0001| HOUSE BILL 449 | 0002| 42ND LEGISLATURE - STATE OF NEW MEXICO - SECOND SESSION, | 0003| 1996 | 0004| INTRODUCED BY | 0005| LUCIANO "LUCKY" VARELA | 0006| | 0007| | 0008| | 0009| FOR THE REVENUE STABILIZATION AND TAX POLICY COMMITTEE | 0010| | 0011| AN ACT | 0012| RELATING TO MEDICAL CARE SAVINGS ACCOUNTS; CHANGING PROVISIONS | 0013| PERTAINING TO THE INCOME TAX EXEMPTION FOR MEDICAL CARE SAVINGS | 0014| ACCOUNTS; PROVIDING FOR A CONTINGENT REPEAL OF THE INCOME TAX | 0015| EXEMPTION FOR MEDICAL CARE SAVINGS ACCOUNTS; AMENDING, REPEALING | 0016| AND ENACTING SECTIONS OF THE NMSA 1978. | 0017| | 0018| BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO: | 0019| Section 1. Section 7-2-5.6 NMSA 1978 (being Laws 1995, | 0020| Chapter 93, Section 8) is amended to read: | 0021| "7-2-5.6. EXEMPTION--MEDICAL CARE SAVINGS ACCOUNTS.--Except as provided in Section [6 of this act] 59A-23D-6 NMSA | 0022| 1978, employer and employee contributions to medical care | 0023| savings accounts established pursuant to the Medical Care | 0024| Savings Account Act, the interest earned on those accounts and | 0025| money reimbursed to an employee for eligible medical expenses | 0001| from those accounts or money advanced to the employee by the | 0002| employer for eligible medical expenses pursuant to that act are | 0003| exempt from taxation." | 0004| Section 2. Section 59A-23D-2 NMSA 1978 (being Laws 1995, | 0005| Chapter 93, Section 2) is amended to read: | 0006| "59A-23D-2. DEFINITIONS.--As used in the Medical Care | 0007| Savings Account Act: | 0008| A. "account administrator" means any of the | 0009| following that administers medical care savings accounts: | 0010| (1) a national or state chartered bank, savings | 0011| and loan association, savings bank or credit union; | 0012| (2) a trust company authorized to act as a | 0013| fiduciary in this state; | 0014| (3) an insurance company or health maintenance | 0015| organization authorized to do business in this state pursuant to | 0016| the New Mexico Insurance Code; | 0017| (4) an employer that has a self-insured health | 0018| plan under the federal Employee Retirement Income Security Act | 0019| of 1974; | 0020| (5) a broker, agent or investment advisor; | 0021| (6) a person who holds a certificate [or] | 0022| of registration as an insurance administrator or for whom the | 0023| registration has been waived; or | 0024| (7) an employer who participates in the medical | 0025| care savings account program; | 0001| B. "deductible" means the total covered medical | 0002| expense [the] an employee or his dependents must pay prior | 0003| to any payment by [the] a qualified higher deductible health | 0004| plan for a calendar year; | 0005| C. "department" means the department of insurance; | 0006| D. "dependent" means: | 0007| (1) a spouse; | 0008| (2) an unmarried or unemancipated child of the | 0009| employee who is a minor and who is: | 0010| (a) a natural child; | 0011| (b) a legally adopted child; | 0012| (c) a stepchild living in the same | 0013| household who is primarily dependent on the employee for | 0014| maintenance and support; | 0015| (d) a child for whom the employee is the | 0016| legal guardian and who is primarily dependent on the employee | 0017| for maintenance and support, as long as evidence of the | 0018| guardianship is evidenced in a court order or decree; or | 0019| (e) a foster child living in the same | 0020| household, if the child is not otherwise provided with health | 0021| care or health insurance coverage; | 0022| (3) an unmarried child described in | 0023| Subparagraphs (a) through (e) of Paragraph (2) of this | 0024| subsection who is between the ages of eighteen and twenty-five | 0025| and is a full-time student at an accredited educational | 0001| institution; provided, "full-time student" means a student is | 0002| enrolled in and taking twelve or more semester hours or | 0003| equivalent contact hours in secondary, undergraduate or | 0004| vocational school or nine or more semester hours or equivalent | 0005| contact hours in graduate school; or | 0006| (4) a child described in Subparagraphs (a) | 0007| through (e) of Paragraph (2) of this subsection who is over the | 0008| age of eighteen, who is incapable of self-sustaining employment | 0009| by reason of mental retardation or physical handicap and who is | 0010| [chiefly] primarily dependent