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IRS Revises 2018 Family Contribution Limit for HSAs

Posted on March 27th, 2018

On Monday, March 5, 2018, the IRS published Internal Revenue Bulletin (IRB) 2018-10 that contains Revenue Procedure (Rev. Proc.) 2018-19. 
Effective 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. 
There has been no change in the individual contribution limit of $3,450 or the catch-up contribution limit of $1,000 for calendar year 2018.
What needs to be done?
Employers offering High Deductible Health Plans (HDHPs) with HSAs should notify their employees of this change and should let employees know who to contact in the case of any excess contributions.
Employees who are contributing via pre-tax payroll deduction towards the previous contribution limit of $6,900 should adjust their Cafeteria Plan election down to the new maximum of $6,850. If this correction is not made, then the excess contributions should be reported as gross income to the employee.
Employees or individuals who have already contributed the full $6,900 contribution for calendar year 2018 should contact their HSA administrator to remove the excess contribution prior to the 2018 tax filing deadline. Any excess contributions that are not resolved by this time will be subject to income tax and a 6% excise tax.
Why the change?
This change came as a result of the tax reform law (P.L. 115-97) that changed the annual inflation adjustment factor from the Consumer Price Index (CPI) to a new factor known as 'chained CPI.'. This change was anticipated to slow the rate of changes in all programs under the tax code, including HSAs. 
Do you have questions about the new HSA family contribution limit or how to correct excess contributions? Simply ask the expert, and Flex will be happy to help!

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