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

assistance.

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.