The IRS announced on November 6, 2019, contribution limits for Flexible Spending Accounts (FSAs) and other tax-advantaged benefits will go up next year. Learn more about 2020 FSA contribution limits below.
2020 FSA Contribution Limits
According to the IRS, the 2020 FSA contribution limits have been increased by $50. Next year, those who participate in a Flexible Spending Account will be able to contribute up to $2,750.
The increase applies to both Health FSAs as well as Limited Purpose FSAs (LPFSAs). In order to have an LPFSA, which can be used for vision and dental expenses, the participant must be enrolled in a Health Savings Account (HSA).
The contribution limit for a Dependent Care FSA, or
Dependent Care Assistance Plan (DCAP), will remain the same at $5,000.
FSA Contribution Limits
|FSA Contribution Limits (Health and LPFSA)||$2,750||$2,700||$2,650|
|Dependent Care FSA||$5,000||$5,000||$5,000|
Employers may allow participants to carry over up to $500 in unspent Health FSA and LPFSA funds to the next year. FSA carryover does not count toward the annual contribution limit. Therefore, in 2020, a person may carry over $500 from 2019 and still contribute $2,750 in 2020, for a total of $3,250.
Uniform Coverage Rule
The Uniform Coverage Rule allows people with an FSA to use
their full annual contribution amount on the first day of the plan year. For
instance, if you choose to elect $2,750, and have an expense for $2,750 on day
one, you can use the full amount without having to wait for the contributions
to add up. Pay period deductions will still occur at the same rate over the
rest of the year, even if the available balance has been exhausted.
2020 Commuter Benefits
In addition to Health and LPFSA limit increases, the IRS is also raising the cap on Transit/Commuter/Parking benefits by $5 to $270 per month.
Transit passes include bus, subway, and commuter train
fares. Vanpool is for highway commuter vehicles that carry six people,
excluding the driver.
Parking expenses are for parking garages, lots, and spots
near the participant’s place of work. It can also include parking at a bus or
Commuters may have both a transit benefit and a parking benefit account at the same time.
Commuter Benefits Monthly Contribution Limits
2020 HSA Contribution Limits
In May 2019, the IRS announced that Health Savings Account (HSA) contributions will go up. Learn more here.
DataPath, Inc. is a leading developer of technology solutions for tax-advantaged benefits administration, including FSAs, HSAs, and Transit/Commuter benefits.