2021 FSA and Commuter Limits

The IRS has published updates for 2021 limits to several tax code provisions.  As part of this annual update, employers will be particularly interested in these benefit plan guidelines from page 14:

  • The $2,750/yr health flexible spending account (health FSA) limit under Code §125(i) is not increasing
    • This is a limit on employee contributions withheld from pay
    • This is not inclusive of employer contributions to health FSAs or amounts from a prior year due to a grace period or carryover benefit
    • As a result of the health FSA limit not increasing, the $550 carryover limit allowed to carry over to plans starting in 2021 will remain the same, with up to $550 allowed to carry over to plans starting in 2022
  • The $270/mo commuter plan limits under §132 are not increasing
    • $270/mo for qualified parking
    • $270/mo for qualified transit or vanpooling
    • These are inclusive of employer contributions
  • Adoption assistance program limits under §23 will be $14,440 (up $140 from the $14,300 limit in 2020)
  • ACA reporting penalties under §§ 6721 and 6722 also indexed for 2020 returns due in early 2021
    • A good faith reporting standard is applicable to potentially avoid these penalties, but only to the extent the employer can demonstrate good faith efforts made to ensure accurate, timely reporting
  • Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) limits under §9831(d) will be $5,300 ($10,700 for family coverage), which is up $50 (or $100 for a family) from 2020

IMA will continue to monitor regulator guidance and offer meaningful, practical, timely information.

This material should not be considered as a substitute for legal, tax and/or actuarial advice. Contact the appropriate professional counsel for such matters. These materials are not exhaustive and are subject to possible changes in applicable laws, rules, and regulations and their interpretations.