The IRS has issued a notice providing guidance regarding the $2,500 per plan year health flexible spending account (FSA) limit created by the Patient Protection and Affordable Care Act. Key points from the notice are:
- the $2,500 limit does not apply for plan years that begin before 2013;
- the “plan year” is the plan year of the cafeteria plan through which the health FSA is established;
- plans may adopt the necessary amendments reflecting the $2,500 limit at any time through the end of the calendar year 2014;
- the limit does not apply to other options in a cafeteria plan, such as dependent care accounts;
- if a plan provides for a grace period (maximum of two months, 15 days), unused contributions to the health FSA for plan years beginning in 2012 or later that carry over into the grace period will not count against the $2,500 limit for the subsequent year;
- the limitation will be indexed for cost-of-living adjustments for plan years beginning after 2013.
Employers can review the full notice here for additional details.