H.R. 6305 would amend the Internal Revenue Code to make a number of changes to Health Savings Accounts (HSAs), including making more individuals eligible and allowing distributions from health Flexible Spending Arrangements (FSAs) and Health Reimbursement Arrangements (HRAs) into HSAs in certain circumstances.
Under current law, individuals are eligible for certain tax-advantaged saving through HSAs if they are covered by a high deductible health plan but not by other health plans. H.R. 6305 would allow individuals to be eligible for HSAs even if they are eligible to access to certain services through their employer at on-site or retail clinics, such as physical examinations, immunizations, or screenings. The bill would also expand HSA eligibility to individuals whose spouse has coverage under a health FSA, subject to certain limitations.
The bill would include distributions from an employee’s health FSA or HRA directly to an employee’s HSA as a “qualified HSA distribution” if the employee establishes coverage under a high deductible health plan after a significant period of not having such coverage. The bill also sets the allowable amount of such qualified HSA distributions up to the total annual limit on FSA contributions ($2,650 in 2018) or twice that amount in the case of an eligible individual who has family coverage under a high deductible health plan.
The statutory annual contribution limits to an HSA in 2018 are $2,250 for an individual with single coverage or $4,500 for an individual with family coverage, and indexed for cost-of-living adjustments. The contribution limits for 2018 are $3,450 for self-only HDHP coverage, and $6,900 for an individual with family coverage. The proposal allows deductible HSA contributions up to these limits for a given year, reduced by the amount of the qualified HSA distribution attributable to that year. The proposal also specifies that if a general purpose health FSA or HRA is converted to an HSA-compatible FSA or HRA, coverage under that health FSA or HRA for the portion of the plan year after a qualified HSA distribution is made is disregarded in determining whether the individual is eligible to make deductible contributions to an HSA.
The staff of the Joint Committee on Taxation (JCT) estimates that enacting H.R. 6305 would reduce revenues by $4.3 billion over the 2019-2028 period. The change in revenues includes a reduction of $900 million over the 2019-2028 period that would result from changes in off-budget revenues (from Social Security payroll taxes). CBO estimates that enacting H.R. 6305 would not affect direct spending.
JCT has determined that the bill contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act.