The IRS announced changes to the Health Savings Account (HSA) contribution limits and the High Deductible Health Plan (HDHP) plan limits. These changes will become effective as of January 1, 2013. Download the IRS official notice here.
HSA Contribution Limits
HDHP Minimum Deductible
- Single Coverage: $3,250 (up from $3,100 in 2012)
- Family Coverage: $6,450 (up from $6,250 in 2012)
HDHP Out-of-Pocket Maximum
- Single Coverage: $1,250 (up from $1,200 in 2012)
- Family Coverage: $2,500 (up from $2,400 in 2012)
- Single Coverage: $6,250 (up from $6,050)
- Family Coverage: $12,500 (up from $12,100)
Medical plans which meet the IRS guidelines, including the minimum deductible and out-of-pocket limits, qualify as HSA compatible plans. The benefit of an HSA compatible plan is that it allows those enrolled in such plans to contribute to an HSA up to the IRS annual limit. HSA contributions qualify as an "above the line" federal tax deduction, meaning the contributions you make to the HSA reduce your Adjusted Gross Income (AGI). In addition to reducing your AGI, the interest earned in an HSA is not subject to federal taxes and withdrawals from the HSA for qualified health expenses are not subject to federal taxes. Each state taxes HSA contributions differently, please seek individual tax advice from a professional to determine how your state handles HSA contributions.
The IRS's governing rules and the eligibility criteria for an HSA can be complex. It is very important for benefit administrators and plan participants to be aware of these rules and consult with a benefits and or tax professional when questions arise. Tax penalties will apply for noncompliance.
More and more employers (large and small) are looking at the option of offering an HDHP in an effort to lower their premium costs. A recent Aon Hewitt report showed that 51 percent of employers now offer a Consumer Driven Health Plan (CDHP), up from just 9 percent in 2005. Many employers use the savings found by moving to an HDHP to fund a portion of the employee's deductible through an HSA contribution. Although the dramatic premium savings may not be available to employers as it had been when HDHPs initially hit the market, the advantages of a HDHP paired with a wellness program is a relevant benefit strategy for employers to consider.