On November 15th 2018, the IRS issued Revenue Procedure 2018-57, announcing that employees can contribute $2,700 to health FSAs in 2019. This is a $50 increase from the 2018 limit of $2,650. In addition, Procedure 2018-57 adjusted limits and thresholds for other employee benefits, including those related to qualified transportation & parking and employer-sponsored adoption assistance programs.
What Should Employers Do Now
Because the FSA contribution increase was announced late in the year – the IRS has historically made such announcements in October – employers who have already initiated open enrollment have two options. They can either keep the 2018 limit of $2,650 for 2019 or reopen the enrollment process and allow employees to increase their FSA election. Employers are not obligated to make the maximum salary amount available to employees, but those who do will need to inform employees about the change by providing addendums to current benefit materials that do not contain the updated limit. Employers may also need to revise their Section 125 cafeteria plan documents and inform their third-party administrator if FSA administration is handled by a third party. Any revised elections for calendar-year plans should be made prior to December 31st.
FAS Benefit Status
For health FSAs to remain an "excepted benefit" exempt from Affordable Care Act reporting requirements, employer contributions may not exceed employees’ salary-reduction contributions, unless the employee contributes less than $500. For instance, if an employee contributes $1,000 to his FSA, the employer can only match up to $1,000. However, if the employee's contribution is less than $500, the employer can still contribute up to $500. In addition, for a health FSA to maintain excepted benefit status, the employer must also offer participating employees the opportunity to enroll in major-medical group health coverage.
How Redstone Can Help
Redstone Government Consulting’s experienced HR team is available to assist your company in navigating the challenges of open enrollment. We also offer training and consulting packages to help your human resources team tackle its year-end reporting needs. Click here to learn more about the services we offer.