
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document affected by Public Law 106-554 Section 1(a)(7)]
[Document affected by Public Law 106-554 Section 1(a)(7)]
[Document affected by Public Law 106-554 Section 1(a)(7)]
[Document affected by Public Law 106-554 Section 1(a)(7)]
[CITE: 26USC106]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
               Subchapter B--Computation of Taxable Income
 
         PART III--ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
 
Sec. 106. Contributions by employer to accident and health plans


(a) General rule

    Except as otherwise provided in this section, gross income of an 
employee does not include employer-provided coverage under an accident 
or health plan.

(b) Contributions to Archer MSAs

                           (1) In general

        In the case of an employee who is an eligible individual, 
    amounts contributed by such employee's employer to any Archer MSA of 
    such employee shall be treated as employer-provided coverage for 
    medical expenses under an accident or health plan to the extent such 
    amounts do not exceed the limitation under section 220(b)(1) 
    (determined without regard to this subsection) which is applicable 
    to such employee for such taxable year.

                     (2) No constructive receipt

        No amount shall be included in the gross income of any employee 
    solely because the employee may choose between the contributions 
    referred to in paragraph (1) and employer contributions to another 
    health plan of the employer.

      (3) Special rule for deduction of employer contributions

        Any employer contribution to an Archer MSA, if otherwise 
    allowable as a deduction under this chapter, shall be allowed only 
    for the taxable year in which paid.

       (4) Employer MSA contributions required to be shown on 
                                   return

        Every individual required to file a return under section 6012 
    for the taxable year shall include on such return the aggregate 
    amount contributed by employers to the Archer MSAs of such 
    individual or such individual's spouse for such taxable year.

          (5) MSA contributions not part of COBRA coverage

        Paragraph (1) shall not apply for purposes of section 4980B.

                           (6) Definitions

        For purposes of this subsection, the terms ``eligible 
    individual'' and ``Archer MSA'' have the respective meanings given 
    to such terms by section 220.

                         (7) Cross reference

            For penalty on failure by employer to make comparable 
        contributions to the Archer MSAs of comparable employees, see 
        section 4980E.

(c) Inclusion of long-term care benefits provided through flexible 
        spending arrangements

                           (1) In general

        Effective on and after January 1, 1997, gross income of an 
    employee shall include employer-provided coverage for qualified 
    long-term care services (as defined in section 7702B(c)) to the 
    extent that such coverage is provided through a flexible spending or 
    similar arrangement.

                  (2) Flexible spending arrangement

        For purposes of this subsection, a flexible spending arrangement 
    is a benefit program which provides employees with coverage under 
    which--
            (A) specified incurred expenses may be reimbursed (subject 
        to reimbursement maximums and other reasonable conditions), and
            (B) the maximum amount of reimbursement which is reasonably 
        available to a participant for such coverage is less than 500 
        percent of the value of such coverage.

    In the case of an insured plan, the maximum amount reasonably 
    available shall be determined on the basis of the underlying 
    coverage.

(Aug. 16, 1954, ch. 736, 68A Stat. 32; Pub. L. 99-272, title X, 
Sec. 10001(b), Apr. 7, 1986, 100 Stat. 223; Pub. L. 99-514, title XI, 
Secs. 1114(b)(1), 1151(j)(2), Oct. 22, 1986, 100 Stat. 2450, 2508; Pub. 
L. 100-647, title I, Sec. 1018(t)(7)(A), title III, Sec. 3011(b)(1), 
Nov. 10, 1988, 102 Stat. 3589, 3624; Pub. L. 101-239, title VII, 
Sec. 7862(c)(1)(A), Dec. 19, 1989, 103 Stat. 2432; Pub. L. 104-191, 
title III, Secs. 301(c)(1), 321(c)(2), Aug. 21, 1996, 110 Stat. 2048, 
2058; Pub. L. 106-554, Sec. 1(a)(7) [title II, Sec. 202(a)(2), 
(b)(2)(A), (6), (10)], Dec. 21, 2000, 114 Stat. 2763, 2763A-628, 2763A-
629.)

                       References in Text

    COBRA, referred to in the heading for subsec. (b)(5), probably means 
the Consolidated Omnibus Budget Reconciliation Act of 1985, Pub. L. 99-
272, Apr. 7, 1986, 100 Stat. 82, as amended. For complete classification 
of this Act to the Code, see Tables.


