The IRS has announced new HSA maximum contribution limits to health savings accounts, courtesy of the Tax Cuts and Jobs Act of 2017.Beginning with the 2018 calendar year, the annual HSA maximum contribution limits allowed for those enrolled in family coverage is reduced to $6,850 (from $6,900).
There are also drops in the maximum income tax exclusion on adoption assistance benefits and the threshold for the ACA’s 40% excise tax on high-cost group plans. All of these changes are the result of using the chained consumer price index (known as chained CPI) instead of the standard index (traditional CPI) to adjust for inflation, a switch mandated by the new tax law.
Chained CPI takes into account not only price increases, but also the modified consumer spending that results—for example, buying less expensive generic brands or different products altogether. This is seen as having a mitigating effect on inflation, which in turn leads to lower cost-of-living increases from chained CPI.
The new HSA maximum contribution limits apply retroactively to the 2018 calendar year, despite the fact that they were announced over two months after the year began. For the reduction in the HSA family maximum, we recommend you notify the affected employees of the change and modify their annual election to the reduced amount ($6,850) so they do not overcontribute. Note that there is no change in the limits for people enrolled in self-only coverage.
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.