It's that time again! Now that open enrollment periods are underway, it's 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 2020, 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. In 2019, the individual limit for FSA contributions was $2,700, but the IRS is raising the limit for 2020 to $2,750. Check below for the information you'll need to make an informed decision for the coming year.
2020 FSA Contribution Limits
Yearly Contribution Limits: $2,750 per FSA. If both spouses have an FSA through their respective employers, they could each elect the maximum for $5,500 per household.
Eligibility to Contribute: FSAs 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.
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.
Change Contributions? 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 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's 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. For more information about what an FSA can cover, visit the FSA Eligibility List.
Some additional things to consider
The 2020 limit applies on a per plan basis regardless of single vs. family, so the max is $2,750 per FSA plan. If spouses both work for companies which offer an FSA, they could each enroll in their employer's FSA and contribute the maximum amount.
The max is for pre-tax employee contributions only. Employers could choose to contribute in excess of the $2,750 if they choose.
The FSA rollover of up to $500, if permitted, does not count towards the max. If someone rolled over $500 this year and elected $2,750 for next year, they could have a full account balance of $3,250 in 2020.
October came and went in a flash, didn't it? It seems like just yesterday people were upset that summer was ending, and now we're already making holiday shopping plans. But in our little corner of the healthcare and finance world, October is usually when the IRS announces its healthcare benefit adjustments for the coming year.
They came a little later than expected, but the 2019 benefit limits are finally here. Well, all of them except one. And yeah, it's the one we want to know about most -- the 2019 FSA contribution limits.
We don't know why many other contribution numbers have been updated except for FSAs, but considering the upward trends demonstrated in other categories, there's reason to be optimistic about tax-free healthcare funds in 2019.
Retirement planners, rejoice! The IRS is giving you a well-deserved bump for 2019! Not only are 2019 HSA limits rising, but 401(k), 403(b) and 457 plan owners will see a $500 bump to their annual elective deferral limits. Taxpayers will be allowed to contribute up to $19,000 before taxes in 2019 into these accounts.
Even though the IRS kept the catch-up contribution limit at $6,000, this $500 boost will certainly be welcome by anyone looking to maximize their retirement funds.
Traditional IRA and ROTH IRA owners will enjoy a $500 boost of their own, with $6000 as the new contribution limit in 2019.
(We probably don't need to tell you what all these numbers mean, but we will anyway -- lower tax bills and more retirement savings.)
If you're self-employed, retirement funding is about to get easier, too. Now you can save an extra $1,000 into your own retirement accounts (increasing to $56,000 in 2019). These contributions will be determined by actual income, up to a maximum of $280,000, which is a $5,000 increase over this year.
We may have exaggerated a BIT in our own headline, since we're still waiting for announcements for few other 2019 adjustments - not just FSAs. This includes important items like federal income-tax brackets and potential changes to the standard deduction. And obviously, expected increases to flexible spending account contributions, which several sources are projecting to be $2,700.
Of course, as soon as we get the news, we'll share it here and on our social media platforms.
FSA Friday is a weekly roundup of the latest topics, tips and headlines to keep you updated on all things flex spending. It appears every Friday, exclusively on the FSAstore.com Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram, YouTube and Twitter.