Q&A: Section 125 Plans

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.