The IRS has recently announced the updated contribution limits for Health Savings Accounts (HSAs) and High Deductible Health Plans (HDHPs) for 2024. Due to ongoing high inflation rates, employees will be able to store away more money in their health savings accounts this year. These changes have significant implications for businesses and employees who rely on these plans to manage their healthcare costs. Therefore, this blog will explore the critical details of the IRS announcement and discuss how businesses should navigate new limits.
Understanding the IRS Announcement
Every year the IRS is required to publish inflation-adjusted limits for HSAs and HDHPs by June 1st. In response to the changing landscape of healthcare costs, annual contribution limits are increasing in one of the biggest jumps we’ve seen in recent years.
These limits include:
- The maximum HSA contribution limit
- The minimum deductible amount for HDHPs
- The maximum out-of-pocket expense limit for HDHPs
These limits vary based on whether an individual has self-only or family coverage under their HDHP. Increases are detailed in the IRS Revenue Procedure 2023-23 and take effect in January 2024.
For eligible individuals with self-only HDHP coverage, the maximum HSA contribution will be $4,150 in 2024, up from $3,850 in 2023. For eligible individuals with family HDHP coverage, the maximum contribution will increase to $8,300, compared to $7,750 for 2023. Additionally, individuals who are 55 years of age or older have the opportunity to make an additional $1,000 “catch-up” contribution to their HSAs.
In 2024, the minimum deductible amount for HDHPs will experience an increase. For self-only coverage, the minimum deductible will rise to $1,600, compared to $1,500 in 2023. Family coverage will have a minimum deductible of $3,200, up from $3,000 in the previous year.
Similarly, the HDHP maximum out-of-pocket expense limit will also increase in 2024. For self-only coverage, the maximum out-of-pocket limit will be $8,050, compared to $7,500 in 2023. For family coverage, the maximum out-of-pocket limit will be $16,100, up from $15,000 in the previous year. These adjustments reflect the evolving economic landscape and aim to accommodate rising healthcare costs.
Action Steps for Companies
It’s important for employers that sponsor HDHPs to prepare for the upcoming year by reviewing their plan’s cost-sharing limits, including the minimum deductibles and maximum out-of-pocket expense limit. This helps ensure that the plan remains compliant with the updated requirements.
Additionally, employers who offer employees the opportunity to make pre-tax HSA contributions should update their plan communications to reflect the increased contribution limits. Doing so will help employees understand and take full advantage of the benefits available to them under the updated guidelines. Staying proactive and keeping employees informed is key to a successful and well-managed healthcare plan.
Benefits and Considerations
The IRS announcement on HSA and HDHP limits has both advantages and potential challenges for employers.
Some of the benefits include:
- Tax advantages: HSAs offer tax benefits for both employers and employees, providing opportunities for tax-free contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.
- Cost control: HDHPs generally have lower premium costs than traditional health insurance plans, allowing businesses to manage health care expenses effectively while keeping costs low.
- Employee empowerment: Offering HSAs and HDHPs allows employees to have more control over their healthcare decisions and promotes a sense of financial responsibility.
Key Considerations include:
- Employee education: Employees may need assistance understanding the nuances of HSAs, HDHPs, and the associated limitations. Providing educational resources and support can help your employees make informed decisions.
- Higher deductibles: HDHPs typically come with higher deductibles, which could potentially pose a challenge for employees who require frequent medical care or have significant healthcare needs.
- Attracting and retaining talent: While HSAs and HDHPs are certainly attractive to some employees, others may prefer traditional health insurance plans. Offering a variety of insurance options and communicating their value effectively can help attract and retain top talent.
There’s a lot for employers to consider when planning for their future healthcare plans. Remember, consulting with benefits experts, like our team at Alltrust Insurance, can assist you in navigating the complexities of the insurance world and help you prepare for upcoming changes.
Always Stay Prepared for Change With Alltrust Insurance
The healthcare industry is ever-evolving. As new regulations and limitations are announced, it’s vital to stay up-to-date with the latest developments to ensure you stay in compliance and minimize expenses. With assistance from our team of professionals at Alltrust Insurance, we can help your business stay prepared no matter what the future holds. Please contact us today to see how we can help your business navigate through the complexities of healthcare.