June 2012 Health Care Reform

June 2012 Health Care Reform

by Posted on: June 5, 2012Categories: HR & Compliance   

Flexible Spending Plan Rules

On May 30th, 2012 the IRS released Notice 2012-40 with the new guidance relating to the $2,500 annual limit for health flexible spending accounts established as part of the Health Care Reform law. The Affordable Care Act (ACA) imposes a $2,500 limit on salary contributions to a FSA which is offered under an employer sponsored cafeteria plan. The limit is scheduled to take effect January 1, 2013. Within the notice the term “taxable year” is defined as the “plan year”. This means that the new rule is not tied to an individual’s taxable year.  Fiscal plan years will not be required to apply the new maximum until the first renewal after January 1, 2013. This will allow the option for plans that renew between 6/1/12-12/31/12 to keep a higher maximum for now. If the FSA plan includes a “grace period” then an employee may use remaining funds in their FSA account to pay for expenses incurred from qualified benefits during the “grace period”. Most “grace periods” are 2 months and 15 days immediately following the end of a plan year. These are just a few of the basic issues from Notice 2012-40 (the IRS is also taking comments on the “Use of Lose It” rules for FSAs through 8/17/2012). If you want more information on the full notice then please click the links below.

Click Here to read the IRS Notice 2012-40

Click Here to Read the Clarke & Company Legislative Brief on IRS Notice 2012-40



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