This week we received official guidance from the IRS on the HSA / HDHP issue that arose from the Contraceptive Equity Act (Male Sterilization) in Maryland in 2016; that piece of legislation too effect on Jan. 1, 2018. The problem was that including vasectomies as a preventive service had not been officially recognized by the Internal Revenue Service. Without the certainty of IRS approval, the tax status of HDHPs and HSAs in Maryland was unclear.
As a result, many insurance brokers, financial planners, CPAs, bankers, and others could not in good faith recommend that clients contribute to HSAs with confidence that such contributions would be upheld by the IRS. This issue surfaced on our listserv, and we immediately worked with a coalition of brokers, financial planners, and business groups to find a solution. We sought two avenues —updated guidance from the Treasury Department to add this procedure to eligible deductions under the IRS, and an amendment to the Maryland law.
This update from our sponsor SIG (the Silberstein Insurance Group) covers the IRS Transition Relief Notice 2018-12 and updated HSA Contribiution Limits in Rev Proc 2018-18:
This means the contributions / deductions for 2018 and 2019 are now restored.
We were also working on legislation in Maryland to continue deductibility for plans after Jan. 1, 2020.
We have supported and testified on two emergency bills — Senate Bill 137 and House Bill 135, each named “Health Insurance – Coverage for Male Sterilization – High-Deductible Health Plans.” The bills are designed to restore these deductions to Maryland HSAs and HDHPs. The Senate version was passed unanimously and is now being considered by the House Health and Government Operations Committee. The House version has been passed unanimously and is now under consideration by the Senate Finance Committee. We expect the governor to eventually sign this legislation into law, thus fixing this issue for 2020 and beyond.
It is now fixed, and the potential 380,000 HSA plans in Maryland are restored as of Jan. 1, 2018.
Thanks to several members of our state tax community for making time to testify on behalf of all of us.
- MACPA in Annapolis supporting changes to restore HSA deductibility
- Legislative alert: HSAs in Maryland are in jeopardy
- Legislative update for Maryland CPAs