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News Flash April 23 2014 - IRS Announces HSA Inflation Adjustments For 2015

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  • 1. News Flash: April 23, 2014 - IRS Announces HSA Inflation Adjustments For 2015 On April 23, 2014, the IRS announced the health savings accounts (HSA) inflation adjustments for 2015. Many employers have been eagerly awaiting the release of this information because, under the health care reform law, a non-grandfathered group health plan’s out-of-pocket maximums for its 2015 plan year cannot exceed those permitted that year for the high-deductible health plan (HDHP) coverage that an individual must have to be eligible for tax-favored contributions to an HSA. This requirement does not apply to grandfathered plans. As noted below, the dollar limits on the out-of-pocket maximum under an HDHP for 2015 are $6,450 for self-only coverage and $12,900 for family coverage. Employers will want to review their plans to ensure compliance with this requirement by the start of their 2015 plan year (January 1, 2015 for a calendar year plan). By law, the IRS must publish the annual inflation adjustments relating to HSAs no later than June 1 for the following calendar year. This chart summarizes the changes for 2015. Calendar Year 2015 Calendar Year 2014 Self-only Family Self-only Family Annual Contribution Limit $3,350 $6,650 $3,300 $6,550 HDHP Minimum Annual Deductible $1,300 $2,600 $1,250 $2,500 HDHP Maximum Out-of-Pocket Limit $6,450 $12,900 $6,350 $12,700 Catch-up Contribution $1,000 $1,000 The Annual Contribution Limit is the maximum amount of tax-favored contributions that can be made to an individual’s HSA for a calendar year. Contributions from all sources are aggregated when determining whether the limit is met. An individual may incur excise taxes on excess contributions. Catch-Up Contributions increase the Annual Contribution limit for individuals age 55 or older. The Catch-Up Contributions limit is not inflation-adjusted. When enacted, the limit was set at $500 for 2004, with $100 annual increases. In 2009, it reached the current $1,000 maximum.
  • 2. The HDHP Minimum Annual Deductible and Maximum Out-of-Pocket Limit refer to features that a health plan must have in order to qualify as a HDHP. Coverage under an HDHP is one of the conditions that an individual must meet in order to be eligible for tax-favored HSA contributions. The limits on these items are also inflation-indexed, with the potential to change each year. Employers that maintain HDHPs need to know these adjustments so that they can make any changes needed for their plans to remain HDHPs. The IRS announces the adjustments for HSAs much earlier in the year than it announces the adjustments for other types of benefits programs. (Inflation adjustments for most plans usually are announced in October or November. A chart of those limits appears in the Willis Health and Welfare Calendar, available from your Willis representative.) The earlier timing of the announcement for HSAs is mandated by legislation that Congress passed at the end of 2006 (see Willis Employee Benefits Alert, Issue 91, “Health Savings Account Legislation Makes HSAs More Flexible”). The legislation revised the provisions governing HSAs so that the IRS now must publish the annual adjustments no later than June 1 for the following calendar year. The information in this publication is not intended as legal or tax advice and has been prepared solely for informational purposes. You may wish to consult your attorney or tax adviser regarding issues raised in this publication.