The IRS has announced that it will enforce the $2,500 health FSA annual maximum – established under the health care reform law and set to begin in 2013 – as a “plan year” maximum rather than a calendar year maximum. This is terrific news for employers offering health FSAs on an “off-year” basis (i.e., anything other than a standard 1/1 – 12/31 calendar year), because it means that the maximum will not go into effect for these plans until the plan year that begins in 2013. (The original notice can be found here.)
XYZ Company offers a Healthcare FSA to its employees running from July 1st – June 30th each year with a $3,000 maximum. XYZ can continue with its $3,000 maximum for the entire July 1, 2012 – June 30, 2013 plan year. The $2,500 maximum will not go into effect until the July 1, 2013 – June 30, 2014 plan year.