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Q&A: Section 125 Plans

Answers are provided by Robyn Morris of R. C. Morris, Incorporated

Federal requirements for maximum contributions?

(Posted January 18, 1999)

Question 124: I am aware that the sponsor is the one who determines the maximum amount to be contributed to the plan for medical expenses, however is there a FEDERALLY mandated maximum?

Answer: Proposed Regulations 1.125-1 explain what the written plan document must contain. See 1.125-1 Q&A 3. Among the requirements is the maximum amount of employer contributions (employee pre-tax as well as employer contributions) available under the plan. Please note that the plan document requirement is for an overall maximum contribution to the plan.

Separately, a Dependent Care reimbursement FSA has a federal maximum of $5,000.

A Medical Reimbursement FSA doesn't have a mandated maximum, but most plans (in fact, all that I know of) state a plan maximum. I suppose that, without a stated Medical FSA maximum, the maximum would be 100% of pay. Most medical FSA accounts have a maximum of less than $10,000 in order to limit the exposure to the plan sponsor. Common annual amounts for medical FSAs range from $1,200 to $5,000.

Important notice: Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner's situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation. The laws, regulations and court decisions in this area change frequently. Answers are believed to be correct as of the posting dates shown. The completeness or accuracy of a particular answer may be affected by changes in the laws, regulations or court decisions that occur after the date on which that Q&A is posted.
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