To amend the Internal Revenue Code of 1986 to allow distributions from a health flexible spending arrangement or health reimbursement arrangement directly to a health savings account in connection with establishing coverage under a high deductible health plan.

This bill amends the Internal Revenue Code to allow employees to transfer unused funds from health flexible spending arrangements (FSAs) or health reimbursement arrangements (HRAs) directly into health savings accounts (HSAs) when they establish coverage under a high-deductible health plan. The transfer is limited to the amount of unused balances accumulated during the portion of the plan year before the transfer, and the FSA or HRA must be modified to comply with HSA-compatibility rules for the remainder of that plan year. The bill requires qualified HSA distributions to be reported on employee W-2 forms.

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