• Coronavirus
  • Blog
  • Careers
  • Contact Us
The Safegard Group, Inc.
  • 1 (888) 892-7688
The Safegard Group, Inc.
  • Client Login
    • Commercial & Personal
    • Employee Benefits
  • Property and Casualty
    • M&A Services
  • Employee Benefits
    • Medical Funding Strategies
    • Technological Capabilities
    • Employee Education
    • Voluntary Benefits
  • Personal Insurance
    • Carrier Claims Reporting

FSA Limit will Increase for 2020

14
Nov, 2019
By Roger Kirtley, Vice President
FSA Limit will Increase for 2020
  • Employee Benefits
  • 1 comment

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 FSA limit is indexed for cost-of-living adjustments and may be increased each year.

On Nov. 6, 2019, the Internal Revenue Service (IRS) released Revenue Procedure 2019-44 (Rev. Proc. 19-44), which increased the health FSA dollar limit on employee salary reduction contributions to $2,750 for taxable years beginning in 2020. It also includes annual inflation numbers for 2020 for a number of other tax provisions.

Employers should ensure that their health FSA will not allow employees to make pre-tax contributions in excess of $2,750 for 2020, and they should communicate the 2020 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 2019 maximum limit for its 2020 plan year.

The ACA initially set the health FSA contribution limit at $2,500. For years after 2013, the dollar limit is indexed for cost-of-living adjustments.

  • 2014: For taxable years beginning in 2014, the dollar limit on employee salary reduction contributions to health FSAs remained unchanged at $2,500.
  • 2015: For taxable years beginning in 2015, the dollar limit on employee salary reduction contributions to health FSAs increased by $50, for a total of $2,550.
  • 2016: For taxable years beginning in 2015, the dollar limit on employee salary reduction contributions to health FSAs remained unchanged at $2,550.
  • 2017: For taxable years beginning in 2017, the dollar limit on employee salary reduction contributions to health FSAs increased by $50, for a total of $2,600.
  • 2018: For taxable years beginning in 2018, the dollar limit on employee salary reduction contributions to health FSAs increased by $50, for a total of $2,650.
  • 2019: For taxable years beginning in 2019, the dollar limit on employee salary reduction contributions to health FSAs increased by $50, for a total of $2,700.
  • 2020: For taxable years beginning in 2020, Rev. Proc. 19-44 further increased the dollar limit on employee salary reduction contributions to health FSAs by an additional $50, to $2,750.

The health FSA limit will potentially be increased further for cost-of-living adjustments in later years.

Employer FSA Limit

An employer may continue to impose its own dollar limit on employees’ salary reduction contributions to health FSAs, as long as the employer’s limit does not exceed the ACA’s maximum limit in effect for the plan year. For example, an employer may decide to continue limiting employee health FSA contributions for the 2020 plan year to $2,500.

Per Employee FSA Limit

The health FSA limit applies on an employee-by-employee basis. Each employee may only elect up to $2,750 in salary reductions in 2020, regardless of whether he or she also has family members who benefit from the funds in that FSA. However, each family member who is eligible to participate in his or her own health FSA will have a separate limit. For example, a husband and wife who have their own health FSAs can both make salary reductions of up to $2,750 per year, subject to any lower employer limits.

If an employee participates in multiple cafeteria plans that are maintained by employers under common control, the employee’s total health FSA salary reduction contributions under all of the cafeteria plans are limited to $2,750. However, if an individual has health FSAs through two or more unrelated employers, he or she can make salary reductions of up to $2,750 under each employer’s health FSA.

Salary Reduction Contributions

The ACA imposes the $2,750 limit on health FSA salary reduction contributions. Non-elective employer contributions to health FSAs (for example, matching contributions or flex credits) generally do not count toward the ACA’s dollar limit. However, if employees are allowed to elect to receive the employer contributions in cash or as a taxable benefit, then the contributions will be treated as salary reductions and will count toward the ACA’s dollar limit.

