The IRS Increases Medical FSA Limit to $2,600:
The IRS announced today (10/25/2016) that the Medical FSA and Limited Purpose FSA cap will increase to $2,600 (an increase $50) for plan years beginning on or after January 1st, 2017. If your plan document was created by 24HourFlex the language will reference the maximum amount permitted, in which case no change is required.
Keep reading below for commonly asked questions related to this update.
Does This Change Require and Amendment to our Plan Document and Summary Plan Description (SPD)?
Usually, these documents do not need to be amended because the language in your plan document or Summary Plan Description does not specifically reference the $2,500 limit, or, it describes the limit as the "maximum amount permitted under code section 125(i)". Other descriptive marketing material created by you may reference a $2,550 limit and should be updated.
Employees have already enrolled for 2017 with the $2,550 limit, can we automatically change those elections to $2,600?
No, the Medical FSA election that your employees made is a specific election and can not be automatically increased. Most calendar-year plans are most likely still within the open-enrollment period. You could choose to notify your employees that the Medical FSA cap has increased to $2,600 and allow the participants to modify their 2017 election.
What Other Areas Could This New $2,600 Cap Impact?
If your payroll or enrollment system has a cap on the Medical FSA of $2,550 you would need to work with those vendors to update the cap to $2,600. You should also verify that information on local intranets, company websites, or other collateral created by you is updated.
Did the Dependent Care FSA Limit Change?
No, the Dependent Care FSA limit did not change. It is stil $5,000.