IRS Lowers Previously-Announced 2018 Limits; IRS Guidance on HDHP Status

Changes in 2018 Family HSA Limit and 2018 Adoption Assistance Limit

The IRS just announced – mid-year – that the family Health Savings Account contribution limit for calendar 2018 is reduced from $6,900 to $6,850 (because of the impact of a technical provision of the December tax law). The individual HSA contribution limit was not changed.

For the same reason, the IRS announced that the 2018 limit for Adoption Assistance Programs is reduced from $13,840 to $13,810.

(Other 2018 limits for retirement and other employee benefits are not affected.)

Impacted employers will need to take appropriate action.

IRS Guidance on HDHPs

Employers that wish to permit their employees to participate in HSAs along with their employee health plan must offer a health plan that qualifies as a High Deductible Health Plan. Among other requirements, HDHPs must require that minimum “high” deductibles be met in most cases, and only limited "preventive" benefits can be provided with no deductible.

Under a January 1, 2018 change in Maryland law affecting health insurance carriers, fully insured health plans in Maryland must offer specified male sterilization benefits without a deductible. At least two other states, Illinois and Oregon, have made similar changes. Male sterilization and other male contraceptive benefits are not included in the non-exhaustive IRS safe harbor list of preventive benefits that can be offered by an HDHP without a deductible.

Impacted employers have been hoping that state legislatures would solve this problem, or that the IRS would announce that these benefits are a type of preventive benefit that may be offered by an HDHP without a deductible. Unfortunately, pending state legislation has not yet been enacted, and the IRS just announced that these benefits are not a type of preventive benefit that may be offered by an HDHP without a deductible. The IRS did include in its announcement a “transition rule” that provides that, for 2018 and 2019, the provision of this particular not-subject-to-a-deductible benefit by a fully insured plan will not cause the plan to lose its HDHP status.

Impacted employers will need to continue to monitor state and federal developments concerning this issue.

Please contact us at 410-321-9000 (or email Alison at achristian@smithdowney.com) if we can assist you in responding to any of these developments.