HSA Alert

A health savings account (HSA) allow taxpayers (or their employers) with high deductible health insurance plans to contribute funds on a pre-tax basis to the HSA for the purpose of paying future medical expenses.

The dollar limit for contributions to HSAs for the 2018 tax year was announced in 2017.  However, as part of the new tax law that was enacted on December 22, 2018, the inflation adjustment calculation for certain limits and thresholds used in the tax code has changed.

As a result, in Revenue Procedure 2018-18, the IRS recently announced a change to the HSA contribution limit for the 2018 tax year.  The revised 2018 dollar limit for contributions for those with family coverage is $6,850, which is $50 less than the originally-announced limit of $6,900. Interestingly, the previously-issued 2018 dollar limit for HSA contributions for those with self-only coverage of $3,450 is unchanged by Revenue Procedure 2018-18.  Only the limit for those with family coverage was lowered.

Practitioners need to be aware of the revised HSA limit.  In addition, some taxpayers may have already made their 2018 HSA contributions before becoming aware of the change in the limit.  While some practitioner groups have requested that the IRS provide relief for those taxpayers (or their employers) who have already made 2018 HSA contributions, to date, no such relief as been provided.

As a result, unless the IRS provides any relief going forward, taxpayers who contributed more than the revised limit are required to correct their contributions to reflect the lower limit.  To the extent that employers make HSA contributions for multiple employees, the seemingly small $50 difference can have a larger effect when it relates to many employees.