Overview
Title
To amend the Internal Revenue Code of 1986 to modernize health savings accounts, and for other purposes.
ELI5 AI
The bill wants to make it easier for people to save money for doctor's visits and medicine by letting them put more money in special piggy banks called Health Savings Accounts (HSAs). It also tries to make rules clearer so that more people and companies can help put money in these piggy banks and know how to use them.
Summary AI
H. R. 6857 aims to update the Internal Revenue Code of 1986 to improve health savings accounts (HSAs). The bill proposes increasing contribution limits, allowing more types of insurance plans to be eligible for HSAs, and permitting rollovers from other accounts like FSAs and HRAs. It includes tax benefits for employer contributions and introduces a new program to raise awareness and encourage people to use HSAs. The goal is to make healthcare savings more accessible and flexible for individuals and families.
Published
Keywords AI
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Bill Statistics
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Language
Complexity
AnalysisAI
Summary of the Bill
The legislation, titled the "Simplify and Expand Health Savings Accounts Act," seeks to amend the Internal Revenue Code of 1986 to update and modernize health savings accounts (HSAs). These accounts allow individuals to save money for medical expenses in a tax-advantaged way. The bill proposes several changes, including increasing contribution limits and introducing new rules surrounding contributions and tax treatments. This legislation also touches on related aspects like bankruptcy protection for HSAs, rollovers from other medical savings accounts, and unused premium tax credits. Moreover, it establishes a grant program to promote public awareness and enrollment in HSAs.
Significant Issues
There are a series of significant issues within the bill:
Complexity and Ambiguity: The legislation contains intricate legal language, which could make understanding the provisions challenging for the average person. Particularly complex are the rules around "integration eligible health plans" and the coordination with the Affordable Care Act (ACA).
Equitable Concerns: Certain provisions, such as the ones allowing employers to contribute substantially to HSAs, may favor higher-income employees, thus raising concerns about fairness and equity.
Marital Coverage Rules: The rules for married individuals regarding family coverage might result in unequal treatment and could be disadvantageous if both spouses have different family coverages.
Eligibility and Enrollment Clarity: The bill lacks clear guidance on specific processes, such as electing to deposit unused tax credits into HSAs, leading to potential confusion and errors.
Grant Allocation: The criteria for the grant program are not well-defined, potentially resulting in unfair distribution of funds among eligible organizations.
Impact on the Public
Broadly, the bill aims to make HSAs more accessible and beneficial to the general public. By allowing larger contributions and rollover from other accounts, individuals could save more effectively for medical expenses.
However, the complexity of the bill could present a significant barrier. If the average person struggles to understand how to optimize their benefits, the intended financial advantages might not reach everyone.
Impact on Specific Stakeholders
Employees: Those with higher incomes may benefit more from this legislation due to the ability to contribute more to their HSAs and receive larger employer contributions, potentially exacerbating the gap between high and low earners.
Employers: They might face challenges in complying with the rules, especially in defining "qualified classes" of employees who can receive contributions. This could create administrative burdens and the risk of non-compliance.
Health Plan Administrators: Ensuring that plans align with the criteria for "integration eligible plans" could be complex. Ambiguities in these requirements might lead to inconsistencies in plan offerings.
Taxpayers: Providing clarity on issues like the inclusion of excess credits as gross income is essential to prevent misunderstandings about tax liabilities.
Non-profit and Community Organizations: Those eligible for grants could benefit from increased funding but need to navigate poorly defined allocation criteria, potentially hindering outreach effectiveness.
In summary, the legislation attempts to modernize HSAs with broader implications for individuals' healthcare savings strategies. Yet, the challenges around comprehension and implementation might dilute its potential benefits unless addressed with clear guidelines and simplified language.
Financial Assessment
The bill H.R. 6857 primarily focuses on the modernization of health savings accounts (HSAs) by modifying various financial provisions in the Internal Revenue Code. This involves increasing contribution limits, introducing new tax benefits, and establishing a grant program for raising awareness about HSAs. Below is an analysis of the financial aspects of the bill and how they relate to the identified issues.
Financial Provisions and Contributions
The bill proposes significant changes to the annual contribution limits to HSAs, allowing eligible individuals to contribute amounts that vary based on the actuarial value of their health plan. For example, an individual with self-only coverage under a plan with an actuarial value of less than 55 percent can contribute up to $10,000 annually, while family coverage under similar conditions allows for contributions up to $20,000. These contribution limits are aimed at increasing savings potential for individuals but may disproportionally benefit those with higher incomes, as noted in the issue concerning fairness and equity.
Additionally, the bill allows for additional contributions of $1,000 for individuals aged 55 or older, further enhancing their ability to save for healthcare expenses. However, this could raise ethical questions about equitable treatment for lower-income individuals who may not have the means to contribute the maximum amounts.
Employer Contributions and Tax Benefits
Another key provision allows employers to contribute to employees' HSAs up to twice the individual's annual limitation. This financial reference has raised concerns about benefiting higher-income employees more than those who are lower-income. The lack of clarity about which employees might receive these benefits—considering the stipulations surrounding "integration eligible health plans"—could also lead to confusion or inequality among employees.
