Paragraph (12) of 
section 6051(a) of such Code is amended to read as follows:
          ``(12) the total amount contributed to health savings 
        accounts (as defined in section 223(d)) of the employee or the 
        employee's spouse and the portion of such total amount 
        contributed at the election of the employee under any cafeteria 
        plan (as defined in section 125(d)),''.
  (d) Conforming Amendments.--Section 25B(d)(3) of such Code, as 
redesignated by subsection (b), is amended--
          (1) by striking the first sentence of subparagraph (A) and 
        inserting the following: ``The aggregate qualified retirement 
        savings contributions determined under paragraph (1) and 
        qualified HSA contributions determined under paragraph (2) 
        shall be reduced (but not below zero) by the aggregate 
        distributions received by the individual during the testing 
        period from any entity of a type to which contributions under 
        paragraph (1) or paragraph (2) (as the case may be) may be 
        made.'', and
          (2) by inserting ``223(f)(1) or (3),'' after ``section 
        72(p),'' in subparagraph (C)(i).
  (e) Effective Date.--The amendments made by this section shall apply 
to taxable years beginning after December 31, 2012.

SEC. 3. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES INCURRED BEFORE 
                    ESTABLISHMENT OF ACCOUNT.

  (a) In General.--Paragraph (2) of section 223(d) of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
subparagraph:
                  ``(D) Treatment of certain medical expenses incurred 
                before establishment of account.--If a health savings 
                account is established during the 60-day period 
                beginning on the date that coverage of the account 
                beneficiary under a high deductible health plan begins, 
                then, solely for purposes of determining whether an 
                amount paid is used for a qualified medical expense, 
                such account shall be treated as having been 
                established on the date that such coverage begins.''.
  (b) Effective Date.--The amendment made by this section shall apply 
with respect to coverage beginning after the date of the enactment of 
this Act.

SEC. 4. ALLOW BOTH SPOUSES TO MAKE CATCH-UP CONTRIBUTIONS TO THE SAME 
                    HEALTH SAVINGS ACCOUNT.

  (a) In General.--Paragraph (5) of section 223(b) of the Internal 
Revenue Code of 1986 is amended to read as follows:
          ``(5) Special rule for married individuals with family 
        coverage.--
                  ``(A) In general.--In the case of individuals who are 
                married to each other, if both spouses are eligible 
                individuals and either spouse has family coverage under 
                a high deductible health plan as of the first day of 
                any month--
                          ``(i) the limitation under paragraph (1) 
                        shall be applied by not taking into account any 
                        other high deductible health plan coverage of 
                        either spouse (and if such spouses both have 
                        family coverage under separate high deductible 
                        health plans, only one such coverage shall be 
                        taken into account),
                          ``(ii) such limitation (after application of 
                        clause (i)) shall be reduced by the aggregate 
                        amount paid to Archer MSAs of such spouses for 
                        the taxable year, and
                          ``(iii) such limitation (after application of 
                        clauses (i) and (ii)) shall be divided equally 
                        between such spouses unless they agree on a 
                        different division.
                  ``(B) Treatment of additional contribution amounts.--
                If both spouses referred to in subparagraph (A) have 
                attained age 55 before the close of the taxable year, 
                the limitation referred to in subparagraph (A)(iii) 
                which is subject to division between the spouses shall 
                include the additional contribution amounts determined 
                under paragraph (3) for both spouses. In any other 
                case, any additional contribution amount determined 
                under paragraph (3) shall not be taken into account 
                under subparagraph (A)(iii) and shall not be subject to 
                division between the spouses.''.
  (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2012.

SEC. 5. INDIVIDUALS ELIGIBLE FOR VETERANS BENEFITS FOR A SERVICE-
                    CONNECTED DISABILITY.

  (a) In General.--Paragraph (1) of section 223(c) of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
subparagraph:
                  ``(C) Special rule for individuals eligible for 
                certain veterans benefits.--An individual shall not 
                fail to be treated as an eligible individual for any 
                period merely because the individual receives hospital 
                care or medical services under any law administered by 
                the Secretary of Veterans Affairs for a service-
                connected disability (within the meaning of section 
                101(16) of title 38, United States Code).''.
  (b) Effective Date.--The amendment made by this section shall apply 
to months beginning after December 31, 2012.

SEC. 6. DISTRIBUTIONS BY CERTAIN EARLY RETIREES FOR HEALTH COVERAGE 
                    TREATED AS QUALIFIED MEDICAL EXPENSE.

  (a) In General.--Subparagraph (C) of section 223(d)(2) of the 
Internal Revenue Code of 1986 is amended by striking ``or'' at the end 
of clause (iii), by striking the period at the end of clause (iv) and 
inserting ``, or'', and by adding at the end the following new clause:
                          ``(v) in the case of an account beneficiary 
                        who has attained age 55 but not the age 
                        specified in section 1811 of the Social 
                        Security Act, any group health plan (as defined 
                        in section 5000(b)(1)) in which such account 
                        beneficiary is enrolled by reason of being a 
                        former employee or a surviving spouse of a 
                        former employee.''.
  (b) Effective Date.--The amendments made by this section shall apply 
to amounts paid for coverage for periods after December 31, 2012.

                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    The bill, H.R. 5858, as reported by the Committee on Ways 
and Means, provides for various improvements to Health Savings 
Accounts (``HSAs'') in order to make them more attractive to 
various populations of consumers.

                 B. Background and Need for Legislation

    In 2011, 13.5 million Americans maintained a Health Savings 
Account (``HSA''), and the number of such accounts has been 
growing by over 10 percent annually for several years. 
According to The Mercer National Survey of Employer Sponsored 
Plans 2011 report: ``This was the biggest one-year increase for 
CDHPs [Consumer Directed Health Plans] since 2007. . . . With a 
40 percent increase in the number of large employers offering 
CDHPs in 2012, it seems safe to say that the future of CDHPs 
has arrived.'' The strong, steady growth of HSAs indicates that 
consumers value these accounts and CDHPs.
    HSAs and CDHPs encourage good health and health care 
policy. By encouraging individuals to plan, shop, and save for 
their own health care needs, patients have more control over 
their own health care. According to the Employee Benefits 
Research Institute, individuals utilizing CDHPs are more likely 
to use wellness programs. A recent study published in the May 
2012 edition of Health Affairs estimated that CDHPs and HSAs 
have the potential to save $57 billion in annual health care 
costs. The authors of the Health Affairs article, ``Growth of 
Consumer-Directed Health Plans to One-Half of All Employer-
Sponsored Insurance Could Save $57 Billion Annually,'' 
concluded that ``[o]ur findings that reductions in spending 
occur through lower spending per episode, more use of generic 
versus brand-name drugs, less use of specialists, and lower 
inpatient hospitalization suggest that these plans do induce 
changes in treatment choices and not just access.''
    To support continued HSA growth, legislation is needed to 
make these accounts more attractive to populations that, for 
various reasons, receive limited benefits from existing 
incentives.

