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| THE GENERAL ASSEMBLY OF PENNSYLVANIA |
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| SENATE BILL |
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| INTRODUCED BY FOLMER, BROWNE, ALLOWAY, EARLL, ERICKSON, PICCOLA, PILEGGI, WONDERLING AND M. WHITE, MARCH 2, 2009 |
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| REFERRED TO BANKING AND INSURANCE, MARCH 2, 2009 |
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| AN ACT |
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1 | Authorizing employees of the Commonwealth and political |
2 | subdivisions to establish health savings accounts; and |
3 | providing for the requirements of health savings accounts and |
4 | for tax exemption under certain circumstances. |
5 | The General Assembly of the Commonwealth of Pennsylvania |
6 | hereby enacts as follows: |
7 | Section 1. Short title. |
8 | This act shall be known and may be cited as the Government |
9 | Employee Health Savings Account Act. |
10 | Section 2. Definitions. |
11 | The following words and phrases when used in this act shall |
12 | have the meanings given to them in this section unless the |
13 | context clearly indicates otherwise: |
14 | "Deductible." The total deductible for an eligible |
15 | individual and all the dependents of that eligible individual |
16 | for a calendar year. |
17 | "Dependent." The spouse or child of an eligible individual |
18 | as defined in section 152 of the Internal Revenue Code of 1986 |
19 | (Public Law 99-514, 26 U.S.C. § 152). |
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1 | "Eligible individual." An individual taxpayer, including an |
2 | employee of an employer who is a government employee, who |
3 | contributes to a health savings account on the employee's behalf |
4 | and who: |
5 | (1) Must be covered by a high deductible health plan |
6 | individually or with a dependent. |
7 | (2) May not be covered under any health plan that is not |
8 | a high deductible health plan, except for: |
9 | (i) Coverage for accidents. |
10 | (ii) Workers' compensation insurance. |
11 | (iii) Insurance for a specified disease or illness. |
12 | (iv) Insurance paying a fixed amount per day per |
13 | hospitalization. |
14 | (v) Tort liabilities. |
15 | (3) Establishes or on whose behalf the health savings |
16 | account is established. |
17 | "Employer." The Commonwealth and any political subdivision |
18 | that employs an individual. |
19 | "Government employee." An individual employed by the |
20 | Commonwealth or a political subdivision. |
21 | "Health savings account" or "account." A trust or custodian |
22 | established in this Commonwealth pursuant to a health savings |
23 | account program exclusively to pay the qualified medical |
24 | expenses of an eligible individual or the individual's |
25 | dependents, but only if the written governing instrument |
26 | creating the account meets the following requirements: |
27 | (1) Except in the case of a rollover contribution, no |
28 | contribution will be accepted: |
29 | (i) unless it is in cash; or |
30 | (ii) to the extent such contribution, when added to |
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1 | the previous contributions to the account for the |
2 | calendar year, exceeds 100% of the eligible individual's |
3 | deductible or $2,600 for an individual or $5,150 per |
4 | family, whichever is lower. |
5 | (2) The trustee or custodian is a bank, an insurance |
6 | company or another person approved by the Secretary of Health |
7 | and Human Services. |
8 | (3) No part of the trust assets will be invested in life |
9 | insurance contracts. |
10 | (4) The assets of the account will not be commingled |
11 | with other property except as allowed for under Individual |
12 | Retirement Accounts. |
13 | (5) The eligible individual's interest in the account is |
14 | nonforfeitable. |
15 | "Health savings account program" or "program." A program |
16 | that includes all of the following: |
17 | (1) The purchase by an eligible individual or by an |
18 | employer of a high deductible health plan. |
19 | (2) The contribution into a health savings account by an |
20 | eligible individual or on behalf of an employee or by the |
21 | employer. The total annual contribution may not exceed the |
22 | amount of the plan's higher deductible or the amounts listed |
23 | in paragraph (1)(ii) of the definition "health savings |
24 | account" or "account." |
25 | "High deductible." The term means: |
26 | (1) In the case of self-only coverage, an annual |
27 | deductible increased each year by a cost-of-living adjustment |
28 | that is not less than $1,000 and the sum of the annual |
29 | deductible and other annual out-of-pocket expenses required |
30 | to be paid under a plan for covered benefits and that does |
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1 | not exceed $5,000. |
2 | (2) In the case of family coverage, an annual deductible |
3 | increased each year by a cost-of-living adjustment of not |
4 | less than $2,000 and the sum of the annual deductible and |
5 | other annual out-of-pocket expenses required to be paid under |
6 | a plan for covered benefits and that does not exceed $10,000. |
7 | A plan shall not fail to be treated as a high deductible plan by |
8 | reason of its failure to include a deductible for preventive |
9 | care or, in the case of a network plan, for having out-of-pocket |
10 | expenses that exceed these limits on an annual deductible for |
11 | services provided outside the network. |
