Health FSA Contribution Limits
Effective for plan years beginning on or after January 1, 2013, the amount employees may contribute to a Health FSA is capped at $2,500 per year, indexed for a cost-of-living adjustment. Plan sponsors can amend cafeteria plans retroactively to reflect the $2,500 limit at any time through December 31, 2014. However, the plan cannot allow a participant to make salary reduction contributions for a plan year beginning January 1, 2013 and after in excess of the $2,500 limit.
The $2,500 limit applies only to salary reduction contributions, not to other employer contributions such as flex credits. The limit applies separately to each individual who is eligible to participate in a Health FSA; if each spouse is eligible to participate in a Health FSA through the same or different employers, each spouse can separately contribute $2,500. Finally, unused salary reduction contributions to a Health FSA for a plan year beginning in 2012 or later that are carried over to the grace period for that plan year will not count against the $2,500 limit for the subsequent plan year.
Health FSA Contribution Limit Hot Topics & FAQs
- Does the limit take effect January 1, 2013, or the first plan year beginning on or after January 1, 2013?
Answer: The Department of Treasury published guidance in Notice 2012-40, providing the limit is effective for plan years beginning after December 31, 2012.
- Are spouses who work limited to combined $2,500 Health FSA contribution?
Answer: No. Each employee is limited to a $2,500 Health FSA contribution per employer (or smaller amount if the employer’s plan has a lower limit).
American Fidelity Assurance Company does not provide tax or legal advice.