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FSA contributions limited to $2,500 starting in 2013

FSA contributions limited to $2,500 starting in 2013Flexible Spending Accounts, or FSAs, are a great way to pay for healthcare expenses using pre-tax money.  Expenses such as  immunizations, prescription eyewear, and braces can be funded with a FSA.  If employees have been putting off expensive things like laser eye surgery or braces, they might want to think about doing these things in 2012.  In 2013, the new health care reform law will limit FSA contributions to $2,500 a year per employee, with annual increases reflecting cost-of-living adjustments.



Key items for employees to consider when using their Flexible Spending Accounts:

  • If they have been putting off costly procedures like laser eye surgery or braces, they should consider planning to do those things in 2012 so they can fund a larger portion with pre-tax funds.
  • Remember the “use it or lose it” rules – the amount that is placed in a FSA expires at the end of the year.
  • Employees should keep in mind the guideline for using Flexible Spending Accounts for over the counter (OTC) products.   As of January 1, 2011, FSA funds can no longer be used to purchase over the counter medicine and drugs unless they have a prescription.  This rule does not apply to insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eyeglasses, contact lenses, co-pays and deductibles.

Key items for employers to consider if they have both a HSA and a FSA:

  • An employer can offer HSAs (health savings accounts) along with a FSA as long as the employer has a limited purpose provision added to their healthcare FSA plan document.
  • The limited purpose provision has two options: 1.) The first option is a post deductible amendment that allows medical expenses to be paid with healthcare FSA dollars once the health plan deductible is met.  HSA funds must be spent first for medical care until the HSA deductible is satisfied ($1,200 for an individual and $2,400 for a family in 2010 and 2011).  2.) The second option is a limited purpose provision that excludes medical expenses from the healthcare FSA but includes dental and vision expenses.
  • There can be restrictions for owners/managers when utilizing a HSA.  Check with your tax professional to find out the limitations.


This Focus Benefits Flash is not intended to be construed as legal advice.  You should consult professional advice from your third party administrator regarding this provision.

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