HSA Modernization Act

Section 223(c)(1)(C) of the Internal Revenue Code of 1986 is amended by striking for a service-connected disability (within the meaning of section 101(16) of title 38, United States Code).

The amendment made by this section shall apply to taxable years beginning after December 31, 2025.

Section 223(c)(1)(B) of the Internal Revenue Code of 1986 is amended by striking and at the end of clause (ii), by striking the period at the end of clause (iii) and inserting, and, and by adding at the end the following new clause:

(iv) entitlement to hospital insurance benefits under part A of title XVIII of the Social Security Act by reason of section 226(a) of such Act.

Section 223(d)(2)(C)(iv) of such Code is amended by inserting and who is not an eligible individual after who has attained the age specified in section 1811 of the Social Security Act.

Section 223(f)(4)(C) of such Code is amended by striking Subparagraph (A) and inserting Except in the case of an eligible individual, subparagraph (A)

Section 223(b)(7) of such Code is amended by inserting (other than an entitlement to benefits described in subsection (c)(1)(B)(iv)) after Social Security Act.

The amendments made by this section shall apply to months beginning after December 31, 2025, in taxable years ending after such date.

Section 223(c)(1) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph:

For purposes of subparagraph (A)(ii), an individual shall not be treated as covered under a health plan described in such subparagraph merely because the individual receives hospital care or medical services under a medical care program of the Indian Health Service or of a tribal organization.

The amendment made by this section shall apply to taxable years beginning after December 31, 2025.

Section 223(c)(2) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph:

The term high deductible health plan shall include any plan described in subsection (d)(1)(A) or (e) of section 1302 of the Patient Protection and Affordable Care Act.

The amendment made by this section shall apply to months beginning after December 31, 2025, in taxable years ending after such date.

Section 223(c)(2) of the Internal Revenue Code of 1986, as amended by this Act, is amended by adding at the end the following new subparagraph:

A plan shall not fail to be treated as a high deductible health plan by reason of failing to have a deductible for not more than the first $500 of any mental health benefits (as defined in section 9812(e)(4)) specified by the plan for purposes of this subparagraph.

The amendments made by this section shall apply to plan years beginning after December 31, 2025.

Section 223(d)(2) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph:

If a health savings account is established during the 60-day period beginning on the date that coverage of the account beneficiary under a high deductible health plan begins, then, solely for purposes of determining whether an amount paid is used for a qualified medical expense, such account shall be treated as having been established on the date that such coverage begins.

The amendment made by this section shall apply with respect to coverage beginning after December 31, 2025.

Section 223(b)(5) of the Internal Revenue Code of 1986 is amended to read as follows:

In the case of individuals who are married to each other, if both spouses are eligible individuals and either spouse has family coverage under a high deductible health plan as of the first day of any month—

(i) the limitation under paragraph (1) shall be applied by not taking into account any other high deductible health plan coverage of either spouse (and if such spouses both have family coverage under separate high deductible health plans, only one such coverage shall be taken into account),

(ii) such limitation (after application of clause (i)) shall be reduced by the aggregate amount paid to Archer MSAs of such spouses for the taxable year, and

(iii) such limitation (after application of clauses (i) and (ii)) shall be divided equally between such spouses unless they agree on a different division.

If both spouses referred to in subparagraph (A) have attained age 55 before the close of the taxable year, the limitation referred to in subparagraph (A)(iii) which is subject to division between the spouses shall include the additional contribution amounts determined under paragraph (3) for both spouses. In any other case, any additional contribution amount determined under paragraph (3) shall not be taken into account under subparagraph (A)(iii) and shall not be subject to division between the spouses.

The amendments made by this section shall apply to taxable years beginning after December 31, 2025.

Section 223(b)(2)(A) of the Internal Revenue Code of 1986 is amended by striking $2,250 and inserting the amount in effect under subsection (c)(2)(A)(ii)(I).

Section 223(b)(2)(B) of such Code is amended by striking $4,500 and inserting the amount in effect under subsection (c)(2)(A)(ii)(II).

Section 223(g)(1) of such Code is amended—

(1) by striking subsections (b)(2) and both places it appears and inserting subsection, and

(2) in subparagraph (B), by striking determined by and all that follows through calendar year 2003. and inserting determined by substituting calendar year 2003 for calendar year 2016 in subparagraph (A)(ii) thereof..

The amendments made by this section shall apply to taxable years beginning after December 31, 2025.

Section 223(d)(2)(A) of the Internal Revenue Code of 1986 is amended by inserting before the last sentence the following: Such term includes amounts paid for qualified long-term care services (as defined in section 7702B(c))..

The amendment made by this section shall apply to amounts paid after the date of the enactment of this Act.

Nothing contained in this section or the amendment made thereby shall be construed to create any inference with respect to any amounts paid on or before such date.