IRS ISSUES GUIDANCE ON HEALTH FSA SALARY DEDUCTION LIMITS
Recently the IRS issued Notice 2012-40 which provides guidance on health flexible spending arrangements (health FSA) salary deductions limits. The Patient Protection and Affordable Care Act of 2010 and the Health Care and Education Reconciliation Act of 2010 enacted a $2,500 limit to employee salary deductions for certain health FSA plans. Previously, there was no statutory limit. Instead the employer’s plan determined the annual limit. The legislation also allows for the $2,500 limit to be indexed to inflation. The statutory limit will be effective with cafeteria plan years beginning in 2013, so it may be a while before you see any changes to a plan you participate in.
For additional summary information you can read the Journal of Accountancy article and for the full scope on all the details IRS Notice 2012-40.