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, 2014. Download the IRS official notice.
HSA Contribution Limits
HDHP Minimum Deductible
- Single Coverage: $3,300 (up from $3,250 in 2013)
- Family Coverage: $6,550 (up from $6,450 in 2013)
HDHP Out-of-Pocket Maximum
- Single Coverage: $1,250 (no change from 2013)
- Family Coverage: $2,500 (no change from 2013)
- Single Coverage: $6,350 (up from $6,250 in 2013)
- Family Coverage: $12,700 (up from $12,500 in 2013)
As evidenced by a recent survey (conducted by Devenir) of the top 50 HSA providers, we continue to see the popularity and the money invested in Health Savings Accounts grow. The following are a few highlights from the survey:
- Total number of HSA accounts grew to more than 8.2 million with total assets of $15.5 billion. This a 22% increase in the number of accounts and 27% of increase in total assets as compared to the prior year.
- Average account balance by end of 2012 was $1,879, up from $1,807 (4% increase)
- HSA contributions reached $13.2 billion in 2012, with accounts retaining about 23% of those contributions
- HSA investment assets reached $1.7 billion in 2012, which is a 55% increase since the end of 2011
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.