IRS Announces Health FSA Limits for 2021

On Monday, October 26, 2020, the Internal Revenue Service (IRS) released Revenue Procedure 2020-45, which officially maintained the maximum Health Flexible Spending Account (FSA) contribution limit at $2,750 for calendar year 2021. The allowable amount of carry-over for FSA plans that have adopted a carry-over provision has been increased to $550 effective for 2020 and 2021 plan years.

Contribution limits effective January 1, 2021 are:

Type20202021
Health FSA$2,750$2,750
Dependent Care $5,000$5,000
Transportation (Parking)$270/month$270/month
Transportation (Transit) $270/month$270/month

Key Takeaway:

All limits are effective January 1, 2021. Organizations that raised the FSA contribution limit to the maximum last year will not be able to raise the limit for 2021. However, it is important to remember that organizations are not required to raise the FSA contribution limits to the maximum. Organizations with January 1 renewal dates who did not raise limits previously should contact your M3 Account Team or the administrator of their Flexible Spending Account plan to determine how to move forward.
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The information above is a summary of laws and regulations regarding provisions relating to employee benefit plan compliance. The information should not be construed as legal or tax advice. In all cases, employers should be advised to consult with tier accountant or legal counsel for assistance.

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