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.
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.