Question: Is the 2017 FSA maximum of $2,600 based on the calendar year or the plan year if it falls outside of January to December? I heard the contribution amount is unlimited beginning in 2018. Is that true?
Answer: Flexible spending account (FSA) maximums and contributions are based on the plan year, not the calendar year. Therefore, the $2,600 contribution for 2017 is for plan years that begin on or after January 1, 2017. In 2012, the IRS issued guidance confirming that the term “taxable year” in § 125(i) refers to the plan year of the cafeteria plan, not an individual employee’s tax year.
Information about maximum FSA contribution limits for 2018 is not yet available. The American Health Care Act, which was proposed in the United States House of Representatives as an option to repeal and replace the Affordable Care Act, included a provision that would eliminate maximum contributions for plan years beginning in 2018; however, the Speaker of the House withdrew the bill from consideration by the full House on March 24. At this point, it is unclear when, if at all, it will be considered. Therefore, we do not know what the contribution limits will be for plan years beginning in 2018. If the AHCA or a similar measure is not passed this year, the IRS typically releases next year’s limits (for plans beginning on or after January 1, 2018), along with other inflation-adjusted benefits caps, near the end of the calendar year.