If you were enrolled in a flexible spending account (FSA) in the past year or are thinking of going for one in 2024, then figuring out just how much you can put into your account will be pivotal for your annual healthcare spending plans.
Each year, the IRS sets the contribution limits for individuals opening an FSA. FSA limits were established with the enactment of the Affordable Care Act and are set to be indexed for inflation each year. As a result, the IRS has revised contribution limits for 2024.
The 2024 FSA contributions limit has been raised to $3,200 for employee contributions (compared to $3,050 in 2023). FSAs only have one limit for individual and family health plan participation, but if you and your spouse are lucky enough to each be offered an FSA at work, you can each elect the maximum for a combined household set aside of $6,400. And for plans with a carryover, the limit has increased to $640 for 2024 (compared to $610 in 2023). Continue reading for some more important notes on FSA limits.
2024 FSA Contribution Limits
Special rules/Deadline Extensions: There are 3 options for employers to to provide relief for FSA users who would otherwise have to forfeit leftover funds:
1. For FSA users with a carryover option, the carryover will allow FSA users with plan years ending in 2024 to move up to $640 of the previous plan year's contribution into next year's allocation (without counting against the overall contribution limit) to avoid forfeiting money at year's end.
- The FSA contribution limit does not include carryovers. If an employer offers a carryover of up to $610 in 2023, someone could have an FSA with $3,810 in it (or more) in 2024.
2. The second is the FSA Grace Period, which gives users 2.5 months after the last day of their plan years to spend down their remaining FSA funds. Employers may offer a grace period or a carryover, but they cannot offer both at the same time.
3. The third can be combined with a carryover or a grace period, and is the FSA Run-out period, allowing up to 3 months after the end of the FSA plan year for account holders to continue to submit claims for reimbursement of eligible expenses they incurred during the plan year.
- Keep in mind that all deadline extensions are optional and at the discretion of the employer, and none have to be offered.
Plan year: Most often one (1) year. In limited circumstances, there may be a shorter plan year.
Eligibility to contribute: FSAs can only be sponsored by employers and eligibility rules are set by each plan. Eligible employees who work for employers who offer FSA plans may contribute up to the allowed maximum per year (the maximum for each plan could be less than the IRS allowed maximum). Self-employed individuals and owners of certain types of corporations are typically not eligible for an FSA.
Account ownership: An FSA is owned and set up by the employer.
Access to money: An employee's yearly FSA allocation is available in full on the first day of the plan year, regardless of contributions to date. Most FSAs come with a debit card function for use at the point of sale.
Change contributions? FSA users can typically only change their contributions during their open enrollment periods. Many plans also allow changes to contributions to be made if the account holder experiences a qualifying life event, such as marriage, divorce, or birth of child.