1999 Legislation
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SENATE BILL NO. 1055 – Medical Savings Acct, info reported


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Daily Data Tracking History

S1055.......................................by COMMERCE AND HUMAN RESOURCES
MEDICAL SAVINGS ACCOUNTS - Amends existing law to require account holders
to report certain information concerning medical savings accounts.

01/27    Senate intro - 1st rdg - to printing
01/28    Rpt prt - to Com/HuRes

Bill Text


 ||||              LEGISLATURE OF THE STATE OF IDAHO             ||||
Fifty-fifth Legislature                 First Regular Session - 1999

                                      IN THE SENATE

                                   SENATE BILL NO. 1055


 1                                        AN ACT
 4        INGS ACCOUNTS.

 5    Be It Enacted by the Legislature of the State of Idaho:

 6        SECTION 1.  That Section 63-3022K, Idaho Code, be, and the same is  hereby
 7    amended to read as follows:

 8        63-3022K.  MEDICAL  SAVINGS  ACCOUNT.  (1) For taxable years commencing on
 9    and after January 1, 1995, annual contributions to a medical  savings  account
10    not  exceeding two thousand dollars ($2,000) for the account holder and inter-
11    est earned on a medical savings account shall be deducted from taxable  income
12    by  the  account  holder,  if  such amount has not been previously deducted or
13    excluded in arriving at taxable income. For married  individuals  the  maximum
14    deduction  shall  be computed separately for each individual. Contributions to
15    the account shall not exceed the amount deductible under this section.
16        (2)  For the purpose of this section, the following terms have the follow-
17    ing meanings unless the context clearly denotes otherwise:
18        (a)  "Account holder" means an individual, in the case of married individ-
19        uals each spouse, including a self-employed person, on  whose  behalf  the
20        medical savings account is established.
21        (b)  "Dependent"  means  a  person for whom a deduction is permitted under
22        section 151(b) or (c) of the Internal Revenue Code if a deduction for  the
23        person is claimed for that person on the account holder's Idaho income tax
24        return.
25        (c)  "Dependent  child"  means a child or grandchild of the account holder
26        who is not a dependent if the account holder actually  pays  the  eligible
27        medical expenses of the child or grandchild and the child or grandchild is
28        any of the following:
29             (i)   Under  nineteen  (19)  years of age, or enrolled as a full-time
30             student at an accredited college or university.
31             (ii)  Legally entitled to the provision of proper or  necessary  sub-
32             sistence,  education, medical care or other care necessary for his or
33             her health, guidance or well-being  and  not  otherwise  emancipated,
34             self-supporting,  married  or  a  member  of  the armed forces of the
35             United States.
36             (iii) Mentally or physically incapacitated to the extent that  he  or
37             she is not self-sufficient.
38        (d)  "Depository" means a state or national bank, savings and loan associ-
39        ation,  credit  union or trust company authorized to act as a fiduciary or
40        an insurance administrator or insurance company authorized to do  business
41        in  this state, a broker or investment advisor regulated by the department
42        of finance, a broker or insurance agent regulated  by  the  department  of
43        insurance or a health maintenance organization, fraternal benefit society,


