IRS Releases Revised 2018 Benefit Limits

On March 5th, the Internal Revenue Service released Revenue Procedure 2018-18 which recalculates a number of cost of living increases for calendar year 2018.

  • The family HSA contribution for 2018 is reduced from $6,900 to $6,850. This could mean that election changes may be required and excess contributions may need to be returned (e.g., for individuals who have already contributed the full family amount).
  • For employer adoption assistance programs, the maximum amount that can be excluded from an employee’s gross income for qualified adoption expenses is reduced from $13,840 to $13,810. Further, the adjusted gross income threshold after which the adoption exclusion begins to phase out is reduced from $207,580 to $207,140.
  • Health care FSA, transit and other benefit limits are not impacted.

One of the provisions in the Tax Cuts and Jobs Bill enacted late last year was a change in the way the IRS was to calculate cost-of-living increases. Specifically, the Tax Cuts and Jobs Bill legislated that cost of living increases must use “Chained CPI.” Chained CPI is a method of calculating inflation that takes into account the fact that as prices increase some consumers switch to lower priced products or substitute products, thereby reducing the effects of inflation. This means that over time Chained CPI will produce lower cost of living increases.

Please refer to IRS Revenue Procedure 2018-10 for more information, or reach out to our customer service team with questions.