The HOPE Act, Explained

A new way to save for health expenses.

A bipartisan proposal from the Problem Solvers Caucus would create a new tax-advantaged account designed to support employer and employee contributions toward healthcare savings. The Health Out-of-Pocket Expense (HOPE) Act would allow for the creation of HOPE Accounts, tax-advantaged medical savings accounts with rules on how money is contributed, used, and reported.

What is a HOPE Account?

A HOPE Account is a trust that can only be used to pay for qualified medical expenses.

Money in the account:

  • Can be contributed by employees, employers, or (in some cases) state programs
  • Grows tax-advantaged and can be withdrawn tax-free for qualified expenses
  • Can only be spent on medical expenses for the account holder, their spouse, or dependents

If funds are used for anything other than medical expenses, they are counted as taxable income and subject to an additional 30% penalty, with limited exceptions.

Who is eligible for a HOPE Account?

Not everyone can use a HOPE Account. To contribute, a person must:

  • Have minimum essential health coverage
  • Not contribute money (or have contributions made on their behalf) to other tax-advantaged health accounts during the same month, including:
    • Health Savings Accounts (HSAs)
    • Flexible Spending Accounts (FSAs)
    • Health Reimbursement Arrangements (HRAs)
    • Archer Medical Savings Accounts

HOPE Account contribution limits at a glance

HOPE Accounts are capped at:

  • $4,000 per year for individuals
  • $8,000 per year for families

Employers and state programs combined cannot contribute more than 50% of the total annual limit. Contributions made by employees are not tax-deductible.

For employees earning less than $100,000 ($200,000 for joint filers), employer contributions to HOPE Accounts are excluded from taxable income.

The HOPE Act would reshape how workers and employers save for medical costs. For small businesses, the Act would introduce a new way to help employees prepare for medical expenses through tax-advantaged savings.