The IRS has released new limits for HSA contributions for family coverage for 2018. And they are lower!
2017 COLA Adjustment for 2018 Tax Year
On May 4, 2017, the IRS under Revenue Procedure (Rev. Proc.) 2017-37 released the COLA increases for health saving accounts (HSAs). Unlike COLA adjustments for qualified plans and IRAs, HSA COLAs must be release by June 1 of the prior year.
On March 6, 2018, the IRS issued Rev. Proc. 2018-18 which describes a few changes to some of the limits regarding HSAs, MSAs and penalties for information returns.
What Prompted this Change?
Under the Tax Cuts and Jobs Act of 2017 that was signed into law in December of 2017, one of the amendments changed the process for calculating the cost-of living adjustments for retirement plans, HSA and MSA limits. The new method basically will reduce the amount of the increases that are made after 2018.
However the following limits are changing effective for calendar year 2018:
1. The annual deduction for MSA and HSA contributions for an individual with family coverage is reduced from $6,900 to $6,850 for calendar year 2018. For an individual with self-only coverage, nothing has changed since the IRS announced the 2018 limits in 2017 (refer to IRS Revenue Procedure 2017-37).
Important Note!! Taxpayers, who have contributed the previously reported maximum amount for 2018, will need to correct the difference as an excess contribution.
2. Some of the failure to file penalties for incorrect information returns (Forms 1099-R and 5498) sent to the IRS and the taxpayer have also changed for the 2018 tax year. Unfortunately these are increased; not decreased.
Susan D. Diehl, CPC, QPA, ERPA, is President, PenServ Plan Services, Inc. and Chair of the NTSA Communications Committee.
Opinions expressed are those of the author, and do not necessarily reflect the views of NTSA or its members.