November 11, 2006
New Indexed Amounts for Health Savings Accounts and Transportation Fringe Benefits
Guidance relating to the maximum benefit levels for transportation fringe benefits, maximum contribution levels for health savings accounts (“HSAs”), and out-of-pocket spending limits and minimum deductibles for high deductible health plans (“HDHPs”) that must be used in conjunction with HSAs was recently issued by the Treasury Department and IRS. These amounts have been indexed for cost-of-living adjustments for 2007 and are included in Revenue Procedure 2006-53.
New Annual Contribution Levels for HSAs:
- For 2007, the statutory maximum annual HSA contribution for an eligible individual with self-only coverage is $2,850. (Note: The maximum contribution is the lesser of this indexed amount or the deductible of the HDHP.)
- For family coverage, the maximum HSA contribution is $5,650. (Note: The maximum contribution is the lesser of this indexed amount or the deductible of the HDHP.)
- Catch up contribution for individuals who are 55 or older is increased by statute to $800 for 2007.
- Both the HSA contribution and catch up contribution apply pro rata based on the number of months of the year a taxpayer is an eligible individual.
New Amounts for Out-of-Pocket Spending on HSA-Compatible HDHPs:
For 2007, the maximum annual out-of-pocket amounts for HDHP self-only coverage is $5,500 and the maximum annual out-of-pocket amount for HDHP family coverage is twice that, $11,000.
Minimum Deductible Amounts for HSA-Compatible HDHPs:
For 2007, the minimum deductible for HDHPs is $1,100 for self-only coverage and $2,200 for family coverage.
Qualified Transportation Benefits:
For 2007, the monthly limitation for transportation in a commuter highway vehicle (i.e., van-pooling) and transit passes is $110. The monthly limitation for qualified parking is $215.
Employers that sponsor transportation benefits and HDHPs should review their plans and revise communication materials in light of the adjustments. If you have any questions about the foregoing items, or need assistance revising your documentation, please contact us.
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The information contained in this ALERT is intended for general information purposes only and does not constitute legal advice relative to a specific situation.