IRS increases FSA contribution cap to $2,700

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Employees can sock away another $50 in their flexible spending accounts next year.

The IRS announced that the annual contribution limit to FSAs will be $2,700 in 2019, up from the 2018 limit of $2,650. The increase also applies to limited-purpose FSAs that are restricted to dental and vision care services, which can be used in tandem with health savings accounts.

For a dependent care FSA, the 2019 contribution limit for an individual who is married but filing jointly is $2,500. For married couples filing jointly or single parents filing as head of household, the limit is $5,000. That limit is not changed from 2018.

See also: End-of-year FSA expenses: An employer cheat sheet

The IRS announced the change in mid-November — which is late for 2019 plans as open enrollment is well underway at several companies and many employees have already picked their benefits for the upcoming year. The agency usually issues limit changes in October.

“Employers generally cannot wait until halfway through November to finalize their open enrollment information, and they generally do not want to rely on the expected changes,” Jay Kirschbaum, vice president of compliance services at Lockton Benefit Group, a benefits brokerage and advisory firm in Kansas City, Missouri, wrote in a blog post. “So, from our experience, most employers used last year’s figure of $2,650 as the maximum employees could elect for FSA purposes.”

For employers who have already gone through the enrollment process, Kirschbaum said that companies can either do nothing — as there is no obligation to make the maximum salary reduction amount available to employees — or reopen the enrollment process and let employees who want to increase their FSA election do so before Dec. 31 for calendar year plans.

“Employers in this camp reason that there will not be that many employees who want to take advantage of the additional $50 deduction,” Kirschbaum wrote. “After all, many fear the use-it-or-lose-it rule, so not many max out the deduction. It is likely very few employees would bother making a change. Therefore, while the benefits may be small, the work and effort to make it available will also be small.”

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