June 25, 2007

IRS announces Cost-of living adjustments for HSAs and HDHPs

The IRS recently announced cost--of-living adjustments (COLA) for Health saving Accounts (HSAs) and High Deductible Health plan (HDHPs). The changes go into effect January 1, 2008. The limits on the maximum HSA contribution and Maximum OOP have increased.

  2007 IRS Limits* 2008 IRS Limits*
  Single Family Single Family
      Minimum HDHP Deductible $1,100 $2,200 $1,100 $2,200
      Maximum HSA Contribution $2,850 $5,650 $2,900 $5,800
Maximum Out-of-pocket $5,500 $11,000 $5,600 $11,200

The 2008 HSA catch-up contribution limit has also increased. Individuals who are age 55 or older may contribute $900 per year, $100 more than last year.

For 2008, the minimum required annual deductibles for HDHPs will unchanged. The maximum out-of-pocket limits will be raised to $5,600 for single coverage and $11,200 for family coverage.

Please note that for ease and simplicity, no adjustments will be made to the minimum HDHP deductible plans despite increases to the out-of-pocket maximums dictated by the 2008 IRS limits. Groups currently on the minimum HDHP plans continue to remain eligible with no changes to the deductible amounts.

In the past, the IRS announced COLA changes in late fall. However, the Tax Relief and Health Care Act of 2006 requires COLA changes to be calculated and announced on or before June 1 for the following calendar year.

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