IRS Increases FSA Contribution Maximum and Other Benefit Limits
The IRS announced in Revenue Procedure 2014-61 issued October 30, 2014, the inflation-adjusted contribution limit for health flexible spending accounts (FSAs) will go up by $50 for the 2015 tax year. The maximum contribution employees will be able to make to their health flexible spending accounts will increase $50 to $2,550 in 2015. That $50 FSA contribution increase will be the first since the 2010 health care reform law set a $2,500 annual limit, effective in 2013.
The FSA limit is kept the same or increased to match the rise in the consumer price index (CPI) at the close of a 12-month period ending on August 31. For the 12-month period ending August 31, 2013, CPI indexing resulted in an indexed amount of $2,542, which, when rounded down to the nearest $50 — a methodology set by PPACA — resulted in a $2,500 maximum contribution for 2014. Through the end of August of this year, the indexed amount rose to just below $2,600. Rounding down to the nearest $50, effective in 2015, results in a maximum contribution limit of $2,550.
Revenue Procedure 2014-61, the annual inflation adjustments for more than 40 tax provisions for 2015, including the tax rate schedules and other tax changes. Annual adjustments include:
- Adoption tax credit limit: The adoption tax credit limit rises to $13,400 in 2015. The available adoption credit for 2015 begins to phase out for taxpayers with modified adjusted gross income in excess of $201,010 and is completely phased out for taxpayers with modified adjusted gross income of $241,010 or more.
- Qualified transportation benefit limits: The monthly limit for qualified transportation benefits for 2015 revert to $130/month for transit passes and $250/month for qualified parking, despite a retroactive increase in the transit benefit limit for tax year 2014.
- Small business health care tax credit: The maximum credit is phased out based on the employer’s number of full-time equivalent employees in excess of 10 and the employer’s average annual wages in excess of $25,800 for tax year 2015.
- Income tax rate ranges: The tax rate of 39.6 percent affects singles whose income exceeds $413,200 (or $464,850 for married taxpayers filing a joint return), up from $406,750 and $457,600, respectively.
- PCORI: The Patient-Centered Outcomes Research Institute (PCORI) fee in IRS Notice 2014-56, issued on Sept. 18, 2014, the fee for plan years ending on or after Oct. 1, 2014 and before Oct. 1, 2015 was announced. It will be $2.08 per covered life, up from $2.00 for plan years that ended on or after Oct. 1, 2013 and before Oct. 1, 2014.
Revenue Procedure 2014-61 also dealt with other annual benefit contribution rates, noting that there would be no change in transit and parking pretax subsidies next year, among other matters.
For a copy of Revenue Ruling 2014-61, go to: http://www.irs.gov/pub/irs-drop/rp-14-61.pdf