Overview
Title
To amend the Internal Revenue Code of 1986 to expand eligibility for health savings accounts, and for other purposes.
ELI5 AI
S. 4771 is a bill that wants to let more people use special savings accounts to save money for medical expenses, even if they don't have a specific kind of insurance. It also wants people to be able to save more money each year in these accounts.
Summary AI
S. 4771 proposes changes to the Internal Revenue Code of 1986 to make more people eligible for Health Savings Accounts (HSAs). Currently, only those with high deductible health plans can have HSAs, but the bill changes that to include anyone with any health insurance. Additionally, the bill increases the limits on how much money people can put into their HSAs each year, raising the individual limit to $8,600 and the family limit to $17,100. These changes would start applying to taxes for the year beginning after December 31, 2024.
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AnalysisAI
Summary of the Bill
The proposed legislation, titled the "Increasing Value for Families with HSAs Act of 2024," intends to amend the Internal Revenue Code of 1986 to broaden the eligibility criteria for Health Savings Accounts (HSAs) and adjust the contribution limits. Currently, HSAs are only available to individuals with a high deductible health plan. This bill seeks to expand eligibility to any individual with any type of health insurance. In addition, it proposes a significant increase in the contribution limits to HSAs, allowing individuals and families to save more money tax-free for medical expenses. The amendments are set to take effect starting in the tax year beginning after December 31, 2024.
Significant Issues
One primary concern related to this bill is the shift from requiring a "high deductible health plan" to "any health insurance coverage" for HSA eligibility. While this broader definition could make HSAs more accessible, it raises ambiguity regarding which insurance plans qualify. This change could lead to differing interpretations or inconsistency in application, potentially affecting both insurers and policyholders.
Another critical issue is the increase in HSA contribution limits, wherein the new limits would rise dramatically from $2,250 to $8,600 for individuals and $4,500 to $17,100 for families. This might lead to increased spending by individuals who can afford to maximize contributions, possibly benefiting wealthier individuals disproportionately.
Furthermore, the bill makes a complex change in the cost-of-living adjustment baseline year, moving it from "calendar year 1997" to "calendar year 2024." This shift could be confusing without additional context, potentially impacting taxpayers’ understanding of future contribution adjustments.
Public Impact
The expansion of eligibility for HSAs from high-deductible plans to any health insurance could make these accounts accessible to a broader range of the American public. With the ability to save more money tax-free for future medical expenses, individuals could face less financial strain when addressing healthcare needs. However, without clear definitions, individuals may find it challenging to determine their eligibility, which could lead to confusion and challenges during tax filing.
Furthermore, the substantial increase in contribution limits might enable families to save more, providing greater financial security against medical costs. However, this benefit might be skewed towards higher-income families who have more disposable income to contribute.
Impact on Stakeholders
For policymakers, expanding HSA eligibility could lead to increased participation, potentially complicating budget forecasts if more individuals utilize tax-free savings. It may also increase government spending on these accounts as more individuals become eligible, impacting federal budgets.
Healthcare providers and insurers might experience changes in consumer behaviors, with patients having more flexibility in managing out-of-pocket expenses. However, the absence of stringent definitions could lead to inefficiencies in how insurance plans are structured and sold.
High-income earners stand to gain from the increased contribution limits, as they can exploit tax benefits more fully by contributing the maximum amount. Conversely, lower-income individuals may not have the means to contribute significantly, which may widen financial disparities.
In conclusion, while the bill could significantly broaden access to HSAs and offer potential savings benefits to a wider population, several aspects require careful consideration to prevent unforeseen complications and disparities. Clearer guidelines and definitions, alongside careful monitoring of the fiscal implications, would be crucial for successful implementation.
Financial Assessment
The proposed bill, S. 4771, introduces significant amendments related to Health Savings Accounts (HSAs), notably impacting financial allocations and references.
Expanding Eligibility for HSAs
A key aspect of the bill is its expansion of eligibility criteria for HSAs. Previously, only individuals under high deductible health plans were qualified. However, the new bill proposes that any individual with health insurance coverage can establish an HSA. This adjustment could dramatically increase the number of eligible participants, potentially expanding the scope of HSAs across a broader population. This modification might lead to increased government expenditures, particularly due to the tax-preferred nature of HSAs, as more individuals take advantage of this benefit. The expansion aligns with the legislative intent to make HSAs more accessible, yet it raises concerns about the budgetary impacts without offering specific justification for this broader eligibility.
