IRS Announces Health Care FSA Limit and Qualified Transportation Expense Account Monthly Limitations for 2021 Will Remain Unchanged from 2020 Limits
October 26, 2020 - the Internal Revenue Service released Revenue Procedure 2020-45. This Revenue Procedure maintains that the Health Care FSA contribution limit will remain unchanged at $2,750 for plan years beginning on or after January 1, 2021. The monthly limit on the value of qualified transportation benefits provided by an employer to its employees will also remain unchanged in 2021. The monthly limitation for qualified parking reimbursement will remain at $270 in 2021. The monthly limit for transportation in a commuter highway vehicle and transit pass provided by an employer to its employees will also remain at $270 per month in 2021.
Earlier this year, the IRS issued Notice 2020-33 to increase the maximum Health Care FSA carryover amount to $550 (or 20% of the Health Care FSA maximum contribution) for plan years beginning on or after January 1, 2020. This maximum was maintained for 2021.
- If you currently allow your Health Care FSA participants to contribute up to the IRS maximum limit, you do not need to take action.
- If you currently allow participants to contribute less than the IRS maximum limit of $2,750 and wish to adjust your plan’s contribution limit for 2021, please notify your dedicated Account Manager.
- If your Health Care FSA plan includes a carryover provision, and you would like to increase your carryover limit from $500 to $550, please notify your dedicated Account Manager.
- If an employer has elected the Health Care FSA carryover option, carryover amounts will not apply to the $2,750 limit (i.e. employees with rollover amounts from a previous plan year may elect to contribute up to $2,750 in additional pre-tax payroll contributions for 2021).
- Monthly Commuter Benefit Account limits for parking and for transit will remain the same for tax year 2021.
Please contact your dedicated Account Manager at 800.532.3327 with questions regarding this notice.
For additional information on the carryover increase that was released earlier this year, please visit:
IRS ISSUES GUIDANCE TO EMPLOYERS ON FLEXIBILITY IN SECTION 125 ADMINISTRATION DUE TO THE COVID-19 PANDEMIC
About Flores
Flores is a leading national administrator of tax-advantaged reimbursement plans including Flexible Spending Accounts (FSAs), Health Savings Accounts (HSAs), Health Reimbursement Accounts (HRAs) and Commuter Benefit Accounts (CBAs). In addition to these account-based benefit options, they also handle COBRA and other direct bill services to meet the compliance needs of the employers they serve. In 2018, Flores introduced life.balanced. Reimbursement Accounts (LBA), an affordable post-tax lifestyle reimbursement account for the culture-driven employer. Based in Charlotte, NC, Flores has emerged as the leader in the CDHP market through a service model founded upon innovative technology, dedicated professionals, and an uncompromising commitment to superior service. For more information, visit the Flores website and follow them on LinkedIn.
- Cindy Bistany
- Director of Business Development and Strategic Alliances
- (828) 693-3595
- cindy@flores247.com
- Clay Peddycord, GBA, CFC
- Director of Business Development and Strategic Alliances
- (800) 532-3327
- clay.peddycord@flores247.com
- Aaron Hunt, MBA, CDHC, HSAe, Certified COBRA Administrator
- Director of Business Development and Strategic Alliances
- (800) 532-3327
- aaron.hunt@flores247.com