FSAs, HSAs and HRAs

FSAs, HSAs and HRAs

The Affordable Care Act (ACA) introduced provisions affecting flexible spending arrangements (FSAs), health savings accounts (HSAs) and health reimbursement arrangements (HRAs):

  • For taxable years beginning in 2019, the dollar limitation on employee salary reductions for contributions to health FSAs is $2,700.
  • For taxable years beginning in 2018, the dollar limitation on employee salary reductions for contributions to health FSAs is $2,650.
  • Over-the-counter drugs must be prescribed by a doctor to qualify for tax-free reimbursement under FSAs, HSAs and HRAs.
  • Tax on non-qualified HSA distributions is 20 percent.

2019 HSA Contribution Limits Released

The IRS has released the inflation-adjusted contribution limits for health savings accounts (HSAs), as well as the deductible and out-of-pocket spending limits for high-deductible health plans (HDHPs), for 2019.

For self-only coverage:

  • The annual HSA contribution limit is $3,500, a $50 increase from $3,450 in 2018.
  • The annual deductible for an HDHP must be at least $1,350. (No change from 2018)
  • The annual out-of-pocket limit for an HDHP may not exceed $6,750, an increase of $100 from $6,650 in 2018.

For family coverage:

  • The annual HSA contribution limit is $7,000, a $100 increase from $6,900 in 2018.
  • The annual deductible for an HDHP must be at least $2,700. (No change from 2018)
  • The annual out-of-pocket limit for an HDHP may not exceed $13,500, an increase of $200 from $13,300 in 2018.

The limits, which become effective Jan. 1, 2019, were issued in Revenue Procedure 2018-30.

Please note: Employers that want to offer their employees an HSA must pair it with an HDHP.