                               Amendments

    2000--Subsec. (b). Pub. L. 106-554 Sec. 1(a)(7) [title II, 
Sec. 202(b)(6)], substituted ``Archer MSAs'' for ``medical savings 
accounts'' in heading.
    Subsec. (b)(1). Pub. L. 106-554 Sec. 1(a)(7) [title II, 
Sec. 202(a)(2)], substituted ``Archer MSA'' for ``medical savings 
account''.
    Subsec. (b)(3). Pub. L. 106-554 Sec. 1(a)(7) [title II, 
Sec. 202(b)(10)], substituted ``an Archer MSA'' for ``a Archer MSA''.
    Pub. L. 106-554 Sec. 1(a)(7) [title II, Sec. 202(a)(2)], substituted 
``Archer MSA'' for ``medical savings account''.
    Subsec. (b)(4). Pub. L. 106-554, Sec. 1(a)(7) [title II, 
Sec. 202(b)(2)(A)], substituted ``Archer MSAs'' for ``medical savings 
accounts''.
    Subsec. (b)(6). Pub. L. 106-554 Sec. 1(a)(7) [title II, 
Sec. 202(a)(2)], substituted ``Archer MSA'' for ``medical savings 
account''.
    Subsec. (b)(7). Pub. L. 106-554, Sec. 1(a)(7) [title II, 
Sec. 202(b)(2)(A)], substituted ``Archer MSAs'' for ``medical savings 
accounts''.
    1996--Pub. L. 104-191, Sec. 301(c)(1), amended text generally. Prior 
to amendment, text read as follows: ``Gross income of an employee does 
not include employer-provided coverage under an accident or health 
plan.''
    Subsec. (c). Pub. L. 104-191, Sec. 321(c)(2), added subsec. (c).
    1989--Subsec. (b)(2). Pub. L. 101-239 amended subsec. (b)(2) as it 
existed prior to general amendment by Pub. L. 100-647 by striking out 
the last sentence which read as follows: ``Under regulations, rules 
similar to the rules of subsections (a) and (b) of section 52 (relating 
to employers under common control) shall apply for purposes of 
subparagraph (A).'' See Effective Date of 1989 Amendment note below.
    1988--Pub. L. 100-647, Sec. 3011(b)(1), amended section generally, 
substituting a single undesignated par. for former subsec. (a) providing 
that gross income does not include employer-provided coverage under an 
accident or health plan and subsec. (b) providing for an exception for 
highly compensated individuals where a plan fails to provide certain 
continuation coverage.
    Subsec. (b)(1). Pub. L. 100-647, Sec. 1018(t)(7)(A), substituted 
``any employer-provided coverage'' for ``any amount contributed by an 
employer'' and ``under a group'' for ``to a group''.
    1986--Pub. L. 99-272 designated existing provisions as subsec. (a) 
and added subsec. (a) heading and subsec. (b).
    Subsec. (a). Pub. L. 99-514, Sec. 1151(j)(2), amended subsec. (a) 
generally. Prior to amendment, subsec. (a) read as follows: ``Gross 
income does not include contributions by the employer to accident or 
health plans for compensation (through insurance or otherwise) to his 
employees for personal injuries or sickness.''
    Subsec. (b)(1). Pub. L. 99-514, Sec. 1114(b)(1), substituted 
``highly compensated employee (within the meaning of section 414(q))'' 
for ``highly compensated individual (within the meaning of section 
105(h)(5))''.


                    Effective Date of 1996 Amendment

    Amendment by section 301(c)(1) of Pub. L. 104-191 applicable to 
taxable years beginning after Dec. 31, 1996, see section 301(j) of Pub. 
L. 104-191, set out as a note under section 62 of this title.
    Amendment by section 321(c)(2) of Pub. L. 104-191 applicable to 
contracts issued after Dec. 31, 1996, see section 321(f) of Pub. L. 104-
191, set out as an Effective Date note under section 7702B of this 
title.


