In the Revenue Procedure 2020-32, the Internal Revenue Service (IRS) announced the annual inflation-adjusted Health Savings Account (HAS) contribution limits for the 2021 calendar year. It also outlined the minimum deductible as well as maximum out-of-pocket expenses for the High-Deductible Health Plans (HDHPs).
The new HSA contributions for the coming year are as follows:
Despite the COVID-19 uncertainties, these increases are similar to those of prior years. Plan sponsors should, therefore, ensure they do their best to maximize savings. Update the payroll and administration systems to reflect the coming year’s cost of living adjustments as well as incorporate the announced limits to the plan communications and documents.
CARES Act has further allowed consumers to have access to over-the-counter medications using HSA or Flexible Spending Account (FSA) to pay without a prescription. The prescription was a requirement under the Affordable Care Act before doing any over-the-counter purchase. Telehealth and other remote care services can also be accessed using the HSAs under the CARES Act up to December 31, 2021.
As pointed out, contribution limits are subject to inflation adjustments annually. Health care costs, however, increases drastically outpacing inflation, Americans are therefore forced to spend more out-of-pocket cost to access health care needs. It is worth appreciating the increasing value of HSAs brought about by the new contribution limits. It not only allows individuals and families to increase health savings for the short term but also a key retirement plan to cover health costs after retirement.