Centurion Insurance Services is pleased to provide our clients with value added information on employee benefits from our team of advisors.
Today’s Benefits Insights bulletin includes information about changes coming to ACA in 2020 regarding HSA/HDHP limits, new HRAs, Pay or Play penalties and Affordability Percentages. Contact us today to discuss important changes to your plan and let us customize coverage that’s right for your business.
HSA/HDHP LIMITS INCREASE FOR 2020
On May 28, 2019, the IRS released Revenue Procedure 2019-25 to announce the inflation-adjusted limits for health savings accounts (HSAs) and high deductible health plans (HDHPs) for 2020. 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.
The IRS limits for HSA contributions increase for 2020. Eligible individuals with self- only HDHP coverage will be able to contribute up to $3,550 for 2020, while eligible individuals with family HDHP coverage will be able to contribute up to $7,100 for 2020. HDHP cost-sharing limits also increase for 2020.
IMPORTANT DATES
January 1, 2020
The new contribution limits for HSAs become effective.
2020 Plan Years
The HDHP cost-sharing limits for 2020 apply for plan years beginning on or after Jan. 1, 2020.
HIGHLIGHTS
Each year, the IRS announces inflation-adjusted limits for HSAs and HDHPs.
The adjusted contribution limits for HSAs take effect as of Jan. 1, 2020.
The adjusted HDHP cost-sharing limits (minimum deductible and maximum out-of-pocket) take effect for the plan year beginning on or after Jan. 1, 2020.
ACTION STEPS FOR HSA/HDHP LIMITS:
Because the cost-sharing limits for HDHPs change for 2020, employers that sponsor these plans may need to make plan design changes for plan years beginning in 2020. Also, employers that allow employees to make pre-tax HSA contributions should confirm that their benefit election forms have been updated for the HSA contributions limits for 2020.
HSA LIMITS FOR 2020
The following chart shows the HSA and HDHP limits for 2020 as compared to 2019. 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.
| Type of Limit | 2019 | 2020 | Change | |
|---|---|---|---|---|
| HSA Contribution Limit | Self-only | $3,500 | $3,550 | Up $50 |
| Family | $7,000 | $7,100 | Up $100 | |
| HSA Catch-up Contributions (not subject to adjustment for inflation) | Age 55+ | $1,000 | $1,000 | No Change |
| HDHP Minimum Deductible | Self-only | $1,350 | $1,400 | Up $50 |
| Family | $2,700 | $2,800 | Up $100 | |
| HDHP Maximum Out- of-pocket Expense | Self-only | $6,750 | $6,900 | Up $150 |
| Limit (deductibles,copayments and other amounts, but not premiums) | Family | $13,500 | $13,800 | Up $300 |
NEW HRA DESIGN OPTIONS FOR 2020
Employers have two new health reimbursement arrangement (HRA) design options for plan years that begin on or after Jan. 1, 2020—an individual coverage HRA (ICHRA) and an excepted benefit HRA (EBHRA).
Individual Coverage HRAs (ICHRA): A HRA that is integrated with certain individual market coverage and Medicare, but not integrated with a group health plan.
Excepted Benefit HRAs (EBHRA): A non-integrated general-purpose HRA that is considered an excepted benefit. This would be limited to paying premiums for vision and dental coverage or similar benefits. It’s permitted only if employees are offered coverage under a group health plan sponsored by the employer.
PAY OR PLAY PENALTIES WILL INCREASE FOR 2020
The adjusted $2,000 amount is $2,570 and the adjusted $3,000 amount is $3,860.
ACTION STEPS FOR PAY OR PLAY PENALTIES:
Employers that owe a pay or play penalty will receive a Letter 226-J from the IRS, which will propose and assess the applicable penalties. The IRS began issuing Letter 226-J to employers in late 2017 to propose and assess pay or play penalty liability for the 2015 calendar year. For 2016 calendar year liability, the IRS began issuing Letter 226-J in 2018.
Employers subject to these rules should ensure that they are offering the required coverage, or they may face increased penalties for each year in which they fail to comply.
AFFORDABILITY PERCENTAGES WILL DECREASE FOR 2020
For plan years beginning in 2020, the ACA’s affordability contribution percentages are decreased to:
-9.78% under the pay or play rules
-9.78% under the premium tax credit eligibility rules
-8.24% under an exemption from the individual mandate
For plan years beginning in 2020, employer sponsored coverage will be considered affordable if the employee’s required contribution for self-only coverage does not exceed 8.24% of the employee’s household income for the year.
ACTIONS STEPS FOR AFFORDABILITY PERCENTAGE DECREASES:
The updated affordability percentages are effective for taxable years and plan years beginning Jan. 1, 2020. This is a decrease from the affordability contribution percentages for 2019. As a result, some employers may have to lower their employee contributions for 2020 to meet the adjusted percentage.
Centurion Insurance Services offers complete benefits advisory services. For help with your employee benefits programs, contact
Tony Paterno: 304.935.2536
Sam Femia: 304.935.2532
Donna Gordon: 304.935.2534
Sarah Looney: 304.935.2124