In 2017, the IRS released the 2018 inflation-adjusted figures for contributions to Health Savings Accounts (HSAs). The contribution limits for HSAs associated with High Deductible Health Plans was increased to $3,450 for individuals with self-only coverage and to $6,900 for individuals with family coverage. In December, the President signed the tax reform bill commonly known as the Tax Cuts and Jobs Act (the Act). The Act included a change in the method used to calculate inflation. As a result of that change, the IRS recently released Revenue Procedure 2018-18 which provides for a small reduction in the 2018 contribution limit for individuals with family coverage. The 2018 contribution limit for individuals with family coverage has been reduced to $6,850, down $50 from the number released in 2017. The individual limit did not change.
Excess HSA contributions are subject to a 6% excise tax imposed on the holder of the HSA, the employee, if not corrected and refunded before the last day for filing the employee’s federal income tax return (including extensions) for that calendar year. Plan Sponsors and healthcare vendors should update their enrollment materials and confirm new enrollees do not contribute more than the maximum limit for 2018. In addition, payroll departments and vendors should adjust the limits in their systems to reflect the lower contribution limit. Finally, we recommend that payroll departments and vendors audit their systems to locate participants who may have already contributed more than the maximum amount for 2018 and make arrangements for corrective refunds.