Sponsors (10)
The bill expands employer-funded HRA options and provides a short-term refundable credit and tax treatment to encourage CHOICE arrangements — improving access and tax advantages for many workers while increasing federal costs, adding compliance burdens (especially for small employers), and creating equity and market-risk concerns.
Millions of employees gain a new option for employer-funded HRAs that can reimburse individual-market premiums and out-of-pocket costs, making it easier for workers to get help paying for coverage.
Non-large employers can get a refundable per-employee tax credit (up to $100/month year 1, $50/month year 2) usable against AMT, lowering near-term employer health benefit costs and encouraging uptake of CHOICE arrangements.
Employees offered CHOICE arrangements can retain pre-tax cafeteria-plan benefits without being disqualified by §125(f), giving some workers continued tax-advantaged access to benefits.
Federal revenue will fall: expanding tax-advantaged treatment and creating a refundable credit will reduce federal receipts and increase budgetary pressures.
Shifting more employees into individual-market coverage (by treating HRAs as satisfying certain coverage rules) could raise individual-market premiums or increase market risk, potentially harming people with higher health needs.
New reporting (W-2) plus substantiation and nondiscrimination verification will increase administrative and payroll/reporting burdens and compliance costs—especially for small employers and plan administrators.
Based on analysis of 4 sections of legislative text.
Defines "CHOICE arrangements" for employer-funded reimbursements of individual-market coverage, adjusts tax/nondiscrimination rules, requires W-2 reporting, and creates a two-year refundable employer credit.
Official title: To amend the Internal Revenue Code of 1986 to provide for the treatment of employer-provided health reimbursement arrangements that are integrated with individual market coverage, and for other purposes.
Introduced September 18, 2025 by Kevin Hern · Last progress September 18, 2025
Creates a new category of employer-funded health reimbursement called a "CHOICE arrangement" (a type of employer-funded account tied to individual-market coverage and certain individual care expenses), treats those arrangements as meeting various federal insurance requirements, exempts them from a cafeteria-plan nondiscrimination rule, adds W-2 reporting of amounts provided, directs agencies to conform existing rules, and establishes a two-year refundable tax credit for eligible employers that provide CHOICE arrangements. Most changes take effect for plan or taxable years beginning after December 31, 2025.