H&W: 2016 FSA Limits

The IRS has released Revenue Procedure 2015-53 which presents the 2016 cost-of-living adjustments for several tax-related limits including those for flexible spending arrangements (“FSA”), specifically, the Health FSA and the Dependent Care FSA which we discuss below.

Health FSA

For  taxable years beginning in 2016, the dollar limitation on voluntary employee salary reductions for contributions to health FSAs is $2,550.  This represents no change from 2015.

Dependent Care FSA

The annual limit for dependent care FSAs or dependent care assistance plans (DCAPs) will remain at $5,000 for qualifying individuals who are married and file a joint return, and will remain at $2,500 for those who are married and file separate returns. This represents no change from 2015.

Other benefit limits addressed in Rev. Proc. 2015-53 that may be of interest to employers include limits relating to Qualified Transportation Fringe Benefits, the Adoption Assistance Exclusion and Adoption Credit and Archer Medical Savings Accounts.

Not addressed in these revenue procedures are the limits relating to Health Savings Accounts (“HSA”).  2016 HSA limits were addressed in a prior release.  Please see our previous blog for 2016 HSA limits.

For additional information relating to Health FSAs, please see the reference materials provided on Compliancedashboard®.

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