2500 limit on FSA in 2013.

[mbozek]

As I understand it under the recent health care law enacted this year, beginning 2013 the FSA exclusion will be limited to $2500. What I am not clear on is whether the $2500 applies only to the out of pocket portion of employee medical expeses such as co pays and deductible amounts or whether it also includes the employee pre tax payments for health and dental insurance. If the $2500 limit includes health insurance payments then most employees with health insurance who itemize deductions will not be able to deduct the cost of the health care premiums because the threshold for itemized deduction of medical expenses will increase from 7.5% of AGI to 10% inb 2013.

Please let me know if the $2500 FSA limit includes health insurance premiums.

[leevena]

No, the fsa cannot be used for employee contributions towards premium. The pre-taxing of those contributions is done outside the fsa.

[LRDG]

Sec. 125 eligible premiums are paid pre-tax via payroll deduction. It is referred to as Premium Conversion or when a Sec. 125 plan does not include FSAs, it is referred to a Premium Only Plan, aka a POP plan.

Eligible deductibles, co-pays, and other eligible out of pocket medical expenses are elected prior to the beginning of the plan year via pre-tax payroll deduction and funded into EEs Medical FSA for claims to be filed/paid as expenses are rendered/incurred within the plan year.

Eligible medical expenses that exceed EEs annual Medical FSA election amount are eligible for deduction when filing individual income tax returns, to the extent medical expenses exceed 7.5% of AGI threshold. Expenses claimed from a MFSA can not be used toward the medical expense threshold of 7.5% of AGI, when filing income tax returns or vise versa.

The 7.5% of AGI threshold has been unchanged since the '60's?, when it was 3.6%? or 6.3%?, it has not changed for approximately the past 50yrs.

A link or citation to substantiate the threshold increase to 10% of AGI in 2013 would be helpful.

There is also a Sec. 129 Dependent/Child Care FSA or DCFSA, for eligible employment related dependent/child care expenses that can be included in a Sec. 125 plan. It covers eligible employment related expenses for day care for infants and pre-school age children, before/after school expenses for care of children attending school, and summer day camp for eligible children no more than 12yoa; elderely and/or disabled dependents 13yoa or older who meet Sec. 152 defination of eligible dependents who qualify for income tax purposes.

The DCFSA maximum amount is $5,000 per year regardless of the number of eligible dependents. Expenses are not limited to $2400 for one eligible dependent, or $4800. for 2 or more eligible dependents for the dependent care tax credit when filing individual income tax returns.

[Chaz]

The 7.5% of AGI threshold has been unchanged since the '60's?, when it was 3.6%? or 6.3%?, it has not changed for approximately the past 50yrs.

A link or citation to substantiate the threshold increase to 10% of AGI in 2013 would be helpful.

PPACA Section 9013 changed Code Section 213(a) to raise the threshold for the itemized deduction for medical expenses from 7.5% to 10% of AGI starting in 2013.

Note that seniors and their spouses are exempt from this increase through 2016.