Adjustments and Inflation
Starting in taxable years after December 31, 2024, the dollar amounts involved in these contributions are subject to annual cost-of-living adjustments. This means that contributions may be increased based on inflation, rounded to the nearest $50. This forward-thinking approach attempts to maintain the value of the savings over time but could add complexity for individuals trying to keep track of their contribution limits.
Grants for Health Savings Account Assistance
The bill allocates up to $5,000,000 annually to be distributed among eligible grant recipients for the purpose of assisting and educating the public about HSAs. This financial allocation aims to enhance awareness and encourage enrollment but lacks specific criteria for how these funds are distributed. Such vagueness could result in uneven distribution and effectiveness, similarly addressed in the issues concerning ambiguous grant processes.
Tax Implications of Deposits
Section 3 of the bill allows unused premium tax credits to be deposited into HSAs. However, these amounts are "includible in the gross income" of the taxpayer, suggesting that while they may bolster savings, they could also affect the individual's tax obligations. The lack of clarity on this point could confuse taxpayers about their fiscal responsibilities.
Conclusion
Overall, the financial provisions within H.R. 6857 aim to enhance the accessibility and flexibility of health savings accounts for individuals and families. However, the plan's execution and impact may vary widely based on income levels and how effectively organizations and individuals can navigate the bill's complexities. Addressing the identified issues, such as fairness in employer contributions and transparency in tax credit treatment, will be crucial for the successful implementation of the proposed changes.
Issues
The complexity and potential ambiguity in the language regarding 'integration eligible health plans' in Section 2 may make it difficult for laypeople to understand how it interacts with existing ACA requirements, possibly leading to confusion over eligibility and credits.
In Section 2, the provision allowing employers to contribute up to twice the limitation for health savings accounts could disproportionately benefit higher-income employees over lower-income employees, raising ethical concerns about fairness and equity.
The 'Coordination with ACA Provisions' in Section 2 may be ambiguous, potentially leading to inconsistencies with existing ACA requirements, which could confuse both beneficiaries and employers about eligibility and benefits.
Section 223 in Section 2 has complex language with legal references and cross-references to other statutes, making it hard for the general public to understand, thus increasing the risk of misinterpretation.
'SPECIAL RULE FOR MARRIED INDIVIDUALS' in Section 223 may lead to inequitable treatment where family coverage limits are divided equally, potentially disadvantaging one spouse if both have family coverage under different plans.
The rules and qualifications for a 'qualified class' in Section 2 might be seen as overly complicated, posing challenges in compliance and enforcement for employers.
The language in Section 3 regarding the process for electing to deposit excess premium tax credits into a health savings account is unclear, potentially causing errors and confusion among taxpayers.
The provision in Section 3 that mentions the excess amount deposited into a health savings account as 'includible in the gross income' of the taxpayer lacks clarity, which could result in misunderstandings regarding a taxpayer's overall tax obligations.
Section 4 lacks adequate definitions for terms like 'qualified retirement savings contribution' and 'applicable taxable year,' which could lead to confusion and complexity in financial planning.
The grant allocation process in Section 5 lacks clear criteria, potentially leading to unequal or unfair distribution of funds among eligible entities.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The section states the official short title of the Act, which is the “Simplify and Expand Health Savings Accounts Act.”
2. Modernization of health savings accounts Read Opens in new tab
Summary AI
The bill amends the Internal Revenue Code regarding health savings accounts (HSAs), allowing individuals to deduct contributions to their HSAs from their taxable income, with various limitations based on coverage and age. It also outlines the rules for employer contributions to these accounts, and introduces provisions for bankruptcy protection and rollovers from other accounts like FSAs and MSAs into HSAs.
Money References
- “(2) MONTHLY LIMITATION.—The monthly limitation for any month is 1⁄12 of— “(A) in the case of an eligible individual who has self-only coverage under a qualified plan as of the first day of such month, the annual limitation determined under the following table:“In the case of a plan with an actuarial value of:The annual limitation is:Less than 55 percent$10,000At least 55 percent and less than 65 percent$8,600At least 65 percent$7,200 “(B) in the case of an eligible individual who has family coverage under a qualified plan as of the first day of such month, the annual limitation determined under the following table:“In the case of a plan with an actuarial value of:The annual limitation is:Less than 55 percent$20,000At least 55 percent and less than 65 percent$17,200At least 65 percent$14,400.
- “(3) ADDITIONAL CONTRIBUTIONS FOR INDIVIDUALS 55 OR OLDER.—In the case of an individual who has attained age 55 before the close of the taxable year, the applicable limitation under subparagraphs (A) and (B) of paragraph (2) shall be increased by $1,000.
