IRS Issues Inflation-Adjusted Health Savings Account Limits for 2015

Author: Rena Pirsos, XpertHR Legal Editor

The Internal Revenue Service (IRS) has released the calendar year 2015 inflation-adjusted amounts for health savings accounts (HSAs) as determined under § 223 of the Internal Revenue Code (IRC). HSAs are tax exempt accounts used by employees to pay for medical expenses for themselves, their spouses and dependents. Employers can offer HSAs to employees who are enrolled in a high deductible health plan (HDHP). Employers and employees can contribute to HSAs up to the annual limits, which are inflation-adjusted each year.

The 2015 annual contribution limitation under IRC § 223(b)(2)(A) for an individual with self-only coverage under an HDHP is $3,350 (up from $3,300 in 2014). The annual limitation on contributions under IRC § 223(b)(2)(B) for an individual with family coverage under an HDHP is $6,650 (up from $6,550 in 2014).

For 2015 an HDHP is defined under IRC § 223(c)(2)(A) as a health plan with an annual deductible of at least $1,300 for self-only coverage (up from $1,250 in 2014) or $2,600 for family coverage (up from $2,500 in 2014), and annual out-of-pocket expenses (deductibles, co-payments and other amounts, but not premiums) that do not exceed $6,450 for self-only coverage (up from $6,350 in 2014), or $12,900 for family coverage (up from $12,700 in 2014).

Extra catch-up contributions of up to $1,000 can be made to an HSA by individuals aged 55 and older until they can enroll in Medicare. Contributions may not be made once they have enrolled in Medicare.

Taxation of Contributions

Employer contributions are excluded from an employee's gross income and are not taxable wages. Accordingly, an employer should not withhold federal income taxes, Social Security and Medicare (FICA) taxes and federal unemployment insurance taxes from the contributions, if the employer reasonably believes the contributions are excludable when made. Any employer contributions that exceed the annual limit or that are made for an ineligible employee are included in the employee's taxable wages. HSAs and HDHPs can be offered as part of a cafeteria plan.

Reporting Requirements

Employers must report contributions made to an HSA and the amount of taxes withheld on Form W-2, Wage and Tax Statement. They must also report them on Form 941, Employer's Quarterly Federal Tax Return, and Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return.

Employee contributions not made by salary reduction are reported as wages on Form W-2. An employee can take a deduction on his or her personal income tax return for contributions made up to the maximum annual limit.