Tag Archives: HDHP

2019 IRS HSA Contribution Limits

The 100+ person team (kidding?) at the IRS has cranked their magic number machine and released their 2019 HSA limits and definitions. This includes the 2019 HSA Contribution Limits as well as the 2019 HDHP Definitions for Minimum Annual Deductible and Out of Pocket Maximum. These amounts govern 1) how much can be contributed to an HSA and 2) what qualified as an HSA for 2019. Overall, they have done a good job and it will be a good year for HSA savers as well as new people looking to establish an HSA for the first time.

2019 is a strong year for HSA’s in general. Both the self-only and family contribution limits increased, and the HDHP definition has widened, making more people eligible.

2019 HSA Contribution Limits

First, the good news on what you can contribute. If you have an HDHP and have opened a Health Savings Account, below are the contribution limits for self-only and family coverage for 2019:

	2015	2016	2017	2018	2019
Self-Only HSA Contribution Limit	$3,350	$3,350	$3,400	$3,450	$3,500
Family HSA Contribution Limit	$6,650	$6,750	$6,750	$6,900*	$7,000
55+ Additional Contribution Limit	+$1,000	+$1,000	+$1,000	+$1,000	+$1,000

*Note: the IRS reduced and then restated the 2018 Family Contribution limit to $6,900.

2019 is another good year for HSA contribution limit increases. Self-only HSA’s have increased their contribution limit by $50 over 2018, which history shows is about as good as it gets. In addition, the family HSA contribution limit has increased by $100 over 2018. These are solid increases especially compared to the lean years of 2016 and 2017. It seems the IRS is giving the taxpayers a (small) break since these contribution limits determine the deduction your HSA allows. This marks the 2nd year where we have strong increases in both the self-only and family contribution limits. This may be a trend and we hope it continues, since it improves the population’s ability to manage their care in an environment of insane health care costs.

Now, if we could just do something about that catch up contribution! The 55+ catch up contribution has been stuck at an additional $1,000 for what seems like forever…

2019 HDHP Limits

Below are the 2019 HDHP deductible limits as well as out of pocket maximums that determine whether or not your plan is an High Deductible Health Plan, and thus, whether or not you can contribute to a Health Savings Account:

	2015	2016	2017	2018	2019
Self-Only Min Deductible	$1,300	$1,300	$1,300	$1,350	$1,350
Self-Only OOP Max	$6,450	$6,550	$6,550	$6,650	$6,750
Family Min Deductible	$2,600	$2,600	$2,600	$2,700	$2,700
Family OOP max	$12,900	$13,100	$13,100	$13,300	$13,500

Overall, HSA coverage is easier to obtain after the IRS changes in 2019. This is true for two reasons. First, the IRS has kept constant the minimum annual deductible for both self-only and family coverage. This amount is the lowest deductible your plan can offer and still be HSA eligible. In 2019, a self-only plan must have a deductible at or above $1,350, while a family plan deductible must be at or above $2,700. As a result, some plans with low deductibles are ineligible to contribute to an HSA since their annual deductible is too low. In prior years, the IRS has increased the minimum annual deductible that defined HDHP (and HSA ) plans. By keeping it constant, it allows more plans to participate. This is especially true in an environment of rising health care costs.

Second, we see large increases in the out-of-pocket maximum. This is the highest amount your plan can make you pay for care in a year. The self-only out-of-pocket max has increased by $100 to $6,750, while the family out-of-pocket max has increased $200 to $13,500. Anything more and the plan is not HSA eligible. This results in more plans with very high deductibles being included in the HDHP definition. It is an open question as to why there needs to be an OOP max at all in the HDHP definition, but either way, an increase in this metric in an environment of rising costs (not just rising premium, but decreasing coverage) is positive. This site maintains that the more HSA’s opened, the better.

2019 HSA Wish list / Forecast / Political Outlook

With Christmas around the corner, here is our 2019 wish list for HSA’s:

Remove retroactive Medicare penalty
Higher contribution limits
More people eligible for HSA’s

Of course, what we really want to see is the minimum annual deductible decrease or disappear. That relates to #3 above but has never really happened – the best case, like this year, is it remains constant year over year. Decreasing this would allow people with more diverse insurance plans take advantage of HSA’s as well.

Perhaps that occurs sometime in the future, but short-term that is unlikely with a split Congress going into 2019. Bills improving HSA’s were introduced during the first 2 years of Trump’s term, during which he held a majority in both houses, but no one could agree on anything and no new laws were passed. With the mid-term elections completing in November 2018, the outlook for HSA’s has decreased, as it is unlikely anything improving (or worsening) HSA’s will be passed in the forthcoming gridlock.

Note: When you file your 2019 taxes and need to complete Form 8889 for your HSA, please consider my service EasyForm8889.com. It asks you simple questions and fills out Form 8889 correctly for you in about 10 minutes.

How Family Plans with Individual Deductibles Affect HSA’s

This question was submitted by an HSA Edge reader Mordechai. Feel free to send in your question today to evan@hsaedge.com.

