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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.

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