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30
Nov

IRS Changes HSA Eligibility

Written by dreilly. Posted in Blog, compliance, education

The IRS has changed the eligibility rules for health savings accounts (HSAs).  Effective January 1, 2013, the minimum health plan deductible rises from $1,200 per person to $1,250 per person, or for families from $2,400 to $2,500. 

This means that to continue contributing to an HSA you must have a health plan with a deductible at least equal to or above the new minimum.   Those who maintain a deductible below the new minimum will no longer be able to contribute to an HSA and will therefore lose the tax advantages associated with future savings. 

Health plans have been notifying plan participants for several months of this pending change.   A variety of notices have been released from a variety of insurance carriers and administrative vendors, much to the confusion of plan participants.  Here are three important clarifications for HSA participants to know.

1)      As an HSA holder you do not lose the value of your account regardless as to whether you change your health plan deductible.  Your HSA balance is separate from your insurance plan and remains yours to save or spend as you wish on future medical expenses.  Remember, you own and control your own savings account. 

2)      The higher deductible requirement applies to new plans or plans that renew on or after January 1, 2013.  It also applies to plans that have deductibles that start over on the calendar year beginning January 1st.  If your deductible starts over on January 1st, then you must select a health plan with a deductible equal to, or higher than, $1,250.  If you do not, then you may no longer contribute to your HSA.  Once again, your balance remains your to save or spend down.

3)      Many participants have plans with deductibles that do not start over on january 1st.  Instead the deductible may start over at a later date in 2013.  For example, consider an employer plan that began on July 1, 2012 that runs through June 30, 2013.  Even with a lower$1,200 deductible, participants in this plan could continue to fund an HSA past the January 1, 2013 date through the end of the plan year up to May 31st.  A mid-year plan need not immediately increase the deductible on January 1st for participants to maintain HSA eligibility through the end of the plan year.   However, in order to maintain the ability to contribute to an HSA after the end of the current plan year, the plan would have to increase the deductible to meet the new minimum requirements.

Also of note, in addition to the deductible changes, the IRS has increased the maximum HSA contributions for calendar year 2013.  Beginning January 1st, eligible single HSA holders may contribute a maximum of $3,250 per year.  This is an increase from $3,100 in 2012.  For families the maximum contribution increases from $6,250 to $6,450.  Those who are over the age of 55 may contribute an additional $1,000.

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