Starting in 2013, there is a new limit of $2,500 on the pre-tax amount employees can set aside in a Health Care Flexible Spending Account (FSA) plan for out-of-pocket health care expenses. If an employee or a spouse currently contributes more than $2,500 to a Health FSA, this is potentially a real takeaway. But there is a way to increase the cap if both have an FSA available, because each are allowed to open and fund a health FSA to the $2,500 limit.
Instead of a benefit takeaway, this feature can provide a new opportunity to gain more tax-free spendable income to cover out-of pocket health expenses. Here’s what your employees need to do at enrollment time—if they are not currently enrolled in an FSA because their spouse holds the account, then they need to sign up for an FSA as well and coordinate contributions so they are each within the $2500 limit. If they already are the current FSA accountholder for the household, then they need to make sure their spouse also enrolls, mindful of the $2,500 individual maximum. Now with both members each contributing up to $2,500 to individual FSAs, they will have up to $5,000 to spend.