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HB Counsel Client Alert – “Effective Immediately: Adjusted 2018 Health Savings Accounts Contribution Limit.”

Effective Immediately:  Adjusted 2018 Health Savings Accounts Contribution Limit

The IRS initially released the 2018 cost-of-living adjustments for Health Savings Accounts (HSAs) on May 4, 2017.  The 2018 limits effective January 1, 2018, for contributions to HSAs were:

  • Individual plan maximum contribution = $3,450
  • Family plan maximum contribution = $6,900

On December 20, 2017, the Senate and House of Representatives passed H.R. 1, more commonly known as the Tax Reform Bill.  President Trump signed H.R. 1, the “Tax Cuts and Jobs Act,” (the “Act”) into law on December 22, 2017.  The Act modifies the calculations the IRS uses to set specific annual dollar limits, including those for contributions to HSAs.

As a result, on March 5, 2018, the IRS published new limits for contributions to HSAs:

  • Individual plan maximum contribution = $3,450
  • Family plan maximum contribution = $6,850

The new HSA 2018 Family Plan contribution limit was effective immediately as of March 5, 2018.

Next Steps

Individuals and employers who contribute to HSAs, and are funding or pre-funded the full family amount of $6,900, will need to make modifications to comply with the newly adjusted $6,850 family contribution limit.

  • If the maximum family contribution of $6,900 was made prior to March 5, 2018:

The individual will need to deduct the excess $50 contribution, plus any interest earned, and claim it as income for 2018.  The IRS has not issued guidance addressing whether employers will need to treat this $50 amount as gross wages on Form W-2.

  • If the maximum family contribution of $6,900 was planned, but not funded prior to March 5, 2018:

The individual and employer will need to modify the remaining contributions for the year to not exceed the annual maximum of $6,850.

Changes to Flexible Spending Accounts (FSAs)

The IRS has not addressed whether the new calculation will affect the contribution limit for Flexible Spending Accounts (FSAs).  The 2018 contribution limit for FSAs will remain at $2,650 unless the IRS issues guidance changing the limit.

Requests for Relief

On March 20, 2018, Congressmen Mike Kelly (R-PA) and Erik Paulsen (R-MN) sent letters to Treasury Secretary Mnuchin requesting that the HSA contribution change not take effect in 2018.  Numerous other organizations have written the Treasury Department requesting transitional relief from the HSA contribution change for 2018.  However, the Treasury Department has issued no transitional relief for 2018 to date.

We continue to monitor the status of these requests for relief and will provide an update if the IRS issues additional guidance.

The content herein is provided for educational and informational purposes only and does not contain tax or legal advice.  Please contact our office if you have any questions about the impact of the IRS HSA limitation change on your employee benefit plans.

Dated:  March 22, 2018

 

 

 

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