Health Care Reform Imposes a $2,500 Limit on Health FSAs for 2013
As a reminder, the limit for Health Care Flexible Spending Accounts is being reduced to $2,500 effective for taxable years (calendar years) beginning after December 31, 2012.
This limit applies on a taxable year basis and is not tied to the Plan Year (a number of employers currently utilize a Plan Year which differs from the calendar year, which will complicate administration). If the employer allows a limit over $2,500 for the 2012 Plan Year that is not the calendar year, it should monitor compliance with the limit on a calendar year basis in order to prevent an employee’s salary reductions from exceeding the $2,500 threshold and ensure the Health Care FSA remains a qualified benefit. Alternatively, the employer may want to set the limit at $2,500 or less for the 2012 tax year right away to simplify administration of plan years that span more than one taxable year.
