The Tax Cuts and Jobs Act (TCJA) has had numerous effects across an array of industries, but the changes have been particularly impactful for human resources teams that must ensure their organization remains compliant. One of the more recent adjustments comes in relation to the maximum deductible health savings account (HSA) contribution under high-deductible health plans.
Despite an initial change that included a $50 less maximum deductible HSA contribution, the Internal Revenue Service has again adjusted this amount for affected taxpayers.
Original maximum deduction contribution remains in tact
"Taxpayers will be able to treat $6,900 as the maximum deductible HSA contribution for 2018."
According to the IRS, although the TCJA encompassed inflation calculations which impacted the maximum deductible health savings account contribution amount, this change will not affect taxpayers this year.
The IRS offered relief for individuals with family coverage under a high-deductible health plan by announcing that these taxpayers will be able to treat the former $6,900 as the maximum deductible HSA contribution for 2018.
Although the proposed change was only a $50 decrease – making the maximum deductible HSA contribution $6,850 as opposed to $6,900 – the IRS noted that "numerous unanticipated administrative and financial burdens" made the adjustment difficult to implement. Due to these circumstances, IRS officials have decided to maintain the $6,900 limit for 2018, ensuring taxpayers will not face any contribution penalties.
What employers need to know
Chatrane Birbal, government relations senior advisor for the Society for Human Resource Management, noted that the IRS' decision not to execute the limit change will benefit taxpayers and employers alike, who can avoid the complications that this adjustment would require.
"The abrupt announcement earlier this year to lower the 2018 contribution level of $6,850 created confusion for employees and an administrative burden on employers that offer HSAs, especially since benefit offerings were solidified last year," Birbal said.
Because the IRS only recently announced this decision, it's important that employers inform their workers, specifically those who receive coverage under a high-deductible health plan. Some staff members may have already adjusted their HSA deductible contribution amounts according to the previous $6,850 and may want to boost this back to the original $6,900 limit.
It's also important that employees who have received distributions from the HSAs based on the adjusted $6,850 limit work with their Human Resources representatives to correct these. This may include repaying, or paying an additional 20 percent tax on the distribution (unless used for qualifying medical expenses) as part of the employee's gross income in 2018.
While these changes can make things a little complicated for employers and their HSA/high-deductible health plan employees, the IRS announcement will be a benefit for workers and businesses this year. To find out more about this change, connect with the experts at Triton Benefits and HR Solutions today.