More Tax-Free Money for Medical Costs: IRS Raises 2024 Health FSA Cap
Unsurprisingly, the IRS has announced an increase in the health flexible spending account (FSA) contribution limit for 2024 to $3,200, according to experts. This $150 boost provides employee the opportunity to set aside more tax-free money to pay for qualifying medical expenses.
What Does This Mean for Employers?
Companies will need to update plan rules for 2024 accordingly so employees can defer up to the new $3,200 cap.
In addition to the higher contribution ceiling, employers should note the carryover limit has also increased from $610 to $640. This means if an employer’s plan includes the carryover provision, employees can roll up to $640 of unused health FSA funds into 2025.
More Room for Health Care Costs
The expanded contribution maximum gives employees more funds in their FSAs to pay for qualified medical expenses. This could be helpful since experts project healthcare price growth will remain high in 2024, potentially reaching up to 8.5 percent.
Later Than Usual Announcement
Open enrollment season is well under way, yet the IRS health FSA news is just rolling out. Experts point out the timing is behind schedule, considering HSA updates came in May and 401(k) changes were announced at the start of November.
For employers in mid-open enrolment who want to communicate plan specifics, it will be important to confirm FSA administrator data is up-to-date with 2024 guidance. Confirming contract details early can help avoid miscommunications around contribution room or carryovers.
What About HSAs and 401(k)s?
In addition to health FSA tweaks for 2024, contribution ceilings have also moved for other workplace savings vehicles like HSAs and 401(k)s. Here’s what else employers should know:
HSAs
- Self-only coverage contribution limit: $4,150
- Family coverage contribution limit: $8,300
401(k)s
- Employee contribution limit: $23,000
- Total contribution limit (with employer match): $69,000
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