Compliance News Week Ending May 16, 2025

Compliance News Week Ending May 16, 2025

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HSA and ICHRA Changes Proposed in Tax Bill

The House Ways and Means Committee released an initial draft of the tax provisions in the reconciliation bill, which is also being referred to as “The One, Big, Beautiful Bill.” 

The bill does include some significant proposed changes to health savings accounts (HSAs) and individual coverage HRAs (ICHRAs). 

Section by Section Summary of the Bill  (HSA and ICHRA proposed changes on pages 18 to 21) 

HSA Proposals in Draft Bill 

Some of the proposed changes to current HSA rules include: 

• Allowing individuals who enroll in Medicare Part A to be HSA-eligible; 
• Restricting the ability to use HSAs for premium expenses upon reaching age 65 to only those who are not HSA-eligible; 
• Allowing individuals to be HSA-eligible if they have a direct primary care (DPC) membership of up to $150/month; 
• Adding the ability to use HSAs for direct primary care membership fees; 
• Adding the ability to use an HSA for gym memberships and other similar physical exercise/activity costs of up to $500/year; 
• Allowing both spouses to make the $1,000 catch-up contribution (available at age 55+) to the same HSA; 
• Allowing individuals to use HSAs for expenses incurred in the 60-day period after enrollment in an HDHP as long as the HSA is established by the end of that 60-day period; 
• Allowing individuals to be HSA-eligible where their spouse is enrolled in a general purpose health FSA; and 
• Increasing the HSA contribution limit by an additional $4,300 individual/ $8,550 family coverage with phase-outs for incomes above $75,000 ($150,000 married), applicable only to employee contributions. 

If proposed changes are approved and become law, they will be effective for tax years and plan years beginning after December 31, 2025. 

ICHRA Proposals in Draft Bill 

Some of the proposed changes to current ICHRA rules include: 

• Rebranding ICHRAs to be known as “Custom Health Option and Individual Care Expense Arrangements,” or “CHOICE Arrangements”; 
• Adding a new requirement to include the ICHRA amount available on the employee’s Form W-2; 
• Allowing employees to pay their share of the premium on a pre-tax basis through the Section 125 cafeteria plan even if it the policy is purchased on the Exchange; and 
• The creation of an employer tax credit for offering an ICHRA. 

If proposed changes are approved and become law, they will be effective for tax years and plan years beginning after December 31, 2025. 

Other Employee-Benefit Related Provisions in Draft Bill 

• Making permanent the CARES Act tax-free $5,250 student loan repayment assistance option for employers (scheduled to expire at the end of 2025); 
• Making permanent the TCJA elimination of the tax-free $20 bicycle commuting reimbursement option for employers (scheduled to return as of 2026).

We will continue to watch to see if in fact these proposed changes (or some of them) move forward. Stay tuned!

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