Tax Reform Changes HSA Limit for Family Coverage

March 7, 2018 – In Internal Revenue Bulletin 2018-10, the Internal Revenue Service (IRS) describes changes to the limit on health savings accounts (HSAs) as prescribed by the Tax Cuts and Jobs Act of 2017.

For calendar year 2018, the annual limitation on deductions under Internal Revenue Code Section 223(b)(2)(B) for an individual with family coverage under a high-deductible health plan is $6,850, down from $6,900. For an individual with self-only coverage, nothing has changed since the IRS announced limits in 2017.

For calendar year 2018, a “high deductible health plan” is defined under § 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,350 for self-only coverage or $2,700 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,650 for self-only coverage or $13,300 for family coverage.

Employer Action May Be Required

This could mean election changes may be required and excess contributions may need to be returned (e.g., for individuals who have already contributed the full family amount). MSAs and adoption assistance benefit thresholds have also been impacted. Other benefit limits (e.g., dependent care and transit) were not impacted.

An employer whose employee benefits program includes an HSA option for family coverage should notify its employees of these changes as soon as possible and make necessary arrangements related to changing elections and processing the return of excess contributions.

For more information, the Internal Revenue Bulletin 2018-10 is here.

 

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This regulatory update is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.