Tag Archives: health savings accounts

IRS revises HSA family contribution limit and other inflation-adjusted amounts

The Internal Revenue Service (IRS) published Revenue Procedure 2018-18 containing inflation-adjusted amounts revised due to the December 2017 enactment of the Tax Cuts and Jobs Act (P.L.115–97). The law revised the basis for certain tax adjustments from the Consumer Price Index for Urban Consumers (CPI-U) to the Chained CPI-U, effective in 2018. Thus, the new revenue procedure replaces figures previously announced for 2018 in Revenue Procedure 2017-37 (regarding health savings accounts [HSAs] and high-deductible health plans [HDHPs]) and Revenue Procedure 2017-58 (tax provisions, including those covering employer-provided benefits, that are subject to annual cost-of-living adjustments [COLAs]).

Revenue Procedure 2018-18 revises the following items (changed amounts are boldfaced):

HSAs/HDHPs: The maximum contribution limit to an HSA for family coverage under an HDHP is reduced by $50, while all other amounts remain the same. The HSA $1,000 annual “catch-up” contribution limit for individuals aged 55 or older was set by law for 2009 and later years and is not subject to inflation adjustments.

Amounts under Rev. Proc. 2017-37 2018 Updated Amounts under Rev. Proc. 2018-18
Benefit Self-Only Family Self-Only Family
HSA Maximum Annual Contribution $3,450 $6,900 $3,450 $6,850
HDHP Minimum Annual Deductible $1,350 $2,700 $1,350 $2,700
HDHP Maximum Annual Out-of-Pocket Expenses $6,650 $13,300 $6,650 $13,300

Archer Medical Savings Accounts: Some figures decrease for 2018.

Amounts under Rev. Proc. 2017-37 2018 Updated Amounts under Rev. Proc. 2018-18
Benefit Self-Only Family Self-Only Family
HDHP Annual Deductible Between $2,300 and $3,450 Between $4,600 and $6,850 Between $2,300 and $3,450 Between $4,550 and $6,850
Annual Out-of-Pocket Expenses $4,600 $8,400 $4,550 $8,400

Adoption Assistance Programs: All figures decrease for 2018.

Amounts under Rev. Proc. 2017-37 2018 Updated Amounts under Rev. Proc. 2018-18
Excludible amounts
For adoption of special
needs child
$13,840 $13,810
For other adoptions $13,840 $13,810
Phase-out Income Thresholds
Phase-out Begins $207,580 $207,140
Phase-out Ends $247,580 $247,140

Employee Health Insurance Expense for Small Employers: The amount decreases for 2018.

Amounts under Rev.
Proc. 2017-37
2018 Updated Amounts under Rev.
Proc. 2018-18
Small Employer Health Insurance Expense $26,700 $26,600

Employers that offer HSAs/HDHPs, Archer medical savings accounts, or adoption assistance to their employees, and/or employers that receive tax credits for health insurance premiums they pay for employees enrolled in qualified health plans under the Small Business Health Options Program (SHOP) should review their programs and consider modifying the amounts to comply with the updated figures. There are potential penalties and other tax consequences for noncompliance with the revised limits. For example, an employee contributing to an HSA for family coverage could be subject to additional taxes if he or she contributes at the outdated maximum amount. At this time, however, the IRS has not provided guidance on the steps necessary to make the midyear changes, so consulting with tax counsel or other expert advisers may be prudent. Employers also may have to modify administrative systems (e.g., to accommodate payroll withholding) and update communications materials to employees.

For further information about the IRS’s revised figures for 2018, please contact your Milliman consultant.

Health savings accounts (HSAs): A more substantial retirement savings tool

Health savings accounts (HSAs) have been in the news recently and for good reason. First introduced in 2003, the HSA is a tax-advantaged medical savings account available to taxpayers in the United States who enroll in a qualified high-deductible health plan (HDHP). Since their introduction, these savings accounts have proven to be valuable for participants as they offer a number of tax advantages for qualified health benefit expenses. Recent changes proposed within the Senate and House bills during the effort in 2017 to repeal and replace the Patient Protection and Affordable Care Act (ACA) are supporting even further expansion of HSAs, creating even more of an advantage. With these changes, HSAs stand to compete with other standard retirement savings mechanisms, such as tax-deferred 401(k) savings plan contributions, potentially even pushing them into the forefront.

The tax code places certain annual limits on contributions to HSAs, as well as on the HDHP’s deductible and out-of-pocket maximum. For individual coverage for 2018, the maximum contribution to an HSA is $3,450, the minimum deductible is $1,350, and the maximum out-of-pocket limit is $6,650. These limits are doubled for family coverage. The standard advantages for HSA participants have not changed since they were first introduced in 2003:

• Contributions to HSAs are tax-exempt.
• Those same contributions can be invested and any investment income and appreciation are also tax-exempt.
• Withdrawals are tax-exempt as long as participants use them to pay for qualified medical expenses, such as doctor’s visits, prescription drugs, and dental care.
• HSA funds roll over and accumulate year to year if they are not spent. They are owned by the individual.
• HSA plan contributions are not subject to the Federal Insurance Contributions Act (FICA) tax whereas 401(k) plan contributions are.

Continue reading

IRS announces HSA and HDHP adjusted limits for 2018

The Internal Revenue Service (IRS) recently published Revenue Procedure 2017-37, which provides the inflation-adjusted amounts for health savings accounts (HSAs) for calendar year 2018. The updated limits specify the maximum annual contributions to HSAs that may be tax-deductible, as well as the minimum deductibles and the maximum out-of-pocket expenses allowed under qualifying high-deductible health plans (HDHPs).

The table below reflects the 2018 and 2017 values:

The “catch-up” contribution amount of $1,000 for individuals aged 55 or older was set by law and has not changed since 2009.

Annual out-of-pocket expenses include the HDHP’s deductibles, copayments, and coinsurance, but not premiums paid by plan participants.

Employers that sponsor HSAs and HDHPs should review their programs and communications materials and plan for the updated limits for 2018.

For additional information about the 2018 updated HSA and HDHP limits, please contact your Milliman consultant.

COLAs for retirement, Social Security, and health benefits for 2014

With the release of the September 2013 Consumer Price Index (CPI) by the U.S. Bureau of Labor Statistics, the Social Security Administration (SSA) and the IRS have announced cost-of-living adjustment (COLA) figures for Social Security and retirement plan benefits, respectively, for 2014. The 2014 adjusted figures for high-deductible health plans (HDHPs) and health savings accounts (HSAs) included in this Client Action Bulletin were released by the IRS earlier this year and are provided here for convenience.

COLAs for retirement, Social Security, and health benefits

With the release of the September 2012 Consumer Price Index (CPI) the Bureau of Labor Statistics, the Social Security Administration (SSA), and the Internal Revenue Service (IRS) have announced cost-of-living adjusted figures for Social Security and retirement plan benefits, respectively, for 2013.

The 2013 adjusted figures for high-deductible health plans (HDHPs) and health savings accounts (HSAs) included in this Client Action Bulletin were released by the IRS earlier this year and are provided here for convenience.

This post was also published at RetirementTownHall.com.