                         C. Legislative History


Background

    H.R. 5858 was introduced on May 29, 2012, and was referred 
to the Committee on Ways and Means.

Committee action

    The Committee on Ways and Means marked up H.R. 5858 on May 
31, 2012, and ordered the bill, as amended, favorably reported 
(with a quorum being present).

Committee hearings

    The impact of HSAs on health care and policy issues 
surrounding health savings accounts have been discussed at six 
committee hearings during the 112th Congress.
    
 Full Committee Hearing on the Health Care Law's 
Impact on Jobs, Employers, and the Economy (January 26, 2011)
    
 Full Committee Hearing on the President's Fiscal 
Year 2012 Budget Proposal with U.S. Department of Health and 
Human Services Secretary Kathleen Sebelius (February 16, 2011)
    
 Subcommittee on Select Revenue Measures Hearing on 
the Tax-Related Provision of H.R. 3 (March 16, 2011)
    
 Subcommittee on Oversight Hearing on Internal 
Revenue Service Operations and the 2011 Tax Return Filing 
Season (March 31, 2011)
    
 Full Committee Hearing on How the Tax Code's 
Burdens on Individuals and Families Demonstrate the Need for 
Comprehensive Tax Reform (April 13, 2011)
    
 Subcommittee on Health Hearing on The Individual 
and Employer Mandates in the Democrats' Health Care Law (March 
29, 2012)

                      II. EXPLANATION OF PROVISION


A. Saver's Credit for Contributions to Health Savings Accounts (sec. 2 
                 of the bill and sec. 25B of the Code)


                              PRESENT LAW

Health savings accounts

            General rules
    An individual with a high deductible health plan (and no 
other health plan other than a plan that provides certain 
permitted insurance or permitted coverage) may establish a 
health savings account (``HSA''). In general, HSAs provide tax-
favored treatment for current medical expenses as well as the 
ability to save on a tax-favored basis for future medical 
expenses. In general, HSAs are tax-exempt trusts or custodial 
accounts created exclusively to pay for the qualified medical 
expenses of the account holder and his or her spouse and 
dependents. Thus, earnings on amounts in HSAs are not taxable.
    Subject to limits, contributions to an HSA made by or on 
behalf of an eligible individual are deductible by the 
individual.\1\ Contributions made by an employer to an HSA are 
excludible from income and wages for employment tax purposes. 
For 2012, the maximum aggregate annual contribution that can be 
made to an HSA is $3,100 in the case of self-only coverage and 
$6,250 in the case of family coverage. The annual contribution 
limits are increased by $1,000 for individuals who have 
attained age 55 by the end of the taxable year (referred to as 
``catch-up contributions''). An excise tax applies to 
contributions in excess of the maximum contribution amount for 
the HSA unless the excess contributions (and earnings allocable 
thereto) are distributed no later than the due date for the 
individual's Federal income tax return for the year.
---------------------------------------------------------------------------
    \1\Sec. 223(a).
---------------------------------------------------------------------------
    Distributions from an HSA for qualified medical expenses 
are not includible in gross income. Distributions from an HSA 
that are not used for qualified medical expenses are includible 
in gross income and are subject to an additional tax of 20 
percent. The 20 percent additional tax does not apply if the 
distribution is made after death, disability, or the individual 
attains the age of Medicare eligibility (i.e., age 65).
            Cafeteria plan
    A cafeteria plan is a separate written plan of an employer 
under which all participants are employees, and participants 
are permitted to choose among at least one permitted taxable 
benefit (for example, current cash compensation) and at least 
one qualified benefit (generally an employer-provided benefit 
excludible from gross income, such as employer-provided health 
coverage). If an employee receives a qualified benefit based on 
his or her election between the qualified benefit and a taxable 
benefit under a cafeteria plan, the qualified benefit generally 
is not includible in gross income.\2\ The amount of the cash 
compensation forgone pursuant to an election under a cafeteria 
plan is generally referred to as a salary reduction 
contribution. One of the choices that may be offered under a 
cafeteria plan is the choice between cash compensation and the 
employer making salary reduction contributions to an HSA.
---------------------------------------------------------------------------
    \2\Sec. 125(a).
---------------------------------------------------------------------------
            W-2 reporting requirements
    An employer must include the amount of any contributions 
made to an employee's HSA on the employee's Form W-2.\3\ There 
is no requirement to separate on the Form W-2 the amount of any 
salary reduction contribution to an HSA under a cafeteria plan 
from any other contribution made by an employer to an HSA.
---------------------------------------------------------------------------
    \3\Sec. 6051(a)(12).
---------------------------------------------------------------------------

Saver's credit

    Present law provides a nonrefundable tax credit for 
eligible taxpayers who make qualified retirement savings 
contributions.\4\ Subject to AGI limits, the credit is 
available to individuals who are 18 or older, other than 
individuals who are full-time students or claimed as a 
dependent on another taxpayer's return. The AGI limits for 2012 
(as indexed for inflation) are $57,500 for married taxpayers 
filing joint returns, $43,125 for head of household taxpayers, 
and $28,750 for single taxpayers and married taxpayers filing 
separate returns.
---------------------------------------------------------------------------
    \4\Sec. 25B.
---------------------------------------------------------------------------
    For purposes of the credit, qualified retirement savings 
contributions include (1) elective deferrals to a section 
401(k) plan, a section 403(b) plan, a governmental section 457 
plan, a SIMPLE IRA, or a SEP; (2) contributions to a 
traditional or Roth IRA; and (3) voluntary after-tax employee 
contributions to a qualified retirement plan or annuity or a 
section 403(b) plan. The maximum amount of qualified retirement 
savings contributions taken into account for purposes of the 
credit is $2,000. The amount of any contribution eligible for 
the credit is reduced by distributions received by the taxpayer 
(or by the taxpayer's spouse if the taxpayer files a joint 
return) from any plan or IRA to which eligible contributions 
can be made during the taxable year for which the credit is 
claimed, the two taxable years prior to the year the credit is 
claimed, and during the period after the end of the taxable 
year for which the credit is claimed and prior to the due date 
for filing the taxpayer's return for the year. Certain 
distributions are disregarded for purposes of this rule, such 
as corrective distributions of qualified retirement savings 
contributions. Distributions that are rolled over to another 
retirement plan do not affect the credit.
    The credit is a percentage of the taxpayer's qualified 
retirement savings contributions up to $2,000. The credit 
percentage depends on the AGI of the taxpayer, varying from 10 
percent to 50 percent, as shown in the table below. The credit 
is in addition to any deduction or exclusion that would 
otherwise apply with respect to the contribution. The credit 
offsets minimum tax liability as well as regular tax liability.

