Individual Medical Account Act Exposed

From ALEC Exposed
Jump to: navigation, search

The Individual Medical Account Act was adopted by ALEC's Health and Human Services Task Force in March 2002, approved by the ALEC Board of Directors April, 2002. ALEC has attempted to distance itself from this piece of legislation after the launch of in 2011, but it has done nothing to get it repealed in the states where it previously pushed for it to be made into law.

ALEC Bill Text

{Title, enacting clause, etc.}

Section 1.

This Act may be cited as the Individual Medical Account Act.

Section 2. {Definitions}

For the purpose of this Act the following definitions apply:

(A) “Account holder” means the individual on whose behalf the individual medical account is established.

(B) “Dependent child” means any person under the age of 21 years or any person who is legally entitled or subject to a court order for the provision of proper and necessary subsistence, education, medical care, or any other care necessary for his health, guidance, or well-being, and who is not otherwise emancipated, married or a member of the armed forces of the United States, or who is so mentally or physically incapacitated that he cannot provide for himself.

(C) “Individual medical account” means a trust created or organized to pay the eligible medical, dental, and long-term care expenses of the account holder.

(D) “Trustee” means a chartered state bank, savings and loan association or trust company authorized to act as a fiduciary; a national banking association or savings and loan association authorized to act as a fiduciary; or an insurance company.

Section 3.

(A) For taxable years beginning on or after 1991, a resident individual shall be allowed to deposit contributions to his or her individual medical account. The amount of deposit for the first taxable year subsequent to the effective data of this Act shall not exceed:

(1) $2,000 for the account holder; or
(2) $2,000 for the account holder and $1,000 for each dependent child of the account holder.

(B) The maximum allowable amount of deposit for subsequent years shall be increased annually by a percentage equal to the previous year’s increase in the national Consumer Price Index (CPI).

(C) Interest earned on an individual medical account shall be exempt from taxation as adjusted gross income in this State.

(D) Upon agreement between an employer and employee, an employee may either have his employer contribute to the employee’s individual medical account or continue to make contributions under the employee’s existing health insurance policy or program, subject, however, to the restrictions in Subsection (F)(1) of this Section.

(E) The individual medical account shall be established as a trust under the laws of this State and placed with a trustee. The trustee shall:

(1) purchase long term care coverage for each account holder to cover all medical, dental, and long-term care expenses in excess of $10,000; and
(2) utilize the trust assets solely for the purpose of paying the medical, dental, and longterm expenses of the account holder.

(F) Individual medical account funds may be withdrawn by the account holder at any time for any purpose, subject to the following restrictions and penalties:

(1) There shall be a distribution penalty for early withdrawal of individual medical account funds by the account holder. Such penalty shall be 10% of the amount of interest earned as of the date of withdrawal on the account, and, upon such withdrawal, the interest earned during the tax year in which withdrawal occurs shall be subject to taxation as adjusted gross income in this Section.
(2) After an account holder reaches 60 years of age, withdrawals shall be permitted for medical, dental or long-term care expenses only, and may be withdrawn without penalty.

(G) Upon the death of the account holder, the account principle, as well as any interest accumulated thereon, shall be distributed to the decedent’s estate as part of the estate.

Section 4. {Severability Clause}

Section 5. {Repealer Clause}

Section 6. {Effective Date}

Adopted by the Health and Human Services Task Force in March 2002.

Approved by the ALEC Board of Directors April 2002.