The IRS has made annual inflation adjustments to health savings accounts (HSAs) in the newly issued Rev. Proc. 2023-23.
The changes to HSA limits for the calendar year 2024 are as follows:
- A “high deductible health plan” is defined as a health plan with an annual deductible that’s not less than $1,600 for self-only coverage/$3,200 for family coverage, and for which annual out-of-pocket expenses (deductibles, copayments, and other amounts, but not premiums) don’t exceed $8,050 for self-only coverage/$16,100 for family coverage.
- The annual deduction limit for an individual with self-only coverage under a high deductible health plan is $4,150.
- The annual deduction limit for an individual with family coverage under a high deductible health plan is $8,300.
It’s also important to note that the HSA catchup contribution limit for those age 55 and older remains unchanged at 1,000.
Why the Changes to HSA Limits?
According to the Society for Human Resource Management (SHRM), the annual contribution limits are increasing by over 7% in response to inflation. This significant jump is considered one of the largest in recent years.
These changes to HSA limits are directly tied to the high inflation rates. The increased HSA limits are expected to generate greater interest in HSAs, as they’re often regarded by industry experts as smart way for employees to save for medical expenses, even in retirement.
This is attributed to their triple tax advantages:
- Contributions are made on a pre-tax basis
- The money in the accounts grow tax-free
- Withdrawals for qualified medical expenses remain tax-free.
The SHRM stated that by the end of 2022, Americans held 35.5 million HSAs totaling a collective $104 billion.
This brief overview highlights just a summary of complex provisions related to HSAs. For more info on the increased HSA limits or to learn how an HSA can add value to your employee benefits package, contact our Inova Benefits Team today.