IRS and HHS Release Certain Limits for Welfare Benefit Plans in 2020

The IRS and HHS have released some of the 2020 inflation-adjusted limits for certain employee welfare benefit plans and the dollar amounts used for certain discrimination tests.

Health Savings Accounts ("HSAs"). The IRS released the inflation-adjusted contribution limits and related amounts for HSAs and HSA-compatible high deductible health plans ("HDHPs") for 2020.

The 2020 limit on contributions to HSAs increases to $3,550 for a self-only HSA and $7,100 for a family HSA. For 2020, a HDHP must have a minimum deductible of $1,400 for employee-only coverage, and $2,800 for family coverage. The maximum out-of-pocket amount for an HDHP (including deductibles, co-payments and other amounts, not including premiums) cannot exceed $6,900 for self-only coverage and $13,800 for a family.

ACA out-of-pocket limit for 2020. HHS announced the inflation-adjusted out-of-pocket ("OOP") limits that will apply to non-grandfathered plans for plan years beginning in 2020. The OOP limit includes the plan's deductible and cost-sharing amounts for benefits that are considered essential health benefits ("EHBs") under the Affordable Care Act ("ACA").

Self-insured plans and large-group insured plans are not required to cover all EHBs (although small-group insured health plans are), but to the extent that they cover EHBs, they cannot impose annual or lifetime dollar limits on such benefits.

The ACA requires non-grandfathered plans to apply an embedded OOP limit for everyone enrolled in coverage other than self-only coverage. Accordingly, each enrollee must have his or her own individual OOP limit on EHBs that is not higher than the maximum self-only OOP limit. For example, if an individual enrolled under family coverage reaches the applicable ACA OOP limit for self-only coverage, that individual cannot incur additional OOP costs for EHBs, even if the family OOP limit has not been met.

For 2020, the ACA OOP limit for self-only coverage is $8,150 (a $250 increase from the 2019 limit of $7,900) and $16,300 for family coverage (an increase of $500 from the 2019 limit of $15,800).

Highly Compensated Employee. The definition of highly compensated employee ("HCE") is used in several welfare plan nondiscrimination tests. For the 2020 plan year, an employee who earns more than $125,000 in 2019 is an HCE.

PCORI. The PCORI fee will not be assessed for plan years ending after September 30, 2019, which means that for a calendar-year plan, the last year for assessment was the 2018 calendar year.