IRS has just issued Revenue Procedure 2012-26, which provides the 2013 cost-of-living contribution and coverage adjustments for HSAs, as required under Code Section 223(g). Most contribution limits and the out-of-pocket amounts have been increased for 2013.
2013 Annual Contribution Limit:
Single coverage: $3,250 (up from $3,100 in 2012)
Family coverage: $6,450 (up from $6,250 in 2012)
2013 Minimum Deductible for HDHP:
Single coverage: $1,250 (up from $1,200 in 2012)
Family coverage: $2,500 (up from $2,400 in 2012)
2013 Maximum Out-of-pocket:
Single coverage: $6,250 (up from $6,050 in 2012)
Family coverage: $12,500 (up from $12,100 in 2012)
For a copy of Revenue Procedure 2012-26, please click on the link below:
http://www.irs.gov/pub/irs-drop/rp-12-26.pdf
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March 1st, 2012 |
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Category: CDHC, Compliance and Regulatory, HRA, HSA, Health Care Reform, Health Reimbursement, Health Savings Accounts, IRS, Taxes, UncategorizedThe HHS has just issued their draft bulletin on defining the “actuarial value” methodology that will be used to calculate AV for health plans, and it is good news for HSAs and HRAs! The rules DO include the employer contributions to accounts in the calculations, which is tremendously beneficial to the attractiveness of the plans. An excerpt from HHS document is below.
The key text is below:
Treatment of Health Savings Accounts and Health Reimbursement Arrangements in Calculating Actuarial Value Section 1302(d)(2)(B) of the Affordable Care Act directs the Secretary to issue regulations under which employer contributions to a health savings account (within the meaning of section 223 of the Internal Revenue Code of 1986) may be taken into account in determining the level of coverage for a plan of the employer. Calculation of the AV of high-deductible health plans (HDHP) linked to a health savings account (HSA) or a health plan linked to a health reimbursement arrangement (HRA) poses a special challenge. Simply calculating the AV of the HDHP based on the insurance product could understate the value of coverage and some HDHPs could fall below the level of a bronze plan based on the HDHP alone. Yet accounting for the total coverage provided by the combination of the HDHP and the full value of the HSA or HRA could overstate the AV because, empirically, only a portion of these accounts are used toward health in a given year. The AV calculation should, therefore, reflect an appropriate adjustment to these contributions. We intend to propose that for purposes of calculating the AV of an employer health benefit plan, the annual employer contribution to the employee’s HSA associated with a qualifying HDHP and the amount made available for the first time in a given year under a HRA that is linked to an employer health benefit plan shall be considered part of the benefit design of the health plan. In calculating the AV of the combined HDHP and HSA or combined employer health benefit plan and HRA, the calculation would assume that the employer contribution to the HSA or HRA is used by the employee to pay for cost-sharing. Accordingly, these amounts would be credited to the numerator of the AV calculation. This means that the AV calculator would include any current year HSA contributions and amounts first made available under an HRA as an input into the calculator that can be used to determine the AV of an employer health benefit plan. For example, if a HDHP with a $3,000 deductible has an AV of 55 percent and the employer provides an HSA contribution of $1,000, that contribution would be applied towards the numerator of the AV calculation. However, because generally only a portion of an HSA is used in a year for health services, HSA contributions would be adjusted so that the employer receives the same credit for HSA contributions in the numerator of the AV calculation as it would receive for the same amount of first-dollar insurance coverage. The same rule would apply for amounts first made available under an HRA. In the individual market, we intend to propose that HSA contributions paid directly by the individual would not count towards AV. Finally, we note that the method used to evaluate the HSA or HRA impact on health plan AV has no bearing on the opportunity of employers to offer HSAs or HRAs, or the tax treatment of HSA contributions or amounts made available under an HRA.
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The HSA minimum deductible, a benchmark for comparing HSAs with traditional PPO plans, will rise to $2,500 family and $1,250 individual in 2013, the first increase in the past 3 years, according to former Treasury official Roy Ramthun who makes the annual estimate using near-final government data.
A statutory technical freeze on the rise for three years has resulted in the average employee plan deductible without an HSA rising to virtually the same amount as an HSA minimum deductible. This means people who are offered a choice often now see little difference in deductibles if they pick an HSA. Now HSAs will probably rise at closer to the same rate as regular HD plans.
Health reimbursement accounts (HRAs) have no minimums on how much the deductible is or the level of the employer contribution. In real market terms, HRAs typically have lower deductibles and generate less out-of-pocket cost than HSAs. So if anything the faster-rising minimum HSA deductible will make that difference with HRAs even greater from the consumer point-of-view.
Ramthun also announced that the maximum contribution to HSAs in 2013 will hit a new high of $6,450 family and $3,200 individuals (self-only), plus $1,000 for those over 55 who will be allowed a total of $7,450. Anybody can contribute up to the maximum regardless of their deductible (combined EE and ER), so a rise in the total allowed makes HSAs more attractive as investments.
