By Jerry Geisel, Crain News Service
WASHINGTON (Oct. 31, 2014) — The maximum contribution employees will be able to make to their flexible spending accounts will rise in 2015 by $50 to $2,550, while the maximum pretax contribution employees can make to cover mass transit expenses will be unchanged, the Internal Revenue Service announced Oct. 30.
That $50 FSA contribution increase will be the first since the 2010 healthcare reform law set a $2,500 annual limit, effective in 2013.
Aside from imposing a $2,500 cap, the Patient Protection and Affordable Care Act (ACA) specified that starting in 2014, the new limit would increase to match the rise in the consumer price index at the close of a 12-month period ending on Aug. 31.
For the 12-month period ending Aug. 31, 2013, CPI indexing resulted in an indexed amount of $2,542, which, when rounded down to the nearest $50 — a methodology set by the ACA — resulted in a $2,500 maximum contribution for 2014, the same as in the prior year.
However, through the end of August of this year, the indexed amount rose to just under $2,600. Rounding down to the nearest $50 results, effective in 2015, in a maximum contribution limit of $2,550.
While that increase will be welcomed by employees, the maximum FSA contribution limit will be far lower than what employers typically previously allowed.
Prior to the ACA-imposed $2,500 limit, employers typically allowed employees to contribute between $3,000 and $5,000 to their FSAs, said Rich Stover, a Buck Consultants at Xerox principal in Secaucus, N.J.
The IRS also affirmed that the maximum monthly pretax contribution employees can make to cover mass transit expenses in 2015 will be $130, unchanged from 2014.
That amount is set in statute. A Senate panel earlier this year approved a bill, S. 2260, to boost — retroactive to 2014 —the monthly maximum contribution to $250, but no additional congressional action on the measure has occurred.
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This report appeared on businessinsurance.com, the website of Business Insurance magazine, a Chicago-based sister publication of Tire Business.
