On Oct. 21, 2015, the IRS announced the annual contribution limit for health flexible spending accounts (FSAs) starting in 2016. According to this guidance, for taxable years beginning in 2016, the dollar limitation on employee salary reduction contributions to health FSAs will remain unchanged at $2,550.
The FSA dollar limit first became effective in 2013 as part of the Affordable Care Act (ACA).
An employer may continue to impose its own dollar limit on employees’ salary reduction contributions to health FSAs, as long as the employer’s limit does not exceed the ACA’s maximum limit in effect for the plan year. Employers should ensure that their cafeteria plan documents reflect the appropriate health FSA dollar limit.