Changes to HSAs and the ACA: What You Need to Know for 2025
Oct 25, 2024
As healthcare in the United States continues to evolve, significant changes are happening within the framework of Health Savings Accounts (HSAs) and the Affordable Care Act (ACA).
Understanding these changes is crucial for individuals looking to optimize their health coverage and employers to ensure they stay compliant.
Below we’ll dive into the latest updates and what they mean for you including the new limits along with how they affect employer contributions, and share some practical steps for adaptation.
First Up…HSAs
Health Savings Accounts (HSAs) are tax-advantaged accounts that allow individuals to save money for medical expenses.
To be eligible for an HSA, you must have a high-deductible health plan (HDHP). Contributions to HSAs can be made by individuals, employers, or both, and the funds can be used for a wide range of qualified medical expenses.
Recent HSA Changes
- Contribution Limits: For 2025, the IRS (Internal Revenue Service) has increased the annual contribution limits for HSAs. These increases are in line with inflation adjustments and provide more opportunities for individuals to save for healthcare costs.
- 2024 Limits: Individuals up to $4,150/ Families up to $8,300
- 2025 Limits: Individuals up to $4,300/ Families up to $8,550
- Catch-Up Contributions: For those aged 55 and older, catch-up contributions remain at $1,000. This is particularly beneficial for those approaching retirement who may have higher healthcare costs.
Next up…the ACA
The Affordable Care Act has significantly transformed healthcare access in the U.S., and recent changes aim to enhance coverage and affordability.
Now under what is being called the Safe Harbor Affordability Threshold, employers with 50 or more full-time equivalent employees must provide at least one health plan option where the employee’s contribution for self-only coverage does not exceed a specific percentage of the Federal Poverty Level (FPL). For 2025, this threshold is set at 9.02% of the FPL, up from 8.39% previously.
Key Figures for 2025
- FPL for 2025: The FPL for the 48 contiguous states and Washington, D.C., will remain at $15,060.
- Maximum Employee Contribution: This means that the maximum amount an employee can contribute for self-only coverage under this health plan will be $113.20 per month (calculated as 9.02% of $15,060).
What Does This Mean for Compliance?
Compliance with the Safe Harbor Affordability Threshold is essential for employers, as failing to meet this requirement can result in significant financial penalties.
Employers may face a $2,700 penalty per full-time employee for failing to offer affordable coverage, which can quickly add up.
The Intersection of HSAs (Health Savings Account) and the ACA
With both HSAs and the ACA evolving, it’s essential to understand how they interact:
- Integration of Benefits: Individuals with high-deductible plans under the ACA can still contribute to HSAs. The increased contribution limits provide a valuable tool for managing out-of-pocket costs.
- Eligibility for Subsidies: It’s important to note that while HSAs offer tax advantages, individuals enrolled in an ACA marketplace plan may not qualify for HSA contributions if their plan is not considered a high-deductible health plan.
- Compliance: The Safe Harbor Affordability Threshold dictates how much employees can contribute towards their health insurance premiums for self-only coverage.
What Should Employers Do Now?
- Evaluate Health Plan OfferingsEmployers should review their current options to ensure that at least one meets the Safe Harbor affordability requirement. This may involve negotiating with insurance providers or adjusting employee contribution rates.
- Communicate with EmployeesClear communication is vital! Employers should inform employees about their health insurance options and how contributions are calculated. Transparency helps employees make informed decisions regarding their health care.
- Consider Alternative PlansIf existing plans are not affordable, employers might explore alternative options, such as offering high-deductible health plans (HDHPs) paired with Health Savings Accounts (HSAs-there have been changes on these too so make sure to be in the know about those too). This can provide a more affordable choice for employees while also encouraging them to save for future medical expenses.
- Monitor Changes in FPLEmployers must stay updated on any changes to the Federal Poverty Level, as this can directly impact the Safe Harbor threshold. Regularly checking government announcements and IRS updates will help in maintaining compliance.
- Seek Professional GuidanceConsulting with benefits advisors or legal experts can provide valuable insights into navigating ACA requirements. These professionals can help tailor offerings to meet both compliance standards and employee needs.
It’s Vital to Be In the Know!
Staying informed about changes to the ACA and HSAs (Health Savings Accounts) is crucial for employers aiming to provide competitive and compliant health benefits.
By understanding these updates and effectively communicating them to employees, employers can foster a healthier workforce and minimize compliance risks.
Investing in employee health is not just a regulatory obligation but also a strategic advantage that can enhance employee satisfaction and retention. Be sure not to miss out on the opportunity to increase the value in your team!
If you need guidance on how these changes could impact your business, contact our SHRM certified team today to see how we can help.
Additional Resources
Ebooks/ Sell Sheets:
Blogs:
- DIY Payroll Management for Small Businesses in Raleigh
- Outsourcing Payroll: A Secret Advantage for Murfreesboro Businesses
- 2025 FLSA Salary Threshold & Minimum Wage Updates
Webinars:
- Upcoming: FLSA Compliance and Efficiency with a Timekeeping System
- Watch On-Demand: How to Avoid Payroll Penalties & Ensure Compliance
- Watch On-Demand: Mastering Benefits Enrollment: Streamline, Engage, Empower
HR Compliance Quick Video Tips:
