Health Savings Account Limits for 2016

At Broussard Poché, we serve as a lifetime firm — here for you at any point in your life that needs financial guidance.

And as your trusted advisors, it’s our job is to keep our clients and our community fully informed about new policy changes and emerging trends. Because when big financial policy changes happen, they affect all of us in one way or another. So let’s try to help you get your heads around one of the latest governmental policy changes.

In May, the Internal Revenue Service (IRS) announced that it would be raising the maximum allowable limit of contributions to health savings accounts (HSAs) by $100 in 2016. So if you’re an employee with family coverage and you’re contributing to an HSA, this is announcement is for you.

What does that mean?

Well let’s start at the beginning. HSAs were created in 2003 so individuals covered by high-deductible health plans (HDHPs) could receive tax-preferred treatment of money saved for medical expenses. Generally, an adult who is covered by a high-deductible health plan (and has no other first-dollar coverage) may establish an HSA.

So what does this new announcement mean?

It means that in 2015, the maximum contribution that could be made to an HSA linked to an HDHP was $6,650 for employees with family coverage. But beginning in 2016, the maximum contribution will jump up $100 to $6,750. But, the maximum contribution for those with single coverage, however, will remain unchanged at $3,350.

Does this change the definition of a HDHP?

Yes. For calendar year 2016, an HDHP will be defined as health plan with an annual deductible that is “not less than $1,300 for self-only coverage or $2,600 for family coverage.” Also, annual out-of-pocket expenses — such as deductibles, copayments, and other amounts that do not include premiums — will not exceed $6,550 for self-only coverage or $13,100 for family coverage.

Is this weird or alarming?

Not at all. This recent announcement from the IRS isn’t a surprise. These HSA contribution limits are updated annually to reflect cost-of-living adjustments. In Revenue Procedure 2015-30, issued May 5, 2015, the IRS provided the inflation-adjusted HSA contribution and HDHP minimum deductible and out-of-pocket limits, effective for calendar year 2016. The higher rates reflect a cost-of-living adjustment and rounding rules under Internal Revenue Code Section 223.

We’re the first to admit that sometimes governmental, financial explanations can induce a headache. So if you want some additional clarity or if you’ve got questions, give us a call.