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FSA limits 2014


Belgarath
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I'm frankly a little confused on this. Per IRS Notice 2013-54, it appears to be the $2,500 salary reduction cap plus 500 (for the rollover, I presume.)

My question is: does this limit include employer contributions or not? And if not, then is there any limit on employer contributions and or benefit payouts?

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I think the answer is in Q&A-7 of that notice...

Greater of:

a) two times the salary reduction, or

b) $500 plus the salary reduction

Kurt Vonnegut: 'To be is to do'-Socrates 'To do is to be'-Jean-Paul Sartre 'Do be do be do'-Frank Sinatra

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Thanks - so the $2,500 plus 500 is only for the FSA's NOT offered through a 125 plan?

Maybe it's just me, but it seems like this Notice was poorly done. But to be fair, I can't imagine being in the shoes of the poor saps at IRS who had to draft this stuff, with all the confusion swirling around the law...

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Thanks - so the $2,500 plus 500 is only for the FSA's NOT offered through a 125 plan?

Maybe it's just me, but it seems like this Notice was poorly done. But to be fair, I can't imagine being in the shoes of the poor saps at IRS who had to draft this stuff, with all the confusion swirling around the law...

Not sure how you would offer an FSA outside of a 125 plan, so your question confuses me.

William C. Presson, ERPA, QPA, QKA
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I'm not sure either. But Q&A-8 refers specifically to health FSA's that are not offered through a Section 125 plan, so I assumed that they are possible.

But since I'm concerned only with the FSA's through a 125 plan, I guess I'll ignore that for now.

Masteff, so this means that it is theoretically possible for a $5,000 BENEFIT amount, right? ($2,500 deferral x 2) - I think I was confusing benefit limitations and deferral limitations.

But the SALARY DEFERRAL can't exceed $2,500 - right? Or have I got that wrong too?

Assuming I've got that right (a risky assumption at best) is there technically no employer contribution limit? Granted that if this is so, why would any employer contribute more than could be paid out in benefits...

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Maybe this from Notice 2013-71 will help: "Nor is the plan, for any plan year, permitted to allow an individual to salary reduce for qualified health FSA benefits more than the indexed $2,500 salary reduction limit or permitted to reimburse claims incurred during the plan year that exceed the applicable indexed $2,500 salary reduction limit (and any nonelective employer flex credits) plus the carryover amount of up to $500."

The implication here is unlimited employer flex credits.

The whole "excepted benefit" business in Notice 2013-54 is a separate mess, coming from Reg 54-9831-1. To be excepted, the FSA has to meet the "greater of" rule above. I do not believe the $500 carryover is the same as in the "greater of" rule. If not excepted (and since an FSA generally is not integrated w/ a health plan) then it's subject to market reform such as preventative services, which it fails (see 2nd paragraph in 2013-54 Q&A-7).

The implication here is health care market reform limits employer contributions based on the "greater of" rule, so somewhere between $500 and $2500. I'm not versed enough to know if there is a scenario in which a plan would not be subject to the "greater of" rule.

Kurt Vonnegut: 'To be is to do'-Socrates 'To do is to be'-Jean-Paul Sartre 'Do be do be do'-Frank Sinatra

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Thanks. I think one of my additional sources of confusion is HEALTH FSA's vs., say, a DEPENDENT CARE FSA. Different rules and limits, I believe. Hooyah! More fun.

Starting from scratch on cafeteria plans, etc. gives me a little more appreciation on how challenging it must be for someone starting out in qualified plans, when they have no background with them. It takes a while to even build up a proper frame of reference, so that you can match up the right questions with the right answers, rather than matching up the right answers with the WRONG questions...

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