2022 Limits for Health FSAs, QSEHRAs and Transit and Parking Reimbursement Plans Confirmed By The IRS

The IRS has released IRS Revenue Procedure 2021-45 confirming cost-of-living based increases for several employee benefit plan related limits.  The announced increases were consistent with expectations based on increases to the Consumer Price Index over the past year.

The announced limits apply to Health Flexible Spending Arrangements (Health FSAs) and Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) with Plan Years beginning at any time during 2022 and to reimbursements paid by Transit and Parking Reimbursement Plans for expenses incurred during any month of 2022.

Health FSAs with 12 month Plan Years beginning in 2022 may allow employee salary reduction contributions up to $2,850 per year which is an increase of $100 over the $2,750 limit applicable to Plan Years beginning in 2021.  Health FSAs with Plan Years consisting of less than 12 months must pro-rate the applicable limit consistent with the actual length of the applicable Plan Year.

The new employee contribution limit also impacts the Health FSA rollover limit for Plan Years beginning during 2022.  In 2020, the IRS linked the maximum annual Health FSA rollover to 20% of the annual employee contribution limit.  Therefore, for Health FSAs beginning in 2022, the amount that can be rolled over into the following Plan Year will be $570.  This is an increase of $20 over the originally announced $550 limit for Plan Years beginning in 2021 (although the $550 limit for Plan Years beginning in 2021 does not actually apply due to a temporary waiver of rollover limits for Health FSAs with Plan Years beginning in 2020 and 2021 granted by Congress in response to the COVID-19 pandemic).

QSEHRAs with 12 month Plan Years beginning in 2022 may reimburse participating employees with self-only coverage up to $5,450 per year.  The limit for participating employees with family coverage is $11,500 per year.  These amounts are increases against the 2021 limits of $5,300 and $10,700.  Similar to the rule for Health FSAs, if a Plan Year is less than 12 months, the limits must be pro-rated consistent with the actual length of the Plan Year.

Transit and Parking Reimbursement Plans may reimburse participating employees up to $280 per month for qualifying benefits which is a $10 per month increase over the 2021 monthly limit of $270.  The $280 limit applies separately to monthly benefits provided for Transit / Van Pooling related expenses and Parking related expenses.  Therefore, it is possible that an employer could reimburse a participating employee up to $560 per month under this fringe benefit if the participant incurs both types of eligible expenses.

Important Note: Clients of Admin America with Health FSAs, QSEHRAs and/or Transit and Parking Reimbursement Plans utilizing the maximum allowable annual employee contributions, rollovers or reimbursements for 2021 will automatically have their applicable 2022 annual limits adjusted to meet the newly announced amounts.  No action is required on the part of clients who wish to take advantage of these automatic adjustments.  Clients utilizing the 2021 maximums who do not wish for Admin America to automatically adjust their 2022 limits should send an e-mail request to renewal@adminamerica.com.

 

If you have any questions regarding any of the 2022 limits or Admin America’s implementation of the limits with regards to your plan, please contact our FSA customer service team via telephone at (678) 578-4641 or via e-mail at fsa@adminamerica.com.

2015 Cost of Living Adjustments for Health FSAs Announced

The IRS recently announced several employee benefits related limits applicable for 2015. Among the limits announced is an increased annual limit on employee contributions towards Health Flexible Spending Arrangements.

Effective for Plan Years beginning on or after January 1, 2015, the maximum annual contribution employees can make to their Health Flexible Spending Arrangement (FSA) will increase to $2,550 (up from $2,500).

The 2015 Health FSA contribution increases were announced in IRS Revenue Procedure 2014-61, the text of which can be accessed here.

Prior to the passage of federal healthcare reform (PPACA) in 2010,  annual employee contribution limits were at the discretion of each employer sponsoring such plans.  PPACA imposed an annual limit of $2,500 per year on Health FSA employee contributions effective for plan years beginning in 2013.

PPACA also specified that starting for Plan Years beginning in 2014, the Health FSA contribution limit would be subject to increases to match the rise in the Consumer Price Index at the close of a 12-month period ending each August 31.  Last year, the CPI did not increase sufficiently enough to trigger such an increase for 2014.  Therefore, this year’s increase is the first under PPACA’s CPI adjustment provision.

Employers wishing to utilize the increased limits for their Health FSA plans in 2015 should review their plan’s governing documents to verify that the increase is allowed under the terms of their plan.  Plan amendments may be required or there may be other procedures required in order to facilitate the change.

Unfortunately, this announcement comes after many employers are well into (or have even completed) their open enrollments for their 2015 Health FSAs.  Introducing the revised limits may require plan sponsors to revise their benefit communications or even reopen their enrollment periods.

Admin America can assist plan sponsors with reviewing their documents to assess any required amendments and can also advise on strategies for efficiently communicating the changes to eligible employees

For more information about implementing the new limits or any other questions regarding FSA compliance or administration, please contact Admin America at info@adminamerica.com or call us at 1-800-366-2961.

FSA rule change drives double-digit growth | BenefitsPro

Anecdotally we expected the new $500 Health FSA rollover provision to increase participation rates in established plans.  This article from BenefitPro provides some data regarding the extent it is affecting plans this year:  FSA rule change drives double-digit growth | BenefitsPro.