Background
The IRS has announced contribution and benefit limits for 2020.
Summary
Flexible Spending Accounts (FSA)
The 2020 contribution limits for FSAs are as follows:
- For Healthcare FSAs, the contribution limit will increase to $2,750.
- For Commuter FSAs, the contribution limit will increase to $270 a year for the qualified transportation fringe benefit.
Health Savings Accounts (HSA)
- Most HSA contribution limits will increase in 2020:
- Minimum deductible amounts for the qualifying high-deductible health plan (HDHP):
- Individual Coverage $1,400
- Family Coverage $2,800
- Maximum contribution levels:
- Individual Coverage $3,550
- Family Coverage $7,100
- Catch-up contribution allowed for those 55 and over is $1,000
- Maximums for HDHP out-of-pocket expenses:
- Individual Coverage $6,900
- Family Coverage $13,800
Qualified Small Employer Health Reimbursement Accounts (QSEHRA)
The 2020 contribution limit for QSEHRA will increase to $5,250 per self-only employee, up $100 from 2019, and to $10,600 per employee with a family, up $150 from 2019.
Retirement Account
The 2020 retirement contribution limits are as follows:
- The employee contribution limit for 401(k) plans will be $19,500, up from $19,000.
- The catch-up contribution limit for employees aged 50 and over will be $6,500, increased from $6,000.
- The employee contribution limit for IRAs will remain at $6,000.
- The catch-up contribution limit for employees aged 50 and over is not subject to an annual cost-of-living adjustment so it remains unchanged, at $1,000.
- The employee contribution limit for SIMPLE IRAs and SIMPLE 401(k) plans will increase to $13,500, up from $13,000. (“SIMPLE” stands for savings incentive match plan for employees.)
- The catch-up limit remains unchanged at $3,000.
Next Steps for Employers
- Notify your employees about the 2020 401(k) increase in the employee contribution limit.
- Contact your payroll provider to prepare for the new contribution limits.
- If you are a Full-Service or Managed Payroll client of HR Knowledge, we will update these newly created plan limits in the ADP system.
- If you are not a client but are interested in learning more about our services, please email us.
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This content is provided with the understanding that HR Knowledge is not rendering legal advice. While every effort is made to provide current information, the law changes regularly and laws may vary depending on the state or municipality. The material is made available for informational purposes only and is not a substitute for legal advice or your professional judgment. You should review applicable laws in your jurisdiction and consult experienced counsel for legal advice. If you have any questions regarding this content, please contact HR Knowledge at 508.339.1300 or email us.
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