For 2015, FSA Contribution Limit Rises to $2,550

Adoption benefit limits, PCORI fees, among other adjustments

By Stephen Miller, CEBS Oct 30, 2014
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For 2016 benefit rates, see 2016 Limits for Commuting, Adoption, FSAs and Other Plans

For tax year 2015, the Internal Revenue Service announced the inflation-adjusted contribution limit for health flexible spending accounts (FSAs) will go up by $50, to $2,550.

Revenue Procedure 2014-61, issued Oct. 30, 2014, also dealt with other annual benefit contribution rates, noting that there would be no change in transit and parking pretax subsidies next year, among other matters.

The IRS had previously announced increases in 401(k) and other retirement plan limits for 2015 and increases affecting health savings accounts (HSAs), including contribution and out-of-pocket spending limits and higher minimum deductibles for HSA-linked health plans. Separately, the Treasury Department had previously announced a 2015 increase income subject to the FICA payroll tax for Social Security.

Revenue Procedure 2014-61 provides the following employee benefit adjustments:


The annual dollar limit on employee contributions to employer-sponsored health care FSAs rises to $2,550 in 2015, up from $2,500 in 2014. Both employer and employee may contribute to an employee's health FSA, but contributions from all sources combined must not exceed the $2,550 annual limit for 2015.

The annual limit for dependent care FSAs or dependent care assistance plans (DCAPs) will remain at $5,000 for qualifying individuals and those who are married and file a joint return, and will remain at $2,500 for those who are married and file separate returns.

Beginning in 2014 but expected to be more widely adopted in 2015, the U.S. Treasury Department and the IRS altered the long-standing “use it or lose it” rule, allowing employers to offer a carryover of up to $500 in unused health FSA funds to the following year or to continue a grace period option giving employees a two-and-a-half month extension to spend remaining FSA funds. FSAs cannot have both a carryover and a grace period option, and employers are not obligated to offer either extension.

Transit Benefits

The monthly limit for qualified transportation benefits for 2015 revert to $130/month for transit passes and $250/month for qualified parking, despite a retroactive increase in the transit benefit limit for tax year 2014 (see box below).

Employees can deduct commuting costs from their paychecks, tax free, through an employer benefit program up to the allowable monthly limit. Similarly, organizations that subsidize their employees' commuting costs may do so up to the allowable limit, which results in lower payroll taxes than if they paid that money in wages.

Proposed tax legislation includes a transit parity provision that would increase the monthly cap on pretax transit benefits on par with the parking benefit. Advocates hope that after the November 2014 elections Congress will pass a two-year extension of the more generous transit cap, or even permanent parity indexed for inflation.

Also, IRS Revenue Ruling 2014-32, issued in November 2014, provides updated guidance on the use of electronic media (such as smartcards and debit cards) to distribute nontaxable transit benefits under section 132 of the tax code. This ruling modifies and supersedes a 2006 ruling on this subject, which many recent technological developments had rendered obsolete.

Transit Benefit Update: Congress Retroactively Increases Transit Benefit Limit for 2014

On Dec. 16, the Senate passed H.R. 5771, the Tax Increase Prevention Act of 2014, a bill that retroactively extends 55 provisions in the tax code. The bill had been passed by the House on Dec. 3, and was sent to the White House for an expected presidential signature.

H.R. 5771 would extend retroactively for one year (generally through the end of 2014) a number of tax relief provisions that expired either at the end of calendar year 2013 or during 2014, thus preventing tax increases when the tax year 2014 filing season begins early in 2015.

Retroactive for 2014, the measure reinstates the maximum monthly exclusion amount for transit passes and van pool benefits (raising it from $130 to $250) so that these transportation benefits match the $250 exclusion for qualified parking benefits. But for 2015, the transit limit returns to $130—unless Congress acts again to raise it.

For more on this topic, see the SHRM Online article Congress Retroactively Increases Transit Benefit Limit for 2014; Passes Other ‘Tax Extenders.’

Adoption Assistance

The adoption tax credit limit rises to $13,400 in 2015, up from $13,190 in 2014. The available adoption credit for 2015 begins to phase out for taxpayers with modified adjusted gross income in excess of $201,010 and is completely phased out for taxpayers with modified adjusted gross income of $241,010 or more (up from a phase out range of $197,880 to $237,889 in 2014).

Among other annual adjustments in the revenue procedure:

  • Small business health care tax credit. The maximum credit is phased out based on the employer's number of full-time equivalent employees in excess of 10 and the employer's average annual wages in excess of $25,800 for tax year 2015, up from $25,400 for 2014.
  • Income tax rate ranges. The tax rate of 39.6 percent affects singles whose income exceeds $413,200 (or $464,850 for married taxpayers filing a joint return), up from $406,750 and $457,600, respectively. The other marginal rates—10, 15, 25, 28, 33 and 35 percent—and the related income tax thresholds are described in the revenue procedure and also shown via tables in the SHRM Online article Income Subject to FICA Payroll Tax Increases in 2015.

PCORI Fees for 2015

The Patient-Centered Outcomes Research Institute (PCORI) fee under the Affordable Care Act applies on a plan year basis to self-insured plans and health insurers. The amount of the fee is adjusted annually.

In IRS Notice 2014-56, issued on Sept. 18, 2014, the fee for plan years ending on or after Oct. 1, 2014 and before Oct. 1, 2015 was announced. It will be $2.08 per covered life, up from $2.00 for plan years that ended on or after Oct. 1, 2013 and before Oct. 1, 2014.

Employers subject to the fee must submit it by July 31 of the year immediately following the last day of the plan year.


Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow him on Twitter @SHRMsmiller.

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