Today is the fourth in an installment of issues covering health care reform legislation and related tax changes. The topic today is health flexible spending accounts also known as FSA’s and the dollar cap on contributions.
For tax years beginning after December 31, 2012, for a health FSA to be a qualified benefit under a cafeteria plan, the maximum amount available for reimbursement of incurred medical expenses of an employee and dependents and other eligible beneficiaries under the health FSA for a plan year can’t exceed $2,500.
This is a maximum limit only. As in the past, an employer may establish its own plan limitation, as long as the plan limit doesn’t exceed this statutory limit.
The $2,500 limit only applies to health FSAs. It doesn’t apply to health savings accounts (HSAs), Archer medical savings accounts (Archer MSAs), or any contributions an employee makes toward health insurance premiums.
The new health FSA limit applies on an employee-by-employee basis. If two people are married, and each has the opportunity to participate in a health FSA, whether through the same employer or through different employers, each may contribute up to $2,500.
Disclaimer: The items included in the Tax Tip Tuesday Video Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation. IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advise contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.