For the first time since HSAs were introduced nearly 15 years ago, the Internal Revenue Service has retroactively reduced the HSA contribution limit. In a recent press release, the IRS announced that it is lowering the maximum family contribution to a Health Savings Account for 2018 from $6,900 to $6,850. The change comes as a result of the new tax bill. The self-only contribution amount remains $3,450.
While this may seem like a minor change, it can cause headaches for your individual and group clients.
Employers that offer HSA-compatible plans (and most do these days) will need to let their employees know that the family contribution amount has changed. This may require them to send out new employee packets and re-calculate the monthly withholdings from employees’ paychecks for those with family coverage who chose to max out their HSA contributions through regular payroll deductions.
Employees or individuals who front-loaded their account and have already made the maximum family contribution for 2018 will need to request an excess contribution form from their HSA administrator. This form will allow them to back the $50 excess contribution out of their account with no tax consequences. This must be completed by April 15, 2019, and failure to remove the excess contribution will cause account holders to pay taxes and a 6% penalty on the $50 excess contribution amount. The penalty continues for each year those excess funds remain in the account.
The good news is that most people with family coverage do not front-load their HSAs, and most do not contribute the annual maximum. This means that the true impact of this change on your clients may not be that significant. However, the fact that there is a change gives you an opportunity to reach out to your clients and demonstrate how you’re helping them stay in compliance.
Additionally, it gives you an opportunity to remind those with HSA-qualified plans who have not set up or are not contributing to a Health Savings Account that they really should do so.
Finally, every conversation with a client can lead to referrals or to sales of additional lines of coverage. You should definitely take advantage of every legitimate reason you have to reach out to your group and individual clients, especially now that things have slowed down a little.