Got fall on your mind? The season of beautiful foliage, pumpkin spice and delightful weather is also a time when many companies will hold their Open Enrollment periods, the one time a year that employees can make important benefits changes for the year ahead. If you were enrolled in a flexible spending account (FSA) in the past year or are thinking of going for one in 2018, knowing just how much you can put into your account is pivotal for your annual health spending plans.
Each year, the Internal Revenue Service sets the contribution limits for individuals opening an FSA and married couples filing jointly. This limit is subject to indexing based on the increase in Consumer Price Index for All Urban Consumers (CPI-U) each year.
In 2017, the individual limit for FSA contributions was $2,600, but the IRS slightly raising the limit for 2018 to be $2,650. Check the chart below for all the information you'll need to make an informed decision this Open Enrollment!
Flexible Spending Account (FSA) (also known as general medical FSA)
Yearly Contribution Limits
$2,650 per FSA. If both spouses have an FSA through their respective employers, they could each elect the maximum for $5,300 per household
FSA plans can only be sponsored by employers and eligibility rules are set by each plan. Employees who work for employers who offer FSA plans may contribute up to the allowed maximum per year. Self-employed individuals and owners of certain types of corporations are not eligible for an FSA.
An FSA account 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.
FSA users can only change their contributions during their Open Enrollment periods. Some 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.
Special Rules/Eligibility Exceptions
Employers can choose one of two (or none) options to provide relief for FSA users who would otherwise have to forfeit leftover funds: the $500 rollover and the 2.5 month grace period. The $500 rollover allows FSA users to move up to $500 of the previous plan year's contribution into next year's allocation (without counting against the overall contribution limit) to avoid forfeiting money to their employers at year end.
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.