IRS Increases 2018 FSA Contribution Limits
The Affordable Care Act (ACA) imposes a dollar limit on employees’ salary reduction contributions to health flexible spending accounts (FSAs). This dollar limit is indexed for cost-of-living adjustments and may be increased each year.
On Oct. 19, 2017, the IRS increased the FSA dollar limit on employee salary reduction contributions to $2,650 for taxable years beginning in 2018. It also includes annual inflation numbers for 2018 for a number of other tax provisions.
You can download a quick reference sheet for the 2018 FSA and HSA contribution limits at the end of this post.
Action Steps for Employers
Employers should ensure that their health FSA will not allow employees to make pre-tax contributions in excess of $2,650 for 2018, and they should communicate the 2018 limit to their employees as part of the open enrollment process.
An employer may continue to impose its own health FSA limit, as long as it does not exceed the ACA’s maximum limit for the plan year. This means that an employer may continue to use the 2017 maximum limit for its 2018 plan year.
Since the 2017 plan year is coming to close, employers should also issue regular reminders to their employees about the “Use it, Or Lose it” function of the FSA. Some plans may allow for either $500 of rollover or a short grace period, but not all plans have these options. Employees should be advised to check their balances and determine if they’d like to make any last purchases with their FSA before the end of the year. Below are some tips on what employees can purchase with their remaining FSA dollars.
Ways to Spend FSA Funds
Outstanding premiums, co-pays, and bills
Employees should first check their records to see if they are up-to-date on all medical bills. If not, many of these can be paid with their FSA account. If the employee or covered dependents haven’t seen their doctor, dentist, or optometrist this year advise they can pay for the visit, glasses, contacts, etc. with the rest of their available FSA funds.
Request a prescription for OTC medications
Any medications must have a prescription when using an FSA. Most doctors are willing to work with your employees to help get prescriptions for items like vitamins, allergy treatments, pain medication, etc. Employees can stock up on seasonal medications for the whole family before the end of the year. Even with a prescription, they may still need to submit a reimbursement claim for OTC medicines.
Restock a first aid or emergency kit*
Stock up on essentials like bandages, thermometers, ointments, sunscreen, hot/cold packs, etc. Employees can expand their home medical equipment by purchasing a stethoscope or blood pressure monitor. Having these items on hand can keep them more involved in their households’ health and provide valuable information for a doctor pre-appointment. Also, buying a pre-made first aid kit at your local drugstore is most likely covered by an FSA.
*Make sure their doctor has written a prescription for these items or signed a medical necessity form to ensure the employee can be reimbursed or pay for eligible items.
Get help managing a medical condition
Classes your employees attend to receive help managing issues like diabetes or weight management are an eligible expense. If it is medically necessary, they may even pay for exercise equipment with FSA money.
Therapy to treat a condition
Medically necessary therapy treatment is covered by FSAs. It may include psychotherapy, acupuncture, or massage therapy. Employees should check with their doctor for a prescription and referral.
Mileage for medical appointments
Employees can claim reimbursement for mileage to their doctor’s appointments. An easy way to calculate this is with Google Maps or MapQuest. Enter the start/finish addresses and provide the map along with the resulting mileage to the FSA provider along with receipts associated with that doctor or pharmacy visit.
Don’t forget to download our quick reference for FSA and HSA limits in 2018. For help with Flexible Spending Account and more benefits and HR concerns, please contact Austin Benefits Group today.
