H.R. 2667 — Flexible Savings Arrangements for a Healthy Robust America Act

This section establishes rules permitting distributions from a health flexible spending arrangement (FSA) or health reimbursement arrangement (HRA)—termed "qualified HSA distributions"—directly to an employee's health savings account (HSA) upon the employee's enrollment in a high-deductible health plan (HDHP) after a significant period without such coverage. (As background, FSAs and HRAs generally provide first-dollar coverage for medical expenses and thus disqualify HDHP enrollees from HSA eligibility and contributions under current law.) Such distributions are limited to the annual health FSA limit under IRC §125(i)(1) (twice that amount for family coverage under IRC §223(b)(2)(B)), excludes those amounts from annual HSA contribution limits to the extent of account increases prior to the distribution (excluding carryovers), and allows the FSA or HRA to continue for the remainder of the plan year if its terms become HDHP-compatible (i.e., would not disqualify HSA eligibility if applied for the full year). (Thus, employees may preserve unused FSA/HRA balances in an HSA when switching to HDHP coverage.) The section also requires employers to report qualified HSA distributions on Form W-2 and applies to distributions made after December 31, 2025, in taxable years ending after such date.