HSAs are incredibly valuable tools in insurance, but it’s important to be aware of contribution limits, which are updated every year. Sometimes, these updates change little, if anything, but for 2021, the IRS chose to increase HSA contribution limits, giving individuals the opportunity to add more money into their medical expense accounts. Here’s everything you need to know about 2021 HSA contribution limits.
For more information on HSAs, the changes they’re undergoing this year, or to request a quote, contact Beckham Insurance Group today.
What is an HSA?
HSAs, or Health Savings Accounts, are basic savings accounts that exist to cover healthcare expenses. Unlike other accounts you may have within your company’s coverage, HSAs are owned and controlled by you, the employee, and you receive the account’s associated tax benefits.
These plans are typically available to people who have high-deductible plan coverage and are not covered by other medical plans. HSAs can be great options for individuals and families, because they offer a health savings option that rolls over from year to year if you don’t use all of the funds.
2021 HSA Contribution Limits
|Single Coverage||Family Coverage||Catch Up Contribution
|2021||$3,600||$7,200||Limit + $1,000|
|2020||$3,550||$7,100||Limit + $1,000|
|2019||$3,500||$6,900||Limit + $1,000|
Every year, the IRS works to set new contribution limits for health savings accounts. For 2021, HSA contribution limits are seeing an increase for both self-coverage and family coverage with a $50 boost for individuals and a $100 boost for family coverage plans. Additionally, there is an overall boost of 1.5% for annual HSA contributions with limits at $3,600 for individual plans and $7,200 for family plans.
There was no change in catch-up contributions for those age 55 and up or HDHP minimum deductibles, which remain at $1,000 total, $1,400 self and $2,800 family respectively. But HDHP maximum out-of-pocket amounts did see an increase for deductibles, co-payments, and other costs excluding premiums. This is not atypical. In fact, the changes that are happening within the contribution limit changes for 2021 are on par with increase patterns from previous years.
Why Did 2021 Contribution Limits Increase?
The short answer to this question can be summed up in a single word: inflation. Typically, most increases to HSA contribution limits are directly linked to the economy—specifically, to the rise in inflation rates. This year’s rise was no exception. Now, more than ever, people need solid medical coverage to help offset the often-astronomical medical bills that can come from lengthy hospital stays, treatments, and other expenses.
Sure, this $50 to $100 increase wasn’t a lot, but every penny matters to employees who are contributing to their HSA accounts. The rise can help families cover more medical bills as they arise and save for future needs while maintaining or increasing their accounts’ current values.
In addition to contribution limits from the IRS increasing, the CARES Act (Coronavirus Aid, Response, and Economic Security) has provided HSA account holders with another benefit. In light of the pandemic, HSAs along with HRAs and FSAs can be used to pay for medical expenses that were previously not covered under the account’s policies.
Now, individuals with these account types can use those funds to pay for over-the-counter medicines and menstrual care products including tampons and pads. This makes the HSA accounts much more accessible and beneficial to individual holders who may be struggling to manage each of these expenses in addition to the financial strains they may be facing at this time.
Adjusting to Changes
Plan sponsors need to ensure they’re staying informed of all IRS mandates concerning savings accounts with their payroll and administrative departments. That way, you can adjust to these new limits and inform employees by including information about them during open enrollment periods or other account-related documents and summaries.
Rising Employer & Employee HSA Contributions
While the IRS and other government agencies worked to increase account limitations and eligible expenditure opportunities, employers have also stepped up to assist their employees more with medical savings compared to previous years. Average employer contributions have risen from $600 in 2017 to $880 in 2019 (latest data year). Employee contributions are also increasing, with average employee contributions going from $1,921 in 2017 to $2,034 in 2019.
Analysts have attributed these increases in part to individual organizations’ rising emphasis on employee health programs that permit individuals to “earn” more company HSA contributions. These have included wellness program incentives like fulfilling health education requirements or meeting gym or step-counting quotas with rewards of increased employer payments into HSA accounts to help better prepare their staff for long-term health and financial success.
Employee Benefits Made Easy
We hope this guide to 2021 HSA contribution limits has been helpful. At Beckham Insurance Group, our knowledgeable and experienced employee benefits representatives are here to help make your benefits administration as easy and stress-free as possible. Contact us today to learn more about how we can help you build a competitive and comprehensive benefits program.