The Tax Parity for Health Plan Beneficiaries Act Introduced in House and Senate

August 24, 2011

Representatives Jim McDermott (D-WA), Richard Hanna (R-NY), Earl Blumenauer (D-OR), and Nan Hayworth (R-NY) introduced the Tax Parity for Health Plan Beneficiaries Act (H.R. 2088) in May 2011. A companion bill (S.1171) was introduced in June 2011 by Senators Chuck Schumer (D-NY) and Susan Collins (R-ME) with 13 additional original cosponsors.

This legislation would permit the reimbursement of medical expenses of non-spouse, non-dependent beneficiaries from health reimbursement arrangements (“HRAs”), such as ICMA-RC’s Retirement Health Savings Plan. The Internal Revenue Code currently excludes from income the value of employer-provided benefits received by employees for coverage of a spouse and dependents, but does not extend this treatment to non-spouse, non-dependent beneficiaries.

Provisions of the bill would reverse the Department of the Treasury’s revenue ruling on HRA beneficiaries, directing the Treasury to issue rules that permit employees to elect to have their HRAs reimburse the uninsured medical expenses of non-spouse, non-dependent designated beneficiaries. Comparable treatment would be afforded health flexible spending arrangements (“Health FSAs”), and health savings accounts (“HSAs”).

The bills have the backing of the Business Coalition for Benefits Tax Equity, a coalition of companies and trade associations that support eliminating the federal tax inequities that result when businesses voluntarily provide health care coverage to non-spouse, non-dependent beneficiaries of their employees. ICMA-RC is a member of the coalition.