Recent News

May 20, 2011

IRS Announces HSA Inflation Adjustments for 2012

~ written by Char Bigelow Sutak, Employee Benefits, Willis

By law, the IRS must publish the annual inflation adjustments relating to health savings accounts (HSAs) no later than June 1 for the following calendar year. The IRS announced the inflation adjustments for 2012. This chart summarizes the changes.

The Annual Contribution Limit is the maximum amount of tax-favored contributions that can be made to an individual’s HSA for a calendar year. Contributions from all sources are aggregated when determining whether the limit is met. An individual may incur excise taxes on excess contributions. Catch-Up Contributions increase the Annual Contribution limit for individuals age 55 or older. The Catch-Up Contributions limit is not inflation-adjusted. When enacted, the limit was set at $500 for 2004, with $100 annual increases. In 2009, it reached the current $1,000 maximum.

The HDHP Minimum Annual Deductible and Maximum Out-of-Pocket Limit refer to features that a health plan must have in order to qualify as a high-deductible health plan (HDHP). Coverage under an HDHP is one of the conditions that an individual must meet in order to be eligible for tax-favored HSA contributions. The limits on these items are also inflation-indexed, with the potential to change each year. Employers that maintain HDHPs need to know these adjustments so that they can make any changes needed for their plans to remain HDHPs.

The IRS announces the adjustments for HSAs much earlier in the year than it announces the adjustments for other types of benefits programs. (Inflation adjustments for most plans usually are announced in October or November.) The legislation revised the provisions governing HSAs so that the IRS now must publish the annual adjustments no later than June 1 for the following calendar year.