on the employee for support | 0011| and maintenance; | 0012| E. "eligible medical expense" means an expense paid | 0013| by the employee for medical care described in Section 213(d) of | 0014| the Internal Revenue Code of 1986 that is deductible for federal | 0015| income tax purposes; | 0016| F. "employee" includes a self-employed individual; | 0017| G. "employer" includes a self-employed individual; | 0018| H. "employer contributions" means the sum of cash | 0019| and securities contributed by an employer to a medical care | 0020| savings account plus any medical care savings account advances | 0021| made by an employer to an employee; | 0022| [H.] I. "medical care savings account" or | 0023| "savings account" means an account established by an employer to | 0024| pay the eligible medical expenses of an employee and his | 0025| dependents; | 0001| [I.] J. "program" means the medical care savings | 0002| account program established by an employer for his employees; | 0003| and | 0004| [J.] K. "qualified higher deductible health | 0005| plan" means a health coverage policy, certificate or contract | 0006| that provides for payments for covered health care benefits that | 0007| exceed the policy, certificate or contract deductible and that | 0008| is purchased by an employer for the benefit of an employee." | 0009| Section 3. Section 59A-23D-4 NMSA 1978 (being Laws 1995, | 0010| Chapter 93, Section 4) is amended to read: | 0011| "59A-23D-4. MEDICAL CARE SAVINGS ACCOUNT PROGRAM.-- | 0012| A. Except as otherwise provided by statute, contract | 0013| or collective bargaining agreement, an employer may establish a | 0014| medical care savings account program for his employees. | 0015| B. In establishing the program, the employer shall: | 0016| (1) provide a qualified higher deductible | 0017| health plan for the benefit of his employees; | 0018| (2) contribute to medical care savings accounts | 0019| for the employees; and | 0020| (3) appoint an account administrator to | 0021| administer the savings accounts. | 0022| [C. Principal contributed to and interest earned on | 0023| a medical care savings account and money reimbursed from the | 0024| savings account to an employee for eligible medical expenses are | 0025| exempt from taxation under the Income Tax Act. For the purposes | 0001| of this subsection, "reimbursement" includes advances paid to | 0002| the employee by the employer for eligible medical expenses as | 0003| provided in Subsection D of Section 5 of the Medical Care | 0004| Savings Account Act. | 0005| D.] C. Before establishing a program, the | 0006| employer shall notify all employees in writing of the federal | 0007| tax status of the program and how federal income taxation | 0008| affects New Mexico income taxes. | 0009| [E.] D. Any compensation required by the account | 0010| administrator to administer the program shall be paid by the | 0011| employer, and the employer shall not require the employee to | 0012| contribute to such compensation while the employee participates | 0013| in the program. If the employee ceases to participate in the | 0014| program, he shall be responsible for costs associated with his | 0015| account. | 0016| [F.] E. Nothing in the Medical Care Savings | 0017| Account Act prohibits the employer from requiring the employee | 0018| to contribute to the qualified higher deductible health plan or | 0019| the medical care savings account. | 0020| [G.] F. Nothing in the Medical Care Savings | 0021| Account Act requires an employee to participate in a program. | 0022| The employer shall offer the program to all employees on a | 0023| nondiscriminatory basis." | 0024| Section 4. Section 59A-23D-5 NMSA 1978 (being Laws 1995, | 0025| Chapter 93, Section 5) is amended to read: | 0001| "59A-23D-5. ACCOUNT ADMINISTRATOR--EMPLOYER AND EMPLOYEE | 0002| RESPONSIBILITIES.