On Monday, May 10, the IRS released its new limits for health savings accounts (HSAs).
They provide an annual inflation adjustment.
Individuals may now contribute $3,650 in 2022 (up from $3,600 for 2021). Families may now contribute up to $7,300 in 2022 (up from $7,200 for 2021). Unchanged is the $1,000 annual “catch-up” contribution that account holders aged 55 and up may make on top of the maximum contribution.
HSAs can be paired with a high-deductible health plan (HDHP) to help offset the deductible cost throughout the year. The limits for those out-of-pocket costs have increased as well. The self-only (individual) coverage limit is now $7,050 (up from $7,000 for 2021) and the family coverage out-of-pocket maximum is now $14,100 (up from $14,000 for 2021).
All of these increases are effective January 1, 2022; however, as individuals enroll in their benefits for 2022 this year, employers should update materials with limits information.
New HSA eligible Expenses
The last 15 months have seen a lot of change in consumer accounts in general, due to legislative and IRS pandemic relief. Notably, for HSAs, individuals may now purchase over-the-counter treatments and medications, feminine hygiene products, and personal protective equipment (PPE), such as masks, sanitizer, and sanitizing wipes purchased to prevent the spread of COVID-19.
Tax filing deadline is May 17. HSA holders may make contributions to their 2020 HSA through that date, as long as they have not yet filed income taxes for the year. Contributing to “last year’s” HSA up to the 2020 limits reduces taxable income for the tax year and boosts the funds available to cover health-related eligible expenses.
Communicating the intricacies of HSAs can be challenging. If you’d like to learn more about communicating the particulars of HSAs to your employees to help them better understand the power of the HSA, check out our e-book: The Four S’s of HSA: A Persona-Based Approach.