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Brought to you by World Insurance Associates LLCHealth savings account (“HSA”) limits will increase next year permitting more tax-free contributions to the accounts. The limits are tied to inflation and the IRS recently released Revenue Procedure 2023-23 to provide the adjusted limits for 2024. In conjunction with the HSA limits, the high deductible health plan (HDHP) requirements for 2024 will also be increased. 

Most employers likely have HDHPs that will meet the new requirements as the trend has been to have larger deductibles than the minimum. Nevertheless, they should review their plan’s minimum deductibles and maximum out-of-pocket expense limits to confirm that they will meet the new limits.  In addition, they should update their plan communications for the increased HSA contribution limits.

HSA Limits Starting January 1, 2024 

Eligible individuals with self-only HDHP coverage will be able to contribute $4,150 to their HSAs for 2024, up from $3,850 in 2023. 

Eligible individuals with family* HDHP coverage will be able to contribute $8,300 to their HSAs for 2024, up from $7,750 in 2023. 

HDHP Amounts Starting January 1, 2024

The minimum deductible amount for HDHPs will increase to $1,600 for self-only coverage and $3,200 for more than self-only coverage for 2024 (up from $1,500 for self-only coverage and $3,000 for more than family coverage for 2023).

The HDHP maximum out-of-pocket expense limit increases to $8,050 for self-only coverage and $16,100 for more than self-only coverage for 2024 (up from $7,500 for self-only coverage and $15,000 for family   coverage for 2023).

*Family coverage is defined as any coverage other than “self-only.” 

HSA/HDHP Limits

The following chart shows the HSA and HDHP limits for 2024 compared to 2023. It also includes the catch-up contribution limit that applies to HSA-eligible individuals aged 55 or older, which is not adjusted for inflation and stays the same from year to year.

HSAs have favorable tax benefits – contributions are not taxable, the accounts can grow tax-free and distributions are tax-free if spent on qualifying medical expenses. In order to contribute to (or receive contributions) an HSA, the individual must be a participant in an HDHP and cannot be covered by any medical plan that is not an HDHP.  HDHPs have minimum deductible limits and maximum out-of-pocket expense limits that Congress imposed when it passed the enabling legislation. The contribution limits are also dependent on whether the individual has self-only or more than self-only coverage under the HDHP.  In addition, individuals aged 55 or older can make a catch-up contribution of $1,000 (which is not inflation-adjusted). All of those limits are adjusted annually on January 1.

This Alert is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.