IRS Releases 2020 HSA Contribution Limits and HDHP Deductible and Out-of-Pocket Limits

The Internal Revenue Service has released the 2020
inflation adjustment for High Deductible Health Plans
and Health Savings Accounts. The table below
summarizes those adjustments and other applicable limits.

Out-of-Pocket Limits Applicable to Non-Grandfathered Plans

The ACA’s out-of-pocket limits for in-network essential health benefits have also been announced and have increased for 2020.

Note that all non-grandfathered group health plans must contain an embedded individual out-of-pocket limit within family coverage, if the family out-of-pocket limit is above $8,150 (2020 plan years) or $7,900 (2019 plan years). Exceptions to the ACA’s out-of-pocket limit rule are available for certain small group plans eligible for transition relief (referred to as “Grandmothered” plans). A one-year extension of transition relief was recently announced extending the transition relief to policy years beginning on or before October 1, 2020, provided that all policies end by December 31, 2020.

Next Steps for Employers

As employers prepare for the 2020 plan year, they should keep in mind the following rules and ensure that any plan materials and participant communications reflect the new limits:

• HDHPs cannot have an embedded family deductible that is lower than the minimum HDHP family deductible of $2,800.
• The out-of-pocket maximum for family coverage for an HDHP cannot be higher than $13,800.
• All non-grandfathered plans (whether HDHP or non-HDHP) must cap out-of-pocket spending at $8,150 for any covered person. A family plan with an out-of-pocket maximum in excess of $8,150 can satisfy this rule by embedding an individual out-of-pocket maximum in the plan that is no higher than $8,150. This means that for the 2020 plan year, an HDHP subject to the ACA out-of-pocket limit rules may have a $6,900 (self-only)/$13,800 (family) out-of-pocket limit (and be HSA-compliant) so long as there is an embedded individual out-of-pocket limit in the family tier no greater than $8,150 (so that it is also ACA-compliant).

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About the Authors. This alert was prepared for The Fedeli Group by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act. Contact Peter Marathas or Stacy Barrow at pm*******@ma*******.com or sb*****@ma*******.com .

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