To amend the Internal Revenue Code of 1986 to reform certain rules related to health savings accounts.
- Bill Number
- H.R. 6183
- Origin Chamber
- House
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-11-20: Referred to the House Committee on Ways and Means.
- Last Updated
- 2025-12-10T09:05:43Z
AI-Generated Summary
Purpose
This legislation, H.R. 6183, aims to reform rules governing Health Savings Accounts (HSAs) under the Internal Revenue Code. HSAs are tax-advantaged savings accounts designed to help individuals cover qualified medical expenses. The bill introduces restrictions on contributions, distributions, and fees to prevent misuse, ensure proper use of funds for medical needs, and increase transparency and oversight.
Key Provisions
- Repeal of Penalty Exception for Non-Medical Distributions: Eliminates a prior rule allowing penalty-free withdrawals from HSAs for certain non-medical reasons after age 65. All non-qualified distributions will now face standard taxes and penalties.
- Income Limits on Deductible Contributions: Caps tax-deductible HSA contributions based on modified adjusted gross income (MAGI, which is a taxpayer's income after certain adjustments). Contributions phase out for higher earners:
- Joint filers or surviving spouses: Starting at $300,000 MAGI.
- Head of household: $250,000.
- Married filing separately: $150,000.
- Single filers: $200,000.
The phase-out occurs over a $40,000 ($20,000 for married filing separately) income range, reducing the deduction proportionally.
- Treatment of Non-Deductible Contributions: Updates rules so non-deductible contributions are taxed like traditional IRA distributions, and adjusts excise taxes on excess contributions to ignore the new income limits.
- Payroll Tax Adjustments: Excludes employer HSA contributions from FICA (Social Security and Medicare taxes) and similar railroad retirement taxes, but only if the employee is expected to qualify under the new income rules.
- Time Limit on Reimbursements: HSA funds can only reimburse qualified medical expenses if withdrawn within 2 years of when the expense was incurred.
- Substantiation Requirement for Distributions: Requires proof that HSA withdrawals are for qualified medical expenses. For expenses needing a provider's opinion (e.g., certain treatments), the opinion must stem from a genuine doctor-patient relationship, be based on an in-person or appropriately remote assessment, and align with standard medical practices. Trustees (account managers) must verify this before allowing tax-free distributions. The IRS Secretary can issue guidance to implement this.
- Exclusions from Qualified Medical Expenses: Removes spa/beauty treatments and limits exercise equipment reimbursements to $500 per tax year.
- Excise Tax on Excessive HSA Fees: Imposes a tax on HSA trustees (e.g., banks or financial firms) for charging fees above "reasonable" levels, as set by the IRS. Covered fees include maintenance, transfers, statements, withdrawals, and insufficient funds charges. Trustees must report fee details annually, including breakdowns by demographics if required by the IRS.
- Reporting of HSA Earnings: HSA trustees must report the average yield (interest rate) on cash balances in individual accounts, compared to the national average for similar savings accounts.
All changes generally apply to tax years, distributions, payments, or fees after December 31, 2025.
Significant Changes to Existing Law
- Stricter Access and Use: Previously, HSAs had fewer income-based restrictions and more flexible reimbursement timing; now, high-income individuals face reduced benefits, and reimbursements are time-bound with mandatory proof.
- Enhanced Oversight: Introduces trustee verification of expenses, fee caps with taxes, and detailed reporting—none of which existed before—shifting from self-reported compliance to active enforcement.
- Tax Integration: Aligns HSA rules more closely with other retirement accounts (e.g., IRAs) for non-qualified withdrawals and excludes qualifying contributions from payroll taxes, potentially simplifying some employer contributions but complicating eligibility.
- Narrower Qualified Expenses: Explicitly bars non-essential items like spa treatments, refining what counts as "medical care" beyond prior IRS interpretations.
Potential Impacts
- On Citizens: Higher-income individuals may contribute less to HSAs due to phase-outs, reducing tax benefits for medical savings. Everyday users face more paperwork for reimbursements, potentially deterring casual use, but could ensure funds target genuine health needs. Lower- and middle-income savers might see little change, while fee regulations could lower costs for all.
- On Government Agencies: The IRS gains new enforcement tools (e.g., substantiation rules, fee taxes, reporting), increasing administrative workload but improving tax compliance and revenue from penalties on misuse. No direct impact on other agencies like HHS.
- On International Relations: Minimal to none, as this is a domestic tax policy focused on U.S. residents and financial institutions.
Main Stakeholders Affected
- Individuals and Families: HSA holders, especially high earners and those with chronic medical needs, who may face reduced flexibility and higher compliance burdens.
- Employers and Employees: Businesses offering HSA contributions through health plans could see simplified payroll tax treatment but must navigate income eligibility.
- Financial Institutions and Trustees: Banks and firms managing HSAs will incur costs for verification, reporting, and avoiding excessive fees, potentially leading to industry consolidation or fee adjustments.
- Healthcare Providers: Doctors may need to provide more formal opinions for HSA reimbursements, affecting administrative time.
- U.S. Treasury/IRS: Responsible for implementation, guidance, and collecting new taxes/reports, benefiting from better oversight.
Notable Legal, Constitutional, or Political Implications
- Legal: Strengthens IRS authority to regulate HSAs via new verification and fee rules, potentially leading to litigation over "reasonable" fees or substantiation standards if guidance is vague. Aligns with broader tax code goals of preventing abuse in tax-advantaged accounts.
- Constitutional: No apparent challenges; changes are within Congress's taxing and spending powers under Article I. Income phase-outs could raise equal protection questions if seen as discriminatory, but they mirror existing tax provisions (e.g., in IRAs).
- Political: May appeal to fiscal conservatives by curbing perceived HSA loopholes for the wealthy, while progressives might support fee controls and medical substantiation to prioritize health equity. Could influence debates on healthcare affordability, as HSAs are tied to high-deductible plans, but risks reducing HSA adoption if seen as overly restrictive.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (1)
Rep. Jayapal, Pramila [D-WA-7]
Recent Actions
- 2025-11-20: Referred to the House Committee on Ways and Means.
- 2025-11-20: Introduced in House
- 2025-11-20: Introduced in House
Bill Versions
- To amend the Internal Revenue Code of 1986 to reform certain rules related to health savings accounts. — issued 2025-11-20 — PDF (12 pages)