By Katherine LaDue
A dollar today doesn’t get you what it used to. When your grandparents used to give you some spare change to run to the candy store, they didn’t always realize that the 30 cents they gave you was enough for maybe half of a Twizzler.
Inflation of the dollar affects health care costs as well as candy prices. To offset the changing value of the dollar, the IRS has increased the amount that employees can put into their health care flexible spending accounts in 2017. The limit will rise to $2,600 from $2,550 this year. This adjustment was triggered by an increase in the cost-of-living index, which is up just over one percent from 2015. There were also some changes made to other benefits like transportation and adoption assistance programs.
What This Means for Employers
Employers need to communicate these changes to employees in all open enrollment communications.
Many employees get confused about the difference between a flexible spending account (FSA) and a health savings account (HSA). They will need to know details about the changes:
Health FSA vs. HSA
An HSA allows unused funds to remain and grow within the account from year to year.
Health FSAs can either rollover up to $500 of unused funds to the next year, or they can have a grace period in the new year to incur new expenses using prior year FSA funds.
Adoption Assistance Programs
The maximum amount excludable from federal income tax withholding in 2017 for reimbursements has gone up to $13,570 from $13,460 in 2016.
The excludable amount phases out for taxpayers with taxpayers with income that exceeds certain levels; the phase-out threshold is now $203,540, up from $201,920 last year.
Long Term Care Premiums
The IRS allows people to deduct qualified medical expenses that exceed 10 percent of their adjusted gross income for the year.
Update your employees on these changes before and during open enrollment as a part of your OE communication strategy. See more tips on how to keep your employees informed and engaged by mirroring a full-scale marketing campaign in your OE strategy here.
An FSA may not be as instantly gratifying as a candy store run, but it’s important to know how much you can contribute so that you’re not wasting any unused funds at the end of the year and maximizing the account’s usefulness.