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Submitted by admin on Fri, 2012-01-27 06:40
Are there new FSA contribution limits this year?
The Affordable Care Act, enacted in March 2010, will limit the amount of pre-tax dollars an employee can contribute to a health Flexible Spending Account in 2013. Presently, there is no IRS-imposed limit on an employee’s pre-tax health FSA contribution. In 2013, however, FSA plans must limit FSA health benefits to $2,500 per calendar year per enrolled employee.
For non-calendar year plans, the 2013 requirement has an impact on an employer’s 2012-2013 FSA plan design. Should an employer allow employees in 2012 to contribute more than $2,500 in a health FSA for a 12-month period, there will be carry over implications in 2013. The result is that employees could find themselves exceeding the 2013 FSA health calendar year limit.
What’s an employer to do?
To date, the IRS has not provided guidance on the consequences of health FSA carryover in 2013. Without such guidance, employers with non-calendar year health FSAs could have an administrative challenge and even face penalties.
Bukaty Companies suggestion
For non-calendar year health FSA plans, Bukaty Companies recommends the following options to minimize any possibility of non compliance.
1) Adopt a short-plan year that effectively ends the FSA plan Dec. 31, 2012. This approach allows employers to set any contribution maximum preferred. While employees still may be receiving reimbursements in 2013 from their 2012 plans, our view is the pre-tax implication does not effect
disbursements from a 2012 plan that are paid out in 2013.
2) Keep a 12-month plan year, but limit the health FSA 2012 contribution maximum at $2,500. By setting a $2,500 limit in 2012, there is no risk of having a contribution maximum that exceeds the 2013 limit.
For Bukaty Companies FSA clients with non-calendar year plans, we will work with you in advance of your FSA enrollment to determine what direction to take.
