CHAPTER 11. EMPLOYEE MEDICAL CARE SAVINGS ACCOUNT PLANS
IC 6-8-11
Chapter 11. Employee Medical Care Savings Account Plans
IC 6-8-11-1
"Deductible" defined
Sec. 1. As used in this chapter, "deductible" means the totaldeductible for an employee and all dependents of the employee fora calendar year.
As added by P.L.92-1995, SEC.2 and P.L.93-1995, SEC.2.
IC 6-8-11-2
"Dependent" defined
Sec. 2. As used in this chapter, "dependent" means any of thefollowing:
(1) The spouse of an employee.
(2) An employee's child who is one (1) of the following:
(A) Less than nineteen (19) years of age.
(B) Less than twenty-three (23) years of age and enrolled asa full-time student at an accredited college or university.
(C) Legally entitled to the provision by the employee ofproper or necessary subsistence, education, medical care, orother care necessary for the child's health, guidance, orwell-being, and not otherwise emancipated, self-supporting,married, or a member of the armed forces of the UnitedStates.
(D) Mentally or physically incapacitated to the extent thatthe child is not self-sufficient.
As added by P.L.92-1995, SEC.2 and P.L.93-1995, SEC.2.
IC 6-8-11-3
"Eligible medical expense" defined
Sec. 3. As used in this chapter, "eligible medical expense" meansan expense paid for medical care (as defined in Section 213(d) of theInternal Revenue Code).
As added by P.L.92-1995, SEC.2 and P.L.93-1995, SEC.2.
IC 6-8-11-4
"Employee" defined
Sec. 4. As used in this chapter, "employee" means the individual:
(1) for whose benefit; or
(2) for the benefit of whose dependents;
a medical care savings account is established.
As added by P.L.92-1995, SEC.2 and P.L.93-1995, SEC.2.
IC 6-8-11-5
"Higher deductible" defined
Sec. 5. (a) As used in this chapter, for calendar year 1996, "higherdeductible" means a deductible of:
(1) not less than one thousand dollars ($1,000); and
(2) not more than five thousand dollars ($5,000). (b) For calendar years after 1996, the term means a deductible of:
(1) not less than the figure set forth in subsection (a)(1),adjusted under subsection (c); and
(2) not more than the figure set forth in subsection (a)(2),adjusted under subsection (c).
(c) The adjustments referred to in subsections (b)(1) and (b)(2):
(1) may reflect increases in the general level of prices since1995; and
(2) must be based on:
(A) the Consumer Price Index updated monthly by theBureau of Labor Statistics of the United States Departmentof Labor; or
(B) other figures issued by the government of the UnitedStates to indicate increases in the general level of prices inthe United States.
As added by P.L.92-1995, SEC.2 and P.L.93-1995, SEC.2.
IC 6-8-11-6
"Medical care savings account" or "account" defined
Sec. 6. As used in this chapter, "medical care savings account" or"account" means an account established in Indiana under a medicalcare savings account program to pay the eligible medical expensesof an employee and dependents of the employee.
As added by P.L.92-1995, SEC.2 and P.L.93-1995, SEC.2.
IC 6-8-11-7
"Medical care savings account program" defined
Sec. 7. A "medical care savings account program" means aprogram established under this chapter to pay the eligible medicalexpenses of employees and dependents of employees throughmedical care savings accounts.
As added by P.L.92-1995, SEC.2 and P.L.93-1995, SEC.2.
IC 6-8-11-8
"Qualified higher deductible health plan" defined
Sec. 8. As used in this chapter, "qualified higher deductible healthplan" means a health coverage policy, certificate, or contract that:
(1) provides for the payment of eligible medical expenses thatexceed a higher deductible;
(2) is purchased by an employer for the benefit of employeesand dependents of employees; and
(3) is part of a medical care savings account programestablished under this chapter.
As added by P.L.92-1995, SEC.2 and P.L.93-1995, SEC.2.
IC 6-8-11-9
Powers and duties of employer
Sec. 9. (a) Except as otherwise provided by statute, contract, or acollective bargaining agreement, an employer may establish amedical care savings account program for the employer's employees. (b) An employer that establishes a medical care savings accountprogram under this chapter shall, before making any contributions tomedical care savings accounts under the program, inform allemployees in writing of the federal tax status of contributions madeunder this chapter.
