On Nov. 9, 2023, the IRS announced the inflation-adjusted limit for 2024 on employee salary reduction contributions to health flexible spending accounts (FSAs). For plan years beginning in 2024, the adjusted dollar limit on employees’ pre-tax contributions to health FSAs increases to $3,200. This is a $150 increase from the 2023 health FSA limit of $3,050.

Health FSA Contribution Limit
The Affordable Care Act (ACA) imposes a dollar limit on employees’ salary reduction contributions to health FSAs. This limit started as $2,500 for plan years beginning on or after Jan. 1, 2013, and has been adjusted for inflation for subsequent plan years.

Action Steps
Employers should ensure that their health FSAs will not allow employees to make pre-tax contributions over $3,200 for the 2024 plan year. Employers can impose a lower limit on employees’ pre-tax contributions to a health FSA.

Employers should confirm that their health FSA contribution limit is included in the plan’s documents and communicated to employees as part of the open enrollment process. In addition, employers that allow health FSA carryovers should confirm that the carryover limit does not exceed $640 for the plan year beginning in 2024.

Health FSA Carryovers
As an exception to the use-or-lose rule, employers with health FSAs may allow employees to carry over a certain amount of funds remaining at the end of a plan year to reimburse eligible expenses incurred in the plan year immediately following. The maximum carryover amount is adjusted annually for inflation. For plan years beginning in 2024, the maximum carryover limit increases to $640 (from $610 for 2023). Employers that allow carryovers may impose their own limit that is lower than the maximum carryover limit.

Contact us today with any questions or to set-up your FSA accounts.

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