Earlier this year, the IRS announced a reduction in the 2018 contribution limit of Health Savings Accounts (HSAs) linked to a family plan from $6,900 to $6,850. On April 26, however, the IRS announced that they’d by granting relief to taxpayers affected by the reduction in contribution. Revenue Procedure 2018-7 states that it will allow taxpayers to treat $6,900 as the maximum deductible.
When the $50 reduction originally occurred, many taxpayers had already maxed out their contribution and therefore the announcement was met with some pushback from employers. Changes after the plan year had already started meant significant administrative costs to some employers. Employees who had already maxed out their account were also stuck in a small rut. They could either leave the $50 towards 2019 funding and pay the 6% excise tax, which truthfully only translated to a $3 tax, or deal with pulling out the excess contribution. Either way, the IRS certainly threw a wrench into HSA plans.
Employers who took action immediately and lowered their HSA plan’s contribution limit to the $6,850 should decide how to proceed with the increased limit and ensure appropriate communications are delivered to employees.
Visit www.irs.gov for more information and the most recent developments.
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