May 27, 2011

2012 Minimums and Maximums for Health Savings Accounts and High-Deductible Health Plans

On May 16, 2011, the Internal Revenue Service (IRS) released Revenue Procedure 2011-32,1 which announced various inflation-adjusted amounts for 2012 for Health Savings Accounts (HSAs) and High-Deductible Health Plans (HDHPs). The IRS calculates the annual adjustments using the 12-month period ending March 31.

The 2012 numbers are shown in the chart below.

2012 Minimums and Maximums for HSAs* and HDHPs
 
Individual Coverage


Family Coverage

Maximum Annual
HSA Contribution**
$3,100
(up $50 from
$3,050 for 2011)

$6,250
(up $100 from
$6,150 for 2011)

Minimum HDHP Deductible

$1,200
(same as for 2011)
$2,400
(same as for 2011)
Maximum HDHP
Out-of-Pocket Expense***

$6,050
(up $100 from
$5,950 for 2011)

$12,100
(up $200 from
$11,900 for 2011)

*
HSAs, established by the Medicare Modernization Act (MMA) as of January 1, 2004, allow individuals or employers to contribute to an HSA as long as the individual is covered under an HDHP. (For more information about HSAs, refer to various publications available on Sibson Consulting's website.
**
Individuals age 55 or over can contribute an additional $1,000 to their HSAs.
***
The out-of-pocket expense does not include premiums.

Reminder: Affordable Care Act Affected HSAs

The Affordable Care Act2 also made some changes affecting HSAs, which are described below:

  • Beginning with distributions made on or after January 1, 2011, the penalty for making withdrawals not used for qualified medical expenses increased from 10 percent to 20 percent of the amount of the distribution.3
  • Beginning January 1, 2011, over-the-counter drugs and medications count as qualified medical expenses only if the drug or medication is prescribed. This new prescription requirement does not apply to insulin.4

Implications for Plan Sponsors

Before next year, plan sponsors that offer HDHPs with HSAs will need to revise their plan design and documents to reflect the 2012 amounts.

Plan sponsors that do not offer HDHPs with HSAs may want to explore that plan design, which some requirements of the Affordable Care Act have made more attractive. Plan sponsors interested in exploring the benefits of an HSA should contact their Segal consultant to determine what course of action is right for them.

●  ●  ●

As with all issues involving the interpretation or application of laws, health plan sponsors should rely on their legal counsel for authoritative advice on HDHPs and HSAs. The Segal Company can be retained to work with plan sponsors and their attorneys on compliance issues related to HDHPs and/or HSAs.

1
Revenue Procedure 2011-32, which was published on May 16, 2011, is available on the IRS website. (Return to the Capital Checkup.)
2
The Affordable Care Act is the abbreviated name for the Patient Protection and Affordable Care Act (PPACA), Public Law No. 111-148, as modified by the subsequently enacted Health Care and Education Reconciliation Act (HCERA), Public Law No. 111-152. (Return to the Capital Checkup.)
3
For more information about this change, see Segal’s December 9, 2011 Capital Checkup, “New Rules on Paying for Over-the-Counter Medications.” (Return to the Capital Checkup.)
4
For more information about this change, see Segal’s January 10, 2011 Capital Checkup, “IRS Modifies Rules on Paying for Over-the-Counter Medications with Debit Cards.” (Return to the Capital Checkup.)

Capital Checkup is The Segal Company's periodic electronic newsletter summarizing activity in Washington with respect to health care and related subjects. Capital Checkup is for informational purposes only. It is not intended to provide guidance on current laws or pending legislation. On all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their attorneys for legal advice.

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