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The IRS recently increased the health flexible spending accounts (FSAs) dollar limit on employee salary reduction contributions for 2024 plan years. For plan years beginning in 2024, the adjusted dollar limit on employees’ pre-tax contributions to health FSAs increased to $3,200.
According to the Affordable Care Act (ACA), a dollar limit is imposed on employees’ salary reduction contributions to health FSAs. This dollar limit is indexed for cost-of-living adjustments and may be increased each year.
Pre-Tax Contributions
The ACA sets a dollar limit on employees' pre-tax contributions to a health FSA. It's important to note that nonelective employer contributions, such as matching contributions or flex credits, generally do not count towards this limit. However, if employees have the option to receive these contributions as cash or a taxable benefit, they must be treated as salary reductions and counted towards the health FSA contribution limit.
Per Employee Limit
The health FSA limit is $3,200 per employee in 2024, regardless of family members benefiting from the funds. Each eligible family member can participate in their own health FSA with a separate limit. For example, a married couple can both make salary reductions of up to $3,200 for 2024, subject to any lower employer limits.
Health FSAs Carryovers
FSAs may allow employees to carry over a certain amount at the end of the plan year to reimburse eligible expenses incurred in the plan year immediately following. The maximum carryover amount is adjusted annually for inflation. For 2024, the maximum carryover limit is $640. Employers that allow for carryover can set their own limit that’s lower than the maximum carryover limit.
Takeaway
Employers should confirm that their health FSA contribution limit is included in the plan’s documents and communicated to employees at enrollment time. Download the bulletin for more details.
National Insurance Services is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Readers are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the readers’ business activities.
