US SB2875

Amends the Internal Revenue Code to establish "Custom Health Option and Individual Care Expense" (CHOICE) arrangements, a new type of employer-funded health reimbursement arrangement (HRA) that reimburses employees for individual market health insurance or Medicare coverage up to a fixed dollar amount per period

Requires CHOICE arrangements to meet nondiscrimination rules by offering the same terms to all employees within designated classes (full-time, part-time, salaried, seasonal, by rating area, etc.) and prohibits employers from offering both traditional group health plans and CHOICE arrangements to the same employee class

Allows employees participating in CHOICE arrangements to use pre-tax cafeteria plan funds to purchase individual health insurance through ACA exchanges, removing the current prohibition on using such funds for exchange coverage

Creates a tax credit for small employers (those not subject to the ACA employer mandate) of $100 per enrolled employee per month during the first year of establishing a CHOICE arrangement, and $50 per month during the second year, with inflation adjustments after 2026

Requires employers to report CHOICE arrangement benefits on employee W-2 forms and provide written notice to eligible employees at least 60 days before each plan year; effective for plan years beginning after December 31, 2025