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Legislative Brief: IRS Reduces HSA Limit for Family Coverage for 2018

 

 

On March 5, 2018, the Internal Revenue Service (IRS) released Revenue Procedure 2018-18 to announce changes to certain tax limits for 2018, including a reduced contribution limit for health savings accounts (HSAs).

The new tax law enacted late last year—the Tax Cuts and Jobs Act—changed the consumer price index for making annual adjustments to the HSA limits. Based on this new index, the IRS lowered the HSA contribution limit for individuals with family coverage under a high deductible health plan (HDHP) from $6,900 to $6,850. This change is effective for the 2018 calendar year. The IRS’ other HSA and HDHP limits for 2018 remain the same.  

ACTION STEPS

Employers with HDHPs should inform employees about the reduced HSA 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 in order to avoid an excise tax.

HSA/HDHP Limits

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

The IRS originally announced the inflation-adjusted limits for HSAs and HDHPs for 2018 in May 2017.

The new federal tax law, which was enacted at the end of 2017, changed the consumer price index for making adjustments to certain tax limits, including the HSA limits. Using the new index, the IRS reduced one of the HSA/HDHP limits for 2018—the HSA contribution limit for individuals with family HDHP coverage. This limit is lowered by $50—from $6,900 to $6,850, effective for the 2018 calendar year. All of the other HSA and HDHP limits for 2018 are unchanged, and remain the same as those announced by the IRS in May 2017.

The following chart shows the HSA/HDHP limits for 2018, as adjusted for the IRS’ recent guidance:

Type of Limit

2018

Original Limit

2018

Current Limit

Change

HSA Contribution Limit

Self-only

$3,450

$3,450

No change

Family

$6,900

$6,850

Down $50

HSA Catch-up Contributions (not subject to adjustment for inflation)

Age 55 or older

$1,000

$1,000

No change

HDHP Minimum Deductible

Self-only

$1,350

$1,350

No change

Family

$2,700

$2,700

No change

HDHP Maximum Out-of-pocket Expense Limit

Self-only

$6,650

$6,650

No change

Family

$13,300

$13,300

No change

If you have questions on this change for 2018, please reach out to Jesse or another member of the Hausmann-Johnson Insurance benefits team. 

 

About the Author

Jesse Oberloh, GBA

Posted in: Employee Benefits, Legislative Brief

Posted by Jesse Oberloh, GBA

Jesse capitalizes on his 15 year background in risk management and account services to develop benefit programs for employers in a way that improves the overall health and productivity of the workforce. He is an expert in alternative funding methods for insurance including self-funded, limited funded and captive plans. By staying well informed on the latest industry trends, Jesse is able to provide proactive and strategic solutions for benefits clients. Prior to joining Hausmann-Johnson Insurance, he was Manager of Member Services at The Alliance, as well as an Account Executive at an insurance company. He is a member of the Wisconsin Association of Health Underwriters and participates in local community chambers and SHRM chapters. Jesse graduated from the University of Wisconsin-Madison with degrees in Finance & Investments, Risk Management & Insurance, and Human Resources Management. He proudly supports Badger Football and is a 15-year season ticket holder. He loves spending time up north at the family cabin fishing with his children or sneaking in a round of golf whenever possible. He also coaches his son’s Verona flag football and little league baseball teams.

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