2019 HSA contribution limits released: IRS

Contribution limits to HSAs have been announced for 2019, the IRS says. Let's look at the numbers.

Contributions to HSAs are made on a pre-tax basis, grow tax-free over time, and withdrawals are not taxed when they are used for qualifying health expenses. They must be used with qualifying high-deductible health plans. Here are the 2019 contribution limits. (Photo: Shutterstock)

Investors in health savings accounts will see a small bump in contribution limits for the calendar year beginning in 2019, according to the IRS.

Individual investors in HSAs tied to high-deductible health plans will be able to contribute up to $3,500 next year, a $50 increase from the 2018 limit. HSAs tied to family HDHPs will see the contribution cap raised $100, to $7,000.

Catch-up contributions for workers over age 55 will remain at $1,000.

The adjustments reflect the application of the Chained Consumer Price Index, or Chained CPI, inflation gauge to HSAs and other tax deductions, which was legislated with the signing of the Tax Cuts and Jobs Act last December.

Previously, the Consumer Price Index, or CPI, was used to set HSA contribution increases.

Some economists argue that the Chained CPI is a more efficient measurement of inflation, because it accounts for “substitution bias,” the economic phenomenon of consumers substituting some goods for others when prices increase.

Others are critical of the use of Chained CPI, and claim lawmakers applied it to the tax bill to slow rates of inflation, consequently leading to lower cap increases on HSAs and other tax-deferred benefits. In doing so, lawmakers were able to keep the cost of the tax bill under statutory requirements, say critics of the Chained CPI.

After implementation of the tax law, the IRS had to make an adjustment to HSA contribution limits for 2018, which were set before the tax bill passed.

Under the original CPI application, the cap on family HSAs was $6,900, but was revised to $6,850 when the Chained CPI was applied. Use of the Chained CPI did not affect caps on individual contributions.

Contributions to HSAs are made on a pre-tax basis, grow tax-free over time, and withdrawals are not taxed when they are used for qualifying health expenses. They must be used with qualifying high-deductible health plans.

For calendar year 2019, high-deductible plans will be defined as those with at least a $1,350 deductible on individual plans and a $2,700 deductible on family plans, both unchanged from 2018.

Qualifying high-deductible plans will have to cap out-of-pocket expenses—deductibles and co-payments, but not premiums—at $6,750 for individuals and $13,500 for family plans, an increase of $100 for individuals and $200 for families from 2018, according to IRS figures.

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