The Maximum HSA Contributions for 2015 & 2016
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…
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).
- 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?