Section 1 Short title
This Act may be cited as the “Health Savings Act of 2014”.
Health Savings Act of 2014
A BILL
To amend the Internal Revenue Code of 1986 to modify rules relating to health savings accounts.
Sec. 2 Health savings accounts for children
In general— Section 223 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:
“(h) Child health savings accounts
“(1) In general—In the case of an individual, in addition to any deduction allowed under subsection (a) for any taxable year, there shall be allowed as a deduction under this section an amount equal to the aggregate amount paid in cash by the taxpayer during the taxable year to a child health savings account of a child or grandchild of the taxpayer.
“(2) Limitations
“(A) Deduction limitation—The amount taken into account under paragraph (1) with respect to each child or grandchild of the taxpayer, as the case may be, for the taxable year shall not exceed the sum of the monthly limitations with respect to such child for months during the taxable year that the child is an eligible individual.
“(B) Limit on accounts with respect to individual—The aggregate amount of contributions which may be made for any taxable year to all child health savings accounts established and maintained on behalf of a child shall not exceed the sum of the monthly limitations for months during the taxable year that the child is an eligible individual.
“(C) Monthly limitation—The monthly limitation for any month with respect to a child is 1/12 of the amount in effect for the taxable year under subsection (c)(2)(A)(ii)(I).
“(3) Treatment of account while a dependent—For purposes of this section, except as otherwise provided in this subsection, a child health savings account established for the benefit of the child of a taxpayer shall be treated as a health savings account of the taxpayer until the first taxable year (and each taxable year thereafter) for which no deduction under section 151 is allowable to any taxpayer with respect to such child, after which such account shall be treated as a health savings account of the child.
“(4) Child health savings account—For purposes of this subsection, the term child health savings account means a health savings account designated as a child health savings account and established for the benefit of a child of a taxpayer.
“(5) Qualified medical expenses—For purposes of this section, the term qualified medical expenses shall, with respect to any child health savings account, not include any amounts paid for medical care (as defined in section 213(d)) for any individual other than the child for whose benefit the account is maintained.
“(6) Exceptions for disability or death of child—If the child becomes disabled within the meaning of section 72(m)(7) or dies—
“(A) subsection (f)(4)(A) shall not apply to any subsequent payment or distribution, and
“(B) the taxpayer may rollover the amount in such account to any health savings account of the taxpayer or grandparent of the child or to any child health savings account of any other child of the taxpayer.
“(7) Guardians—Any legal guardian of a child shall be treated as the parent of such child for purposes of this section.
“(8) Regulations—The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection, including rules for determining application of this subsection in the case of legal guardians and in the case of parents of a child who file separately, are separated, or are not married.”
Coordination with means-Tested programs— Amounts in a child health savings account shall not be taken into account in determining resources for purposes of title XIX of the Social Security Act.
Effective date— The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.
Sec. 3 Allowing HSA rollover to child or parent of account holder
by inserting “child, parent, or grandparent” after “surviving spouse”,
by inserting “child, parent, or grandparent, as the case may be,” after “the spouse”,
by inserting “, child, parent, or grandparent” after “spouse” in the heading thereof, and
by adding at the end the following: “In the case of a child who acquires such beneficiary’s interest and with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which such individual’s taxable year begins, such health savings account shall be treated as a child health savings account of the child.”.
Effective date— The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.
Sec. 4 Maximum contribution limit to HSA increased to amount of deductible and out-of-pocket limitation
Self-Only coverage— Subparagraph (A) of section 223(b)(2) of the Internal Revenue Code of 1986 is amended by striking “$2,250” and inserting “the amount in effect under subsection (c)(2)(A)(ii)(I)”.
Family coverage— Subparagraph (B) of section 223(b)(2) of such Code is amended by striking “$4,500” and inserting “the amount in effect under subsection (c)(2)(A)(ii)(II)”.
Effective date— The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.
Sec. 5 Transfer of required minimum distribution from retirement plan to health savings account
Transfer from retirement plan—
Individual retirement accounts— Section 408(d) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:
“(10) Required minimum distribution transferred to health savings account
“(A) In general—In the case of an individual who has attained the age of 70½ and who elects the application of this paragraph for a taxable year, gross income of the individual for the taxable year does not include a qualified HSA transfer to the extent such transfer is otherwise includible in gross income.
“(B) Qualified HSA transfer—For purposes of this paragraph, the term qualified HSA transfer means any distribution from an individual retirement plan—
“(i) to a health savings account of the individual in a direct trustee-to-trustee transfer,
“(ii) to the extent such distribution does not exceed the required minimum distribution determined under section 401(a)(9) for the distribution calendar year ending during the taxable year.
“(C) Application of section 72—Notwithstanding section 72, in determining the extent to which an amount is treated as otherwise includible in gross for purposes of subparagraph (A), the aggregate amount distributed from an individual retirement plan shall be treated as includible in gross income to the extent that such amount does not exceed the aggregate amount which would have been so includible if all amounts from all individual retirement plans were distributed. Proper adjustments shall be made in applying section 72 to other distributions in such taxable year and subsequent taxable years.
