30 April 2018

Follow the Bouncing Ball: 2018 Family HSA Limit is Back to $6,900

The family HSA contribution limit for 2018 was initially set at $6,900, was reduced to $6,850 and is now once again, $6,900.  What’s going on?

The maximum single and family HSA contribution limits are subject to annual adjustment for changes in the cost-of-living.  The new limits for a calendar year are reviewed annually and any changes in the limits are typically announced in the spring before the new year begins.  The family HSA contribution for 2018, announced in May 2017, was to be $6,900.

The tax reform legislation enacted in late 2017 changed the method of adjusting for inflation beginning in 2018 to a “chained CPI” approach which tends to produce lower cost-of-living increases.  The IRS recalculated various annual limits in light of the new rules.  Most of the limits were not adjusted as a result of this change.  However, in March 2018, the IRS made one key adjustment regarding the 2018 family HSA contribution limit, decreasing it from $6,900 to $6,850.

Stakeholders, including individuals, employers and HSA trustees and custodians, pushed back on the IRS.  As a result of the comments received, the IRS announced on April 26, 2018 that it will allow taxpayers to contribute up to $6,900 for the family HSA contribution limit for 2018 after all.  If an individual contributed the full $6,900 and already requested and received a $50 distribution, the taxpayer may repay the distribution, including earnings, to his/her HSA.

If you have any questions about this HSA development, please contact the authors or any other member of the Employee Benefit Practice Group.