Magazine article HRMagazine

Can an Employee Have a Health Flexible Spending Account with Our Company and the Spouse Have Another with His or Her Company? Does the Internal Revenue Service Limit Apply to the Family or the Individual?

Magazine article HRMagazine

Can an Employee Have a Health Flexible Spending Account with Our Company and the Spouse Have Another with His or Her Company? Does the Internal Revenue Service Limit Apply to the Family or the Individual?

Article excerpt

As a result of the federal Patient Protection and Affordable Care Act, a maximum annual limit on individual contributions for flexible spending accounts (FSAs) has been established for plan years beginning after 2012. Prior to 2012, there was no statutory limit. It was up to the plan sponsor (generally the employer) to set the maximum dollar amount.

For plans beginning after 2012, the IRS set the FSA statutory limit at $2,500 and will adjust it annually for inflation. Employers are permitted to set limits lower than the IRS dollar limit. If a cafeteria plan offering a health FSA exceeded the maximum limit, tax-favored status would be lost.

Statutory limits for FSAs are on a per-employee basis regardless of how many individuals are covered under the employee's FSA. Therefore, employees with multiple family members are not permitted to make higher health FSA salary reductions.

However, individuals and families may have more than one FSA. Even though an employee has an FSA, the employee's spouse may also elect to have his or her own FSA through the spouse's employer. Each employed spouse can make FSA salary reductions up to the limit set by the IRS or employer, even if the spouse has the same employer and participates in the same health insurance and FSA plan. …

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