The IRS recently announced that employees can put an extra $50 into their health care Flexible Spending Accounts (FSA) starting in 2020. The contribution limit will be set at $2,750, which will benefit employees with all types of health FSAs, including those accounts restricted to individual coverage, such as vision or dental services.
This year, the announcement comes as many employees are already selecting their benefits on enrollment platforms programmed with the 2019 health FSA limit of $2,700. It’s likely that for 2020 contributions, many employers will simply keep the 2019 limit for another year. Be sure to verify with your organization whether your contribution limit will be set at $2,700 or $2,750.
FSA funds can be used to cover medical expenses, including deductibles, copays, over the counter medicine, prescriptions, and other eligible medical costs. FSAs are extremely beneficial to individuals because contributions made are not taxed, making it a better option than paying for healthcare expenses out of pocket using their own taxed income.
They are also beneficial for families, since the employee contributing to the fund can use the fund for themselves, their spouse or dependents. It can help lift the burden of high medical expenses by being able to use pre-tax dollars for family copays or prescriptions. Over the course of a year, an FSA account allows the employee to save a great deal of money.
An FSA is a great product for employers because employees are contributing to the plan on a pre-tax basis. Since the funds are not paid to the employee via payroll, this solution helps the employer save 7.65% in FICA taxes. Plus, FSAs can help offset deductible expenses for employees, serving as a strong retention tool.
To learn more about FSAs, visit https://www.mymidamerica.com/flexible-spending-account/.