(c) Except as provided in sections 17 and 23 of this chapter, the:
(1) principal contributed by an employer to a medical caresavings account;
(2) interest earned on money on deposit in a medical caresavings account; and
(3) money:
(A) paid out of a medical care savings account for eligiblemedical expenses; or
(B) used to reimburse an employee for eligible medicalexpenses;
are exempt from taxation as income of the employee underIC 6-3-2-18.
As added by P.L.92-1995, SEC.2 and P.L.93-1995, SEC.2.
IC 6-8-11-10
Requirements
Sec. 10. (a) A medical care savings account program establishedby an employer under this chapter must include all of the following:
(1) The purchase by the employer of a qualified higherdeductible health plan for the benefit of one (1) or moreemployees and dependents of the employees.
(2) The contribution by the employer, and the deposit into themedical care savings account established on behalf of eachemployee, of all or part of the difference between:
(A) the cost to the employer of purchasing a qualified higherdeductible health plan for the benefit of the employee; and
(B) the cost previously incurred by the employer to pay theeligible medical expenses of the employee through a healthcoverage policy, certificate, or contract.
(3) The designation of an account administrator to administerthe medical care savings accounts of employees.
(b) Notwithstanding subsection (a)(2), if an employer, beforeestablishing a medical care savings account program under thischapter, did not pay the eligible medical expenses of the employer'semployees through a health coverage policy, certificate, or contract,the employer may contribute all or part of the deductible of thequalified higher deductible health plan purchased by the employer toestablish the medical care savings account program.
(c) The contribution under subsection (b) must not exceed thefollowing:
(1) For 1996, five thousand dollars ($5,000).
(2) For calendar years after 1996, the figure set forth insubdivision (1), adjusted under subsection (d).
(d) The adjustments referred to in subsection (c):
(1) may reflect increases in the general level of prices since
1995; and
(2) must be based on:
(A) the Consumer Price Index updated monthly by theBureau of Labor Statistics of the United States Departmentof Labor; or
(B) other figures issued by the government of the UnitedStates to indicate increases in the general level of prices inthe United States.
As added by P.L.92-1995, SEC.2 and P.L.93-1995, SEC.2. Amendedby P.L.66-1996, SEC.1.
IC 6-8-11-11
Contributions by employee
Sec. 11. (a) A medical care savings account program establishedby an employer under this chapter may allow an employee tocontribute money to the medical care savings account established forthe employee. However, an employee may not contribute an amountlarger than necessary to make the balance in the account equal thedeductible.
(b) Notwithstanding sections 17 and 23 of this chapter, if anemployee contributes money to an account under this section:
(1) the money may be withdrawn from the account by theemployee at any time and for any purpose without a penalty;
(2) the withdrawal of the money by the employee is not incometo the employee that is subject to taxation under IC 6-3-1through IC 6-3-7; and
(3) income earned on the money while it is in the account is notincome to the employee that is subject to taxation underIC 6-3-1 through IC 6-3-7.
As added by P.L.92-1995, SEC.2 and P.L.93-1995, SEC.2.
IC 6-8-11-12
Authorized account administrators
Sec. 12. The following may be an account administrator under thischapter:
(1) A federal or state chartered:
(A) bank;
(B) savings association;
(C) savings bank; or
(D) credit union.
(2) A trust company authorized to act as a fiduciary.
(3) An insurance company or a health maintenance organizationauthorized to do business in Indiana under IC 27.
(4) A broker-dealer, an agent, or an investment advisorregistered under IC 23-19.
(5) A person that is licensed as an administrator underIC 27-1-25.
(6) An employee welfare benefit plan that is governed by thefederal Employee Retirement Income Security Act, 29 U.S.C.1001 et seq. (7) An employer that participates in the medical care savingsaccount program.
As added by P.L.92-1995, SEC.2 and P.L.93-1995, SEC.2. Amendedby P.L.79-1998, SEC.14; P.L.160-2003, SEC.1; P.L.27-2007, SEC.6.
IC 6-8-11-13
Use of funds
Sec. 13. An account administrator shall use the funds held in amedical care savings account exclusively for the purpose of payingthe eligible medical expenses of the employee or the employee'sdependents.
As added by P.L.92-1995, SEC.2 and P.L.93-1995, SEC.2.
IC 6-8-11-14
Prohibited use of funds
Sec. 14. (a) Funds held in a medical care savings account shall notbe used to cover medical expenses of the employee or the employee'sdependents that are otherwise covered.
(b) Medical expenses that are "otherwise covered" for thepurposes of this section include expenses covered by:
(1) an automobile insurance policy;
(2) a workers' compensation insurance policy or self-insuredplan; or
(3) another health coverage policy, certificate, or contract.
