On Thursday the Internal Revenue Service issued Revenue Procedure 2013-25, heralding changes to health savings account contributions for individuals and families for 2014. As well as this, employee out-of-pocket expenses are also set to change. These changes are to reflect the changes in the cost of living.
Savings
Available to those in high-deductible health plans, health savings accounts, or HSAs, are funds contributed to by policyholders primarily used to pay for qualified medical expenses.
Funds contributed are not subject to taxation at the time of deposit. If they are not spent during the year, the funds are allowed roll over and accumulate year on year. This fund can be used to purchase over the counter medications, with a doctor’s prescription, or withdrawals can be made for non-medical expenses also. Tax penalties on these types of withdrawals vary depending on when they are made.
Contributions
The changes brought in by the IRS are increases to the maximum contribution that can be made to a health savings account. Individuals can now contribute $50 more and families $100 in 2014.
Up from $3,250, employees with single coverage can contribute a maximum of $3,300. Those with family coverage will see their limit extended to $6,550, up from $6,450.
Out-of-pocket
HSAs, as we know, are held by those enrolled in high-deductible health plans. In line with the increased maximum contributions, these out-of-pocket expenses and deductibles are also set to change.
The IRS has announced that the maximum out-of-pocket employee expense will rise to $6,350 for single coverage – up from $6,250. This is including deductibles. In 2014, out-of-pocket expenses and deductibles for those with family coverage will increase by $200, from $12,500 to $12,700.
Cost of living
Cost of living, the amount of money consumers need to buy good and services in their daily lives, has seen steady increase in the last few years. At this moment in time the Consumer Price Index for the United States, excluding rent, stands at 78.80%, groceries is 77.08%. The average monthly spend for an 85m2 apartment on utilities such as electricity and heating is $174.22. Many of these increases have been linked to the increase in the cost of oil. Increased cost of living has a knock-on-effect to many areas including, as we have seen, health cover and health savings accounts.
