Hardworking Seniors Act
- Sponsor
- Rep. Fischbach, Michelle [R-MN-7]
- Committees
- Ways and Means Committee (primary)
- Last action
- Aug 10, 2026
Bottom line
The bill allows Medicare Part A beneficiaries to contribute to HSAs but imposes new restrictions on how they can use those funds without penalty, making the benefit less straightforward than it appears.
What it actually does
This bill, the 'Hardworking Seniors Act,' amends the Internal Revenue Code of 1986 to permit individuals who are entitled to Medicare Part A solely by reason of age to contribute to Health Savings Accounts (HSAs). Currently, enrollment in Medicare Part A generally disqualifies individuals from making HSA contributions. While allowing contributions, the bill also introduces significant restrictions for these newly eligible individuals: they may not use HSA funds for health insurance premiums without penalty, and they remain subject to the 20% penalty for non-qualified distributions even after age 65, unlike other seniors.
Proponents argue
Proponents argue that this bill empowers seniors by giving them greater control over their healthcare savings, allowing them to continue benefiting from the tax advantages of HSAs even after becoming eligible for Medicare Part A. They contend it provides flexibility for those who may still be working or have high-deductible health plans alongside Medicare, promoting personal responsibility and efficient healthcare spending.
Opponents contend
Opponents might argue that while seemingly beneficial, the bill's added restrictions on penalty-free withdrawals for health insurance premiums and non-qualified distributions after age 65 diminish the practical utility of HSAs for this group, potentially creating confusion or unexpected penalties. They might also raise concerns about the administrative complexity of these carve-outs or the potential for unintended consequences in tax planning for seniors.
The bill text is very short, but its implications require careful reading and understanding of existing tax code sections.
Section 2(a) amending Section 223(c)(1)(B) of the Internal Revenue Code of 1986
HSA Eligibility for Medicare Part A Beneficiaries
This provision modifies the definition of an 'eligible individual' for Health Savings Account (HSA) purposes. It specifically adds individuals who are entitled to hospital insurance benefits under Medicare Part A solely due to their age (as defined by section 226(a) of the Social Security Act) to the list of those who can contribute to an HSA. This overturns the current rule that generally disqualifies individuals from contributing to an HSA once they enroll in Medicare Part A.
Supporters argue
Supporters argue this provision empowers seniors by allowing them to continue utilizing tax-advantaged savings vehicles for their healthcare, promoting financial independence and flexibility in managing medical costs during retirement, especially for those who continue working or have high-deductible plans.
Critics contend
Critics might argue that allowing Medicare beneficiaries to contribute to HSAs could complicate the healthcare system, potentially leading to confusion regarding coverage coordination or creating an uneven playing field for different groups of seniors.
Tradeoffs
The provision balances the desire to provide seniors with more savings options against the existing structure of Medicare and HSA eligibility rules, which were designed to prevent overlap.
Section 2(b) amending Section 223(d)(2)(C)(iv) and Section 2(c) amending Section 223(f)(4)(C) of the Internal Revenue Code of 1986
New Limitations on HSA Use for Part A Beneficiaries
These provisions introduce two key restrictions for individuals who become eligible to contribute to HSAs under the bill (i.e., Medicare Part A beneficiaries by reason of age). First, they will not be able to use HSA funds for health insurance premiums (such as Medicare Part B or D premiums) without penalty, unlike other seniors over 65. Second, they will remain subject to the 20% penalty for non-qualified distributions from their HSA, even after age 65, which is a penalty generally waived for other seniors once they reach that age. This means their HSA funds are more restricted in use and withdrawal flexibility than for other HSA holders or seniors.
Section 2(d) amending Section 223(b)(7) of the Internal Revenue Code of 1986
Continued Catch-Up Contributions for Part A Beneficiaries
This provision clarifies that individuals who become eligible to contribute to HSAs under this bill (i.e., Medicare Part A beneficiaries by reason of age) will still be able to make 'catch-up contributions' to their HSAs. Currently, individuals aged 55 or older can make additional contributions, but this amount is reduced if they are entitled to Medicare benefits. This amendment ensures that the new category of eligible individuals can continue to make these larger contributions.
These amendments significantly alter how newly eligible Medicare Part A beneficiaries can use their HSA funds. Specifically, they prevent these individuals from using HSA funds for health insurance premiums (like Medicare Part B or D) without penalty, and they remove the waiver of the 20% penalty for non-qualified distributions after age 65, which applies to other seniors.
Section 2(b) amending Section 223(d)(2)(C)(iv) and Section 2(c) amending Section 223(f)(4)(C) of the Internal Revenue Code of 1986
Why it matters:While technical amendments are standard legislative practice, the significant impact of these changes on the utility of HSAs for the newly eligible group, without explicit mention in the bill's short title or primary purpose statement, could be seen as potentially evasive, making it harder for a casual reader to grasp the full implications.
Case for: Proponents might argue these are necessary technical adjustments to ensure the HSA program's integrity and prevent unintended uses of tax-advantaged funds, aligning the new eligibility with the original intent of HSAs for out-of-pocket medical expenses rather than general retirement savings or premium payments.
Case against: Critics would argue that these provisions significantly diminish the value of allowing Medicare Part A beneficiaries to contribute to HSAs, creating a confusing and less beneficial system for seniors. They might suggest these restrictions are designed to limit the fiscal impact of the bill by making the HSA less attractive to this group, rather than genuinely empowering them.
Estimated impact: These restrictions could substantially reduce the financial flexibility and attractiveness of HSAs for millions of Medicare Part A beneficiaries, potentially leading to unexpected tax penalties for those who do not fully understand the nuanced rules.