short plan year limits on contributions to FSA

[Guest Brenda Schachle]

For a short plan year (new plan 7/1/01, year end 12/31) is the de

[Guest Brenda Schachle]

As I was saying, for a short plan year (7/1/01 year end 12/31) is the daycare limit of $5,000 prorated? What about the plan imposed medical reimbursement amount of $1,200?

[Lisa Hand]

That should be defined in your plan document.

[Bob R]

Both of those issues are plan document issues. There is nothing in the law mandating that the $5,000 dependent care limit be reduced for a short year. That's an annual limit on what an employee can exclude from income. Since there is no risk of loss to the employer, most plans do not reduce the limit for a short year.

There is no legal dollar limit on a health FSA. So, the limit is entirely based on the terms of the plan - even for a short year.