-- | 0003| A. [The] An employer, in conjunction with | 0004| [the] an account administrator, shall provide a current | 0005| written statement to employees that details how money in their | 0006| medical care savings accounts is or will be invested and the | 0007| rate of return employees may reasonably anticipate on the | 0008| investment of the savings accounts. The account administrator | 0009| shall file the statement with the department. | 0010| B. Except as provided in Section [6 of this act] | 0011| 59A-23D-6 NMSA 1978, money in [the] a medical care savings | 0012| account shall be used solely for the purpose of paying the | 0013| eligible medical expenses of [the] an employee and his | 0014| dependents. | 0015| C. The account administrator shall reimburse the | 0016| employee from the employee's medical care savings account for | 0017| eligible medical expenses. When seeking reimbursement, the | 0018| employee shall submit documentation of eligible medical expenses | 0019| paid by the employee. | 0020| D. If an employer makes contributions to a program | 0021| on a periodic installment basis, the employer may advance to an | 0022| employee, interest free, an amount necessary to cover eligible | 0023| medical expenses incurred that exceed the amount in the | 0024| employee's savings account if the employee agrees to repay the | 0025| advance from future installments or when he ceases to be an | 0001| employee of the employer or a participant in the program. | 0002| [Such advances shall be exempt from taxation under the Income | 0003| Tax Act.]" | 0004| Section 5. Section 59A-23D-6 NMSA 1978 (being Laws | 0005| 1995, Chapter 93, Section 6) is amended to read: | 0006| "59A-23D-6. WITHDRAWALS.-- | 0007| [A. An employee may withdraw money without penalty | 0008| from his medical care savings account for a purpose other than | 0009| reimbursement of eligible medical expenses when he reaches the | 0010| age of fifty-nine and one-half. | 0011| B. Except as provided in Subsection A of this | 0012| section] | 0013| A. If an employee withdraws money from the | 0014| employee's medical care savings account on the last business day | 0015| of the account administrator's business year for a purpose [not | 0016| set forth in Section 4 of the Medical Care Savings Account Act] | 0017| other than payment of eligible medical expenses, the money | 0018| withdrawn shall be considered income to the individual, subject | 0019| to taxation. The withdrawal does not subject the employee to a | 0020| penalty or make interest earned on the account during the tax | 0021| year taxable as income to the employee. | 0022| [C. Except as provided in Subsection A of this | 0023| section] | 0024| B. If an employee withdraws money from the | 0025| employee's medical care savings account for a purpose [not set | 0001| forth in Section 4 of the Medical Care Savings Account Act] | 0002| other than payment of eligible medical expenses at any time | 0003| other than the last business day of the account administrator's | 0004| business year: | 0005| (1) the amount of the withdrawal shall be | 0006| considered income to the [individual] employee and subject | 0007| to taxation; | 0008| (2) the administrator shall withdraw and, on | 0009| behalf of the employee, pay a penalty equal to ten percent of | 0010| the amount of the withdrawal; and | 0011| (3) all interest earned on the balance in the | 0012| savings account during the tax year in which the withdrawal is | 0013| made shall be considered income to the [individual] employee | 0014| and subject to taxation. | 0015| [D.] C. If an individual is no longer employed | 0016| by an employer that participates in a program or if an employee | 0017| chooses to cease participating in the program, the individual or | 0018| employee shall, within sixty days of his final day of employment | 0019| or participation: | 0020| (1) request, in writing, the transfer of his | 0021| savings account to a new account administrator; | 0022| (2) request, in writing, that the former | 0023| employer's account administrator continue to administer the | 0024| savings account, including in the request an agreement to pay | 0025| the cost, if any, of account administration on that savings | 0001| account; or | 0002| (3) withdraw the money from the savings | 0003| account. | 0004| [E.] D. No more than thirty days after the | 0005| expiration of the sixty-day period pursuant to Subsection [D] | 0006| C of this section, the account administrator shall: | 0007| (1) transfer the savings account to a new | 0008| account administrator as requested; | 0009| (2) agree, in writing, to continue to act as | 0010| the account administrator for the savings account; or | 0011| (3) mail a check to the individual or employee | 0012| at his last known address for the amount in the account as of | 0013| the day the check was issued, excluding the applicable | 