Tax Reform Change Clips 2018 HSA Contribution Limit

Tax reform legislation signed into law last year made some changes in benefit cost-of-living adjustments – and one has already had an effect.

Specifically, Internal Revenue Bulletin 2018-18 revises certain 2018 figures released last May, notably (for our purposes), the maximum 2018 contribution to a family health savings account (HSA). This change is a result of a provision in H.R. 1 that changed the way that inflation-related increases are calculated.

Essentially, the family contribution limit for HSAs in 2018 has dropped, effectively immediately, from $6,900 to $6,850, although the individual contribution limit remains $3,450, and the minimum deductibles and out-of-pocket maximums for high-deductible health plans (HDHPs) weren’t changed.

The change may not be much, but some employees may have already contributed the previously announced 2018 family maximum of $6,900. If so, that (now) excess contribution needs to be withdrawn from the HSA by April 15, 2019, to avoid a 6% excise tax.

The same Internal Revenue Bulletin also reiterated the definition of a high-deductible health plan, which remains unchanged 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.”

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