My family insurance plan (parents and children), besides having a total deductible and out of pocket max for the entire plan, has a separate deductible and OOP max for each individual on the plan. Do these numbers effect my eligibility for an HSA?

Family vs. Individual Deductibles

A deductible is an amount you pay out of pocket before insurance begins paying. Most family coverage HSA plans feature an aggregate (“non-embedded”) deductible with one deductible amount for the entire family. Each individual’s medical spending counts toward that deductible, and once met, insurance coverage begins. The only thing that matters is whether the deductible is met, not who spent what towards it. This means that one person can incur enough cost to trigger the deductible, or it can be a shared effort. Either way, it is irrelevant since there is one deductible and it is shared.

Some HSA eligible HDHP insurance plans include individual deductibles in addition to the family deductibles. These plans are quoted as “deductible of $4,000, individual deductible of $2,800”. Each individual’s expenses count towards their individual deductible as well as the family deductible. Once they have met their individual deductible for the year, insurance begins paying expenses for that individual. Once the family deductible is met for the year, insurance begins paying for the entire family.

The benefit of an individual deductible is they are lower than family deductibles, so you can receive full cost coverage sooner. The downside is that coverage only applies to one person until the family deductible is met. In addition, it is another deductible to manage for each person insured.

How Individual Deductibles Work with Health Savings Accounts

When evaluating HDHP plans for HSA eligibility, it is important to keep in mind how individual deductibles come into play. The IRS states that for a plan to be HSA eligible, both the family and individual deductible must be above the minimum annual deductible for HDHPs. If not, the plan is not considered a HDHP and is not HSA eligible. Per IRS form 969:

HSA-rules-individual-deductible

Said another way, if any of the individual deductibles are lower than the HDHP minimum deductible ($2,700 in 2018) the entire plan is not HSA eligible. This is true even if the plan’s “total” or family deductible is above the HDHP minimum. I don’t really like this rule as it is a grey area and confusing to users. That said, I understand its use since parts of the plan have a lower deductible than that required for HSA’s. The problem I have is this may not be apparent when choosing coverage, leading to a situation where someone plans and saves in their HSA, only to find they are not allowed to contribute.

Note: to fulfill the IRS requirement of tracking HSA receipts, please consider my service TrackHSA.com for your Health Savings Account record keeping. You can store purchases, upload receipts, and record reimbursements securely online.

2017 Form 8889 – Instructions and Examples

If you made contributions to or distributions from your HSA in 2017, you will need to file the federal tax form 8889. This form is specific to HSA’s and records all activity with your HSA for the year. It flows to Form 1040 to adjust your income: your contributions reduce your taxable income, whereas any penalties adds back to income, increasing tax.

Form 8889 is not as straightforward as it could be, so I created a service called EasyForm8889.com that completes your form for you. I have also created the following video to walk through how to file Form 8889. Little has changed since the 2016 form used in this video. Check it out, otherwise, the transcription of the information is below.

Watch on Youtube: How to File HSA Tax Form 8889

In the following article we will cover:

Changes to 2017 Form 8889
2017 HSA Contribution Limits
2017 HDHP Definitions
2017 Form 8889 instructions and example

Changes to 2017 Form 8889 tax form

The 2017 HSA tax form presents little difference to prior year tax forms. Throughout the form you will see the tax year incremented to 2017, so make sure you are working on the correct version. This can be confirmed in the upper right of the form. Contribution limits have increased in 2017, so these amounts are reflected throughout the form (specifically Line 3).

There were also some changes to HDHP definitions in 2017 so read on if those apply to you.

Changes to 2017 Form 8889 instructions

The 2017 Form 8889 instructions have been released by the IRS and can be found here. They are substantially the same as prior years save for year and contribution limit updates.

2017 HSA Contribution Limits

For self-only coverage, the maximum contribution limit increased by $50 to $3,400 in 2017. There were no changes to the family coverage amount which is $6,750, as well as the 55+ catch up contribution amount of $1,000. The IRS defines the maximum amounts that may be contributed to a Health Savings Account each year. Per IRS Publication 969:

The amount you or any other person can contribute to your HSA depends on the type of HDHP coverage you have, your age, the date you became an eligible individual, and the date you cease to be an eligible individual…for 2017, if you have self-only HDHP coverage, you can contribute up to $3,400. If you have family HDHP coverage you can contribute up to $6,750.

Here are HSA contribution limits for prior years:

	2014	2015	2016	2017
Self-Only HSA Contribution Limit	$3,300	$3,350	$3,350	$3,400
Family HSA Contribution Limit	$6,550	$6,650	$6,750	$6,750
55+ Additional Contribution Limit	+$1,000	+$1,000	+$1,000	+$1,000

The maximum contribution amount for your HSA in 2017 is $3,400 for self-only coverage and $6,750 for family. Note that this does not include the additional 55+ catch up contribution of $1,000 allowed to properly aged HSA holders. Thus, if you are over 55 on or before the end of 2017, you can contribute $4,400 for self-only coverage or $7,750 for family coverage.

