On May 20, 2020 the Internal Revenue Service (IRS) released Revenue Procedure 2020-32, which provides the inflation adjusted amounts for Health Savings Accounts (HSAs) and High Deductible Health Plans (HDHPs) for the 2021 plan year.
As cost of living expenses continue to rise, the IRS annually adjust the following amounts and contribution limits to accommodate increases in spending:
- The maximum HSA contribution limit;
- The minimum deductible amount for HDHPs; and
- The maximum out-of-pocket expense limit for HDHPs.
HSA Contribution Limits
- Those with employee-only HDHP coverage will be able to contribute $3,600 to their HSAs, up $50 from 2020.
- Those with family HDHP coverage will be able to contribute up to $7,200 to their HSAs, up $100 from 2020.
- Catch-up contributions, for individuals age 55 or older, will remain the same at a max of $1,000.
- The minimum deductible amount for those with employee-only coverage will remain the same at $1,400. For those with family coverage, the limit will remain the same at $2,800.
- The maximum out-of-pocket expense limit will increase by $100, for those with employee-only coverage, to $7,000; and by $200 for those with family coverage, to $14,000.
What does this mean for employees and employers?
Annual increases in contribution limits for HSAs and HDHPs can help ensure these benefits remain an attractive perk to an employee’s benefits package. The 2021 limit increases will also allow employees to set aside more tax-free money to pay for services they need throughout the year, all while reducing their taxable income.
Employers, we encourage you to review your plan’s cost-sharing limits (minimum deductibles and maximum out-of-pocket expense limit) when preparing for the 2021 plan year. If you permit employees to make pre-tax HSA contributions, you should also update your plan communications for the increased contribution limits.
For more information on these new changes, click here.
Questions? Reach out to the Creative Benefits Team at 866-306-0200 or email us at email@example.com.