House Ways and Means Committee introduces “Big Beautiful Bill”

On May 13, 2025, the House Ways and Means Committee introduced their bill delivering on the President’s campaign promise to extend the 2017 tax cuts. The bill introduces several provisions impacting employee benefits.

Go deeper:

While this bill may go through some iterations and these details may change, the following provides a first look at the benefit provisions included at the start:

ICHRA:

Codify Individual Coverage Health Reimbursement Arrangements (ICHRAs) into law, rename them as "CHOICE Arrangements" (Custom Health Option and Individual Care Expense) and make the following adjustments:

• 60-day advance notice instead of 90
• Allow pre-tax payment for Exchange individual premium (currently employers can only amend their cafeteria plan to allow pre-tax paycheck deductions for Medicare or off-Exchange individual premiums)
• A new two-year credit for an employer who is not an applicable large employer (non-ALE) for a newly installed CHOICE Arrangement ($100 per enrolled employee per month the first year with intent to index, and half credit the second year)

Paid family & medical leave (PFML)

‍Update paid family and medical leave (PFML) tax credit and employer-provided child care credit.

Education Assistance

‍Index the education assistance plan’s $5,250 annual limit and permanently allow student loans to be reimbursable.

HSA and FSA:

Makes adjustments for health savings accounts (HSAs) and flexible spending accounts (FSAs):

• Allows up to 60 days to establish HSA after first enrolling in QHDHP, and have expenses reimbursable back to the date in which the QHDHP began
• Allows Medicare Part A to be HSA-compatible
• Allows direct primary care (DPC) to be HSA-compatible if it does not exceed $150/month (double for family, to be indexed for inflation) and does not include services requiring general anesthesia, Rx or labs not typically administered in an ambulatory primary care setting
• Allow bronze or catastrophic Exchange plans to be HSA-compatible
• Allows limited on-site clinic access to be HSA-compatible
• Codifies IRS Notice 2019-45 chronic preventive care safe harbor for HSA
• Allows qualified sports and fitness, including gym memberships, to be reimbursable from HSAs up to $500/year ($1,000 for joint filers, to be indexed for inflation), divided up equally each month (does not appear to make these §213(d) medical expenses reimbursable from the health FSAs, but hopefully that will be clarified)
• When both spouses are enrolled in a family qualified high-deductible health plan (QHDHP), allows them to make catch-up contributions to the same HSA account
• Allows up to an extra $4,300 single, $8,550 family, of employee HSA contributions, adjusted for inflation
  • Subject to income phase-out based on a ratio of extra adjusted gross income above $75,000 ($150,000 joint filer with family coverage) over $25,000 ($50,000 joint filer with family coverage), adjusted for inflation
  • Thus, the full extra contribution is available to adjusted gross income up to $75,000/$150,000 and phases down to zero at $100,000/$200,000, adjusted in future years for inflation
• Allows DPC fees to be §213(d) medical expense reimbursable from health FSAs and HSAs
• Allows FSAs or health reimbursement arrangements (HRAs) to convert to newly established HSAs if not enrolled in a QHDHP for the last 4 years, up to the annual FSA salary reduction contribution cap (double for family coverage).  If done mid-plan year, would treat the remainder of that plan year as not having health FSA or HRA disqualifying coverage
• Allows a spouse to have FSA without disqualifying the HSA (and does not appear to prohibit the spouse's FSA reimbursing the employee's medical expenses, but hopefully that will be clarified)

Potential impact to employers:

This is the introductory bill, not yet law, with an unknown future, so changes will likely develop. However, this gives employers a view into some provisions Congress may be considering for 2026 and beyond. We will be keeping a close eye on developments and final impacts to employee benefit plans.

‍

Compliance update brought to you by Benefit Compliance Solutions (BCS) in partnership with Nava Benefits.The information contained in this update, including any attachments, is presented solely in the capacity of Nava as compliance consultants. Nothing contained herein should be construed as tax or legal advice or opinion or used as a substitute for consultation with professional legal counsel. Nava is not authorized to practice law, is not an attorney or law firm, and is not rendering legal advice. Communications with Nava are not subject to attorney-client privilege.

‍