March 06, 2018
On March 5, 2018, the Internal Revenue Service (IRS) released Revenue Procedure 2018-18 within Revenue Bulletin 2018-10 to announce changes to certain tax limits for 2018, including a reduced contribution limit for health savings accounts (HSAs).
Separately, the IRS released Notice 2018-12 to provide transition relief for certain high deductible health plans (HDHP) that provide for male sterilization or male contraceptive coverage without a deductible, or below the minimum deductible required to constitute a high deductible health plan under Internal Revenue Code (Code) Section 223. Code Section 223 is the provision governing 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 an HDHP 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.
The IRS originally announced the 2018 inflation-adjusted limits for HSAs and HDHPs back in May 2017. The following chart shows the HSA/HDHP limits for 2018, as adjusted for the IRS' recent guidance:
|Type of Limit||2018
|HSA Contribution Limit||Self-only||$3,450||$3,450||No change|
|HSA Catch-up Contributions (not subject to adjustment for inflation)||Age 55 or older||$1,000||$1,000||No change|
|HDHP Minimum Deductible||Self-only||$1,350||$1,350||No change|
|HDHP Maximum Out-of-pocket Expense Limit||Self-only||$6,650||$6,650||No change|
Additionally, Revenue Procedure 2018-18 contains the following provisions:
This Notice clarifies that a health plan providing benefits for male sterilization or male contraceptives without a deductible, or with a deductible below the minimum deductible for an HDHP under Code Section 223(c)(2)(A), doesn't meet the requirements for an HDHP. Several states require benefits for male sterilization or male contraceptives to be provided without a deductible (as preventive care). Individuals, in turn, have enrolled in such plans, with the understanding that these plans qualify as HDHP coverage, and thus, with the understanding that they are HSA eligible individuals. To provide states with time to change their laws, accordingly, in response to this Notice, transition relief is provided for periods before 2020. For these periods, an individual will not be treated as failing to qualify as an HSA-eligible individual for purposes of Code Section 223.
With respect to the change in the HSA contribution limit for 2018, employers with HDHPs 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. Also, any individuals with family HDHP coverage who have already contributed $6,900 for 2018 must receive a refund of the excess contribution in order to avoid an excise tax.
Employers covering male sterilization or male contraceptive service benefits in their HDHPs without a deductible, or at a deductible that is below the deductible limit for HDHPs, should revisit their plan design to ensure their health plan maintains their status as a HDHP.
Internal Revenue Bulletin No. 2018-10, containing Revenue Procedure 2018-18 can be found here, while Notice 2018-12 is available here.
For additional information, please contact your Burnham Benefits Consultant or Burnham Benefits at 949-833-2983 or firstname.lastname@example.org.
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