                              TABLE 1.--CREDIT RATES FOR SAVER'S CREDIT (FOR 2012)
----------------------------------------------------------------------------------------------------------------
             Joint filers                Heads of households        All other filers           Credit rate
----------------------------------------------------------------------------------------------------------------
$0-$34,500...........................   $0-$25,875............   $0-$17,250............   50 percent.
$34,501-$37,500......................   $25,876-$28,125.......   $17,251-$18,750.......   20 percent.
$37,501-$57,500......................   $28,126-$43,125.......   $18,751-$28,750.......   10 percent.
----------------------------------------------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that more should be done to 
encourage low-income taxpayers to take advantage of HSAs. To 
provide an additional tax benefit for contributions to HSAs for 
low-income taxpayers, the bill makes contributions to HSAs 
eligible contributions for the saver's credit.

                        EXPLANATION OF PROVISION

    Under the provision, deductible contributions to an HSA 
made by a taxpayer and salary reduction contributions under a 
cafeteria plan made by an employer to an HSA for the taxpayer 
qualify for the saver's credit. These HSA contributions are 
aggregated with qualified retirement savings contributions to 
determine the amount of credit to which a taxpayer is entitled. 
Thus, the present law limit of $2,000 applies to aggregate 
contributions (both HSA contributions and qualified retirement 
savings contributions) taken into account in determining the 
amount of the credit.
    HSA contributions are generally subject to the same rules 
as apply to qualified retirement savings contributions 
including the reduction in the amount of qualified 
contributions due to distributions received by the taxpayer (or 
by the taxpayer's spouse if the taxpayer files a joint return 
with the spouse) during certain periods. However, distributions 
from an HSA used for qualified medical expenses are disregarded 
in determining the amount by which qualified contributions are 
reduced for distributions. Further, as in the case of 
corrective distributions of qualified retirement savings 
contributions, distributions of excess HSA contributions plus 
allocable earnings (made before the due date of the taxpayer's 
Federal income tax return) are also disregarded in determining 
the amount by which qualified contributions are reduced for 
distributions.
    In order to identify salary reduction contributions to an 
HSA under a cafeteria plan for purposes of the saver's credit, 
the provision also includes a requirement that the employer 
separately state on an employee's Form W-2 the amount of salary 
reduction contributions made to an HSA under a cafeteria plan.

                             EFFECTIVE DATE

    The provision applies for taxable years beginning after 
December 31, 2012.

     B. Special Rule for Certain Medical Expenses Incurred Before 
 Establishment of Health Savings Account (sec. 3 of the bill and sec. 
                            223 of the Code)


                              PRESENT LAW

Health savings accounts

    An individual with a high deductible health plan (and no 
other health plan other than a plan that provides certain 
permitted insurance or permitted coverage) may establish a 
health savings account (``HSA'').\5\ In general, HSAs provide 
tax-favored treatment for current medical expenses as well as 
the ability to save on a tax-favored basis for future medical 
expenses. In general, HSAs are tax-exempt trusts or custodial 
accounts created exclusively to pay for the qualified medical 
expenses of the account holder and his or her spouse and 
dependents. Thus, earnings on amounts in HSAs are not taxable.
---------------------------------------------------------------------------
    \5\Sec. 223. Generally, a high deductible health plan is a health 
plan that, for 2012, has an annual deductible that is at least $1,200 
for self-only coverage or $2,400 for family coverage and that has an 
out-of-pocket expense limit that is no more than $6,050 in the case of 
self-only coverage and $12,100 in the case of family coverage. Out-of-
pocket expenses include deductibles, co-payments, and other amounts 
(other than premiums) that the individual must pay for covered benefits 
under the plan. A plan does not fail to be a high deductible health 
plan by reason of failing to have a deductible for preventive care.
---------------------------------------------------------------------------
    Subject to limits, contributions to an HSA made by or on 
behalf of an eligible individual are deductible by the 
individual. Contributions to an HSA are excludible from income 
and wages for employment tax purposes if made by the employer. 
For 2012, the maximum aggregate annual contribution that can be 
made to an HSA is $3,100 in the case of self-only coverage and 
$6,250 in the case of family coverage. The annual contribution 
limits are increased by $1,000 for individuals who have 
attained age 55 by the end of the taxable year (referred to as 
``catch-up contributions''). Contributions, including catch-up 
contributions, cannot be made once an individual is enrolled in 
Medicare.
    Distributions from an HSA for qualified medical expenses 
are not includible in gross income. Distributions from an HSA 
that are not used for qualified medical expenses are includible 
in gross income and are subject to an additional tax of 20 
percent. The 20 percent additional tax does not apply if the 
distribution is made after death, disability, or the individual 
attains the age of Medicare eligibility (i.e., age 65).
    In order for a distribution from as an HSA to be excludible 
as a payment for a qualified medical expense, the medical 
expense must be incurred on or after the date that the HSA is 
established.\6\ Thus, a distribution from an HSA is not 
excludible as payment used for a qualified medical expense if 
the medical expense is incurred after a taxpayer enrolls in a 
high deductible health plan but before the taxpayer establishes 
an HSA.
---------------------------------------------------------------------------
    \6\Q&A-26 of Notice 2004-2, 2004-1 C.B. 269.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee continues to believe that high deductible 
health plans and the related HSAs will help reduce health care 
costs. The Committee has identified certain cases where it 
believes that the operation of HSAs can be improved. One such 
case involves the typical lag between obtaining coverage under 
a high deductible health plan and the establishment of an HSA.
    Recognizing this lag, the Committee believes it is 
appropriate to allow medical expenses incurred after coverage 
is obtained under a HDHP but prior to the establishment of the 
HSA to be paid for from the HSA and to be excludible from 
income, provided the HSA is established within 60 days of 
obtaining coverage under a HDHP.

                        EXPLANATION OF PROVISION

    Under the provision, if an HSA is established during the 
60-day period beginning on the date that an individual's 
coverage under a high deductible health plan begins, then the 
HSA is treated as having been established on the date that such 
coverage begins for purposes of determining if an expense 
incurred is a qualified medical expense. Thus, if a taxpayer 
establishes an HSA within 60 days of the date that the 
taxpayer's coverage under a high deductible health plan begins, 
any distribution from an HSA used as a payment for a medical 
expense incurred during that 60-day period after the high 
deductible health plan coverage began is excludible from gross 
income as a payment used for a qualified medical expense even 
though the expense was incurred before the date that the HSA 
was established.

