2022 Inflation-Adjusted Amounts for HSAs and Excepted Benefit HRAs

hsa smallIn a Revenue Procedure, the IRS has provided: a) the 2022 inflation-adjusted amounts for Health Savings Accounts (HSAs); and b) the inflation-adjusted maximum dollar amount that may be made newly available for excepted benefit health reimbursement arrangements (HRAs) for plan years that begin in 2022.

Background—HSAs.

An HSA is a trust created or organized in the U.S. exclusively for the purpose of paying the “qualified medical expenses” of an “account beneficiary.”  An HSA can only be established for the benefit of an “eligible individual” who is covered under a “high deductible health plan.”

Generally, a high deductible health plan (HDHP) is a health plan which has an annual deductible that is not less than $1,000 for self-only coverage, and $2,000 for family coverage. In addition, the sum of the annual deductible and other annual out-of-pocket expenses required to be paid under the plan for covered benefits (but not for premiums) cannot exceed $5,000 for self-only coverage and $10,000 for family coverage.

The annual contribution limitation and the annual deductible and out-of-pocket expenses are adjusted annually for inflation.

Within specified dollar limits, an above-the-line deduction is allowed for an individual’s contribution to an HSA (annual contribution limitation).

Background—HRAs.

Group health plans are subject to a variety of requirements enacted by (1) the Health Insurance Portability and Accountability Act of 1996 (HIPAA), and (2) the Affordable Care Act (ACA), which incorporated Public Health Service Act (PHSA) requirements into the Code.

The HIPAA rules limit preexisting condition exclusions under Code Sec. 9801; prohibit the exclusion of certain individuals based on health status under Code Sec. 9802, and guarantee the renewability of health insurance coverage under Code Sec. 9803.

The PHSA rules provide for standards related to benefits for mothers and newborns under Code Sec. 9811; mental health parity rules under Code Sec. 9812; and requirements related to coverage for dependent students on medically necessary leaves of absence under Code Sec. 9813. In addition, they limit lifetime and annual limits, require coverage of certain preventive services, extend dependent coverage, and impose various other market reforms on group health plans and health plan issuers under Code Sec. 9815.

However, the requirements listed above generally don’t apply to “excepted benefits.” Excepted benefits include:

  1. limited scope vision and dental benefits;
  2. benefits for long-term care, nursing home care, home health care, or community-based care, or any combination of those benefits; and
  3. other similar, limited benefits as specified in the regs.

Reg §54.9831-1(c)(3)(viii) provides rules for HRAs and other “account-based” group health plans to qualify as excepted benefits (“excepted benefit HRAs”).

An HRA is an arrangement that: (1) is paid for solely by the employer and not provided pursuant to a salary reduction election or otherwise under a cafeteria plan; (2) reimburses the employee for medical care expenses incurred by the employee and the employee’s spouse and dependents; and (3) provides reimbursements up to a maximum dollar amount for a coverage period, and any unused portion of the maximum dollar amount at the end of a coverage period is carried forward to increase the maximum reimbursement amount in subsequent coverage periods.

Reg §54.9831-1(c)(3)(viii)(B) provides that, for each plan year, amounts newly made available to excepted benefit HRAs may not exceed $1,800. For plan years beginning after December 31, 2020, the $1,800 dollar amount is adjusted for inflation.

Inflation adjustments for contributions to HSAs in 2021.

The IRS has released the 2021 inflation-adjusted figures for contributions to HSAs:

Annual contribution limitation. For the calendar year 2022, the annual contribution limitation under Code Sec. 223(b)(2) for an individual with self-only coverage under a HDHP is $3,650; the amount is $7,300 for an individual with family coverage.

High deductible health plan defined. For the calendar year 2022, an HDHP is a health plan with an annual deductible that is not less than $1,400 for self-only coverage or $2,800 for family coverage, and annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) that do not exceed $7,050 for self-only coverage or $14,100 for family coverage.

HRA inflation-adjusted item.

For plan years beginning in 2022, the maximum amount that may be made newly available for the plan year for an excepted benefit HRA is $1,800.