e-Alerts

e-Alert — COVID-19 – Heath Savings Accounts and High Deductible Health Plan Limits Increase for 2021

Background

On May 20, 2020, the IRS released Revenue Procedure 2020-32 to provide the inflation-adjusted limits for health savings accounts (HSAs) and high deductible health plans (HDHPs) for 2021.

Summary

The IRS is required to publish these limits by June 1 of each year. These limits include:

  • The maximum HSA contribution limit;
  • The minimum deductible amount for HDHPs; and
  • The maximum out-of-pocket expense limit for HDHPs.

These limits vary based on whether an individual has self-only or family coverage under an HDHP.

Eligible individuals with self-only HDHP coverage will be able to contribute $3,600 to their HSAs for 2021, up from $3,550 for 2020. Eligible individuals with family HDHP coverage will be able to contribute $7,200 to their HSAs for 2021, up from $7,100 for 2020. Individuals who are age 55 or older are permitted to make an additional $1,000 “catch-up” contribution to their HSAs.

The minimum deductible amount for HDHPs remains the same for 2021 plan years ($1,400 for self-only coverage and $2,800 for family coverage). However, the HDHP maximum out-of-pocket expense limit increases to $7,000 for self-only coverage and $14,000 for family coverage.

The new contribution limits for HSAs become effective January 1, 2021. The HDHP cost-sharing limits for 2021 apply for plan years beginning on or after Jan. 1, 2021.

HSA/HDHP Limits

The following chart shows the HSA and HDHP limits for 2021 as compared to 2020. It also includes the catch-up contribution limit that applies to HSA-eligible individuals who are age 55 or older, which is not adjusted for inflation and stays the same from year to year.

Type of Limit 2020 2021 Change
HSA Contribution Limit Self-only $3,550 $3,600 Up $50
Family $7,100 $7,200 Up $100
HSA Catch-up Contributions (not subject to adjustment for inflation) Age 55 or older $1,000 $1,000 No change
HDHP Minimum Deductible Self-only $1,400 $1,400 No change
Family $2,800 $2,800 No change
HDHP Maximum Out-of-pocket Expense Limit (deductibles, copayments and other amounts, but not premiums) Self-only $6,900 $7,000 Up $100
Family $13,800 $14,000 Up $200

Employers Next Steps

  • Employer that sponsor and HSA/HDHP accounts should review their plans cost-sharing limits (minimum deductibles and maximum out-of-pocket expense limit) when preparing for the plan year beginning in 2021.
  • Employers that allow employees to make pre-tax HSA contributions should update their plan communications for the increased contribution limits.
  • If you have any questions please contact us at benefitsupport@hrknowledge.com.

The People Simplifying HR

For almost twenty years, HR Knowledge has made it our mission to demystify the complex and daunting process of HR management. We do more than just provide the level of service and technology you’d expect from an industry leader. We combine an unparalleled passion for service with our decades of HR, payroll, and benefits experience to provide our clients with personalized and actionable advice that is second—to—none. From managed payroll to employee benefits to HR support, we can help your organization thrive, grow, and reduce operating costs — no matter what industry you serve. Whether you’re interested in our Full-Service solution or just need your employee handbook written, HR Knowledge can help you minimize risk while staying on top of compliance regulations. The bottom line? We’re not just another cloud-based technology company that also does HR, #WeAreHR. Get the scoop on how we can help you simplify HR.

This content is provided with the understanding that HR Knowledge is not rendering legal advice. While every effort is made to provide current information, the law changes regularly and laws may vary depending on the state or municipality. The material is made available for informational purposes only and is not a substitute for legal advice or your professional judgment. You should review applicable laws in your jurisdiction and consult experienced counsel for legal advice. If you have any questions regarding this content, please contact HR Knowledge at 508.339.1300 or email us.

 

DOWNLOAD PDF