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IRS Reduced the Family HSA Contribution Limit, What Now?
+ New W-4 Form
HSA Family Contribution Limit Reduced
The IRS has lowered the maximum HSA Family contribution to $6,850 from $6,900 as previously announced. There are no changes to the self-only coverage contribution limit which remains $3,450.
This recalculation is due to the Tax Cuts and Jobs Act that passed at the end of 2017. The Tax Cuts and Jobs Act applies the chained consumer price index (chained CPI) to increase in HSA and some other employee benefit contribution limits.
What employers and employees need to do:
Employers with High Deductible Health Plans (HDHPs) should communicate the reduced HSA contribution limit for family HDHP coverage to employees.
Employees may need to change their HSA elections going forward to comply with the new limit, which will affect payroll deductions.
Also, any individuals with family HDHP coverage who have already contributed $6,900 for 2018 must receive a refund of the excess contribution to avoid an excise tax.
What happens if I don’t get a refund or alter payroll deductions?
If you do contribute $6,900 or more to your HSA this year, you are over the amount allowed by the IRS. You will be subject to a 6 percent excise tax on the excess contribution amount.
About the New IRS Form W-4
The IRS has released an updated Withholding Calculator and updated version of the Form W-4 to help taxpayers check their tax withholdings following the passage of the Tax Cuts and Jobs Act.
If changes to withholding should be made, the Withholding Calculator gives employees the information they need to fill out a new Form W-4, Employee’s Withholding Allowance Certificate. Advise employees on the new form and make sure they submit the completed W-4 you if changes are necessary.
The following groups are those specifically recommended to check their withholdings by the IRS:
- Two-income families.
- People with two or more jobs at the same time or who only work for part of the year.
- People with children who claim credits such as the Child Tax Credit.
- People who itemized deductions in 2017.
- People with high incomes and more complex tax returns.
The withholding changes do not affect 2017 tax returns that are due this April.
Resources
Get the New IRS Form W-4 from the IRS
Withholding Calculator Frequently Asked Questions
HSA Real-Life Scenario Examples for Employees
If you have any questions about these changes, please do not hesitate to reach out to your dedicated Austin Account Manager or email us at service@austinbenefits.com.
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Cathy Siska
Chief Operating Officer