                             EFFECTIVE DATE

    The provision applies with respect to high deductible 
health plan coverage commencing after the date of enactment.

 C. Allow Both Spouses To Make Catch-Up Contributions to the Same HSA 
             (sec. 4 of the bill and sec. 223 of the Code)


                              PRESENT LAW

    An individual with a high deductible health plan and no 
other health plan (other than a plan that provides certain 
permitted insurance or permitted coverage) may establish a 
health savings account (``HSA''). In general, HSAs provide tax-
favored treatment for current medical expenses as well as the 
ability to save on a tax-favored basis for future medical 
expenses. In general, HSAs are tax-exempt trusts or custodial 
accounts created exclusively to pay for the qualified medical 
expenses of the account holder and his or her spouse and 
dependents. Thus, earnings on amounts in HSAs are not taxable.
    Subject to limits, contributions to an HSA made by or on 
behalf of an eligible individual are deductible in determining 
adjusted gross income of the individual (that is, an ``above-
the-line'' deduction). Contributions to an HSA by an employer 
for an employee (including salary reduction contributions made 
through a cafeteria plan) are excludible from income and from 
wages for employment tax purposes. Distributions from an HSA 
for qualified medical expenses are not includible in gross 
income. Distributions from an HSA that are not used for 
qualified medical expenses are includible in gross income and 
are subject to an additional tax of 20 percent. The 20 percent 
additional tax does not apply if the distribution is made after 
death, disability, or the individual attains the age of 
Medicare eligibility (i.e., age 65).
    For 2012, the maximum aggregate annual contribution that 
can be made to an HSA is $3,100 in the case of self-only 
coverage and $6,250 in the case of family coverage.\7\ The 
annual contribution limits are increased by $1,000 for an 
eligible individual who has attained age 55 by the end of the 
taxable year (referred to as ``catch-up contributions'').\8\ 
All HSA contributions are aggregated for purposes of the 
maximum annual contribution limit, and contributions to Archer 
MSAs reduce the annual HSA contribution limit. The annual HSA 
contribution limit for an individual is generally the sum of 
the limits determined separately for each month (1/12 of the 
maximum aggregate annual contribution amount), based on the 
individual's status and health plan coverage as of the first 
day of the month.\9\
---------------------------------------------------------------------------
    \7\Under section 4973, an excise tax applies to contributions in 
excess of the maximum contribution amount for the HSA. The excise tax 
generally is equal to six percent of the cumulative amount of excess 
contributions that are not distributed from the HSA.
    \8\Contributions, including catch-up contributions, cannot be made 
once an individual is enrolled in Medicare.
    \9\Under a special rule, an individual who is an eligible 
individual during the last month of a taxable year is treated as having 
been an eligible individual for every month in the taxable year for 
purposes of computing the amount that may be contributed to the HSA for 
the year. Thus, the individual may contribute the maximum aggregate 
annual contribution amount. However, if the individual ceases to be an 
eligible individual within a certain period, contributions that could 
not otherwise have been made are generally includible in income and are 
subject to a 10-percent additional tax.
---------------------------------------------------------------------------
    If eligible individuals are married to each other and 
either spouse has family coverage, both spouses are treated as 
having only family coverage, so that the annual contribution 
limit for family coverage applies. This annual contribution 
limit (without regard to any catch-up contribution amounts) is 
reduced by any Archer MSA contributions and then divided 
equally between the spouses unless they agree on a different 
division.
    If both spouses of a married couple are eligible 
individuals, each may contribute to an HSA, but they cannot 
have a joint HSA.\10\ Under the rule described above, however, 
the spouses may divide their annual contribution limit by 
allocating the entire amount to one spouse to be contributed to 
that spouse's HSA.\11\ This rule does not apply to catch-up 
contribution amounts, though. Thus, if both spouses are at 
least age 55 and eligible to make catch-up contributions, each 
must make the catch-up contribution to his or her own HSA.\12\
---------------------------------------------------------------------------
    \10\Notice 2004-50, 2004-2 C.B. 196, Q&A-63.
    \11\Notice 2004-50, Q&A-32. Funds from that HSA can be used to pay 
qualified medical expenses for either spouse on a tax-free basis. 
Notice 2004-50, Q&A-36.
    \12\Notice 2008-59, 2008-2 C.B. 123, Q&A-22.
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                           reasons for change

    The Committee has identified certain cases where it 
believes that the operation of HSAs can be improved. One such 
case involves the present-law obstacle that prevents both 
otherwise eligible spouses from making catch-up contributions 
if they have only one HSA account. The Committee believes the 
efficiency of HSAs could be improved by allowing both eligible 
spouses to make catch up contributions to a single HSA, rather 
than the present law requirement that they each must have their 
own HSA in order to make catch up contributions.

                        EXPLANATION OF PROVISION

    Under the provision, if both spouses of a married couple 
are eligible for catch-up contributions and either has family 
coverage, the annual contribution limit that can be divided 
between them includes both catch-up contribution amounts. Thus, 
for example, they can agree that their combined catch-up 
contribution amount is allocated to one spouse to be 
contributed to that spouse's HSA. In other cases, as under 
present law, a spouse's catch-up contribution amount is not 
eligible for division between the spouses; the catch-up 
contribution must be made to the HSA of that spouse.

                             EFFECTIVE DATE

    The provision is effective for taxable years beginning 
after December 31, 2012.

 D. Individuals Eligible for Veterans Benefits for a Service-Connected 
        Disability (sec. 5 of the bill and sec. 223 of the Code)


