The Internal Revenue System (IRS) recently announced the 2020 dollar limits for employee benefits including:
- High Deductible Health Plans (HDHPS),
- Health Savings Accounts (HSAs),
- Flexible Spending Accounts (FSAs),
- Transportation Benefits,
- and Adoption Assistance.
As cost of living expenses continue to rise due to inflation, the IRS annually adjusts contribution limits to accommodate increases in spending.
- The minimum deductible for those with single coverage will increase by $50 to $1,400. For those with family coverage, the limit will increase by $100 to $2,800.
- The maximum out-of-pocket will increase by $150 for those with single coverage, to $6,900; and by $300 for those with family coverage, to $13,800.
HSA Contribution Limits
- Those with single HDHP coverage will be able to contribute up to $3,550, up $50 from 2019. Those with family HDHP coverage, will be able to contribute up to $7,100, up $100 from 2019.
- Catch-up contributions will remain the same at $1,000.
- The Health FSA limit on employees’ pre-tax contributions will increase by $50 to $2,750.
- The Dependent Care FSA (tax exclusion) contribution limit will remain the same at $5,000 ($2,500 if married and filing taxes separately).
- Transit pass and vanpooling (combined) will increase by $5 to $270.
- Parking will increase by $5 to $270.
For adoption of a child, the maximum amount that may be excluded from an employee’s gross income under an employer-provided adoption assistance program will increase to $14,300, up from $14,080 in 2019.
For the 2020 plan year, employers should update their benefit plan designs for the new limits and make sure plan administration will be consistent with the new limits. Employers should also communicate the new limits to employees.
Who does this benefit?
The new benefit plan limits should benefit both the employer and employee. Annual increases in contribution limits can help ensure that these benefits remain an attractive addition to an employee’s benefits package. Employers can also save on their payroll taxes when employees take advantage of these benefits.
The 2020 limit increase will also allow employees to set aside more tax-free money to pay for services they need throughout the year, all while reducing their taxable income in the meantime.
For more information on these new changes, click here.
Reach out to the Creative Benefits Team at 866-306-0200 or email us at email@example.com with any questions.