Health care law requires employers to make a change to their FSAs starting in 2013

Now that the U.S. Supreme Court has upheld the Patient Protection and Affordable Care Act of 2010, businesses need to start preparing for provisions that will go into effect in 2013 (unless Congress repeals them). One such provision is a new limit on employee contributions to health care Flexible Spending Accounts (FSAs).

Employees can redirect pretax income to FSAs, which then pay or reimburse them for medical expenses not covered by insurance. Currently, employers that offer FSAs can set the employee contribution limits for them. But starting in 2013 the health care act applies a $2,500 limit to employee contributions. (However, there will continue to be no limit on employer contributions to FSAs. Also note that a $5,000 employee contribution limit already applies to child and dependent care FSAs.)

According to the IRS, the $2,500 limit on pretax employee FSA contributions applies on a plan year basis. Thus, non-calendar-year plans must comply for the plan year that starts in 2013. Employers will need to amend their plans and summary plan descriptions to reflect the $2,500 limit (or a lower one, if they wish) and institute measures to ensure employees don’t elect contributions that exceed the limit.