IRS Finally Releases 2019 FSA Limits

IRS Finally Releases 2019 FSA Limits

The Internal Revenue Service (IRS) released the 2019 limits for flexible spending accounts (FSAs). According to the notice published on November 15, 2018, employees will be able to contribute $2,700 to health FSAs in 2019, a $50 increase from the 2018 limit of $2,650. The change applies to both traditional FSAs and limited purpose FSAs that can be used in conjunction with a health savings account for dental and vision services.

Usually the IRS announces the FSA limits in October, so that employers with January 1st plan years will have enough time to include the accurate limit levels in their open enrollment materials and platforms. This year, the notice arrived in the middle of many group open enrollment periods, necessitating some choices for companies that include FSAs as part of their group benefit plans. Employers do not have to use the federal maximum FSA limits when establishing their 2019 plan options, so if your plan already started open enrollment using the 2018 limits, you are not required to make any plan alterations. However, if your company wants to offer employees the option of increasing their FSA contributions by $50 in 2019, you can.  The only caveats are all plan documents and open enrollment materials will have to be adjusted accordingly, and you will need to notify employees of the change.  Please contact your Kistler Tiffany Benefits’ Employee Benefits Consultant if you need assistance with making the switch.

In addition to the change to the 2019 FSA limits, Revenue Procedure Notice 2018-57 includes some other threshold changes for 2019 that may be important to your plan.  The notice increases the maximum amount that an employee may be reimbursed from a qualified small employer health reimbursement arrangement (QSEHRA) to $5,150 for individual coverage and $10,450 for family coverage.  Also, the highly compensated employee salary level will rise to $125,000, impacting cafeteria plan testing in 2019. The threshold salary for a key employee was raised by $5000 too, so it will be $180,000 in the year ahead.  The pre-tax benefits for parking and transportation went up by $5 to $265 annually. One limit that didn’t change is the dependent care FSA maximum contribution threshold – it remains steady at $5000 per year.