FSA Contribution Cap to Increase to $2600 in 2017

November 9, 2016

Employees can contribute up to $2600 in pre-tax money into their health care flexible spending account (FSA) next year – an increase of $50 from 2016.

This news, released in the Revenue Procedure 2016-55 by the IRS on October 25th, is welcomed for employees who have their fair share of health expenses.

FSAs help cover out-of-pocket qualified medical expenses, including copays for doctor’s visits, prescriptions, and deductibles (to name just a few things).  

With open enrollment currently upon us, employers should communicate this increase to their employees so they can update their FSA contributions accordingly before the deadline.

[Need help setting up FSA for your company? Find out how Zenefits can help.]

Why this Increase is Important

  •      For Employees: FSA benefits are great for employees as FSA contributions are excluded from employees’ gross taxable income, so they end up paying less in taxes, even though they make the same amount.  
  •      For Employers: Employees’ taxable income is reduced by their FSA contributions, so employers pay less in Medicare and Social Security taxes (together, FICA taxes). Higher enrollment rates mean more savings for the employer.


Raised by small business owners in Long Beach, California, Sarah loves creating meaningful content that truly helps people run their businesses successfully and efficiently. In addition to being a Content Marketing Manager at Zenefits, Sarah is a coffee addict, baked-good lover, and a LA Clippers fan.

Category: Compliance, Zenefits, Benefits

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