“(D) Coordination—An election may not be made under subparagraph (A) for a taxable year for which an election is in effect under paragraph (9).”
Other retirement plans— Section 402 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:
“(m) Required minimum distribution transferred to health savings account
“(1) In general—In the case of an individual who has attained the age of 70½ and who elects the application of this subsection for a taxable year, gross income of the individual for the taxable year does not include a qualified HSA transfer to the extent such transfer is otherwise includible in gross income.
“(2) Qualified HSA transfer—For purposes of this subsection, the term qualified HSA transfer means any distribution from a retirement plan—
“(A) to a health savings account of the individual in a direct trustee-to-trustee transfer,
“(B) to the extent such distribution does not exceed the required minimum distribution determined under section 401(a)(9) for the distribution calendar year ending during the taxable year.
“(3) Application of section 72—Notwithstanding section 72, in determining the extent to which an amount is treated as otherwise includible in gross for purposes of paragraph (1), the aggregate amount distributed from an individual retirement plan shall be treated as includible in gross income to the extent that such amount does not exceed the aggregate amount which would have been so includible if all amounts from all individual retirement plans were distributed. Proper adjustments shall be made in applying section 72 to other distributions in such taxable year and subsequent taxable years.
“(4) Eligible retirement plan—For purposes of this subsection, the term eligible retirement plan has the meaning given such term by subsection (c)(8)(B) (determined without regard to clauses (i) and (ii) thereof).”
Transfer to health savings account—
In general— Subparagraph (A) of section 223(d)(1) of such Code is amended by striking “or” at the end of clause (i), by striking the period at the end of clause (ii)(II) and inserting “, or”, and by adding at the end the following new clause:
“(iii) unless it is in a qualified HSA transfer described in section 408(d)(10) or 402(m).”
Excise tax inapplicable to qualified HSA transfer— Paragraph (1) of section 4973(g) of such Code is amended by inserting “or in a qualified HSA transfer described in section 408(d)(10) or 402(m)” after “or 223(f)(5)”.
Effective date— The amendments made by this section shall apply to distributions made after the date of the enactment of this Act.
Sec. 6 Equivalent bankruptcy protections for health savings accounts as retirement funds
In general— Section 522 of title 11, United States Code, is amended by adding at the end the following new subsection:
“(r) For purposes of this section, any health savings account (as described in section 223 of the Internal Revenue Code of 1986) shall be treated in the same manner as an individual retirement account described in section 408 of such Code.”
Effective date— The amendment made by this section shall apply to cases commencing under title 11, United States Code, after the date of the enactment of this Act.
Sec. 7 Allowance of silver and bronze plans in connection with health savings accounts
by striking “a high deductible health plan” each place it appears and inserting “an HSA compatible health plan”,
by striking “high deductible health plan” in subsection (b)(8)(A)(ii) and inserting “HSA compatible health plan”, and
by striking “the high deductible health plan” in subsection (c)(1)(A)(ii)(II) and inserting “the HSA compatible health plan”.
HSA compatible health plan defined— Paragraph (2) of section 223(c) of such Code is amended by redesignating subparagraphs (A), (B), (C), and (D) as subparagraphs (B), (C), (D), and (E) and by inserting before subparagraph (B), as so redesignated, the following new subparagraph:
“(A) In general—The term HSA compatible health plan means—
“(i) any high deductible health plan,
“(ii) any plan described in section 1302(e) of the Patient Protection and Affordable Care Act (relating to catastrophic plan), or
“(iii) any silver or bronze plan which was enrolled in through an Exchange established under section 1311 of the Patient Protection and Affordable Care Act.”
Clerical amendments— Section 223 of such Code is amended—
by striking “In general” in the heading for subsection (c)(2)(B), as redesignated by subsection (b) of this Act, and inserting “High deductible health plan”,
by striking “high deductible health plan” in the heading for subsection (b)(8)(B) and inserting “hsa compatible health plan”, and
by striking “High deductible health plan” in the heading for subsection (c)(2) and inserting “HSA compatible health plan”.
Effective date— The amendments made by this section shall apply to taxable years beginning after December 31, 2014.
Sec. 8 Identification of HSA compatible plans
Section 1103(b) of the Patient Protection and Affordable Care Act (42 U.S.C. 18003(b)) is amended by adding at the end the following new paragraph:
“(3) Identification of HSA compatible plans—Beginning for plan year 2015, the format described in paragraph (1) shall require that information on a coverage option described in subsection (a)(2) that is an HSA compatible health plan (as defined in section 223(c)(2) of the Internal Revenue Code of 1986) identifies such plan as a plan that satisfies the requirement of section 223(c)(1)(A)(i) of such Code.”