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Employee Benefit Cost of Living Adjustments

In March the IRS released cost-of-living adjustments (COLAs) that affect employee benefits retroactively for the 2018 calendar year.

  • The annual health savings account (“HSA”) contribution limit for individuals with family coverage is reduced to $6,850.

  • The amount that may be excluded from an employee’s gross income under an employer‑sponsored adoption assistance program for the adoption of a special needs child is now $40 less at $13,810. The adoption assistance program exclusion is now phasing out for taxpayers with modified adjusted gross income in excess of $207,140.

  • If you offer an Archer medical savings account the maximum out of pocket for individuals has been reduced $50 to $4,550.


  • Inform your employees about the new limits.

  • Make sure payroll doesn’t exceed these new limits.

  • Determine whether the adoption assistance program exclusion will affect payroll practices and benefit administration.

  • If you offer an Archer MSA (typically for small businesses and self-employed), consider how the lower out-of-pocket limit will affect the current health plan.

  • Update employee communications and new employee enrollment materials.

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