§ 44-30-25.1 - Scituate – Modification relating to medical savings accounts.
SECTION 44-30-25.1
§ 44-30-25.1 Scituate – Modificationrelating to medical savings accounts. – (a) As used in this section:
(1) "Account administrator" means any of the following:
(i) A state chartered bank, savings and loan association,credit union, or trust company authorized to act as fiduciary in this state; ora national banking association or federal savings and loan association orcredit union authorized to act as fiduciary in this state;
(ii) An insurance company authorized to do business in thisstate.
(2) "Account holder" means a resident individual of the townof Scituate who establishes a medical savings account.
(3) "Deductible" means the total deductible for an employeeor account holder and all the dependents of that employee or account holder fora calendar year.
(4) "Dependent" means the spouse of the employee or accountholder or a child of the employee or account holder if the child is any of thefollowing:
(i) Under twenty-three (23) years of age and enrolled as afull-time student at an accredited college or university or under nineteen (19)years of age;
(ii) Legally entitled to the provision of proper or necessarysubsistence, education, medical care, or other care necessary for his or herhealth, guidance or well-being and not otherwise emancipated, self-supporting,married, or a member of the Armed Forces of the United States; and
(iii) Mentally or physically incapacitated to the extent thathe or she is not self-sufficient.
(5) "Eligible medical expense" means an expense paid by thetaxpayer for medical care described in § 213(d) of the Internal RevenueCode, 26 U.S.C. § 213(d).
(6) "Employee" means an individual employed by the town ofScituate for whose benefit or for the benefit of whose dependents a medicalsavings account is established.
(7) "Employer" means the town of Scituate.
(8) "ERISA" means the Employee Retirement Income Security Actof 1974, 29 U.S.C. § 1001 et seq.
(9) "Higher deductible" means an annual deductible in theapplicable amount (as adjusted) set forth in § 220(c)(2)(A) of theInternal Revenue Code, 26 U.S.C. § 220(c)(2)(A).
(10) "Medical savings account" or "account" means: (i) anaccount established in this state pursuant to a medical savings account programto pay the eligible medical expenses of an employee or account holder and thedependents of the employee or account holder, or (ii) an account as defined in§ 220(d) of the Internal Revenue Code, 26 U.S.C. § 220(d).
(11) "Medical savings account program" or "program" means oneof the following programs:
(i) A program established by an employer that previouslyprovided a health coverage policy, certificate or contract or self insuredhealth plan that includes all of the following:
(A) The purchase by an employer of a qualified higherdeductible health plan for the benefit of an employee or an employee and his orher dependents; and
(B) The contribution on behalf of an employee into a medicalsavings account by his or her employer of all or part of the higher deductibleof the plan purchased pursuant to subparagraph (A) of this paragraph. Theemployee may contribute into the account in addition to a contribution by theemployer all or part of the difference between the employer's contribution andthe amount of the higher deductible.
(ii) A program established by an employer that did notpreviously provide a health coverage policy, certificate or contract or selfinsured health plan that includes the following:
(A) The purchase by an employer of a qualified higherdeductible health plan for the benefit of an employee or an employee and his orher dependents; and
(B) The contribution on behalf of an employee into a medicalsavings account by his or her employer of all or part of the higher deductibleof the plan purchased pursuant to subparagraph (A) of this paragraph. Theemployee may contribute to the account in addition to a contribution by theemployer all or part of the difference between the employer's contribution andthe amount of the higher deductible.
(iii) A program established by an account holder thatincludes all of the following:
(A) The purchase by the account holder of a qualified higherdeductible health plan for the benefit of the account holder or the accountholder and his or her dependents; and
(B) A contribution by the account holder into a medicalsavings account of an amount not more than the amount of the higher deductible.
(12) "Qualified higher deductible health plan" means a healthcoverage policy, certificate, or contract or health plan that provides forpayments for covered benefits that exceed the higher deductible and that ispurchased or established by an account holder or by an employer for the benefitof an account holder or employee for whom the account holder or employer makesdeposits into a medical savings account.
(b) For tax years beginning after December 31, 2002, both ofthe following apply:
(i) An employer, except as otherwise provided by statute,contract, or a collective bargaining agreement, may offer a medical savingsaccount program to the employer's employees and their dependents; and
(ii) A resident individual of the town of Scituate mayestablish a medical savings account program for himself or herself and his orher dependents.
(2) Before making any contributions, an employer that offersa medical savings account program shall inform all employees in writing of thestate and federal tax status of contributions made pursuant to this section.
(3) Upon agreement between an employer and an employee, anemployee may have his or her employer contribute either to the employee'smedical savings account or continue to make contributions under the employer'sexisting health insurance policy program.
(c) An account administrator shall administer the medicalsavings account from which the payment of claims is made and has a fiduciaryduty (including the duty to prudently invest uncommitted funds on deposit inmedical savings accounts) to the person for whose benefit the accountadministrator administers an account.
(2) Not more than thirty (30) days after an accountadministrator begins to administer an account, the account administrator shallnotify, in writing, each employee and account holder on whose behalf theaccount administrator administers an account of the date of the last businessday of the account administrator's business year.