12 | "High deductible health plan." A health coverage policy, |
13 | certificate or contract that provides for payments for covered |
14 | benefits that exceed the higher deductible. |
15 | "Qualified medical expense." An expense paid by a taxpayer |
16 | for medical care described in section 213(d) of the Internal |
17 | Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 213(d)). |
18 | Section 3. Applicability and scope. |
19 | (a) General rule.--The provisions of this act shall apply |
20 | also to taxpayers who do not receive preferred Federal tax |
21 | treatment for a health savings account under section 223 of the |
22 | Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § |
23 | 223). |
24 | (b) Annual limitation on deposits.--For taxable years |
25 | beginning after December 31, 2008, a resident of this |
26 | Commonwealth or an employer shall be allowed to deposit |
27 | contributions to a health savings account. The amount of deposit |
28 | shall not exceed the amount of the plan's high deductible, nor |
29 | $2,600 for an individual policy and $5,150 for a family policy. |
30 | (c) Tax exemption.--Except as provided in section 5, |
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1 | principal contributed to and interest earned on a health savings |
2 | account and money reimbursed to an eligible individual or an |
3 | employee for qualified medical expenses are exempt from taxation |
4 | under the act of March 4, 1971 (P.L.6, No.2), known as the Tax |
5 | Reform Code of 1971. |
6 | Section 4. Distribution of funds from health savings accounts. |
7 | (a) General rule.--A trustee or custodian of a health |
8 | savings account shall utilize the funds held in the health |
9 | savings account solely for the purpose of paying the qualified |
10 | medical expenses of the eligible individual or the individual's |
11 | dependents or to purchase a health coverage policy certificate |
12 | or contract if the eligible individual is receiving unemployment |
13 | compensation, is exercising continuation privileges under |
14 | Federal law or is purchasing a long-term care insurance |
15 | contract, or to pay for health insurance other than a Medicare |
16 | supplemental policy for those who are Medicare eligible. |
17 | (b) Restriction of use of funds.--Funds held in a health |
18 | savings account may not be used to cover expenses of an eligible |
19 | individual or the individual's dependents that are otherwise |
20 | covered, including, but not limited to, a medical expense |
21 | covered pursuant to an automobile insurance policy, workers' |
22 | compensation insurance policy or self-insured plan or another |
23 | employer-funded health coverage policy, certificate or contract. |
24 | Section 5. Withdrawals from health savings accounts. |
25 | (a) General rule.--Subject to the provisions of this |
26 | section, an eligible individual may withdraw money from the |
27 | individual's health savings account for any purpose, other than |
28 | a purpose described in section 4(a). |
29 | (b) Tax consequences of certain withdrawals.--Subject to the |
30 | provisions of subsection (c), if an eligible individual |
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1 | withdraws money from the individual's health savings account for |
2 | any purpose, other than a purpose described in section 4(a) at |
3 | any other time, all of the following apply: |
4 | (1) The amount of the withdrawal is income under the act |
5 | of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code |
6 | of 1971, in the tax year of the withdrawal. |
7 | (2) Interest earned on the account during the tax year |
8 | in which a withdrawal under this subsection is made is income |
9 | for the purposes of the Tax Reform Code of 1971. |
10 | (c) Effect of bankruptcy.--The amount of disbursement of any |
11 | assets of a health savings account pursuant to a filing for |
12 | protection under 11 U.S.C. (relating to bankruptcy) by an |
13 | eligible individual or person for whose benefit the account was |
14 | established is not considered a withdrawal for purposes of this |
15 | section. The amount of the disbursement is not subject to |
16 | taxation under the Tax Reform Code of 1971 and subsection (b) |
17 | does not apply. |
18 | (d) Transfers between spouses or former spouses.--The |
19 | transfer of an eligible individual's interest in a health |
20 | savings account to an eligible individual's spouse or former |
21 | spouse shall not be considered a taxable transfer made by such |
22 | eligible individual, notwithstanding any other provision of this |
23 | act and this interest shall, after the transfer, be treated as a |
24 | health savings account with respect to which the spouse is the |
25 | eligible individual. |
26 | (e) Effect of eligible individual's death.--Upon the death |
27 | of the eligible individual, the trustee or custodian shall |
28 | distribute the principal and accumulated interest of the health |
29 | savings account to the estate of the deceased. |
30 | (f) Effect of changed employment.--If an employee becomes |
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1 | employed with a different employer that participates in a health |
2 | savings account program, the employee may transfer his or her |
3 | health savings account to that new employer's trustee or |
4 | custodian or to an individually purchased account program. |
5 | Section 20. Effective date. |
6 | This act shall take effect in 60 days. |
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