Baker Tilly

IRS Announces NEW FSA Maximums for 2020

11.07.19

The IRS released the 2020 annual inflation adjustments. Effective January 1, 2020, the new annual Health Care FSA maximum contribution will increase to $2,750. The new monthly maximum contributions for Qualified Transportation plans will be $270.

Here’s a look at some of the other important limits:

YEARS	2020	2019
Health FSA Max Election	$2,750	$2,700
Dependent Care FSA Max Election	$5,000	$5,000
Parking	$270/mo	$265/mo
Mass Transit	$270/mo	$265/mo
HDHP Min Annual Deductible – Single	$1,400	$1,350
HDHP Min Annual Deductible – Family	$2,800	$2,700
HDHP Out of Pocket Max – Single	$6,900	$6,750
HDHP Out of Pocket Max – Family	$13,800	$13,500
HSA Max Contribution Limit – Single	$3,550	$3,500
HSA Max Contribution Limit – Family	$7,100	$7,000
HSA Catch-Up Contribution Limit	$1,000	—
401(k) Retirement Plans	$19,500	$18,500

Administratively, the timing of the announcement represents a challenge for employers that have already completed their January 1, 2020 annual enrollment periods or are well into their enrollment efforts. Available options to explore include the following:

Modifying online systems to reflect the changes if print communications already have been released, and posting related update messaging on the page/site.
If the schedule allows for a post-enrollment change process, issuing confirmation statements that advise employees to adjust their election during the allotted change window.
When enrollment is open and where feasible, issuing email and text message blasts to employees informing them of the late change.
Issuing targeted post-enrollment communications to those who elected the old maximums ($2,700 and $270) before the change was implemented, then affording this targeted group an opportunity to increase their election to the new maximum before the start of the new plan year.

To those still “planning the plan”, these increases can be folded into your base communications, enrollment processes and key open enrollment messaging. We have great resources available to assist in your communication strategy. If you’re looking to do some education, or have any questions, contact your dedicated account team for additional resources.

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.