Flexible Spending Account Limits Start in 2013
Beginning January 1, 2013, employee contributions to health flexible spending accounts will be limited to $2,500.00 per year. The contribution limit will rise each year based on the rate of inflation.
To date, there has been no annual limit on the amount employees could contribute to FSAs on a pre-tax basis.
Employers should begin working with their third-party administrators to update cafeteria plan documents and summary plan descriptions to reflect the annual limit. Employers should also be ready to communicate the changes to their employees.
The following are a few key points to note:
- The $2,500.00 limit is effective for plan years starting January 1, and not the taxpayer’s tax year. Employers with fiscal year health FSAs may keep higher reimbursement limits in effect through the end of their 2012-2013 plan year.
- The $2,500.00 limit only applies to employee salary reduction contributions (and does not affect employer contributions).
- The limit does not apply to dependent care FSAs (which have a statutory cap of $5,000.00 in a calendar year) or health reimbursement arrangements.
- Health savings account plans are not affected by this provision, but do have their own annual limits.
In order to prepare for the 2013 FSA changes, employers should review and update their FSA plans and related documents as soon as possible to help ensure a smooth transition.
© 2012 Vandenack Weaver LLC
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