Senate Bill No. 55

Introduced By benedict

A Bill for an Act entitled: "An Act amending the Montana Medical Care Savings Account Act of 1995 to allow account holders to administer their own account; providing definitions and exceptions; amending sections

15-61-102, 15-61-203, and 15-61-204, MCA; and providing an immediate effective date and a retroactive applicability date."

Be it enacted by the Legislature of the State of Montana:

Section 

•   Section 15-61-102, MCA, is amended to read:

"15-61-102.   Definitions. As used in this chapter, unless it clearly appears otherwise, the following definitions apply:

(1)  "Account administrator" means:

(a)  a state or federally chartered bank, savings and loan association, credit union, or trust company;

(b)  a health care insurer as defined in 33-22-125;

(c)  a certified public accountant licensed to practice in this state pursuant to Title 37, chapter 50; or

(d)  an employer if the employer has a self-insured health plan under ERISA; or

(e) the account holder of or an employee for WHOSE BENEFIT the account in question. IS ESTABLISHED;

(F) A BROKER, INSURANCE PRODUCER, OR INVESTMENT ADVISOR REGULATED BY THE COMMISSIONER OF INSURANCE;

(G) AN ATTORNEY LICENSED TO PRACTICE LAW IN THIS STATE;

(H) A LICENSED PUBLIC ACCOUNTANT OR A PERSON WHO IS AN ENROLLED AGENT ALLOWED TO PRACTICE BEFORE THE UNITED STATES INTERNAL REVENUE SERVICE.

(2)  "Account holder" means an individual who is a

resident of this state and who establishes a medical care savings account or for whose benefit the account is established.

(3)  "Dependent" means the spouse of the employee or account holder or a child of the employee or account holder if the child is:

(a)  under 23 years of age and enrolled as a full-time student at an accredited college or university or is under 19 years of age;

(b)  legally entitled to the provision of proper or necessary subsistence, education, medical care, or other care necessary for the health, guidance, or well-being of the child and is 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)  "Eligible medical expense" means an expense paid by the employee or account holder for medical care defined by 26 U.S.C. 213(d) for the employee or account holder or a dependent of the employee or account holder.

(5)  "Employee" means an employed individual for whose benefit or for the benefit of whose dependents a medical care savings account is established. The term includes a self-employed individual.

(6)  "ERISA" means the Employee Retirement Income Security Act of 1974, Public Law 93-406.

(7)  "Medical care savings account" or "account" means an account established with an account administrator in this state pursuant to 15-61-201."





Section 

•   Section 15-61-203, MCA, is amended to read:

"15-61-203.   Withdrawal of funds from account for purposes other than medical expenses and long-term care. (1) An employee or account holder may withdraw money from the individual's medical care savings account for any purpose other than an eligible medical expense or the long-term care of the employee or account holder or a dependent of the employee or account holder only on the last business day of the account administrator's business year. Money withdrawn from an account pursuant to this subsection must be taxed as ordinary income of the employee or account holder.

(2)  If the employee or account holder withdraws money from the account other than for eligible medical expenses or long-term care or other than on the last business day of the account administrator's business year, the administrator shall withhold from the amount of the withdrawal and, on behalf of the employee or account holder, pay as a penalty to the department of revenue an amount equal to 10% of the amount of the withdrawal. Payments made to the department pursuant to this section must be deposited in the general fund. Money withdrawn from an account pursuant to this subsection must be taxed as ordinary income of the employee or account holder.

(3) For the purposes of this section, "last business day of the account administrator's business year", as applied to an account administrator who is also the account holder or an employee, means the last weekday in December."





Section 

•   Section 15-61-204, MCA, is amended to read:

"15-61-204.   Administration of account. (1) An account administrator shall administer the medical care savings account from which the payment of claims is made and has a fiduciary duty to the person for whose benefit the account is administered. EXCEPT FOR REPORTING AND REMITTING OF PENALTIES TO THE DEPARTMENT OF REVENUE, A FINANCIAL INSTITUTION SHALL ADMINISTER A MEDICAL SAVINGS ACCOUNT AS A REGULAR DEPOSIT. A FINANCIAL INSTITUTION IS NOT RESPONSIBLE FOR THE USE OR APPLICATION OF FUNDS.

(2)  Not more than 30 days after an account administrator begins to administer an account, the account administrator shall notify in writing each employee and account holder on whose behalf the account administrator administers an account of the date of the last business day of the account administrator's business year.

(3)  An account administrator may use funds held in a medical care savings account only for the purpose of paying the eligible medical expenses of the employee or account holder or the employee's or account holder's dependents, purchasing long-term care insurance or a long-term care annuity for the long-term care of the employee or account holder or a dependent of the employee or account holder, or paying the expenses of administering the account. Funds held in a medical care savings account may not be used to pay medical expenses or for a long-term care insurance policy or annuity of the employee or account holder or a dependent of the employee or account holder that is otherwise reimbursable, including medical expenses payable pursuant to an automobile insurance policy, workers' compensation insurance policy or self-insured plan, or another health coverage policy, certificate, or contract.

(4)  The employee or account holder may submit documentation of eligible medical expenses paid by the employee or account holder or a dependent of the employee or account holder in the tax year to the account administrator, and the account administrator shall reimburse the employee or account holder from the employee's or account holder's account for eligible medical expenses. THE BURDEN OF PROVING THAT A WITHDRAWAL FROM A MEDICAL SAVINGS ACCOUNT WAS MADE FOR AN ELIGIBLE MEDICAL EXPENSE IS UPON THE ACCOUNT HOLDER AND NOT UPON THE ACCOUNT ADMINISTRATOR OR THE EMPLOYER OF THE ACCOUNT HOLDER.

(5)  The employee or account holder may submit documentation of the purchase of long-term care insurance or a long-term care annuity for the employee or account holder or a dependent of the employee or account holder to the account administrator, and the account administrator shall reimburse the employee or account holder from the employee's or account holder's account for payments made for the purchase of the insurance or annuity. The account administrator may also provide for a system of automatic withdrawals from the account for the payment of long-term care insurance premiums or an annuity.

(6)  If an employer makes contributions to a medical care savings account on a periodic installment basis, the employer may advance to an employee, interest free, an amount necessary to cover medical expenses incurred that exceeds the amount in the employee's medical care savings account at the time that the expense is incurred if the employee agrees to repay the advance from future installments or when the employee ceases employment with the employer.

(7) In the case of an account administrator who is also the account holder or an employee:

(a) notice by the account administrator to the account holder pursuant to subsection (2) is not required;

(b) the account administrator may not use funds held in an account to pay expenses of administering the account; and

(c) documentation of eligible medical expenses must be maintained but is not required to be submitted to the account administrator;

(D) CONTRIBUTIONS TO A MEDICAL SAVINGS ACCOUNT MUST BE ESTABLISHED IN A SEPARATE ACCOUNT AND BE SEGREGATED FROM OTHER FUNDS;

(E) THE ACCOUNT HOLDER IS SUBJECT TO THE SAME YEAREND REPORTING REQUIREMENTS AS ALL OTHER ACCOUNT ADMINISTRATORS; AND

(F) THE ACCOUNT HOLDER IS REQUIRED TO FORWARD THE 10% PENALTY ON FUNDS WITHDRAWN FOR NONELIGIBLE MEDICAL EXPENSES TO THE STATE."





NEW SECTION. Section 

•   Retroactive applicability. [This act] applies retroactively, within the meaning of 1-2-109, to medical savings accounts created prior to [the effective date of this act].




NEW SECTION. Section 

•   Effective date. [This act] is effective on passage and approval.

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