To amend the Internal Revenue Code of 1986 to establish a pilot program to encourage the use of medical savings accounts by public employees of the State of Minnesota and political jurisdictions thereof.

March 27, 2003

Mr. COLEMAN (for himself and Mr. CHAMBLISS) introduced the following bill; which was read twice and referred to the Committee on Finance

To amend the Internal Revenue Code of 1986 to establish a pilot program to encourage the use of medical savings accounts by public employees of the State of Minnesota and political jurisdictions thereof.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Minnesota MSA Empowerment Act of 2003'.

SEC. 2. DEDUCTION FOR MINNESOTA PUBLIC EMPLOYEE MSA PILOT PROGRAM.

(a) IN GENERAL- Part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to additional itemized deductions) is amended by redesignating section 223 as section 224 and by inserting after section 222 the following new section:

`SEC. 223. MINNESOTA PUBLIC EMPLOYEE MSAS.

`(a) IN GENERAL- In the case of an eligible individual, there shall be allowed as a deduction an amount equal to the amount contributed during the taxable year by such individual to the Minnesota public employee MSA of such individual.

`(b) ELIGIBLE INDIVIDUAL- For purposes of this section, the term `eligible individual' means an individual who--

`(1) is in receipt of retirement benefits for the taxable year from a retirement plan associated with the State of Minnesota or a political subdivision thereof, or

`(2) is an employee of the State of Minnesota or a political subdivision thereof.

`(c) MINNESOTA PUBLIC EMPLOYEE MSA-

`(1) IN GENERAL- The term `Minnesota public employee MSA' means an Archer MSA which is created or organized exclusively for the purpose of paying the qualified medical expenses of the eligible individual and--

`(A) which is designated as a Minnesota public employee MSA, and

`(B) with respect to which no contribution may be made other than a contribution made by the eligible individual or the employer of the eligible individual.

`(2) ARCHER MSA; QUALIFIED MEDICAL EXPENSES- For purposes of this section, the terms `Archer MSA' and `qualified medical expenses' shall have the respective meanings given to such terms by section 220(d).

`(d) SPECIAL RULES- In applying section 220 to a Minnesota public employee MSA--

`(1) subsection (d)(1)(A)(ii) shall not apply, and

`(2) subsection (f)(3) shall be treated as including a reference to this section.

`(e) REPORTS- In the case of a Minnesota public employee MSA, the report under section 220(h)--

`(1) shall include the fair market value of the assets in such Minnesota public employee MSA as of the close of each calendar year, and

`(2) shall be furnished to the account holder--

`(A) not later than January 31 of the calendar year following the calendar year to which such reports relate, and

`(B) in such manner as the Secretary prescribes.

`(f) COORDINATION WITH LIMITATION ON NUMBER OF TAXPAYERS HAVING ARCHER MSAS- Subsection (i) of section 220 shall not apply to an individual with respect to a Minnesota public employee MSA, and Minnesota public employee MSAs shall not be taken into account in determining whether the numerical limitations under section 220(j) are exceeded.'.

(b) DEDUCTION ALLOWED WHETHER OR NOT TAXPAYER ITEMIZES- Subsection (a) of section 62 is amended by inserting after paragraph (18) the following new item:

`(19) MINNESOTA PUBLIC EMPLOYEE MSAS- The deduction allowed by section 223.'.

(c) TAX ON EXCESS CONTRIBUTIONS- Section 4973(d)(1) of such Code (relating to excess contributions to Archer MSAs) is amended by inserting `or 223' after `220'.

(d) CLERICAL AMENDMENT- The table of sections for part VII of subchapter B of chapter 1 of such Code is amended by striking the last item and inserting the following new items:

`Sec. 223. Minnesota public employee MSAs.

`Sec. 224. Cross reference.'.

(e) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2003.

END