Right on schedule! IRS has updated annual limits for cafeteria plans and fringe benefits.
Revenue Procedure 2020-45 maps out the info your finance staffers will need as they prep for tax year 2021.
Cafeteria plans
The carryover limit for unused amounts in cafeteria plans will rise in 2021 to a maximum of $550. That’s up from $500 in 2020.
(Remember: You have the option to increase 2020’s carryover limit to $550 due to COVID-19.)
For tax year 2021, the dollar limit for employee salary contributions to health flexible spending arrangements will remain the same: $2,750.
Offer your workers a qualified small employer health reimbursement arrangement (QSEHRA)? You have updates there, too.
The total amount of tax-free reimbursement from employers with a QSEHRA can’t exceed $5,300 for individual coverage or $10,700 for family coverage in 2021.
Medical savings accounts
For participants with self-only coverage in a Medical Savings Account, the 2021 plan must have an annual deductible that is not less than $2,400 (up $50 from 2020) but not more than $3,600 ($50 more than this year). For self-only coverage, the maximum out-of-pocket expense amount is $4,800, up $50 from 2020.
In 2021, for participants with family coverage, the floor for the annual deductible is $4,800, up from $4,750 in 2020. However, the deductible cannot be more than $7,150, up $50 from this year. The out-of-pocket expense limit for family coverage is $8,750 for tax year 2021, $100 more than 2020.
Fringe benefit alert
When looking at fringe benefits, the limit for qualified adoption benefits that can be excluded from a worker’s income will be $14,440 in 2021, up from $14,300.
In 2021, these benefits will begin to phase out once an employee makes over $216,660 annually, and they phase out entirely once a worker earns over $256,660 a year.
