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For 2014, Higher Limits for HSA Contributions, Out-of-Pocket Expenses
Minimum deductible amounts for high-deductible plans unchanged

By Stephen Miller, CEBS  5/3/2013

 

Update: In April 2014, the IRS announced 2015 health savings account (HSA) contribution limits, along with high-deductible health plan maximum out-of-pocket expenses and minimum deductible amounts.

 

The Internal Revenue Service announced higher limits for 2014 on contributions to health savings accounts (HSAs) and for out-of-pocket spending under high-deductible health plans (HDHPs) linked to them.

In Revenue Procedure 2013-25, issued May 2, 2013, the IRS provided the inflation-adjusted HSA contribution and HDHP minimum deductible and out-of-pocket limits, effective for calendar year 2014. The higher rates reflect a cost-of-living adjustment and rounding rules under Internal Revenue Code Section 223.

A comparison of the 2014 and 2013 limits is shown below:

 

Contribution and Out-of-Pocket Limits for Health Savings Accounts and for High-Deductible Health Plans

 

For 2014

For 2013

Change

HSA contribution limit (employer + employee)

Individual:
$3,300

Family:
$6,550

Individual:
$3,250

Family:
$6,450

Individual:
+$50

Family:
+100

HSA catch-up contributions (age 55 or older)*

$1,000

$1,000

No change**

HDHP minimum deductibles

Individual:
$1,250

Family:
$2,500

Individual:
$1,250

Family:
$2,500

No change

HDHP maximum out-of-pocket amounts (deductibles, co-payments and other amounts, but not premiums)

Individual:
$6,350

Family:
$12,700

Individual:
$6,250

Family:
$12,500

Individual:
+$100

Family:
+$200


*
Catch-up contributions can be made any time during the year in which the HSA participant turns 55.
** Unlike other limits, the HSA catch-up contribution amount is not indexed; any increase would require statutory change.

The increases in contribution limits and out-of-pocket maximums from 2013 to 2014 were somewhat lower than the increases a year earlier, reflecting the government's calculation of a more modest inflation rate. From 2012 to 2013 the contribution limit rose $150 for individual coverage and $200 for family plans, while maximum out-of-pocket amounts rose $200 for individuals and $400 for families, and HDHP minimum deductible amounts rose $50 for individuals and $100 for families.

Penalties for Nonqualified Expenses

Those under age 65 (unless totally and permanently disabled) who use HSA funds for nonqualified medical expenses face a penalty of 20 percent of the funds used for such expenses. Funds spent for nonqualified purposes are also subject to income tax.

Coverage of Adult Children

While the Patient Protection and Affordable Care Act allows parents to add their adult children (up to age 26) to their health plans, the IRS has not changed its definition of a dependent for health savings accounts. This means that an employee whose 24-year-old child is covered on his HSA-qualified high-deductible health plan is not eligible to use HSA funds to pay that child's medical bills.

If account holders can't claim a child as a dependent on their tax returns, then they can't spend HSA dollars on services provided to that child. According to the IRS definition, a dependent is a qualifying child (daughter, son, stepchild, sibling or stepsibling, or any descendant of these) who:

  • Has the same principal place of abode as the covered employee for more than one-half of the taxable year.

  • Has not provided more than one-half of his or her own support during the taxable year.

  • Is not yet 19 (or, if a student, not yet 24) at the end of the tax year or is permanently and totally disabled.

Stephen Miller, CEBS, is an online editor/manager for SHRM.

Other 2014 Benefit Change Articles:

 

For 2014, IRS Issues 401(k) and Pension Plan Limits, SHRM Online Benefits, November 2013
 

FICA Adjusts: Income Subject to Payroll Tax Increases in 2014, SHRM Online Benefits, October 2013

FSA Use-It-or-Lose-It Rule Modified, SHRM Online Benefits, November 2013

Health Benefit Costs Could Jump in 2014, SHRM Online Benefits, November 2013

Related SHRM Articles:

Consumer-Driven Decision: Weighing HSAs vs. HRAs, SHRM Online Benefits, updated May 2013

Study: CDHP Customers Lowered Health Risks and Costs, SHRM Online Benefits, February 2013

Consumer-Driven Health Plan Participants More Cost-Conscious, SHRM Online Benefits, December 2012

IRS Issues Guidance on $2,500 FSA Limit for 2013, SHRM Online Benefits, updated October 2012

Consumer-Driven Plans Are Now Second Most Common Design, SHRM Online Benefits, September 2012

Satisfaction Levels Up for CDHPs, Down for Traditional Plans, SHRM Online Benefits, September 2012

Quick Links:

SHRM Online Benefits Discipline

SHRM Online Health Care Reform web page 

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