                              PRESENT LAW

    An individual with a high deductible health plan and no 
other health plan (other than a plan that provides certain 
permitted insurance or permitted coverage) is generally 
eligible to make deductible contributions to a health savings 
account (``HSA''), subject to certain limits (an ``eligible 
individual''). HSA contributions made on behalf of an eligible 
individual by an employer are excludible from income and wages 
for employment tax purposes. Eligibility for HSA contributions 
is generally determined monthly, based on the individual's 
status and health plan coverage as of the first day of the 
month. Contributions to an HSA cannot be made once an 
individual is enrolled in Medicare.
    An individual with other coverage in addition to a high 
deductible health plan is still eligible to make HSA 
contributions if such other coverage is permitted insurance or 
permitted coverage. Permitted insurance is: (1) insurance if 
substantially all of the coverage provided under such insurance 
relates to (a) liabilities incurred under worker's compensation 
law, (b) tort liabilities, (c) liabilities relating to 
ownership or use of property (e.g., auto insurance), or (d) 
such other similar liabilities as the Secretary of Treasury may 
prescribe by regulations; (2) insurance for a specified disease 
or illness; and (3) insurance that provides a fixed payment per 
day (or other period) for hospitalization. Permitted coverage 
is coverage (whether provided through insurance or otherwise) 
for accidents, disability, dental care, vision care, or long-
term care. Coverage under certain health flexible spending 
arrangements or health reimbursement arrangements is also 
permitted.
    Under IRS guidance, an otherwise eligible individual who is 
eligible for medical benefits under a program of the Department 
of Veterans Affairs (``VA''), but who has not actually received 
such benefits during the preceding three months, continues to 
be an eligible individual.\13\ However, an individual is not 
eligible to make HSA contributions for any month if the 
individual has received VA medical benefits at any time during 
the previous three months unless the benefits are for 
permissible coverage or preventive care.\14\
---------------------------------------------------------------------------
    \13\Notice 2004-50, 2004-2 C.B. 196, Q&A-5.
    \14\Notice 2004-50, Q&A-5; Notice 2008-59, 2008-2 C.B. 123, Q&A-9.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes the present-law HSA eligibility 
rules inappropriately discriminate against those who avail 
themselves of VA medical benefits for a service-connected 
disability. The Committee therefore believes it is appropriate 
to allow otherwise eligible individuals to contribute to an HSA 
regardless of whether they receive VA medical benefits for a 
service-connected disability.

                        EXPLANATION OF PROVISION

    Under the provision, an individual does not fail to be 
treated as an eligible individual for any period merely because 
the individual receives VA medical benefits for a service-
connected disability.
    The provision does not otherwise change the application of 
the present-law rule for individuals eligible for VA medical 
benefits. Thus, an otherwise eligible individual who is 
eligible for VA medical benefits, but who has not actually 
received such benefits during the preceding three months, 
continues to be an eligible individual. However, an individual 
is not eligible to make HSA contributions for any month if the 
individual has received VA medical benefits at any time during 
the previous three months unless the benefits are for 
permissible coverage or preventive care (or for a service-
connected disability).

                             EFFECTIVE DATE

    The provision applies to months beginning after December 
31, 2012.

E. Distributions by Certain Early Retirees for Health Coverage Treated 
 as Qualified Medical Expense (sec. 6 of the bill and sec. 223 of the 
                                 Code)


                              PRESENT LAW

    An individual with a high deductible health plan and no 
other health plan (other than a plan that provides certain 
permitted insurance or permitted coverage) may establish a 
health savings account (``HSA''). In general, HSAs are tax-
exempt trusts or custodial accounts created exclusively to pay 
for the qualified medical expenses of the account holder and 
his or her spouse and dependents.
    Distributions from an HSA for qualified medical expenses 
are not includible in gross income.\15\ Distributions from an 
HSA that are not used for qualified medical expenses are 
includible in gross income and are subject to an additional tax 
of 20 percent. The 20-percent additional tax does not apply if 
the distribution is made after death, disability, or the 
individual attains the age of Medicare eligibility (i.e., age 
65).
---------------------------------------------------------------------------
    \15\Amounts in an HSA can be used for qualified medical expenses 
even if the individual is not currently eligible to make HSA 
contributions.
---------------------------------------------------------------------------
    Payments for insurance are generally not qualified medical 
expenses that can be paid from an HSA on a tax-free basis, 
subject to certain exceptions. For example, an exception 
applies for health insurance expenses, other than for a 
Medicare supplemental policy, of an HSA holder who is at least 
age 65.

                           REASONS FOR CHANGE

    The Committee is concerned about the growing medical care 
costs of a growing population of early retirees, some of whom 
may have involuntarily retired early and are unable to find new 
employment in the current jobs environment. In order to help 
defray the medical insurance costs of these taxpayers, the 
Committee believes that it is appropriate to expand the 
definition of HSA eligible medical expenses to include expenses 
for coverage under a group health plan in which the HSA holder 
is enrolled by reason of being a former employee or a surviving 
spouse of a former employee.

                        EXPLANATION OF PROVISION

    Under the provision, in the case of an HSA holder who is at 
least age 55 but not age 65, qualified medical expenses include 
expenses for coverage under a group health plan (that is, an 
employer-sponsored health plan) in which the HSA holder is 
enrolled by reason of being a former employee or a surviving 
spouse of a former employee. Thus, in that case, expenses for 
such coverage can be paid from an HSA on a tax-free basis.

                             EFFECTIVE DATE

    The provision is effective for amounts paid for coverage 
for periods after December 31, 2012.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the votes of the Committee on Ways and Means in its 
consideration of H.R. 5858.

                    MOTION TO REPORT RECOMMENDATION

    The bill H.R. 5858, as amended, was ordered favorably 
reported by a roll call vote of 21 yeas to 7 nays (with a 
quorum being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Camp.......................        X   ........  .........  Mr. Levin........  ........  ........  .........
Mr. Herger.....................        X   ........  .........  Mr. Rangel.......  ........  ........  .........
Mr. Johnson....................  ........  ........  .........  Mr. Stark........  ........        X   .........
Mr. Brady......................        X   ........  .........  Mr. McDermott....  ........        X   .........
Mr. Ryan.......................        X   ........  .........  Mr. Lewis........  ........        X   .........
Mr. Nunes......................        X   ........  .........  Mr. Neal.........  ........  ........  .........
Mr. Tiberi.....................        X   ........  .........  Mr. Becerra......  ........  ........  .........
Mr. Davis......................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Reichert...................        X   ........  .........  Mr. Thompson.....  ........        X   .........
Mr. Boustany...................        X   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Roskam.....................        X   ........  .........  Mr. Blumenauer...  ........        X   .........
Mr. Gerlach....................        X   ........  .........  Mr. Kind.........        X   ........  .........
Mr. Price......................        X   ........  .........  Mr. Pascrell.....  ........  ........  .........
Mr. Buchanan...................        X   ........  .........  Ms. Berkley......        X   ........  .........
Mr. Smith......................        X   ........  .........  Mr. Crowley......  ........  ........  .........
Mr. Schock.....................        X   ........  .........
Ms. Jenkins....................        X   ........  .........
Mr. Paulsen....................        X   ........  .........
Mr. Marchant...................  ........  ........  .........
Mr. Berg.......................        X   ........  .........
Ms. Black......................  ........  ........  .........
Mr. Reed.......................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

                  IV. BUDGET EFFECTS OF THE PROVISION


               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the revenue provisions 
of the bill, H.R. 5858, as reported.
    The bill is estimated to have the following effects on 
Federal budget receipts for fiscal years 2013-2022:
<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>

