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Maximum FSA contribution to remain at $2,550 for 2016

Maximum FSA contribution to remain at $2,550 for 2016

The maximum contribution employees will be able to make to their flexible spending accounts in 2016, will, as expected, remain unchanged from this year's $2,550 limit, the Internal Revenue Service disclosed Wednesday.

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The maximum FSA contribution limit and how that limit can increase are mandated by provisions in the 2010 health care reform law.

One Affordable Care Act provision set a $2,500 annual limit on FSA contributions effective in 2013. Prior to that limit, employers typically allowed employees to contribute between $3,000 and $5,000 to their FSAs.

Another provision specified that starting in 2014, the new limit would increase to match the rise in the consumer price index at the close of a 12-month period ending on Aug. 31, with the increase rounded down to the nearest $50.

In the first 12-month period, ending in August 2013, the rise in the index resulted in an indexed amount of $2,542, which, when rounded down to the nearest $50, resulted in no increase in the maximum FSA contribution limit in 2014.

Last year, inflation rose just enough to boost the limit to $2,550 for 2015. With the index rising, according to the Bureau of Labor Statistics, just 0.2% in the 12-month period ending Aug. 31, 2015, that increase was not enough to trigger a hike in the maximum FSA contribution limit for 2016.

While FSAs are still a part of many employers' benefit programs, employee contribution and participation rates have been falling. According to benefit consultant Aon Hewitt, the average FSA contribution per participant fell to $1,342 in 2015, down from $1,405 in 2014, while 17% of employees working for employers offering FSAs made contributions in 2015, down from 20% the prior year.

Aon Hewitt says a likely reason for decreases are the increased popularity of consumer-driven health care plans linked to health savings accounts or health reimbursement arrangements.

The IRS also reported that the maximum monthly pretax contribution employees can make to pay for mass transit commuting expenses in 2016 will be $130, unchanged from 2015.

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