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Health Savings Account contribution limit for 2018 reduced slightly for family plans

Apr 09, 2018

By Frank T. Ardito, CPA
Vice President & Director

Among the unforeseen consequences of the new Tax Cuts and Jobs Act is an unusual reduction on the limits that Health Savings Account holders can contribute to their plans.    

It’s unusual because the IRS announced last fall that the limit on contributions to HSAs for holders of family health plan coverage would remain unchanged at $6,900 for 2018.

However, because the TCJA, hastily enacted in late December, requires the IRS to change the way it calculates such tax-deferred contributions, the IRS announced in early March that the HSA contribution limit for holders of family health coverage would drop by $50, to $6,850. (An additional catch-up contribution for participants over age 55 remains intact.) The contribution limit for holders of individual health coverage remains unchanged at $3,450.

Health Savings Accounts generally are offered by employers to accompany high-deductible health plans, as a way for participants to defer tax-free savings from their paychecks in order to cover out-of-pocket healthcare expenses.

What to do?

  • If you have an HSA and you are contributing the maximum, with a family health plan, be sure to ratchet your withholding back by $50 before the end of the year to prevent over-withholding. HSAs allow for contribution changes mid-year, so there is plenty of time to make the adjustment and stay in compliance.
  • Participants in HSAs who have already made the full $6,900 contribution for the year should talk with their benefits administrators about how to get a $50 refund (plus any earnings that may have accrued).
  • Employers who offer HSAs should talk with their benefits providers about how to ensure their participants’ contributions are held within the allowable limit. Many benefits providers are still working to react to this change, so patience may be required.

Contact us with any questions you may have about HSAs or employee benefit plans. We are ready to help.

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