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IRS Reduces HSA Contribution Amount for Current Year

In 2017, the IRS released the 2018 inflation-adjusted figures for contributions to Health Savings Accounts (HSAs).  The contribution limits for HSAs associated with High Deductible Health Plans was increased to $3,450 for individuals with self-only coverage and to $6,900 for individuals with family coverage.  In December, the President signed the tax reform bill commonly known as the Tax Cuts and Jobs Act (the Act).  The Act included a change in the method used to calculate inflation.  As a result of that change, the IRS recently released Revenue Procedure 2018-18 which provides for a small reduction in the 2018 contribution limit for individuals with family coverage.  The 2018 contribution limit for individuals with family coverage has been reduced to $6,850, down $50 from the number released in 2017.  The individual limit did not change.

Excess HSA contributions are subject to a 6% excise tax imposed on the holder of the HSA, the employee, if not corrected and refunded before the last day for filing the employee’s federal income tax return (including extensions) for that calendar year.  Plan Sponsors and healthcare vendors should update their enrollment materials and confirm new enrollees do not contribute more than the maximum limit for 2018.  In addition, payroll departments and vendors should adjust the limits in their systems to reflect the lower contribution limit.  Finally, we recommend that payroll departments and vendors audit their systems to locate participants who may have already contributed more than the maximum amount for 2018 and make arrangements for corrective refunds.

Jackson Lewis P.C. © 2018

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About this Author

Kathryn Wheeler Knowledge Management Lawyer Jackson
Attorney

Kathryn W. Wheeler is the Knowledge Management (“KM”) Attorney for Jackson Lewis P.C.’s Employee Benefits Practice Group, and is based in the Overland Park, Kansas, office of Jackson Lewis P.C. She has more than 24 years in the employee benefits industry, 14 of those years as a benefits manager for private industry. 

Ms. Wheeler has experience with employee benefits from the perspective of clients and of legal counsel, giving her the ability to understand the issues confronting clients from both sides of the table. Her zeal...

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Melissa Ostrower, Employee Benefits Attorney, Jackson Lewis Law Firm, qualified retirement plans
Principal

Melissa Ostrower is a Principal in the New York City, New York, office of Jackson Lewis P.C. She counsels clients in a broad range of employee benefit matters, including general compliance and administration of qualified retirement plans and nonqualified retirement plans.

Ms. Ostrower assists clients with welfare plan issues involving cafeteria plans, health plans, flexible spending accounts, COBRA and the Affordable Care Act. She regularly speaks on all benefits issues including federal health care reform, fiduciary compliance and executive compensation.

(212) 545-4000