Yesterday, the Internal Revenue Service (IRS) released a bulletin that includes a change impacting contributions to Health Savings Accounts (HSAs) and Employer Adoption Assistance Programs.
The family HSA contribution for 2018 has been reduced from $6,900 to 6,850. This change is effective January 1, 2018. We advise plan participants to adjust their HSA contributions, if utilizing the maximum contribution for the 2018 calendar year. The individual, self-only, maximum HSA contribution limit has not changed. The current 2018 HSA contribution limits are $3,450 for self-only coverage and $6,850 for family coverage.
For employer adoption assistance programs, the maximum amount that can be excluded from an employee’s gross income for qualified adoption expenses is reduced from $13,840 to $13,810. Further, the adjusted gross income threshold after which adoption exclusion begins to phase out is reduced from $207,580 to $207,140.
The reason for the change, is due to adjustments made to accommodate the new tax law, Tax Cuts and Jobs Bill, at the end of 2017. Tax reform updates require the IRS to implement a modified method of calculating cost-of-living adjustment limits or inflation-adjusted limits for 2018. The IRS now utilizes the Chained Consumer Price Index for All Urban Consumers (Chained CPI) to calculate benefit-related inflationary adjustments. Chained CPI is a method of calculating inflation that takes into account the fact that as prices increase, some consumers switch to lower priced products or substitute products, thereby reducing the effects of inflation.
At Innovative, we are committed to providing our clients with up to date information that impacts their benefit plans, their employees, and their families. We strongly recommend advising your employees who have elected to maximize their family contribution, to adjust their annual election, to be consistent with the IRS’ new guidance. Failure to make the adjustment could lead the individual to be penalized by the IRS when filing individual tax returns.
If you have any questions about how this impacts your plan, or for any other benefit related inquiries, please do not hesitate to contact us. For more information on current, pending and future legislative changes that affect employers, we invite you to join us for one of our upcoming Update from the Hill Lunch N’ Learn seminars where program participants will hear the inside scoop from Dan & Ryan’s discussions with lawmakers at last week’s NAHU Capitol Conference. We hope to see you there!