Sponsors
This bill increases flexibility and simplifies many HSA rules—expanding who and what HSAs can cover and making some tax treatment easier—while trading off reduced federal revenue, potential inequality in who benefits, and short‑term administrative and compliance challenges.
Most Americans with HSAs (and those eligible to open them) face simpler, more predictable contribution and rollover rules: the bill allows annual aggregate HSA contribution limits (instead of monthly pro rata calculations), ties limits to existing indexed Code sections, and treats certain qualified distributions as rollovers, which simplifies tax reporting and preserves tax-advantaged transfers.
People aged 50 and over can make larger, indexed catch-up HSA contributions (changed/tied to a referenced indexed amount), giving near-retirees more flexibility to save for health and retirement costs.
Families can use HSAs more flexibly for dependents: any child under age 27 can be an eligible beneficiary for the taxable year, and dependent children who inherit HSAs can be treated as account holders, preserving tax advantages for family medical expenses.
Many taxpayers will indirectly bear higher costs because the bill broadens tax-preferred HSA uses, increases allowable deductions/rollovers, expands eligible beneficiaries, and permits retroactive reimbursements—changes that collectively reduce federal revenue.
The changes will create short-term administrative and implementation burdens for the IRS, employers, benefits administrators, and tax preparers as forms, guidance, payroll systems, and plan rules are updated and reinterpreted.
Replacing monthly pro rata rules with aggregate annual limits and changing timing rules increases the risk some individuals will mistime contributions (or be unsure how to prorate eligibility for mid‑year coverage changes), exposing them to excess-contribution penalties.
Based on analysis of 9 sections of legislative text.
Simplifies HSA limits to an annual, indexed cap; adds a 50+ catch-up; expands eligible children and wellness expenses; allows certain pre-account expenses and correctives; treats HSAs like IRAs in bankruptcy.
Introduced November 20, 2025 by Rand Paul · Last progress November 20, 2025
Replaces the current month-by-month Health Savings Account (HSA) rules with a simpler annual contribution limit tied to existing tax-code indexing, adds a standard catch-up contribution for people age 50 and older, and expands who and what HSAs can cover. It also clarifies corrections for mistaken contributions, allows certain medical expenses incurred shortly before an HSA is opened to be treated as HSA-qualified, lets a dependent child treat an inherited HSA as their own in specific situations, expands eligible “wellness” expenses (vitamins, certain supplements, gym memberships, wearables), and makes HSAs bankruptcy-exempt like IRAs. Most provisions amend HSA tax rules and take effect for taxable years beginning after enactment (with the corrective-distribution rule effective on enactment and the bankruptcy exemption applying to bankruptcy cases filed after enactment). The bill includes many technical and cross-reference changes to the tax code to reflect the new structure.