Legislation that would significantly broaden the ability of individuals to use health savings accounts (HSAs) has been introduced in the House of Representatives.
Rep. Andy Biggs (R-AZ) on Jan. 9 introduced the Freedom for Families Act (H.R. 107), which would increase the annual contribution limits to $9,000 for single coverage and $18,000 for family coverage.
Perhaps most significantly, the legislation would do away with the requirement that an individual must be covered under a high deductible health plan (HDHP) in order to contribute to an HSA, opening up the ability for a much broader pool of individuals to use the accounts to save for future health costs.
Consider the possibilities. According to data by Devenir, HSAs grew to nearly $100 billion in assets and were held in almost 34 million accounts — a year-over-year increase of 6% for assets and 9% for HSAs for the period ending June 30, 2022. The firm estimates that by 2024 there will be more than $142 billion in assets among 39 million accounts.
Additionally, data from the Plan Sponsor Council of America’s 2022 HSA survey finds that half of large employers — and more than a third of respondents overall — indicate that they do or will position the HSA as part of a retirement savings strategy to employees, which reported on the 2021 plan-year experience of more than 450 employers.
What’s more, these programs are the only account that offers a “triple tax” advantage for healthcare expenditures — offering the same pre-tax savings advantage and tax deferral on investment growth as 401(k)s, but also allowing for the tax-free withdrawal of those funds for eligible healthcare expenses.
Meanwhile, Rep. Biggs’ legislation would also expand qualified distributions that would be excludable from gross income to include periods of qualified caregiving as defined under the Family and Medical Leave Act.
Under the legislation, qualified caregiving would be defined to include any period during which an individual is on leave or not employed because of:
- the birth of the employee’s child and the period required to care for such child;
- placement of a child with the employee for adoption or foster care;
- caring for an employee’s family member (such as spouse, son, daughter or parent) because of a serious health condition;
- the inability to perform their job duties because of a serious health condition; and
- certain emergencies as a result of covered active duty by the employee’s spouse, son, daughter, or parent.
H.R. 107 was referred to the tax-writing House Ways and Means Committee.
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