As added by P.L.92-1995, SEC.2 and P.L.93-1995, SEC.2.
IC 6-8-11-15
Reimbursement
Sec. 15. If an employee submits documentation to the accountadministrator concerning eligible medical expenses that theemployee has incurred and paid for medical care for the employee ora dependent of the employee, the account administrator shallreimburse the employee from the employee's account for the eligiblemedical expenses paid by the employee.
As added by P.L.92-1995, SEC.2 and P.L.93-1995, SEC.2.
IC 6-8-11-16
Advancement of money
Sec. 16. An employer that makes contributions to a medical caresavings account program on a periodic installment basis may advanceto an employee, interest free, an amount necessary to cover unpaideligible medical expenses that exceed the amount in the employee'smedical care savings account if the employee agrees to repay theadvance:
(1) from future installments; or
(2) when the employee ceases to be an employee of theemployer.
As added by P.L.92-1995, SEC.2 and P.L.93-1995, SEC.2.
IC 6-8-11-17 Withdrawal of money for other purposes
Sec. 17. (a) An employee may, under this section, withdrawmoney from the employee's medical care savings account for apurpose other than the purposes set forth in section 13 of thischapter.
(b) Except as provided in section 11(b) of this chapter, if anemployee withdraws money from the employee's medical caresavings account on the last business day of the accountadministrator's business year for a purpose not set forth in section 13of this chapter:
(1) the money withdrawn is income to the individual that issubject to taxation under IC 6-3-2-18(e); but
(2) the withdrawal does not:
(A) subject the employee to a penalty; or
(B) make the interest earned on the account during the taxyear taxable as income of the employee.
(c) Except as provided in section 11(b) of this chapter, if anemployee withdraws money for a purpose not set forth in section 13of this chapter at any time other than the last business day of theaccount administrator's business year, all of the following apply:
(1) The amount of the withdrawal is income to the individualthat is subject to taxation under IC 6-3-2-18(e).
(2) The administrator shall withhold and, on behalf of theemployee, pay a penalty to the department of state revenueequal to ten percent (10%) of the amount of the withdrawal.
(3) All interest earned on the balance in the account during thetax year in which a withdrawal under this subsection is made isincome to the individual that is subject to taxation underIC 6-3-2-18(f).
(d) Money paid to the department of state revenue as a penaltyunder this section shall be deposited in the local health maintenancefund established by IC 16-46-10-1.
As added by P.L.92-1995, SEC.2 and P.L.93-1995, SEC.2.
IC 6-8-11-18
Written notice required
Sec. 18. (a) For the purposes of section 17(b) of this chapter, anaccount administrator that begins to administer a medical caresavings account shall, in writing, notify the employee for whosebenefit the account was established of the date of the last businessday of the administrator's business year.
(b) The notice required by this section must be given not morethan thirty (30) days after the account administrator begins toadminister the medical care savings account.
As added by P.L.92-1995, SEC.2 and P.L.93-1995, SEC.2.
IC 6-8-11-19
Money exempt from execution
Sec. 19. Money in a medical care savings account establishedunder this chapter is exempt from execution under IC 34-55-10-2.As added by P.L.92-1995, SEC.2 and P.L.93-1995, SEC.2. Amendedby P.L.1-1998, SEC.85.
IC 6-8-11-20
Distribution upon death of employee with no covered dependents
Sec. 20. (a) This section applies only to an employee who has nodependents who are covered under the medical care savings accountestablished for the benefit of the employee.
(b) Upon the death of the employee for whose benefit a medicalcare savings account was established, the account administrator shalldistribute the principal and accumulated interest of the account to theestate of the employee by mailing a check to the personalrepresentative of the employee (as defined in IC 29-1-1-3).
(c) The distribution of the balance in a medical care savingsaccount under this section is not income to the individual or to theestate of the individual that is subject to taxation under IC 6-3-1through IC 6-3-7.
As added by P.L.92-1995, SEC.2 and P.L.93-1995, SEC.2.
IC 6-8-11-21
Transfer of account
Sec. 21. If an individual:
(1) who was employed by an employer that participated in amedical care savings account program; and
(2) whose employment was terminated;
becomes employed with a different employer that participates in amedical care savings account program, the individual may transferthe medical care savings account that was established for theindividual's benefit by the former employer to the accountadministrator of the new employer.
