Proposed HSA Expansion Under the 2025 Tax Legislation: What Investors Should Know

EDITORIAL NOTE - Please Read Before Proceeding: This article was originally published on May 25, 2025, and reflects the status of the "One Big Beautiful Bill" as passed by the U.S. House of Representatives at that time. The legislative status of this bill has evolved since the original publication date. The Senate has continued deliberations, and the provisions described herein may have been amended, enacted, modified, or withdrawn. This article has not been updated to reflect developments after its original publication date. Readers should not rely on this article as a current statement of law or proposed legislation. Please consult your Hafnia Financial adviser and your independent tax professional for current guidance.

Proposed HSA Expansion Under the 2025 Tax Legislation: What Investors Should Know

Health Savings Accounts (HSAs) - which offer three potential tax advantages for qualifying individuals: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses - may be significantly expanded under legislation currently working its way through Congress. The bill, referred to as the "One Big Beautiful Bill," passed the House of Representatives and as of the publication date of this article, remains under consideration in the Senate. Its final form, timing, and likelihood of enactment are uncertain. The provisions described in this article reflect the bill as passed by the House and are subject to change.

Important: The information in this article describes proposed - not enacted - legislation. No changes to HSA rules are currently in effect as a result of this bill. Investors should not make HSA contribution or planning decisions based solely on proposed legislation. Please consult your tax professional and financial adviser regarding your individual situation.

Proposed Changes at a Glance

The House-passed legislation includes several notable proposed changes to HSA rules. The following summarizes the key provisions as written in the bill.

• Doubled contribution limits: Individuals could contribute up to approximately $8,600 annually; families up to approximately $17,100 - roughly double current 2025 limits of $4,150 and $8,300 respectively.
• Phase-out for higher incomes: The increased limits may phase out for individuals earning more than $75,000 and married couples earning more than $150,000.
• Medicare Part A eligibility: Working seniors enrolled in Medicare Part A may be permitted to continue contributing to HSAs - reversing a long-standing restriction.
• Catch-up contributions: Married couples may be allowed to make catch-up contributions to a single shared account, rather than requiring separate accounts.
• Expanded qualified expenses: Gym memberships, fitness programs, and certain wellness-related services may become eligible for tax-free HSA reimbursement.
• Retroactive expense coverage: Individuals may be permitted to use HSA funds for qualifying medical expenses incurred up to 60 days before formally opening the account, provided they were covered by a high-deductible health plan at the time.
• FSA and HRA rollovers: The bill may ease restrictions on rolling over funds from Flexible Spending Accounts (FSAs) and Health Reimbursement Arrangements (HRAs) into HSAs.

Doubling Contribution Limits

One of the most consequential proposals in the bill would approximately double annual HSA contribution limits. Under the proposed changes, individuals could contribute up to $8,600 per year, and families up to $17,100 - a significant increase from current 2025 limits of $4,150 and $8,300 respectively. These higher limits may begin to phase out for higher-income households: individuals earning above $75,000 and married couples earning above $150,000 could see reduced maximum contributions.

Expanded Eligibility

A notable reform in the proposal would allow working seniors enrolled in Medicare Part A to continue contributing to HSAs - reversing a rule that has historically prevented many retirees who continue working from accessing this savings vehicle. Additionally, the bill proposes to allow married couples to consolidate catch-up contributions into a single account, a simplification that could ease administration for dual-income households.

More Ways to Spend, More Ways to Save

The proposed legislation may also expand the range of expenses eligible for tax-free HSA reimbursement. Gym memberships, fitness programs, and other wellness-related services could become qualifying expenses - reflecting a broader policy shift toward preventive care.

Another proposed change would allow individuals to use HSA funds for qualifying medical expenses incurred up to 60 days before the account was formally opened, provided they were covered under a high-deductible health plan at the time. This could benefit individuals who face unexpected medical costs early in a plan year.

Finally, the bill proposes to ease restrictions on transferring funds from Flexible Spending Accounts (FSAs) and Health Reimbursement Arrangements (HRAs) into HSAs, which could allow more individuals to consolidate health-related savings in a single, tax-advantaged account.

What Happens Next?

As of the publication date of this article, the bill passed the House of Representatives and remains under Senate consideration. The legislative process in the Senate typically involves further negotiation, potential amendment, and committee review. The final form of any legislation - and whether these specific HSA provisions survive intact - is not certain.

If enacted in a form similar to the House-passed version, certain provisions could take effect in 2026, though the effective date of individual provisions may vary.

Our guidance at this time: We recommend staying informed about the progress of this legislation, but we do not believe clients should make changes to their HSA contributions or financial plans based on proposed legislation that has not yet been enacted. Individual circumstances vary widely. If you have questions about how potential HSA changes might interact with your financial plan, please contact your Hafnia Financial adviser and consult your independent tax professional.