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IRS Announces 2021 Increases for HSAs

The IRS has released its 2021 annual inflation adjustments for Health Savings Accounts (HSAs) as determined under Section 223 of the Internal Revenue Code. Specifically, IRS Revenue Procedure 2020-32 provides the adjusted limits for contributions to a Health Savings Account (“HSA”), as well as the high deductible health plan (“HDHP”) minimums and maximums for calendar year 2021.

The 2021 limits are as follows:

Annual Contribution Limit
- Single Coverage: $3,600
- Family Coverage: $7,200
HDHP-Minimum Deductible
- Single Coverage: $1,400
- Family Coverage: $2,800
HDHP-Maximum Annual Out-of-Pocket Expenses (including deductibles, co-payments and other amounts, but not including premiums)
- Single Coverage: $7,000
- Family Coverage: $14,000
The catch-up contribution for eligible individuals age 55 or older by year end remains at $1,000.

Plans and related documentation, including employee communications, should be updated to reflect these new limits for 2021.

As always, please keep in mind that participation in a health FSA (or any other non-HDHP) will result in HSA ineligibility, unless the health FSA is limited to: (1) limited-scope dental or vision excepted benefits; and/or (2) post-deductible expenses.

This alert serves as a general summary of lengthy and comprehensive new provisions of the Internal Revenue Code. It does not constitute legal guidance. Please contact us with any specific questions.

We have created a response team to the rapidly changing COVID-19 situation and the law and guidance that follows, so we will continue to post any new developments. You can view our COVID-19 Response Page and additional resources by following the link here. In the meantime, if you have any questions, please contact your Fraser Trebilcock attorney.

Elizabeth H. Latchana specializes in employee health and welfare benefits. Recognized for her outstanding legal work, in both 2019 and 2015, Beth was selected as “Lawyer of the Year” in Lansing for Employee Benefits (ERISA) Law by Best Lawyers, and in 2017 as one of the Top 30 “Women in the Law” by Michigan Lawyers Weekly. Contact her for more information on this reminder or other matters at 517.377.0826 or elatchana@fraserlawfirm.com.

Brian T. Gallagher is an attorney at Fraser Trebilcock specializing in ERISA, Employee Benefits, and Deferred and Executive Compensation. He can be reached at (517) 377-0886 or bgallagher@fraserlawfirm.com.

Client Alert: IRS Announces 2020 Increases for HSAs

The IRS has released its 2020 annual inflation adjustments for Health Savings Accounts (HSAs) as determined under Section 223 of the Internal Revenue Code. Specifically, IRS Revenue Procedure 2019-25 provides the adjusted limits for contributions to a Health Savings Account (“HSA”), as well as the high deductible health plan (“HDHP”) minimums and maximums for calendar year 2020.

The 2020 limits are as follows:

Annual Contribution Limit
- Single Coverage: $3,550
- Family Coverage: $7,100
HDHP-Minimum Deductible
- Single Coverage: $1,400
- Family Coverage: $2,800
HDHP-Maximum Annual Out-of-Pocket Expenses (including deductibles, co-payments and other amounts, but not including premiums)
- Single Coverage: $6,900
- Family Coverage: $13,800
The catch-up contribution for eligible individuals age 55 or older by year end remains at $1,000.

Plans and related documentation, including employee communications, should be updated to reflect these new limits for 2020.

Client Alert: IRS Announces 2019 Increases for HSAs and Provides Relief for 2018 Reduction in Family Contribution Levels

IRS Announces 2019 Increases for HSAs and Provides Relief for 2018 Reduction in Family Contribution Levels

The IRS has just released its 2019 annual inflation adjustments for Health Savings Accounts (HSAs) as determined under Section 223 of the Internal Revenue Code. Specifically, IRS Revenue Procedure 2018-30 provides the adjusted limits for contributions to a Health Savings Account (“HSA”), as well as the high deductible health plan (“HDHP”) minimums and maximums for calendar year 2019.

The 2019 limits are as follows:

Annual Contribution Limit
- Single Coverage: $3,500
- Family Coverage: $7,000
HDHP-Minimum Deductible
- Single Coverage: $1,350
- Family Coverage: $2,700
HDHP Maximum Annual Out-of-Pocket Expenses (including deductibles, co-payments and other amounts, but not including premiums)
- Single Coverage: $6,750
- Family Coverage: $13,500
The catch-up contribution for eligible individuals age 55 or older by year end remains at $1,000

Plans and related documentation, including employee communications, should be updated to reflect these new limits for 2019. As always, please keep in mind that participation in a health FSA (or any other non-HDHP) will result in HSA ineligibility, unless the health FSA is limited to: (1) limited-scope dental or vision excepted benefits; and/or (2) post-deductible expenses.

As for 2018, the IRS recently offered relief to those taxpayers affected by the reduction in maximum family contribution. By way of background, Revenue Procedure 2017-37 provided that the adjusted limits for contributions to HSAs for calendar year 2018 were $3,450 for single coverage and $6,900 for family coverage. Based on this guidance, employers communicated these amounts to their employees, and employees made elections up to these amounts.

However, the Tax Cuts and Jobs Act reflected a change in the inflation adjustment calculations for 2018, which actually reduced the maximum annual HSA contribution for those with family coverage back down to $6,850, which was the amount for 2017.

That has since been rectified by relief provided in Revenue Procedure 2018-27, which announced that the previously established $6,900 limitation would remain in effect for 2018.

Those employers who took swift action after the passage of the Tax Cuts and Jobs Act by alerting employees of the reduction, modifying salary reduction amounts, and possibly amending plan documents, are now (depending on the wording of their plan documents and communications) likely put in the position of undoing these changes…

For others, it is welcome relief that modifications are not required.

This alert serves as a general summary of lengthy and comprehensive new provisions of the Internal Revenue Code. It does not constitute legal guidance. Please contact us with any specific questions.

Elizabeth H. Latchana specializes in employee health and welfare benefits. Recognized for her outstanding legal work, in both 2018 and 2015, Beth was selected as “Lawyer of the Year” in Lansing for Employee Benefits (ERISA) Law by Best Lawyers, and in 2017 as one of the Top 30 “Women in the Law” by Michigan Lawyers Weekly. Contact her for more information on this reminder or other matters at 517.377.0826 or elatchana@fraserlawfirm.com.