IRS Announces 2021 Limits for Health FSAs and Transit Benefits

Kathleen A. Berger, CEBS

Kathleen A. Berger, CEBS

On October 26, 2020, the Internal Revenue Service (IRS) announced annual inflation adjustments for more than 50 tax provisions. Due to low inflation, some of the 2020 limits for benefit plans will remain the same for 2021.

The limit for voluntary employee contributions to employer-sponsored healthcare flexible spending accounts (HFSAs) for plan years beginning in 2020 has been $2,750 and it will not change for 2021. For HFSAs that include a carryover provision, up to $550 may be carried over to the next plan year.

The IRS also confirmed that there will be no changes in the monthly limits for qualified transportation fringe benefits under Code § 132(f). For transportation in a commuter highway vehicle and mass transit passes, the monthly limit of $270 will continue. The separate limit for qualified parking also will remain at $270 per month. Details of this announcement can be found in Revenue Procedure 2020-45.