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Health FSA Limit Increases

fsa limits increase for 2020

1.5 minute read

The IRS recently increased the health FSA dollar limit on employee salary reduction contributions for 2020 plan years. According to the Affordable Care Act (ACA), a dollar limit is imposed on employees’ salary reduction contributions to health flexible spending accounts (FSAs) offered under cafeteria plans. This dollar limit is indexed for cost-of-living adjustments and may be increased each year.

For taxable years beginning in 2020, the health FSA dollar limit on employee salary reduction contributions has increased to $2,750. It also includes annual inflation numbers for 2020 for a number of other tax provisions.

NIS Learning Series - Medical Savings Accounts: Which Ones Work for Public Sector Employers?

The health FSA limit applies on an employee-by-employee basis. Employees may only elect up to $2,750 in salary reductions in 2020, regardless of whether they have family members who benefit from the FSA funds. Each family member who is eligible to participate in their own health FSA will have a separate limit.

Employers should ensure that their health FSA doesn’t allow employees to make pre-tax contributions in excess of $2,750 for 2020. Communicate the increased limit to employees during the open enrollment process.

An employer may continue to impose its own health FSA limit, as long as it doesn’t exceed the ACA’s maximum limit in effect for the plan year. This means that an employer could continue to use the 2019 maximum limits for its 2020 plan year.

For more information, download the bulletin.

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.

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Adam Kuck

Adam Kuck

The first things you will notice about Adam Kuck are how personable and organized he is. As your Account Representative, Adam will be on hand to walk you through your group's plans, conduct employee and retiree meetings, and be your advocate when a problem arises. Adam first joined National Insurance Services (NIS) in 2013 as an intern in the Marketing Department. He enjoyed NIS’ company culture and team values so much that he later applied and was hired as a Retirement Income Account Representative for NIS and MidAmerica Administrative & Retirement Solutions. Adam specializes in Health Reimbursement Arrangements (HRAs), Flexible Spending Accounts (FSAs), and 403(b) Special Pay Plans (SPP) for clients in Minnesota, Pennsylvania, and Oklahoma. He is a licensed Health and Life insurance agent and a registered securities representative with his Series 6 and 63 licenses.