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Legal Alert: IRS Adjusts Health Flexible Spending Account and Other Benefit Limits for 2025
Compliance News
Thursday, November 07 2024
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On October 22, 2024, the Internal Revenue Service (IRS) released Revenue Procedure 2024-40, which increases the health flexible spending account (FSA) salary reduction contribution limit to $3,300 for plan years beginning in 2025, an increase of $100 from 2024. Thus, for health FSAs with a carryover feature, the maximum carryover amount is $660 (20% of the $3,300 salary reduction limit) for plan years beginning in 2025. When carrying over funds from 2024 to 2025, 20% of the $3,200 salary reduction limit for 2024 is $640.

The Revenue Procedure also contains the cost-of-living adjustments that apply to dollar limitations in certain other sections of the Internal Revenue Code.

Qualified Commuter Parking and Mass Transit Pass Monthly Limit

For 2025, the monthly limits for qualified parking and mass transit are increased to $325 each, an increase of $10 from 2024.

Adoption Assistance Tax Credit Increase

For 2025, the credit allowed for adoption of a child is $17,280 (up $470 from 2024). The credit begins to phase out for taxpayers with modified adjusted gross income in excess of $259,190 (up $7,040 from 2024) and is completely phased out for taxpayers with modified adjusted gross income of $299,190 or more (up $7,040 from 2024).

Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) Increase

For 2025, reimbursements under a QSEHRA cannot exceed $6,350 (single) / $12,800 (family), an increase of $200 (single) / $350 (family) from 2024.

Reminder: 2025 HSA Contribution Limits and HDHP Deductible and Out-of-Pocket Limits

Earlier this year, in Rev. Proc. 2024-25, the IRS announced the inflation adjusted amounts for HSAs and high deductible health plans

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