Health Flexible Spending Arrangements Improvements Act of 2012

Health Flexible Spending Arrangements Improvements Act of 2012 - Amends the Internal Revenue Code to allow a distribution to a participant in a flexible spending arrangement (FSA) of FSA funds not used to reimburse medical expenses by the end of the plan year (currently, unspent funds must be forfeited). Limits the amount of such distribution to the lesser of: (1) $500; or (2) the excess of the salary reduction contributions to the FSA, over reimbursements for medical expenses for the plan year. Includes such distributions in the gross income of the FSA participant for income and employment tax purposes.

[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1004 Introduced in House (IH)]

112th CONGRESS
  1st Session
                                H. R. 1004

To amend the Internal Revenue Code of 1986 to increase participation in 
                medical flexible spending arrangements.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 10, 2011

Mr. Boustany (for himself, Mr. Larson of Connecticut, Mr. Paulsen, Mr. 
Johnson of Illinois, Mr. Bishop of Georgia, and Mr. Burton of Indiana) 
 introduced the following bill; which was referred to the Committee on 
                             Ways and Means

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to increase participation in 
                medical flexible spending arrangements.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medical FSA Improvement Act of 
2011''.

SEC. 2. ADDITION OF TAXABLE DISTRIBUTIONS.

    (a) Treatment of Amounts Expended for Medical Care.--Section 105 of 
the Internal Revenue Code of 1986 (relating to amounts received under 
accident and health plans) is amended by inserting at the end the 
following new subsection:
    ``(k) Amounts Paid Under Medical Flexible Spending Arrangements.--
            ``(1) Application of subsection (b) and section 106.--For 
        purposes of subsection (b) and section 106, a plan shall not 
        fail to be treated as flexible spending arrangement solely 
        because such plan, in addition to reimbursing expenses incurred 
        for medical care (as defined in subsection (b)) during the plan 
        year, distributes for the plan year all or a portion of the 
        employee's balance.
            ``(2) Limitation.--Paragraph (1) shall apply only in the 
        case that the balance under such arrangement for a plan year is 
        distributed after the close of the plan year to which the 
        balance relates and not later than the end of the 7th month 
        following the close of such plan year.
            ``(3) Tax treatment of distribution.--Any distribution to 
        which paragraph (1) applies shall be treated as remuneration of 
        the employee for employment for the taxable year in which it is 
        distributed.
            ``(4) Flexible spending arrangement.--The term `flexible 
        spending arrangement' means a benefit program within the 
        meaning of section 106(c)(2) (relating to long-term care 
        benefits).''.
    (b) Additional Deferred Compensation Exception.--Paragraph (2) of 
section 125(d) of such Code (relating to deferred compensation under a 
cafeteria plan) is amended by inserting at the end the following new 
subparagraph:
                    ``(E) Exception for certain flexible spending 
                arrangements.--Subparagraph (A) shall not apply to a 
                flexible spending arrangement (within the meaning of 
                section 106(c)(2)) as a result of amounts being 
                distributed to the covered employee in accordance with 
                section 105(k).''.
    (c) Conforming Amendment.--Section 409A(d)(1) of such Code is 
amended by striking ``and'' at the end of subparagraph (A), by striking 
the period at the end of subparagraph (B) and inserting ``, and'', and 
by adding at the end the following:
                    ``(C) a flexible spending arrangement which is 
                subject to section 105(k).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2012.
    (e) Transition Rules.--In the case of plan years that begin before 
the date of the enactment of this Act, in implementing the amendments 
made by this section a flexible spending arrangement may allow an 
individual to make a new election or to revise an existing election 
under such arrangement so long as such new or revised election is made 
within 90 days after the date of the enactment of this Act.
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