Update from the IRS: FSA Contribution Limit Increase for 2020

Insights | Update from the IRS: FSA Contribution Limit Increase for 2020

As anticipated, the 2020 maximum contribution limit for health flexible spending accounts (FSAs) is increasing to $2,750 (up $50 from $2,700 in 2019). Yesterday, the IRS released annual inflation adjustments via Revenue Procedure 2019-44, which included an adjustment for FSAs (among other benefits).

For 2020, employees can elect up to a $2,750 salary reduction for contributions to their FSAs if their employers allow. This increase also applies to limited-purpose FSAs (e.g., dental and vision only). While the IRS adjusts the maximum contribution limit each year due to inflation, an employer is not required to apply the new limit to its FSA. Like last year, this announcement comes as some employers have already completed open enrollment. That said, many employers may choose to stay with the previous limit of $2,700. However, for those employers adopting the new limit, the Section 125 Plan Document should be updated as needed to reflect the new limit and communicated with employees.

As a reminder, other benefit limits impacting 2020 plans include: 

Type of Limit 2019 2020 Increase
HSA Contribution Limit Self-only $3,500 $3,550 $50
Family $7,000 $7,100 $100
HSA Catch-up Contributions 55 or older $1,000 $1,000 No Change
HDHP Minimum Deductible Self-only $1,350 $1,400 $50
Family $2,700 $2,800 $100
HDHP Out-of-pocket Maximum Self-only $6,750 $6,900 $150
Family $13,500 $13,800 $300
ACA Out-of-Pocket Maximum Self-only $7,900 $8,150  $250 
Family $15,800  $16,300  $500 

Please contact your HORAN representative with questions.