Effective for plan years beginning on or after January 1, 2017, the amount employees may contribute to a Health Flexible Spending Account (Health FSA) is capped at $2,600 per year, indexed for a cost-of-living adjustment. Plan sponsors can amend Section 125 Plans retroactively to reflect the $2,600 limit at any time through December 31, 2017. However, the plan cannot allow a participant to make salary reduction contributions for a plan year beginning January 1, 2017 and after in excess of the $2,600 limit.
The $2,600 limit applies only to salary reduction contributions, not to other employer contributions such as flex credits. The limit applies separately to each individual who is eligible to participate in a Health FSA; if each spouse is eligible to participate in a Health FSA through the same or different employers, each spouse can separately contribute $2,600. Finally, unused salary reduction contributions to a Health FSA for a plan year beginning in 2014 or later that are carried over to the next plan year will not count against the limit for the subsequent plan year.