 1        hospital  and  professional  service  corporation  as  defined  in section
 2        41-3403, Idaho Code, or nonprofit mutual insurer regulated under title 41,
 3        Idaho Code.
 4        (e)  "Eligible medical expense" means an expense paid by the taxpayer  for
 5        medical  care  described  in  section 213(d) of the Internal Revenue Code,
 6        medical insurance premiums, dental and  long-term  care  expenses  of  the
 7        account  holder  and  the spouse, dependents and dependent children of the
 8        account holder.
 9        (f)  "Long-term care expenses" means expenses incurred in providing custo-
10        dial care in a skilled nursing facility or intermediate care  facility  as
11        those  terms are defined in section 39-1301, Idaho Code, and for insurance
12        premiums relating to long-term care insurance under chapter 46, title  41,
13        Idaho Code.
14        (g)  "Medical savings account" means an account established with a deposi-
15        tory  to  pay  the eligible medical expenses of the account holder and the
16        dependents and dependent children of the account holder.  Medical  savings
17        accounts  shall carry the name of the account holder, a designated benefi-
18        ciary or beneficiaries of the account holder and shall  be  designated  by
19        the depository as a "medical savings account."
20        (3)  Upon  agreement  between  an  employer  and employee, an employer may
21    establish and contribute to the employee's medical savings account or contrib-
22    ute to an employee's existing medical  savings  account.  The  total  combined
23    annual  contributions  by  an employer and the account holder shall not exceed
24    two thousand dollars ($2,000) for the account holder.  Employer  contributions
25    to an employee's medical savings account shall be owned by the employee.
26        (4)  Funds  held  in  a  medical  savings  account may be withdrawn by the
27    account holder at any time. Withdrawals for the  purpose  of  paying  eligible
28    medical  expenses shall not be subject to the tax imposed in this chapter. The
29    burden of proving that a withdrawal from a medical savings  account  was  made
30    for  an  eligible  medical expense is upon the account holder and not upon the
31    depository or the employer of the account holder. Other withdrawals  shall  be
32    subject to the following restrictions and penalties:
33        (a)  There  shall be a distribution penalty for withdrawal of funds by the
34        account holder for purposes other than the  payment  of  eligible  medical
35        expenses.  The  penalty  shall be ten percent (10%) of the amount of with-
36        drawal from the account and, in addition, the amount  withdrawn  shall  be
37        subject  to  the tax imposed in this chapter. The direct transfer of funds
38        from a medical savings account to a medical savings account at a different
39        depository shall not be considered a withdrawal for purposes of this  sec-
40        tion.  Charges  relating  to  the  administration  and  maintenance of the
41        account by the depository are not withdrawals for purposes  of  this  sec-
42        tion.
43        (b)  After  an  account  holder  reaches  fifty-nine and one-half (59 1/2)
44        years of age, withdrawals may be made for eligible medical expenses or for
45        any other reason without penalty, but subject to the tax imposed  by  this
46        section.
47        (c)  Upon  the  death of an account holder, the account principal, as well
48        as any interest accumulated thereon, shall be distributed without  penalty
49        to the designated beneficiary or beneficiaries.
50        (d)  Funds  withdrawn  which  are later reimbursed shall be taxable unless
51        redeposited into the account within sixty (60) days of the  reimbursement.
52        Deposits  of reimbursed eligible medical expenses shall not be included in
53        calculating the amount deductible.
54        (e)  Funds deposited in a medical savings account which are  deposited  in
55        error  or  unintentionally and which are withdrawn within thirty (30) days


 1        of being deposited shall be treated as if the amounts had not been  depos-
 2        ited  in  the medical savings account. Funds withdrawn from a medical sav-
 3        ings account which are withdrawn in error or unintentionally and which are
 4        redeposited within thirty (30) days of being withdrawn shall be treated as
 5        if the amounts had not been withdrawn from the medical savings account.
 6        (f)  Funds withdrawn which are, not later than the sixtieth day after the
 7        day of the withdrawal, deposited into another medical savings account  for
 8        the  benefit  of the same account holder are not a withdrawal for purposes
 9        of this section and shall  not  be  included  in  calculating  the  amount
10        deductible.
11        (5)  Reporting  --    Depositories      The account holder
12     shall provide to the state tax commission   with  his  income  tax
13    return    the  following information regarding medical savings accounts:
14    the name of the account holder, the address of the account  holder,  the  tax-
15    payer  identification  number  of the account holder, deposits made during the
16    tax year by the account holder, withdrawals made during the tax  year  by  the
17    account  holder,  interest earned on the proceeds of a medical savings account
18    or other information deemed necessary by the commission.   Reports  shall
19    be  filed annually on or before the last day of February following the year to
20    which the information in the report relates. 
21        (6)  Any medical care savings account established pursuant to chapter  53,
22    title  41, Idaho Code, as enacted by chapter 186, laws of 1994, may be contin-
23    ued pursuant to the provisions of this section and all duties, privileges  and
24    liabilities imposed in this section upon medical care savings accounts and the
25    beneficiaries  of  those accounts shall apply to medical care savings accounts
26    and their beneficiaries established pursuant to chapter 53,  title  41,  Idaho
27    Code,  as enacted by chapter 186, laws of 1994, as if the medical care savings
28    account were a medical savings account established pursuant to this section.

Statement of Purpose / Fiscal Impact

                          STATEMENT OF PURPOSE

                                RS 08707

In the early and mid 1990's, Idaho enacted several laws dealing
with health insurance. One of these laws created the medical ~
savings account program. At the time this program was enacted,
Idaho was trying to coordinate, or "piggy-back" its program with
federal proposals. The federal program was unnecessarily complex
and complicated, so Idaho simplified its medical savings account to
what you see here. The only vestige of the federal requirement is
the need for the financial institution to report to the tax
commission on each medical savings account. Idaho law does not
require this kind of report on any other savings account, or
interest bearing account. Reporting investment income has always
been left to the individual tax payer.

This bill would simply remove the requirement that a financial
institution report to the tax commission on each medical savings
account, and require that the individual make such a report, as has
always been the case for other interest bearing accounts.

                               FISCAL NOTE

As best we can estimate, we see no reason why this minor change in
this law would materially affect the number of medical savings
acounts now in place. Thus, no calculable impact on the general

CONTACT: Sen. John Andreason 332-1000