News You Can Use: IRS Reduces HSA Contribution Limit for Family Coverage
On March 5, 2018, the Internal Revenue Service (IRS) released Revenue Procedure 2018-18 to announce changes to certain tax limits for 2018, including a reduced contribution limit for Health Savings Accounts (HSAs).
The new tax law enacted late last year—the Tax Cuts and Jobs Act—changed the consumer price index for making annual adjustments to the HSA limits. Based on this new index, the IRS lowered the HSA contribution limit for individuals with family coverage under a high deductible health plan from $6,900 to $6,850. This change is effective for the 2018 calendar year. The IRS’ other HSA and HDHP limits for 2018 remain the same.
Employers with HSA-compatible health plans should inform employees about the reduced HSA contribution limit for family HDHP coverage. Employees may need to change their HSA elections going forward to comply with the new limit. Any individuals with family coverage who have already contributed $6,900 for 2018 must receive a refund of the excess contribution in order to avoid an excise tax.