Congress tightens HSA rules: income caps, 2-year limits, fee oversight

What it does

This bill modifies health savings accounts (HSAs) by adding income limits for contributions, restricting reimbursements to expenses incurred within the past 2 years, requiring medical substantiation for distributions, excluding spa/beauty treatments and exercise equipment over $500, imposing an excise tax on excessive HSA fees charged by trustees, and requiring reporting of HSA earnings and fee information. The changes take effect for tax years and distributions after December 31, 2025.

Why we flagged it

The bill is a comprehensive restructuring of HSA rules, mixing consumer protections (fee caps, transparency) with new restrictions (income limits, reimbursement windows, substantiation) that reshape how HSAs function as savings vehicles.

What the text implies

• The 2-year reimbursement window (Section 4) may force HSA holders to choose between immediate reimbursement or forfeiting the deduction, effectively converting HSAs from long-term savings vehicles to shorter-term accounts and reducing their appeal as retirement health-care funding tools.
• Income limits (Section 3) phase out HSA deductibility for higher earners, potentially reducing HSA adoption among affluent workers and shifting the account's user base downward—a policy choice not explicitly framed as income redistribution but functionally regressive in effect.
• Substantiation requirements (Section 5) delegate medical-expense validation to HSA trustees, creating a new compliance burden on financial institutions and potentially exposing account holders to disputes over what qualifies as 'generally accepted standards of medical practice'—a vague standard.
• The excise tax on excessive fees (Section 7) is regulatory but lacks a clear definition of 'reasonable' fees upfront; the Secretary must determine reasonableness by regulation, creating uncertainty for trustees and potential retroactive compliance costs.
• Exclusion of spa/beauty and high-cost exercise equipment (Section 6) narrows the definition of 'qualified medical expenses' without clear medical justification, potentially affecting wellness-focused HSA users and creating boundary disputes (e.g., is physical therapy equipment subject to the $500 cap?).

Who it affects

The bill creates new restrictions and compliance burdens on HSA users (income limits, 2-year reimbursement windows, substantiation requirements) that may reduce flexibility and increase administrative friction for middle-income savers. However, it also protects consumers by capping excessive trustee fees and requiring transparency on earnings and costs—benefits that may offset restrictions for price-sensitive account holders.

Who stands to gain

• HSA trustees and financial institutions (fee regulation may reduce competitive pressure and standard
• Lower-income HSA users (fee caps and transparency reduce costs)
• Health insurance carriers (HSA restrictions may increase reliance on traditional insurance)

Named in the bill

Internal Revenue Service (IRS), Health Savings Accounts (HSAs), Section 223 (IRC), Section 4973 (IRC), Section 3121 (IRC), Section 3231 (IRC), Secretary of the Treasury, HSA trustees, Qualified medical expenses

Where it stands

1 cosponsor: 1 Democrats.

• Nov 20, 2025 — Introduced · Congress.gov: “Introduced in House”
• Nov 20, 2025 — Referred to House Committee on Ways and Means · Congress.gov: “Referred to the House Committee on Ways and Means”

Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.

Money around this bill

1 lobbying clients named this bill on 1 disclosure filings across 1 quarter, Jun 2026 to Jun 2026. Those filings disclosed $66,189 in lobbying spend. A filing names 29 bills on average, so that figure is what each filing reported, not a share belonging to this bill.

More lobbying clients named this bill than 0% of bills with at least one filing.

Lloyd Doggett, the sponsor, reported $142,750 in PAC receipts in the 2026 cycle.

• National Multiple Sclerosis Society — $66,189 on 1 filing

Lobbying Disclosure Act filings through Jul 20, 2026. A filing shows who paid to lobby on a bill it names, not what changed.