The Office of Personnel Management (OPM) has received notice from the IRS that the annual employee pretax contributions allowed under Health Care Flexible Spending Accounts (HCFSA) and Limited Expense Health Flexible Spending Accounts (LEXFSA) will increase from $2,600 to $2,650. The increases for HCFSAs and LEXFSAs are effective for plans beginning on or after January 1, 2018.  The annual maximum for Dependent Care Flexible Spending Accounts has not been increased. It will remain at $5,000. 

Please note that OPM indicates that the educational materials and the brochure language for the upcoming Open Season reflect the current FSA limit of $2,600.  It was too late to update these tax changes to the materials.  As a general reminder, Open Season, where individuals can evaluate and make changes to their overall benefit elections and coverage, will run from November 13 through December 11, 2017. Employees must take action to enroll annually in FSAs.  

The IRS has also announced an increase in the “elective deferral limit” in 401(k) programs, which also affects the Thrift Savings Plan (TSP).  In 2018, the limit will rise from $18,000 to $18,500.  For those making both pretax and after-tax “Roth” investments, it applies to the combination. To take advantage of the higher limit, one will have to make a new payroll withholding election for 2018. (This limit counts only personal investments, and not agency contributions into the TSP accounts of employees under the Federal Employees Retirement System).  The TSP also mirrors 401(k)s in allowing “catch-up contribution” investments by those who are age 50 or older in a year, if they reach the regular limit or are investing at a rate to hit it by the end of the year. That maximum will remain at $6,000.