We’re not even halfway through the year but the Internal Revenue Service (IRS) has already confirmed the updated health savings account (HSA) contribution limits for 2020 along with the adjusted limits for corresponding high-deductible health plans (HDHPs).
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First, let’s look into some background on these plans.
What is an HSA?
Generally speaking, the HSA was made to pay for the daily medical expenses that an individual or family member may incur and to do so on a completely tax-free basis.
The employee owns the account and money is deposited directly into that individual’s account.
Contributions can be made by the employee through lump sum contributions or pre-tax payroll deductions. An employer may also contribute to the account.
Funds are available as soon as they accumulate. This is different than a flexible spending account (FSA) that has uniform coverage – the entire balance is available as of the first date of the plan year.
What type of corresponding health plan is required?
An HSA must be paired with a qualified high deductible health plan (QHDHP) that meets the maximum out-of-pocket minimum annual deductible requirements set annually by the IRS. (See chart below).
HSAs have a lot of great benefits – to learn more about them, click here.
While it may not even be summer, it’s never too early to start thinking about future medical expenses and opportunities to save for retirement.
Remember, HSA contributions may be made through pre-tax salary reductions and/or on a post-tax basis, up to the maximum limit for that year. Post-tax contributions may be made up until the date an individual’s taxes are due (April 15).
How can PrimePay help?
PrimePay offers benefits administration for HSAs (and other pre-tax plans, while we’re at it). Click this link to learn more or fill out the form below to request more information.