ISSUE

Many of our schools are employing HSA’s (Health Savings Accounts) and HRA’s (Health Reimbursement Accounts) as a benefit to employees given the “tough times” they are experiencing with health insurance coverage.

 

 

SITUATION

Idaho Bible College and Seminary (IBCS) is a private college exempt under Internal Revenue Code section 501(c)(3) and 170(b)(1)(A)(ii).  They are not required to file Form 990 annually.

The Controller at IBCS calls us and says, “Starting in July, we are offering an HDHP plan to employees including an HSA provision for our health insurance coverage in order to manage costs better.  Several employees have asked what the contribution limits are for 2019 and 2020.”

We tell them that the various HSA limits are as follows:

For 2019, the annual limit on deductible contributions is $3,500 for individuals with self-only coverage under an HDHP and $7,000 for family coverage.

For 2020, the annual limit on deductible contributions is $3,550 for individuals with self-only coverage under an HDHP and $7,100 for family coverage.

The annual deductible limits are subject to annual inflation adjustments. For 2020, the lower limit on the annual deductible for an HDHP increases to $1,400 for self-only coverage and $2,800 for family coverage. The upper limit for out-of-pocket expenses increases $6,900 for self-only coverage and $13,800 for family coverage.

 

RULES

From IRS Rev. Proc. 2019-25:

SECTION 1. PURPOSE

This revenue procedure provides the 2020 inflation adjusted amounts for Health Savings Accounts (HSAs) as determined under § 223 of the Internal Revenue Code.

SECTION 2. 2020 INFLATION ADJUSTED ITEMS

Annual contribution limitation. For calendar year 2020, the annual limitation on deductions under § 223(b)(2)(A) for an individual with self-only coverage under a high deductible health plan is $3,550. For calendar year 2020, the annual limitation on deductions under § 223(b)(2)(B) for an individual with family coverage under a high deductible health plan is $7,100.

High deductible health plan. For calendar year 2020, a “high deductible health plan” is defined under § 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,400 for self-only coverage or $2,800 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,900 for self-only coverage or $13,800 for family coverage.

SECTION 3. EFFECTIVE DATE

This revenue procedure is effective for calendar year 2020.

 

BOTTOM LINE

  • Health Savings Accounts are being utilized more and more by the institutions that we are hearing from.
  • To be eligible to contribute to an HSA, an individual must participate in a high-deductible health plan (HDHP).
  • Employees who participate in an HDHP are permitted a deduction for contributions to HSAs set up to help pay their medical expenses.
  • Contributions to HSA’s are limited each year – the amounts are adjusted for inflation.

 

Specific questions? Email Dave Moja

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.

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