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Annual Inflation Rates for FSA Salary Reduction, Transportation and Dependent Care

The Internal Revenue Service has released the Inflation Rates for the 2016 Tax Year for Flexible Spending Arrangements (FSA), Transportation and Dependent Care Assistance Programs (DCAP).  


To whom does this apply?

This guidance applies to employers who offer FSA, transportation, and dependent care benefits. 


What changes do employers need to be aware of?

  • Flexible Spending Arrangements
    The annual dollar limit on employee contributions to employer-sponsored healthcare FSA remains $2,550.
  • Qualified Transportation Fringe Benefits
    For the 2016 tax year, the combined transit pass/vanpooling monthly limit on the amount that may be excluded from an employee’s income for the qualified parking benefit should not exceed $255.00. 
  • Dependent Care Assistance Program
    For the 2016 tax year, an employee can generally exclude up to $5,000 of benefits received under a DCAP each year from their gross income. This limit is reduced to $2,500 for married employees filing separate returns. These amounts have not changed since 2014. 

When do employers need to comply?  

These rates are applicable to the 2016 tax year.


Whom should I contact with questions?

You can contact your Client Solutions Team with questions.


Compliance Quarterly is being provided as an informational tool. It is recommended that plans consult with their own experts or counsel to review all applicable federal and state legal requirements that may apply to their group health plan. By providing this publication and any attachments, Meritain Health is not exercising discretionary authority over the plan and is not assuming a plan fiduciary role, nor is Meritain Health providing legal advice.