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MacCorkle Insurance Service is pleased to provide you with this update - we hope you find the presented topic both interesting and informative. Please look for future editions providing the HR professional with compliance and legislative briefs throughout the year.
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IRS Provides Guidance on $2,500 Health FSA Limit
The Affordable Care Act (ACA) imposes a $2,500 limit on salary reduction contributions to a health flexible spending account (FSA) offered under a cafeteria plan. This limit is applicable to grandfathered and non-grandfathered health FSAs. ACA provides that this change is effective for taxable years beginning after Dec. 31, 2012. The $2,500 limit will be indexed for cost-of-living adjustments for 2014 and later years.
Prior to the ACA change, the law did not limit employees' health FSA contributions. It has been common, however, for employers to limit employee contributions to health FSAs. Employers  may continue to impose limits on employee health FSA contributions, as long as the employer's limit does not exceed the $2,500 maximum limit under ACA.
Because ACA ties the effective date of the health FSA limit to the taxable year, and not specifically to the plan year, there has been some confusion regarding when the limit becomes effective for non-calendar year plans. In addition, the deadline for amending cafeteria plans to include the health FSA limit has also been unclear. On May 30, 2012, the Internal Revenue Service (IRS) issued Notice 2012-40 to provide guidance on these issues and some others related to the $2,500 limit for health FSAs.
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