- On October 29, 2024
Last week, the Internal Revenue Service (IRS) announced the 2025 contribution limits for flexible spending accounts (FSA) and other account-based plans, just in time to prepare 4th Quarter open enrollment materials. Here’s what’s changing from last year:
- Health FSA: $3,300 (increased from $3,200)
- FSA Rollover: $660 (up from $640)
- Dependent Care: No Change (The annual limits will remain $5,000 for single taxpayers and married couples filing jointly or $2,500 for married people filing separately.)
- Commuter (Parking and Transit): $325 per month (Increased from $315).
- Qualified Small Employer HRA: $6,350 for individuals and $12,800 for families.
New Expenses May Be Covered First-Dollar Through HSAs/QHDHPs and Health FSAs and HRAs
On October 17, 2024, the IRS released Notice 2024-75, which expands the list of preventive care benefits permitted to be covered before the deductible is applied in qualified high-deductible health plans (QHDHP).
Notice 2024-75 states that QHDHPs will not lose their qualified status and ability to pair with a health savings account (HSA) if they cover over-the-counter (OTC) contraceptives and male condoms, all types of breast cancer screenings beyond mammography, continuous glucose monitors and/or insulin under specific conditions as preventive care. This retroactively effective guidance covers plan years beginning on or after December 31, 2022.
Brokers should keep in mind that the new services that may be considered preventive care under QHDHPs and reimbursed first dollars are optional additions to QHDHP’s preventive care list. Group health plans that wish to cover these expenses before the deductible will have to amend their QHDHP plans to allow this type of coverage, which is not mandatory. Group health plans interested in these coverage extensions must work with their third-party administrator and/or issuer to determine if they are operationally possible.
Notably, the new guidance only applies to the definition of preventive care for QHDHP purposes. It does not apply to the list of preventive care services that must be covered on a first-dollar basis by traditional plans as per the Affordable Care Act (ACA). Since the law creating QHDHPs and its definition of preventive care predates the ACA, the two lists of preventive care services differ. The QHDHP definition of preventive care services includes all of the ACA-required items and additional services, and the IRS is permitted to add optional items to the list at any time on a regulatory basis, as they have in this case.
In addition to the QHDHP preventive care changes, the IRS simultaneously released Notice 2024-71 to establish male condoms may be treated as a reimbursable expense using a health flexible savings account (FSA), Archer medical savings account, health reimbursement account (HRA) or HSA. This guidance is effective immediately.