0014| withdrawal penalty. The penalty shall be paid to the [human | 0015| services] department at the same time as the individual's or | 0016| employee's check is issued. Any penalty received shall be | 0017| deposited into the general fund. | 0018| [F.] E. Upon the death of an employee, the | 0019| account administrator shall distribute the principal and | 0020| accumulated interest of the savings account to the estate of the | 0021| employee." | 0022| Section 6. Section 59A-23D-6 NMSA 1978 (being Laws 1995, | 0023| Chapter 93, Section 6, as amended by Section 5 of this act,) is | 0024| repealed and a new Section 59A-23D-6 NMSA 1978 is enacted to | 0025| read: | 0001| "59A-23D-6. [NEW MATERIAL] WITHDRAWALS.-- | 0002| A. If an employee withdraws money from the | 0003| employee's medical care savings account on the last business day | 0004| of the account administrator's business year for a purpose other | 0005| than payment of eligible medical expenses, the money withdrawn | 0006| shall be considered income to the individual and subject to | 0007| taxation to the extent that the money withdrawn is considered | 0008| income and subject to taxation under the provisions of the | 0009| Internal Revenue Code of 1986, as amended. The withdrawal does | 0010| not subject the employee to a penalty. | 0011| B. If an employee withdraws money from the | 0012| employee's medical care savings account for a purpose other than | 0013| payment of eligible medical expenses at any time other than the | 0014| last business day of the account administrator's business year: | 0015| (1) the amount of the withdrawal shall be | 0016| considered income to the employee and subject to taxation to the | 0017| extent that the money withdrawn is considered income and subject | 0018| to taxation under the provisions of the Internal Revenue Code of | 0019| 1986, as amended; | 0020| (2) the administrator shall withdraw and, on | 0021| behalf of the employee, pay a penalty equal to ten percent of | 0022| the amount of the withdrawal; and | 0023| (3) all interest earned on the balance in the | 0024| savings account during the tax year in which the withdrawal is | 0025| made shall be considered income to the employee and subject to | 0001| taxation to the extent that the money withdrawn is considered | 0002| income and subject to taxation under the provisions of the | 0003| Internal Revenue Code of 1986, as amended. | 0004| C. If an individual is no longer employed by an | 0005| employer that participates in a program or if an employee | 0006| chooses to cease participating in the program, the individual or | 0007| employee, within sixty days of his final day of employment or | 0008| participation, shall: | 0009| (1) request, in writing, the transfer of his | 0010| savings account to a new account administrator; | 0011| (2) request in writing that the former | 0012| employer's account administrator continue to administer the | 0013| savings account, including in the request an agreement to pay | 0014| the cost, if any, of account administration on that savings | 0015| account; or | 0016| (3) withdraw the money from the savings | 0017| account. | 0018| D. No more than thirty days after the expiration of | 0019| the sixty-day period pursuant to Subsection C of this section, | 0020| the account administrator shall: | 0021| (1) transfer the savings account to a new | 0022| account administrator as requested; | 0023| (2) agree in writing to continue to act as the | 0024| account administrator for the savings account; or | 0025| (3) mail a check to the individual or employee | 0001| at his last known address for the amount in the account as of | 0002| the day the check was issued, excluding the applicable | 0003| withdrawal penalty. The penalty shall be paid to the department | 0004| at the same time as the individual's or employee's check is | 0005| issued. Any penalty received shall be deposited into the | 0006| general fund. | 0007| E. Upon the death of an employee, the account | 0008| administrator shall distribute the principal and accumulated | 0009| interest of the savings account to the estate of the employee." | 0010| Section 7. REPEAL.--Section 7-2-5.6 NMSA 1978 (being Laws | 0011| 1995, Chapter 93, Section 8, as amended by Section 1 of this | 0012| act) is repealed. | 0013| Section 8. APPLICABILITY.