IRS lowers family HSA contribution

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The Internal Revenue Service announced in a March service bulletin that it is changing the inflation adjusted amounts individuals with family coverage under a high-deductible health plan can contribute to their health savings account in 2018.

The annual limitation on deductions for an individual with family coverage will be $6,850 in 2018, not $6,900, as the IRS previously had announced. The changes to the family coverage HSA contribution limitations were prescribed by the Tax Cuts and Jobs Act of 2017.

For individuals who only cover themselves, the annual limitation on deductions is $3,450, which is the same as in 2017. Flexible spending accounts, transit and other benefit limits linked to the chained consumer price index because of tax reform were not affected for 2018.

The IRS describes a high-deductible health plan as one in which the annual deductible is not less than $1,350 for self-only coverage or $2,700 for family coverage, and the annual out-of-pocket expenses do not exceed $6,650 for self-only coverage or $13,300 for family coverage.

“Employees contributing to an HSA should be informed of the reduced maximum limit, and adjustments in contributions for the remainder of 2018 may be needed,” Mark Stember, a partner in the Washington, D.C. office of law firm Kilpatrick Townsend, advised employers in a blog post. “Employees who have already contributed the maximum amount for 2018, such as a one-time HSA contribution from a beginning of the year bonus payment, will need to receive a refund of the excess contribution.”

Internal Revenue Bulletin 2018-10 is here.

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