CHOICE HRA Provisions Removed from One Big Beautiful Bill Act in Final Senate Revisions

The removal of the CHOICE HRA provisions from the OBBBA means the ICHRA framework remains unchanged under the existing 2019 regulations.

BRADENTON, FL, UNITED STATES, August 5, 2025 /EINPresswire.com/ -- Core Documents, a leading provider of IRS Section 125 plan expertise, announces that the Custom Health Option and Individual Care Expense (CHOICE HRA) provisions, initially included in the One Big Beautiful Bill Act (H.R. 1), were removed during the final Senate revisions. The bill, signed into law by President Trump on July 4, 2025, no longer includes the proposed changes outlined in Sections 110201, 110202, and 110203, leaving the existing Individual Coverage Health Reimbursement Arrangement (ICHRA) framework unchanged.

Background on Proposed CHOICE HRA Provisions

The One Big Beautiful Bill Act, passed by the U.S. House of Representatives on May 21, 2025, initially proposed significant updates to the ICHRA framework, rebranding it as the CHOICE HRA effective January 1, 2026. The following sections detailed these changes:
- Section 110201: Treatment of Health Reimbursement Arrangements Integrated with Individual Market Coverage
This section aimed to codify the 2019 ICHRA regulations into federal law, transitioning the regulatory framework to a statutory one. It would have formalized the CHOICE HRA as a compliant health reimbursement arrangement, ensuring integration with individual market coverage while meeting requirements under sections 9802, 2705, 2711, 2713, and 2715 of the Public Health Service Act.
- Section 110202: Participants in CHOICE Arrangement Eligible for Purchase of Exchange Insurance Under Cafeteria Plan
This provision would have amended Section 125(f)(3) of the Internal Revenue Code to allow employees enrolled in a CHOICE HRA to use salary reductions through a cafeteria plan to cover health plan premiums purchased via a Health Insurance Exchange. This change would have addressed existing restrictions, enabling employees to save on premium costs not covered by the CHOICE HRA allowance, effective for taxable years beginning after December 31, 2025.
- Section 110203: Employer Credit for CHOICE Arrangement
This section proposed a two-year tax credit for small businesses (fewer than 50 employees) adopting CHOICE HRA arrangements for the first time. The credit would have provided $100 per employee per month in the first year and $50 per employee per month in the second year, adjusted for inflation. This incentive aimed to encourage small employers, particularly those previously unable to offer health benefits, to adopt CHOICE HRAs.

These provisions were designed to strengthen the legal foundation of ICHRAs, enhance their flexibility by integrating with cafeteria plans, and promote adoption among small businesses, with 83% of new ICHRA adopters historically not offering health benefits.

Senate Revisions and Removal of CHOICE HRA Provisions

During the Senate’s review process, finalized by July 2, 2025, the CHOICE HRA provisions in Sections 110201, 110202, and 110203 were removed from the One Big Beautiful Bill Act. The Senate’s legislative text excluded these sections, and the final bill, signed into law on July 4, 2025, retained no references to the CHOICE HRA. This decision was influenced by Senate deliberations, including concerns raised by the Senate Parliamentarian about provisions requiring a 60-vote threshold under the Byrd Rule, though specific reasons for removing the CHOICE HRA sections were not detailed in public records.

Impact on ICHRA Going Forward

The removal of the CHOICE HRA provisions means the ICHRA framework remains unchanged under the existing 2019 regulations. Key implications include:
- No Statutory Codification: ICHRAs will continue to operate under the regulatory framework established in 2019, without the enhanced legal stability that federal law would have provided.
- No Cafeteria Plan Integration: Employees cannot use salary reductions through cafeteria plans to cover Exchange-purchased health plan premiums, maintaining the current restriction that limits reimbursement flexibility.
- No Tax Credits for Small Businesses: The proposed tax credits to incentivize small business adoption of ICHRAs will not take effect, potentially slowing the growth of ICHRA adoption among small employers.
- Continued ICHRA Functionality: ICHRAs remain a viable option for employers to reimburse employees for individual health insurance premiums, subject to existing compliance requirements, offering flexibility for businesses and employees.

Core Documents remains committed to monitoring legislative developments and providing expert guidance on IRS Section 125 plans, including ICHRAs. Employers and employees seeking to navigate health reimbursement arrangements are encouraged to consult with our certified professionals for tailored solutions.

Gene Ennis
Core Documents, Inc.
+1 888-755-3373
email us here

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