This article is from McKenna Long and Aldridge, LLP…
May 7, 2012
The Internal Revenue Service (“IRS”) recently released 2013 inflation-adjusted figures for contributions to health savings accounts (“HSAs”) and the minimum deductible and maximum out-of-pocket limits for accompanying high deductible health plans (“HDHPs”). HSAs are savings accounts that allow an eligible individual to contribute (or have contributed on his or her behalf) amounts on a tax-favored basis to pay for certain medical expenses. In order to be eligible to participate in an HSA, an individual must be enrolled in an HDHP.
Annual HSA Contribution Limits for 2013
For calendar year 2013, the annual limit on HSA contributions for an individual with self-only coverage under an HDHP is $3,250, up from $3,100 in 2012. The annual contribution limit for an individual with family coverage under an HDHP is $6,450, up from $6,250 in 2012.
Annual HDHP Deductible Limits for 2013
For calendar year 2013, an HDHP is a health plan with an annual deductible that is not less than $1,250 for self-only coverage, up from $1,200 in 2012, and $2,500 for family coverage, up from $2,400 in 2012.
Annual HDHP Limits on Out-of-Pocket Expenses for 2013
For calendar year 2013, an HDHP’s annual out-of-pocket expense limit (deductibles, co-payments, and other amounts not including premiums) may not exceed $6,250 for self-only coverage, up from $6,050 in 2012, and $12,500 for family coverage, up from $12,100 in 2012.
|2013 Limits||Self-Only Coverage||Family Coverage|
|Annual HSA Contribution Limitation||$3,250||$6,450|
|Annual HDHP Limit on Deductibles||$1,250||$2,500|
|Annual HDHP Limit on Out-of-Pocket Expenses||$6,250||$12,500|
Considerations for Employers
If you currently offer an HSA and an HDHP, you should ensure your plans, policies and payroll systems properly account for these new limits.
Special considerations apply if you currently offer health flexible spending accounts (“health FSAs”) that allow up to an extra 2 ½ months after the end of the plan year in which participants can spend their money (known as a “grace period”). If you are considering offering an HSA in 2013, you may want to take steps now to inform your employees who currently participate in your health FSA (or the health FSA of their spouse, if the employee is eligible to be reimbursed under that FSA), that if the health FSA contains a grace period, they need to have spent all of the money in their health FSA (even if they have not yet submitted the claim or been reimbursed) on or before December 31, 2012 if they want to qualify for an HSA for the entire 2013 taxable year. If the employee or his or her spouse (assuming the employee is eligible to be reimbursed under that FSA) has any unspent money in a health FSA at December 31, 2012, the employee will be ineligible to participate in an HSA until the first of the calendar month following the end of the grace period (usually, April 1st). If your company’s health FSA contains a grace period, you may prefer to eliminate it in order to avoid this problem.
Also, since a grace period under the health FSA of an employee’s spouse may similarly jeopardize the employee from eligibility for an HSA for a portion of the 2013 taxable year, even if you do not offer a grace period in your health FSA, you may want to warn employees to check their spouse’s health FSA and take steps now to avoid any problems.
Your employees do not become ineligible for an HSA if you only offer (i) a limited purpose health FSA or limited purpose health reimbursement account (“HRA”) (i.e., one that pays or reimburses only permitted coverage such as vision or dental, permitted insurance, or preventive care without regard to the HDHP deductible), or (ii) a health FSA or HRA that only offers “post-deductible coverage” (i.e., one that only pays or reimburses for eligible expenses incurred after the minimum annual HDHP deductible has been satisfied). Your employee may contribute to an HSA and a limited purpose health FSA or HRA during the same plan year. Similarly, your employees may contribute to an HSA and a health FSA or HRA that only offers “post-deductible coverage” during the same plan year.
Finally, if you currently offer an HRA, you may want to consider amending the HRA (if necessary) to allow an individual to elect to suspend his or her HRA coverage so that no medical expenses incurred (except for those permitted by a limited purpose HRA, such as permitted insurance and preventive care) may be reimbursed by the HRA during the plan year in which the individual contributes to an HSA. An employee may elect to suspend his or her HRA and subsequently contribute to an HSA without forfeiting or distributing the balance in his or her HRA (employer contributions can continue to be made, but not used). Please consult your legal advisor regarding the timing of these elections, if you decide you wish to allow.