PUBLIC LAW 109–432—DEC. 20, 2006
120 STAT. 2951
reason of the death of the individual or the individual becoming disabled (within the meaning of section 72(m)(7)). ‘‘(iii) TESTING PERIOD.—The term ‘testing period’ means the period beginning with the last month of the taxable year referred to in subparagraph (A) and ending on the last day of the 12th month following such month.’’. (b) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 2006.
26 USC 223 note.
SEC. 306. EXCEPTION TO REQUIREMENT FOR EMPLOYERS TO MAKE COMPARABLE HEALTH SAVINGS ACCOUNT CONTRIBUTIONS.
(a) IN GENERAL.—Section 4980G (relating to failure of employer to make comparable health savings account contributions) is amended by adding at the end the following new subsection: ‘‘(d) EXCEPTION.—For purposes of applying section 4980E to a contribution to a health savings account of an employee who is not a highly compensated employee (as defined in section 414(q)), highly compensated employees shall not be treated as comparable participating employees.’’. (b) EFFECTIVE DATE.—The amendment made by this section shall apply to taxable years beginning after December 31, 2006.
26 USC 4980G.
26 USC 4980G note.
SEC. 307. ONE-TIME DISTRIBUTION FROM INDIVIDUAL RETIREMENT PLANS TO FUND HSAs.
(a) IN GENERAL.—Subsection (d) of section 408 (relating to taxability of beneficiary of employees’ trust) is amended by adding at the end the following new paragraph: ‘‘(9) DISTRIBUTION FOR HEALTH SAVINGS ACCOUNT FUNDING.— ‘‘(A) IN GENERAL.—In the case of an individual who is an eligible individual (as defined in section 223(c)) and who elects the application of this paragraph for a taxable year, gross income of the individual for the taxable year does not include a qualified HSA funding distribution to the extent such distribution is otherwise includible in gross income. ‘‘(B) QUALIFIED HSA FUNDING DISTRIBUTION.—For purposes of this paragraph, the term ‘qualified HSA funding distribution’ means a distribution from an individual retirement plan (other than a plan described in subsection (k) or (p)) of the employee to the extent that such distribution is contributed to the health savings account of the individual in a direct trustee-to-trustee transfer. ‘‘(C) LIMITATIONS.— ‘‘(i) MAXIMUM DOLLAR LIMITATION.—The amount excluded from gross income by subparagraph (A) shall not exceed the excess of— ‘‘(I) the annual limitation under section 223(b) computed on the basis of the type of coverage under the high deductible health plan covering the individual at the time of the qualified HSA funding distribution, over ‘‘(II) in the case of a distribution described in clause (ii)(II), the amount of the earlier qualified HSA funding distribution.
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