2017 HDHP Definitions

To qualify as an HDHP, your health plan cannot exceed an out-of-pocket maximum limit established by the IRS. There were no changes to these amounts from 2016 to 2017. For self-only plans, the minimum deductible remains $1,300 and the out of pocket maximum is $6,550. For Family plans, the minimum deductible is $2,600 while the out of pocket maximum is $13,100. Plans with a deductible below that specified are not HSA eligible, nor are plans with an out-of-pocket max greater than those listed. The HDHP definitions for recent years are summarized below:

	2014	2015	2016	2017
Self-Only Min Deductible	$1,250	$1,300	$1,300	$1,300
Self-Only OOP Max	$6,350	$6,450	$6,550	$6,550
Family Min Deductible	$2,500	$2,600	$2,600	$2,600
Family OOP max	$12,700	$12,900	$13,100	$13,100

2017 HSA Form 8889 example

Let’s walk through an example of the 2017 Form 8889 to show how it works.

Let’s assume I am a married 40 year old who had family HSA eligible coverage from January – June of 2017 (6 months). On July 1st, I changed to a non-HSA eligible plan. My spouse does not have their own Health Savings Account. I contributed $1,800 to my HSA and my employer contributed $800. I distributed $800 from the HSA during the year, all of which I spent on qualified medical expenses.

Part I – Contributions and Deduction

Form 8889 starts off pretty simply on Line 1 by asking the type of insurance you had (mostly) during the year. For this example, it is family. Line 2 then goes on to ask how much you contributed to your HSA during the year. In our case this was $1,800, which does not include employer contributions. Line 3 can be quite complicated, but in essence you need to list your contribution limit for the year. If you had self-only or family coverage all year, the amounts are provided for you. Otherwise, you need to prorate your coverage by month. In this case, we had family coverage for 6 months, so our contribution limit is $3,375 for 2017. Line 4 asks about Archer MSA’s (does not apply here) and Line 5 is a simple subtraction.

[Note: all 2017 tax forms were generated in minutes using EasyForm8889.com]

2017 HSA Form 8889 part 1 example

We continue with Line 6, which for self-only filers equals Line 5. For family coverage where both spouses have their own Health Savings Account, each of you needs to file your own Form 8889. Then on Line 6, you allocate the share of the contribution limit that belongs to that HSA. In this case, only the insured has an HSA, so this line equals Line 5. For some situations, Line 7 adds the $1,000 catch up contribution, but our example assumes the HSA holder is 40 years old so this does not apply. Line 8 is simple subtraction, and the $800 employer contribution comes into play on Line 9. If you contributed to your HSA from an IRA you would indicate that on Line 10, and Line 11 is simple addition. Line 12 is subtraction, and Line 13 does a comparison to calculate what your 2017 HSA deduction is, which makes its way to Form 1040. In our case, it is the $1,800 we contributed to the HSA.

Part II – Distributions

The second part of the 2017 Form 8889 deals with distributions, or amounts that came out of your HSA. We assume that we distributed $800 from the HSA, so that amount is shown on Line 14a. Line 14b lists rollover amounts and excess contributions that were removed, and Line 14c subtracts them out. The filer tracked his qualified medical expenses and receipts using TrackHSA.com this year, so he can easily prove all $800 in distributions were used for medical expenses. He places that amount in Line 15. A subtraction occurs on Line 16 to determine any amounts not spent on qualified medical expenses; luckily that is $0 for us. If you had an amount on Line 16, Line 17a gives you the chance to exclude this from taxation based on a few exceptions. Otherwise, that Line 16 amount is taxed 20% on Line 17b, which gets recorded on Form 1040.

2017 HSA Form 8889 Part 2 example

Part III – Penalties and Taxes

For most people, Part III will look a lot below: all zeroes. This is good, but it is possible that you have accrued some taxes and penalties. If in the prior tax year, you 1) used the Last Month Rule and proceeded to 2) fail its Testing Period, a difficult calculation awaits you on Line 18. You are going to have to go back, figure out how much you contributed in the prior year, redetermine what you could have contributed without the Last Month Rule, and place the difference here. On a similar note, if you made a qualified funding distribution from your IRA but failed its Testing Period in 2017, you will have to enter the amount that failed in Line 19. Once that is done, Line 20 adds Line 18 and Line 19 and adds it back to income (where it is taxed) on Form 1040. Finally, for good measure, Line 21 assesses a 10% penalty against the amount on Line 20, which also makes its way to Form 1040.
2017 HSA Form 8889 part 3 example

Note: if you need help with your 2017 Form 8889, or just want it done right now, please consider using my service EasyForm8889.com. It asks simple questions in a straightforward way and will generate your completed HSA tax forms in 10 minutes. It is fast and painless, no matter how complicated your HSA situation.