The stage for FSA open enrollment is already set, thus employees are required to start planning to get maximum benefits out of it.
In general, under FSA, a fixed dollar amount is deducted from employee’s paycheck on a pretax basis. This money is allowed to be utilized for certain eligible out-of-expenses, as determined by IRS. Under Flexible Spending Accounts, two plans are offered to the eligible participants: the Health FSA and Dependent Care FSA.
- Eligible expenses that qualify for Health FSA are copays, deductibles, coinsurance and other out-of-pocket expenses.
- Whereas, Dependent Care FSA is for child care and/or elderly dependent care.
To eliminate any kind of misconceptions, all eligible participants are required to review the list of eligible expenses.
FSA Contribution Limits 2016
January 1, 2015 marked as the day when FSA contribution limit was first increased since PPACA was set in 2010. The limit jumped $50 to a yearly cap of $2,550. Now, the next big question that is bothering FSA account holders is the contribution limits for the coming year.
Normally, the determination of the maximum FSA contribution limit and how that limit can increase are mandated by inflation and various provisions in the Affordable Care Act. But, according to the U.S. Bureau of Labor Statistics, the customer price index just rose to a negligible 0.2%, through the 12-month period ending in July 2015. Thus, it can be stipulated that the 2016 contribution limit will remain $2,550 in the coming year too.
2016 Health FSA Elections – Renewed With The Introduction Of New $500 Carry-Over Feature
2016 Health FSA elections are all set to portray a new $500 Carry-Over provision replacing the present FSA grace period. This provision will help FSA account holders to carry over a maximum of $500 unreimbursed amount from the account of 2016 to 2017 and beyond, provided the participants remain benefits-eligible to access carry-over, thereafter.
The Health FSA carry-over is not going to affect the IRS maximum election provision of $2,550, rather it will add up to the following year’s election, making a total of $3,050.
Moreover, the provision is limited to Health FSA only, as mandated by the IRS, and does not apply to the Dependent Care FSAs. This means that the permitted grace period for Dependent Care FSA remains the same.
FSA, despite being the most popular consumer spending accounts available to employees, is losing its use in recent years. Calculated in 2015, the percent of employees utilizing FSAs and the average FSA contributions per participant have dropped significantly as compared to the figures in 2014. But, regardless of the drop, FSA will continue to provide the best affordable way to save on growing health care expenses, offer tax savings to the consumers and the best alternative to cover those healthcare expenses that are typically not covered in your existing health insurance plans.