Today the IRS officially announced under, Revenue Procedure 2019-44 the 2020 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules, and other tax changes. Included in the announcement is the inflation adjusted 2020 limits for Health Care flexible spending accounts (FSAs) under an IRC § 125 cafeteria plan.
Health Care FSA
The pre-tax salary reduction limit for Health Care FSAs will increase to $2,750 for plan years on or after January 1, 2020.
The Health Care FSA pre-tax salary reduction limit is per employee, per employer, per plan year. If the employer makes contributions (that cannot be taken as taxable cash) to the Health Care FSA, the employer’s contribution is in addition to the amount that the employee can elect to set aside through pre-tax salary reductions. As a result, the employee could have more than $2,750 available per plan year to reimburse qualified medical expenses if the employer contribution is part of the plan design.
In addition, if an employer has adopted rollover (carryover) of up to $500 for the Health Care FSA, any amount that rolls over into the new plan year does not affect the maximum election the employee can make.
For a complete review of the updates to the 2020 tax provisions refer to Revenue Procedure 2019-44.
Quick Reference Guide
For your convenience, Employee Benefits Corporation has prepared a quick reference guide for the current and new plan limits. Please click here to access this guide.