Sponsors (2)
The bill tightens and clarifies HSA rules and increases fee/yield transparency to curb misuse and improve oversight, but those safeguards raise taxes and out‑of‑pocket costs for some beneficiaries, increase compliance burdens (which may be passed to consumers), and could restrict coverage for certain therapeutic or telehealth services.
Millions of HSA account holders and taxpayers benefit from stronger safeguards that reduce improper non-medical uses of HSAs, preserving tax-preferred balances and modestly reducing revenue leakage.
Consumers and regulators gain better transparency and benchmarking because trustees must report fee detail and custodians must report cash-yields against a national benchmark, making it easier to compare products and detect fee disparities.
Employers, employees, and payroll administrators get clearer payroll-tax and contribution-treatment rules (including treatment of employer payments excludable under §106(d) and non‑deductible HSA contributions), reducing uncertainty in payroll and tax reporting.
High‑earners and some HSA users will face higher taxes or reduced tax benefits (loss of deductions, additional 20% penalties, or taxable distributions) as the bill narrows allowable HSA uses and phases in new limits.
People who rely on therapeutic spa services, certain nontraditional or telehealth-delivered care, or high-cost prescribed equipment could lose HSA coverage or face new out-of-pocket costs due to tighter substantiation rules and caps (e.g., $500 equipment limit).
Banks, trustees, employers, payroll administrators, and the Treasury will incur new compliance and reporting costs (fee reporting, yield benchmarking, substantiation verification, payroll changes), costs that are likely to be passed on to consumers and could reduce competition as smaller trustees struggle to comply.
Based on analysis of 8 sections of legislative text.
Tightens HSA tax rules: adds MAGI-based deduction phaseouts, shortens/substantiates reimbursement timing, bans some expenses, and adds fee and yield reporting (mostly effective after 12/31/2025).
Official title: To amend the Internal Revenue Code of 1986 to reform certain rules related to health savings accounts.
Introduced November 20, 2025 by Lloyd Alton Doggett · Last progress November 20, 2025
Changes tax and reporting rules for Health Savings Accounts (HSAs). It narrows penalty-free distribution exceptions, creates an income-based phaseout of HSA contribution deductions, limits and requires substantiation and timing for reimbursements, disallows certain non-medical expenditures, and requires new fee and yield reporting. Most changes take effect for amounts, payments, or taxable years beginning after December 31, 2025.