The IRS has just released its 2022 annual inflation adjustments, in which it announced that the Code section 125 dollar limitation on voluntary employee salary reductions to health flexible spending arrangements (health FSAs) is increasing to $2,850.
The IRS annual inflation adjustments for more than 60 tax provisions, including health FSAs, qualified transportation fringe benefits, adoption assistance, medical savings accounts, and qualified small employer HRAs, can be found in Rev. Proc. 2021-45.
With regard to the health FSA increase for 2022, Rev. Proc. 2021-45 reiterates that cafeteria plans can be written to allow carryovers of unused health FSA amounts up to a maximum of $570. However, by way of temporary relief and if the cafeteria plan was amended, leftover amounts in the dependent care FSA and/or the health FSA can be carried over from the 2021 plan year to the 2022 plan year. This is allowed under Notice 2021-15 and was previously described in our March 8, 2021 Client Alert.
Although open enrollment season is about to be in full swing for most, employers should ensure that their salary reduction agreements, plan documents, and related enrollment materials are updated to reflect any changes in benefits for the upcoming plan year.
This alert serves as a general summary, and does not constitute legal guidance. Please contact us with any specific questions.
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 firstname.lastname@example.org.
Brian T. Gallagher is an attorney at Fraser Trebilcock specializing in ERISA, Employee Benefits, and Deferred and Executive Compensation. He can be reached at (517) 377-0886 or email@example.com.