                    Effective Date of 1989 Amendment

    Section 7862(c)(1)(C) of Pub. L. 101-239 provided that: ``The 
amendments made by this paragraph [amending this section and section 
1161 of Title 29, Labor] shall apply to years beginning after December 
31, 1986.''
    Section 7863 of Pub. L. 101-239 provided that: ``Except as otherwise 
provided in this subpart any amendment made by this subpart [subpart A 
(Secs. 7861-7863) of part V of title VII of Pub. L. 101-239, amending 
this section and sections 162, 411, 417, and 4980B of this title and 
sections 1052 to 1055, 1161, 1162, 1167, 1398, and 1461 of Title 29, 
Labor, enacting provisions set out as notes under this section and 
sections 162, 417, 1167, 4980, and 4980B of this title, and amending 
provisions set out as notes under sections 401 and 411 of this title and 
sections 1001 and 1054 of Title 29], shall take effect as if included in 
the provision of the Reform Act [Pub. L. 99-514] to which such amendment 
relates.''


                    Effective Date of 1988 Amendment

    Amendment by section 1018(t)(7)(A) of Pub. L. 100-647 effective, 
except as otherwise provided, as if included in the provision of the Tax 
Reform Act of 1986, Pub. L. 99-514, to which such amendment relates, see 
section 1019(a) of Pub. L. 100-647, set out as a note under section 1 of 
this title.
    Amendment by section 3011(b)(1) of Pub. L. 100-647 applicable to 
taxable years beginning after Dec. 31, 1988, but not applicable to any 
plan for any plan year to which section 162(k) of this title (as in 
effect on the day before Nov. 10, 1988) did not apply by reason of 
section 10001(e)(2) of Pub. L. 99-272, see section 3011(d) of Pub. L. 
100-647, set out as a note under section 162 of this title.


                    Effective Date of 1986 Amendments

    Amendment by section 1114(b)(1) of Pub. L. 99-514 applicable to 
years beginning after Dec. 31, 1986, see section 1114(c)(1) of Pub. L. 
99-514, set out as a note under section 414 of this title.
    Amendment by section 1151(j)(2) of Pub. L. 99-514 applicable, with 
certain qualifications and exceptions, to years beginning after Dec. 31, 
1988, see section 1151(k) of Pub. L. 99-514, as amended, set out as a 
note under section 79 of this title.
    Section 10001(e) of Pub. L. 99-272 provided that:
    ``(1) General rule.--The amendments made by this section [amending 
this section and section 162 of this title] shall apply to plan years 
beginning on or after July 1, 1986.
    ``(2) Special rule for collective bargaining agreements.--In the 
case of a group health plan maintained pursuant to one or more 
collective bargaining agreements between employee representatives and 
one or more employers ratified before the date of the enactment of this 
Act [Apr. 7, 1986], the amendments made by this section shall not apply 
to plan years beginning before the later of--
        ``(A) the date on which the last of the collective bargaining 
    agreements relating to the plan terminates (determined without 
    regard to any extension thereof agreed to after the date of the 
    enactment of this Act), or
        ``(B) January 1, 1987.
For purposes of subparagraph (A), any plan amendment made pursuant to a 
collective bargaining agreement relating to the plan which amends the 
plan solely to conform to any requirement added by this section shall 
not be treated as a termination of such collective bargaining 
agreement.''


                               Regulations

    Secretary of the Treasury or his delegate to issue before Feb. 1, 
1988, final regulations to carry out amendments made by section 1114 of 
Pub. L. 99-514, see section 1141 of Pub. L. 99-514, set out as a note 
under section 401 of this title.


 Nonenforcement of Amendment Made by Section 1151 of Pub. L. 99-514 for 
                            Fiscal Year 1990

    No monies appropriated by Pub. L. 101-136 to be used to implement or 
enforce section 1151 of Pub. L. 99-514 or the amendments made by such 
section, see section 528 of Pub. L. 101-136, set out as a note under 
section 89 of this title.


           Plan Amendments Not Required Until January 1, 1989

    For provisions directing that if any amendments made by subtitle A 
or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or title XVIII 
[Secs. 1800-1899A] of Pub. L. 99-514 require an amendment to any plan, 
such plan amendment shall not be required to be made before the first 
plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. 
L. 99-514, as amended, set out as a note under section 401 of this 
title.

                  Section Referred to in Other Sections

    This section is referred to in sections 51A, 104, 125, 220, 414, 
3231, 3306, 3401, 4973, 6039D, 7701 of this title; title 29 section 
1167.
