For 2020, the IRS increased the new 2020 Flexible Spending Account (FSA) limit to $2,750. For groups that have already set their contribution limits to the 2019 amount of $2,700, Further will automatically update the amount to the 2020 limit of $2,750, unless notified otherwise within the next 30 days.
A medical FSA is a personal expense account that works with an employers’ health plan, allowing employees to set aside a portion of their salary, pretax, to pay for qualified medical expenses. An FSA offers employees a smart way to help plan for health care costs and save money on their taxes at the same time. Employers benefit too, with reduced employee payroll taxes.
How much should employees contribute to their FSA?
When employees are deciding how much to contribute to their FSAs, they should consider the following questions:
- Do they expect to have medical, dental, or vision expenses that are not fully covered by insurance?
- Do they, their spouse, or an eligible tax dependents have an ongoing condition that requires expensive medication or frequent visits to a physician?
- Do they, their spouse or eligible dependents need prescription eyeglasses, sunglasses, contact lenses and/or lens solution?
- Do they pay for day care for children or adult dependents?
Employees should be conservative in their estimates because money left in the account at the end of the year may be forfeited unless their employer allows FSA rollover or a grace period.
To learn more about FSAs, including more information about the 2020 FSA limit increase, visit the Further Learning Center.