We mention HSAs (Health Savings Accounts) frequently because they are a growing share of the market in employer sponsored health insurance. This is because they lower the cost of insurance by making part of the cost of medical care payable by the employee. The employer can contribute to this amount, but spending is at the employee’s discretion. This should restrain spending and therefore help to hold down costs.
So we wanted to review the dollar limits and other rules of HSAs.
2018 Contribution Limit
(Family) $6,850 (see below)
Additional Catch-Up Contribution (55 or older) $1,000
- Opening Deadline: April 15th of next year, no extension.
Funding Deadline: April 15th of next year, no extension.
- Annual contribution limit may be affected by the number of months that you have an HDHP in a given tax year.
- You cannot use HSA funds to pay for expenses incurred prior to opening the account.
- Any eligible individual can contribute to an HSA.
- For an employee’s HSA, the employee, the employee’s employer, or both may contribute to the employee’s HSA in the same year as long as the aggregate contributions are under the contribution limit.
- 2018 HDHP Minimum Deductible:
For a single individual, an HSA-qualified health plan in 2018 must have a deductible no lower than $1,350.
For a family, an HSA-qualified health plan in 2017 must have a deductible no lower than $2,700.
- 2018 HDHP Maximum Out of Pocket:
For a single individual, the maximum out-of-pocket exposure on an HSA-qualified health plan cannot exceed $6,650.
For a family, the maximum out-of-pocket exposure on an HSA-qualified health plan cannot exceed $13,300.
After the passing of the tax reform bill, known formally as the Tax Cuts and Jobs Act, the IRS adjusted the amount for HSA family contributions from $6,900 to $6,850 due to a change in inflation calculations. After public outcry and consideration of the administrative and financial burdens this change would have on tax payers, the IRS has released a notice allowing for taxpayers to treat $6,900 as the annual limitation for an individual in family coverage under a high deductible health plan (HDHP) for 2018.
The IRS allows for individuals who have reduced their HSA contribution to meet the $6,850 change, via a distribution from the account, to repay the additional $50 without requiring an additional reporting to the IRS. Therefore, individuals who wish to maximize their HSA contribution limit, for 2018, may utilize the $6,900 limit, if enrolled in family coverage under a qualified HDHP, for eligible medical expenses.