I.R.C. § 138(a) Exclusion —
Gross income shall not include any payment to the
Medicare Advantage MSA of an individual by the Secretary of Health and Human Services
under part C of title XVIII of the Social Security
Act.
I.R.C. § 138(b) Medicare Advantage MSA —
For purposes of this section, the term “Medicare Advantage MSA” means an Archer
MSA (as defined in section 220(d))—
I.R.C. § 138(b)(1) —
which is designated as a Medicare Advantage MSA,
I.R.C. § 138(b)(2) —
with respect to which no contribution may be made other than—
I.R.C. § 138(b)(2)(A) —
a contribution made by the Secretary of Health and Human Services pursuant to part
C of title XVIII of the Social Security Act, or
I.R.C. § 138(b)(2)(B) —
a trustee-to-trustee transfer described in subsection (c)(4),
I.R.C. § 138(b)(3) —
the governing instrument of which provides that trustee-to-trustee transfers described
in subsection (c)(4) may be made to and from such account, and
I.R.C. § 138(b)(4) —
which is established in connection with an MSA plan described in section 1859(b)(3) of the Social Security Act.
I.R.C. § 138(c) Special Rules For Distributions
I.R.C. § 138(c)(1) Distributions For Qualified Medical Expenses —
In applying section 220 to a Medicare Advantage MSA—
I.R.C. § 138(c)(1)(A) —
qualified medical expenses shall not include amounts paid for medical care for any
individual other than the account holder, and
I.R.C. § 138(c)(1)(B) —
section 220(d)(2)(C) shall not apply.
I.R.C. § 138(c)(2) Penalty For Distributions From Medicare Advantage MSA Not
Used For Qualified Medical Expenses If Minimum Balance Not Maintained
I.R.C. § 138(c)(2)(A) In General —
The tax imposed by this chapter for any taxable year in which there is a payment
or distribution from a Medicare Advantage MSA which is not used exclusively to
pay the qualified medical expenses of the account holder shall be increased by 50
percent of the excess (if any) of—
I.R.C. § 138(c)(2)(A)(i) —
the amount of such payment or distribution, over
I.R.C. § 138(c)(2)(A)(ii) —
the excess (if any) of—
I.R.C. § 138(c)(2)(A)(ii)(I) —
the fair market value of the assets in such MSA as of the close of the calendar
year preceding the calendar year in which the taxable year begins, over
I.R.C. § 138(c)(2)(A)(ii)(II) —
an amount equal to 60 percent of the deductible under the Medicare Advantage MSA
plan covering the account holder as of January 1 of the calendar year in which the
taxable year begins.
Section 220(f)(4) shall not apply to any payment or distribution from a Medicare Advantage MSA.
I.R.C. § 138(c)(2)(B) Exceptions —
Subparagraph (A) shall not apply if the payment or distribution is made on or after the date the
account holder—
I.R.C. § 138(c)(2)(B)(i) —
becomes disabled within the meaning of section 72(m)(7), or
I.R.C. § 138(c)(2)(B)(ii) —
dies.
I.R.C. § 138(c)(2)(C) Special Rules —
For purposes of subparagraph (A)—
I.R.C. § 138(c)(2)(C)(i) —
all Medicare Advantage MSAs of the account holder shall be treated as 1 account,
I.R.C. § 138(c)(2)(C)(ii) —
all payments and distributions not used exclusively to pay the qualified medical
expenses of the account holder during any taxable year shall be treated as 1 distribution,
and
I.R.C. § 138(c)(2)(C)(iii) —
any distribution of property shall be taken into account at its fair market value
on the date of the distribution.
I.R.C. § 138(c)(3) Withdrawal Of Erroneous Contributions —
Section 220(f)(2)
and paragraph (2) of this subsection shall not apply to any payment or distribution from a Medicare
Advantage MSA to the Secretary of Health and Human Services of an erroneous contribution
to such MSA and of the net income attributable to such contribution.
