Health Savings Accounts (HSAs) are pre-tax accounts available to individuals covered under a high-deductible health plan. Eligible individuals can accumulate money, tax-free, in HSAs to pay for qualified medical expenses in the face of rising health insurance costs.
The annual limits for HSA contributions are indexed for inflation and released annually by June 1 for the following year.
Last May, the Internal Revenue Service (IRS) announced the following annual limits for HSA contributions for 2018:
- $3,450 for individuals with self-only coverage; and
- $6,900 for family coverage.
However, on March 5, 2018, the IRS announced that it was revising downward the annual limit for HSA contributions for family coverage from $6,900 to $6,850. The limit for self-only coverage has not changed. The contribution limit changed because the tax reform legislation passed in December 2017 requires a new inflation measure.
The new limit is effective immediately and applies to the 2018 calendar year.
- Notify employees of the new limit on contributions for family coverage; and
- Inform employees how they can adjust their contributions.
Employees who contribute the maximum amount under the previously-released limit may be subject to an excise tax for their excess contribution.
Employers with questions about the effect of this revised limit, including how to deal with excess contributions, should consult a tax professional.
For more information on health savings account limits, visit the IRS website.