The IRS has announced that it will restore the family deduction limit for Health Savings Account (HSA) contributions to $6,900 for 2018. The IRS had previously set this limit last spring, but earlier this year announced that changes made by the Tax Cuts and Jobs Act would lower the limit to $6,850. Although only a $50 reduction, the change presented significant difficulties to employers who had communicated the $6,900 limit to employees and built that higher limit into their plans and payroll systems. In announcing the relief, the IRS recognized the administrative hardships presented by the $50 reduction, concluding that those burdens outweighed any benefit of enforcing the lower limit.
The restoration of the $6,900 limit will be welcome news to employers whose health plans contain an HSA. Employers may—but are not required to—allow employees to repay any distribution made on the assumption that the reduced limit would apply. Regardless of whether an employee repays that amount, the guidance provides that HSA rules will not cause the employee to be taxed on the amount of the distribution.
Ballard Spahr attorneys established the Health Care Reform Dashboard as a one-stop resource under the Affordable Care Act. We have expanded the scope of the Dashboard to extend to certain other laws, but continue the mission of providing our readers with information about significant changes affecting health care and health benefits in the United States and to establish a repository for analysis and original source material of significant developments that have occurred over time. Change is ongoing, and we will continue to update the Dashboard to reflect new legislation, administrative guidance, and judicial decisions as they are published.