For 2016, FSA Contribution Cap Stays $2,550

2016 limits for commuting, adoption, and other benefits also announced

By Kin Chan and Andrew Eisner © Buck Consultants Oct 22, 2015
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updated on 12/18/2015

Update: In December 2015, legislation was enacted making both the mass-transit and qualified-parking tax-excludable amounts equal for 2016, at $255/month. The legislation also retroactively made mass-transit and parking benefits equal for 2015, at $250/month. See the SHRM Online article Law Makes Tax Breaks Equal for Parking & Transit Benefits. The chart of qualified transit benefits in the article below was updated to reflect the new monthly caps on pretax contributions.

The IRS issued Revenue Procedure 2015-53, which contains 2016 limits for qualified transportation benefits, adoption assistance programs, long-term care premiums, health flexible spending accounts (FSAs), and medical savings accounts.

The guidance is in addition to 2016 retirement plan limits that the IRS also released on Oct. 21, 2015. The 2016 limits for contributions to health savings accounts and for high-deductible health plans were released earlier, in May 2015.

Health FSAs

The 2016 limit on voluntary employee salary reductions for contributions to health FSAs is $2,550, unchanged from 2015.

Qualified Transportation Benefits

The monthly limits under section 132(f) for tax years beginning in 2016 (compared with 2015) are:

2016

2015

Commuter highway vehicle and transit pass

$255

$130
(retroactively raised to $250)

Qualified parking

$255

$250


Adoption Assistance Programs

For employer-provided adoption assistance programs, the maximum amount excludible from an employee’s income in 2016 (compared with 2015) for the adoption of a child (both for regular and special needs adoptions) is shown below. The excludible amount phases out for taxpayers with modified adjusted gross income that exceeds certain levels:

2016

2015

Excludible amount

$13,460

$13,400

Phased-out income thresholds

phase-out begins

$201,920

$201,010

Phase-out complete

$241,920

$241,010


Long-Term Care Premiums

The limits under section 213 for eligible long-term care premiums that qualify as medical expenses for tax years beginning in 2016 (compared with 2015) are shown below, based on attained age before the close of the taxable year:

2016

2015

Age 40 or less

$390

$380

Over 40 but under 50

$730

$710

Over 50 but under 60

$1,460

$1,430

Over 60 but under 70

$3,900

$3,800

Over 70

$4,870

$4,760


Medical Savings Accounts

Medical savings accounts (MSAs) are available to employees of small businesses and self-employed individuals if they participate in high-deductible health plans. The deductible limits and out-of-pocket limits in connection with these plans differ from those for HSAs.

For tax years beginning in 2016, the annual deductible for an MSA high-deductible health plan may not be less than $2,250 and not more than $3,350 for single coverage. The annual deductible for an MSA high-deductible health plan may not be less than $4,450 and not more than $6,700 for family coverage. Also, annual out-of-pocket expenses (exclusive of premiums) cannot exceed $4,450 for single coverage and $8,150 for family coverage.

Kin Chan and Andrew Eisner, ASA, EA, MAAA, FCA, contribute to the Knowledge Resource Center of Buck Consultants at Xerox. © 2015 Xerox Corp. and Buck Consultants. All rights reserved. Republished with permission.

Additional online links in this article were added by SHRM Online.

Related SHRM Articles:

2016 Payroll Tax Unchanged; Tax Brackets Nudge Up, SHRM Online Compensation, October 2015

For 2016, Most Retirement Plan Limits Stay Put, SHRM Online Benefits, October 2015

IRS Issues 2016 HSA Contribution Limits, SHRM Online Benefits, May 2015

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