Summary
Amended by sections 10902 of the Manager’s Amendment and 1403 of HCERA. Limits employee contributions via salary reduction to health FSAs to $2,500 annually beginning in 2013, indexed at CPI-U in subsequent years.
Implementation Status
On June 25, 2012, the IRS issued Notice 2012-40 providing guidance about effective and related compliance dates for these new rules and provides relief for certain contributions that “mistakenly exceed the limit yet are corrected in a timely manner.”
Statutory Text
SEC. 9005. LIMITATION ON HEALTH FLEXIBLE SPENDING ARRANGEMENTS
UNDER CAFETERIA PLANS.
(a) IN GENERAL.—Section 125 of the Internal Revenue Code of
1986 is amended—
(1) by redesignating subsections (i) and (j) as subsections
(j) and (k), respectively, and
(2) by inserting after subsection (h) the following new subsection:
‘‘(i) LIMITATION ON HEALTH FLEXIBLE SPENDING ARRANGEMENTS.—
Replaced by section 10902(a)
‘‘(1) IN GENERAL.—For purposes of this section, if a benefit
is provided under a cafeteria plan through employer contributions
to a health flexible spending arrangement, such benefit
shall not be treated as a qualified benefit unless the cafeteria
plan provides that an employee may not elect for any taxable
year to have salary reduction contributions in excess of $2,500
made to such arrangement.
‘‘(2) ADJUSTMENT FOR INFLATION.—As revised by section
1403(b) of HCERA In the case of any taxable year beginning
after December 31, 2013, the dollar amount in paragraph (1)
shall be increased by an amount equal to—
‘‘(A) such amount, multiplied by
‘‘(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which such taxable
year begins by substituting ‘calendar year 2012’ for ‘calendar
year 1992’ in subparagraph (B) thereof.
If any increase determined under this paragraph is not a multiple
of $50, such increase shall be rounded to the next lowest
multiple of $50.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2010.