SEC. 2. TREATMENT OF HEALTH REIMBURSEMENT AR-
RANGEMENTS 
INTEGRATED 
WITH 
INDI-
VIDUAL MARKET COVERAGE. 
(a) IN GENERAL.—Section 9815(b) of the Internal 
Revenue Code of 1986 is amended— 
(1) by striking ‘‘EXCEPTION.—Notwithstanding 
subsection (a)’’ and inserting the following: ‘‘EXCEP-
TIONS.— 
‘‘(1) SELF-INSURED GROUP HEALTH PLANS.— 
Notwithstanding subsection (a)’’, and 
(2) by adding at the end the following new 
paragraph: 
‘‘(2) CUSTOM HEALTH OPTION AND INDIVIDUAL 
CARE EXPENSE ARRANGEMENTS.— 
‘‘(A) IN GENERAL.—For purposes of this 
subchapter, a custom health option and indi-
vidual care expense arrangement shall be treat-
ed as meeting the requirements of section 9802 
and sections 2705, 2711, 2713, and 2715 of 
title XXVII of the Public Health Service Act. 
‘‘(B) CUSTOM HEALTH OPTION AND INDI-
VIDUAL
CARE
EXPENSE
ARRANGEMENTS
DE-
FINED.—For purposes of this section, the term 
‘custom health option and individual care ex-
pense arrangement’ means a health reimburse-
ment arrangement— 
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‘‘(i) which is an employer-provided 
group health plan funded solely by em-
ployer contributions to provide payments 
or reimbursements for medical care subject 
to a maximum fixed dollar amount for a 
period, 
‘‘(ii) under which such payments or 
reimbursements may only be made for 
medical care provided during periods dur-
ing which the individual is covered— 
‘‘(I) under individual health in-
surance coverage (other than coverage 
that consists solely of excepted bene-
fits), or 
‘‘(II) under part A and B of title 
XVIII of the Social Security Act or 
part C of such title, 
‘‘(iii) which meets the nondiscrimina-
tion requirements of subparagraph (C), 
‘‘(iv) which meets the substantiation 
requirements of subparagraph (D), and 
‘‘(v) which meets the notice require-
ments of subparagraph (E). 
‘‘(C) NONDISCRIMINATION.— 
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‘‘(i) IN
GENERAL.—An arrangement 
meets the requirements of this subpara-
graph if an employer offering such ar-
rangement to an employee within a speci-
fied class of employee— 
‘‘(I) offers such arrangement to 
all employees within such specified 
class on the same terms, and 
‘‘(II) does not offer any other 
group health plan (other than an ac-
count-based group health plan or a 
group health plan that consists solely 
of excepted benefits) to any employees 
within such specified class. 
In the case of an employer who offers a 
group health plan provided through health 
insurance coverage in the small group mar-
ket (that is subject to section 2701 of the 
Public Health Service Act) to all employees 
within such specified class, subclause (II) 
shall not apply to such group health plan. 
‘‘(ii) 
SPECIFIED
CLASS
OF
EM-
PLOYEE.—For purposes of this subpara-
graph, any of the following may be des-
ignated as a specified class of employee: 
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‘‘(I) Full-time employees. 
‘‘(II) Part-time employees. 
‘‘(III) Salaried employees. 
‘‘(IV) Non-salaried employees. 
‘‘(V) Employees whose primary 
site of employment is in the same rat-
ing area. 
‘‘(VI) Employees who are in-
cluded in a unit of employees covered 
under a collective bargaining agree-
ment to which the employer is subject 
(determined under rules similar to the 
rules of section 105(h)). 
‘‘(VII) Employees who have not 
met a group health plan, or health in-
surance issuer offering group health 
insurance coverage, waiting period re-
quirement that satisfies section 2708 
of the Public Health Service Act. 
‘‘(VIII) Seasonal employees. 
‘‘(IX) Employees who are non-
resident aliens and who receive no 
earned income (within the meaning of 
section 911(d)(2)) from the employer 
which constitutes income from sources 
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within the United States (within the 
meaning of section 861(a)(3)). 
‘‘(X) Under such rules as the 
Secretary may prescribe, employees 
who are hired for temporary place-
ment with an unrelated person that is 
not the common law employer. 
‘‘(XI) Such other classes of em-
ployees as the Secretary may des-
ignate. 
An employer may designate (in such man-
ner as is prescribed by the Secretary) two 
or more of the classes described in the pre-
ceding subclauses as the specified class of 
employees to which the arrangement is of-
fered for purposes of applying this sub-
paragraph. 
‘‘(iii) 
SPECIAL
RULE
FOR
NEW 
HIRES.—An employer may designate pro-
spectively so much of a specified class of 
employees as are hired after a date set by 
the employer. Such subclass of employees 
shall be treated as the specified class for 
purposes of applying clause (i). 
