Under the recently passed Tax Cuts and Jobs Act (Act), the method of calculating the cost of living adjustments (COLAs) for fringe benefits was changed. As a result of this change the following limits for 2018 were reduced:

2018 2018 (updated)
Health Savings Account Limitations (HSAs)
HSA Contribution Limits
Family $6,900 $6,850

So what happens if the full $6,900 has already been contributed to an HSA? The answer can vary.

  • If an employer contributed the full amount, then the employer may instruct the HSA custodian to return the excess funds back to the employer by the end of the 2018 tax year.
  • If an employee has elected the full amount to be deducted via payroll throughout the year, then the employee may be able to change their election and reduce it by $50 on their own. Contrarily, the payroll system may automatically be reprogrammed to disallow any excess contribution. Employees should check with their human resources representative to be certain and plan a course of action.
  • If an individual contributes to an HSA managed outside of payroll (e.g. at a bank) and has already contributed the 2018 maximum, then the person should instruct the HSA custodian to distribute the $50 as taxable income. Otherwise, similar to a payroll provider, the bank may have their systems reprogrammed for the reduced limit. Check with the custodian to be certain.
2018 2018 (updated)
Adoption Assistance Programs
Employer-Provided Programs Only
Maximum amounts excluded pre-tax from gross income or maximum adoption credit $13,840 $13,810

The exclusion and the credit will begin to be phased out for individuals with an adjusted gross income (AGI) greater than $207,140 (reduced from $207,580) and will be entirely phased out for individuals with an AGI of $247,140 or more (reduced from $247,580).

If you have questions as to how these limits apply to your plan, please contact your Nyhart consultant.