FSA Limits Increasing for 2018

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The Internal Revenue Service (IRS) announced it is increasing the health Flexible Spending Account (FSA) salary reduction contribution limit for 2018 to $2,650 from $2,600.  The Affordable Care Act limited employee FSA contributions to $2,500 per plan year but included a provision to increase the limit to account for inflation.  The limit increased to $2,550 in 2015 and then $2,600 in 2017.  The IRS recently issued Revenue Procedure 2017-58 increasing the limit to $2,650 for plan years beginning on or after January 1, 2018.  Employers who have not updated their Section 125 cafeteria plan document to automatically incorporate the FSA cost-of-living increases but who want to allow their employees to contribute up to the new maximum will need to amend the plan document.