I.R.C. § 138(c)(4) Trustee-To-Trustee Transfers —
Section 220(f)(2) and
paragraph (2) of this subsection shall not apply to any trustee-to-trustee transfer from a Medicare
Advantage MSA of an account holder to another
Medicare Advantage MSA of such account holder.
I.R.C. § 138(d) Special Rules For Treatment Of Account After Death Of Account Holder —
In applying section 220(f)(8)(A) to an account
which was a Medicare Advantage MSA of a decedent, the rules of section 220(f) shall apply in lieu of the rules of subsection (c) of this section with respect to the spouse as the account holder of such Medicare
Advantage MSA.
I.R.C. § 138(e) Reports —
In the case of a Medicare Advantage MSA, the report
under section 220(h)—
I.R.C. § 138(e)(1) —
shall include the fair market value of the assets in such Medicare Advantage MSA
as of the close of each calendar year, and
I.R.C. § 138(e)(2) —
shall be furnished to the account holder—
I.R.C. § 138(e)(2)(A) —
not later than January 31 of the calendar year following the calendar year to which
such reports relate, and
I.R.C. § 138(e)(2)(B) —
in such manner as the Secretary prescribes in such regulations.
I.R.C. § 138(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 Medicare Advantage MSA, and
Medicare Advantage MSAs shall not be taken into account in determining whether
the numerical limitations under section 220(j) are exceeded.
(Added by Pub. L. 105-33, Sec. 4006, Aug. 5, 1997; amended by Pub. L. 106-554, Sec. 202, Dec. 21, 2000, 114 Stat. 2763; Pub. L. 108-311, title IV, Sec. 408(a)(5), Oct. 4, 2004, 118 Stat. 1166.)
BACKGROUND NOTES
AMENDMENTS
2004 — Sec. 138. Pub. L. 108-311, Sec. 408(a)(5)(A), amended sec. 138 by substituting “Medicare Advantage MSA” for “Medicare+Choice
MSA” each place it appeared.
Sec. 138. Pub. L. 108-311, Sec. 408(a)(5)(B), amended the heading of sec. 138 by substituting “MEDICARE ADVANTAGE MSA” for “MEDICARE+CHOICE
MSA”.
Subsec. (b). Pub. L. 108-311, Sec. 408(a)(5)(C), amended the heading of subsec. (b) by substituting “MEDICARE ADVANTAGE MSA” for
“MEDICARE+CHOICE MSA”.
Subsec. (c)(2). Pub. L. 108-311, Sec. 408(a)(5)(D), amended the heading of par. (2) by substituting “MEDICARE ADVANTAGE MSA” for “MEDICARE+CHOICE
MSA”.
Subsec. (c)(2)(C)(i). Pub. L. 108-311, Sec. 408(a)(5)(E), amended clause (i) by substituting “Medicare Advantage MSAs” for “Medicare+Choice
MSAs”.
Subsec. (f). Pub. L. 108-311, Sec. 408(a)(5)(F), amended subsec. (f) by substituting “Medicare Advantage MSA's” for
“Medicare+Choice MSA's”.
2000 — Subsec. (b). Pub. L. 106-554, Sec. 202, amended subsec. (b) by substituting “an Archer MSA” for “a medical spending account”.
Subsec. (f). Pub. L. 106-554, Sec. 202, amended subsec. (f) by substituting
“Archer MSAs” for “medical spending accounts” in the heading.
EFFECTIVE DATE FOR 2004 AMENDMENTS
Amendments by Pub. L. 108-311, Sec. 408(a)(5), effective on the date of the enactment of this Act [Enacted: Oct. 4, 2004].
EFFECTIVE DATE FOR 2000 AMENDMENTS
Amendments by Pub. L. 106-554, Sec. 202, effective on the date of the enactment of this Act [Enacted: Dec. 21, 2000].
EFFECTIVE DATE
Applicable to taxable years beginning after December 31, 1998.
PRIOR PROVISION
Prior section 138 redesignated by Pub. L. 105-33 as section 139.
