2024 Health FSA Limit Increased

The IRS has released Revenue Procedure 2023-34 confirming that for plan years beginning on or after January 1, 2024, the health FSA salary reduction contribution limit will increase to $3,200.

The adjustment for 2024 represents a $150 increase to the current $3,050 health FSA salary reduction contribution limit in 2023.

What About the Carryover Limit into 2025?

The indexed carryover limit for plan years starting in calendar year 2024 to a new plan year starting in calendar year 2025 will increase to $640.

• Carryover Limit from a Plan Year Starting in 2023 to a Plan Year Beginning in 2024: $610
• Carryover Limit from a Plan Year Starting in 2024 to a Plan Year Beginning in 2025: $640

Other Notable 2024 Health and Welfare Employee Benefit Amounts

• Dependent Care FSA: The dependent care FSA limit remains fixed (with no inflation adjustment) at $5,000.
• HSA Limits: The IRS released the significantly increased 2024 HSA limits back in May. The individual contribution limit will be $4,150 (up from $3,850) and the family contribution limit will be $8,300 (up from $7,750).
• ACA Employer Mandate Affordability: The 2024 affordability safe harbor percentage decreases dramatically to 8.39% (down from 9.12%). This sets the federal poverty line affordability safe harbor at a $101.93 maximum monthly employee-share of the premium for the lowest-cost plan option at the employee-only tier.
• ACA Pay or Play Penalties: The 2023 annualized employer mandate pay or play penalties will increase to $2,970 (the Section 4980H(a) “A Penalty”) and $4,460 (the Section 4980H(b) “B Penalty”) annualized.
• ACA Reporting: The deadline to furnish 2023 Forms 1095-C to employees will be March 1, 2024. Last year, the IRS finalized regulations making permanent the 30-day extension from the otherwise standard January 31 deadline. Although the 30-day extension typically results in a March 2 deadline, that date is moved up to March 1 in 2024 because it is a leap year.
  Keep in mind that IRS did not extend the good faith enforcement safe harbor from penalties for incorrect or incomplete information on the Forms 1094-C and 1095-C (generally $310 per return in 2024).
  The Form 1094-C and copies of the Forms 1095-C must be filed electronically with the IRS by April 1, 2024 (March 31 is a Sunday). As a result of newly finalized IRS regulations, virtually all employers will need to file electronically. This will generally require engaging with a third-party vendor that can complete the electronic filing.
• PCORI Fee: The IRS recently released the July 2024 PCORI fee for plan years that end on or after October 1, 2023, and before October 1, 2024 (including 2023 calendar plan years) at $3.22 per covered life.

IRS announces relief for certain Form 1094/1095 reporting requirements

The IRS has issued relief from certain Form 1094-C and 1095-C reporting requirements under the Affordable Care Act relating to employee health plans, as well as relief from certain reporting-related penalties.

As a refresher, the ACA generally requires four forms to be produced each year, and the names are anything but intuitive:

• Form 1094-B: This is essentially a transmittal form used by insurance carriers to report the individual statements (Form 1095-B) to the IRS
• Form 1095-B: This form is used to report certain statutorily-required information to the employee under a fully-insured policy about his or her coverage.
• Form 1094-C: This is used by applicable large employers (“ALEs”) to report whether the employer offered minimum essential coverage and to transmit the employee statements (Form 1095-C) to the IRS.
• Form 1095-C: Finally, this form is used by ALEs to report certain statutory-required information to employees about their employer-sponsored health coverage.

Which form your plan would be required to file or furnish depends on whether you are an ALE, and how you fill out the form and whether you offer fully insured or self-insured coverage. 

Extended deadline for participant statements

The IRS has extended the deadline for furnishing Forms 1095-B and 1095-C to individuals. The typical deadline to report 2020 plan information is January 31, 2021. However, the new relief extends the deadline to March 2, 2021. The extension is automatic, and the IRS has indicated that no further extensions will be granted, and it will not respond to such requests.

No extension for IRS filings

Be aware that this extension does not apply to the 1094-B and 1094-C filings with the IRS. The deadline for submitting these filings to the IRS will remain March 1, 2021 (since the original due date of February 28 falls on a Sunday), for paper filings and March 31, 2021, for those filing electronically. However, while the automatic extension does not apply to these deadlines, filers may still request an extension from the IRS.

Penalty relief

Recognizing that the main purpose of Forms 1095-B and 1095-C was to allow an individual to compute his or her tax liability relating to the individual mandate, and because the individual mandate has been reduced to zero, the IRS has granted relief from furnishing certain documents to individuals.

The IRS indicated that it will not assess penalties for failure to furnish a Form 1095-B if two conditions are met. First, the reporting entity must post a prominent notice on its website stating that individuals may receive a copy of their 2020 Form 1095-B upon request, along with an email address, physical address, and phone number. Second, the reporting entity must furnish the 2020 Form 1095-B to the responsible individual within 30 days of receipt of the request. The statements may be furnished electronically if certain additional requirements are met.

The same reporting relief does not extend to ALEs that are required to furnish Form 1095-C. This form must continue to be furnished to full-time employees, and penalties will continue to be assessed for a failure to furnish Form 1095-C. However, the relief does generally apply to furnishing the Form 1095-C to participants who were not full-time employees for any month of 2019 if the requirements above are met. This would typically include part-time employees, COBRA continuees, or retirees.

Note that while these requirements for furnishing the 1095-B and 1095-C to individuals has been modified, these forms must still be transmitted to the IRS along with their Form 1094 counterparts.

Good-faith relief for errors in reporting

In the final piece of good news from the IRS, it announced relief from penalties for incorrect or incomplete information on any of these forms. This relief applies to both missing and inaccurate taxpayer identification numbers and birthdays, as well as other required information.

The reporting entity must be able to show that it made a good faith effort to comply with the reporting requirements. A successful showing of good faith will show that an employer made reasonable efforts to prepare for the reporting requirements and the furnishing to employees, such as gathering and transmitting the necessary information to the person preparing the forms.

However, the relief does not apply to reporting entities that completely fail to file or furnish the forms at all.

Finally, and importantly, the IRS has indicated that this will be the last year that it will provide this good faith reporting relief.