-- | 0014| A. The provisions of Sections 1, 2 and 5 of this act | 0015| apply to taxable years beginning on or after January 1, 1996. | 0016| B. The provisions of Sections 3, 4, 6 and 7 of this | 0017| act are applicable to taxable years for which the federal act | 0018| described in Section 9 of this act is applicable. | 0019| Section 9. CONTINGENT EFFECTIVE DATE.--The provisions of | 0020| Sections 3, 4, 6 and 7 of this act are contingent upon the | 0021| passage by the United States congress and the approval by the | 0022| president of the United States of an act establishing income tax | 0023| treatment of medical care savings accounts similar to the | 0024| treatment established by Laws 1995, Chapter 93. Sections 3, 4, | 0025| 6 and 7 of this act become effective on the date that the | 0001| federal act is effective for federal purposes. | 0002| - 13 - State of New Mexico | 0003| House of Representatives | 0004| | 0005| FORTY-SECOND LEGISLATURE | 0006| SECOND SESSION, 1996 | 0007| | 0008| | 0009| February 12, 1996 | 0010| | 0011| | 0012| Mr. Speaker: | 0013| | 0014| Your TAXATION AND REVENUE COMMITTEE, to whom has | 0015| been referred | 0016| | 0017| HOUSE BILL 449 | 0018| | 0019| has had it under consideration and reports same with | 0020| recommendation that it DO PASS, amended as follows: | 0021| | 0022| 1. On page 5, between lines 7 and 8, insert the following | 0023| new section: | 0024| | 0025| "Section 3. Section 59A-23D-3 NMSA 1978 (being Laws 1995, | 0001| Chapter 93, Section 3) is amended to read: | 0002| | 0003| "59A-23D-3. ACCOUNT ADMINISTRATOR--REGISTRATION WITH | 0004| DEPARTMENT--DEPARTMENT POWERS AND DUTIES.-- | 0005| | 0006| A. An account administrator shall register with the | 0007| department and pay a registration fee of twenty-five dollars | 0008| ($25.00). The registration fee shall be deposited in the general | 0009| fund. Registration as an account administrator does not affect | 0010| the regulation of a bank, savings and loan association, credit | 0011| union, trust company or insurance company as otherwise provided by | 0012| law. | 0013| | 0014| B. An account administrator shall provide to the | 0015| department annually a list of the employers for whom it provides | 0016| account administration and the number of employees and dependents | 0017| for whom it administers accounts. The information shall be | 0018| provided in the form requested by the department. The department | 0019| may request other information it deems appropriate from the | 0020| account administrator; provided, however, that the department | 0021| shall not request any information about an individual employee or | 0022| dependent unless a complaint has been filed with the department by | 0023| that employee or dependent and the information is required to | 0024| investigate the complaint. | 0025| | 0001| C. The department may receive, investigate and settle | 0002| complaints about medical care savings accounts and account | 0003| administrators or it may refer complaints to other appropriate | 0004| agencies. | 0005| | 0006| D. The department shall adjust annually the maximum | 0007| deductible for qualified higher deductible health plans to reflect | 0008| the last known increase in the medical care component of the | 0009| consumer price index published by the United States department of | 0010| labor. For 1995, the maximum deductible shall not be less than | 0011| one thousand dollars ($1,000) and not more than three thousand | 0012| dollars ($3,000). | 0013| | 0014| E. [The department may adjust annually the maximum | 0015| employer contribution to reflect the last known increase in the | 0016| medical care component of the consumer price index. For 1995, the | 0017| employer's contribution shall not exceed three thousand dollars | 0018| ($3,000).] The annual employer contributions shall not exceed | 0019| two thousand dollars ($2,000). Any annual contributions by an | 0020| employee shall not exceed two thousand dollars ($2,000)."". | 0021| | 0022| 2. Renumber the succeeding sections accordingly. | 0023| | 0024| 3. On page 13, line 12, strike "and 5" and insert in lieu | 0025| thereof ", 3 and 6". | 0001| | 0002| 4. On page 13, line 14, strike "3, 4, 6 and 7" and insert in | 0003| lieu thereof "4, 5, 7 and 8". | 0004| | 0005| 5. On page 13, line 16, strike "9" and insert in lieu | 0006| thereof "10". | 0007| | 0008| 6. On page 13, line 18, strike "3, 4, 6 and 