The New 2019 Health FSA Contribution Limit

The new 2019 health FSA contribution limit has been announced. Take a look at the new regulations, how they’ve changed from last year, and the benefits of opening an FSA account versus an HSA account.

2019 Health FSA Contribution Limit

For 2019, the FSA contribution cap is rising to $2,700. The IRS announced the increase in late 2018. The new law allows employees to contribute $50 more than last year as the previous limit was $2,650. The new limit applies to all health FSAs, which includes accounts restricted to individual coverage, such as dental or vision services.

Although the new 2019 health FSA contribution limit is beneficial to employees, it came with a bit of pushback. The announcement wasn’t made until mid-November, which made the increase unavailable to those who already selected their benefits in October during open enrollment.

Benefits of an FSA Account

Why do employees choose to contribute to an FSA? Contributions are not subject to taxes. This is typically the number one reason staff members elect to participate in an FSA as opposed to paying healthcare expenses out of pocket with taxed income.

FSA funds can be used to cover medical expenses, such as deductibles, co-pays, over-the-counter medications, prescriptions, and other related costs.

FSAs are great for families. An employee who contributes to a company-sponsored FSA has the flexibility to use the funds for themselves, their spouse, or children. The account can be a lifesaver when it comes to dependent care. Using these pre-tax dollars for the family’s co-pays, prescriptions, or orthodontics, for example, will save a significant amount of money throughout the year.

Differences Between an FSA and an HSA

A Flexible Spending Account (FSA) is much different than a Health Savings Account (HSA). Since employees can usually only enroll in one of these options, it’s important to understand which benefit is best for you.

FSAs provide tax-free reimbursements for healthcare expenses, but the funds available only amount to what the employee has contributed for the year, up to the $2,700 limit. HSA funds use pre-tax payroll deductions that lower gross incomes and annual tax burdens. The money contributed to an HSA can be used for healthcare expenses and investments, such as stocks and bonds.

FSAs and HSAs have a different contribution limit as well. Employees can contribute up to $2,700 in an FSA and $3,500 for an HSA.

Account ownership is another factor to consider. FSAs are owned by the employer, and the accounts are not transferable if the employee decides to leave the company. HSAs, however, are not owned by the employer. Therefore employees have the freedom to contribute to the account as they switch jobs or enter retirement.

Unless you meet the requirement for these exceptions, employees will typically lose their FSA funds if they aren’t used during the calendar year. HSAs can usually roll over year after year. These primary account differences should help you make the decision that’s best for you when it comes to enrolling in an FSA or an HSA.

Questions about the new 2019 FSA contribution limits? Reach out to a Zenefits Advisor today. We’re here to help!