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Changes to HSA Contribution Limit

Changes to HSA Contribution Limit

HSA's (Health Savings Account) contribution has people wondering about the effect of the new changes, especially on limits. Taxpayers are to have health benefits coverage for 2023. HSA holders are wondering how much they can contribute to their accounts for 2023 without breaking any laws. Knowing how much you can save in HSA for the year will save you some negligence.


What Is a Health Savings Account?

An HSA is a portion of your money put aside for tax on medical expenses. The account experiences tax-free earnings and withdrawals for paying qualified medical expenses. The scheme has high tax advantages, including keeping your money for as long as you want. 

However, to qualify, you must have a high-deductible health plan, aka HDHP. These accounts attract lower premiums but have a higher impact on out-of-pocket expenses, which HSA offsets.


2022 HSA contribution limits

In 2022, the HSA contribution was $3,650 for personal coverage and $7,300 for family plans. However, if you're over 55, the account accepts an additional $1,000 as a catch-up donation.

2023 HSA contribution limits

The year 2023 experienced a significant jump in its threshold - $3,850 for self-only coverage and $7,750 for family coverage the highest ever recorded. The increase encourages taxpayers to participate in an open enrollment and start contributing to their accounts or increase their current contributions. 

It also serves as a fast lane for employees who have not started contributing to their employer's HSA. You can start with a nominal sum or a couple of thousand. The contribution is to increase engagement between employees and their accounts and enhance their healthcare benefits. Taxpayers also use other means like matching their employee's HSA contributions, like in the case of 401(k) retirement plans, by implementing formulas similar to matching 401(k). Additionally, employees are contributing to their income to favor lower-paid employees needing extra help.

Adjustments Reflect Inflation

The contribution limits are announced in early October of each year except for HSA, which is done in April or May. The contributions are affected by inflation, rounding up to the nearest $50 each year according to the Consumer Price Index for All Urban Consumers for 12 months ending March 31. 

However, the catch-up amount is fixed by status. HSA and HDHP increase the threshold earlier than other employee benefits limits. The early release is to help insurance companies offering high-deductible health plans allow their clients to register with the HSA contribution scheme. However, the employee must use an insurance product approved by the state insurance regulation.


HSA eligibility

You can start contributing to HSA without an HSA-eligible health plan enrollment. In essence 

  • You have at least a $1,4000 deductible for self-coverage and $2,800 for family coverage

  • The out-of-pocket cost must not be over $7,050 for self-coverage and $14,100 for family coverage.

And to contribute to an HSA, you must:

  • Not have any health plan or a full-purpose health care flexible spending account (FSA) except an HSA-eligible plan

  • Not having a Medicare

  • Not be dependent on someone's tax return

Excepted-Benefit HRA Maximum

For the year 2023, Revenue Procedure increases their maximum amount for 2022 to 2024. As a result, employers may contribute $1,950 to an expected-benefit health reimbursement arrangement (HRA). The increase is $150 higher than the 2022 amount of $1,800. However, excepted-benefits HRAs are permitted for vision and dental coverage or other similar benefits not included in the ACA and not covered by the employer's initial group plan.


Health Plan Minimum Deductibles

To qualify for a contribution, you must have a high-deductible health plan. The health plan limit for 2023 is $1,500 for self-coverage and $3,000 for family coverage. Again, the amount can be adjusted according to inflation to $1,400 for self-coverage and $2,800 for family coverage.



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