(3) The employee or account holder shall utilize the fundsheld in a medical savings account solely for the purpose of paying the eligiblemedical expenses of the employee or account holder or his or her dependents orto purchase a health coverage policy, certificate or contract. Funds held in amedical savings account shall not be used to pay medical expenses of theemployee or account holder or his or her dependents that are otherwisereimbursable, including, but not limited to, medical expenses payable pursuantto an automobile insurance policy, worker's compensation insurance policy orself insured plan, or another health coverage policy, certificate or contract.
(4) The employee or account holder may submit documentationof medical expenses paid by the employee or account holder in the tax year tothe account administrator, and the account administrator shall reimburse theemployee or account holder from the employee's or account holder's account foreligible medical expenses. Other methods for payment of eligible medicalexpenses, including the use of a swipe card or checkbook, shall also be allowed.
(5) If an employer makes contributions to a medical savingsaccount program on a periodic installment basis, the employer may advance to anemployee, interest free, the amount necessary to cover medical expensesincurred that exceed the amount in the employee's medical savings account atthe time the expense is incurred if the employee agrees to repay the advancefrom future installments or when he or she ceases to be an employee of theemployer.
(d) The portion of any contribution to a medical savingsaccount, to the extent it is deemed taxable income under the Internal RevenueCode, shall be a modification decreasing federal adjusted gross income of theparticipant for the purpose of determining his or her Rhode Island income taxliability in the year of the contribution. Provided, the modification shall notexceed an amount that would otherwise be allowed based on the maximumcontribution under § 220 of the Internal Revenue Code, 26 U.S.C. §220. Income, including gains and losses, on a medical savings account shall beexempt from taxation under this chapter.
(2) An employee or account holder may withdraw money from hisor her medical savings account for any purpose other than a purpose describedin subdivision (c)(3) of this section without incurring the penalty underparagraph (3)(ii) of this subsection only when the withdrawal is made on thelast business day of the account administrator's business year; provided, themoney withdrawn on that date shall not be eligible for the modification or theexemption provided under subdivision (1) of this subsection and the amount ofany such withdrawal shall, to the extent that any earlier contribution(s) orincome was claimed as a modification decreasing federal adjusted gross incomefor Rhode Island purposes shall be a modification increasing federal adjustedgross income of the account holder or employee for the purpose of determininghis or her Rhode Island income tax liability in the year of the withdrawal orwithdrawals.
(3) Subject to subdivision (4) of this subsection, if anemployee or account holder withdraws money from a medical savings account: (i)for any purpose other than a purpose described in subdivision (c)(3) of thissection at any time other than the last business day of the accountadministrator, or (ii) in an amount that exceeds any applicable limit formedical savings accounts pursuant to § 220 of the Internal Revenue Code,26 U.S.C. § 220, the following shall apply:
(i) The money withdrawn shall not be eligible for themodification or the exemption provided under subdivision (1) of this subsectionand the amount of any such withdrawal shall, to the extent that any earliercontribution(s) or income was claimed as a modification decreasing federaladjusted gross income for Rhode Island purposes shall be a modificationincreasing federal adjusted gross income of the account holder or employee forthe purpose of determining his or her Rhode Island income tax liability in theyear of the withdrawal(s); and
(ii) The account administrator shall withhold from the amountof the withdrawal and on behalf of the account holder or employee, shall pay apenalty to the Rhode Island division of taxation equal to ten percent (10%) ofthe amount of the withdrawal.
(4) The amount of a disbursement of any assets of a medicalsavings account pursuant to a filing for protection under title 11 of theUnited States Code, 11 U.S.C. §§ 101 to 1330, by an employee, accountholder, or person for whose benefit the account was established is notconsidered a withdrawal for purposes of this section.
(5) Upon the death of the account holder or employee, theaccount administrator shall distribute the principal and accumulated interestof the medical savings account to the estate of the account holder or employee.
(6) If an employee is no longer employed by the town ofScituate and the employee, not more than sixty (60) days after his or her finalday of employment, transfers the account to a new account administrator orrequests in writing to the town's account administrator that the account remainwith that administrator and that account administrator agrees to retain theaccount, the money in the medical savings account may be utilized for thebenefit of the employee or the employee and his or her dependents subject tothis section. Not more than thirty (30) days after the expiration of the sixty(60) days, if an account administrator has not accepted the former employee'saccount, the employer shall mail a check to the former employee at theemployee's last known address equal to the amount in the account on that day.If an employee becomes employed with a different employer that participates ina medical savings account program, the employee may transfer his or her medicalsavings account to that new employer's account administrator. If an accountholder becomes an employer that participates in the medical savings accountprogram, the account holder may transfer his or her account to the employer'saccount administrator.
(7) Amounts in a medical savings account at the end of a yearmay be used to pay eligible medical expenses in future years, and any suchamounts shall not reduce the amount that must be contributed by an employer.
(8) After an account holder or employee reaches fifty-nineand one-half (59 1/2) years of age, withdrawals shall not be subject to theten percent (10%) penalty.
(9) An account holder whose account consists solely of his orher own funds and no funds from an employer, shall be entitled to a tax creditof two hundred dollars ($200) in each year the account holder makes the maximumcontribution to his or her account.