HSA/HDHP Limits Increase for 2021

In May 2020, the IRS released Revenue Procedure 2020-32 to provide the inflation-adjusted limits for health savings accounts (HSAs) and high deductible health plans (HDHPs) for 2021. The IRS is required to publish these limits by June 1 of each year.

These limits include:

• The maximum HSA contribution limit;
• The minimum deductible amount for HDHPs; and
• The maximum out-of-pocket expense limit for HDHPs.

These limits vary based on whether an individual has self-only or family coverage under an HDHP.

Eligible individuals with self-only HDHP coverage will be able to contribute $3,600 to their HSAs for 2021, up from $3,550 for 2020. Eligible individuals with family HDHP coverage will be able to contribute $7,200 to their HSAs for 2021, up from $7,100 for 2020. Individuals who are age 55 or older are permitted to make an additional $1,000 “catch-up” contribution to their HSAs.

The minimum deductible amount for HDHPs remains the same for the 2021 plan years ($1,400 for self-only coverage and $2,800 for family coverage). However, the HDHP maximum out-of-pocket expense limit increases to $7,000 for self-only coverage and $14,000 for family coverage.

Highlights

• Each year, the IRS announces inflation-adjusted limits for HSAs and HDHPs.
• By law, the IRS is required to announce these limits by June 1 of each year.
• The adjusted contribution limits for HSAs take effect as of January 1, 2021.
• The adjusted HDHP cost-sharing limits take effect for the plan year beginning on or after January 1, 2021.

Important Dates

• January 1, 2021: The new contribution limits for HSAs become effective.
• 2021 Plan Years: The HDHP cost-sharing limits for 2021 apply for plan years beginning on or after January 1, 2021.

Action Steps

Employers that sponsor HDHPs should review their plan’s cost-sharing limits (minimum deductibles and maximum out-of-pocket expense limit) when preparing for the plan year beginning in 2021. Employers who allow employees to make pre-tax HSA contributions should update their plan communications for the increased contribution limits. 

HSA/HDHP Limits

The following chart shows the HSA and HDHP limits for 2021 as compared to 2020. It also includes the catch-up contribution limit that applies to HSA-eligible individuals who are age 55 or older, which is not adjusted for inflation and stays the same from year to year.