IRS Releases 2015 Flexible Spending Account (FSA) Maximum and Transit and Parking Limits for the new year
In Revenue Procedure 2014-61 released on October 30, 2014, the IRS announced the adjusted limits for multiple benefits and tax exemptions for the 2015 tax year. Included in the announcement is an increase in the amount that may be deducted from an employee’s paycheck for FSA’s.
The limit for years beginning in 2015 will be $2,550, which is an increase of $50 from the previous limit of $2,500.
Originally, IRS Notice Notice 2012-40 set the limit at $2,500 for FSA’s for plan years beginning on or after January 1, 2013 noting the amount may be indexed in future years for inflation. The maximum amount remained $2,500 for 2014. 2015 will be the first year the amount has been indexed for inflation.
The maximum amount that may be deducted also applies to limited purpose FSA’s. Employer contributions that are not able to cashed out as taxable income are not counted towards the $2,550 limit however, employers will want to be sure any employer contributions meet the necessary criteria so the FSA remains an excepted benefit.
Amounts counted towards rollover or grace period funds do not count towards the maximum amount of $2,550. This same time last year, the IRS modified the Use-it-or-Lose-it Rule to allow plans to choose between the rollover of up to $500 of unused funds to the next plan year, or allow participants up to two and a half (2½ ) months from the end of the plan year to incur expenses against unused funds from the prior plan year.
2015 Limits for Qualified Transit and Parking Plans
The revenue procedure also announced that the limits for Section 132 Qualified Transit and Parking plans will remain at $130 per month for transit expenses and $250 for parking expenses.
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BusinessPlans, Inc. – myCafeteriaPlan does not intend to provide legal or tax advice and information contained in this article should not be interpreted as such. Regulations governing pretax plans are often open to interpretation and should be reviewed with your legal or tax advisor before making any decisions regarding your plan.