| Issue: |
Your high deductible health plan (HDHP) renews on October 1, 2012. The deductible will be $1,200 for individuals and $2,400 for families. Your manager wants to know whether the plan has to increase the deductible to the new 2013 minimum on January 1, 2013, or whether it can wait until the next renewal on October 1, 2013. In other words, is the 2013 minimum health savings account (HSA) deductible increase (to $1,250/$2,500) effective for (1) the first plan year following January 1, 2013, or (2) on January 1, 2013, regardless of the plan year?
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Answer: |
An HDHP may apply any required cost-of-living adjustments under Internal Revenue Code Sec. 223(g) to the minimum annual deductible amounts or maximum annual out-of-pocket expense limits on the renewal date of the HDHP if that date is after January 1.
Generally, an HDHP is a health plan that satisfies certain requirements with respect to minimum annual deductibles and maximum annual out-of-pocket expense. These annual amounts are indexed for inflation using annual cost-of-living adjustments. Any required change to the deductibles and out-of-pocket expense limits may be applied as of the renewal date of the HDHP in cases where the renewal date is after the beginning of the calendar year, but in no event longer than a 12-month period ending on the renewal date.
Thus, a fiscal year plan that satisfies the minimum annual deductible on the first day of the first month of its fiscal year may apply that deductible for the entire fiscal year, even if the minimum annual deductible increases on January 1 of the next calendar year.
Source: IRS Notice 2004-50, Q&A 86.
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