The IRS just announced the cap for health flexible spending accounts (health FSAs) for 2022. The good news: It increased. The bad news: For many employers it may be too late for their employees to take advantage of the increase.
But before we get into that, here’s what the increase is.
Flexible spending account cap
For 2022, employees can contribute up to $2,850 to their health flexible spending account. That’s an increase of $100 from 2021. For cafeteria plans that allow carryover of unused funds, the maximum carryover is $579. An increase of $20 from 2021.
As for employees who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that isn’t less than $2,450, which is a $50 increase from 2021. But it can’t be more than $3,700, an increase of $100 from 2021.
For self-only coverage, the out-of-pocket max is $4,950 – an increase of $150 from 2021.
The annual deductible for family coverage for 2022 can’t be less than $4,950 – a $150 increase. However, it can’t be more than $7,400 – a $250 increase from 2021. And the out-of-pocket expense limit for family coverage is $9,050 for 2022. This is a $300 increase.
Too little, too late?
As stated previously, for some firms, it’s too late to take advantage of these increases because they’ve completed their open enrollment. But if your firm hasn’t completed it yet, send out an urgent email informing employees of the higher limits so they can take advantage of them.
Maybe one day the IRS will release this info earlier, but for now do all you can to help your employees get the most out of their benefits.
Note: These were just a few of the 60 tax provisions, including the tax rate schedules and other tax changes in the Revenue Procedure 2021-45. We also told you about some yesterday.
