November 16, 2012
How Does the $2,500 Health FSA Limit Apply to Families?
~ written by Char Bigelow, Employee Benefits, Willis
The National Legal & Research Group was recently asked how the $2,500 limit on employees’ pre-tax contributions to health flexible spending accounts is affected by a spouse who is eligible to contribute to a health FSA through his or her employer.
Under the Patient Protection and Affordable Care Act, annual salary reduction contributions to health FSAs will be limited to $2,500 a year. The limit is effective for plan years beginning after December 31, 2012 (for plan years after December 31, 2013, the amount is indexed). The $2,500 limit applies to employee pre-tax salary reduction contributions to a health FSA in a cafeteria plan. The limit does not apply to employer non-elective credits (i.e., non-cashable flex credits that an employer makes available to an employee who is eligible to participate in the cafeteria plan, to be used at the employee’s election only for one or more qualified benefits).
The $2,500 limit applies on an employee-by-employee basis. The limit is the maximum salary reduction contribution each employee may make for a plan year, regardless of the number of other individuals (e.g., spouses or dependents) whose medical expenses are reimbursable under the employee’s health FSA. This would allow each spouse, if eligible, to elect salary reduction contributions to a health FSA, to elect to make salary reduction contributions of up to $2,500 (as indexed) to his or her own health FSA (even if they both participate in a health FSA sponsored by the same employer).
Contact Char Bigelow firstname.lastname@example.org for more information.