The IRS has increased the Flexible Spending Account (FSA) dollar limit on employee salary reduction contributions to $2,650 for taxable years beginning in 2018. Revenue Procedure 2017-58 also includes annual inflation numbers for 2018 for a number of other tax provisions.
Employers should ensure that their health FSA will not allow employees to make pre-tax contributions in excess of ,650 for 2018, and they should communicate the limit to employees during the open enrollment process.
An employer may continue to use the 2017 maximum limit for its 2018 plan year and may impose its own health FSA limit, as long as it does not exceed the Affordable Care Act’s maximum limit for the plan year.
In the years ahead, the health FSA limit may be increased further for cost-of-living adjustments.
