FSA Employer Contribution Rules

A flexible spending account, or FSA for short, is offered by many businesses. As Healthcare.gov explains, “A Flexible Spending Account (also known as a flexible spending arrangement) is a special account you put money into that you use to pay for certain out-of-pocket health care costs.” The most notable part being, “companies don’t pay taxes on this money.” In short, an FSA saves on taxes, allocating that money towards medical expenses instead. But what are the FSA employer contribution rules and how do you know if you’re staying compliant?

Offer FSA options is usually a well-received and competitive perk, but make sure you’re aware of all the regulations surrounding this benefit before offering it to employees.

What are the FSA limits for 2018? What about in 2019?

In 2018, the FSA employer contribution rules set the contribution cap to $2,650, a $50 increase from the previous year. This cap signifies that throughout the year employees are limited to depositing under $2,650 into their FSA accounts.

In 2019, however, the limit is set to increase by another $50, bringing the 2019 cap to $2,700.

In 2018, the FSA employer contribution cap was set to $2,650, a $50 increase from the previous year.

Can an employer contribute to an FSA?

The FSA employer contribution rules are straightforward. Overall, employees, employers, or a combination of the two can contribute to an employee’s FSA account. The only guideline for employees is that they don’t exceed the contribution limit. Employer contributions, on the other hand, are subject to more regulations. It is important to keep in mind that employer contributions usually do not count towards an employee’s FSA contribution limit.

Jeremy Miller, the CEO of FSAstore.com explained to SHRM that, “technically, there is no set maximum for employer contributions to an FSA,” adding that “employers will typically limit their contributions to no more than $500 or to a match of the employee contribution, up to the 2018 limit.”

How much FSA money can be carried over to the next year?

There are typically two ways that FSA carryovers are handled. One way is allowing them to roll over up to $500 worth of the previous year’s contributions—anything over $500 is forfeited. The other is a sort of grace period that gives employees additional time in the following year to use the previous year’s funds. Anything unused after the set deadline becomes forfeited.

While employers are not required to offer extensions, it is common practice to do so.

Can two spouses each have their own FSA?

Yes, spouses are allowed to have their own FSA accounts, but they are not allowed to both get reimbursed for the same expense. If two spouses each have an FSA and they file their taxes separately, the individual cap amount applies. If they choose to file jointly, then their collective limit becomes $5,000.