H.R. 2745: Catch Up Act

This legislation, known as the Catch Up Act, proposes an amendment to the Internal Revenue Code to modify the rules surrounding health savings accounts (HSAs) for married couples. The key features of this bill include the following:

Catch-Up Contributions for Married Couples

1. **Catch-Up Contributions**: The bill allows both spouses who are married and eligible individuals to contribute to the same health savings account, if they have family coverage under a high deductible health plan.

2. **Limitation Adjustments**: The contribution limits for HSAs would be adjusted in such a way that:

• The limitations on contributions would not take into account other high deductible health plan coverage that either spouse may have. If both spouses have separate family coverage under different high deductible health plans, only one of those coverages would be considered.
• The contribution limit would be reduced by any amounts that the spouses have contributed to Archer Medical Savings Accounts (MSAs) during the tax year.
• The remaining contribution limit would be divided equally between the spouses, unless they choose a different method of division.

Additional Contribution Amounts

3. **Special Rule for Older Spouses**: If both spouses are aged 55 or older by the end of the taxable year, they would be able to include additional contribution amounts that apply to catch-up contributions in their calculation of the limits. If only one or neither spouse is 55 or older, those additional amounts would not be included in the contribution limit calculation for division.

Effective Date

4. **Timing of Implementation**: The changes proposed by this bill would apply to taxable years beginning after December 31, 2025, meaning that the new rules would not take effect until the year 2026 for tax purposes.

Overall Impact

The Catch Up Act aims to provide married couples with more flexibility in managing their health savings accounts and potentially increase their ability to save for healthcare expenses by allowing catch-up contributions under a shared account. This could benefit families who are in a position to make use of HSAs and wish to enhance their savings strategies.

Relevant Companies

None found