March 15, 2018 3:11 am

Treating Male Sterilization as Preventive Care Kills HSA Contribution but IRS Provides Transition Relief

Health savings account contributions are only permitted if the taxpayer is covered by a high-deductible health plan meeting IRS tests (HDHP). The IRS has taken the position that treating male sterilization and male contraceptive services as preventive benefits that don’t require a deductible runs counter to federal law defining preventive care for HDHP purposes (Notice 2018-12).

However, several states currently require health insurance plans to classify male contraceptives and male sterilization as preventive care with no deductible or a deductible below the minimum fixed annually by the IRS for HDHPs. In order to give the legislatures in these states time to change their laws in response to Notice 2018-12, the IRS will provide transition relief. Before 2020, residents of these states will not be barred from making deductible contributions to health savings accounts (HSAs) solely because their health plans (that otherwise qualify as HDHPs) provide coverage for male sterilization or contraception without a deductible or a deductible below the IRS minimum for an HDHP. Similarly, employer contributions to HSAs for employees with otherwise qualifying HDHPs in these states will be excludable from income before 2020.

Tax Glossary

Disaster losses

Casualty losses such as from a storm, in areas declared by the President to warrant federal assistance. An election may be made to deduct the loss in the year before the loss or the year of the loss.

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