IRS Announces HSA And HDHP Limitations For 2020

Author:Mr Damian A. Myers
Profession:Proskauer Rose LLP

On May 28, 2019, the IRS released Revenue Procedure 2019-25 setting dollar limitations for health savings accounts (HSAs) and high-deductible health plans (HDHPs) for 2020. HSAs are subject to annual aggregate contribution limits (i.e., employee and dependent contributions plus employer contributions). HSA participants age 55 or older can contribute additional catch-up contributions. Additionally, in order for an individual to contribute to an HSA, he or she must be enrolled in an HDHP meeting minimum deductible and maximum out-of-pocket thresholds. The contribution, deductible and out-of-pocket limitations for 2020 are shown in the table below (2019 limits are included for reference).

HSA/HDHP Limitations 2019 2020 Maximum HSA Contribution (Employee + Employer)

Self-Only: $3,500 Family: $7,000

Self-Only: $3,550 Family: $7,100

Catch-Up Contribution Limit $1,000 $1,000 Minimum HDHP Deductible Self-Only: $1,350 Family: $2,700

Self-Only: $1,400 Family: $2,800

HDHP Out-of-Pocket Max Self-Only: $6,750 Family: $13,500

Self-Only: $6,900 Family: $13,800

Note that the Affordable Care Act (ACA) also applies an out-of-pocket maximum on expenditures for essential health benefits. However, employers should keep in mind that the HDHP and ACA out-of-pocket maximums differ in a couple of respects. First, ACA out-of-pocket maximums are higher than the maximums for HDHPs. As explained in our May 9, 2014 blog entry, the ACA's out-of-pocket maximum was identical to the HDHP maximum initially, but the Department of Health and Human Services (which sets the ACA limits) is required to use a different methodology than the IRS (which sets the HSA/HDHP limits) to determine annual inflation increases. That methodology has resulted in a higher out-of-pocket maximum under the ACA. The ACA out-of-pocket limitations for 2020 were announced in the 2020 Notice of Benefit and Payment Parameters and are shown in the table below (2019 limits are included for reference).

ACA Out-of-Pocket Limitations 2019 2020 Self-Only $7,900 $8,150...

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