Guidance regarding the MRA cap of $2,500

On May 30, 2012, the IRS issued Notice 2012-42 to clarify how the cap on salary deferrals to a Medical Reimbursement Account (MRA) will work.  The guidance provided changes to the original 2010 Healthcare Reform legislation regarding the MRA cap of $2500. 

The key changes of the recent guidance are:

  1. The cap only applies to FSA plans that begin on or after January 1, 2013.  This cleared up uncertainty regarding non-calendar year plans beginning in 2012; the cap will not apply to such plans until the following plan year.  As an example, an FSA plan that runs from July 1, 2012 to June 30, 2013 will be exempt from the cap; the cap will apply to the following year plan (beginning July 1, 2013).
  2. The $2,500 cap must be prorated for short plan years.
  3. Amounts carried over during a plan grace period do not count towards the cap.
  4. Relief is provided for certain salary reduction contributions that exceed the cap due to a reasonable mistake that is corrected.
  5. The $2,500 cap is applied on an employee-by-employee basis.  If both spouses have an FSA available, each can fund his/her health FSA to the full amount of the cap.  In addition, if an individual is employed by two separate employers who are not members of the same controlled group or affiliated service group (as defined by the IRS), he or she may establish and fund an FSA at each employer up to the amount of the cap.
  6. The $2,500 cap only applies to salary reduction contributions and does not apply to employer non-elective contributions.

BASIC will automatically reduce MRA maximums to $2,500 for plans starting on or after 1/1/2013.

If you have any questions please contact BASIC at 1-800-444-1922 ext. 1.

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