Print Friendly SENATE BILL NO. 1055 – Medical Savings Acct, info reported
SENATE BILL NO. 1055
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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
|||| LEGISLATURE OF THE STATE OF IDAHO ||||
Fifty-fifth Legislature First Regular Session - 1999
IN THE SENATE
SENATE BILL NO. 1055
BY COMMERCE AND HUMAN RESOURCES COMMITTEE
1 AN ACT
2 RELATING TO MEDICAL SAVINGS ACCOUNTS; AMENDING SECTION 63-3022K, IDAHO CODE,
3 TO PROVIDE FOR REPORTING REQUIREMENTS FOR ACCOUNT HOLDERS OF MEDICAL SAV-
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
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-
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
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
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
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.
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
STATEMENT OF PURPOSE/ FISCAL NOTE S1055