The ACA imposes a maximum dollar limit on employees’ salary reduction contributions to a health FSA. Although the ACA set this limit at $2,500, the limit is indexed for cost-of-living adjustments each year. On Oct. 27, 2020, the IRS announced that, for taxable years beginning in 2021, the dollar limit on employees’ salary reduction contributions to a health FSA will remain at $2,750.

This ACA Compliance Bulletin explains the indexed health FSA limit for 2021.