IRS Reinstates Relief for HSA Family Maximum Limit

Last month, the IRS had announced a reduction in the maximum family contribution limit to an HSA from $6,900 to $6,850 for 2018.  However, the IRS has now maintained the $6,900 as the 2018 family limit.  The reasoning was many individuals had already made maximum payments or set salary reductions to reflect the prior maximum.  In addition, the IRS acknowledged that the costs of modifying systems to reflect the $50 reduction, and the costs associated with distributing a $50 excess contribution, would be significantly greater than any tax benefit associated with unreduced HSA contribution.

The change in procedure guidance provides instructions for individuals who may have already taken a 2018 distribution from their HSA, based on the earlier published maximum limit of $6,850.  Unfortunately, employers may face additional work if they had already communicated the lower limit to employees and correspondingly reduced employees’ cafeteria reductions.

Please note that the individual HSA contribution limit for 2018 will remain at $3,450.