Friday, November 30, 2018

FSA, Commuting and Adoption Contribution Limits Rise Slightly in 2019

Belatedly, the IRS recently published the new employee contribution limits for FSA, Commuting and Adoption benefits for next year.  FSA employee contribution limits increase from $2,650 to $2,700 in 2019, while commuting (transit passes and van pool services, along with parking) contributions increase from $260 a month to $265 next year. Adoption assistance contributions increase by $270 to $14,080 annually next year.

Many employers conduct enrollment in these programs in October for the following year, making it seemingly too late for their employees to take advantage of the slight increase in non-taxable income.  While no obligation exists for employers to make the maximum contribution available to employers, those employers who have completed enrollment have the option to re-open enrollment before the end of the calendar year to allow employees to increase their contribution limits.

Surprisingly, many employees still choose not to use FSA’s. Some surveys estimate that only 20% of employees in jobs where an FSA benefit is offered, take advantage of the tax shelter. Presumably employee reluctance to use this benefit is based on fear of forfeiture of unused funds at the end of the year. In 2014, though, the IRS loosened its regulations by allowing a three month grace period after the calendar year or the ability to carry over up to $500 into the following calendar year.