A health savings account is a popular type of medical reimbursement plan that combines the benefits of both a traditional and Roth 401(k) owned by employees for medical expenses. An employer typically offers an HSA-qualified high-deductible health plan and an HSA.
Recently, the IRS raised the maximum allowable contribution to a health savings account by $100 in 2016 for family coverage. The contribution that can be made next year to an HSA with a high-deductible plan will be $6,750 ($6,650 in 2015) for employees with family coverage. The maximum contribution for those having single coverage remains unchanged at $3,350.
Last year, the maximum HSA contribution for individuals increased by $50. The limits are updated every year to reflect cost-of-living adjustments.
For calendar year 2016, the out-of-pocket maximums are set to $6,550 for self-only coverage (up $100 from 2015) while the family coverage reaches $13,100 (up $200 from 2015).
If you use HSA funds to pay for nonqualified medical expenses, the tax penalty is 20 percent. The 2016 HSA guidelines were released by the IRS in Revenue Procedure 2015-30 and take effect in January.