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IRS Announces Updates to the 2018 Limits

Yesterday, the IRS Published Internal Revenue Bulletin (IRB) 2018-10 which included Revenue Procedure (Rev. Proc.) 2018-19. Within this document were updates to previously announced limits for the 2018 Calendar Year.

For Calendar Year 2018, the family contribution limit for Health Savings Accounts (HSAs) has been lowered by $50 from the previously announced limit of $6,900. The new limit for 2018 is now $6,850. Employees contributing to an HSA should be informed of the reduced maximum limit so that they may make adjustments to their contributions for the remainder of 2018. Any employees who have already contributed the previously announced maximum for 2018 will need to receive a refund of the excess contribution by having them fill out a contribution reversal form. FBA will be reaching out to our clients directly who have employees that have contributed the previous maximum to go over the next steps in more detail.

The bulletin also included an updated to the 2018 maximum for employer sponsored Adoption Assistance Programs. The limit has been reduced to $13,810 from the previously announced limit of $13,840.

These updates were made by the IRS due to the Tax Cuts and Jobs Act (P. L. 115-97) that was passed by congress on December 22, 2017. This act affected the way that the Internal Revenue Service calculates cost of living increases from the Consumer Price Index (CPI) to a new method known as “chained CPI”. Chained CPI is a method of calculating inflation that takes into account that as prices increase some consumers switch to a lower priced product or substitute products, thereby reducing the effects of inflation. Over time, Chained CPI is meant to produce lower cost of living increases.