HR 74 · 119th CongressIn Committee

Freedom for Families Act

Latest updateJan 3, 2025

Referred to the House Committee on Ways and Means.

Taxation

Sponsor

Andy Biggs

Introduced

January 3, 2025

Latest action

January 3, 2025

Legislative Progress

How far this bill has traveled through Congress

Introduced

Bill filed in chamber

Committee

Reviewed & reported

Passed Chamber

House or Senate vote

Passed Both

House & Senate agree

President

Sent to White House

Enacted

Signed into law

Introduced

Bill filed in chamber

Committee

Reviewed & reported

Passed Chamber

House or Senate vote

Passed Both

House & Senate agree

President

Sent to White House

Enacted

Signed into law

Latest Action

Referred to the House Committee on Ways and Means.

Plain-Language Summary

AI Generated

Currently, health savings accounts (HSAs) are tax-advantaged savings vehicles available only to individuals enrolled in high-deductible health plans. These accounts allow workers to set aside pre-tax income for qualified medical expenses, and unused balances roll over year to year. However, withdrawals for any non-medical purpose trigger income tax and a 20 percent penalty. Additionally, HSA contribution limits are tied to the specific health plan an individual holds, varying based on whether coverage is self-only or family. This structure creates inflexibility for workers facing caregiving responsibilities who need to take leave.

The Freedom for Families Act amends the Internal Revenue Code to allow tax-free HSA withdrawals during periods of qualified caregiving leave. The bill directs the Treasury Department to treat distributions from HSAs as non-taxable income when an account holder takes leave under circumstances covered by the Family and Medical Leave Act of 1993—including caring for a spouse, child, or parent with a serious health condition, or bonding with a newborn. The legislation also eliminates the requirement that HSA holders maintain high-deductible health plan coverage, and establishes a flat annual contribution limit of $9,000 for individual coverage and $18,000 for joint returns, replacing the current variable limits tied to specific plan types.

These changes take effect for taxable years beginning after enactment. The bill creates no new federal spending; it operates through the tax code by allowing HSA funds to be accessed without penalty during family leave. The removal of the high-deductible plan requirement expands HSA eligibility to workers in other insurance arrangements, potentially increasing overall HSA participation. The fixed contribution limits simplify administration but may reduce contributions for some workers previously covered under higher limits. The caregiving provision effectively converts HSAs into dual-purpose accounts that function both for medical expenses and income replacement during unpaid leave.

Key Provisions

1Authorize tax-free distributions from health savings accounts during periods of qualified caregiving leave as defined under the Family and Medical Leave Act, without triggering income tax or penalties.
2Eliminate the requirement that health savings account holders maintain high-deductible health plan coverage, allowing HSA eligibility for individuals in any health insurance arrangement.
3Establish a fixed annual contribution limit of $9,000 for individual health savings account coverage and $18,000 for joint returns, replacing variable limits previously tied to specific plan types.
4Amend the Internal Revenue Code to treat caregiving-related HSA distributions as non-includible income, conforming the tax treatment to qualified medical expense distributions.

★ Why this matters

Workers taking family or medical leave could access their HSA funds without income tax or penalties, effectively converting savings into income replacement during unpaid leave periods. Expanding HSA eligibility beyond high-deductible plan holders increases the number of workers who can build tax-advantaged health savings. Simplified, fixed contribution limits reduce administrative complexity for employers and individuals managing HSA accounts. The changes make HSAs more flexible financial tools for managing both healthcare costs and caregiving transitions.

● Who this affects

Workers taking leave under the Family and Medical Leave Act to care for family members or bond with newborns; employees in employer health plans other than high-deductible plans who currently cannot open HSAs; employers offering HSAs, who face simplified contribution limit administration; self-employed individuals and gig workers seeking tax-advantaged savings vehicles; families with caregiving responsibilities who need income support during unpaid leave; and the Internal Revenue Service, which must implement new HSA distribution tracking and reporting requirements.

Bill Text

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<DOC>

119th CONGRESS
  1st Session
                                 H. R. 74

To amend the Internal Revenue Code of 1986 to allow for tax-advantaged 
  distributions from health savings accounts during family or medical 
                     leave, and for other purposes.

                    IN THE HOUSE OF REPRESENTATIVES

                            January 3, 2025

  Mr. Biggs of Arizona (for himself and Mr. Burlison) introduced the 
 following bill; which was referred to the Committee on Ways and Means

                                 A BILL

 
To amend the Internal Revenue Code of 1986 to allow for tax-advantaged 
  distributions from health savings accounts during family or medical 
                     leave, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Freedom for Families Act''.

SEC. 2. DISTRIBUTIONS FROM HEALTH SAVINGS ACCOUNTS DURING PERIODS OF 
              QUALIFIED CAREGIVING.

    (a) In General.--Paragraphs (1) and (2) of section 223(f) of the 
Internal Revenue Code of 1986 are amended to read as follows:
            ``(1) Exclusion of amounts used for qualified medical 
        expenses or distributed during periods of qualified 
        caregiving.--Any amount paid or distributed out of a health 
        savings account shall not be includible in gross income if it 
        is--
                    ``(A) used exclusively to pay qualified medical 
                expenses of any account beneficiary, or
                    ``(B) paid or distributed during a period of 
                qualified caregiving.
            ``(2) Inclusion of amounts neither used for qualified 
        medical expenses nor distributed during periods of qualified 
        caregiving.--Any amount paid or distributed out of a health 
        savings account shall be included in the gross income of the 
        account beneficiary if it is not described in paragraph (1).''.
    (b) Definition of Period of Qualified Caregiving.--Section 223(f) 
of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new paragraph:
    ``(9) Period of Qualified Caregiving.--For purposes of this 
section, the term `period of qualified caregiving' means any period 
during which an individual is on leave or not employed by reason of a 
situation described in subparagraphs (A) through (E) of section 
102(a)(1) of the Family and Medical Leave Act of 1993.''.
    (c) Conforming Amendments.--
            (1) Section 223(d)(1) of such Code is amended by inserting 
        ``or the expenses incurred during a period of qualified 
        caregiving of the account beneficiary'' after ``paying the 
        qualified medical expenses of the account beneficiary''.
            (2) Section 223(f)(4) of such Code is amended in the 
        heading by striking ``distributions not used for qualified 
       …

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D-North Carolina · District 12

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Freedom for Families Act

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