New FSA Election Limit

All Health FSAs will be capped at $2500 per plan year and indexed annually beginning January 1, 2014. If your plan year is a calendar year and runs January 1, 2012 through December 31, 2012, you will need to make sure that your medical FSA is capped at $2500 for the plan year beginning January 1, 2013. If your plan year begins any time after January 1, 2012 you will need to amend your document to reflect the $2500 cap to ensure that your plan remains compliant under the new rule for the portion of the plan year that is in 2013. The new $2500 limit is not an eligible status change for your employees to make a change to their health FSA election. Example: plan year begins February 1, 2012 and runs through January 31, 2013, your employee elects $3000 in the Health FSA, he/she will be taxed and possibly penalized on the $500 which exceeds the $2500 limit. The plan will also be noncompliant as of January 1, 2013 and possibly penalized as well. The Laymon Group will remind and recommend to all clients at renewal time to revise the Health FSA limit to a maximum of $2500. The cap does NOT apply to HRAs.