© Interpro Publications 2012
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January 31st, 2012 |
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Category: CDHC, Cafeteria Plans, Compliance and Regulatory, FSA, Flexible Spending, HRA, HSA, Health Care Reform, Health Reimbursement, Health Savings Account, Health Savings Accounts, IIAS, IRS, Section 125 Plans, Taxes, UncategorizedPublication 969 has been updated for use in preparing 2011 tax returns. This publication provides basic information about HSAs, HRAs, health FSAs, Archer MSAs and Medicare Advantage MSAs, including brief descriptions of benefits, eligibility requirements, contribution limits and distribution issues. There are very few changes to the 2011 version. The publication has been updated to reflect two changes that apply beginning in 2011: the prescription requirement for OTC drugs (other than insulin) purchased after 2010, and the increase (to 20 percent) in the additional tax on HSA and MSA distributions not used for qualified medical expenses.
Click here to view IRS Publication 969.
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Q. How much can an individual contribute if she’s HSA eligible all year but changes from self-only to family coverage after her May 18, 2011, wedding?
A. This individual can take one of two approaches.
General Rule: “Sum of the Monthly Contribution Limits Rule.” Accountholders’ annual HSA contributions are pro-rated based on the number of months they are HSA eligible under each contract type during the year. When this individual is enrolled in a self-only contract, she can contribute $254.17 per month (the statutory maximum annual contribution of $3,050 divided by 12 months). During the months that she is enrolled on a family contract, she can contribute $512.50 per month (the $6,150 statutory maximum annual contribution divided by 12 months). In this case, her month-by-month maximum contribution is as follows:
| Month |
Maximum Contribution |
| January |
$254.17 |
| February |
$254.17 |
| March |
$254.17 |
| April |
$254.17 |
| May |
$254.17 |
| June |
$512.50 |
| July |
$512.50 |
| August |
$512.50 |
| September |
$512.50 |
| October |
$512.50 |
| November |
$512.50 |
| December |
$512.50 |
| Total |
$4,858.33 |
Special Rule: “Last-Month Rule.” This special rule (which comes with a testing period requirement noted below) permits the individual to make a full year’s family contribution as long as she is enrolled in a family contract as of Dec. 1, 2011, regardless of when during the first 11 months of 2011 she is married and switches to a family contract. If she takes this approach, she must remain eligible through the end of the following 12-month “testing period.” The testing period ends on December 31 of the following year (2012 in the above example). If she loses HSA eligibility any time before December 31, 2012, she must include any contributions for months during which they were not eligible, except for the last-month rule, in her taxable income in the year she loses eligibility. In addition, excess contributions are subject to a 10% additional tax that year. Accountholders incur this penalty regardless of age.
If she loses HSA eligibility during the testing period, she must include in her 2012 taxable income any contribution she made in 2011 that is in excess of the pro-rated contribution maximum. Her maximum contribution would be $4,858.33, and any amount above that figure would be included in her 2012 taxable income, and she would pay an additional 10% tax on the excess contribution as well.
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January 4th, 2012 |
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Category: CDHC, COBRA, Cafeteria Plans, Compliance and Regulatory, FSA, Flexible Spending, HRA, HSA, Health Care Reform, Health Reimbursement, Health Savings Account, Health Savings Accounts, IIAS, IRS, PPACA, Section 125 Plans, State Legislation, TaxesThe IRS has issued new guidance to clarify how employers and benefit plan administrators will need to meet Form W2 health benefit cost reporting requirements, including the treatment of FSAs, HRAs, EAPs and wellness programs, and supplemental coverage.
The W2 reporting requirements were created under PPACA and for informational purposes only so that employees are provided with comparable consumer information on the cost of their health care coverage. Notice 2012-9 restates and amends the interim guidance initially provided in Notice 2011-28 and includes the following changes:
- States that the reporting requirement does not apply to coverage under a health FSA if contributions occur only through employee salary reduction elections (Q&A-19).
- Clarifies that employers may include the cost of coverage under programs not required to be included under applicable interim relief, such as the cost of coverage under an HRA (Q&A-33).
- Employers are not required to include the cost of coverage under an employee assistance program, wellness program, or on-site medical clinic in the reportable amount if the employer does not charge a premium with respect to that type of coverage provided under COBRA to a qualifying beneficiary (Q&A-32).
- Employers do have to include the cost of any supplemental health benefits, such as cancer insurance that they pay for, but they do not have to include the cost of supplemental health benefits that the employees pay for with after-tax dollars (Q&A-38).
The guidance is applicable beginning with 2012 Forms W2 (forms required for the 2012 calendar year that employers are required to give employees by the end of January 2013). In addition, employers may rely on the guidance provided in this notice if they voluntarily choose to report the cost of coverage on 2011 Forms W2, even though this reporting is not required for 2011.
Click here to read Notice 2012-9.
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The release of President a Obama’s deficit reduction plan comes just a week after the President submitted to Congress the actual text of his proposed jobs legislation.
NAHU’s greatest concern with S. 1549 , which seems quite unlikely to move forward in its current form, is that, as a pay for, the bill would change the tax treatment of employer-sponsored health insurance. Section 401 of the bill limits the value of all itemized deductions for married couples filing jointly with adjusted gross income of at least $250,000 and single taxpayers with adjusted gross income of at least $200,000 to 28 percent. This would include the cost of employer-sponsored health coverage and deductions for health-spending accounts (HSAs and HRAs). The amount that is reported by the employer for the employee is not excludable by the taxpayer. Republicans have expressed openness to some elements of the jobs proposal but have generally opposed the proposed tax changes and other revenue raisers that President Obama outlined. A number of Democrats also have spoken out against elements of the President’s proposal.
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