In late October, the IRS released Revenue Procedure 2016-55 (Rev. Proc. 16-55). Rev. Proc. 16-55 increased the flexible spending account (FSA) dollar limit on voluntary employee salary reduction contributions to $2,600 for taxable years beginning in 2017.
Employers should ensure that their health FSAs will not allow employees to make pre-tax contributions greater than $2,600 for 2017. Employers may continue to impose their own health FSA limits, as long as they do not exceed the ACA’s maximum limit for the plan year. For example, an employer may continue to use the 2016 maximum limit for its 2017 plan year.
Regardless of the FSA limit an employer chooses, it should be certain to communicate it to employees as part of the open enrollment process.