For employers that maintain High Deductible Health Plans paired with Health Savings Accounts, the annual contribution limit previously announced by the IRS has been reduced for participants with family coverage under a HDHP. The change is reflected in IRS Notice 2018-18 and is the result of applying a different method for determining the Inflation Adjusted Amount, as required under the Budget Act recently passed by Congress. While the change is small, a reduction of $50 for the year, this will impact elections made by participants who wanted to “max out” for the year, requiring adjustments to pre-tax deductions made through a cafeteria plan.
The relevant provisions appear in Section 4 of the Notice and reads as follows:
Annual contribution limitation. For calendar year 2018, the annual limitation on deductions under § 223(b)(2)(A) for an individual with self-only coverage under a high deductible health plan is $3,450. For calendar year 2018, the annual limitation on deductions under§ 223(b)(2)(B) for an individual with family coverage under a high deductible health plan is $6,850.