UPDATE: On April 26, 2018, the IRS announced a reversal. Refer this blog for the details.
Early this March, the IRS announced a reduction of the 2018 contribution limit of health savings accounts (HSAs) linked to a family plan to $6,850, down from the $6,900 which was previously announced. This IRS recalculation occurred due to the Tax Cuts and Jobs Act that passed at the end of 2017 which now uses the chained consumer price index (chained CPI) to account for inflation.
The 2018 contribution limit for self-coverage individuals remains the same as 2017 at $3,450. The contribution limit for flexible spending accounts (FSAs) also remains unchanged.
Mark Stember, a partner in the Washington, D.C. office of the law firm Kilpatrick Townsend announced via a blog post, “Employees contributing to an HSA should be informed of the reduced maximum limit, and adjustments in contributions for the remainder of 2018 may be needed. Employees who have already contributed the maximum amount for 2018, such as a one-time HSA contribution from a beginning of the year bonus payment, will need to receive a refund of the excess contribution.”
With this change, potential administrative burdens can follow as pointed out by American Benefits Council Senior Counsel, Health Policy, Kathryn Wilber stated in an official news release, “For months, companies have been relying on the HSA limits announced in Internal Revenue Service (IRS) Revenue Procedure 2017-37, which pegged the 2018 limit for family coverage in a high-deductible health plan to $6,900. It may not seem like much, but this $50 difference creates a host of problems for employers and employees who contribute to the accounts. In fact, many taxpayers may already have made a contribution that exceeds this new limit.”
The Tax Cuts and Jobs Act had a huge impact on employer and employee payroll-related deductions. Although it seems that the last of those changes have been rolled out already, we’ll remain vigilant and stay on top of additional changes the IRS announces throughout 2018.
PAYDAY Workforce Solutions provides a single database SAAS solution for Human Capital Management (HCM) including payroll, human resources, time management, benefits administration and onboarding to companies of all sizes and in various industries.
625 The City Drive South, Suite 250
Orange, CA 92868