Sponsor
Rand Paul
Senator · R-KY
Senator · R-KY
The bill expands and simplifies HSA use and protections—making accounts more flexible, clearer to administer over time, and protecting funds in bankruptcy—while increasing tax-preferred spending, creating short-term administrative burdens, and concentrating benefits among those already able to use HSAs.
Millions of HSA owners and taxpayers: simplifies contribution and deduction rules by allowing annual aggregate limits and clearer cross-references (reducing month-by-month proration and tying caps to indexed Code sections), making tax reporting and planning easier.
Individuals aged 50 and older: enables an earlier/indexed catch-up contribution (age 50 tied to existing indexed amounts), increasing retirement and health-savings flexibility for near-retirees.
Parents and families with dependents: expands who can be treated as eligible beneficiaries (covers children under age 27 and allows dependent children to be HSA account holders on inheritance), preserving tax-advantaged funds for more family medical needs.
All taxpayers / federal budget: broadening deductions, retroactive reimbursements, expanded eligible beneficiaries, wellness expense eligibility, and sheltered HSA treatment in bankruptcy will likely reduce federal tax revenue and could increase deficit pressure or require offsets.
IRS, employers, and taxpayers: the changes require updates to forms, guidance, payroll systems, and plan documents and may create short-term administrative burden and confusion during implementation.
Individuals with mid-year coverage changes: replacing month-by-month proration with annual rules risks excess contributions or ambiguity about eligibility timing, exposing some taxpayers to penalties or disputes.
Based on analysis of 9 sections of legislative text.
Simplifies HSA rules, sets an annual contribution limit and standardized 50+ catch-up, expands eligible children and wellness expenses, adds payroll-correction safe harbor, and protects HSAs in bankruptcy.
This bill expands and simplifies rules for Health Savings Accounts (HSAs). It replaces monthly contribution limits with an annual limit tied to other Internal Revenue Code limits, creates a standard catch-up contribution for people age 50 and older, broadens who counts as a family member (including children under age 27), allows certain pre-establishment medical expenses to be treated as qualified, permits corrective distributions for payroll errors without penalty if made by tax-filing deadline, treats HSAs inherited by dependent children as the child’s own HSA, adds vitamins, supplements, gym memberships and wearable trackers to permitted “qualified wellness expenses,” and makes HSAs exempt in bankruptcy like IRAs. The bill makes numerous conforming edits across the tax code and the Bankruptcy Code and phases most changes in for taxable years beginning after enactment (with a few immediate-effect or filing-date-specific provisions).
Official title: Amend the Internal Revenue Code of 1986 to increase the limitations on contributions to health savings accounts, and for other purposes.
Introduced November 20, 2025 by Rand Paul · Last progress November 20, 2025