When it comes to coronavirus (COVID-19) preparedness, strategy is key. When it comes to your HSA contributions, the same applies—now more than ever.
The more you contribute to your HSA, the more you stand to benefit from a tax perspective since your HSA contributions are tax-deductible up to the annual contribution limit—not to mention the better off you’ll be for any expected (or unexpected) healthcare expenses short and long-term. And while the IRS recently decided that testing and treatment for coronavirus can be covered pre-deductible under your high-deductible health plan (HDHP) and HSA, it’s still a sound strategy to revisit your HSA contributions to make sure you’re adequately covered now and into the future.
Your HDHP Now Covers Coronavirus (COVID-19) Costs Pre-Deductible and Won’t Negatively Impact Your HDHP or HSA
On March 11, 2020, the IRS released IRS Notice 2020-15, an emergency ruling which relaxes the normal annual minimum deductible requirements (for 2020, $1,400 for individual coverage and $2,800 for family coverage) HSA users typically face with their HDHP. This ruling is meant to ensure that the higher deductibles associated with HDHPs and HSAs don’t get in the way of testing and care related to coronavirus for those with HSAs and HDHPs.
You can read the complete notice here, but to summarize, all testing to the coronavirus will be covered pre-deductible, and won’t violate HDHP rules or negatively impact your HDHP and HSA in any way. Simply put, if you end up needing testing for the coronavirus, you won’t have to satisfy the minimum deductible requirements typically laid out for your HDHP—all testing will be covered under the umbrella of preventive services. And when it comes to your HSA, it won’t affect your HSA eligibility or ability to make or receive HSA contributions—or any other HSA advantages— in any way.
Please note, this notice only applies to the coronavirus pandemic and doesn’t change any other requirements associated with HDHPs and HSAs. Along with that, always protect yourself and consult your particular health plan provider regarding your specific health benefits for testing and treatment related to COVID-19 provided by your specific plan. Be sure to get clarity on the potential application of any deductible or cost sharing, which could play into your HSA contribution strategy.
Even with Pre-Deductible Coronavirus (COVID-19) Coverage, Now May Be the Right Time to Adjust Your HSA Contributions
Planning your HSA contributions is key, and looking longer term is always a good idea.
Your HSA contributions are tax-deductible up to the annual contribution limit (for 2019, $3,500 for individuals and $7,000 for families; for 2020, $3,550 for individuals and $7,100 for families—with a catch-up contribution limit of $1,000 for those over age 55 for either year). The more you contribute, the more you save in taxes. Plus, payments made from your HSA for qualified medical expenses are always tax-free. And any interest you earn on your HSA grows income tax free. So again, the more you contribute, the more you stand to save—and earn.
So, if you can swing contributing more to your HSA, now is the perfect time to start.
And remember, when it comes to HSA contribution changes and updates, HSAs provide plenty of flexibility, so you’re never locked into one decision. With an HSA, you can change your contribution amount as many times as you’d like at any point during the year. You just need to plan your HSA contributions accordingly to make sure you don’t exceed the annual HSA maximum contribution limit specific to your situation, as well as that you make all your contributions by the tax year deadline you want the funds applied to (for the 2019 tax year, the deadline is April 15, 2020). And keep in mind, the HSA contribution limit set by the IRS includes ALL contributions made to your health savings account for a given tax year—that means the total sum of all HSA contributions from you, your employer and anyone else can’t exceed the maximum annual contribution limit.
At Bend, We’re Here to Help
Dealing with the coronavirus pandemic can be trying at times. But navigating your HSA shouldn’t be. For help with anything HSA-related—we’re here for you. Just get in touch. And we’ll do the same with any further developments regarding the coronavirus, HDHPs and HSAs.