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Uncle Sam Reveals Limits for HSAs in 2021

Uncle Sam Reveals Limits for HSAs in 2021

There will be an increase in contribution limits for Health Savings Accounts in 2021. Self-only coverage will have an increase of $50, while family coverage will have an increase of $100. With this, employers who sponsor high deductible health plans have enough time to have an open enrolment.

There will be a 1.5% increase in HSA contribution from the previous year as self-only contribution will have it at $3,600 while family coverage will have it at $7,200. 

This information is available in Revenue Procedure (RP) 2020-32, which is effective for the 2021 calendar year.

This contribution limit increase from the IRS mimics previous years' growth, not minding the COVID-19 situation.

Plan sponsors must update their payroll and system administration for the adjustments in cost of living in 2021. They also need to include the fresh limits in important participant communications.

Employers need to take note of these limits at time when preparing for the benefit plan for the coming year. They also need to explore their communications so that it reflects the appropriate limit.

 

Adjustments to Take Care of Inflation 

Accounts with tax advantage do have their contribution limits as revealed in October, even though HSAs are usually announced in May. Every year, this contribution limit takes care of inflation by employing the (CPI) Consumer Price Index for all Consumers.

Even though the contribution limit increase in HSA takes care of inflation, healthcare costs do outpace inflation every year. The implication of this is more spending for Americans every year.

However, the silver lining is that the fresh contribution limits do help boost the HSA values to the concerned parties. In other words, HSAs help save health for people at the moment and help with health care during retirements.

The increase is reasonable; hence it is an excellent opportunity for all Americans to take care of their health bills and costs. With the yearly increase in the yearly contribution limit, the HSAs keep providing the intended value and remain a vital retirement planning tool.

  

Increased Contributions

A report from HSA investment advisory firm Devenier revealed that workers and their employers contributed more to their worker’s HSA the previous year.

In the first month, Jan 2020, Devenier gathered data from the consumer for the previous years from the first 100 HSA plan administrators in the United States. Here are some of the findings: 

  • In 2019, the average contribution from each worker was $880

  • In 2019, an employer contributed an average of $2,034.

Analyzing the employer’s contribution with a different lens, a report from medical trends indicated that each employer had an average HSA contribution in 2020 as:

  • $512 for HSA singles coverage 

  • $996 for employee and spouse

  • $1,047 HSA family coverage 

This report is the result of an analysis from the health plans of more than a thousand employers.

More firms are now making it possible for their workers to qualify for an employer HSA contribution. Taking part in wellness programs is one of the qualification factors, even though not all workers will be interested in the program.

As a result, employees need to be sensitized to what HSA can offer them and fully utilize and maximize it. This will reduce health bills for the employer and employee alike.

HSA participants that can do this are advised to contribute to their annual limits. This will help take advantage of tax savings and help make their future health affordable. This is possible if employers will make HSA contributions available to their workers as an additional benefit.


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