IRS Reduces HSA Limit for Family Coverage for 2018

March 19, 2018

The Internal Revenue Service (IRS) released the Revenue Procedure 2018-18 on March 5th to announce changes to certain tax limits for 2018, including a contribution reduction limit for Health Savings Accounts (HSAs). The IRS originally announced the inflation-adjusted limits for HSAs and HDHPs (High Deductible Health Plans) for 2018 in May 2017.

Blog Post Highlights

  • The IRS reduced the HSA maximum contribution limit for 2018 for individuals with family HDHP coverage by $50 to $6,850.
  • Previously announced HSA and HDHP limits for all others remain the same for 2018
  • Employees with family HDHP coverage may need to change their HSA election to comply with the new limit.

The Tax Cuts and Jobs Act, enacted late in 2017, changed the consumer price index for making annual adjustments to the HSA limits. Based on this new index, the IRS lowered the HSA maximum contribution limit only for individuals with family coverage under a High Deductible Health Plan (HDHP) to $6,850 from $6,900 effective for the 2018 calendar year. The IRS’ other HSA and HDHP limits for 2018 remain the same (see chart below).

Type of Limit

2018 Original Limit

2018 Current Limit

Change

HSA Contribution Limit

 

Self-only:

2018 Original Limit: $3,450

2018 Current Limit: $3,450

Change: None


Family:

2018 Original Limit: $6,900

2018 Current Limit: $6,850

Change: ↓ $50

HSA Catch-up Contributions

(not subject to adjustment for inflation)

55 or older:

2018 Original Limit: $1,000

2018 Current Limit: $1,000

Change: None

HDHP Minimum Deductible

 

Self-only:

2018 Original Limit: $1,350

2018 Current Limit: $1,350

Change: None


Family:

2018 Original Limit: $2,700

2018 Current Limit: $2,700

Change: None

HDHP Maximum Out of Pocket Expense Limit

 

Self-only:

2018 Original Limit: $6,650

2018 Current Limit: $6,650

Change: None


Family:

2018 Original Limit: $13,300

2018 Current Limit: $13,300

Change: None

 

Although the amount isn’t significant, employers with HDHPs should still inform employees about the reduced HSA maximum contribution limit for family HDHP coverage. Employees may need to change their HSA elections going forward to comply with the new limit. Also, any individuals with family HDHP coverage who have already contributed $6,900 for 2018 must receive a refund of the excess contribution to avoid an excise tax.

Each year the IRS announces inflation-adjusted limited for HSAs and HDHPs. The adjusted contribution limits for HSAs take effect as of the next January 1st. The adjusted HDHP cost- sharing limited (minimum deductible and maximum out-of-pocket limit) take effect for the plan year beginning on or after the next January 1st.

Important dates to keep in mind for this IRS change to HSA family coverage limits:

  • The 2018 contribution limits for HSAs became effective January 1, 2018.
  • On March 5, 2018 the IRS announced that the HSA contribution limit for family HDHP coverage is reduced for 2018.

For more information regarding Employee Benefits, Health Savings Accounts and High Deductible Health Plans for your business or organization, or to speak with one of our advisors, email Jason Della Penna, Senior Vice President at Brown & Brown Benefit Advisors at jdellapenna@advisorsbb.com.


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