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IRS Releases 2020 Limits for Welfare Benefit Plans: Health FSA and HSA Limits Increase

On Behalf of | Nov 21, 2019 |

The IRS has released the 2020 inflation-adjusted limits for certain employee welfare benefit plans and the dollar amounts used for certain discrimination tests.

Health FSAs. The limit for employee salary reduction contributions for health flexible spending account coverage for 2020 is $2,750, an increase of $50 over the amount for 2019.

Health Savings Accounts. The 2020 limit on contributions to health savings accounts (“HSAs”) increases to $3,550 for a self-only HSA and $7,100 for a family HSA. For 2020, a high deductible health plan (“HDHP”) must have a minimum deductible of $1,400 for employee-only coverage, and $2,800 for family coverage. The maximum out-of-pocket amount for an HDHP (including deductibles, co-payments and other amounts, not including premiums) cannot exceed $6,900 for self-only coverage and $13,800 for a family.

Dependent Care. There were no changes to the limits for dependent care flexible spending account contributions, and the maximum tax-exempt benefit from a dependent care assistance plan remains at $5,000 ($2,500 if married and filing separately), as this amount is not indexed to inflation.

Transportation and Parking. For 2020, the qualified transportation benefit limit for transit passes and for qualified parking is $270 per month.

Highly Compensated Employee. The definition of highly compensated employee (“HCE”) is used in several welfare plan nondiscrimination tests. For the 2020 plan year, an employee who earns more than $125,000 in 2019 is an HCE. For the 2021 plan year, an employee who earns more than $130,000 in 2020 is an HCE.

PCORI. The ACA’s PCORI fee is no longer assessed for plan years ending after Sept. 30, 2019.