The IRS has announced changes to health savings accounts contribution limits for 2011. Due to a cost of living, contribution limits will remain as they are in 2010.
According to a census of insurance firms that America’s Health Insurance Plans released last month, more than 10 million U.S. residents are covered by health savings accounts (HSAs). These plans allow individuals to contribute thousands of pre-tax dollars to HSAs, which participants may spend on health care needs or roll over indefinitely. HSA accounts were initially chosen by consumers who might otherwise go without insurance because of its high cost or their good health, but the recent rise has been fueled by more companies and their employees opting for the plans. Choosing these plans does shift the risk onto the patient but offers less-expensive premiums than traditional coverage.
Recently, the IRS released the 2011 cost-of -living adjusted HSA contribution limits. Individuals must have a high deductible plan in order to qualify to make an HSA contribution. HSA contribution limits, along with high-deductible health plan (HDHP) deductibles and out-of-pocket maximums, will stay the same as they are in 2010. This decision is due to the cost-of-living remaining flat. After the application of the cost-of-living adjustment rules, the changes in the Consumer Price Index for the relevant period did not result in any changes to the HSA amounts for 2011.
Under Internal Revenue Service Revenue Procedure 2010-22:
The annual HSA contribution limit for employee-only coverage will remain at $3,050 ($6,150 for family coverage).
The minimum deductible for employee-only HDHP coverage will remain at $1,200 ($2,400 for family coverage)
The limit on maximum out-of-pocket expenses (including deductibles, co-pays and co-insurance but not premiums) for employee-only coverage will remain at $5,950 ($11,900 for family coverage).
The catch-up contribution limit, for individuals who are 55 or older, will remain at $1,000.
While most of the HSA limits will stay the same, one significant change that will occur in 2011 is the penalty on taxable, non-medical distributions. The penalty for 2010 is 10% and this will increase to 20% starting in 2011.