In addition, the limit does not impact contributions under other employer-provided coverage. For example, employee salary reduction contributions to an FSA for dependent care assistance or adoption care assistance are not affected by the health FSA limit. The limit also does not apply to salary reduction contributions to a cafeteria plan that are used to pay for an employee’s share of health coverage premiums, to contributions to a health savings account (HSA) or to amounts made available by an employer under a health reimbursement arrangement (HRA).

Grace Period/Carry-Over Feature

A cafeteria plan may include a grace period of up to two months and 15 days immediately following the end of a plan year. If a plan includes a grace period, an employee may use amounts remaining from the previous plan year, including any amounts remaining in a health FSA, to pay for expenses incurred for certain qualified benefits during the grace period. If a health FSA is subject to a grace period, unused salary reduction contributions that are carried over into the grace period do not count against the $2,750 limit applicable to the following plan year.

Also, if a health FSA does not include a grace period, it may allow participants to carry over up to $500 of unused funds into the next plan year. This is an exception to the “use-it-or-lose-it” rule that generally prohibits any contributions or benefits under a health FSA from being used in a following plan year or period of coverage. A health FSA carryover does not affect the limit on salary reduction contributions. This means the plan may allow the individual to elect up to $2,750 in salary reductions in addition to the $500 that may be carried over.

Plan Amendments

Plan documents that specify the health FSA dollar limit must be amended if the higher limit will be used in 2020.

More Information

Looking for more guidance on your company’s FSA plan or health benefits in general? Contact The Safegard Group for additional resources.

Share this:

  • Click to share on Facebook (Opens in new window)
  • Click to share on Twitter (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)
  • Click to print (Opens in new window)

Related

About Roger Kirtley, Vice President

1 Comments

  • By victormalcalaw

    I think these annual increases to contribution limits help to ensure that health care FSAs, adoption assistance programs, and transit and parking programs remain attractive benefits to plan sponsors and participants.

Leave a Reply Cancel reply

Categories

  • Claims & Risk Management (141)
  • Company News (73)
    • Designations (2)
    • New Hires (27)
    • Press Release (17)
    • Website (1)
  • Employee Benefits (76)
  • Personal Lines (61)
  • Property & Casualty (154)
  • White Papers (3)
    • Property & Casualty (3)

Recent Posts

  • Gambling in the Workplace December 31, 2019
  • Return to Work Program December 26, 2019
  • The Benefits of Upskilling December 24, 2019
  • Manage Cost of Risk, Control Price December 19, 2019
  • Liability from On-site Fitness Center December 17, 2019

Top Posts

  • Warehouse Housekeeping to Improve Safety
    Warehouse Housekeeping to Improve Safety
  • The Staggering Cost of Workplace Bullying
    The Staggering Cost of Workplace Bullying
  • Amazon Purchases with Your HSA or FSA
    Amazon Purchases with Your HSA or FSA
  • Health Plan Rules: Treating Employees Differently
    Health Plan Rules: Treating Employees Differently
  • Concrete Truck Safety
    Concrete Truck Safety
  • Backing Up Vehicles Safely
    Backing Up Vehicles Safely
  • The 3 S's of Trenching Safely: Slope It, Shore It, Shield It!
    The 3 S's of Trenching Safely: Slope It, Shore It, Shield It!
  • 5 Child Care Initiatives to Enhance Your Workplace
    5 Child Care Initiatives to Enhance Your Workplace
  • Fueling Safely on the Worksite
    Fueling Safely on the Worksite
  • NCCI Eliminating Anniversary Rating Date Rule
    NCCI Eliminating Anniversary Rating Date Rule
  • @safegardgroup We are proud to share that our own Safety Consultant, Joe Abbonizio was recognized for “Safety Person of the Year”… https://t.co/bbkRCBF4fw by The Safegard Group

    May 11, 2022
  • @safegardgroup We're thrilled to announce we made the Philadelphia Inquirer's 2022 #TopWorkplaces list. This award means the world… https://t.co/yKwTNcERLN by The Safegard Group

    April 19, 2022
  • @safegardgroup We came together to participate in a non-perishable food drive for one of our clients! All donations will benefit f… https://t.co/ISjhO7QAsZ by The Safegard Group