B. Statement Regarding New Budget Authority and Tax Expenditures Budget 
                               Authority

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
bill involves no new or increased budget authority. The 
Committee further states that the revenue-reducing tax 
provisions involve increased tax expenditures.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the CBO, the following statement by the CBO is 
provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, June 4, 2012.
Hon. Dave Camp,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 5858, the Health 
Savings Accounts Improvements Act of 2012.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CB0 staff contact is Kalyani 
Parthasarathy.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

H.R. 5858--Health Savings Accounts Improvements Act of 2012

    Summary: H.R. 5858 would make several changes to the tax 
treatment of health savings accounts (HSAs). The staff of the 
Joint Committee on Taxation (JCT) estimates that these changes 
together would decrease revenues by $173 million in 2013, about 
$1.8 billion over the 2013-2017 period, and $4.7 billion over 
the 2013-2022 period. Pay-as-you-go procedures apply because 
enacting the legislation would affect revenues.
    The bill would allow certain former employees to use HSA 
contributions for their health insurance expenses, allow 
spouses to allocate their catch-up contributions between their 
HSAs, permit certain deductible HSA contributions to be 
eligible for a saver's tax credit, allow individuals recently 
receiving veterans benefits for a service-connected disability 
to make HSA contributions, and allow HSA contributions to pay 
for certain expenses incurred before the establishment of the 
account.
    JCT has determined that the provisions of H.R. 5858 contain 
no intergovernmental or private-sector mandates as defined in 
the Unfunded Mandates Reform Act (UMRA).
    Estimated cost to the Federal Government: The estimated 
budgetary impact of the Health Savings Accounts Improvements 
Act of 2012 is shown in the following table.

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      By fiscal year, in millions of dollars--
                                                  ----------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                              2012-      2012-
                                                      2012       2013       2014       2015       2016       2017       2018       2019       2020       2021       2022       2017       2022
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       CHANGES IN REVENUES

Distributions by Former Employees................          0        -96       -144       -162       -179       -196       -212       -228       -243       -255       -266       -776     -1,981
Spousal Catch-up Contributions...................          0        -59       -127       -144       -160       -175       -190       -204       -217       -229       -239       -665     -1,745
Saver's Credit Eligibility.......................          0         -3        -29        -39        -44        -54        -56        -64        -70        -73        -75       -169       -507
Veterans' Eligibility............................          0        -11        -18        -21        -25        -30        -35        -41        -47        54        -61       -105       -343
Previous Medical Expenses........................          0         -4         -9        -10        -11        -12        -13        -14        -15        -15        -16        -47       -120
Total Changes....................................          0       -173       -327       -376       -419       -467       -506       -551       -592       -626       -657     -1,762     -4,696
    On-budget....................................          0       -166       -317       -365       -405       -451       -488       -531       -570       -602       -630     -1,704     -4,527
    Off-budgeta..................................          0         -7        -10        -11        -14        -16        -18        -20        -22        -24        -27        -58      -169
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Components may not sum to totals because of rounding.
aOff-budget revenues result from changes in Social Security payroll tax receipts, which are categorized as off-budget.
Source: Staff of the Joint Committee on Taxation.

    Basis of estimate: Under current law, tax-deductible 
contributions to HSAs generally cannot be used to pay health 
insurance expenses. H.R. 5858 would allow such use for an HSA 
account holder between the ages of 55 and 64 who is enrolled in 
an employer-sponsored health plan as a former employee or a 
surviving spouse of a former employee. JCT estimates that this 
proposal would decrease revenues by $96 million in 2013, $776 
million over the 2013-2017 period, and about $2.0 billion over 
the 2013-2022 period. Some of those revenue losses--$53 million 
over the 2013-2022 period--would be off-budget.
    Eligible individuals who are at least age 55 at the end of 
the taxable year may make catch-up contributions to their HSAs, 
which are amounts above the normal contribution limits, under 
current law. H.R. 5858 would permit catch-up contributions from 
either spouse to be allocable to the HSA of one spouse in the 
same manner as is allowed for other annual contributions. JCT 
estimates that this change would decrease revenues by $59 
million in 2013, $665 million over the 2013-2017 period, and 
about $1.7 billion over the 2013-2022 period.
    Current law provides a saver's tax credit to individuals 
who make qualified retirement savings contributions, and whose 
annual gross income is under certain thresholds. H.R. 5858 
would permit tax-deductible contributions to an HSA by such 
individuals to also be eligible for this saver's credit. The 
sum of such HSA contributions and qualified retirement savings 
contributions would still be subject to the current law limit 
of $2,000. JCT estimates that the provision would result in a 
revenue loss of $3 million in 2013, $169 million over the 2013-
2017 period, and $507 million over the 2013-2022 period.
    H.R. 5858 also would allow individuals to remain eligible 
to make deductible HSA contributions despite recently receiving 
medical benefits from the Department of Veterans Affairs for a 
service-connected disability. Under current law, such 
individuals would not be eligible to make contributions to an 
HSA if they had received such benefits in the previous three 
months. JCT estimates that this change would decrease revenues 
by $11 million in 2013, $105 million over the 2013-2017 period, 
and $343 million over the 2013-2022 period. Some of those 
revenue losses--$99 million over the 2013-2022 period--would be 
off-budget.
    H.R. 5858 would allow certain contributions to an HSA to 
pay for expenses incurred after the taxpayer entered into a 
high deductible health plan but before the establishment of the 
account. Under current law, the medical expense must be 
incurred on or after the date the HSA is established in order 
to remain eligible for reimbursement. H.R. 5858 would remove 
this requirement so long as the expense was incurred within 60 
days of the date the taxpayer established the HSA. JCT 
estimates that this provision would decrease revenues by $4 
million in 2013, $47 million over the 2013-2017 period, and 
$120 million over the 2013-2022 period. Some of those revenue 
losses--$17 million over the 2013-2022 period--would be off-
budget.
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in outlays and revenues that are 
subject to those pay-as-you-go procedures are shown in the 
following table. Only on-budget changes to outlays or revenues 
are subject to pay-as-you-go procedures.

                                CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 5858, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON WAYS AND MEANS ON MAY 31, 2012
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      By fiscal year, in millions of dollars--
                                                  ----------------------------------------------------------------------------------------------------------------------------------------------
                                                      2012       2013       2014       2015       2016       2017       2018       2019       2020       2021       2022    2012-2017  2012-2022
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      NET INCREASE OR DECREASE (-) IN THE ON-BUDGET DEFICIT

Statutory Pay-As-You-Go Impact...................          0        166        317        365        405        451        488        531        570        602        630      1,704      4,527
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Intergovernmental and private-sector impact: JCT has 
determined that the provisions of H.R. 5858 contain no 
intergovernmental or private-sector mandates as defined in 
UMRA.
    Estimate prepared by: Kalyani Parthasarathy.
    Estimate approved by: Frank Sammartino, Assistant Director 
for Tax Analysis.