- “(d) Health savings account.—For purposes of this section— “(1) IN GENERAL.—The term ‘health savings account’ means a trust created or organized in the United States as a health savings account exclusively for the purpose of paying the qualified medical expenses of the account beneficiary, but only if the written governing instrument creating the trust meets the following requirements: “(A) Except in the case of a rollover contribution described in subsection (f)(5) or section 220(f)(5), no contribution will be accepted— “(i) unless it is in cash, or “(ii) to the extent such contribution, when added to previous contributions to the trust for the calendar year, exceeds the sum of the dollar amounts in effect under paragraphs (2) and (3) of subsection (b) or are excludible from gross income under section 106(d). “(B) The trustee is a bank (as defined in section 408(n)), an insurance company (as defined in section 816), or another person who demonstrates to the satisfaction of the Secretary that the manner in which such person will administer the trust will be consistent with the requirements of this section. “(C) No part of the trust assets will be invested in life insurance contracts.
- — “(1) IN GENERAL.—In the case of any taxable year beginning after December 31, 2024, each dollar amount in paragraphs (2) and (3) of subsection (c) shall be increased by an amount equal to— “(A) such dollar amount, multiplied by “(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which such taxable year begins determined by substituting ‘2023’ for ‘2016’ in subparagraph (A)(ii) thereof.
- “(2) ROUNDING.—If any increase under paragraph (1) is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50.
223. Health savings accounts Read Opens in new tab
Summary AI
The section describes the rules for health savings accounts (HSAs), highlighting that eligible individuals can deduct cash contributions to their HSAs on their tax returns, up to certain limits based on their health plan coverage and age. It also explains the tax treatment of HSA distributions, which are tax-free if used for qualified medical expenses, and lays out special rules related to marriage, dependents, contribution limits, and circumstances like death or divorce affecting the accounts.
Money References
- In the case of a plan with an actuarial value of:The annual limitation is:Less than 55 percent$10,000At least 55 percent and less than 65 percent$8,600At least 65 percent$7,200 (B) in the case of an eligible individual who has family coverage under a qualified plan as of the first day of such month, the annual limitation determined under the following table:
- In the case of a plan with an actuarial value of:The annual limitation is:Less than 55 percent$20,000 At least 55 percent and less than 65 percent$17,200 At least 65 percent$14,400.
- (3) ADDITIONAL CONTRIBUTIONS FOR INDIVIDUALS 55 OR OLDER.—In the case of an individual who has attained age 55 before the close of the taxable year, the applicable limitation under subparagraphs (A) and (B) of paragraph (2) shall be increased by $1,000.
- (3) PERMITTED INSURANCE.—The term “permitted insurance” means— (A) insurance if substantially all of the coverage provided under such insurance relates to— (i) liabilities incurred under workers’ compensation laws, (ii) tort liabilities, (iii) liabilities relating to ownership or use of property, or (iv) such other similar liabilities as the Secretary may specify by regulations, (B) insurance for a specified disease or illness, and (C) insurance paying a fixed amount per day (or other period) of hospitalization. (4) FAMILY COVERAGE.—The term “family coverage” means any coverage other than self-only coverage. (d) Health savings account.—For purposes of this section— (1) IN GENERAL.—The term “health savings account” means a trust created or organized in the United States as a health savings account exclusively for the purpose of paying the qualified medical expenses of the account beneficiary, but only if the written governing instrument creating the trust meets the following requirements: (A) Except in the case of a rollover contribution described in subsection (f)(5) or section 220(f)(5), no contribution will be accepted— (i) unless it is in cash, or (ii) to the extent such contribution, when added to previous contributions to the trust for the calendar year, exceeds the sum of the dollar amounts in effect under paragraphs (2) and (3) of subsection (b) or are excludible from gross income under section 106(d).
- — (1) IN GENERAL.—In the case of any taxable year beginning after December 31, 2024, each dollar amount in paragraphs (2) and (3) of subsection (c) shall be increased by an amount equal to— (A) such dollar amount, multiplied by (B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which such taxable year begins determined by substituting “2023” for “2016” in subparagraph (A)(ii) thereof. (2) ROUNDING.—If any increase under paragraph (1) is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50.
3. Unused premium tax credits may be deposited in health savings accounts Read Opens in new tab
Summary AI
Unused premium tax credits can be deposited into a taxpayer's health savings account if the taxpayer makes an election to do so. This process is coordinated with existing health savings account rules and will apply to taxable years starting after the law is enacted.
4. One-time application of saver’s credit to contributions to health savings accounts Read Opens in new tab
Summary AI
In this section, taxpayers can choose one specific year within a three-year period to treat their contributions to a health savings account as qualified retirement savings, allowing them to use the saver’s credit on these contributions. This election can only be made for one year, and the specifics will be determined by the Secretary of the Treasury.
5. Grants for health savings account assistance and outreach Read Opens in new tab
Summary AI
The section describes a grant program, overseen by the Administrator of the Centers for Medicare & Medicaid Services, to help various organizations inform and assist people with health savings accounts. These organizations can use the funds to educate people about these accounts, help them enroll, and address any complaints or questions, with a total annual budget of up to $5 million.
Money References
- (d) Amount.—The Administrator may distribute up to $5,000,000 annually to be divided among grant recipients under this section.