A bit of confusion was cleared by the IRS on Thursday with its announcement that the maximum deductible for taxpayers with family coverage under a High Deductible Health Plan (HDHP) with HSA contributions will stay at $6,900 for tax-year 2018.
Originally pegged at $6,900, a change in the inflation adjustment calculations for 2018 under the Tax Cuts and Jobs Act (President Trump’s tax plan) reduced the maximum deductible HSA contributions by $50 to $6,850.
It caused the few contributors who had maxed out their HSA contributions to wonder if penalties would be imposed for overcontributions due to the change. The announcement restores it to the full amount.
“Revenue Procedure 2018-27 announces this relief for affected taxpayers and allows the $6,900 limitation to remain in effect for 2018,” according to the popular revenue-gathering arm of the United States government. “The $6,900 annual limitation was originally published in Revenue Procedure 2017-37.”
A recent HSA and 401k contribution analysis from benefits administration and solutions-provider Alight found that participants who contribute to both a health savings account and a 401k do so in greater amounts than those who contribute to just one or the other.
Specifically, the firm found that 57 percent of people who are offered both and HSA and 401k from an employer contribute to both.
“We took a look at who is using both the employer-sponsored medical plan and who is using the employer-sponsored 401(k) plans,” said Rob Austin, Alight’s head of research. “We have recordkeeping data on both and we often hear how one might cannibalize the other since there is only so much of a dollar-spend that participants can afford.”
So, does offering an HSA deter people from contributing to a 401k?
“For the most part, no,” Austin claimed. “The majority of people that are eligible to be contributing to a 401k plan and an HSA are actually putting money into both of those vehicles.”
He concedes the 57 percent figure “is not a great number, it’s not a terrible number.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
