For companies allowing health savings account (HSA) contributions via payroll deductions, a recent IRS announcement contains important info for 2024.
The HSA contribution limits will increase significantly next year.
Of course, employees who make contributions must be covered by a high-deductible health plan (HDHP).
IRS provided the inflation-adjusted numbers for both HSAs and HDHPs in Revenue Procedure 2023-23.
Here are the details:
What’s the new maximum?
The maximum amount an employee can contribute varies based on whether that person elects self-only or family coverage under the HDHP.
For someone with self-only coverage, the:
- 2023 limit is $3,850, and
- 2024 limit will be $4,150.
For someone with family coverage, the:
- 2023 limit is $7,750, and
- 2024 limit will be $8,300.
With either type of coverage, an employee who’s 55 or older can set aside even more as a catch-up contribution. That amount will remain $1,000 next year.
Key HDHP numbers
The IRS revenue procedure also included the dollar amounts needed to determine if you’re offering an HDHP.
In 2024, the annual deductible for an HDHP must be at least:
- $1,600 for self-only coverage (currently, it’s $1,500), and
- $3,200 for family coverage (currently, it’s $3,000).
Also, out-of-pocket expenses for an HDHP can’t exceed:
- $8,050 for self-only coverage ($7,500 in 2023), and
- $16,100 for family coverage ($16,000 in 2023).
Clarity on HSA expenses
Earlier in 2023, IRS released guidance on what medical expenses can be paid under an HSA.
Specifically, the guidance discussed medical expenses related to nutrition, wellness and general health.
For example, although the cost of most over-the-counter drugs can’t be deducted as a medical expense, the cost of OTC drugs can be paid or reimbursed under an HSA.
In all, IRS addressed 14 situations that employees and employers may encounter.