RCGI-2019-FSA-Contribution-Cap-Rises-to-$2,700

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.

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Written by Redstone Team

About Redstone GCI

Redstone GCI is a consulting firm focused on fulfilling the needs of government contractors in all areas of compliance. With a singular mission to help contractors through the multiple layers of “red tape,” we allow contractors to focus on what they do best – support their mission with the U.S. Government. We are home to a group of consultants made up of GovCon industry professionals, CPAs, attorneys, and retired government audit and acquisition professionals.

Our focus and knowledge of audit and compliance functions administered by DCAA and DCMA will always be at the heart of what we do. However, for the past decade, we’ve strategically grown to support other areas of the government contractor back-office with that same level of focus and expertise. We’ve added expertise in contracts management, subcontract administration, proposal pricing, various software systems, HR and employment law, property administration, manufacturing, data analytics/reporting, Grant specialists, M&A, and many other areas. When we see a trend in the needs of contractors, we act to ensure we can provide the best expertise in the market to fulfill those needs.

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Topics: Contracts & Subcontracts Administration, Human Resources