§ 106. Contributions by employer to accident and health plans
(a)
General rule
Except as otherwise provided in this section, gross income of an employee does not include employer-provided coverage under an accident or health plan.
(b)
Contributions to Archer MSAs
(1)
In general
In the case of an employee who is an eligible individual, amounts contributed by such employee’s employer to any Archer MSA of such employee shall be treated as employer-provided coverage for medical expenses under an accident or health plan to the extent such amounts do not exceed the limitation under section
220
(b)(1) (determined without regard to this subsection) which is applicable to such employee for such taxable year.
(2)
No constructive receipt
No amount shall be included in the gross income of any employee solely because the employee may choose between the contributions referred to in paragraph (1) and employer contributions to another health plan of the employer.
(3)
Special rule for deduction of employer contributions
Any employer contribution to an Archer MSA, if otherwise allowable as a deduction under this chapter, shall be allowed only for the taxable year in which paid.
(4)
Employer MSA contributions required to be shown on return
Every individual required to file a return under section
6012 for the taxable year shall include on such return the aggregate amount contributed by employers to the Archer MSAs of such individual or such individual’s spouse for such taxable year.
(5)
MSA contributions not part of COBRA coverage
Paragraph (1) shall not apply for purposes of section
4980B.
(6)
Definitions
For purposes of this subsection, the terms “eligible individual” and “Archer MSA” have the respective meanings given to such terms by section
220.
(7)
Cross reference
For penalty on failure by employer to make comparable contributions to the Archer MSAs of comparable employees, see section
4980E.
(c)
Inclusion of long-term care benefits provided through flexible spending arrangements
(2)
Flexible spending arrangement
For purposes of this subsection, a flexible spending arrangement is a benefit program which provides employees with coverage under which—
(A)
specified incurred expenses may be reimbursed (subject to reimbursement maximums and other reasonable conditions), and
(B)
the maximum amount of reimbursement which is reasonably available to a participant for such coverage is less than 500 percent of the value of such coverage.
In the case of an insured plan, the maximum amount reasonably available shall be determined on the basis of the underlying coverage.
(d)
Contributions to health savings accounts
(1)
In general
In the case of an employee who is an eligible individual (as defined in section
223
(c)(1)), amounts contributed by such employee’s employer to any health savings account (as defined in section 223(d)) of such employee shall be treated as employer-provided coverage for medical expenses under an accident or health plan to the extent such amounts do not exceed the limitation under section
223
(b) (determined without regard to this subsection) which is applicable to such employee for such taxable year.
(2)
Special rules
Rules similar to the rules of paragraphs (2), (3), (4), and (5) of subsection (b) shall apply for purposes of this subsection.
(3)
Cross reference
For penalty on failure by employer to make comparable contributions to the health savings accounts of comparable employees, see section
4980G.
(e)
FSA and HRA terminations to fund HSAs
(1)
In general
A plan shall not fail to be treated as a health flexible spending arrangement or health reimbursement arrangement under this section or section
105 merely because such plan provides for a qualified HSA distribution.
(2)
Qualified HSA distribution
The term “qualified HSA distribution” means a distribution from a health flexible spending arrangement or health reimbursement arrangement to the extent that such distribution—
(A)
does not exceed the lesser of the balance in such arrangement on September 21, 2006, or as of the date of such distribution, and
(B)
is contributed by the employer directly to the health savings account of the employee before January 1, 2012.
Such term shall not include more than 1 distribution with respect to any arrangement.
(3)
Additional tax for failure to maintain high deductible health plan coverage
(A)
In general
If, at any time during the testing period, the employee is not an eligible individual, then the amount of the qualified HSA distribution—
(4)
Definitions and special rules
For purposes of this subsection—
(A)
Testing period
The term “testing period” means the period beginning with the month in which the qualified HSA distribution is contributed to the health savings account and ending on the last day of the 12th month following such month.
(5)
Tax treatment relating to distributions
For purposes of this title—
(A)
In general
A qualified HSA distribution shall be treated as a payment described in subsection (d).
(B)
Comparability excise tax
(i)
In general
Except as provided in clause (ii), section
4980G shall not apply to qualified HSA distributions.
(ii)
Failure to offer to all employees
In the case of a qualified HSA distribution to any employee, the failure to offer such distribution to any eligible individual covered under a high deductible health plan of the employer shall (notwithstanding section
4980G
(d)) be treated for purposes of section
4980G as a failure to meet the requirements of section
4980G
(b).
(f)
Reimbursements for medicine restricted to prescribed drugs and insulin
For purposes of this section and section
105, reimbursement for expenses incurred for a medicine or a drug shall be treated as a reimbursement for medical expenses only if such medicine or drug is a prescribed drug (determined without regard to whether such drug is available without a prescription) or is insulin.