Thanks in part to continued high inflation, employees will be able to make a lot more money in health savings accounts (HSAs) next year.
Annual HSA contribution limits for 2024 are increasing in one of the biggest jumps in recent years, the IRS announced May 16: The annual limit for HSA contributions for self-coverage-only will be $4,150, up 7.8 percent from the $3,850 limit in 2023. For family coverage , the HSA contribution limit jumps to $8,300, up 7.1 percent from $7,750 in 2023.
Participants age 55 and older can contribute an additional $1,000 to their HSAs. This amount will remain unchanged.
Meanwhile, for 2024, a high-deductible health plan (HDHP) must have a deductible of at least $1,600 for self-coverage only, up from $1,500 in 2023, or $3,200 for family coverage, up from $3,000, as you noted. tax authority. Annual personal expense caps (deductibles, co-payments, and other amounts, but not premiums) cannot exceed $8,050 for self-coverage only in 2024, up from $7,500 in 2023, or $16,100 for family coverage, up from $15,000.
The IRS also announced that it will raise the maximum amount that employers may contribute to an excluded health compensation arrangement (HRA) in 2024 to $2,100 — up from the 2023 amount of $1,950.
The increases are detailed in IRS revenue measures 2023-20 and go into effect in January 2024.
Contribution and pocket limits
For Health and High-Dedu savings accountsctible health plans
The new limits are a big jump, said Kevin Robertson, senior vice president and chief revenue officer at HSA Bank, but not surprising in the context of months and months of high inflation, which has contributed to increased costs for employees.
“The increase to these limits is not surprising because they are indexed by the CPI serialized by the IRS, and these limits are justified by the inflationary effects of last year,” he said.
He said that while it was expected, the increase in the 2024 HSA range was significant for exceeding certain financial token thresholds. For the first time, including catch-up contributions for those 55 and older, a couple on family coverage can now contribute more than $10,000, and a single person on self-only coverage can now contribute more than $5,000.
“These are important levels that can not only have powerful subconscious effects on HSA participants, but may also attract the attention of financial advisors who may help counsel these people,” Robertson said. “This is very good news to help more Americans understand and use the HSA as a powerful tool in health care spending and long-term savings.”
Many industry experts describe the HSA as a smart way for employees to save for medical expenses, even in retirement, citing triple tax benefits: Contributions are made before tax, money in accounts grows tax-free and withdrawals for qualified medical expenses are tax-free.
HSA enrollment continues to grow, and more employers are making contributions to employee accounts. At the end of 2022, Americans held $104 billion in 35.5 million HSA accounts, according to HSA advisory firm Devenir.
Despite the benefits, most account holders don’t take full advantage of their accounts and miss out on big bonuses, according to the Employee Benefits Research Institute. Recent data from EBRI found that the average account holder has a modest balance, contributes well below the maximum and does not invest an HSA.
HSA limits are issued every April or May by the IRS — ahead of other limits like flexible spending accounts and 401(k) contributions — giving employers and HSA administrators plenty of time to adjust their systems. Employers often promote HSAs and encourage employees to increase their contributions during open enrollment, Robertson said, though it would be a good idea for HR and benefits leaders to start that conversation now.
“For employers looking for ways to bring the benefits of HSAs to their employees’ attention, this is ‘good news to use’ to help promote healthy behavior and engagement with their employees,” he said. “This can be useful in helping employees understand how to handle not only their current health care spending but also, and more importantly, the impact that an HSA can have on preparing them for retirement in the long term.”
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