House Panel OKs Legislation to Raise HSA Contribution Limits

The House Ways and Means Committee has passed two pieces of legislation that would expand health savings accounts, incuding raising HSA contribution limits and allowing workers over 65 who are enrolled in Medicare Part A to make contributions.

The Bipartisan HSA Improvement Act of 2023, H.R. 5688, and the HSA Modernization Act of 2023, H.R. 5687, passed out of committee on Sept. 28.

The HSA Modernization Act, introduced by Rep. Beth Van Duyne, R-Texas, would increase the HSA contribution limit to the sum of the annual deductible and out-of-pocket expenses permitted under the high-deductible health plans to which HSAs are tied.

In 2023, that sum is $7,500 for self-only coverage and $15,000 for family coverage. Under current law, the 2023 HSA contribution limits are $3,850 for self-only coverage and $7,750 for families, with a $1,000 annual catch-up contribution allowed for those 55 and older.

The American Benefits Council applauded the bill for allowing employees 65 and older to contribute to an HSA.

Under current law, “active employees are only allowed to contribute to an HSA if they are not enrolled in Medicare,” ABC said. The group said it supports legislation “that would allow employees to continue to contribute to their HSAs until they retire, even though they are automatically enrolled in Medicare Part A at age 65.”

The bill would also allow HSA funds to cover health care services that occurred up to 60 days prior to the establishment of the account and allow both spouses to make catch-up contributions to the same HSA.

The Bipartisan HSA Improvement Act, introduced by Rep. Lloyd Smucker, R-Pa., would:

• Allow an individual to maintain an HSA even if their spouse is enrolled in a flexible spending arrangement (FSA).
• Ensure employees, at the employer’s discretion, may convert their FSA and health reimbursement arrangement (HRA) balances into an HSA contribution upon enrolling in a high-deductible health plan with an HSA. The conversion amount is capped at the annual FSA contribution limit for an individual ($3,050 in 2023) and double that for family coverage.
• Clarify that HSA funds can be used for direct primary care, an arrangement in which patients pay monthly fees directly to a care provider.

“Many of the solutions included in these bills reflect basic common sense like ending the marriage penalty that currently bars married couples from combining their HSA contributions into a single account, ensuring eligibility of direct primary care arrangements and worksite clinics, and allowing folks to save an amount that will actually cover what they might owe in out-of-pocket expenses,” Ways and Means Committee Chairman Jason Smith, R-Mo., said in a statement.

With 78% of health savings accounts owned by taxpayers making less than $100,000, Smith said, “HSAs are clearly a tool middle- and low-income families find useful.”