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‘‘(iv) RULES FOR DETERMINING TYPE 
OF EMPLOYEE.—For purposes for clause 
(ii), any determination of full-time, part- 
time, or seasonal employment status shall 
be made under rules similar to the rules of 
section 105(h) or 4980H, whichever the 
employer elects for the plan year. Such 
election shall apply with respect to all em-
ployees of the employer for the plan year. 
‘‘(v) 
PERMITTED
VARIATION.—For 
purposes of clause (i)(I), an arrangement 
shall not fail to be treated as provided on 
the same terms within a specified class 
merely 
because 
the 
maximum 
dollar 
amount of payments and reimbursements 
which may be made under the terms of the 
arrangement for the year with respect to 
each employee within such class— 
‘‘(I) increases as additional de-
pendents of the employee are covered 
under the arrangement, and 
‘‘(II) increases with respect to a 
participant as the age of the partici-
pant increases, but not in excess of an 
amount equal to 300 percent of the 
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lowest maximum dollar amount with 
respect to such a participant deter-
mined without regard to age. 
‘‘(D) SUBSTANTIATION REQUIREMENTS.— 
An arrangement meets the requirements of this 
subparagraph if the arrangement has reason-
able procedures to substantiate— 
‘‘(i) that the participant and any de-
pendents are, or will be, enrolled in cov-
erage described in subparagraph (B)(ii) as 
of the beginning of the plan year of the ar-
rangement (or as of the beginning of cov-
erage under the arrangement in the case of 
an employee who first becomes eligible to 
participate in the arrangement after the 
date notice is given with respect to the 
plan under subparagraph (E) (determined 
without regard to clause (iii) thereof), and 
‘‘(ii) any requests made for payment 
or reimbursement of medical care under 
the arrangement and that the participant 
and any dependents remain so enrolled. 
‘‘(E) NOTICE.— 
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (iii), an arrangement meets 
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the requirements of this subparagraph if, 
under the arrangement, each employee eli-
gible to participate is, not later than 60 
days before the beginning of the plan year, 
given written notice of the employee’s 
rights and obligations under the arrange-
ment which— 
‘‘(I) is sufficiently accurate and 
comprehensive to apprise the employee 
of such rights and obligations, and 
‘‘(II) is written in a manner cal-
culated to be understood by the aver-
age employee eligible to participate. 
‘‘(ii) NOTICE
REQUIREMENTS.—Such 
notice shall include such information as the 
Secretary may by regulation prescribe. 
‘‘(iii) NOTICE
DEADLINE
FOR
CER-
TAIN EMPLOYEES.—In the case of an em-
ployee— 
‘‘(I) who first becomes eligible to 
participate in the arrangement after 
the date notice is given with respect 
to the plan under clause (i) (deter-
mined without regard to this clause), 
or 
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‘‘(II) whose employer is first es-
tablished fewer than 120 days before 
the beginning of the first plan year of 
the arrangement, 
the requirements of this subparagraph 
shall be treated as met if the notice re-
quired under clause (i) is provided not 
later than the date the arrangement may 
take effect with respect to such em-
ployee.’’. 
(b) INCLUSION OF CHOICE ARRANGEMENT PER-
MITTED BENEFITS ON W–2.— 
(1) IN
GENERAL.—Section 6051(a) of such 
Code is amended by striking ‘‘and’’ at the end of 
paragraph (18), by striking the period at the end of 
paragraph (19) and inserting ‘‘, and’’, and by insert-
ing after paragraph (19) the following new para-
graph: 
‘‘(20) the total amount of permitted benefits for 
enrolled individuals under a custom health option 
and individual care expense arrangement (as defined 
in section 9815(b)(2)) with respect to such em-
ployee.’’. 
(c) TREATMENT OF CURRENT RULES RELATING TO 
CERTAIN ARRANGEMENTS.— 
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(1) NO INFERENCE.—To the extent not incon-
sistent with the amendments made by this section— 
(A) no inference shall be made from such 
amendments with respect to the rules pre-
scribed in the Federal Register on June 20, 
2019, (84 Fed. Reg. 28888) relating to health 
reimbursement arrangements and other ac-
count-based group health plans, and 
(B) any reference to custom health option 
and individual care expense arrangements shall 
for purposes of such rules be treated as includ-
ing a reference to individual coverage health re-
imbursement arrangements. 
(2) OTHER CONFORMING OF RULES.—The Sec-
retary of the Treasury, the Secretary of Health and 
Human Services, and the Secretary of Labor shall 
modify such rules as may be necessary to conform 
to the amendments made by this section. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to plan years beginning after De-
cember 31, 2025. 
