Current Status Bill Number:
283Type of Legislation: General Bill GBIntroducing Body: SenateIntroduced Date: 19950110Primary Sponsor: MitchellAll Sponsors: Mitchell, WashingtonDrafted Document Number: RES9504.TWMResiding Body: SenateCurrent Committee: Finance Committee 06 SFSubject: Medical Savings Account
Body Date Action Description Com Leg Involved ______ ________ _______________________________________ _______ ____________ Senate 19950309 Recommitted to Committee 06 SF Senate 19950309 Recalled from Committee 02 SBI Senate 19950110 Introduced, read first time, 02 SBI referred to Committee Senate 19941114 Prefiled, referred to Committee 02 SBIView additional legislative information at the LPITS web site.
TO AMEND TITLE 44, CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING CHAPTER 120 SO AS TO ENACT THE "MEDICAL SAVINGS ACCOUNT ACT".
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Title 44 of the 1976 Code is amended by adding:
Section 44-120-10. This chapter may be cited as the `Medical Savings Account Act'.
Section 44-120-20. As used in this chapter:
(1) `Account administrator' means:
(a) a national or state chartered bank, a federal or state chartered savings and loan association, a federal or state chartered savings bank, or a federal or state chartered credit union;
(b) a trust company authorized to act as a fiduciary;
(c) an insurance company authorized to do business in this State;
(d) a broker-dealer, commodity issuer, investment advisor, or agent registered pursuant to the Uniform Securities Act;
(e) a third party administrator with a current certificate of authority;
(f) a certified public accountant licensed to practice in this State;
(g) an attorney licensed to practice in this State;
(h) an employer that participates in the medical care savings account program.
(2) `Deductible' means the total deductible for an employee and all the dependents of that employee for a calendar year.
(3) `Dependent' means the spouse of the employee or a child of the employee if the child is:
(a) under nineteen years of age or under twenty-three years of age and enrolled as a full-time student at an accredited college or university;
(b) legally entitled to the provision of proper or necessary subsistence, education, medical care, or other care necessary for the child's health, guidance, or well-being and not otherwise emancipated, self-supporting, married, or a member of the Armed Forces of the United States; or
(c) mentally or physically incapacitated to the extent that the child is not self-sufficient.
(4) `Domicile' means an individual's true, fixed, and permanent home and principal establishment, to which, whenever absent, the individual intends to return. Domicile continues until another permanent home or principal establishment is established.
(5) `Eligible medical expense' means an expense paid by the taxpayer for medical care described in Section 213(d) of the Internal Revenue Code.
(6) `Employee' means the individual for whose benefit or for the benefit of whose dependents a medical care savings account is established.
(7) `ERISA' means the Employer Retirement Income Security Act of 1974.
(8) `Higher deductible' means a deductible of not less than one thousand dollars and not more than three thousand dollars for 1996. This minimum and maximum must be adjusted annually by the State Treasurer to reflect increases in the consumer price index.
(9) `Medical care savings account' or `account' means an account established in this State pursuant to a medical care savings account program to pay the eligible medical expenses of an employee and the employee's dependents.
(10) `Medical care savings account program' or `program' means a program that includes:
(a) the purchase by an employer of a qualified higher deductible health plan for the benefit of an employee and the employee's dependents.
(b) the contribution on behalf of an employee into a medical care savings account by the employee's employer of all or part of the premium differential realized by the employer based on the purchase of a qualified higher deductible health plan for the benefit of the employee. An employer that did not previously provide a health coverage policy, certificate, or contract for employees may contribute all or part of the deductible of the plan purchased pursuant to subitem (a). A contribution under this subitem may not exceed three thousand dollars for 1996. This maximum must be adjusted annually by the State Treasurer to reflect increases in the consumer price index.
(c) an account administrator to administer the medical care savings account from which payment of claims is made. Not more than thirty days after an account administrator begins to administer an account, the administrator shall notify in writing each employee on whose behalf the administrator administers an account of the date of the last business day of the administrator's business year.
