Citing complaints from stakeholders (individuals, employers, and HSA providers) about additional administrative and financial burdens, the IRS determined that it would be “in the best interest of sound and efficient tax administration” to allow taxpayers to rely on the limit of $6,900 as originally announced back in May 2017.

So what happens to HSA account owners that already received a distribution from their HSA of an excess contribution (with earnings) based on the lower limit?  Those individuals can (if the HSA trustee/custodian so allows) repay the distribution to the HSA by April 15, 2019 and treat the distribution as a mistake of fact due to reasonable cause.  Mistake of fact treatment means that the distribution isn’t included in gross income nor is it subject to the 6% excise tax on excess contributions

If the HSA account owner already received a distribution from his or her HSA of an excess contribution (with earnings) based on the lower limit and the individual does not pay back the excess distribution, then so long as the distribution was made by the due date (including extensions) for the individual’s 2018 income tax return, the distribution won’t be subject to the 6% excise tax, but will of course be subject to income taxes.

This is where I refer to you the handy chart of 2018 limits for HSAs, reflecting the limits after the do-over from the IRS.  I really hope I don’t have to update this every again!