Revenue Procedure 2018-27, issued by the IRS on April 26, 2018, grants relief for taxpayers by allowing the family-coverage HSA contribution limit of $6,900 to remain in effect for 2018.
In the up again, down again changes of the IRS HSA maximum, the 2018 contribution limit for health savings accounts (HSAs) linked to family coverage will now be $6,900 once more. Originally adjusted in March 2018 to $6,850, employers had to make adjustments in contributions for the remainder of the calendar year to any employee who had elected the maximum. That meant that any employee who had already contributed the maximum amount at the beginning of the year from a bonus payment or other payment option, now needed to receive a refund of any excess contributions.
Revised 2018 limits:
• HSA – annual tax-deductible contribution limit for 2018 will remain at $3,450 for self-only coverage through a high-deductible plan. For family-level coverage, the amount has been adjusted to $6,900 and a catch-up amount of $7,900 for those participants over the age of 55.
• Adoption Assistance Programs – maximum amount for qualified adoption-related expenses is $13,810 with an adjusted gross income of $207,140, after which point the exclusion begins to phase out.
• Health Flexible Spending Accounts were not changed for 2018.
Why should employees be concerned?
Many employees often calculate their HSA pre-tax contributions at open enrollment and then don’t give much thought to it throughout the year,” says Van Ballantyne, EA and owner of Counting House Associates. “Any employee who over-contributes, due to changes in IRS regulations may not realize that there is a six percent excise tax on any amounts over the federal maximum. With all of the recent shuffling of federal maximum amounts, now is a great time to review what is being contributed to make sure that it falls in line with the changes.”
Why so much shifting?
Chained CPI is tied to several health benefits – such as HSA, health flexible spending accounts (FSA) , commuter and adoption assistance benefits – causing annual adjustments to contribution limits on these benefits to increase or decrease at a slightly slower pace. With that in mind, there may be continued shifts in the coming years.
The problem is that while these changes may seem minor, after all it is just $50 we’re talking about here, the impact to employers who have to administer these plans is much bigger.
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Please be advised that, based on current IRS rules and standards, any advice contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty that the IRS may assess related to this matter. Any information contained in this article, whether viewed or subsequently printed, cannot be relied upon as qualified tax and accounting advice. Any information contained in this article does not fall under the guidelines of IRS Circular 230.