Sponsoring a high-deductible health plan (HDHP) along with Health Savings Accounts (HSAs) has become a widely used employee benefits approach. When the One Big Beautiful Bill Act (OBBBA) was enacted last year, it expanded HSA eligibility for many potential participants. On December 9, 2025, the IRS issued guidance on the OBBBA’s changes to the HSA rules in Notice 2026-05. Here’s a brief overview.
The basics
HSAs are generally employer-provided, participant-owned, tax-advantaged accounts used to accumulate funds for eligible medical expenses. They can be offered to employees only in conjunction with an HDHP, which is defined in 2026 as a plan with a deductible of at least:
- $1,700 for self-only coverage (up from $1,650 in 2025), or
- $3,400 for family coverage (up from $3,300).
In addition, the plan’s maximum out-of-pocket costs can’t exceed $8,500 for self-only coverage (up from $8,300 in 2025) or $17,000 for family coverage (up from $16,600). The 2026 HSA contribution limit is $4,400 for self-only coverage (up from $4,300) and $8,750 for family coverage (up from $8,550).
As with employer-sponsored qualified retirement plans, such as traditional 401(k)s, HSA contributions are typically made via pretax salary deferrals. However, the tax treatment of distributions differs. Under a traditional 401(k), contributions and accumulated investment returns are taxable upon withdrawal. Although HSA funds can also be invested and grow tax-deferred, HSA distributions are nontaxable so long as they’re used for qualified medical expenses, which are surprisingly broad.
When HSA distributions are used for ineligible expenses, they’re subject to a 20% penalty plus federal income tax at the account holder’s ordinary rate. That 20% penalty, however, disappears when account holders turn 65 — though distributions used for nonmedical expenses from age 65 onward remain subject to regular federal income tax.
3 affected areas
As mentioned, starting this year, the OBBBA broadens eligibility for HSA participation. It does so by loosening some restrictions that previously disqualified certain individuals from contributing to an HSA in three areas:
1. Telehealth and remote care services. The law restores the “telehealth coverage exception” introduced under the Coronavirus Aid, Relief, and Economic Security Act in 2020, which temporarily allowed HDHPs to provide telehealth services without requiring participants to first meet their deductibles. The exception had expired for plans beginning on or after January 1, 2025, but the OBBBA restored it retroactively to that date and made it permanent. So these telehealth services won’t prevent eligible HDHP participants from contributing to their HSAs.
2. Bronze and catastrophic plans. Under previous rules, people who’d bought one of these two types of plans from a Health Insurance Marketplace (commonly known as an “exchange”) generally were ineligible to contribute to HSAs because the plans didn’t meet the HDHP requirements. Beginning in 2026, however, bronze or catastrophic plan enrollees can contribute to HSAs regardless of whether the plan meets the normal HDHP requirements.
3. Direct primary care service arrangements (DPCSAs). Before the OBBBA, individuals enrolled in DPCSAs generally didn’t qualify to make HSA contributions even if they were covered by an HDHP. Now they can make contributions so long as other requirements are met, such as being covered by a qualifying HDHP and not receiving other disqualifying benefits. One other caveat: Aggregate monthly fees for all DPCSAs can’t exceed $150, or $300 if the arrangement covers multiple people. Those amounts will be annually adjusted for inflation.
Q&As from the IRS from the IRS
Along with recapping the OBBBA’s changes to HSA eligibility, the guidance features a series of Q&As designed to clarify potential uncertainties in the three areas described above. For example, in response to a question about which benefits the IRS will treat as qualifying telehealth or other remote care services, Notice 2026-05 refers readers to “a service that is included on the list of telehealth services payable by Medicare that is published annually by the Department of Health and Human Services.” But it indicates that other telehealth services may also qualify.
Meanwhile, a Q&A for small employers asks whether bronze plans offered through the Small Business Health Options Program (SHOP) will be treated as eligible HDHPs. “Generally, no,” says the IRS. “SHOP coverage that may be offered by a small employer is not individual coverage and therefore does not meet the criteria to be treated as an HDHP under [the applicable tax code section].” However, there are additional details worth reviewing.
The Q&As regarding DPCSAs are quite detailed. One query asks whether DPCSA fees treated as amounts paid for qualified medical expenses under the applicable tax code section may be reimbursed by an HSA if they were paid by an individual’s employer. The answer: “No. These payments by the employer are not expenses of the HSA beneficiary. The payments are compensation excluded from employees’ gross income.”
Evolving rules
If your organization sponsors an HDHP with HSAs, be sure you understand how the OBBBA’s expanded eligibility provisions affect plan administration. You may also want to proactively inform participants about the changes. And if you’re still considering whether an HDHP with HSAs would be a good fit, be sure to account for the evolving rules in your assessment.
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We highly recommend you confer with your Miller Kaplan advisor to understand your specific situation and how this may impact you.
