Broker Check

HSA funding is on hold

| January 15, 2018
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2018 HSA UPDATE:

Individual: $3,450 (up from $3,400 in 2017)

Family: $6,900 (up from $6,750 in 2017)

On April 30, 2018. The IRS indicated that it would accept $6,900 as the 2018 HSA Family contribution maximum. This is a reverse decision from what was released in March indicating that the limit would be reduced to $6,850.

On March 5, 2018. The IRS provided transitional relief for periods before 2020, during which individuals won't be treated as failing to qualify as eligible individuals merely because they are covered by plans that fail to qualify as HDHPs. Individuals covered by such plans remain eligible to make and receive tax free contributions to an HSA, so long as all other requirements are met, for all periods prior to January 1, 2020.

 

Maryland CPA and CFP organizations are advising that clients not fund HSAs in Maryland until the state reconciles an issue with preventive care in Maryland health insurance plans and IRS rules. In 2016, the Contraceptive Equity Act was enacted in Maryland, to go into effect on January 1, 2018. This legislation requires that all health insurance carriers cover male contraceptive services (vasectomies) as a preventive procedure, i.e., without a deductible. In direct conflict with this Act, however, high-deductible health insurance plans (HDHPs) are prohibited from covering any benefits until the deductible is met, due to IRS regulation. The IRS does have a list of approved preventive services excluded from this mandate (e.g., various screenings, education, and contraceptive methods for women) but vasectomies are not on that list.

The Maryland Insurance Administration has gone to the IRS for clarification and is pushing for vasectomies to be added to the approved list of services so that HDHPs can provide appropriate coverage. Until then, however, contributions to health savings accounts (HSAs) may be subject to tax penalties, regardless of whether this service is used or not. Even if vasectomies are added to the list of preventive services, the IRS must backdate the position to January 1, when the Contraceptive Equity Act went into effect. The Maryland General Assembly is expected to introduce legislation on January 10 to begin addressing this disconnect. We will keep an eye on the issue and update our clients as soon as we know more.

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