Health FSA Salary Reduction Limits Don't Apply to Plan Years Before 2013

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The $2,500 limit on salary reduction contributions to health flexible spending arrangements set by a provision of the 2010 federal health care law does not apply for plan years starting before 2013, IRS says in Notice 2012-40. Notice 2012–40 fleshes out the details of the $2,500 cap on salary reduction contributions to cafeteria plan health FSAs under Section 125(i), as added by Section 9005 of the Patient Protection and Affordable Care Act. The notice defines the term “taxable year” under Section 125(i) as the plan year of a cafeteria plan, a clarification that employers sponsoring plans with fiscal years not lining up with the calendar year have been anxiously awaiting.

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