Health FSA – $2,700 Contribution Limit and Qualified Transportation Fringe Benefit Limits for 2019
For 2019, the dollar limit on employee salary reduction contributions to health flexible
spending arrangements (“FSAs”) will increase to $2,700 (a $50 increase from the 2018 limit
of $2,650). This $2,700 limit continues to apply on a rolling basis, effective for plan years
beginning January 1, 2019.
Limit continues only to apply to salary reduction: The $2,700 limit generally continues
to apply only to salary reduction contributions by the employee and not to employer nonelective
contributions which are usually available to an employee to be used only for one or
more qualified benefits. For example, if an employer contributes $500 to each employee’s
health FSA for the 2019 plan year, each employee may still elect to make salary reduction
contributions of $2,700 to the health FSA for that plan year. However, if an employer
provides a contribution that an employee may elect to receive as cash or as a taxable
benefit, the contribution will be subject to the $2,700 limit.
Limit only applies to health FSAs: The statutory $2,700 limit applies only to salary
reduction contributions under a health FSA. The limit does not apply to employee salary
reduction contributions to an FSA for dependent care assistance or adoption care
Limit applies on an employee-by-employee basis: The maximum salary reduction
contribution each employee may make for a plan year is $2700, regardless of the number of
individuals whose medical expenses are reimbursable under the health FSA (i.e. spouses,
dependents, etc). If two spouses are each eligible to elect salary reduction contributions to
an FSA, however, each spouse may elect to make salary reduction contributions up to
$2,700, even if both spouses participate in the same FSA sponsored by the same employer.
Amending your Cafeteria Plan: A cafeteria plan offering a health FSA must be amended to
set forth the $2,700 limit (or at the employer’s discretion, a lower limit). Allied, however, will
amend your cafeteria plan to ensure compliance with the $2,700 limit by your plan year
beginning January 1, 2019. If you do not choose to amend your plan to set forth the $2,700
limit please notify your Allied Account Manager by Nov. 30, 2018.
Additionally, the IRS has released the 2019 cost-of-living adjustments for qualified
transportation fringe benefits.
Parking Expenses: For 2019, the monthly limit on the amount that may be excluded from
an employee’s income for qualified parking benefits will increase to $265, which is five
dollars greater than the amount in 2018.
Transit Passes and Vanpooling Expenses: The combined monthly limit for transit passes
and vanpooling expenses for 2019 will also increase to $265, which is five dollars greater
than the amount in 2018.