Asile
06-05-2012, 08:27 PM
I don't want to put this in the Politics folder 'cause it's not wholly politics, and it possibly affects a bunch of us here.
If you didn't know, starting with 2013 plan years, the annual pre-tax maximum you can contribute to a Health Flexible Spending Account (FSA) is being reduced from $5,000 to $2,500. However, one thing that's being looked at, that I just found out today, is the possibility of removing the "use it or lose it" rule...which means that you could tuck away your yearly max of $2,500 in 2013 and have that available to help with a major surgery in 2014, in addition to your 2014 contribution.
A lot of the following may not mean much to anyone but your company HR/Benefits folks (like me), but the last paragraph gives the info on how you can comment on the use-it-or-lose-it rule.
6/1/2012
IRS issues guidance on salary-reduction contribution limit for health FSAs — AGENCY GUIDANCE
The IRS has issued guidance on the effective date of the $2,500 limit (as indexed for inflation) on salary-reduction contributions to health flexible spending arrangements (health FSAs) under Code Sec. 125(i) and on the deadline for amending plans to comply with that limit. The new guidance also provides relief for certain contributions that mistakenly exceed the $2,500 limit and that are corrected in a timely manner. Specifically, the guidance provides that:
the $2,500 limit does not apply for plan years that begin before 2013;
the term "taxable year" in Code Sec. 125(i) refers to the plan year of the cafeteria plan as this is the period for which salary-reduction elections are made;
plans may adopt the required amendments to reflect the $2,500 limit at any time through the end of calendar year 2014;
in the case of a plan providing a grace period (which may be up to two months and 15 days), unused salary-reduction contributions to the health FSA for plan years beginning in 2012 or later that are carried over into the grace period for that plan year will not count against the $2,500 limit for the subsequent plan year; and
relief is provided for certain salary-reduction contributions exceeding the $2,500 limit that are due to a reasonable mistake and not willful neglect and that are corrected by the employer.
Under the guidance, Code Sec. 125(i) applies to plan years beginning after December 31, 2012. Indexing of the $2,500 limit applies to plan years beginning after December 31, 2013. The Treasury Department and the IRS intend to amend Reg. §§1.125-1, 1.125-2 and 1.125-5 to provide for the $2,500 limit, and taxpayers may rely on the new guidance pending issuance of the amended regulations.
The IRS clarifies that the statutory limit of $2,500 does not apply to flex credits, contributions available under other types of FSAs, health savings accounts, or health reimbursement arrangements, or to salary reduction contributions to cafeteria plans that are used to pay an employee’s share of health coverage premiums. In other words, it only applies to salary reduction contributions under a health FSA.
Comments Requested
Comments are requested on whether to modify the use-or-lose rule that is currently set forth in the proposed regulations with respect to health FSAs. Comments must be submitted by August 17, 2012, and should include a reference to Notice 2012-40. Submissions should be sent to CC:PA:LPD:PR (Notice 2012-40), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, D.C. 20044. Submissions may also be hand-delivered Monday through Friday between the hours of 8:00 a.m. and 4:00 p.m. to CC:PA:LPD:PR (Notice 2012-40), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW., Washington, D.C. 20044, or sent electronically, via email to: Notice.comments@irscounsel.treas.gov. "Notice 2012-40" should be included in the subject line of any electronic communication.
Source: Notice 2012-40, I.R.B. 2012-25, June 18, 2012.
If you didn't know, starting with 2013 plan years, the annual pre-tax maximum you can contribute to a Health Flexible Spending Account (FSA) is being reduced from $5,000 to $2,500. However, one thing that's being looked at, that I just found out today, is the possibility of removing the "use it or lose it" rule...which means that you could tuck away your yearly max of $2,500 in 2013 and have that available to help with a major surgery in 2014, in addition to your 2014 contribution.
A lot of the following may not mean much to anyone but your company HR/Benefits folks (like me), but the last paragraph gives the info on how you can comment on the use-it-or-lose-it rule.
6/1/2012
IRS issues guidance on salary-reduction contribution limit for health FSAs — AGENCY GUIDANCE
The IRS has issued guidance on the effective date of the $2,500 limit (as indexed for inflation) on salary-reduction contributions to health flexible spending arrangements (health FSAs) under Code Sec. 125(i) and on the deadline for amending plans to comply with that limit. The new guidance also provides relief for certain contributions that mistakenly exceed the $2,500 limit and that are corrected in a timely manner. Specifically, the guidance provides that:
the $2,500 limit does not apply for plan years that begin before 2013;
the term "taxable year" in Code Sec. 125(i) refers to the plan year of the cafeteria plan as this is the period for which salary-reduction elections are made;
plans may adopt the required amendments to reflect the $2,500 limit at any time through the end of calendar year 2014;
in the case of a plan providing a grace period (which may be up to two months and 15 days), unused salary-reduction contributions to the health FSA for plan years beginning in 2012 or later that are carried over into the grace period for that plan year will not count against the $2,500 limit for the subsequent plan year; and
relief is provided for certain salary-reduction contributions exceeding the $2,500 limit that are due to a reasonable mistake and not willful neglect and that are corrected by the employer.
Under the guidance, Code Sec. 125(i) applies to plan years beginning after December 31, 2012. Indexing of the $2,500 limit applies to plan years beginning after December 31, 2013. The Treasury Department and the IRS intend to amend Reg. §§1.125-1, 1.125-2 and 1.125-5 to provide for the $2,500 limit, and taxpayers may rely on the new guidance pending issuance of the amended regulations.
The IRS clarifies that the statutory limit of $2,500 does not apply to flex credits, contributions available under other types of FSAs, health savings accounts, or health reimbursement arrangements, or to salary reduction contributions to cafeteria plans that are used to pay an employee’s share of health coverage premiums. In other words, it only applies to salary reduction contributions under a health FSA.
Comments Requested
Comments are requested on whether to modify the use-or-lose rule that is currently set forth in the proposed regulations with respect to health FSAs. Comments must be submitted by August 17, 2012, and should include a reference to Notice 2012-40. Submissions should be sent to CC:PA:LPD:PR (Notice 2012-40), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, D.C. 20044. Submissions may also be hand-delivered Monday through Friday between the hours of 8:00 a.m. and 4:00 p.m. to CC:PA:LPD:PR (Notice 2012-40), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW., Washington, D.C. 20044, or sent electronically, via email to: Notice.comments@irscounsel.treas.gov. "Notice 2012-40" should be included in the subject line of any electronic communication.
Source: Notice 2012-40, I.R.B. 2012-25, June 18, 2012.