Tax Facts: The potential impact of  H.R.6311 on your HSA

Last week we talked about H.R.6199, and how it would change the rules for HSAs if it's passed by the Senate and enacted into law. This week, let's take a look at H.R.6311.

This proposal passed by a vote of 242-176 in the House of Representatives in late July. It wasn't added to the Senate calendar as of late August, but if it were to be enacted, it would take effect in January 2019. The legislation calls for some fairly major rule changes designed to expand access to HSAs.

Increasing the contribution limits for HSAs

H.R.6311 would increase the amount that people can contribute to their HSAs. Under current rules, the HSA contribution limits for 2019 will be $3,500 if you have self-only coverage under a high-deductible health plan (HDHP) and $7,000 if your HDHP covers at least one other family member.

Under H.R.6311, you'd be able to contribute up to the maximum allowable out-of-pocket limit for HDHPs. In 2019, that will be $6,750 for self-only coverage/$13,000 for family coverage.

Allowing more people to contribute to HSAs

H.R.6311 would also significantly expand access to HSAs by allowing people enrolled in bronze or catastrophic plans (as defined in Section 1302 of the Affordable Care Act) to contribute to an HSA. Under current rules, you can only contribute to an HSA if you have a qualified HDHP, strictly regulated by the IRS.

Most bronze plans currently sold in the individual and small group markets are not HSA-qualified, and none of the catastrophic plans are HSA-qualified. H.R.6311 would change that.

Under current rules, you have to stop contributing to your HSA once you're enrolled in Medicare. But H.R.6311 would allow seniors who keep their HSA-qualified coverage to continue to make HSA contributions, even after they're enrolled in Medicare.

Additional flexibility for catch-up contributions and expenses

H.R.6311 would allow two spouses to make "catch-up" contributions to the same HSA. People age 55+ who are HSA-eligible are allowed to contribute an extra $1,000 per year to an HSA. But under current rules, two spouses, both of whom are 55+ and HSA-eligible, must have separate HSAs in order to each make the catch-up contribution.

In many cases, spouses with HDHP coverage opt to just have one HSA (in one spouse's name, since HSAs can't be jointly owned) and make the maximum family contribution to that account. H.R.6311 would allow them to continue to do that after they both turn 55, while also being able to take advantage of the catch-up contributions for each of them.

Under current rules, you can only use HSA funds to pay for medical expenses if the expenses are incurred after you establish your HSA. So let's say you enroll in an HDHP, have surgery the following week, but then don't get around to establishing your HSA until the next month. You can't then contribute money to your HSA and reimburse yourself for the expenses related to that surgery.

But H.R.6311 would essentially give people a 60-day grace period, after their HDHP coverage starts, to set up an HSA and use it to cover expenses incurred anytime after the HDHP coverage began.

So, in the example we just looked at, you could have surgery the week after your HDHP coverage begins, then open your HSA within 60 days of your HDHP coverage effective date. Then you could contribute tax-free money to your HSA, and use it to reimburse yourself (now or anytime in the future) for the expenses associated with the surgery.

H.R.6311 would make some additional changes unrelated to HSAs, aimed at expanding access to lower-cost health plans and delaying the ACA's health insurer fee.

Although the future of H.R.6311 is uncertain, this bill is certainly one to watch. Expanding access to HSAs and increasing the amount that people can contribute to their HSAs are priorities for advocates.

Tax Facts is a weekly column offering straight up, no-nonsense HSA tax tips, written in everyday language. Look for it every Tuesday, exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook and Twitter.

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