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Small Business Employee Benefits and HR Blog

Health Savings Account - HSA 2016 Rules & Requirements

The IRS recently announced the Health Savings Account (HSA) rules and requirements for 2016. This article reviews the HSA contribution limits, HDHP minimum required deductibles, and out-of-pocket maximums for 2016, as set annually by the Internal Revenue Service (IRS).

2016 Annual HSA Contribution Limits2016_Health_Savings_Account_HSA_rules_and_requirements

For calendar year 2016, the annual HSA contribution limits are:

  • Individuals (self-only coverage) - $3,350 (no change from 2015)

  • Family coverage - $6,750 (up $100 from 2015)

2016 HDHP Minimum Required Deductibles

For calendar year 2016, the High Deductible Health Plan (HDHP) required deductibles for an HSA are:

  • $1,300 for self-only coverage (no change from 2015)

  • $2,600 for family coverage (no change from 2015)

2016 HDHP Out-of-Pocket Maximum

The annual out-of-pocket expenses include deductibles, co-payments, and other amounts, but not premiums.

For calendar year 2016, the out-of-pocket maximums are:

  • $6,550 for self-only coverage (up $100 from 2015)

  • $13,100 for family coverage (up $200 from 2015)

If you use an HSA to pay for unqualified medical expenses, the tax penalty is 20% of the HSA distribution.

Related - IRS Publication 969 - Guidelines for HSAs, HRAs, MSAs, and FSAs

Background on Health Savings Accounts

Health Savings Accounts, or HSAs, are a popular type of medical reimbursement plan. HSAs are individual bank accounts owned by employees that allow for tax-free payment or reimbursement of eligible medical expenses. An employer usually offers an HSA-qualified high-deductible health plan and an HSA.

U.S. federal regulations require citizens to have a minimum deductible on their health insurance from all sources in order to make tax-deductible contributions to their Health Savings Accounts (HSA).

Related - Health Savings Accounts (HSAs) - 10 FAQs

HSAs combine the benefits of both traditional and Roth 401(k)s and IRAs for medical expenses. Taxpayers receive a 100% income tax deduction on annual contributions, they may withdraw HSA funds tax-free to reimburse themselves for qualified medical expenses, and they may defer taking such reimbursements indefinitely without penalties.

HSAs are unique—“IRAs on Steroids”—with triple tax advantages:

  1. Tax-deductible contributions,

  2. Tax-free accumulation of interest and dividends tax-free, and

  3. Tax-free distributions for qualified medical expenses.

The 2016 HSA guidelines were released by the IRS in Revenue Procedure 2015-30.

For 2015 HSA rules and requirements, see: HSA 2015 Rules & Requirements.

Questions about the Health Savings Account (HSA) guidelines for 2016? Leave a question and we’ll help answer.

Learn the differences between HSAs, HRAs, and FSAs

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