In October 2017, the Internal Revenue Service (IRS) released the 2018 contribution and benefit limits for retirement and other benefit plans types. The IRS recently announced revisions to the Health Savings Account (HSA) contribution limit for individuals with family coverage. This change is a result of the tax reform law. Keep in mind, for HSA purposes, family coverage is any coverage other than self-only coverage. Below are a few HSA contribution highlights:
- The new 2018 HSA contribution limit for individuals with family coverage is $6,850, which is $50 less than the previously announced limit of $6,900. This change will only affect you, if you had intended to “max out” your 2018 HSA contributions.
Example: If you intended to contribute $6,900 to your HSA for 2018, you will now be able to contribute only $6,850. If you have already contributed more than $6,850 to your HSA for 2018, to avoid adverse tax consequences, you will need to take a withdrawal of the excess contribution before April 15, 2019 or before you file your 2018 personal income tax return. If you find yourself in this situation, contact the HSA custodian for information about the paperwork you will need to complete for the excess contribution withdrawal.
- This change does not affect you if you are enrolled in self-only coverage for all of 2018. In this case, your annual contribution limit for 2018 will remain $3,450.
- If you are age 55 or older as of December 31, 2018, you may still contribute an additional $1,000 in catch-up contributions to your HSA for 2018.
- If you are not eligible to make HSA contributions for all of 2018 because, for example, you enroll in Medicare during the year or cease being covered by a high deductible health plan, your HSA contribution limit will be pro-rated.
It is important to update plan documents and benefit plan materials to reflect the recent changes. It is also important to consider any individual participant notification requirements that are necessary to remain in compliance with plan rules. If you have questions about the changes or their impact on your benefit plans, please contact Smith Schafer for assistance. We are also available for benefit plan consulting, plan audit and third-party retirement plan administration needs. For additional information, click here to contact us. We look forward to speaking with you soon.