                    D. Macroeconomic Impact Analysis

    In compliance with clause 3(h)(2) of rule XIII of the Rules 
of the House of Representatives, the following statement is 
made by the Joint Committee on Taxation with respect to the 
provisions of the bill amending the Internal Revenue Code of 
1986: the effects of the bill on economic activity are so small 
as to be incalculable within the context of a model of the 
aggregate economy.

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE


          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives (relating to oversight findings), 
the Committee advises that it was as a result of the 
Committee's review of the provisions of H.R. 5858 that the 
Committee concluded that it is appropriate to report the bill, 
as amended, favorably to the House of Representatives with the 
recommendation that the bill do pass.

        B. Statement of General Performance Goals and Objectives

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
bill contains no measure that authorizes funding, so no 
statement of general performance goals and objectives for any 
measure that authorizes funding is required.

              C. Information Relating to Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
    This Committee has determined that the reported bill does 
not contain any Federal private sector mandates within the 
meaning of Public Law No. 104-4, the Unfunded Mandates Reform 
Act of 1995. The costs required to comply with each Federal 
private sector mandate generally are no greater than the 
aggregate estimated budget effects of the provision.
    The Committee has determined that the bill does not impose 
a private sector mandate, and has determined that the bill does 
not impose a Federal intergovernmental mandate on State, local, 
or tribal governments.

                D. Applicability of House Rule XXI 5(b)

    Clause 5(b) of rule XXI of the Rules of the House of 
Representatives provides, in part, that ``A bill or joint 
resolution, amendment, or conference report carrying a Federal 
income tax rate increase may not be considered as passed or 
agreed to unless so determined by a vote of not less than 
three-fifths of the Members voting, a quorum being present.'' 
The Committee has carefully reviewed the provisions of the 
bill, and states that the provisions of the bill do not involve 
any Federal income tax rate increases within the meaning of the 
rule.

                       E. Tax Complexity Analysis

    Section 4022(b) of the Internal Revenue Service Reform and 
Restructuring Act of 1998 (the ``IRS Reform Act'') requires the 
Joint Committee on Taxation (in consultation with the Internal 
Revenue Service and the Department of the Treasury) to provide 
a tax complexity analysis. The complexity analysis is required 
for all legislation reported by the Senate Committee on 
Finance, the House Committee on Ways and Means, or any 
committee of conference if the legislation includes a provision 
that directly or indirectly amends the Internal Revenue Code 
and has widespread applicability to individuals or small 
businesses.
    Pursuant to clause 3(h)(1) of rule XIII of the Rules of the 
House of Representatives, the staff of the Joint Committee on 
Taxation has determined that a complexity analysis is not 
required under section 4022(b) of the IRS Reform Act because 
the bill contains no provisions that amend the Code and that 
have ``widespread applicability'' to individuals or small 
businesses within the meaning of the rule.

  F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
                                Benefits

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill, and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                     INTERNAL REVENUE CODE OF 1986


Subtitle A--Income Taxes

           *       *       *       *       *       *       *


CHAPTER 1--NORMAL TAXES AND SURTAXES

           *       *       *       *       *       *       *


Subchapter A--Determination of Tax Liability

           *       *       *       *       *       *       *


PART IV--CREDITS AGAINST TAX

           *       *       *       *       *       *       *



Subpart A--Nonrefundable Personal Credits

           *       *       *       *       *       *       *



SEC. 25B. ELECTIVE DEFERRALS AND IRA CONTRIBUTIONS BY CERTAIN 
                    INDIVIDUALS.

  (a) Allowance of Credit.--In the case of an eligible 
individual, there shall be allowed as a credit against the tax 
imposed by this subtitle for the taxable year an amount equal 
to the applicable percentage of so much of the aggregate 
qualified HSA contributions and qualified retirement savings 
contributions of the eligible individual for the taxable year 
as do not exceed $2,000.

           *       *       *       *       *       *       *

  (d) Qualified Retirement Savings Contributions.--For purposes 
of this section--
          (1) * * *
          (2) Qualified hsa contributions.--The term 
        ``qualified HSA contribution'' means, with respect to 
        any taxable year, any contribution to a health savings 
        account (as defined in section 223(d)(1)) if--
                  (A) such contribution is allowable as a 
                deduction to the taxpayer under section 223(a) 
                for such taxable year, or
                  (B) such contribution is made by an employer 
                of the taxpayer at the election of the taxpayer 
                under a cafeteria plan (as defined in section 
                125(d)) and is not includible in the gross 
                income of the taxpayer by reason of section 
                125.
          [(2)] (3) Reduction for certain distributions.--
                  (A) In general.--[The qualified retirement 
                savings contributions determined under 
                paragraph (1) shall be reduced (but not below 
                zero) by the aggregate distributions received 
                by the individual during the testing period 
                from any entity of a type to which 
                contributions under paragraph (1) may be made.] 
                The aggregate qualified retirement savings 
                contributions determined under paragraph (1) 
                and qualified HSA contributions determined 
                under paragraph (2) shall be reduced (but not 
                below zero) by the aggregate distributions 
                received by the individual during the testing 
                period from any entity of a type to which 
                contributions under paragraph (1) or paragraph 
                (2) (as the case may be) may be made. The 
                preceding sentence shall not apply to the 
                portion of any distribution which is not 
                includible in gross income by reason of a 
                trustee-to-trustee transfer or a rollover 
                distribution.

           *       *       *       *       *       *       *

                  (C) Excepted distributions.--There shall not 
                be taken into account under subparagraph (A)--
                          (i) any distribution referred to in 
                        section 72(p), 223(f)(1) or (3), 
                        401(k)(8), 401(m)(6), 402(g)(2), 
                        404(k), or 408(d)(4), and

           *       *       *       *       *       *       *


Subchapter B--Computation of Taxable Income

           *       *       *       *       *       *       *


PART VII--ADDITIONAL ITEMIZED DEDUCTIONS FOR INDIVIDUALS

           *       *       *       *       *       *       *


SEC. 223. HEALTH SAVINGS ACCOUNTS.

