2015 Brings Positive Changes to FSAs, Commuting, Dependent Care and Adoption Assistance Programs


If you have access to a flexible spending account, or FSA, good news: The Internal Revenue Service has announced a $50 increase to allowable FSA contributions beginning in 2015. The new annual limit is $2,550.For those of you using or planning to use a dependent care FSA or a dependent care assistance plan (DCAP), your annual contribution limit is unchanged, however, at $5,000 per year.  Likewise the monthly allowable limit for qualified transportation benefits are unchanged: Transit passes are $130 per month, while qualified parking expenses are limited to $250 per month.The transit benefits program allows employees to deduct certain transportation and commuting expenses from their paychecks on a pre-tax basis, up to these monthly limits. Employers may run a similar reimbursement program themselves, up to these limits, subsidizing commuting costs directly rather than paying out these amounts in wages. This may save the employer on payroll tax.Taken together, these plans are helpful to millions of workers because they allow employees to pay for certain critical items such as child or dependent care or qualified medical expenses with pre-tax dollars. This may help make things like day care for your children, or an annual pair of eyeglasses or dental work much more affordable.

The catch, however, is that once you contribute money to these plans, you must use them, or you forfeit your contribution at the end of the plan year.

Grace Provisions For FSAs

Starting in 2014 however, the IRS began allowing FSA sponsors to cut workers some slack: The ‘use it or lose it’ rule was modified to allow employers to let workers carry up to $500 in unused benefits into the next year, or to allow employees an additional 2½ months into the new year to use up their FSA balance (but not both). Thus far, few employers have taken the IRS up on the offer, but according to the Society for Human Resource Management, observers are expecting employers to begin granting these provisions in much greater numbers in 2015 and beyond.  MCP-Flexible-Spending-Account-Updates

Adoption Credit

Congress has lifted the adoption tax credit limit for next year up to $13,400 for 2015, an increase from $13,190 the previous year. The credit gradually phases out for those with modified adjusted gross incomes of $201,010 or higher and reaches zero with an income of $241,010. Both numbers reflect increases from the 2014 phase-out thresholds of $197,880 and $237,880, respectively.

For small business owners, the IRS has also announced a change in how the Small Business Health Care Tax Credit is calculated: The credit is based on the number of full-time employees in excess of 10, or their equivalents where part-timers are involved, and their average annual wage in excess of $25,800. That is an increase from 2014’s wage threshold, which was $25,400.

If your organization isn’t currently offering any of the plans metioned above, be sure to give us a call at 800.854.4485!