Guidance on how to apply the cap for plan years that start in 2012 and end in 2013 (i.e., February 1 to January 31) is unclear. To date, the Treasury/IRS has not commented so there are many questions still unanswered.
There are two possible scenarios available. At eflex, we are leaning toward option 2.
1. The employer starts a plan on February 1 (or after) and informs employees that they must choose a maximum contribution of $2,500 for their Health FSA because the plan year ends in 2013.
2. The employer communicates that they will allow a $5,000 maximum (plan document limit) for the 2012 plan year even though it ends in 2013. Employees would then be subject to the $2,500 maximum for the 2013 plan year which ends in 2014.
The last word out of Washington was an email to from our attorney Mark Stember at Kilpatrick Townsend & Stockton, LLP, who wrote:
“This guidance is rumored to come out shortly, but has not been released yet.”
Stay tuned to BenefitBlog for further clarification when it becomes available.