What HR Pros Need to Know about Latest Changes to HSA Maximum Contributions

And this has never been more evident than what happened over the past week with 2018 HSA contribution limits.

In May 2017, the IRS set the HSA contribution maximums for 2018. We all spent the year building our plan documents and informing our employees of their options for enrolling in HSA plans during Annual Enrollment.

Then in March 2018, the IRS came out with a real doozy… retroactively changing the HSA maximum contribution amount for an individual with family coverage from $6900 to $6850.

They had their reasons, of course. A provision in the Tax Cuts and Jobs Act signed into law on December 22, 2017, substituted a measure when determining cost-of-living increases for benefits called “the chained consumer price index” (C-CPI-U) for one previously mandated by law, the consumer price index (CPI-U). The CPI examines the weighted average of prices of a basket of consumer goods and services, such as transportation or food and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. Changes in the CPI are used to assess price changes associated with the cost of living.

Regardless of the reasons, it doesn’t change the headache and the hassle that comes with changing an employee’s max contribution (which they had elected previously) for a mere $50.

Typically expected with retroactive changes such as these, there is often hope of transition relief. But nothing is guaranteed, which is why we took steps in our benefits technology platform–Benefitsolver–to decrease the ongoing HSA plan maximum for individuals with family coverage to $6850.

Our system is highly flexible, so making that change was a calculated decision, knowing we could quickly reverse course if the IRS indeed issued relief.

And, in fact, transition relief came to fruition last week when the IRS issued Rev. Proc. 2018-27, allowing participants to treat $6900 as the annual HSA contribution limit for an individual with family coverage.

So what does this mean going forward? Here’s a couple of things to keep in mind:

Employees who already contributed $6900 or will have contributed $6900 by the end of the year will be given a break thanks to the transition relief. They can leave their contributions as is.
Going forward, employers have the option of keeping the $6850 HSA plan max limit or reverting back to $6900 for individuals with family coverage.
Review your benefit summary documents. Many employers made changes to their benefits documents based on the IRS mandate and will now need to review those documents to ensure they are up to date.
Talk to your employees. If this is confusing to us as HR professionals, imagine the confusion it’s causing your employees, potentially creating questions about their paycheck. Make sure they understand the changes that have taken place and encourage them to use this as an opportunity to review the investment they are making in their HSA.

We take pride in keeping our client population up-to-date on the latest compliance requirements. While this one has been stressful for everyone, you can trust us to have your back and ensure Benefitsolver remains compliant for all.