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2018 HSA family contribution restored to $6,900 – IRS RP 2018-27
Earlier this year, the IRS reduced the 2018 maximum contribution limit on Health Savings Accounts (HSAs) for persons with family coverage from $6,900 to $6,850. Today, we are happy to report that the 2018 HSA family contribution has been restored to the original $6,900.
Although the amount is small, any reduction in tax savings for the American family is unacceptable. It may be that the IRS originally miscalculated the cost of living adjustment (COLA) for 2018 and then issued the reduction notice to correct the error. Who knows why the agency decided to return to the original amount, but now it all changes back again.
Impact of IRS 2018 HSA family contribution flip-flops
IRS Revenue Procedure 2018-27 explains that the reason for returning to the $6,900 limit is that “stakeholders” informed the IRS that making a correction to a $6,850 limit, “would impose numerous unanticipated administrative and financial burdens.”
These burdens come from the IRS notice of reduction being issued long after most companies’ open enrollment period for benefits had ended. As stated in the latest notice (RP-18-27), employees had already, “made annual salary reduction elections for HSA contributions through their employers’ cafeteria plans based on the $6,900 limit.”
In many cases, companies like ours notified clients of the change, advising these employers to communicate the news to their employees. Chances are that these employers expended some level of resources to make adjustments for employees election the 2018 HSA family contribution maximum of $6,900 down to the IRS change to $6,850. Some employers and payroll companies told the IRS that, “the costs of modifying the various systems to reflect the reduced maximum . . . would be significantly greater than any tax benefit . . . and in some instances may exceed $50.”
First, the bad news . . .
What a shame someone at the IRS did not think through all of that before issuing the notice to reduce the 2018 HSA family contribution in the first place.
As when the first notice went out, we will notify our employer clients advising them to inform employees, and any changes made in response to IRB 2018-10 will be reversed to get back to where we were on January 1, 2018.
In spite of all that, it is very good news indeed that the 2018 HSA family contribution is preserved for maximum tax benefits to employers and employees.
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