,,ii  #aacth ,,congress  #ast ,session  
,s4 #iff  ,,in ,,the ,,senate ,,of ,,the
 ,,united ,,states  ,may #ae1 #bjac ,mr4
 ,cardin 7for himself and ,mr4 ,enzi7   
introduced the following bill2 which was
 read twice and referred to the         
,committee on ,finance  ,a ,,bill  ,to  
amend the ,internal ,revenue ,code of   
#aihf to increase participation in      
medical flexible spending arrangements4 
#a4 ,short title ,this ,act may be cited
 as the ,medical ,,fsa ,improvement ,act
 of #bjac4  #b4 ,addition of taxable    
distributions  7a7 ,treatment of        
,amounts ,expended for ,medical ,care   
,section #aje of the ,internal ,revenue 
,code of #aihf is amended by inserting  
at the end the following new subsection3
  7k7 ,amounts ,paid ,under ,medical    
,flexible ,spending ,arrangements  7#a7 
,application of subsection 7b7 and      
section #ajf ,for purposes of subsection
 7b7 and section #ajf1 a plan shall not 
fail to be treated as a flexible        
spending arrangement solely because such

 plan1 in addition to reimbursing       
expenses incurred for medical care 7as  
defined in subsection 7b77 during the   
plan year1 distributes to the employee  
all or a portion of the employee's      
balance for the plan year4  7#b7        
,limitation ,paragraph 7#a7 shall apply 
only in the case that the balance under 
such arrangement for a plan year is     
distributed after the close of the plan 
year to which the balance relates and   
not later than the end of the #gth month
 following the close of such plan year4 
7#c7 ,tax treatment of distribution ,any
 distribution to which paragraph 7#a7   
applies shall be treated as remuneration
 of the employee for employment for the 
taxable year in which it is distributed4
  7#d7 ,flexible spending arrangement   
,the term flexible spending arrangement 
means a benefit program within the      
meaning of section #ajf7;c77#b7         
7relating to long-term care benefits74  
4  7b7 ,additional ,deferred            
,compensation ,exception ,paragraph 7#b7

 of section #abe7;d7 of the ,internal   
,revenue ,code of #aihf is amended by   
inserting at the end the following new  
subparagraph3  7,e7 ,exception for      
certain flexible spending arrangements  
,amounts distributed to the covered     
employee from a flexible spending       
arrangement 7within the meaning of      
section #ajf7;c77#b77 in accordance with
 the limitations under section #aje7k7  
shall not be treated as deferred        
compensation for purposes of            
subparagraph 7,a74  4  7c7 ,conforming  
,amendment ,section #dji;,a7d77#a7 of   
such ,code is amended by striking and at
 the end of subparagraph 7,a71 by       
striking the period at the end of       
subparagraph 7,b7 and inserting 1 and1  
and by adding at the end the following3 
7,c7 a flexible spending arrangement    
which is subject to section #aje7k74  4 
7d7 ,effective ,date ,the amendments    
made by this section shall apply to plan
 years beginning after ,december #ca1   
#bjac4  7e7 ,transition ,rules ,in the  

case of plan years that begin before the
 effective date of this ,act1 in        
implementing the amendments made by this
 section a flexible spending arrangement
 may allow an individual to make a new  
election or to revise an existing       
election under such arrangement so long 
as such new or revised election is made 
within #ij days after the effective date
 of this ,act4