Health Savings Accounts Policy Adjustments

Republican tax proposal highlight no. 3: HSAs! The proposed legislation contains a number of HSA sweeteners, some of which have been kicking around Congress for several years. First, the HSA contribution limit would be doubled to $8,600 (individual) / $17,100 (family). However, the increased contribution would phase out between $75k-$125k of AGI for single filers and $150k-$200k for married filers with family coverage. Second, people age 65+ who are covered by Medicare Part A (but not Part B) would no longer be ineligible to contribute to an HSA - meaning that those who enroll in Social Security (and therefore become covered by Part A) wouldn't automatically lose their HSA eligibility. Third, all Bronze-level or catastrophic healthcare plans would be considered High-Deductible Health Plans (HDHPs) for HSA purposes. Fourth, certain physical activity and fitness expenses would become HSA-eligible - e.g. gym memberships, classes, and sports. Golf, hunting, sailing, and riding wouldn't be eligible, nor would one-on-one personal training. But your beer league softball team probably would be! Fifth, when one or more spouse in a couple is age 55+, each spouse's catch-up HSA contribution would be allowed to go into either spouse's HSA (as opposed to each spouse's own HSA as the current law requires). Sixth, people who convert to HDHP coverage during the year and have unused FSA or HRA funds would be able convert those funds to an HSA. Finally, individuals whose spouse is covered by an FSA would no longer be ineligible to make HSA contributions (rectifying one of the weirdest tax traps out there at the moment). All of these provisions would take effect starting in 2026. In all, there are some much-needed reforms here that remove some of the stickier rules around HSAs. Although it's questionable if some provisions (like FSA-HSA conversions and allowing catch-up contributions to go to either spouse's account) would ultimately be allowed in the bill because they might not have an impact on government revenue or expenses, as is required for reconciliation legislation. Stay tuned for more updates over the next few days!

🏛️ Legislative Update: GOP Lawmakers Push to Restore HSA Expansions in Reconciliation What’s Happening: Over two dozen House Republicans—including Reps. Chip Roy (TX), Andy Harris (MD), and Eric Burlison (MO)—are urging GOP leadership to preserve $40+ billion in HSA (Health Savings Account) expansions that were included in the House-passed reconciliation bill but stripped out of the Senate draft. Key Provisions They’re Fighting For: • ✅ Direct Primary Care & Fitness: HSAs could be used for DPC services and gym memberships. • ✅ Marketplace Access: Those with bronze or catastrophic ACA plans could contribute to HSAs. • ✅ Medicare-Eligible Workers: Seniors eligible for Medicare Part A but still working could keep contributing. • ✅ Equity in Contributions: Higher contribution limits would apply to low-income individuals and households. These reforms are aligned with consumer-directed healthcare principles and could increase demand for HSA-qualified plans, drive market competition, and expand access to tax-preferred savings vehicles. What are your thoughts on the modernization of HSAs? In favor? Cautionary tale? Couldn’t happen fast enough?

My favorite account type - HSAs - might be getting sweeter 🍧 In the proposed tax bill, there are expansions to HSA access: → HSAs could be used for some fitness/gym memberships moving forward. → An additional 20 million Americans are predicted to gain access to HSAs, including those on Medicare Part A and those on ACA Bronze and Catastrophic plans. → Catch-up contributions will be simplified for spouses sharing one HSA. Currently, those over age 55 need to save their $1,000 catch-up into their own separate HSA accounts. The new tax bill will allow spouses to add to the same HSA account. The bill is pending approval by the Senate. Stay tuned.