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IRS Announces Reduction in Family HSA Contribution Limit for 2018

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In Revenue Procedure 2018-18, the Internal Revenue Service announced a reduction in the HSA contribution limit for family coverage in 2018 to $6,850 from $6,900.  The self-only HSA contribution limit for 2018 remains unchanged at $3,450.

This change is a technical result of the Tax Cuts and Jobs Act, which adjusted the method for calculating inflation. Although the reduction may appear somewhat small, it may cause certain employees to inadvertently contribute over the limit.  For instance, an employee who front-loads his or her annual contribution may have already exceeded the new limit.

The IRS has not issued any transition relief for excess contributions made in 2018 by employees relying on the original contribution limit announced in Revenue Procedure 2017-37.  However, certain members of Congress and several employer groups recently petitioned the IRS to issue such relief.  In the absence of relief, employers may wish to adjust their payroll systems and to communicate the revised limit to their employees.

For more information about annual cost of living adjustments and related contribution limits, please see our “2017 End of the Year Plan Sponsor To Do List (Part 2)” and our SW Benefits Blog Post from October 31, 2017, “IRS Announces Cost of Living Adjustments.”  Please note that we have updated both publications to reflect the reduced contribution limit discussed above.