Increases in Health Savings Account Contributions for 2020

The IRS recently announced increases in the health savings account (HSA) contribution limits for the next calendar year. Beginning in 2020, individuals with employee-only coverage under a high deductible health plan (HDHP) may contribute up to $3,550 (including any employer contributions), while individuals with family HDHP coverage (individual plus a spouse and/or child(ren)) may contribute up to $7,100. As in previous years, those who are age 55 or older by the end of the year and who are covered by a HDHP may make an additional $1,000 "catch-up" contribution to their HSA.

To qualify as a HDHP, a plan must have an annual deductible of at least $1,400 for individuals with self-only coverage or at least $2,800 for individuals enrolled in any family coverage. A HDHP may not have an annual out-of-pocket expense limit exceeding $6,900 for self-only coverage or $13,800 for family coverage. Out-of-pocket expenses include deductibles, co-payments and any other out-of-pocket amounts, but not premiums.

To contribute the maximum during 2020, an individual must be covered by a HDHP every month during the calendar year and may not have any other impermissible coverage during any month (including any enrollment in a non-HDHP which pays the individual's or any covered family member's medical expenses before the HDHP's annual deductible is satisfied). The HSA contribution limit is reduced proportionately by 1/12 of the applicable annual limit for each month for which an individual was not enrolled in a HDHP or for each month the individual or a covered family member has other impermissible coverage (including a spouse's non-HDHP group health plan, a flexible spending arrangement or Medicare).

The IRS announced the inflation-adjusted increases to the annual HSA contribution limits for calendar year 2020 in Revenue Procedure 2019-25. See Internal Revenue Bulletin 2019-22 published May 28, 2019.

If you have any questions about HSAs or HDHPs, please contact a member of the Barrett McNagny Employee Benefits Group.