  (a) * * *
  (b) Limitations.--
          (1) * * *

           *       *       *       *       *       *       *

          [(5) Special rule for married individuals.--In the 
        case of individuals who are married to each other, if 
        either spouse has family coverage--
                  [(A) both spouses shall be treated as having 
                only such family coverage (and if such spouses 
                each have family coverage under different 
                plans, as having the family coverage with the 
                lowest annual deductible), and
                  [(B) the limitation under paragraph (1) 
                (after the application of subparagraph (A) and 
                without regard to any additional contribution 
                amount under paragraph (3))--
                          [(i) shall be reduced by the 
                        aggregate amount paid to Archer MSAs of 
                        such spouses for the taxable year, and
                          [(ii) after such reduction, shall be 
                        divided equally between them unless 
                        they agree on a different division.]
          (5) Special rule for married individuals with family 
        coverage.--
                  (A) In general.--In the case of individuals 
                who are married to each other, if both spouses 
                are eligible individuals and either spouse has 
                family coverage under a high deductible health 
                plan as of the first day of any month--
                          (i) the limitation under paragraph 
                        (1) shall be applied by not taking into 
                        account any other high deductible 
                        health plan coverage of either spouse 
                        (and if such spouses both have family 
                        coverage under separate high deductible 
                        health plans, only one such coverage 
                        shall be taken into account),
                          (ii) such limitation (after 
                        application of clause (i)) shall be 
                        reduced by the aggregate amount paid to 
                        Archer MSAs of such spouses for the 
                        taxable year, and
                          (iii) such limitation (after 
                        application of clauses (i) and (ii)) 
                        shall be divided equally between such 
                        spouses unless they agree on a 
                        different division.
                  (B) Treatment of additional contribution 
                amounts.--If both spouses referred to in 
                subparagraph (A) have attained age 55 before 
                the close of the taxable year, the limitation 
                referred to in subparagraph (A)(iii) which is 
                subject to division between the spouses shall 
                include the additional contribution amounts 
                determined under paragraph (3) for both 
                spouses. In any other case, any additional 
                contribution amount determined under paragraph 
                (3) shall not be taken into account under 
                subparagraph (A)(iii) and shall not be subject 
                to division between the spouses.

           *       *       *       *       *       *       *

  (c) Definitions and Special Rules.--For purposes of this 
section--
          (1) Eligible individual.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Special rule for individuals eligible for 
                certain veterans benefits.--An individual shall 
                not fail to be treated as an eligible 
                individual for any period merely because the 
                individual receives hospital care or medical 
                services under any law administered by the 
                Secretary of Veterans Affairs for a service-
                connected disability (within the meaning of 
                section 101(16) of title 38, United States 
                Code).

           *       *       *       *       *       *       *

  (d) Health Savings Account.--For purposes of this section--
          (1) * * *
          (2) Qualified medical expenses.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Exceptions.--Subparagraph (B) shall not 
                apply to any expense for coverage under--
                          (i) * * *

           *       *       *       *       *       *       *

                          (iii) a health plan during a period 
                        in which the individual is receiving 
                        unemployment compensation under any 
                        Federal or State law, [or]
                          (iv) in the case of an account 
                        beneficiary who has attained the age 
                        specified in section 1811 of the Social 
                        Security Act, any health insurance 
                        other than a medicare supplemental 
                        policy (as defined in section 1882 of 
                        the Social Security Act)[.], or
                          (v) in the case of an account 
                        beneficiary who has attained age 55 but 
                        not the age specified in section 1811 
                        of the Social Security Act, any group 
                        health plan (as defined in section 
                        5000(b)(1)) in which such account 
                        beneficiary is enrolled by reason of 
                        being a former employee or a surviving 
                        spouse of a former employee.
                  (D) Treatment of certain medical expenses 
                incurred before establishment of account.--If a 
                health savings account is established during 
                the 60-day period beginning on the date that 
                coverage of the account beneficiary under a 
                high deductible health plan begins, then, 
                solely for purposes of determining whether an 
                amount paid is used for a qualified medical 
                expense, such account shall be treated as 
                having been established on the date that such 
                coverage begins.

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Subtitle F--Procedure and Administration

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CHAPTER 61--INFORMATION AND RETURNS

           *       *       *       *       *       *       *


Subchapter A--Returns and Records

           *       *       *       *       *       *       *


PART III--INFORMATION RETURNS

           *       *       *       *       *       *       *


         Subpart C--Information Regarding Wages Paid Employees

SEC. 6051. RECEIPTS FOR EMPLOYEES.

  (a) Requirement.--Every person required to deduct and 
withhold from an employee a tax under section 3101 or 3402, or 
who would have been required to deduct and withhold a tax under 
section 3402 (determined without regard to subsection (n)) if 
the employee had claimed no more than one withholding 
exemption, or every employer engaged in a trade or business who 
pays remuneration for services performed by an employee, 
including the cash value of such remuneration paid in any 
medium other than cash, shall furnish to each such employee in 
respect of the remuneration paid by such person to such 
employee during the calendar year, on or before January 31 of 
the succeeding year, or, if his employment is terminated before 
the close of such calendar year, within 30 days after the date 
of receipt of a written request from the employee if such 30-
day period ends before January 31, a written statement showing 
the following:
          (1) * * *

           *       *       *       *       *       *       *

          [(12) the amount contributed to any health savings 
        account (as defined in section 223(d)) of such employee 
        or such employee's spouse,]
          (12) the total amount contributed to health savings 
        accounts (as defined in section 223(d)) of the employee 
        or the employee's spouse and the portion of such total 
        amount contributed at the election of the employee 
        under any cafeteria plan (as defined in section 
        125(d)),

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                         VII. DISSENTING VIEWS

    We voted against this bill because it costs $4.7 billion in 
lost tax revenues and this revenue loss is not offset. When 
combined with the three other health care measures under 
consideration at the Markup, the total cost for all bills is 
nearly $42 billion and the Majority has not set forth any 
options to pay for this cost. Not one option was set forth at 
the Markup. It is simply unacceptable in this time of fiscal 
austerity to not pay the cost of these bills. It is 
irresponsible to add nearly $42 billion to the deficit.
    This Markup continues the Majority's attempt to repeal the 
Affordable Care Act (ACA) without offering a replacement. In 
January of 2009, the Majority voted to repeal and replace the 
ACA. If their replacement solution is expanded access to Health 
Flexible Spending Accounts and Health Savings Accounts, then it 
falls far short of the needs of American families. Neither 
Health Flexible Spending Accounts nor Health Savings Accounts 
provide health coverage to participants. They only provide tax 
breaks for certain health costs. They are not real solutions to 
the problems facing our nation with respect to health care and 
insurance coverage.

                                   Sander M. Levin.
                                   Fortney Pete Stark.
                                   Jim McDermott.
                                   John Lewis.
                                   Xavier Becerra.
                                   Earl Blumenauer.