Flexible Savings Arrangements for a Healthy Robust America Act
- Bill Number
- H.R. 2667
- Origin Chamber
- House
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-04-07: Referred to the House Committee on Ways and Means.
- Last Updated
- 2026-02-13T15:46:13Z
AI-Generated Summary
Purpose of the Legislation
This bill, titled the "Flexible Savings Arrangements for a Healthy Robust America Act," aims to make it easier for individuals to transfer unused funds from health flexible spending arrangements (FSAs, which are employer-sponsored accounts for pre-tax medical expenses) or health reimbursement arrangements (HRAs, similar employer-funded accounts for health costs) directly into a health savings account (HSA, a tax-advantaged savings account for medical expenses paired with high-deductible health plans). The goal is to support people switching to high-deductible health plans (HDHPs, insurance plans with lower premiums but higher out-of-pocket costs before coverage kicks in) by preserving their pre-tax health savings without tax penalties.
Key Provisions
- Qualified HSA Distributions: Defines a "qualified HSA distribution" as a direct transfer from an FSA or HRA to an HSA when an employee starts HDHP coverage after a "significant period" (not precisely defined in the bill but implying a notable gap) without it. The FSA or HRA must then operate in an HSA-compatible way (meaning it doesn't cover expenses before the HDHP deductible is met) for the rest of the plan year.
- Dollar Limits: The total transferable amount per person is capped at the annual FSA contribution limit (around $3,200 for 2025, subject to inflation adjustments; doubled for family coverage under HDHPs).
- Adjustment to HSA Contributions: Any transferred amount reduces the annual HSA contribution limit (normally up to $4,150 for individuals or $8,300 for families in 2025), but only for the net increase in the FSA/HRA balance before the transfer (excluding prior carryovers or decreases).
- Plan Year Conversion: After the transfer, the remaining FSA or HRA coverage for the year must be structured to not disqualify HSA eligibility (e.g., no reimbursements for expenses below the HDHP deductible).
- Reporting Requirements: Employers must report these transfers on employees' W-2 tax forms, separate from other health benefits, to ensure IRS tracking.
- Effective Date: Applies to distributions made after December 31, 2025, in tax years ending after that date.
Significant Changes to Existing Law
- Redefines HSA Funding Rules: Amends Section 106(e)(2) of the Internal Revenue Code to explicitly allow direct FSA/HRA-to-HSA rollovers under specific conditions, which current law generally prohibits to avoid double-dipping on tax benefits.
- Modifies HSA Contribution Limits: Updates Section 223(b)(4) to subtract qualified transfers from deductible HSA contributions, preventing excess tax-advantaged savings.
- Expands HSA Eligibility: Revises Section 223(c)(1)(B)(iii) to permit partial-year FSA/HRA use if converted to HSA-compatible terms post-transfer, broadening flexibility beyond full-year restrictions.
- Enhances Tax Reporting: Adds to Section 6051(a) for W-2 inclusion of these distributions, improving transparency and compliance over prior vague guidelines.
Potential Impacts
- On Citizens: Allows workers to avoid losing unused FSA/HRA funds (which typically expire or are forfeited) when switching to HDHPs, potentially saving thousands in taxes and encouraging long-term health savings. This could benefit those with variable job situations or changing family needs.
- On Government Agencies: The IRS will see increased administrative workload from new reporting and verification, but it promotes compliance with tax rules for health accounts. No direct impact on other agencies like HHS (Health and Human Services).
- On International Relations: None apparent; this is a domestic tax policy focused on U.S. health benefits.
- Broader Effects: May increase HSA adoption, shifting toward consumer-driven health care, but could complicate employer plan designs if not implemented smoothly.
Main Stakeholders Affected
- Employees and Individuals: Primary beneficiaries, especially those with employer-sponsored FSAs/HRAs transitioning to HDHPs/HSA-eligible plans; helps mid-career workers or families manage health costs.
- Employers: Must update benefit plans, payroll systems, and W-2 reporting; larger firms with robust health programs may face higher setup costs but could retain talent through flexible benefits.
- Health Insurers and Plan Administrators: Need to adjust HDHP offerings and FSA/HRA terms to comply, potentially increasing product variety.
- IRS and Taxpayers: IRS gains tools for oversight; general taxpayers indirectly affected through revenue-neutral changes to health tax incentives.
Notable Legal, Constitutional, or Political Implications
- Legal: Strengthens tax code consistency by clarifying rollover rules, reducing disputes over forfeited funds. No challenges to enforceability expected, as it builds on existing HSA framework without overriding contracts.
- Constitutional: No issues; falls under Congress's taxing and spending powers (Article I, Section 8), promoting voluntary health savings without mandates.
- Political: Aligns with efforts to expand consumer choice in health care (e.g., similar to past HSA expansions under various administrations), potentially appealing across party lines for reducing "use-it-or-lose-it" waste in benefits. Could spark debate on tax equity if seen as favoring higher-income savers, but remains a modest, targeted reform.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (2)
Rep. Panetta, Jimmy [D-CA-19], Rep. Crenshaw, Dan [R-TX-2]
Recent Actions
- 2025-04-07: Referred to the House Committee on Ways and Means.
- 2025-04-07: Introduced in House
- 2025-04-07: Introduced in House
Bill Versions
- Flexible Savings Arrangements for a Healthy Robust America Act — issued 2025-04-07 — PDF (5 pages)