The Affordable Care Act (ACA) imposes a dollar limit on employees’ salary reduction contributions to flexible spending accounts, or FSAs. An FSA is a tax-advantaged account, sponsored by the employer, which allows employees to pay for qualified expenses. The account works on an annual basis and is funded through regular payroll deductions.
The Internal Revenue Service (IRS) released Revenue Procedure 2022-38, announcing that the health care FSA dollar limit on employee salary reduction contributions will increase to $3,050 for the 2023 plan year. It also included 2023 inflation-adjusted numbers for the combined monthly limit for transportation in a commuter highway vehicle and a transit pass which will increase to $300 in 2023. Similarly, the 2023 monthly limit for qualified parking is also increasing to $300.
For 2023, FSAs that are permitted to carry over unused funds, the maximum amount will increase to $610. However, some plans are subject to a use-it-or-lose-it rule, meaning funds must spent by the end of each plan year or the funds will be forfeited.
Examples of eligible Health Care FSA items
Health care FSA funds may be used for:
- Over-the-counter or prescription medicines
- First aid supplies
- Skincare
- Menstrual care products
- Medical diagnostic products
- Dental and vision expenses
- Hearing and home health care items
If you have questions regarding Flexible Spending Accounts, please do not hesitate to contact your dedicated Creative Benefits, Inc. team member.