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HIGHLIGHTS
Background Details
On April 29, 2022, the IRS announced health savings account (HSA) contribution limits for 2023. The annual inflation-adjusted amounts demonstrate a notable spike having been increased by approximately 5.5% for 2023 over 2022 versus the 1.4% adjustment that occurred in 2022 over 2021 in response to the recent inflation surge.
The annual inflation-adjusted limit on HSA contributions for self-only coverage will be $3,850, up from $3,650 in 2022. The HSA contribution limit for family coverage will be $7,750, up from $7,300. In Revenue Procedure 2022-24, the IRS confirmed HSA contribution limits effective for calendar year 2023, along with minimum deductible and maximum out-of-pocket expenses for the HDHPs with which HSAs are paired.
HSA Contribution Limit (employer + employee)
Individual: $3,850 (Increase of $200 over 2022)
Family: $7,750 (Increase of $450 over 2022)
HSA Catch-Up Contributions (55+)
$1,000 (No change)
HDHP Minimum Deductibles
Individual: $1,500 (Increase of $100 over 2022)
Family: $3,000 (Increase of $200 over 2022)
HDHP Maximum Out-Of-Pocket (deductibles, co-pays, other amounts excluding premiums)
Individual: $7,500 (increase of $450 over 2022)
Faily: $15,000 (increase of $900 over 2022)
The new 2023 limits can be used by employers during open enrollment to encourage employees to start contributing to their accounts or to increase their current contributions. Employers not currently contributing to their employees’ HSAs may want to consider the added benefit of an employer contribution to assist employees with the increased costs of care.
Employers who actively educate their employees on the benefits of HSAs and participate in contributions see increased engagement by employees and enhanced value perception of their health care benefits. Experts have shared a notable increase in employers matching employees’ HSA contributions, similar to 401(k) retirement plan matches.
Caveats to Remember
- Exceeding the set contribution limits can result in an annual 6% excise penalty tax on the excess amount unless it is withdrawn from the HSA before the tax deadline for the year.
- Married couples with HSA-eligible family coverage share one family HSA contribution limit. Spouses who each have individual HSAs may contribute up to the Individual maximums in separate accounts.
- 55+ considerations:
- When both spouses are 55+, each may contribute the additional catch-up contribution as long as they have HSA accounts in separate names.
- When one spouse is 55+ and the other is <55, the 55+ spouse must have a separate account in order to contribute the additional allowed catch-up contribution.
ACA Limit Differences
Prompting some confusion for some plan administrators, there are two sets of limits on out-of-pocket expenses. The Department of Health and Human Services (HHS) issues annual out-of-pocket or cost-sharing limits for essential health benefits covered under an ACA_compliant plan (excluding grandfathered plans). The HHS limits for the 2023 annual dollar limits were issued at the end of 2021 and are higher than those set by the IRS. To qualify as an HSA-compatible HDHP, a plan must not exceed the IRS’s lower out-of-pocket maximums. Take a look at the comparison:
| 2023 | |
| HHS (ACA-compliant plans)
Max. out-of-pocket |
Individual: $9,100 (Increase of $350 over 2022)
Family: $18,200 (Increase of $800 over 2022) |
| IRS (HSA-qualified HDHP plans)
Max out-of-pocket |
Individual: $7,500 (Increase of $450 over 2022)
Family: $15,000 (Increase of $900 over 2022) |
*The ACA’s Individual out-of-pocket maximum for essential health benefits applies to each individual in a non-grandfathered group health plan, regardless of whether the individual is enrolled in individual or family coverage.
Excepted-Benefit HRA Maximum
In addition to the above increases, the IRS also raised the maximum amount employers may contribute to an excepted-benefit health reimbursement arrangement (HRA) from the 2022 amount of $1,800 to the new amount for 2023 of $1,950 (a $150 increase).