Tax Hot Topics
The IRS issued Notice 2026-05 (PDF - 164 KB) to provide guidance in the form of questions and answers to implement and explain changes made by the One Big Beautiful Bill Act (OBBBA) that expand the availability of health savings accounts (HSAs) under Section 223. These changes affect both the eligibility to contribute to HSAs and the types of health coverage that can coexist with HSA eligibility, making the guidance relevant to employers that sponsor high-deductible health plans (HDHPs).
Section 223 allows eligible individuals to establish an HSA, which can receive tax-favored contributions made by or on behalf of the account holder. Amounts in an HSA may be used on a tax-free basis to pay for or reimburse medical expenses. To qualify as eligible, an individual must be covered under an HDHP and have no disqualifying health coverage. An HDHP is a health plan that satisfies certain requirements, including requirements with respect to minimum deductibles and maximum out-of-pocket expenses. Only eligible individuals are allowed to make contributions to an HSA or to receive contributions from an employer to their HSA.
Generally, an HDHP is generally not permitted to provide benefits for any year until the minimum annual deductible for that year is satisfied, and payment of an annual deductible plus other annual out-of-pocket expenses (other than premiums) cannot exceed the out-of-pocket maximum for the year. However, there is a safe harbor for the absence of a deductible for preventive care.
The OBBBA provided the following favorable expansions to HSAs:
- Makes permanent a safe harbor initially enacted in 2020 for the absence of a deductible for telehealth and other remote care services that was, which is retroactively effective for plan years beginning after Dec. 31, 2024.
- Treats bronze and catastrophic plans offered through an Affordable Care Act exchange as HDHPs, even if they do not otherwise satisfy HDHP deductible or out-of-pocket statutory limits, for months beginning after Dec. 31, 2025.
- Provides that certain direct primary care service arrangements (DPCSAs) will no longer disqualify individuals from HSA eligibility and that DPCSA fees may, in many cases, be reimbursed from an HSA, effective for months beginning after December 31, 2025.
Grant Thornton insight:
Collectively, these provisions broaden employee access to HSAs and increase plan-design flexibility for employers generally beginning in 2026.
Contacts:
Content disclaimer
This content provides information and comments on current issues and developments from Grant Thornton Advisors LLC and Grant Thornton LLP. It is not a comprehensive analysis of the subject matter covered. It is not, and should not be construed as, accounting, legal, tax, or professional advice provided by Grant Thornton Advisors LLC and Grant Thornton LLP. All relevant facts and circumstances, including the pertinent authoritative literature, need to be considered to arrive at conclusions that comply with matters addressed in this content.
For additional information on topics covered in this content, contact a Grant Thornton professional.
Grant Thornton LLP and Grant Thornton Advisors LLC (and their respective subsidiary entities) practice as an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable law, regulations and professional standards. Grant Thornton LLP is a licensed independent CPA firm that provides attest services to its clients, and Grant Thornton Advisors LLC and its subsidiary entities provide tax and business consulting services to their clients. Grant Thornton Advisors LLC and its subsidiary entities are not licensed CPA firms.
Tax professional standards statement
This content supports Grant Thornton Advisors LLC’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. It is not, and should not be construed as, accounting, legal, tax, or professional advice provided by Grant Thornton Advisors LLC. If you are interested in the topics presented herein, we encourage you to contact a Grant Thornton Advisors LLC tax professional. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein.
The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal, tax, or professional advice provided by Grant Thornton Advisors LLC. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact a Grant Thornton Advisors LLC tax professional prior to taking any action based upon this information.
Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton Advisors LLC assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.
Grant Thornton Advisors LLC and its subsidiary entities are not licensed CPA firms.
Trending topics
Share with your network
Share