Health Savings Accounts

Contributions to HSA accounts can be made by both the employer and the eligible individual. If the employer makes contributions, they are not taxable to the employee which means they are excluded from taxable income. Employee contributions can be made on a pre-tax basis through payroll deduction. An individual can also make an “after-tax” contribution and receive a deduction on their tax return as an “above-the-line” deduction.
The IRS limits the amount of money you can contribute to an HSA. The IRS may update these limits annually. The limits are a combination of both employee and employer contributions. The 2018 annual limit, if you are enrolled in self-only HDHP is $3,450. If you are enrolled in family HDHP coverage, the maximum you and your employer can contribute is $6,900. The 2019 annual limit, if you are enrolled in self-only HDHP is $3,500. If you are enrolled in family HDHP coverage, the maximum you and your employer can contribute is $7,000. If you are 55 years of age or older at the end of the tax year you can contribute an additional catchup of $1,000.
If you have more than one HSA, the annual total can’t exceed the limits discussed above. For example, if you change jobs during the year and both your previous and current employers contribute to an HSA and you also made contributions, the totals of all contributions can’t exceed the annual limit.
NOTE: Beginning with the first month you are enrolled in Medicare, your contribution limit is zero. This rule applies to periods of retroactive Medicare coverage.
Refer to the HSA Federal Guidelines for the current year limits. Your employer will not monitor these limits as they may be different based on individual circumstances. Make sure you don’t over-contribute. If you do, contact your tax accountant and financial institution to make the corrections as soon as possible to avoid costly taxes and penalties.
For more information regarding Health Savings Accounts refer to IRS Publication 969. https://www.irs.gov/pub/irs-pdf/p969.pdf