On November 6, the IRS announced the tax year 2020 annual inflation adjustments for more than 60 tax provisions. These tax provisions included limits relating to health FSAs, qualified transportation fringe benefits, qualified small employer health reimbursement arrangements (QSEHRAs), and the small business health care tax credit.

2020 Adjustments

Health Flexible Spending Accounts (FSAs)

For 2020, the dollar limit on employee salary reduction contributions to health FSAs is $2,750 (up from $2,700).

Qualified Transportation Fringe Benefits

For 2020, the monthly limit on the amount that may be excluded from an employee’s income for qualified parking benefits is $270 (up from $265). The combined monthly limit for transit passes and vanpooling expenses for 2020 will be $270 (up from $265).

Qualified Small Employer Health Reimbursement Accounts (QSEHRAs) 

For 2020, the maximum amount of payments and reimbursements under a QSEHRA is $5,250 for self-only coverage and $10,600 for family coverage (up from $5,150 and $10,450, respectively).

Small Business Health Care Tax Credit

For 2020, the average annual wage level at which the tax credit begins to phase out for eligible small employers is $27,600 (up from $27,100). The maximum average annual wages to qualify for the credit as an eligible small employer for 2020 will be twice this amount, $55,200 for example.

Dependent Care Assistance Program (DCAP)

The $5,000/$2,500 DCAP limit has not changed (it is a non-indexed limit).

Health Savings Accounts (HSAs)

The limits for health savings accounts (HSA) for 2020 were announced earlier this year and are going up $50 for individual coverage and $100 for family coverage bringing them to $3,550 and $7,100, respectively. The catch-up contribution limit for those over age 55 will remain at $1,000.

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Disclaimer: Please note that this Q&A is not all inclusive. Our guidance is designed only to give general information on the issues actually covered. It is not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion. Consult your own legal advisor regarding specific application of the information to your own plan.