Invest

how to invest

Live

career, food, travel

Save

saving, credit, debt

Protect

insurance, security

Retire

401K, IRA, FI, Retire

Home » Health, Health Insurance, HSA's

The Maximum HSA Contributions for 2015 & 2016

Last updated by on 5 Comments

The IRS recently published an inflation adjustment increase to the maximum HSA contribution for 2016 over the 2015 maximum HSA contribution limit. More specifically, the family contribution maximum will increase while the individual contribution maximum will stay the same as this year’s. And there are some associated HDHP limit changes as well.

If you’ve been following along, you know that I have been a big fan of health savings accounts (HSA’s) over the last few years and fully max them out. Why? HSA’s are like IRA’s on steroids (tax-free steroids at that). They offer users pre-tax contributions, tax-free investment gains, and tax-free distributions to pay for eligible health care expenses.

With HSA’s, you own the account. It goes with you and can be used regardless of future employment status or health plan. This is not the case with FSA’s, which are tied to your employer.

All benefits aside, your ability to annually contribute to an HSA is determined by whether or not you are enrolled in a high deductible health plan (HDHP), as they are defined by the IRS.

For 2016, HDHP’s will be defined as plans that have:

  • A minimum annual deductible of at least $1,300 for individual coverage or $2,600 for family coverage; and
  • Annual out-of-pocket expense maximums (e.g., deductibles, co-payments, and other amounts, but not premiums) up to $6,550 for individual coverage or $13,100 for family coverage.

This compares to 2015 HDHP limit definitions:

  • A minimum annual deductible of at least $1,300 for individual coverage (up from $1,250 in 2014) or $2,600 for family coverage (up from $2,500 in 2014); and
  • Annual out-of-pocket expense maximums (e.g., deductibles, co-payments, and other amounts, but not premiums) up to $6,450 for individual coverage (up from $6,350 in 2014) or $12,900 for family coverage (up from $12,700 in 2014).

Take this in to consideration when open enrollment comes around this fall.

Here are the maximum HSA contribution amounts for 2015 and 2016…

maximum HSA contribution

2015 Maximum HSA Contribution Limits

  • Individual Plan: $3,350 (+$50 over 2014)
  • Family Plan: $6,650 (+$100 over 2014)

2016 Maximum HSA Contribution Limits

  • Individual Plan: $3,350 (same as 2015)
  • Family Plan: $6,750 (+$100 over 2015)

HSA Catch-Up Contribution Amount

Similar to IRA’s and 401K’s, there are catch up contributions for those age 55 and over. The HSA catch-up contribution is $1,000 for both individual and family plans for both 2015 and 2016.

The Case for Maxing Out your HSA Contribution

In most cases, you’ll have to decide your HSA contributions for the following year during your open enrollment. Your employer will usually let you contribute a specified amount evenly across all pay periods.

Some employers will allow you to make larger contributions towards the end of the year, but you’ll have to check with your HR department.

Here’s why you should consider contributing as much as you can to an HSA. If you are young and healthy, health care costs will eventually catch up with you.

HSA’s allow you to build a significant cushion to protect yourself from future costs. Why pay for health care costs with after-tax dollars if you could pay with pre-tax dollars?

When you turn 65, you can use HSA funds on not just medical expenses, but anything, without penalty (non-medical expenses are taxed like Traditional IRA distributions) – so there’s little downside to contributing too much.

And remember, the entire time, you can grow your contributions through investments, just like any other retirement account.

Your employer may also make tax-free contributions to your HSA, if you are enrolled in their HDHP offering.

If all of that sounds appealing and you’re interested in more on HSA’s, check out the previous links in this article or IRS publication 969. Also, check out my list of the best HSA accounts if you’ve left an employer and want to move your current HSA to a new one (fees do vary quite a bit).

HSA Discussion:

  • Will you be maxing out your HSA this year or next year?
  • Have you moved away from HDHP/HSA’s now that ACA changes have taken effect?

About the Author
I am G.E. Miller, & this is my story. My goal is financial independence ASAP. If you share that goal, join me & 7,500+ others by getting FREE email updates. You'll also find every post by category & every post in order.


5 Comments »
  • Brad says:

    This year I elected to contribute $50 per paycheck and my employer contributes $400/yr. So roughly half the maximum. I ought to max it out. We’re allowed to direct investments from it with any balance over $1000.

    Something important to note that I’m not seeing… you can’t use an HSA on insurance premiums. Just deductibles/copays and other costs. So a 50-year-old would be amiss tie up all his money in it. The ‘increased cost due to age’ will mainly come through premium cost (for ACA plans for sure) to you or your employer.

    So having $50k or whatever in it is great, but if your deductible is $2k and your max out of pocket is $6k… just saying. Your health spend is very unlikely to outpace the IRS max contributions in the long run. Obviously situations vary.

    • Brian says:

      This is the key point though:

      “When you turn 65, you can use HSA funds on not just medical expenses, but anything, without penalty (non-medical expenses are taxed like Traditional IRA distributions) – so there’s little downside to contributing too much.”

      You can basically use it like an additional retirement savings vehicle (with the upside of also being able to cover medical expenses in the meantime). It doesn’t matter if you have way more in there than you’ll ever spend on medical expenses… live off of it :)

  • Mike B says:

    Do you feel that HSA’s should only be used as a retirement tool or is there merit to using it for your healthcare expenses? I am considering making a tool that will show all the possible covered medical expenses, keep track of yearly deductible spending, and how to maximize healthcare dollars.

    Are there things you are unhappy with about your current HSA that you would like see changed or improved upon?

  • Paying for medical expenses through an HSA also results in a huge reduction in “moral hazard”. For instance, when shopping for an MRI provider, the prices ranged from $1500 to $300 – for the same service. All except the $300 provider could not immediately answer the question, “how much will it cost?” Instead, they asked me, “Why do you care? Doesn’t insurance pay for it?”, and then had to research their price and get back to me.

    HMO plans are not really insurance – they are more like an all-you-can-eat restaurant. The restaurant damages your health as you overeat in order to feel you are “getting your money’s worth”. The HMO damages your wallet as you pay no attention to medical price scalping (which you ultimately pay for in higher premiums).

  • Ron Ablang says:

    I am not currently maxing out my HSA. It is closer to the limits that were set 2 years ago. I just never adjusted up. I figure it’s close enough.

SPEAK YOUR MIND

Enter your:


Home | Sitemap | Terms | © 20somethingfinance.com