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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.

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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

Adam Kuck embodies our company culture and team values with his personable and organized demeanor. He excels in building relationships, fostering connections, and is known for his friendly and knowledgeable approach. As Vice President of Retirement Income, Adam oversees hiring, managing, and developing retirement income salespeople, account representatives, and the client relations team. He also develops and executes strategy and nurtures regional relationships. Adam is a licensed insurance representative specializing in Health Reimbursement Arrangements (HRAs), Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), Special Pay Plans, and OPEB Trusts for schools, cities, and counties across the U.S. As a licensed insurance agent with a Series 6 and Series 63 licenses, Adam is well-equipped to provide top-notch service to our valued clients.