The IRS has just released its 2020 annual inflation adjustments, in which it announced that the dollar limitation under Code section 125 on voluntary employee salary reductions for contribution to health flexible spending arrangements (health FSAs) is increasing to $2,750. Previously the limitation was $2,700. The authority for this increase can be found in Rev. Proc. 2019-44: https://www.irs.gov/pub/irs-drop/rp-19-44.pdf. This link takes you to the IRS annual inflation adjustments for more than 60 tax provisions.
Although open enrollment season is about to be in full swing for most, employers should ensure that their salary reduction agreements and related enrollment materials are updated to reflect this increase. Additionally, employers will want to review their Code section 125 cafeteria plan documents to ensure these also allow for such an increase.
Elizabeth H. Latchana specializes in employee health and welfare benefits. Recognized for her outstanding legal work, in both 2019 and 2015, Beth was selected as “Lawyer of the Year” in Lansing for Employee Benefits (ERISA) Law by Best Lawyers, and in 2017 as one of the Top 30 “Women in the Law” by Michigan Lawyers Weekly. Contact her for more information on this reminder or other matters at 517.377.0826 or elatchana@fraserlawfirm.com.