Yesterday the Internal Revenue Service released a bulletin which included IRS Revenue Procedure 2018-18: Inflation-Adjusted Amounts, Revised for Statutory Amendments of the Budget Reconciliation Act.
The maximum family annual contribution has been reduced from $6,900 to $6,850. This change is effective immediately. If you allow employees to make pre-tax HSA contributions you must allow them to change their elections.
2018 Limits: For calendar year 2018, the annual limitation on deductions under § 223(b)(2)(A) for an individual with self-only coverage under a high deductible health plan is $3,450. For calendar year 2018, the annual limitation on deductions under § 223(b)(2)(B) for an individual with family coverage under a high deductible health plan is $6,850.
The amounts for calendar year 2018 for a “high deductible health plan” (HDHP) remain unchanged. An HDHP is defined under § 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,350 for self-only coverage or $2,700 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,650 for self-only coverage or $13,300 for family coverage.
What if you have contributed $6,900? If an individual has exceeded the allowable limit they should notify their HSA trustee and request a distribution of the excess amount and any attributable earnings. If they have already used those monies then they should consult with the HSA trustee about how to report the earlier distributions to avoid a 6% excise tax.
If an employer has contributed more than the maximum allowed the excess contribution can be included in the individual’s taxable income in 2018. Discuss with your HSA administrator other possible options, such as returning the excess amount to the employer.
We have provided an updated 2018 IRS Limits document for your reference. We will keep you updated if any further guidance is provided. Please contact your dedicated Account team if you have any questions.
The information provided in this legislative update for our clients and colleagues is for general guidance only and is not intended to be, and does not constitute, tax or legal advice. We recommend that you consult with your tax and legal advisors for the interpretation or application of any laws for your particular circumstances and situation.