The Affordable Care Act (ACA) imposes a dollar limit on employees’ salary
reduction contributions to health flexible spending accounts (FSAs) offered
under cafeteria plans. This dollar limit is indexed for cost-of-living adjustments
and may be increased each year.
On Nov. 10, 2021, the IRS released Revenue Procedure 2021-45 (Rev. Proc. 21-
45), which announced that the health FSA dollar limit on employee salary
reduction contributions will increase to $2,850 for taxable years beginning in
2022. This is a $100 increase from the 2021 health FSA limit of $2,750. Rev.
Proc. 21-45 also increases the carryover limit for a health FSA to $570. It also
includes annual inflation-adjusted numbers for 2022 for a number of other tax
provisions.
Employers should ensure that their health FSAs will not allow employees to
make pre-tax contributions in excess of $2,850 for the 2022 plan year and
communicate the 2022 limit to their employees as part of the open enrollment
process.
FSA Employer Contribution Limits
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. For example, an
employer may decide to limit employee health FSA contributions for the 2022
plan year to $2,500.
FSA Per Employee Contribution Limit 2022
The health FSA limit applies on an employee-by-employee basis. Each employee
may only elect up to $2,850 in salary reductions in 2022, regardless of whether
he or she also has family members who benefit from the funds in that FSA.
However, each family member who is eligible to participate in his or her own
health FSA will have a separate limit. For example, a husband and wife who
have their own health FSAs can both make salary reductions of up to $2,850
per year, subject to any lower employer limits.
© December 2021 - Enquiron, a Zywave Company