As added by P.L.92-1995, SEC.2 and P.L.93-1995, SEC.2.
IC 6-8-11-22
Termination of employment
Sec. 22. If the employment of an individual by an employer thatparticipates in a medical care savings account program is terminated,the money in the individual's medical care savings account maycontinue to be used for the benefit of the individual and theindividual's dependents and remains exempt from taxation asprovided under this chapter if, not more than sixty (60) days after theindividual's final day of employment:
(1) the individual transfers the individual's medical care savingsaccount to a new account administrator; or
(2) the individual requests in writing that the former employer'saccount administrator remain the administrator of theindividual's account, and the account administrator agrees toretain the account.
As added by P.L.92-1995, SEC.2 and P.L.93-1995, SEC.2.
IC 6-8-11-23 Procedures for payment upon termination
Sec. 23. (a) This section applies when the employment of anindividual by an employer that participates in a medical care savingsaccount program is terminated.
(b) If the former employer is not informed, within ninety (90)days after the former employee's final day of employment, of thename and address of an account administrator to which the formeremployer is transferring the former employee's medical care savingsaccount under section 21 of this chapter, the former employer shallpay the money in the former employee's medical care savingsaccount to the former employee under subsection (d).
(c) If:
(1) the former employee, under section 22(2) of this chapter,requests in writing that the former employer's accountadministrator remain the administrator of the individual'smedical care savings account; and
(2) the account administrator does not agree to retain theaccount;
the former employer shall, within ninety (90) days after the formeremployee's final day of employment, pay the money in the formeremployee's medical care savings account to the former employeeunder subsection (d).
(d) An employer that is required under this section to pay themoney in a former employee's medical care savings account to theformer employee shall mail to the former employee, at the formeremployee's last known address, a check for the balance in the accounton the ninety-first day after the employee's final day of employment.
(e) Except as provided in section 11(b) of this chapter, money thatis paid to a former employee under subsection (d):
(1) is subject to taxation under IC 6-3-1 through IC 6-3-7 asincome of the individual; but
(2) is not subject to the penalty referred to in section 17(c)(2) ofthis chapter.
As added by P.L.92-1995, SEC.2 and P.L.93-1995, SEC.2.
IC 6-8-11-24
Distribution upon death of employee with dependents
Sec. 24. (a) This section applies if an individual:
(1) whose employer participates in a medical care savingsaccount program; and
(2) who has one (1) or more dependents who are covered underthe account established for the benefit of the individual;
dies.
(b) After the death of an individual described in subsection (a),the money in the individual's medical care savings account maycontinue to be used for the benefit of the individual's dependents andremains exempt from taxation as provided under this chapter if, notmore than sixty (60) days after the individual's death:
(1) the individual's medical care savings account is transferredto a new account administrator; or (2) the dependents of the individual request in writing that theaccount administrator of the late individual's employer remainthe administrator of the account, and the account administratoragrees to retain the account.
(c) If the former employer of an individual described in subsection(a) is not informed, within ninety (90) days after the individual'sdeath, of the name and address of an account administrator to whichthe medical care savings account has been transferred undersubsection (b)(1), the former employer shall pay the money in themedical care savings account to the estate of the individual undersubsection (e).
(d) If:
(1) the dependents of an individual described in subsection (a),under subsection (b)(2), request in writing that the formeremployer's account administrator remain the administrator ofthe individual's medical care savings account; and
(2) the account administrator does not agree to retain theaccount;
the former employer shall, within ninety (90) days after theindividual's death, pay the money in the individual's medical caresavings account to the estate of the individual under subsection (e).
(e) Under the circumstances described in subsection (c) or (d), theaccount administrator shall distribute the principal and accumulatedinterest in the account to the estate of the individual by mailing acheck to the personal representative of the individual (as defined inIC 29-1-1-3).
(f) The distribution of the balance in a medical care savingsaccount under subsection (e) is not income to the individual or to theestate of the individual that is subject to taxation under IC 6-3-1through IC 6-3-7.
As added by P.L.92-1995, SEC.2 and P.L.93-1995, SEC.2.
IC 6-8-11-25
Rules
Sec. 25. (a) The insurance commissioner appointed underIC 27-1-1-2 and the department of state revenue may adopt rulesunder IC 4-22-2 necessary to implement this chapter.
(b) The rules adopted under this section must include a procedurefor the adjustment of figures required by sections 5 and 10 of thischapter.
As added by P.L.92-1995, SEC.2 and P.L.93-1995, SEC.2.