Last week, the IRS announced in Bulletin No 2018-10, a reduction in the family contribution limit for Health Savings Accounts (HSAs). In 2017, the IRS announced a $3,450 limit for individuals and $6,900 limit for families. While the limit for individuals remains the same, the limit for families has been reduced by $50 to $6,850. The decrease from the previously announce amount is due to the change in the cost of living index in the new tax bill which caused the limit to rise a little slower than previously anticipated.
This change is for the 2018 calendar year and is retroactive back to January 1, 2018. If families have already contributed the previous maximum amount of $6,900, they may be taxed for the $50 excess. To avoid being taxed on the over-contribution, employers can remove the extra funds and return it to the employee as taxable income.
Under the same bulletin, an adjustment was also made for adoption assistance programs. The maximum amount to be withheld from an employee’s income for a qualified adoption has been reduced from $13,840 to $13,810. Additionally, the adjusted gross income threshold after which the adoption exclusion begins to phase out has been reduced to $207,140, down $440 from $207,580. The new limits should be communicated to employees and adjustments should be made for those who contribute the maximum amounts.