May 24, 2023
IRS releases Health Savings Account limits for 2024
In Revenue Procedure 2023-23, the IRS announced the inflation adjustments that will apply to Health Savings Accounts (HSAs) under IRC Section 223 effective for calendar year 2024.
Form W-2 reporting reminder
Employer contributions and employee pre-tax contributions to an HSA are required to be reported on Form W-2, box 12, Code W. Employer and employee pretax contributions that, when combined, exceed the annual calendar year limit, are required to be treated as taxable wages and reported on Form W-2, boxes 1, 3 (up to the Social Security limit) and 5 (2023 Form W-2 instructions, page 11). Additionally, excess contributions to an HSA are subject to an excise tax.
Ernst & Young LLP insights
HRA- and HSA-eligible health plans constitute what are called "consumer-driven" health plans (CDHPs) because they give employees the choice of electing health plan options that best meet their projected out-of-pocket medical expenses. CDHPs also raise payroll challenges because the rules governing each of these medical reimbursement account options (FSA, HRA, HSA and MSA) are unique in terms of their tax treatment and reporting.
How companies name their health plans might not clearly communicate the type of medical reimbursement vehicle that applies, causing time-consuming and potentially costly errors in payroll system configurations.
To avoid year-end reporting complications, now is a good time to review employee elections and how they are being handled in your payroll system.
Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor
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