Beginning in 2013, employee pre-tax contributions to a flexible spending account (FSA) will be limited to $2500. In the past, companies could impose their own limits on these employee contributions.
The limit applies based on your cafeteria plan’s plan year. It is first applicable to plan years beginning in 2013. For the majority of companies, this means it will become effective January 1, 2013 and the open enrollment materials for 2013 have to be changed to incorporate the limit.
If the cafeteria plan utilizes the 2 ½ month grace period that allows for a carryover of amounts, these carryover amounts do not reduce the $2500 limit.
Any company contributions made to the cafeteria plan- so called “flex credits”- are not subject to any limit and do not count towards the $2500.
The $2500 is indexed for inflation, like so many other limits on benefits.
The cafeteria plan has be amended no later than December 31, 2014 to reflect the new limit.
Please be sure to consult with your current Section 125 administrator regarding updating your plan document to reflect the new FSA limit or contact our office regarding setting up an FSA account or amending your document.