AN ACT relating to medical savings accounts.
     Create new sections of KRS Chapter 142 to authorize employers to establish medical savings accounts; provide that contributions to medical savings accounts cannot exceed sixty-five percent (65%) of the annual deductible for self-coverage and seventy-five percent (75%) of the annual deductible for family coverage; exclude the principal contributed and interest earned on a medical savings account from taxable gross income; exempt from taxation as income money paid out of the account for eligible medical expenses or to reimburse the account holder for eligible medical expenses; direct the account administrator to use funds in the account exclusively for paying eligible medical expenses of the account holder or dependents of the account holder; provide that unencumbered funds in the account at the end of the tax year that are in excess of the higher deductible shall either remain in the fund to be used to meet future medical expenses or transferred to the account holder's 401(k) plan or any other retirement plan of the account holder; provide that if funds are withdrawn for other than medical expenses the money is subject to income tax and a penalty, unless the withdrawal is on the last business day of the tax year, in which case it will be subject to income tax but not to a penalty; provide that upon death of the account holder the account administrator shall distribute the funds in the account to the estate of the account holder and the funds shall not be subject to taxation; allow an employee upon termination of employment to transfer a medical savings account to a new employer if that new employer participates in a medical savings account program; provide that if the employee's employment is terminated the money in the account may continue to be used for the employee if, within 60 days after the employee's final day of employment, the employee transfers the account to a new account administrator or the employee requests in writing that the former account administrator remain the administrator and that administrator agrees; provide that if within 90 days after the last day of employment the employer does not receive notification of the name and address of a new account administrator the employer shall pay the money in the account to the former employee; provide that money paid to the terminated employee shall be subject to income tax but shall not be subject to a penalty; provide that money deposited in a medical savings account and money withdrawn for eligible medical expenses is exempt from income taxation; provide that money withdrawn for reasons other than eligible medical expenses is subject to income taxes; amend KRS 141.01 and 304.17A-250 to conform.

     Feb 25-introduced in House
     Feb 26-to Appropriations and Revenue (H)