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May 21, 2007
2008 Minimums and Maximums for Health Savings Accounts Plans and High-Deductible Health Plans
The Internal Revenue Service (IRS) recently released Revenue Procedure 2007-36,1 which announced various inflation-adjusted amounts for 2008 for Health Savings Accounts (HSAs) and High-Deductible Health Plans (HDHPs). In previous years, these amounts were released in November. However, this time frame meant that plan sponsors with HSAs had little time to incorporate these figures into their planning or employee communications. Congress enacted the Tax Relief and Health Care Act of 2006,2 to address several problems in HSA administration, one of which was the delay in releasing indexed amounts. As a result of this Act, the IRS is now required to publish annual HSA/HDHP updates no later than June 1. The IRS calculates the annual adjustments using the 12-month period ending March 31 (instead of August 31).
The new numbers are shown in the chart below.
| Individual Coverage | Family Coverage | |
|---|---|---|
| * 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 The Segal Company's Web site. | ||
| ** Individuals age 55 or over can contribute an additional $900 to their HSAs for 2008. Catch-up contributions increase by $100 per year under the statute until they reach a maximum of $1,000 in 2009. | ||
| ***The out-of-pocket expense does not include premiums. | ||
| Maximum Annual HSA Contribution** | $2,900 (up $50 from $2,850 in 2007) |
$5,800 (up $150 from $5,650 in 2007) |
| Minimum HDHP Deductible | $1,100 (no change from 2007) |
$2,200 (no change from 2007) |
| Maximum HDHP Deductible | None | None |
| Maximum HDHP Out-of-Pocket Expense*** | $5,600 (up $100 from $5,500 in 2007) |
$11,200 (up $200 from $11,000 in 2007) |
Implications for Plan Sponsors
America’s Health Insurance Plans’ (AHIP) most recent annual study of HSA/HDHP enrollment found that as of January 2007, about 4.5 million Americans were covered by HSAs with HDHPs.3 This is a 43 percent increase from 2006.
Before the Tax Relief and Health Care Act of 2006, contributions to an HSA were limited to the lesser of the annual deductible under the companion HDHP or the indexed amount. The Act removed the link to the annual HDHP deductible for tax years beginning after December 31, 2006. This higher permissible contribution was expected to increase interest in HSAs.
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 HSAs. The Segal Company can be retained to work with plan sponsors and their attorneys to evaluate the impact of the decision and possible compliance responses.
- To see Revenue Procedure 2007-36, which was published on May 11, 2007, click here. (To return to the Capital Checkup text, click here.)
- The Tax Relief and Health Care Act of 2006 (Public Law 109-432) was discussed in The Segal Company’s January 2007 Bulletin, “HSA Expansions in the Tax Relief and Health Care Act of 2006.” (To return to the Capital Checkup text, click here.)
- To see this AHIP research, click here. (To return to the Capital Checkup text, click here.)
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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