Ensure employee understanding of HSA adjustments

The Internal Revenue Service Wednesday issued its yearly changes to health spending account contribution limits and out-of-pocket maximums to adjust for cost-of-living. While the changes are expected and “almost meaningless” because so small, employees don’t always understand the concept of out-of-pocket maximums, according to one benefit adviser.

“That’s another aspect of the ACA that most consumers just don’t get,” says David C. Smith, a broker at Raleigh-Durham, N.C.-based Ebenconcepts.

Other benefit industry professionals agree the IRS change is a good opportunity to ensure that employers are communicating, and employees are understanding, out-of-pocket HSA maximums.

An individual can contribute up to $3,350, and a family can contribute up to $6,650, to HSAs under a high-deductible health plan in 2015, the IRS says. In defining a high-deductible health plan, the IRS says the annual out-of-pocket expenses (including deductibles, co-payments and other amounts, but not premiums) cannot exceed $6,450 for self-only coverage or $12,900 for family coverage. The agency also sets the annual deductible at no less than $1,300 for self-only coverage or $2,600 for family coverage.

The out-of-pocket change is the biggest takeaway for advisers, according to one lawyer. “People should keep in mind that while the same out-of-pocket maximums applied in 2014 for HSAs and the Affordable Care Act cost-sharing limit, those maximums will differ in 2015,” says Linda Rowings, chief compliance officer at United Benefit Advisors in Indianapolis. “The ACA limits are a bit higher ($6,600 single and $13,200 family); high deductible health plans that are linked to HSAs will need to meet the lower, HSA maximum.”

Keith Mong, partner at Venable LLP in Washington agrees, also noting that an employee must meet the high-deductible out-of-post maximums “in order to be eligible to make deductible contributions to an HSA.”