Family HSA Contribution Reduction for 2018 Included in IRS Benefit Limit Recalculations

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The IRS has published IRS Rev. Proc. 2018-18 in Internal Revenue Bulletin 2018-10 this week that recalculates the limits on various benefits. One of the provisions in the tax reform bill enacted late last year, the Tax Cuts and Jobs Bill, was a change in the way the IRS was required to calculate cost-of-living increases.  The dollar amounts that were previously indexed and announced last fall using Consumer Price Index for All Urban Consumers (CPI-U) for the figures listed below are instead indexed using Chained Consumer Price Index for All Urban Consumers (C-CPI-U, i.e., so-called "chained CPI"). The chained CPI grows at a slower pace and will impact indexes for inflation this year and going forward.

Many of the limits related to employee benefits for 2018 remain unchanged.

  • Health care flexible spending accounts: Plan year limit remains $2,650 per plan year for plan years beginning or renewing on or after 1/1/18
  • Transportation plans: Parking and transit/vanpooling remains $260/month for each

The following are important highlights of some of the more notable differences:

Health Savings Accounts: For calendar year 2018, for a health saving account (HSA), the annual limitation on deductions is $3,450 (up from $3,400 for 2017) for an individual with self-only coverage and $6,850 (up from $6,750 for 2017) for an individual with family coverage under a high deductible health plan. The minimum deductibles ($1,300 Single, $2,700 Family) and maximum out-of-pocket limits ($6,650 Single and $13,300 Family) remain unchanged.

Note:  This is a reduction from previously reported indexes for family HSA contributions ($6,900).

Adoption Assistance Programs: For calendar year 2018, § 137(a)(2), the amount that can be excluded from an employee’s gross income for the adoption of a child with special needs is $13,810. For taxable years beginning in 2018, under § 137(b)(1) the maximum amount that can be excluded from an employee’s gross income for the amounts paid or expenses incurred by an employer for qualified adoption expenses furnished pursuant to an adoption assistance program for other adoptions by the employee is $13,810. The amount excludable from an employee’s gross income begins to phase out under § 137(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $207,140 and is completely phased out for taxpayers with modified adjusted gross income of $247,140 or more.

Note:  This is a reduction from previously reported indexes for adoption assistance plans ($13,840 annual exclusion from gross income and the income thresholds $207,580-$247,580).

Archer Medical Savings Accounts (MSA): For taxable years beginning in 2018, the term 'high deductible health plan' as defined in Section 220(c)(2)(A) means, for self-only coverage, a health plan that has an annual deductible for self only coverage that is not less than $2,300 and not more than $3,450, and under which the annual out-of-pocket expenses $4,550. For family coverage, a health plan that has an annual deductible for family coverage that is not less than $4,550 and not more than $6,850, and under which the annual out-of-pocket expenses $8,400.

Note: This is a reduction from previously reported indexes for self only maximum annual out-of-pocket ($4,600) and family minimum deductible ($4,600).

Employee Health Insurance Expense of Small Employers: For taxable years beginning in 2018, the dollar amount in effect under Section 45R(d)(3)(B) is $26,600. This amount is used under Section 45R(c) for limiting the small employer health insurance credit and under § 45R(d)(1)(B) for determining who is an eligible small employer for purposes of the credit.

Note:  This is a reduction from previously reported indexes ($26,700).

 

Categories: Benefits in General, Compliance | Tags: IRS , IR Bulletin 2018-10 , HSA , Indexes for inflation , Adoption Assistance Plans , Archer MSA , Small Employer Tax Credit , Health Care Flexible Spending Accounts , Transportation Plans , Tax Reform , 2018 Limits | Return