    November 24, 2021
  • @safegardgroup Our Claims Department is looking for a new Claims Consultant, find out more on our website: https://t.co/MNvgnN8tc7 https://t.co/8x8jxcRFWd by The Safegard Group

    August 19, 2021
  • @safegardgroup Our Employee Benefits team is growing! We're currently seeking a new Employee Benefits Account Executive/Manager, f… https://t.co/jRyBjmbgIg by The Safegard Group

    August 19, 2021
  • @safegardgroup We are looking for a full time Commercial Insurance Account Executive/Manager! Find out all of the details and appl… https://t.co/ABUX3Klfzk by The Safegard Group

    August 19, 2021
  • @safegardgroup Job Opening! We are currently recruiting for an entry-level position with our company as an HR Administrator/Execut… https://t.co/gVWuihSKFZ by The Safegard Group

    May 24, 2021
  • @safegardgroup We're hiring! We are looking for a full-time Small Business Account Representative with previous experience in an i… https://t.co/OrP2naH15f by The Safegard Group

    March 5, 2021
  • @safegardgroup Planning to move? Get 30 things to do for 30 days to help make your move easier. https://t.co/pImf1Fj4DU https://t.co/Kl7PLxG5gd by The Safegard Group

    August 7, 2020
  • @safegardgroup Do you know the signs of heat exhaustion? Here are important guidelines to learn how to spot it, prevent it and hel… https://t.co/IHGBWhths8 by The Safegard Group

    August 5, 2020
  • @safegardgroup Increasing your following distance during heavy rain can help keep you safer. Get more safe driving tips:… https://t.co/inKj5IP7lO by The Safegard Group

    August 3, 2020
  • @safegardgroup Use this checklist as a guide when selecting a contractor for your next home renovation. https://t.co/hyLFpwt9Un https://t.co/3konDQs0li by The Safegard Group

    July 31, 2020
  • @safegardgroup Thinking about solar power for your home? Here are a few things to consider before installation:… https://t.co/S2XQAh9VzK by The Safegard Group

    July 29, 2020
  • @safegardgroup Hitting the road this summer? Consider the following tips to help avoid work zones. Share them with your friends an… https://t.co/6kVw4GojnX by The Safegard Group

    July 27, 2020
  • @safegardgroup Moving? Use this three-step packing process from Travelers for a smoother transition to your new home. #ThinkSafe… https://t.co/LhWADcYjX0 by The Safegard Group

    July 24, 2020
  • @safegardgroup Going on vacation? Here are some basic home security steps you can take to help create a secure environment while y… https://t.co/nnSacDWSrk by The Safegard Group

    July 22, 2020
  • @safegardgroup Are you ready to enjoy your time by the pool? Don’t forget the pool safety tips. Share them with your friends & fam… https://t.co/NgwJptoT3M by The Safegard Group

    July 20, 2020
  • @safegardgroup Trying to find the right home inspector? Here are some questions from Travelers to ask potential candidates… https://t.co/r16ZcJDCZA by The Safegard Group

    July 17, 2020
  • @safegardgroup Thunderstorms can strike with little to no warning, bringing dangerous lightning. Do you know how to react if you’r… https://t.co/BbYMxMhjaP by The Safegard Group

    July 15, 2020
  • @safegardgroup Ready to enjoy your fire pit? Read these safety tips to help avoid injury and damage to your home.… https://t.co/LNIZ5n4jKo by The Safegard Group

    July 13, 2020

Subscribe to our Newsletter

By subscribing to our mailing list you will get the latest news from us.

Latest Posts

  • Gambling in the Workplace December 31, 2019
  • Return to Work Program December 26, 2019
  • The Benefits of Upskilling December 24, 2019

Contact

  • The Safegard Group, Inc.
    100 Granite Drive, Suite 205
    Media, PA 19063
  • Phone: 1 (888) 892-7688
    Fax: (610) 892-7695
  • eassistant@safegardgroup.com

Follow Us

© 2020 The Safegard Group, Inc. | A Division of Patriot Growth Insurance Services, LLC