My current employer offers an FSA. For 2014 I have opted to contribute the maximum allowed which is $2,500. If, after using that $2,500, I switched employers and they also offered an FSA would I be able to contribute to and use that one as well? Is there a maximum the IRS allows for a year regardless of employer(s)?
I'm married filing jointly and the sole income earner for my family, if that makes a difference.
You can have multiple $2500/yr contributions from multiple employers
http://www.irs.gov/pub/irs-drop/n-12-40.pdf
See bottom of page 5 through top of page 6:
However, an employee employed by two or more employers that are not members of the same controlled group may elect up to $2,500 (as indexed for inflation) under each employer’s health FSA.
According to IRS Publication 969:
For plan years beginning after December 31, 2012, salary reduction contributions to a health FSA cannot be more than $2,500 a year (or any lower amount set by the plan). This amount is indexed for inflation and may change from year to year.
You can only contribute $2,500 yourself, but you could get more than $2,500 of benefit in one year with multiple employers. For example:
Unfortunately, this screws Employer A out of $2,200 (and it's probably not a good reason to switch jobs on its own) but according to the IRS you are not allowed to pay it back to them (and they cannot request it). So in this scenario you'd get $4,800 of medical benefits for $2,500 in pretax money.
I recently changed jobs and the benefits specialist at my new gig directly contradicted the other answers here. Specifically, my situation was:
For what it's worth, both companies' FSA plans are through the same benefits provider - but I doubt that has any impact on the situation. I work in software, so benefits are generally competitive, which may have to do with being allowed to join mid year. (Aside: are corporations really too modest to say their benefits are "really good"?) Finally, the payroll deductions my new employer is taking from my pay seem to add up to a little under half of my elected FSA contribution for 2014 before the plan year rolls over January 1st. (See Update 3 below for more on this.) I mention this because I'm essentially dipping yet another time into free FSA money. I thought there was a quote in another answer explaining how this is an IRS rule that favors employees over employers, but it does not seem to be on this page any more, and I can't find another question on the topic.
I have reviewed IRS Publication 969, which Aaron Brager quoted above, in attempt to confirm this, and it does not mention changing employers during a plan year. The closest it mentions to variations in eligibility or joining/leaving the plan is the following paragraph:
When to Contribute
At the beginning of the plan year, you must designate how much you want to contribute. Then, your employer will deduct amounts periodically (generally, every payday) in accordance with your annual election. You can change or revoke your election only if there is a change in your employment or family status that is specified by your plan.
So a change in employment qualifies for a change in the plan, but that's still pretty vague. The only other information in the document regarding balances is around carryover/grace period and use-it-or-lose-it status at the end of a plan year, with no mention of ending the plan mid-year.
In conclusion, my experience so far has agreed with the link Shawn provided in a comment above. I would however prefer to have an answer direct from an IRS source. I am submitting a question to the IRS website, and I will edit this answer here if they give an applicable reply.
Update 1: The IRS replied to my email question with probably the least helpful response possible.
The Answer To Your Question Is: Thank you for your inquiry. We assume your inquiry is regarding a health flexible spending arrangement (FSA). Unfortunately, we are unable to provide a response to your question via this service. Instead please visit our web site, www.irs.gov, to find the answer to your question. The following resources, which you can find on www.irs.gov, cover some of the more commonly asked questions:
- Pub 17 for Individuals
- Pub 583 for Business
- Pub 15 & 15A for Employers
- Pub 510 for Excise Tax
- Pub 559 for Estate and Gift Tax
- Circular 230 for Tax Professional
You can also search for the following using the search box on the irs.gov home page, or you can simply click on the "Help and Resources" tab: *Interactive Tax Assistant which is a tax law resource that takes you through a series of questions and provides you with responses to tax law questions. *IRS Tax Map which gives you single-point access to tax law information by subject
You can also call Tele Tax: 1-800-829-4477 for information on a variety of tax topics. In addition many commercial software packages also provide answers to tax questions or you may seek help from a tax professional.
Requests for private letter rulings may be submitted to the IRS Office of Chief Counsel at the address shown below. The IRS is required to charge a fee for this service.
IRS Office of Chief Counsel
ATTN: CC:DOM:CORP: TSS
P.O. Box 7604
Ben Franklin Station
Washington, D.C. 20044Thank you for using this service and we apologize for any inconvenience.
I haven't reviewed the Publications they mention, but as half of them don't even seem relevant to health or even individual related taxes, it appears the matter will remain a mystery for now.
Update 2: I consulted a family friend who is a tax professional (corporate accountant, I believe). Unfortunately, she was unfamiliar with the exact rules of FSAs. She was under the impression that an annual contribution limit is always firm. For example, you can't reset your 401k contributions by going to a different investment firm (or to a different employer who uses a different investment firm).
However, she does not have a direct source for her answer either. I remain on the search.
Update 3: I found out at the start of this year that the FSA election I made for my new employer actually has a term of June 1st, 2014 through May 31st, 2015. I elected to contribute $2,000 to this FSA and consumed it all before Dec 31st, 2014. I've not received my W2's yet, but I expect my total FSA contributes for the 2014 tax year (Jan 1 to Dec 31) to be around $3,000 (with $4,000 redeemed and received), so I may get an answer from the IRS when I send in my 1040. If they don't say anything, I will direct an inquiry to the plan administrator. At this point, I have a suspicion that the exact rules for FSA's are negotiated and administrated by the plan, and only have to conform to certain IRS guidelines.
Update 4: I received my W2's and filed my taxes. My forms do not show FSA contributions separately, but they do show pre-tax deductions, and they seem to ad up to what I estimated: $1000 contributed from each employer I had in 2014. I am still contributing to my current employer's June 2014 - June 2015 FSA election.
The IRS has kindly processed my 1040 Tax Forms and W2's and issued the full amount of refund that I calculated. So that's at worst an implicit acceptance by the IRS of my FSA situation, not worthy of an audit by itself. Whether or not they come along and correct it later remains to be seen.
I believe that the limit is an annual limit.
A big concern you will have if you switch companies is that your ability to use the FSA money is cutoff after you are no longer using their health insurance. That might take place on your last day of work, or the end of the month, but you need to investigate the cutoff date.
Because the old company will not have collected all of the $2500 from you will still have some room to make contributions with the new company.
Also realize that the medical FSA allows you to spend money before it is collected. The child care FSA doesn't allow negative balances. When you leave the first company you may have withdrawn more than they collected. Theoretically they could try and collect it from you but I don't know of anybody that this has happened to.
If the old company collected $1250 of the $2500 from you via payroll deductions, and you have submitted claims for $2000, personally I would limit my contributions via the second company to $500 to avoid testing the system.
Found on www.irs.gov Bulletin: 2012-26 June 25, 2012 Notice 2012-40
All employers that are treated as a single employer under 414b,c,or m, relating to controlled groups and affiliated service groups, are treated as a single employer for purposes of the $2,500 limit. If an employee participates in multiple cafeteria plans offering health FSA's maintained by members of a controlled group or affiliated service group, the employee's total health FSA salary reduction contributions under all of the cafeteria plans are limited to $2,500. However, an employee employed by two or more employers that are not members of the same controlled group may elect up to $2,500 under each employer's health FSA.
Would that because it is likely if the two companies are members of different controlled groups the medical companies would also be different? And thus would fall in line with the above statement about "A big concern you will have if you switch companies is that your ability to use the FSA money is cutoff after you are no longer using their health insurance." If you left and went to the 2nd company and they had the same health insurance, than you would have already consumed benefits.....
