HEALTH FSA LIMIT WILL INCREASE FOR 2018
The Affordable Care Act (ACA) imposes a dollar limit 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. On Oct. 19, 2017, the Internal Revenue Service (IRS) released Revenue Procedure 2017-58 (Rev. Proc. 17-58), which increased the FSA dollar limit on employee salary reduction contributions to $2,650 for taxable years beginning in 2018. It also includes annual inflation numbers for 2018 for a number of other tax provisions.
ACTION STEPS
Employers should ensure that their health FSA will not allow employees to make pre-tax contributions in excess of $2,650 for 2018, and they should communicate the 2018 limit to their employees as part of the open enrollment process. An employer may continue to impose its own health FSA limit, as long as it does not exceed the ACA’s maximum limit for the plan year. This means that an employer may continue to use the 2017 maximum limit for its 2018 plan year.
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