Increased Contribution Limits
The legislation also suggests hiking the annual contribution limits to HSAs, which is another critical financial change. The individual contribution cap is proposed to rise from $2,250 to $8,600, while the family contribution limit would increase from $4,500 to $17,100. Such substantial increases suggest a strong legislative push to enhance the utility and attractiveness of HSAs as health care savings tools. However, these elevated limits could disproportionately favor high-income individuals who have the capacity to maximize these contributions, potentially exacerbating tax benefit inequalities. The new limits would take effect for taxable years beginning after December 31, 2024, which may also necessitate immediate attention for tax planning purposes.
Cost-of-Living Adjustment and Baseline Year
The bill also shifts the baseline year for the cost-of-living adjustments from calendar year 1997 to calendar year 2024. This change requires careful interpretation to ensure taxpayers understand how their contributions will be adjusted in real terms over time. The lack of clarity surrounding this baseline shift may lead to confusion among taxpayers regarding the future value of their contributions.
These financial references illustrate a concerted effort to broaden the benefits of HSAs, but they also introduce complexities and potential inequalities that require careful consideration. The substantial adjustments in contribution limits and eligibility raise significant questions about their wider economic and social impacts, which demand thorough evaluation and public discourse.
Issues
The amendment in Section 2 to expand HSA eligibility from individuals under a 'high deductible health plan' to 'any health insurance coverage' could significantly increase the number of eligible individuals, potentially raising government expenditures without clear justification, which could affect taxpayers and government budgets.
The language change from 'high deductible health plan' to 'any health insurance coverage' in Section 2 introduces ambiguity, possibly leading to inconsistent application and exploitation of loopholes, affecting both insurers and policyholders.
The substantial increase in HSA contribution limits in Section 3 from $2,250 to $8,600 for individuals and from $4,500 to $17,100 for families may disproportionately benefit high-income earners who can afford to contribute the maximum amount, potentially increasing inequality in tax benefits.
The change in the cost-of-living adjustment baseline year from 'calendar year 1997' to 'calendar year 2024' in Section 3 could be confusing without clear context, affecting taxpayers' understanding of how their contributions will adjust over time.
Section 2 includes a complex amendment regarding the removal and replacement of subparagraph (B) of section 223(g)(1), which might benefit from clearer language to understand its impact, potentially causing legal and financial misunderstandings.
The effective dates of December 31, 2024, in Sections 2 and 3 require clarification on transitional provisions or implications for immediate tax planning, impacting taxpayers planning for HSA contributions.
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 first section of this act states its short title, which is "Increasing Value for Families with HSAs Act of 2024" or simply the "IVF with HSAs Act of 2024."
2. Health savings account eligibility Read Opens in new tab
Summary AI
The bill updates the rules for health savings accounts, changing the definition of an "eligible individual" to include anyone with any type of health insurance starting at the beginning of each month. It removes the requirement for coverage under a high deductible health plan and adjusts related sections of the tax code to reflect these changes, which will take effect for tax years after December 31, 2024.
3. Increase in HSA contribution limitations Read Opens in new tab
Summary AI
The section describes changes to the rules about Health Savings Account (HSA) contribution limits. It increases the amount someone can contribute to an HSA and updates how adjustments for inflation will be calculated starting in 2026, with the changes taking effect for tax years beginning after December 31, 2024.
Money References
- (a) In general.—Paragraph (2) of section 223(b) of the Internal Revenue Code of 1986, as amended by this Act, is further amended— (1) by striking “$2,250” in subparagraph (A) and inserting “$8,600”, and (2) by striking “$4,500” in subparagraph (B) and inserting “$17,100”. (b) Cost-of-Living adjustment.—Paragraph (1) of section 223(g) of the Internal Revenue Code of 1986, as amended by this Act, is further amended— (1) by striking “Each” and inserting “In the case of a taxable year beginning after 2025, each”, and (2) by striking “calendar year 1997” and inserting “calendar year 2024”.