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What H.R. 6306 Means For HSA Accountholders

What H.R. 6306 Means For HSA Accountholders

 

On July 11-12, the House Ways and Means Committee approved 11 bills designed to expand consumer-driven healthcare and sent them to the House of Representatives for review. Here, we’ll take a look at one of the bills (H.R. 6306) and explain what it would mean for HSA accountholders if it passed the House and Senate.

H.R. 6306, sponsored by Rep. Erik Paulsen, has three major points:

1. Increase HSA contribution limits

Currently, the IRS’ 2018 HSA contribution limits are $3,450 for people with self-only health coverage and $6,900 for people with family coverage. H.R. 6306 would move the contribution limits up to the IRS’ annual maximum deductible and out-of-pocket expense limits. For 2018, these limits are $6,650 for people with self-only health coverage and $13,300 for people with family coverage.

This would nearly double annual HSA contribution limits, bringing them closer to 401(k) limits and giving accountholders unprecedented ability to put in funds. Whether accountholders used the funds to pay for currently medical expenses tax-free or invested them to pay for retirement healthcare costs, they’d have a lot more to work with.

2. Change catch-up contribution rules

Currently, HSA-eligible accountholders who are 55 or older at the end of the year are allowed to contribute up to $1,000 annually as a catch-up contribution. However, if each spouse is HSA-eligible, 55 or older, and wants to add a catch-up contribution, they must each have their own HSAs. They can’t put catch-up contributions into the other spouse’s HSA.

H.R. 6306 would allow both spouses to put their catch-up contributions into one spouse’s HSA. This would give couples the ability to each add catch-up contributions and not incur the additional fees associated with opening and maintaining a second HSA.

3. Allow for limited retroactive HSA use

Remember, part of the IRS’ HSA eligibility requirements is being covered by an HSA-qualified high deductible health plan (HDHP). Currently, expenses incurred before an HSA was created are not able to be reimbursed tax-free with HSA funds. However, under H.R. 6306, if someone opened an HSA within 60 days of starting coverage under an HSA-qualified HDHP, any qualified medical expenses incurred since the HDHP coverage began could be reimbursed with HSA funds.

 

If passed, H.R. 6306 would drastically increase how much accountholders could contribute to their HSAs, as well as ease HSA restrictions in other areas. Check back for updates on the bill’s progress!

Author: James Denison