The Internal Revenue Service announced relief for taxpayers with family coverage under a High Deductible Health Plan (HDHP) who contribute to a Health Savings Account (HSA). For 2018, taxpayers with family coverage under an HDHP may treat $6,900 as the maximum HSA contribution.

As we previously discussed, the maximum contribution was reduced to $6,850 last month because of a revised cost of living adjustment for 2018 under the Tax Cuts and Jobs Act. The recalculation did not impact the single-only annual contribution limit for 2018 and so that limit remains at $3,450.

So, the announcement comes after most individuals have already received notice of the initially revised contribution limit. The notice acknowledges that some individuals with family coverage under an HDHP made the maximum HSA contribution for the 2018 calendar year (‘front loaded’) before the deduction limitation was announced, and that many other individuals made annual salary reduction elections for HSA contributions through their employers’ cafeteria plans based on the $6,900 limit for an individual with family coverage under an HDHP.

For individuals who made their withholding elections based upon the $6,900, they may now keep those elections and for those individuals who front loaded their HSA contributions and who have received the $50 as a distribution may treat the distribution as a mistake and repay the HSA without any tax or reporting consequence.

Disclaimer: Please note that this is not all inclusive. Our guidance is designed only to give general information on the issues actually covered. It is not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion. Consult your own legal advisor regarding specific application of the information to your own plan.