On October 21, the IRS released Revenue Procedure 2015-53 providing certain cost of living and indexing information for 2016. In the Revenue Procedure, the IRS released the Health FSA max for 2016 plans, which will remain unchanged from 2015 - $2,550. As a bit of history, prior to 2013, employee contributions to health FSAs were not limited by law, only by plan sponsor. The Affordable Care Act limited employee FSA contributions to $2,500 per plan year beginning in 2013, providing the IRS with discretion to index periodically. The max remained $2,500 through 2014, then was increased to $2,550 for 2015. Since there is no increase for 2016, an increase in 2017 is likely.
Plans are permitted to set the maximum employee contribution below $2,550. However, most plans choose to allow the full maximum, in order to maximize the tax savings for both the plan and employee. The FSA maximum should be outlined in the FSA plan documents. The plan documents provided by ProBenefits are drafted to automatically increase the plan max when indexed for all plans that allow the IRS max, so plan document updates are not required each time the maximum changes. Plans that choose a lower max are designed to remain unchanged year-to-year unless amended.
The Dependent Care FSA max, which has been $5,000 per household for nearly 15 years, remains unchanged. In May, the IRS released HSA limits for 2016 in Revenue Procedure 2015-30, which can be found in our recent blog post.