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SEC. 3. PARTICIPANTS IN CHOICE ARRANGEMENT ELIGI-
BLE FOR PURCHASE OF EXCHANGE INSUR-
ANCE UNDER CAFETERIA PLAN. 
(a) IN GENERAL.—Section 125(f)(3) of the Internal 
Revenue Code of 1986 is amended by adding at the end 
the following new subparagraph: 
‘‘(C) EXCEPTION
FOR
PARTICIPANTS
IN 
CHOICE
ARRANGEMENT.—Subparagraph 
(A) 
shall not apply in the case of an employee par-
ticipating in a custom health option and indi-
vidual care expense arrangement (within the 
meaning of section 9815(b)(2)) offered by the 
employee’s employer.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2025. 
SEC. 4. EMPLOYER CREDIT FOR CHOICE ARRANGEMENT. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by adding at the end the following new 
section: 
‘‘SEC. 45BB. EMPLOYER CREDIT FOR CHOICE ARRANGE-
MENT. 
‘‘(a) IN GENERAL.—For purposes of section 38, in 
the case of an eligible employer, the CHOICE arrange-
ment credit determined under this section for any taxable 
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year is an amount, with respect to each employee enrolled 
during the credit period in a CHOICE arrangement main-
tained by the employer, equal to— 
‘‘(1) $100 multiplied by the number of months 
for which the employee is so enrolled during the first 
year in the credit period, and 
‘‘(2) one-half of the dollar amount in effect 
under paragraph (1) for the taxable year, multiplied 
by the number of months for which the employee is 
so enrolled during the second year of the credit pe-
riod. 
‘‘(b) ARRANGEMENT MUST CONSTITUTE MINIMUM 
ESSENTIAL COVERAGE.—An employee shall not be taken 
into account under subsection (a) unless such employee’s 
eligibility for the CHOICE arrangement (determined with-
out regard to the employee being enrolled) would cause 
the employee to be treated under section 36B(c)(2) as 
being eligible for minimum essential coverage consisting 
of an eligible employer-sponsored plan (as defined in sec-
tion 5000A(f)(2)). 
‘‘(c) DEFINITIONS.—For purposes of this section— 
‘‘(1) 
CHOICE 
ARRANGEMENT.—The 
term 
‘CHOICE arrangement’ means a custom health op-
tion and individual care expense arrangement (as de-
fined in section 9815(b)(2)(B)). 
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‘‘(2) CREDIT PERIOD.—The credit period with 
respect to an eligible employer is the first 2 one-year 
periods beginning with the month during which the 
employer first establishes a CHOICE arrangement 
on behalf of employees of the employer. 
‘‘(3) ELIGIBLE EMPLOYER.—The term ‘eligible 
employer’ means, with respect to any taxable year 
beginning in a calendar year, an employer who is not 
an applicable large employer for the calendar year 
under section 4980H. 
‘‘(d) INFLATION ADJUSTMENT.— 
‘‘(1) IN GENERAL.—In the case of any taxable 
year beginning in a calendar year after 2026, the 
dollar amount in subsection (a) shall be increased by 
an amount equal to— 
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar 
year in which such taxable year begins by sub-
stituting ‘calendar year 2025’ for ‘calendar year 
2016’ in subparagraph (A)(ii) thereof. 
‘‘(2) ROUNDING.—If any amount after adjust-
ment under paragraph (1) is not a multiple of $10, 
such amount shall be rounded to the next lower mul-
tiple of $10.’’. 
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(b) CREDIT MADE PART OF GENERAL BUSINESS 
CREDIT.—Section 38(b) of such Code is amended by strik-
ing ‘‘plus’’ at the end of paragraph (40), by striking the 
period at the end of paragraph (41) and inserting ‘‘, plus’’, 
and by adding at the end the following new paragraph: 
‘‘(42) the CHOICE arrangement credit deter-
mined under section 45BB(a).’’. 
(c) CREDIT ALLOWED AGAINST ALTERNATIVE MIN-
IMUM TAX.—Section 38(c)(4)(B) of such Code is amend-
ed— 
(1) by redesignating clauses (x), (xi), and (xii) 
as clauses (xi), (xii), and (xiii), respectively, and 
(2) by inserting after clause (ix) the following 
new clause: 
‘‘(x) the credit determined under sec-
tion 45BB,’’. 
(d) CLERICAL AMENDMENT.—The table of sections 
for subpart D of part IV of subchapter A of chapter 1 
of such Code is amended by adding at the end the fol-
lowing new item: 
‘‘Sec. 45BB. Employer credit for CHOICE arrangement.’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2025. 
Æ 
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