(11) `Qualified higher deductible health plan' means a health coverage policy, certificate, or contract that provides for payments for covered benefits that exceed the higher deductible and that is purchased by an employer for the benefit of an employee for whom the employer makes deposits into a medical care savings account.
Section 44-120-30. (A) For tax years beginning after 1995, an employer, except as otherwise provided by statute, contract, or a collective bargaining agreement, may offer a medical care savings account program to the employer's employees.
(B) An employer that offers a medical care savings account program shall inform before making any contributions all employees in writing of the federal tax status of contributions made pursuant to this act.
(C) Except as provided in Section 44-120-50, principal contributed to and interest earned on a medical care savings account and money reimbursed to an employee for eligible medical expenses are exempt from taxation under Title 12.
Section 44-120-40. (A) The account administrator shall utilize the funds held in a medical care savings account solely for the purpose of paying the medical expenses of the employee or his or her dependents or to purchase a health coverage policy, certification, or contract if the employee does not otherwise have health insurance coverage. Funds held in a medical care savings account shall not be used to cover medical expenses of the employee or his or her dependents that are otherwise covered including but not limited to medical expenses covered pursuant to an automobile insurance policy, workers' compensation insurance policy or self-insured plan, or another health coverage policy, certificate, or contract.
(B) The employee may submit documentation of medical expenses paid by the employee in the tax year to the account administrator and the account administrator shall reimburse the employee from the employer's account for eligible medical expenses.
(C) If an employer makes contributions to a medical care savings account program on a periodic installment basis, the employer may advance to an employee, interest free, an amount necessary to cover medical expenses incurred that exceed the amount in the employee's medical care savings account when the expense is incurred if the employee agrees to repay the advance from future installments or when he or she ceases to be an employee of the employer.
Section 44-120-50. (A) Notwithstanding subsection (B) and subject to subsection (C), an employee may withdraw money from his or her medical care savings account for any purpose other than a purpose described in Section 44-120-40(A) only on the last business day of the account administrator's business year. Money withdrawn pursuant to this subsection is income for the purposes of the income taxation.
(B) Subject to subsection (C), if the employee withdraws money for any purpose other than a purpose described in Section 44-120-40(A) at any other time all of the following apply:
(1) The amount of the withdrawal is income for the purposes of Title 12.
(2) The administrator shall withhold and on behalf of the employee shall pay a penalty to the State Treasurer equal to ten percent of the amount of the withdrawal.
(3) Interest earned on the account during the tax year in which a withdrawal under this subsection is made is income for purposes of Title 12.
(C) The amount of a disbursement of any assets of a medical care savings account pursuant to a filing for protection under Title 11 of the United States Code, 11 U.S.C. 101 to 1330 by an employee or person for whose benefit the account was established is not considered a withdrawal for purposes of this section. The amount of a disbursement is not subject to taxation under Title 12.
(D) Upon the death of the employee, the account administrator shall distribute the principal and accumulated interest of the medical care savings account to the estate of the employee.
(E) If an employee is no longer employed by an employer that participates in a medical care savings account program and the employee, not more than sixty days after his or her final day of employment, transfers the account to a new account administrator or requests in writing to the former employer's account administrator that the account remain with that administrator and that account administrator agrees to retain the account, the money in the medical care savings account may be utilized for the benefit of the employee or his or her dependents subject to this act thirty days after the expiration of the sixty days, if an account administrator has not accepted the former employee's account, the employer shall mail a check to the former employee at the employee's last known address equal to the amount in the account on that day and that amount is subject to taxation pursuant to Section 44-120-50(A) but is not subject to the penalty under Section 44-120-50(B)(2). If an employee becomes employed with a different employer that participates in a medical care savings account program, the employee may transfer his or her medical care savings account to that new employer's account administrator."
SECTION 2. This act takes effect upon approval by the Governor and applies to tax years beginning after 1995.