Some good news for those of you with Self-Directed Health Savings Accounts (HSAs): The IRS recently announced the maximum allowable Self-Directed HSA contribution for family plans 2018 will be $6,900. That is an increase of $50 from the prior limit of $6,850. The maximum allowable contribution limit for single participants for 2018 is $3,450. The limits are the same for Self-Directed HSA accounts.
The IRS had previously reduced the allowable contribution from $6,900 to $6,850 for 2018, which caused confusion and headaches for employers and Self-Directed HSA participants alike.
Those ages 55 and older may contribute an additional $1,000 to their Self-Directed HSA plans on an annual basis.
Employers who have already communicated the lower limits to employees should make it clear to Self-Directed HSA participants that the $6,900 limit has been reinstated. This will allow employees to increase their annual contribution to reflect the new limit – thereby enabling them to maximize the benefit of the Self-Directed HSA.
The other Self-Directed HSA limits are unaffected:
Minimum annual HDHP deductible
Plan out-of-pocket maximum for Self-Directed HSA eligibility:
Self-Directed Health Savings Accounts allow individuals to save money for future health expenses on a tax-advantaged basis. Contributions to Self-Directed Health Savings Accounts grow tax-deferred, and distributions to pay for qualified health expenses are tax free.
Contributions to Self-Directed HSAs are pre-tax, and assets in an HSA grow tax-free if they remain in the account. Distributions for qualified medical expenses are likewise tax-free. Distributions for other reasons are subject to income tax, plus an additional 20 percent penalty on non-qualified withdrawals prior to age 65, unless you are sooner disabled.
Employers can also offer Self-Directed HSAs, and even contribute to HSAs on employees’ behalf, provided the employee is also currently covered under a high-deductible health plan.
Employers and participants can get more information on the change to the annual contribution limit for Self-Directed HSAs from IRS Rev. Proc. 2018-27.
Benefits of Self-Directed Health Savings Accounts
Self-Directed Health Savings Accounts have several important benefits:
- You can claim a tax deduction for your own contributions, or for contributions anyone other than your employer makes, even if you do not itemize deductions on Schedule A.
- Contributions your employer makes to your Self-Directed HSA are generally excluded from income.
- Self-Directed HSA assets are portable. You keep these assets, even if you leave your employer or get another kind of insurance coverage in future years.
- Assets in Self-Directed HSAs are available to supplement income after age 65, when most people are first eligible for Medicare. You will still have to pay income tax on distributions, but there are no required minimum distributions and no 20 percent excise tax for withdrawals made after you turn 65.
Qualifying for a Self-Directed HSA
To be eligible for an HSA, including a Self-Directed HSA, you must meet the following criteria as of December 1st of 2017.
- You must be covered under a high deductible health plan.
- You must have no other health coverage (with certain exceptions for those covered by the VA).
- You must not be enrolled in Medicare.
- You cannot be claimed on anyone else’s tax return as a dependent.
Health Savings Accounts can be self-directed, just like any IRA. This means plan participants have far more choices in how they can invest money in their Self-Directed Health Savings Accounts. By opening an account with American IRA, LLC, you can take those assets and invest them in direct ownership of real estate, gold and precious metals, stocks, bonds, private placements, venture capital, tax liens and certificates, and a variety of other investment asset classes.
A Self-Directed HSA may benefit you if you want to increase your exposure to non-traditional or alternative asset classes, want to increase your potential investment returns, lower your overall risk, or both. For more information, see IRS Publication 969.
For more information on Self-Directed IRAs or how to set up your own Self-Directed HSA, call us today at 866-7500-IRA (472). Or visit us on the Web at www.AmericanIRA.com.