Wanted to take a quick moment to let all our readers know that effective immediately for calendar year 2018, the family contribution limit for Health Savings Accounts (HSAs) has been lowered to $6,850 from the previously set amount of $6,900.
Please inform your employees or be aware yourself that the maximum contribution to your HSA has been reduced by $50.00. This may force some HSA owners to make some changes in their contribution amounts to ensure that they will not exceed the maximum. If the employee has already contributed the entire amount for the year, then they will need to receive a refund before the end of the 2018 calendar year.
For individuals who only cover themselves, the deduction remains the same ($3,450) as 2017.
Other types of accounts such as Flexible Spending and Transit were not affected for 2018.
This reduction is due to changes related to the Tax Cuts and Jobs Bill legislation defining how the cost of living rates should be calculated. The Bill states that the cost of living increase must use the “Chained CPI” approach. Chained CPI calculates inflation to include the fact that as some prices increase, some consumers will switch to lower priced products or switch to different products. This consumer activity reduces the overall impact of inflation. Over time, the Chained CPI will ultimately produce lower cost of living increases. The immediate impact of this calculation is to lower the amount that the IRS allows for contribution to the employee’s HSA.
HSA’s are used to help fund high-deductible health plans. Those are defined as plans where the annual deductible is not less than $1,350 for individuals or $2,700 for family coverage and the annual out-of-pocket expenses do not exceed $6,650 for individuals or $13,300 for families.
If you have any questions or wish to talk about how this impacts your business and your employees, please contact us.
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