Based on new guidance issued this week from the IRS, the Health Savings Account (HSA) annual contribution limit applicable to an individual with family coverage has been reduced to $6,850. This guidance was announced in Revenue Procedure 2018-18, which modified the inflation-adjusted figures to reflect changes made under the Tax Cuts and Jobs Act of 2017. As a result, the IRS reduced the 2018 family HSA contribution limit by $50 from the originally announced $6,900 limit to the new $6,850 limit. The individual HSA contribution limit for 2018 remains unchanged at $3,450.
The adoption assistance program maximum exclusion was also reduced. For taxable years beginning in 2018, the maximum amount that can be excluded from an employee’s gross income for the amounts paid or expenses incurred by an employer for qualified adoption expenses furnished pursuant to an adoption assistance program by the employee is $13,810 (reduced from $13,840).
As we noted in a prior alert, the retirement plan limits previously announced in IR 2017-177 and detailed in Notice 2017-64 remain in place as announced.
Employers with HSAs and/or adoption assistance programs will want to communicate these changes with employees promptly. Employees with family coverage who are currently contributing to a HSA through payroll deductions may need to adjust their contributions to avoid over-contributing. Coordinating with the HSA administrator will also be required. In the event an employee has already contributed the previously announced maximum amount of $6,900, then return of the excess contribution should be facilitated during 2018.