The IRS originally set the inflation-adjusted limit for contributions to an HSA under a high deductible health plan (HDHP) to $6,900 on May 4, 2017. However, the passage of the Tax Reform Bill late last year led to a recalculation of the limit based on inflation adjustments modified in the bill.
In response to the March 5 announcement of the revised $6,850 maximum, stakeholders reached out to the Treasury Department and IRS with several concerns:
- Some individuals with family coverage already made the full $6,900 HSA contribution prior to the announcement of the reduction in March.
- Others made annual salary reduction elections for HSA contributions through their employers’ cafeteria plans based on the $6,900 limit announced last May.
- The cost of modifying systems to reflect the reduced maximum, and the costs associated with distributing the $50 excess contribution, and earnings, would be significantly greater than any tax benefit associated with the unreduced HSA contribution.
- The annual inflation adjustments for HSAs are required to be published by June of the preceding calendar year.
In response to those concerns, the Treasury Department and the IRS responded that it is “in the best interest of sound and efficient tax administration” to allow taxpayers to treat the $6,900 annual limitation as the 2018 inflation-adjusted maximum contribution.
If there’s another announcement next month, we’ll let you know!