What is the limit for employee contributions to a health FSA?
The maximum FSA Contribution for plan years starting in 2022 is $2,850.
The maximum FSA Contribution for plan years starting in 2023 is $3,050.
IRS Section 125 was amended by the Affordable Care Act to include a limit. The limit is adjusted for inflation and is usually announced in November.
Is the limit applied on a calendar year?
No, the limit is applied on a plan year.
What if the plan has a short plan year?
If the plan has a short plan year, the limited must be prorated based on the number of months in the short plan year.
What if an employee is hired mid-year?
There is no requirement that the limit be prorated for an employee hired mid-year. However, there is no stipulation that the employer could not impose a prorated limit for employees hired mid-year.
What if an employee is employed by multiple employers who each offer an FSA?
If an employee participates in multiple health FSAs maintained by members of a controlled group or affiliated service group, then salary reductions to the health FSAs are aggregated and a single limit applies. In contrast, if the employers are not members of a controlled group or affiliated service group, the employee may make salary reductions up to the limit under each employer's health FSA.
If an employee and a spouse work for the same employer (or different employers), how would the limit apply?
Both the employee and their spouse could both contribute the maximum health FSA amount.
Does the carryover reduce the limit on contributions?
No, health FSA carryovers will not count against or otherwise affect the limit on health FSA salary contributions.