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IRS Reduces HSA Limit for Family Coverage for 2018

IRS Reduces HSA Limit for Family Coverage for 2018

On March 5, 2018, the Internal Revenue Service (IRS) released Revenue Procedure 2018-18 to announce changes to certain tax limits for 2018, including a reduced contribution limit for health savings accounts (HSAs).

The new tax law enacted late last year—the Tax Cuts and Jobs Act—changed the consumer price index for making annual adjustments to the HSA limits. Based on this new index, the IRS lowered the HSA contribution limit for individuals with family coverage under a high deductible health plan (HDHP) from $6,900 to $6,850. This change is effective for the 2018 calendar year. The IRS’ other HSA and HDHP limits for 2018 remain the same.

Action Steps

Employers with HDHPs should inform employees about the reduced HSA contribution limit for family HDHP coverage. Employees may need to change their HSA elections going forward to comply with the new limit. Also, any individuals with family HDHP coverage who have already contributed $6,900 for 2018 must receive a refund of the excess contribution in order to avoid an excise tax.

Type of Limit 2018

Original Limit

2018

Current Limit

Change
HSA Contribution Limit Self-only $3,450 $3,450 No change
Family $6,900 $6,850 Down $50
HSA Catch-up Contributions (not subject to adjustment for inflation) Age 55 or older $1,000 $1,000 No change
HDHP Minimum Deductible Self-only $1,350 $1,350 No change
Family $2,700 $2,700 No change
HDHP Maximum Out-of-pocket Expense Limit Self-only $6,650 $6,650 No change
Family $13,300 $13,300 No change

 

Source: IRS Reduces HSA Limit for Family Coverage for 2018