The IRS has released the 2022  Health Savings Account (HSA) inflation adjustments. To be eligible to make HSA contributions, an individual must be covered under a high deductible health plan (HDHP) and meet certain other eligibility requirements.

New HSA 2022 limits are as follows:

Age 55 Catch Up Contribution

As in 401k and IRA contributions, you are allowed to contribute extra if you are above a certain age. If you are age 55 or older by the end of the year, you can contribute an additional $1,000 to your HSA. If you are married, and both of you are age 55, each of you can contribute an additional $1,000. A savvy strategy for high-income earners is to invest the money in your HSA for the long haul. Once you’re 65, you can take out tax-free distributions to cover Medicare premiums. If you withdraw money at that point for non-medical uses, you pay the same tax as you would on withdrawals from a pretax 401(k). But you can also take money out tax-free to reimburse yourself for prior years’ out-of-pocket medical expenses if you have the old receipts.

COVId-19 Update: 

You can even use an HSA to save on a typical trip to the CVS. Thanks to a tax relief provision tucked in the last Covid-19 stimulus package, you can use the money you stash in an HSA or FSA (more on those later) for over-the-counter medications like Tylenol or Flonase as well as menstrual products like tampons and pads. That reverses Obamacare restrictions on OTC meds requiring a doctor’s prescription for them to be eligible for reimbursement.

HSA/HDHP Market Growth

HSA holders own the assets in the accounts and can build up substantial sums over time.  Enrollment in HSA-compatible insurance plans has increased to 10 million earlier this year, from 1 million in March 2005, according to, America’s Health Insurance Plans (AHIP), a trade group.

HSAs were authorized starting in January 2004. Since then, AHIP has conducted a periodic census of health plans participating in the HSA/HDHP market.

• The number of people with HSA/HDHP coverage rose to more than 11.4 in January 2011, up from 10.0 million in January 2010, 8.0 million in January 2009, and 6.1 million in January 2008.
• 30 percent of individuals covered by an HSA plan were in the small group market, 50 percent were in the large-group market, and the remaining 20 percent were in the individual market.
•  14% of all workers in the private sector have access to a Health Savings Account acc. to the Bureau of Labor Statistics.
• States with the highest levels of HSA/HDHP enrollment were California, Ohio, Florida, Texas, Illinois, and Minnesota.

HSA Advantages:

• Opportunity to build savings – Unused money stays in your account from year to year and earns tax-free interest. The HSA also gives you an investment opportunity.
• Tax-free contributions and earnings – You don’t pay taxes on contributions or earnings.
• Tax-Free Money allowed for non-traditional Medical coverage– As per IRS Publication 502, unused money can be used for dental, vision, Lasik eye surgery, acupuncture, yoga, infertility, etc.  Popular Examples
• Portability – The funds belong to you, so you keep the funds if you change jobs or retire.

Our overall experience with HSAs has been positive when employer funding is at a minimum 50% using either the HSA or an HRA (Health Reimbursement Account-employer keeps unspent money).  Traditional plans trend of higher copays and new in-network deductibles has also led to the popularity of an HSA.

Next Steps

Plan sponsors should update payroll and plan administration systems for the 2022 cost-of-living adjustments and should incorporate the new limits in relevant participant communications, such as open enrollment and communication materials, plan documents, and summary plan descriptions.

RESOURCE:

• Health Savings Account Calculator
• More on HSA’s – Health Savings Account
• H.S.A. FAQ’s
• All About H.S.A’s – US Treasury
• Qualified Medical Expense
• PPE Expenses May Be Reimbursable Under HSA

Is your HSA compliant?  Which pre-tax qualified HSA, FSA, HRA spending card is right for you? Please contact our team at Millennium Medical Solutions Corp (855)667-4621 for immediate answers.  Stay tuned for updates as more information gets released.  Sign up for the latest news updates.

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