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

In Rev. Proc. 2019-25, the IRS released the inflation adjusted amounts for 2020 relevant to HSAs and high deductible health plans (HDHPs).  The table below summarizes those adjustments and other applicable limits.

  2020 2019 Change
Annual HSA Contribution Limit(employer and employee) Self-only: $3,550 Family: $7,100 Self-only: $3,500 Family: $7,000 Self-only: +$50 Family: +$100
HSA catch-up contributions(age 55 or older) $1,000 $1,000 No change
Minimum Annual HDHP Deductible Self-only: $1,400 Family: $2,800 Self-only: $1,350 Family: $2,700 Self-only: +$50 Family: +$100
Maximum Out-of-Pocket for HDHP(deductibles, co-payment & other amounts except premiums) Self-only: $6,900 Family: $13,800 Self-only: $6,750 Family: $13,500 Self-only: +$150 Family: +$300

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.

  2020 2019 Change
ACA Maximum Out-of-Pocket Self-only: $8,150Family: $16,300 Self-only: $7,900Family: $15,800 Self-only: +$250Family: +$500

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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This alert was prepared for Advanced Benefits by Stacey Barrow. Mr. Barrow is a nationally recognized expert on the Affordable Care Act. His firm, Marathas Barrow Weatherhead Lent LLP, is a premier employee benefits, executive compensation and employment law firm. He can be reached at .
The information provided in this alert is not, is not intended to be, and shall not be construed to be, either provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our lawyers or our clients. This is not legal advice. No client-lawyer relationship between you and our lawyers is or may be created by your use of this information. Rather, the context is intended as a general overview of the subject matter covered. This agency and Marathas Barrow & Weatherhead LLP are not obligated to provide updates on the information presented herein. Those reading this alert are encouraged to seek direct counsel on legal services.
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