Health care reform imposes an annual cap on the amount of salary reduction contributions that may be made to a health flexible spending account (health FSA). The initial cap was $2,500, but the statute provides that it is indexed for inflation and the cap is currently $2,550.
Yesterday the IRS released Revenue Procedure 2016-55, which contains cost-of-living adjustments for various tax-related amounts that are indexed for inflation. As indicated in this guidance, the IRS has decided to increase the cap on health FSA salary reduction contributions for plan years beginning in 2017. The maximum amount participants may contribute to a health FSA during the 2017 plan year will be $2,600.
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