HSA Redesigns?

While it is anyone’s guess what might be included in the next health care bill once the dust settles, there are some proposed changes to Health Savings Accounts (HSA) designed to make them more attractive.  Remember, HSAs are permitted for individuals and families enrolled in High Deductible Health Plans.  Here are some of the proposed changes:

  1. Raise the HSA contribution limits.  Right now, the limits are $3,400 for a single plan and $6,750 for a family plan.  Proposed rule changes for 2018 would make that $6,550 for a single plan and $13,100 for a family plan.
  2. If an employee is not eligible for an HSA because they are enrolled in a traditional health plan, proposed legislation would remove the cap on contributions to Flexible Spending Accounts. The current limit for 2017 is $2,600.  Since FSA plans require all funds to be spent or forfeited in the plan year there is a built-in cap on what reasonable contributions might be for a given family.
  3. Remove the requirement that a prescription be required for over-the-counter medications to be eligible for payment from an HSA account.
  4. Lower the penalty for non-qualified early withdrawals from an HSA plan from 20% to 10%.
  5. Allow for distribution to reimburse medical expenses that were incurred within 60 days of the start of coverage by the High Deductible Health Plan and before the HSA account was established.
  6. Allow spouses to make catch-up contributions to the same HSA instead of having to open a second account.

Remember, money can continue to accumulate in an HSA plan from year to year and contributions up to the limit are pre-tax.  That means that contributed funds are never lost and can be withdrawn without penalty after age 65.