In the days before health care reform, the IRS permitted employers to determine the maximum amount an employee could set aside tax-free in a Flexible Spending Account. But that was then, and this is now.
Going forward, employers will need to enforce a $2,500 annual limit on all employee healthcare FSA contributions.
The Patient Protection and Affordable Care Act also changed the definitions of qualified medical expenses (for FSAs, HSAs, and HRAs) to bring them in-line with the definition used for the medical expenses tax deduction, an itemized deduction, which excludes tax-free reimbursements for over-the-counter drugs not prescribed by a physician.
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