Employers who sponsor a High Deductible Health Plan with a Health Savings Account (HSA) should take immediate action and notify employees that the annual maximum family contribution limit to an HSA has changed.
Revenue Procedure 2018-18 implements certain changes under the Tax Cuts and Jobs Act. One of the changes affecting health and welfare plans is a change to the methodology used by the IRS to calculate cost-of-living increases, including certain annual contribution limits. As a result of this change, the IRS has reduced the previously announced annual maximum family contribution limit to an HSA from $6,900 to $6,850, effectively immediately for 2018. The individual contribution limit of $3,450 remains unchanged.
For 2018, any family contribution to an HSA in excess of the newly announced $6,850 maximum will be subject to taxes and penalties. Any employee who has contributed more than the maximum amount for 2018 must request a refund of the excess contribution before the due date for their 2018 income tax filings.
Adoption assistance programs are also affected by the new methodology. For taxable years beginning in 2018, the maximum amount that can be excluded from an employee’s gross income for qualified adoption expenses has been reduced from $13,840 to $13,810. Also, the adjusted gross income threshold after which the adoption exclusion begins to phase out is reduced to $207,140.