7" and insert in | 0009| lieu thereof "4, 5, 7 and 8". | 0010| | 0011| 7. On page 13, lines 22 and 23, strike "3, 4, 6 and 7" and | 0012| insert in lieu thereof "4, 5, 7 and 8". | 0013| | 0014| Respectfully submitted, | 0015| | 0016| | 0017| | 0018| | 0019| | 0020| Jerry W. Sandel, Chairman | 0021| | 0022| | 0023| Adopted Not Adopted | 0024| | 0025| (Chief Clerk) (Chief Clerk) | 0001| | 0002| Date | 0003| | 0004| The roll call vote was 12 For 0 Against | 0005| Yes: 12 | 0006| Excused: None | 0007| Absent: Ryan | 0008| | 0009| | 0010| .111905.2 | 0011| H0449TR1 | 0012| | 0013| FORTY-SECOND LEGISLATURE HB 449/a | 0014| SECOND SESSION, 1996 | 0015| | 0016| | 0017| February 14, 1996 | 0018| | 0019| Mr. President: | 0020| | 0021| Your WAYS AND MEANS COMMITTEE, to whom has been | 0022| referred | 0023| | 0024| HOUSE BILL 449, as amended | 0025| | 0001| has had it under consideration and reports same with | 0002| recommendation that it DO PASS, amended as follows: | 0003| | 0004| 1. Strike House Taxation and Revenue Committee amendment 1. | 0005| | 0006| 2. On page 5, between lines 7 and 8, insert the following new | 0007| section: | 0008| | 0009| "Section 3. Section 59A-23D-3 NMSA 1978 (being Laws 1995, | 0010| Chapter 93, Section 3) is amended to read: | 0011| | 0012| "59A-23D-3. ACCOUNT ADMINISTRATOR--REGISTRATION WITH | 0013| DEPARTMENT--DEPARTMENT POWERS AND DUTIES.-- | 0014| | 0015| A. An account administrator shall register with the | 0016| department and pay a registration fee of twenty-five dollars | 0017| ($25.00). The registration fee shall be deposited in the general | 0018| fund. Registration as an account administrator does not affect | 0019| the regulation of a bank, savings and loan association, credit | 0020| union, trust company or insurance company as otherwise provided by | 0021| law. | 0022| | 0023| B. An account administrator shall provide to the | 0024| department annually a list of the employers for whom it provides | 0025| account administration and the number of employees and dependents | 0001| for whom it administers accounts. The information shall be | 0002| provided in the form requested by the department. The department | 0003| may request other information it deems appropriate from the | 0004| account administrator; provided, however, that the department | 0005| shall not request any information about an individual employee or | 0006| dependent unless a complaint has been filed with the department by | 0007| that employee or dependent and the information is required to | 0008| investigate the complaint. | 0009| | 0010| C. The department may receive, investigate and settle | 0011| complaints about medical care savings accounts and account | 0012| administrators or it may refer complaints to other appropriate | 0013| agencies. | 0014| | 0015| D. The department shall adjust annually the maximum | 0016| deductible for qualified higher deductible health plans to reflect | 0017| the last known increase in the medical care component of the | 0018| consumer price index published by the United States department of | 0019| labor. For 1995, the maximum deductible shall not be less than | 0020| one thousand dollars ($1,000) and not more than three thousand | 0021| dollars ($3,000). | 0022| | 0023| E. [The department may adjust annually the maximum | 0024| employer contribution to reflect the last known increase in the | 0025| medical care component of the consumer price index. For 1995, the | 0001| employer's contribution shall not exceed three thousand dollars | 0002| ($3,000).] The annual employer contribution per employee shall | 0003| not exceed two thousand five hundred dollars ($2,500). Any annual | 0004| contribution by an employee shall not exceed two thousand five | 0005| hundred dollars ($2,500)."". | 0006| | 0007| 3. Renumber the succeeding sections accordingly. | 0008| | 0009| | 0010| | 0011| Respectfully submitted, | 0012| | 0013| | 0014| | 0015| __________________________________ | 0016| TITO D. CHAVEZ, Chairman | 0017| | 0018| | 0019| | 0020| Adopted_______________________ Not Adopted_______________________ | 0021| (Chief Clerk) (Chief Clerk) | 0022| | 0023| | 0024| Date ________________________ | 0025| | 0001| | 0002| The roll call vote was 7 For 0 Against | 0003| Yes: 7 | 0004| No: 0 | 0005| Excused: Wiener | 0006| Absent: None | 0007| | 0008| | 0009| S0449WM1 .112258.1 | 0010| | 0011| |