Boost Your Well-Being: Increases in Contribution Limits for HSAs and More
Originally published on December 3, 2019
Updated on November 1st, 2023
Medical expenses are usually unexpected. But there’s at least one aspect that your employees can control—contributions to health-related benefit plans. And starting next year, you both can contribute a little more.
The IRS has increased contribution limits for account-based healthcare benefits such as health savings accounts (HSAs). These plans do more than provide financial assistance for medical expenses. They also present possible tax savings opportunities because they are tax free and deductible from your employees’ returns.
We’ve outlined the changes on several plan types that help employees with medical expenses.
Health Savings Account (HSA)
An HSA allows employees to set aside money to use toward medical expenses such as high deductibles. Starting in 2020, contribution limits are $3,550 for individual-only plans and $7,100 for family plans. These reflect increases of $50 and $100, respectively.
To be eligible for an HSA, an employee must be enrolled in a high-deductible health insurance plan (HDHP). The federal government defines such a plan as follows for 2020 (changes reflect slight increases from last year):
- Individual only: Annual deductible at or greater than $1,400, with an annual out-of-pocket expenses not exceeding $6,900.
- Family coverage: Annual deductible at or greater than $2,800, with an annual out-of-pocket expenses not exceeding $13,800.
Flexible Spending Account (FSA)
FSAs also provide a way to save money for medical expenses. While they’re similar to HSAs, there are several differences in how they’re established, funded and used. Additionally, an employee doesn’t need to have an HDHP to use one.
Effective in 2020, the yearly contribution limit is $2,750 for a medical FSA and $5,000 for a dependent care FSA. (The dependent care level is unchanged from 2019, while individual plan limit is up $50.)
Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)
A QSEHRA is a reimbursement benefit plan to help employees pay for expenses. Unlike HSAs and FSAs (which are funded by employee pre-tax contributions), these plans are funded by the employer.
Beginning next month, employers can contribute up to $5,250 per year for an individual QSEHRA and $10,600 for a family plan. These are increases of $100 and $150, respectively.
If you offer any of these benefits, take steps now to adjust your policies. Also make sure to edit your benefits literature to reflect the new limits so employees are in the loop.
Are you considering adding such plans to your benefits package? If so, contact the HR consultants at James Moore to help you choose the options that best suit your organization.
All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.
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