Highlights
- The IRS announced that the health Flexible Spending Account (FSA) dollar limit will increase to $3,200 for 2024 (up from $3,050 in 2023)
- Employers may impose their own dollar limit on employee salary reduction contributions to health FSAs, up to the ACA’s maximum.
- Employers should communicate their 2024 limit to their employees as part of the open enrollment process.
On November 9, 2023, the Internal Revenue Service (IRS) released Revenue Procedure 2023-34 (Rev. Proc. 23-34), which includes the inflation-adjusted limit for 2024 on employee salary reduction contributions to health FSAs. The Affordable Care Act (ACA) imposes a dollar limit on employees’ salary reduction contributions to health FSAs. This dollar limit is indexed for cost-of-living adjustments and often increases from year-to-year.
For plan years beginning in 2024, cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $640 [up $30 from 2023].
Per Employee Limit
The health FSA limit applies on an employee-by-employee basis. Each employee may only elect up to $3,200 in salary reductions in 2024, regardless of whether he or she has family members who benefit from the funds in that FSA. However, each family member who is eligible to participate in his or her own health FSA will have a separate limit. For example, a husband and wife who have their own health FSAs can both make salary reductions of up to $3,200 per year, subject to any lower employer limits.
Other 2024 Limits
Qualified Commuter Parking & Mass Transit Pass
For 2024, this benefit is increased by $15 since 2023 to $315 per month.
Adoption Assistance Tax Credit
For 2024, the credit for the adoption of a child is up $860 from 2023 to $16,810. This benefit will phase out for incomes over $252,150 ($12,920 in 2023) with the credit unavailable for modified adjusted gross income of $292,150 or more.
Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)
For 2024, reimbursements for a QSEHRA cannot exceed $6,150 for a single person and $12,450 for family, an increase of $300 and $650, respectively.
Conclusion
Employers should ensure that their health FSAs will not allow employees to make pre-tax contributions in excess of $3,200 for the 2024 plan year and communicate the 2024 limit to their employees as part of the open enrollment process.