FSA Changes Coming in 2013
Consider a Health Care FSA plan year that runs from July 1 through June 30 and imposes a $5,000 maximum. How is that maximum affected by the $2,500 limit imposed in 2013? Thus far, the IRS has yet to address this issue or deliver a concrete course of action. Unless and until it does, we presume one of three possible options would comply with the intent of the new law.
Option One: The most conservative option would be to simply impose the $2,500 limit before 2013. In the above example, for instance, the employer would simply reduce the $5,000 limit to $2,500 beginning July 1, 2012.
Option Two: Another cautious option would be to declare a so-called "short plan year" for the balance of 2012 and start things fresh on January 1, 2013 with a plan year that follows the calendar year. In the above example, for instance, participants could elect up to $5,000 for the July 1- December 31 short plan year. Of course, this option may not be acceptable to plan sponsors who do not want to administer a plan year that follows the calendar year.
Option Three: This option is somewhat more aggressive than the above two, but may be something some plan sponsors want to consider: Employees would "front-load" some of their salary reductions in 2012 for use during the 2013 part of the plan year
Also remember beginning Jan. 1, 2011, over-the-counter (OTC) medications are no longer eligible for reimbursement from a Flexible Spending Account (FSA), Health Savings Account (HSA), or Health Reimbursement Account (HRA) unless obtained with a prescription.
Also in 2011, the excise tax for non-qualified HSA withdrawals doubled to 20%.