Tax Equity for Health Plan Beneficiaries Bill Reintroduced

The Tax Equity for Health Plan Beneficiaries Act of 2009 has been reintroduced in Congress. Supporters are seeking to have the bill language included in a larger health reform bill sometime this year. The bill, first introduced in 2007, would provide tax parity to non-spouse/non-dependent individuals who qualify for and receive employer-provided health plan benefits. Both House and Senate bills, introduced on May 21, 2009, contain a provision that would reverse the Treasury’s Revenue Ruling on Health Reimbursement Arrangements (HRA) beneficiaries.

The HRA provision directs the Treasury to issue rules that allow employees to elect to have their Health Reimbursement Accounts (HRAs) reimburse the uninsured medical expenses of a non-spouse, non-dependent designated beneficiary. Because it would override current Treasury rules concerning non-spouse, non-dependent beneficiaries, the HRA provision would correct beneficiary tax issues that exist in Retirement Health Savings (RHS) programs.

The bill also would permit a Voluntary Employees Beneficiary Association (VEBA) to provide full health benefits to a non-spouse, non-dependent beneficiary without endangering its tax-exempt status.

The House bill is H.R. 2625 and was introduced by Rep. Jim McDermott (D-WA), a senior member of the tax-writing House Ways & Means Committee. The Senate bill is S. 1153 and was introduced by Senator Chuck Schumer (D-NY), a senior member of the tax-writing Senate Finance Committee.

The bills have strong bipartisan support in both houses and has the backing of the Business Coalition for Benefits Tax Equity, a coalition of companies and trade associations that supports eliminating the federal tax inequities that result when businesses voluntarily provide health care coverage to the domestic partners (and other non-spouse, non-dependent beneficiaries) of their employees. ICMA-RC is a member of the coalition.