IRS Addresses 2018 HSA Contribution Limits for Family Coverage (Again)

IRS Adjusts 2018 HSA Contribution Limits

It’s hard to keep up with all the health care legislation news lately. That’s why we’re providing regular summaries of the latest news, reflecting the current state of health care in the United States or how it may be changing in the not-too-distant future. Here’s a recap of some of the latest stories:

The Internal Revenue Service issued transition relief on April 26, 2018 allowing taxpayers to treat the 2018 Health Savings Account (HSA) contribution limit for an individual with family coverage under a High Deductible Health Plan (HDHP) as $6,900.

All taxpayers, not just those who have already contributed the maximum contribution limit, are allowed to treat the 2018 contribution limit for an individual with family coverage as $6,900.

This relief, provided in Revenue Procedure 2018-27, is in response to the previous reduction in the maximum contribution for an individual from $6,900 to $6,850 released in Revenue Procedure 2018-18.

That earlier HSA contribution change was a result of a provision in H.R. 1 (“Tax Reform”) that changed the way that inflation-related increases are calculated from the “Consumer Price Index” (CPI) to a new factor known as “chained CPI.”

With this adjustment, the IRS acknowledged that the reduction in the maximum contribution limit caused hardship to both individuals and organizations in administrating this mid-year change.

The IRS also states that taxpayers who have already taken an excess contribution distribution from their HSA based on Revenue Procedure 2018-18 have two options.

  • First, the taxpayer may treat the distribution as a mistaken distribution and pay the money back to HSA as a mistaken distribution, if allowed by the custodian of the account.
  • Alternatively, the taxpayer may continue to treat the distribution as a distribution of an excess contribution. This distribution would not need to be included in gross income or subject to excise tax unless the excess contribution is attributable to an employer or payroll deduction.

If the excess contribution is attributable to an employer or payroll deduction and was not subject to income tax, then the amount will need to be included in gross income unless the taxpayer can show there is a corresponding qualified medical expense.

The corrective procedures above are subject to tax filing deadlines. For more information, please see Revenue Procedure 2018-27.

As with the previous adjustment, the HSA contribution limit for those with individual coverage was not impacted by this new change and remains $3,450 for 2018.

Other HSA-related limits, including the minimum deductible for an HSA-qualified high deductible health plan (HDHP), maximum out of pocket limits for HSA-qualified plans, and the post-age 55 contribution catch up limit, have not changed.

For specific guidance on how this impacts your plan, contact your ERISA attorney, broker, consultant, or tax and benefit expert.

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By |2018-04-27T11:04:45-04:00April 27th, 2018|Brokers, Employer Posts, HSAs, Legislation|
Disclaimer: ConnectYourCare does not provide tax or legal advice. This information is not intended and should not be taken as tax or legal advice. Any tax or legal information in this notice is merely a summary of ConnectYourCare’s understanding and interpretation of some of the current tax regulations and is not exhaustive. You should consult your tax advisor or legal counsel for advice and information concerning your particular situation before making any decisions.

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