The Affordable Care Act (ACA) imposes a dollar limit on employees’ salary reduction contributions to health flexible spending accounts (FSAs) offered under cafeteria plans. This dollar limit is indexed for cost-of-living adjustments and may be increased each year.
On Oct. 25, 2016, the Internal Revenue Service (IRS) released Revenue Procedure 2016-55 (Rev. Proc. 16-55). Rev. Proc. 16-55 increased the FSA dollar limit on employee salary reduction contributions to $2,600 for taxable years beginning in 2017. It also includes annual inflation numbers for 2017 for a number of other tax provisions.