HR-5463 : Still Just a Bill

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The "Choice Arrangement Act of 2025" (H.R. 5463) amends the Internal Revenue Code of 1986 to modify the treatment of employer-provided health reimbursement arrangements (HRAs) integrated with individual market coverage. Key provisions include:

• Custom Health Option and Individual Care Expense Arrangements: Defines these arrangements as employer-provided group health plans funded solely by employer contributions for medical care reimbursements, subject to a maximum fixed dollar amount.
• Requirements for Arrangements: These arrangements must:
  • Only reimburse medical care when the individual is covered by individual health insurance, Medicare Parts A and B, or Medicare Part C.
  • Meet nondiscrimination requirements, offering the arrangement on the same terms to all employees within a specified class (e.g., full-time, part-time, salaried).
  • Meet substantiation requirements to verify enrollment in qualifying coverage and validity of reimbursement requests.
  • Provide employees with written notice of their rights and obligations under the arrangement.
• W-2 Inclusion: Requires employers to report the total amount of permitted benefits for enrolled individuals under a custom health option and individual care expense arrangement on the employee's W-2 form.
• Cafeteria Plan Eligibility: Allows employees participating in a custom health option and individual care expense arrangement to purchase exchange insurance under a cafeteria plan, which is normally prohibited.
• Employer Credit: Establishes an employer tax credit for establishing a "CHOICE arrangement"
  • The credit is $100 per month for the first year of enrollment, and $50 per month for the second year of enrollment, per employee.
  • The employer must not be considered a large employer under section 4980H.

The amendments generally apply to plan years beginning after December 31, 2025.

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