The Internal Revenue Service (IRS) has released Revenue Procedure 2023-34, detailing modifications to the health flexible spending account (FSA) salary reduction contribution limit for the year 2024.
According to the new mandate, the health FSA salary reduction contribution limit has been increased to $3,200 for plan years beginning in 2024 from $3050 in 2023 – a rise of $150. This change has implications for health FSAs with a carryover feature. The maximum carryover amount now stands at $640, which amounts to 20% of the $3,200 salary reduction limit for plan years starting in 2024.
When funds are carried over from 2023 to 2024, the 20% will still be calculated based on the $3,050 limit from 2023.
This adjustment can have significant implications for corporations, especially those offering health benefits to their employees. Such entities are encouraged to review this updated contribution limit, as it will place a higher cap on the tax-free benefits that employees can gain, providing them with a potential increase in healthcare coverage.
It’s essential for all legal professionals, particularly those operating within large corporates, to be aware of these new limits, to dispense timely advice to clients and align corporate policies and benefits accordingly.